[Federal Register Volume 62, Number 66 (Monday, April 7, 1997)]
[Notices]
[Pages 16555-16560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8841]
[[Page 16555]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-412-811]
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From
the United Kingdom; 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 hot-
rolled lead and bismuth carbon steel products from the United Kingdom.
The period covered by this administrative review is January 1, 1995,
through December 31, 1995. For information on the net subsidy for each
reviewed company, as well for all 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 indicated in the ``Preliminary Results
of Review'' section of this notice. Interested parties are invited to
comment on these preliminary results.
EFFECTIVE DATE: April 7, 1997.
FOR FURTHER INFORMATION CONTACT: Christopher Cassel or Dana
Mermelstein, Office of CVD/AD Enforcement VI, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On March 22, 1993, the Department published in the Federal Register
(58 FR 15327) the countervailing duty order on certain hot-rolled lead
and bismuth carbon steel products from the United Kingdom. On March 4,
1996, the Department published a notice of ``Opportunity to Request an
Administrative Review'' (61 FR 8238) of this countervailing duty order.
We received timely requests for review from Inland Steel Bar Co. and
United States/Kobe Steel Co., interested parties to this proceeding. We
initiated the review, covering the period January 1, 1995, through
December 31, 1995, on April 25, 1996 (61 FR 18378).
In accordance with 19 CFR Sec. 355.22(a), this review covers only
those producers or exporters for which a review was specifically
requested. Accordingly, this review covers British Steel Engineering
Steel Limited (formerly United Engineering Steels Limited), and British
Steel plc. On November 29, 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. Extension of the Time Limit for Certain
Countervailing Duty Administrative Review, 61 FR 60684 (November 29,
1996). Therefore, the deadline for these preliminary results is no
later than March 31, 1997, 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
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.
Scope of the Review
Imports covered by this review are hot-rolled bars and rods of non-
alloy or other alloy steel, whether or not descaled, containing by
weight 0.03 percent or more of lead or 0.05 percent or more of bismuth,
in coils or cut lengths, and in numerous shapes and sizes. Excluded
from the scope of this review are other alloy steels (as defined by the
Harmonized Tariff Schedule of the United States (HTSUS) Chapter 72,
note 1 (f)), except steels classified as other alloy steels by reason
of containing by weight 0.4 percent or more of lead or 0.1 percent or
more of bismuth, tellarium, or selenium. Also excluded are semi-
finished steels and flat-rolled products. Most of the products covered
in this review are provided for under subheadings 7213.20.00.00 and
7214.30.00.00 of the HTSUS. Small quantities of these products may also
enter the United States under the following HTSUS subheadings:
7213.31.30.00, 60.00; 7213.39.00.30, 00.60, 00.90; 7214.40.00.10,
00.30, 00.50; 7214.50.00.10, 00.30, 00.50; 7214.60.00.10, 00.30, 00.50;
and 7228.30.80. Although the HTSUS subheadings are provided for
convenience and for Customs purposes, our written description of the
scope of this proceeding is dispositive.
Verification
As provided in section 782(i) of the Act, we verified information
submitted by the Government of the United Kingdom, British Steel plc.,
and British Steel Engineering Steels. We followed standard verification
procedures, including meeting with government and company officials and
examining relevant accounting and financial records and other original
source documents. Our verification results are outlined in the public
versions of the verification reports, which are on file in the Central
Records Unit (Room B-099 of the Main Commerce Building).
Facts Available
Section 776(a)(2) of the Act, requires the Department to use facts
available if ``an interested party or any other person * * * withholds
information that has been requested by the administering authority * *
* under this title.'' The facts on the record show that British Steel
plc received assistance during the period of review (POR) under the
European Union BRITE/EuRAM program. The facts also show that this
assistance was unreported in the questionnaire response,
notwithstanding a specific question on this program in the Department's
questionnaire. See the March 31, 1997, Memorandum for Acting Assistant
Secretary Re: Facts Available for New Subsidies Discovered at
Verification, public document, on file in the Central Records Unit,
Room B-099 of the Department of Commerce).
