[Federal Register Volume 62, Number 149 (Monday, August 4, 1997)]
[Notices]
[Pages 41933-41939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20490]


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

DEPARTMENT OF COMMERCE

International Trade Administration
[C-122-827]


Preliminary Affirmative Countervailing Duty Determination: Steel 
Wire Rod From Canada

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

EFFECTIVE DATE: August 4, 1997.

FOR FURTHER INFORMATION CONTACT: Robert Bolling or Rick Johnson, Office 
of AD/CVD Enforcement, Office IX, Import Administration, International 
Trade Administration, U.S. Department of Commerce, Room 1874, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-1386, or 482-0165.

Preliminary Determination

    The Department preliminarily determines that countervailable 
subsidies have been provided to Sidbec-Dosco (Ispat) Inc. (see 
``Corporate History'') a producer and exporter of steel wire rod from 
Canada. We have also preliminarily determined that Ivaco, Inc. (Ivaco) 
and Stelco, Inc. (Stelco) received no countervailable subsidies. For 
information on the estimated countervailing duty rates, see the 
Suspension of Liquidation section of this notice.

Case History

    Since the publication of the notice of initiation in the Federal 
Register (62 FR 13866, March 24, 1997) the following events have 
occurred:
    On April 1, 1997, we issued a questionnaire to the Government of 
Canada (GOC), the Government of Quebec (GOQ), Sidbec-Dosco (Ispat) Inc. 
(Sidbec-Dosco (Ispat)), Stelco, Inc. (Stelco) and Ivaco, Inc. (Ivaco). 
On May 2, 1997, we postponed the preliminary determination in this 
investigation until July 28, 1997 (62 FR 25172, May 8, 1997). On May 
27, we received responses from the GOC, GOQ, Sidbec-Dosco (Ispat), 
Stelco, and Ivaco. On June 13, 1997, we issued a supplemental 
questionnaire to respondents. Additionally, on June 13, 1997, we issued 
a questionnaire to the Government of Ontario (GOO). We received 
responses on July 2, 1997 from respondents GOC, GOO, Sidbec-Dosco 
(Ispat), Stelco, and Ivaco. On July 3, 1997, we received the GOQ's 
response to this questionnaire. On July 10, 1997, we issued a second 
supplemental questionnaire to the GOC, GOQ, GOO, and Sidbec-Dosco 
(Ispat). We received responses on July 17, 1997.
    On June 6, 1997, petitioners alleged that Sidbec, Inc., the 
government-owned company which was the parent company to Sidbec-Dosco, 
Inc., during the period in which the alleged subsidies were granted, 
received subsidies from the GOC and the GOQ which benefitted the 
subject merchandise. Petitioners requested that the Department include 
these new subsidy allegations in its investigation of steel wire rod 
from Canada.
    On July 1, 1997, we initiated an investigation on these additional 
subsidy allegations and issued questionnaires to Sidbec, Inc., the GOC 
and GOQ on July 2, 1997. We received responses to this questionnaire on 
July 16, 1997.

Scope of Investigation

    The products covered by this investigation are certain hot-rolled 
carbon steel and alloy steel products, in coils, of approximately round 
cross section, between 5.00 mm (0.20 inch) and 19.0 mm (0.75 
inch),inclusive, in solid cross-sectional diameter. Specifically 
excluded are steel products possessing the above noted physical 
characteristics and meeting the Harmonized Tariff Schedule of the 
United States (HTSUS) definitions for (a) stainless steel; (b) tool 
steel; (c) high nickel steel; (d) ball bearing steel; (e) free 
machining steel that contains by weight 0.03 percent or more of lead, 
0.05 percent or more of bismuth, 0.08 percent or more of sulfur, more 
than 0.4 percent of phosphorus, more than 0.05 percent of selenium, 
and/or more than 0.01 percent of tellurium; or (f) concrete reinforcing 
bars and rods.