Section 776(b) of the Act permits the administering authority to
use an inference that is adverse to the interests of an interested
party if that party has ``failed to cooperate by not acting to the best
of its ability to comply with a request for information.'' Such adverse
inference may include reliance on information derived from: (1) The
petition, (2) a final determination in the investigation under this
title, (3) any previous review under section 751 or determination under
section 753 regarding the country under consideration, or (4) any other
information placed on the record. Because respondents were aware of the
requested information but did not comply with the Department's request
for such information, we find that respondents failed to cooperate by
not acting to the best of their ability to comply with the Department's
request. Therefore, we are using adverse inferences in accordance with
section 776(b) of the Act. The adverse inference
[[Page 16556]]
is a finding that the BRITE/EuRAM program is specific under section
771(5A) of the Act, and that the grants constitute a financial
contribution which benefits the recipient. As such, these grants are
countervailable. This finding conforms with the Department's facts
available determination in the Final Affirmative Countervailing Duty
Determination; Certain Pasta From Turkey, 61 FR 30366, 30367 (June 14,
1996).
Change in Ownership
(I) Background
On March 21, 1995, British Steel plc (BS plc) acquired all of
Guest, Keen & Nettlefolds' (GKN) shares in United Engineering Steels
(UES), the company which produced and exported the subject merchandise
to the United States during the original investigation. Thus, during
the POR, UES became a wholly-owned subsidiary of BS plc and was renamed
British Steel Engineering Steels (BSES). For ease of reference, we will
continue to refer to the company as UES in this notice.
Prior to this change in ownership, UES was a joint venture company
formed in 1986 by British Steel Corporation (BSC), a government-owned
company, and GKN. In return for shares in UES, BSC contributed a major
portion of its Special Steels Business, the productive unit which
produced the subject merchandise. GKN contributed its Brymbo Steel
Works and its forging business to the joint venture. BSC was privatized
in 1988 and now bears the name BS plc.
In the investigation of this case, the Department found that BSC
had received a number of subsidies prior to the 1986 transfer of its
Special Steels Business to UES. See Final Affirmative Countervailing
Duty Determination: Certain Hot-Rolled Lead and Bismuth Carbon Steel
Products From the United Kingdom, 58 FR 6237, 6243 (January 27, 1993)
(Lead Bar). Further, the Department determined that the sale to UES did
not alter the effect of these previously bestowed subsidies, and thus
the portion of BSC's pre-1986 subsidies attributable to its Special
Steels Business transferred to UES. Lead Bar at 6240.
In the 1993 certain steel products investigations, the Department
modified the Lead Bar allocation methodology. Specifically, the
Department stated that it could no longer be assumed that the entire
amount of subsidies allocated to a productive unit follows it when it
is sold. Rather, when a productive unit is spun-off or acquired, a
portion of the sales price of the productive unit represents the
reallocation of prior subsidies. See the General Issues Appendix (GIA),
appended to the Final Countervailing Duty Determination; Certain Steel
Products From Austria, 58 FR 37217, 37269 (July 9, 1993) (Certain
Steel). In a subsequent Remand Determination, the Department aligned
Lead Bar with the methodology set forth in the ``Privatization'' and
``Restructuring'' sections of the GIA. Certain Hot-Rolled Lead and
Bismuth Carbon Steel Products from the United Kingdom: Remand
Determination (October 12, 1993) (Remand).
(II) Analysis of BS plc's Acquisition of UES
On March 21, 1995, BS plc acquired 100 percent of UES. In
determining how this change in ownership affects our attribution of
subsidies to the subject merchandise, we relied on Section 771(5)(F) of
the Act, which states that a change in ownership does not require a
determination that past subsidies received by an enterprise are no
longer countervailable, even if the transaction is accomplished at
arm's length. The Statement of Administrative Action, H.R. Doc. No.
316, 103d Cong., 2d Sess. (1994) (SAA), explains that the aim of this
provision is to prevent the extreme interpretation that the arm's
length sale of a firm automatically, and in all cases, extinguishes any
prior subsidies conferred. While the SAA indicates that the Department
retains the discretion to determine whether and to what extent a change
in ownership eliminates past subsidies, it also indicates that this
discretion must be exercised carefully by considering the facts of each
case. SAA at 928.
In accordance with the SAA, we have examined the facts of BS plc's
acquisition of UES, and we preliminarily determine that the change in
ownership does not render previously bestowed subsidies attributable to
UES no longer countervailable. However, we also preliminarily determine
that a portion of the purchase price paid for UES is attributable to
its prior subsidies. Therefore, we have reduced the amount of the
subsidies that ``travel'' with UES to BS plc, taking into account the
allocation of subsidies to GKN, the former joint-owner of UES. See the
March 31, 1997, Memorandum For Acting Assistant Secretary Re: BS plc's
March 1995 Acquisition of UES (public document, on file in the Central
Records Unit, Room B-099 of the Department of Commerce) (Acquisition
Memo). To calculate the amount of UES' subsidies that passed through to
BS plc as a result of the acquisition, we applied the methodology
described in the ``Restructuring'' section of the GIA. See GIA, 58 FR
at 37268-37269. This determination is in accordance with our changes in
ownership finding in Final Affirmative Countervailing Duty
Determination; Pasta From Italy, 61 FR 30288, 30289-30290 (June 14,
1996), and our finding in the 1994 administrative review of this case,
in which we determined that ``[t]he URAA is not inconsistent with and
does not overturn the Department's General Issues Appendix methodology
or its findings in the Lead Bar Remand Determination.'' Certain Hot-
Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom;
Final Results of Countervailing Duty Administrative Review, 61 FR
58377, 58379 (November 14, 1996).
With the acquisition of UES, we also need to determine whether BS
plc's remaining subsidies are attributable to the subject merchandise.
Where the Department finds that a company has received untied
countervailable subsidies, to determine the countervailing duty rate,
the Department allocates those subsidies to that company's total sales
of domestically produced merchandise, including the sales of 100-
percent-owned domestic subsidiaries. If the subject merchandise is
produced by a subsidiary company, and the only subsidies in question
are the untied subsidies received by the parent company, the
countervailing duty rate calculation for the subject merchandise is the
same as described above. Similarly, if such a company purchases another
company, as was the case with BS plc's purchase of UES, then the
current benefit from the parent company's allocable untied subsidies is
attributed to total sales, including the sales of the newly acquired
company. See, e.g., GIA, 58 FR at 3762 (``the Department often treats
the parent entity and its subsidiaries as one when determining who
ultimately benefits from a subsidy'); Final Affirmative Countervailing
Duty Determinations: Certain Steel Products from Germany, 58 FR 37315
(July 9, 1993). Accordingly, we preliminarily determine that it is
appropriate to collapse BSES with BS plc for purposes of calculating
the countervailing duty for the subject merchandise. BSES, as a 100
percent-owned subsidiary of BS plc, now also benefits from the
remaining benefit stream of BS plc's untied subsidies.
In collapsing UES with BS plc, we also preliminarily determine that
UES' untied subsidies ``rejoin'' BS plc's pool of subsidies with the
company's 1995 acquisition. All of these subsidies were
[[Page 16557]]
untied subsidies originally bestowed upon BSC (BS plc). After the
formation of UES in 1986, the subsidies that ``traveled'' with the
Special Steels Business to their new home were also untied, and were
found to benefit the company as a whole. See the Acquisition Memo.
(III) Calculation of Benefit
To calculate the countervailing duty rate for the subject
merchandise in 1995, we first determined BS plc's benefits in 1995,
taking into account all spin-offs of productive units (including the
Special Steel Business) and BSC's full privatization in 1988. See Final
Affirmative Countervailing Duty Determination; Certain Steel Products
from the United Kingdom, 58 FR 37393 (July 9, 1993) (UK Certain Steel).
We then calculated the amount of UES's subsidies that ``rejoined'' BS
plc after the 1995 acquisition, taking into account the reallocation of
subsidies to GKN. As indicated above, in determining both these
amounts, we followed the methodology outlined in the GIA. After adding
BS plc's and UES' benefits for each program, we then divided that
amount by BS plc's total sales of domestically produced merchandise in
1995.
In this administrative review, we preliminarily find it appropriate
to make two changes to the calculation methodology. These changes
involve (1) The calculation of the net present value in administrative
reviews and (2) the period of allocation for non-recurring subsidies.