[[Page 41934]]

The following products are also excluded from the scope of this 
investigation:

    Coiled products 5.50 mm or less in true diameter with an average 
partial decarburization per coil of no more than 70 microns in depth, 
no inclusions greater than 20 microns, containing by weight the 
following: carbon greater than or equal to 0.68 percent; aluminum less 
than or equal to 0.005 percent; phosphorous plus sulfur less than or 
equal to 0.040 percent; maximum combined copper, nickel and chromium 
content of 0.13 percent; and nitrogen less than or equal to 0.006 
percent. This product is commonly referred to as ``Tire Cord Wire 
Rod.''
    Coiled products 7.9 to 18 mm in diameter, with a partial 
decarburization of 75 microns or less in depth and seams no more than 
75 microns in depth; containing 0.48 to 0.73 percent carbon by weight. 
This product is commonly referred to as ``Valve Spring Quality Wire 
Rod.''
    The products under investigation are currently classifiable under 
subheadings 7213.91.3000, 7213.91.4500, 7213.91.6000, 7213.99.0030, 
7213.99.0090, 7227.20.0000, and 7227.90.6050 of the HTSUS. Although the 
HTSUS subheadings are provided for convenience and customs purposes, 
our written description of the scope of this investigation is 
dispositive.

The 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 effective January 1, 1995, (the 
``Act'').

Injury Test

    Because Canada is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (ITC) is required to determine whether imports of steel wire 
rod from Canada materially injure, or threaten material injury to, a 
U.S. industry. On April 30, 1997, the ITC published its preliminary 
determination finding that there is a reasonable indication that an 
industry in the United States is being materially injured or threatened 
with material injury by reason of imports from Canada of the subject 
merchandise (62 FR 23485).

Petitioners

    The petition in this investigation was filed by Connecticut Steel 
Corp., Co-Steel Raritan, GS Industries, Inc., Keystone Steel & Wire 
Co., North Star Steel Texas, Inc., and Northwestern Steel and Wire (the 
petitioners), six U.S. producers of wire rod.

Corporate History

    Sidbec, Inc. was established by the GOQ in 1964. In 1968, Sidbec, 
Inc. acquired Dominion Steel and Coal Corporation Limited, a steel 
producer, and later changed the name to Sidbec-Dosco, Inc. The GOQ 
owned 100 percent of Sidbec, Inc.'s stock, and Sidbec, Inc. owned 100 
percent of Sidbec-Dosco Inc.'s stock, until privatization in 1994.
    In 1976, Sidbec Inc., British Steel Corporation, and Quebec Cartier 
Mining Company entered into a joint venture to mine and produce iron 
ore concentrates and iron oxide pellets. The company they formed was 
Sidbec-Normines Inc. (Normines), of which Sidbec, Inc. owned 50.1%. 
These mining activities were shut down in 1984.
    Sidbec-Dosco (Ispat) operates steel making facilities in 
Contrecoeur, Montreal and Longueuil, Quebec. Until 1987, all of the 
facilities at Longueuil and a good portion of the facilities in 
Contrecouer were owned by Sidbec, Inc. and leased to Sidbec-Dosco, Inc. 
In 1987, Sidbec, Inc. reorganized in order to consolidate all steel-
related assets under its wholly-owned subsidiary Sidbec-Dosco, Inc. On 
August 17, 1994, Sidbec-Dosco, Inc. was sold to Beheer-en 
Beleggingsmaatschappij Brohenco B.V. (Brohenco), which is wholly-owned 
by Ispat-Mexicana, S.A. de C.V. (Ispat Mexicana), thus becoming Sidbec-
Dosco (Ispat). Currently, Sidbec, Inc. continues to be 100% owned by 
the GOQ.
    Because Sidbec, Inc.'s financial statements were consolidated 
including both its mining and steel manufacturing activities, and 
because the alleged subsidies under investigation were granted through 
Sidbec, Inc., we are treating Sidbec, Inc., Sidbec-Dosco, Inc. and 
Sidbec-Normines as one entity for the purposes of determining benefits 
to the subject merchandise from alleged subsidies. For purposes of this 
investigation, we are collectively referring to Sidbec, Inc., Sidbec-
Dosco, Inc., and Sidbec-Normines as ``Sidbec''.