(1) The Net Present Value Calculation in Administrative Reviews
To calculate the benefit to UES in the original investigation, we
determined the subsidies that were allocated from BSC to UES by
following the GIA methodology described above. To do this, we first
divided the asset value of BSC's Special Steels Business by the value
of BSC's total assets. This ratio represents the portion of BSC's
subsidies that were attributable to its Special Steels Business. The
Department then applied this ratio to the net present value, in the
year of the spin-off, of the future benefit streams from all of BSC's
prior subsidies. The future benefit stream took into account prior
spin-offs of BSC productive units. That amount represented the
subsidies allocated to the Special Steels Business.
The Department next estimated the portion of the purchase price
that could be attributed to prior subsidies by determining the portion
of BSC's net worth that was accounted for by subsidies at the time of
the spin-off. This was calculated by dividing the face value of the
allocable subsidies received by BSC in each year from fiscal year 1977/
78 through fiscal year 1984/85 (the year prior to the spin-off) by
BSC's net worth in the same year. The simple average of these ratios
was then multiplied by the purchase price of the productive unit to
determine the portion of the purchase price that can be attributed to
prior subsidies. This amount was then subtracted from the amount of
subsidies attributed to BSC's Special Steels Business at the time of
the sale. The result is the amount of subsidies allocated to UES in
1986. We then divided the subsidies allocated to UES by the net present
value in 1986 of the future benefit streams from all non-recurring
subsidies received by BSC prior to the spin-off. The resulting
percentage represented the portion of BSC's future benefit streams
apportioned to UES. This percentage was then multiplied by the benefit
amount from BSC's previously bestowed subsidies. The result represented
the total amount of countervailable subsidies to UES for that period.
In each of the two prior administrative reviews of this case, and
in each administrative review of other cases involving changes in
ownership, we recalculated the amount of subsidies that were
extinguished due to privatization, or which ``pass-through'' as a
result of a change in ownership. Specifically, we revisited the
original privatization or change in ownership calculation, and excluded
from the future benefit streams subsidies whose benefit had expired in
the year prior to the POR. We then recalculated the net present value
of the remaining subsidies in the year of the transaction. This
recalculation results in a change in the amount of subsidies that pass-
through or that may be extinguished as a result of a change in
ownership. The rationale underlying that approach was that in the
calculation for a specific POR, the net present value of the future
stream of benefits should include only the subsidies benefitting the
company during the POR.
We have revisited that methodology in this administrative review
and preliminarily determine that it is not appropriate to modify the
calculation in the manner described above. The change in ownership of a
company is a fixed event at a particular point in time. Thus, the
percentage of subsidies that ``travel'' with a company or that may be
extinguished due to privatization in a given year is also fixed at that
same point in time and does not change. See the March 31, 1997,
Memorandum for Acting Assistant Secretary Re: Privatization/Change in
Ownership Calculation Methodology (public document on file in the
Central Records Unit, Room B-099 of the Department of Commerce).
Therefore, the pass-through percentage will no longer be altered once
it has initially been determined in an investigation or administrative
review. We have modified the UES spin-off calculations in this
administrative review to reflect the change outlined above.
(2) Allocation Methodology
In the past, the Department has relied upon information from the
U.S. Internal Revenue Service (IRS) on the industry-specific average
useful life (AUL) of assets in determining the allocation period for
non-recurring subsidies. GIA, 58 FR at 37226. However, in British Steel
plc. v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel I),
the U.S. Court of International Trade (the Court) ruled against this
allocation methodology. In accordance with the Court's remand order,
the Department calculated a company-specific allocation period based on
the AUL of non-renewable physical assets for BS plc. This allocation
period was 18 years. This remand determination was affirmed by the
Court on June 4, 1996. British Steel plc v. United States, 929 F. Supp.
426, 439 (CIT 1996) (British Steel II).
The Department has acquiesced to the Court's decision and, as such,
we have been determining the allocation period for non-recurring
subsidies using company-specific AUL data where reasonable and
practicable. In other cases, the Department has stated that it is
reasonable and practicable to allocate all new non-recurring subsidies
(i.e., subsidies that have not yet been assigned an allocation period)
based on a company-specific AUL. However, we have further determined
that 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.
[[Page 16558]]
As such, the Department found that a more reasonable and accurate
approach was, normally, to continue using the allocation period first
assigned to the subsidy. See, e.g., Certain Carbon Steel Products from
Sweden; Preliminary Results of Countervailing Duty Administrative
Review, 61 FR 64062 (December 3, 1996) (Swedish Steel).
However, notwithstanding the general approach outlined above, due
to the unique circumstances of this case, we preliminarily determine
that it is appropriate to change the allocation period for the
previously bestowed subsidies attributed to UES, even though all of
these subsidies were bestowed prior to the POR and had established
allocation periods. The Department's acquiescence to the CIT's decision
in the Certain Steel cases has resulted in different allocation periods
between the UK Certain Steel and Lead Bar proceedings (18 years vs. 15
years). Different allocation periods for the same subsidies in two
different proceedings involving the same company generate significant
inconsistencies. For instance, the portion of BSC's subsidies
attributed to UES in UK Certain Steel is different from the portion
calculated in the Lead Bar proceeding. Furthermore, with BS plc's
reacquisition of UES in 1995, UES became a wholly-owned subsidiary of
BS plc. Because we have now collapsed the two companies, UES' subsidies
now ``rejoin'' BS plc's subsidies (see the Acquisition Memo). To
maintain a consistent allocation period across the Lead Bar and UK
Certain Steel proceedings, as well as in the different segments of Lead
Bar, we preliminarily determine that it is appropriate to apply the
company-specific 18-year allocation period to all non-recurring
subsidies in this review. See the March 31, 1997, Memorandum For Acting
Assistant Secretary Re: Allocation Period for Nonrecurring Subsidies
(in the Central Records Unit of the Department of Commerce, Room B-099
of the Main Commerce Building) (Allocation Memo).
Analysis of Programs
I. Programs Conferring Subsidies
In determining the subsidies previously bestowed to BSC/BS plc that
were allocated to UES, we examined the following programs: equity
infusions, Regional Development Grants, a National Loan Fund loan
cancellation, and loans and interest rebates under ECSC Article 54.
(A) Equity Infusions
In every year from 1978/79 through 1985/86, BSC/BS plc received
equity capital from the Secretary of State for Trade and Industry
pursuant to section 18(1) of the Iron and Steel Acts 1975, 1981, and
1982. According to section 18(1), the Secretary of State for the
Department of Trade and Industry may ``pay to the Corporation (BSC)
such funds as he sees fit.'' The Government of the United Kingdom's
equity investments in BSC/BS plc were made pursuant to an agreed
external financing limit which was based upon medium-term financial
projections. BSC's performance was monitored by the Government of the
United Kingdom on an ongoing basis and requests for capital were
examined on a case-by-case basis. The UK government did not receive any
additional ownership, such as stock or additional rights, in return for
the capital provided to BSC/BS plc under section 18(1) since it already
owned 100 percent of the company.
In Lead Bar (58 FR at 6241), the Department found BSC/BS plc to be
unequityworthy from 78/79 through 1985/86, and thus determined that the
Government of the United Kingdom's equity infusions were inconsistent
with commercial considerations. Although, prior to the formation of
UES, BSC's section 18(1) equity capital was written off in two stages
(3,000 million in 1981 and 1,000 million in
1982) as part of a capital reconstruction of BSC, the Department
determined that BSC/BS plc benefitted from these equity infusions,
notwithstanding the subsequent write-off of equity capital. Therefore,
the Department countervailed the equity investments as grants given in
the years the equity capital was received. No new information or
evidence of changed circumstances was presented in this review to
warrant a reconsideration of that finding.
Because the Department determined in Lead Bar that the infusions
are non-recurring, we have allocated the benefits over BS plc's
company-specific average useful life of renewable physical assets (18
years).
To calculate the benefit from these grants, we have used a discount
rate which includes a risk premium. See, e.g., Final Affirmative
Countervailing Duty Determinations: Certain Steel Products From Mexico,
58 FR 37352, 37354 (July 9, 1993) (Mexican Steel). While
uncreditworthiness was not specifically alleged or investigated during
the investigation on lead bar, in UK Certain Steel the Department found
that BSC/BS plc was uncreditworthy from 1977/78 through 1985/86. No new
information or evidence of changed circumstances was presented in this
review to warrant a reconsideration of that finding.
To calculate the benefit to the subject merchandise from this
program, we first summed the benefit to BS plc from all infusions
allocated to 1995. Then, we determined the portion of that benefit
still remaining with BS plc after accounting for privatization and
spin-offs. To that we added the portion of UES's subsidies under this
program that ``rejoined'' BS plc with the acquisition. See the ``Change
in Ownership'' section of the notice. We then divided the result by BS
plc's total sales of all products domestically-produced during 1995. On
this basis, we preliminarily determine the net subsidy for this program
to be 6.55 percent ad valorem in 1995.
(B) Regional Development Grant Program
Regional development grants were paid to BSC/BS plc under the
Industry Act of 1972 and the Industrial Development Act of 1982. In
order to qualify for assistance under these two Acts, an applicant had
to be engaged in manufacturing and located in an assisted area.
Assisted areas are older, industrial regions identified as having deep-
seated, long-term problems such as high levels of unemployment,
migration, slow economic growth, derelict land, and obsolete factory
buildings. Regional development grants were given for the purchase of
specific assets. According to the Government of the United Kingdom, the
program involved one-time grants, sometimes disbursed over several
years.
BSC/BS plc received regional development grants during the period
between fiscal years 1978/79 and 1985/86. The Department found this
program countervailable in Lead Bar (58 FR at 6242), because it is
limited to specific regions. No new information or evidence of changed
circumstances was presented in this review to warrant a reconsideration
of that finding.
In Lead Bar, we determined that, since each grant required a
separate application, these grants are non-recurring. Accordingly, we
have calculated the benefits from this program by allocating the
benefits over BS plc's company-specific average useful life of
renewable physical assets (18 years). See British Steel II, 929 F.
Supp. at 439. Since BSC/BS plc was uncreditworthy from 1978/79 through
1985/86 (as discussed under the ``Equity Infusions'' section, above),
we have used a discount rate which includes a risk premium (see Mexican
Steel, 58 FR at 37354) to calculate the benefits from these grants.
To calculate the benefit from this program, we followed the same
methodology described above for equity
[[Page 16559]]
infusions. On this basis, we preliminarily determine the net subsidy
for this program to be 0.23 percent ad valorem in 1995.
(C) National Loan Funds Loan Cancellation
In conjunction with the 1981/1982 capital reconstruction of BSC,
section 3(1) of the Iron and Steel Act of 1981 extinguished certain
National Loans Fund (NLF) loans, as well as the accrued interest
thereon, at the end of BSC's 1980/81 fiscal year. Because this loan
cancellation was provided specifically to BSC, the Department
determined in Lead Bar (58 FR at 6242) that it provided a
countervailable benefit. No new information or evidence of changed
circumstances was presented in this review to warrant a reconsideration
of that finding.
We calculated the benefit for this review using our standard
methodology for non-recurring grants. We allocated the benefits from
this loan cancellation over BS plc's company-specific average useful
life of renewable physical assets (18 years). See British Steel II, 929
F. Supp. at 439. Because BSC/BS plc was found to be uncreditworthy in
1981/82 (as discussed under ``Equity Infusions'' section, above), we
have used a discount rate which includes a risk premium. See Mexican
Steel, 58 FR at 37354.
To calculate the benefit from this program, we followed the same
methodology described above for equity infusions. On this basis, we
preliminarily determine the net subsidy for this program to be 0.56
percent ad valorem in 1995.
(D) European Coal and Steel Community (ECSC) Article 54 Loans/
Interest Rebates
The European Coal and Steel Community's (ECSC) Article 54
Industrial Investment loans are direct, long-term loans from the
Commission of the European Communities to be used by the iron and steel
industry for purchasing new equipment or financing modernization. The
purpose of the program is to facilitate the borrowing process for
companies in the ECSC, some of which may not otherwise be able to
obtain loans. In UK Certain Steel, the Department determined that this
program is limited to the iron and steel industry, and thus is
countervailable to the extent that it provides loans on terms
inconsistent with commercial considerations. 58 FR at 37397. No new
information or evidence of changed circumstances was presented in this
review to warrant a reconsideration of that finding.
In addition, interest rebates on Article 54 loans were granted to
steel companies during the restructuring and modernization of the
industry in the early 1980s. To qualify for the rebates, companies had
to meet certain criteria, such as being in the process of reducing
their steel production capacity or of implementing improvements in
processing that would yield energy savings and improved efficiency.
The interest rebates, which were limited to a maximum of 3 percent
of the total investment over a period of five years, were funded from
the ECSC operational budget. While levies imposed on ECSC steel
companies have provided the revenues for the operational budget since
1985, contributions by Member States supplemented the budget before
that time. For this reason, the Department determined in UK Certain
Steel that a portion of those interest rebates was countervailable. Id.
Following the same methodology in this review to determine the
countervailable portion, we calculated the ratio of the contributions
by Member States to the ECSC's total available funds for each year in
which the rebates were given, and then multiplied this ratio by the
rebate amount.
BSC/BS plc received one Article 54 loan in fiscal year 76/77 and
two Article 54 loans in fiscal year 77/78, all of which were provided
in U.S. dollars were still outstanding during the POR. BSC/BS plc also
received interest rebates during the first five years of the 76/77
loan. Because BSC/BS plc qualified for the interest rebate at the time
the loan was granted, we considered the rebate to constitute a
reduction in the interest rate charged rather than a grant.
We considered the loan made to BSC/BS plc during its creditworthy
period (i.e., in BSC's 76/77 fiscal year) separately from the two loans
made during its uncreditworthy period (i.e., in BSC's 77/78 fiscal
year). For the Article 54 loan provided when BSC/BS plc was
creditworthy, we used as our benchmark the average U.S. long-term
commercial rate for 1977. We used this rate because we did not have
information on U.S. dollar loans borrowed in the United Kingdom in
1977. To calculate the benefit from this loan we employed our long-term
loan methodology. See, e.g., Final Affirmative Countervailing Duty
Determinations: Certain Steel Products From France, 58 FR 37304, 37308
(July 9, 1993) (French Steel). We then compared the amount of interest
that would have been paid on the benchmark loan to the interest paid by
BSC/BS plc (factoring in the interest rebate as discussed above) and
found that BSC's interest payments were higher than those it would have
made on the benchmark loan. Therefore, we find that this particular
loan was provided on terms consistent with commercial considerations.
For the loans provided when BSC/BS plc was uncreditworthy, we used
as our benchmark the highest U.S. lending rate available for long-term
fixed rate loans at the time the loan was granted, plus a risk premium
equal to 12 percent of the U.S. prime rate for 1977. See, e.g., Final
Affirmative Countervailing Duty Determination: New Steel Rail, Except
Light Rail, from Canada, 54 FR 31991 (August 3, 1989); see also, French
Steel, 58 FR at 37309. Again, we used a U.S. interest rate because we
did not have information on U.S. dollar loans borrowed in the United
Kingdom in 1977. We then compared the cost of the benchmark financing
to the cost of the financing that BSC/BS plc received under this
program and found that the two Article 54 loans to BSC/BS plc during
its uncreditworthy period were provided on terms inconsistent with
commercial considerations.
To calculate the benefit from these loans we used our long-term
loan methodology and a benchmark discount rate which includes a risk
premium (French Steel, 58 FR at 37308). We first calculated the grant
equivalent and allocated it over the life of the loans. We then
followed the same methodology described above for equity infusions. On
this basis, we preliminarily determine the net subsidy for this program
to be 0.001 percent ad valorem in 1995.
(E) BRITE/EuRAM
As explained in the ``Facts Available'' section of this notice, BS
plc received assistance under the BRITE/EuRAM program during the POR
that was unreported in the questionnaire response, notwithstanding a
specific question on this program in the Department's questionnaire.
Because respondents failed to comply with the Department's request for
information, we are applying adverse inferences in accordance with
section 776(b) of the act. Therefore, we preliminarily determine that
the BRITE/EuRAM program is specific under section 771(5A) of the Act
and, therefore, countervailable. See the March 31, 1997, Memorandum for
Acting Assistant Secretary Re: Facts Available for New Subsidies
Discovered at Verification, public document, on file in the Central
Records Unit, Room B-099 of the Department of Commerce).
We have calculated the benefit under this program for the POR using
our standard methodology for non-recurring
[[Page 16560]]
grants. See GIA, 58 FR at 37226. However, the grants received by BS plc
under this program were less than 0.5 percent of BS plc's total sales,
and thus were allocated to the year of receipt. On this basis, we
preliminarily determine the net subsidies for this program to be 0.001
percent ad valorem.
II. Programs Preliminarily Determined To Be Not Used
We examined the following programs and preliminarily find that the
producers and/or exporters of the subject merchandise subject to this
review did not apply for or receive benefits under these programs
during the POR:
(A) New Community Instrument Loans
(B) ECSC Article 54 Loan Guarantees
(C) NLF Loans
(D) ECSC Conversion Loans
(E) European Regional Development Fund Aid
(F) Article 56 Rebates
(G) Regional Selective Assistance
(H) ECSC Article 56(b)(2) Redeployment Aid
(I) Inner Urban Areas Act of 1978
(J) LINK Initiative
(K) Transportation Assistance
III. Programs Preliminarily Determined To Be Terminated Transportation
Assistance
The Department originally found that BS plc received preferential
rail transport freight subsidies under this program in the Certain
Steel investigation. UK Certain Steel, 58 FR at 37397. During this
administrative review, however, we found that this program has been
terminated and that there are no residual benefits. See the March 31,
1997, Memorandum to the File Re: Transportation Assistance (public
document on file in the Central Records Unit, Room B-099 of the
Department of Commerce).
Preliminary Results of Review
In accordance with 19 CFR 355.22(c)(4)(ii), we have calculated an
individual subsidy rate for each producer/exporter subject to this
administrative review. As discussed in the ``Change in Ownership''
section of the notice, above, we are treating British Steel plc and
British Steel Engineering Steels as one company for purposes of this
proceeding. For the period January 1, 1995 through December 31, 1995,
we preliminarily determine the net subsidy for British Steel plc/
British Steel Engineering Steel/United Engineering Steel (BS plc/BSES/
UES) to be 7.35 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 to assess countervailing duties for
BS plc/BSES at 7.35 percent ad valorem. The Department also intends to
instruct the U.S. Customs Service to collect a cash deposit of 7.35
percent of the f.o.b. invoice price on all shipments of the subject
merchandise from BS plc/BSES/UES, entered, or withdrawn from warehouse,
for consumption on or after the date of publication of the final
results of this review.
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 countervailing duty cases are
now essentially the same as those in antidumping cases, except as
provided for in section 777A(e)(2)(B) of the Act. Requests for
administrative reviews must now specify the companies to be reviewed.
See 19 CFR Sec. 355.22(a). The requested review will normally cover
only those companies specifically named. Pursuant to 19 CFR
Sec. 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); see also, Floral Trade
Council v. United States, 822 F. Supp. 766 (CIT 1993) (interpreting 19
CFR Sec. 353.22(e), the antidumping regulation on automatic assessment,
which is identical to 19 CFR Sec. 355.22(g)). Therefore, the cash
deposit rates for all companies except those covered by this review
will be unchanged by the results of this review. We will instruct
Customs to continue to collect cash deposits for non-reviewed companies
at the most recent company-specific or country-wide rate applicable to
the company.
Accordingly, the cash deposit rates that will be applied to non-
reviewed companies covered by this order are 20.33 percent ad valorem
for Allied Steel Wire and 9.76 percent ad valorem for all other non-
reviewed companies, which are the rates calculated in the most recently
completed administrative proceeding. See Certain Hot-Rolled Lead and
Bismuth Carbon Steel Products from the United Kingdom; Final Results of
Countervailing Duty Administrative Review, 60 FR 54841 (October 26,
1995). These rates shall apply to all non-reviewed companies until a
review of a company assigned these rates is requested. In addition, for
the period January 1, 1995 through December 31, 1995, 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 argument 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 Sec. 355.38.
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 19 CFR Sec. 355.38, 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)).
Dated: March 31, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-8841 Filed 4-4-97; 8:45 am]
BILLING CODE 3510-DS-P