Subsidies Valuation Information

    Period of Investigation: The period for which we are measuring 
subsidies (the ``POI'') is the calendar year 1996.
    Allocation Period: In the past, the Department has relied upon 
information from the U.S. Internal Revenue Service on the industry-
specific average useful life of assets, in determining the allocation 
period for nonrecurring subsidies. See General Issues Appendix appended 
to Final Countervailing Duty Determination; Certain Steel Products from 
Austria (58 FR 37217, 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 the 
allocation methodology. In 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. See British Steel, 929 F. Supp. 426, 439 
(CIT 1996).
    In this investigation, the Department has followed the Court's 
decision in British Steel. Therefore, for the purposes of this 
preliminary determination, the Department has calculated a company-
specific AUL.
    Based on information provided by Sidbec, Inc. and Sidbec-Dosco 
(Ispat) regarding Sidbec's depreciable assets, the Department has 
preliminarily determined the appropriate allocation period for Sidbec. 
We are unable to provide the specific AUL for Sidbec due to the 
proprietary nature of data from Sidbec-Dosco (Ispat). Therefore, for 
the calculation of Sidbec's AUL, see, Memorandum to The File: 
Calculation of AUL Period, dated July 22, 1997, which is in the public 
file (public version) in the Central Records Unit, Room B-099 of the 
Department of Commerce.
    Because we have preliminarily determined that Ivaco and Stelco were 
not the recipients of non-recurring subsidies, we have not calculated 
an AUL for either company.
    Equityworthiness: In analyzing whether a company is equityworthy, 
the Department considers whether or not that company could have 
attracted investment capital from a reasonable, private investor in the 
year of the government equity infusion based on information available 
at that time. In this regard, the Department has consistently stated 
that a key factor for a company in attracting investment capital is its 
ability to generate a reasonable return on investment within a 
reasonable period of time.
    In making an equityworthiness determination, the Department 
examines the following factors, among others:
    1. Current and past indicators of a firm's financial condition 
calculated from that firm's financial statements and accounts;
    2. Future financial prospects of the firm including market studies, 
economic forecasts, and projects or loan appraisals;

[[Page 41935]]

    3. Rates of return on equity in the three years prior to the 
government equity infusion;
    4. Equity investment in the firm by private investors; and
    5. Prospects in the world for the product under consideration.
    For a more detailed discussion of the Department's equityworthiness 
methodology, see General Issues Appendix, (58 FR at 37239 and 37244).
    Petitioners have alleged that Sidbec, Inc. and Sidbec-Dosco, Inc. 
were unequityworthy for the period 1982 through 1992. Therefore, 
petitioners allege that any equity infusions received during those 
years would not have been provided by a reasonable private investor and 
therefore conferred a countervailable benefit within the meaning of 
section 771(5)(E)(i) of the Act. In this case, we initiated an 
investigation of Sidbec-Dosco Inc.'s equityworthiness for the years 
1982 through 1988. See Memorandum from The Team to Joseph A. Spetrini 
dated March 18, 1997, Re: Initiation of Countervailing Duty 
Investigation: Steel Wire Rod from Canada (March Initiation Memo), 
which is in the public file in the Central Records Unit, Room B-099 of 
the Department of Commerce. Additionally, on July 1, 1997, we initiated 
an investigation of Sidbec's equityworthiness for the period 1982 
through 1992. See Memorandum from The Team to Joseph A. Spetrini dated 
July 1, 1997, Re: Initiation of Countervailing Duty Investigation: 
Steel Wire Rod from Canada (July Initiation Memo), which is in the 
public file (public version) in the Central Records Unit, Room B-099 of 
the Department of Commerce. Because we are treating Sidbec, Inc., 
Sidbec-Dosco Inc., and Sidbec-Normines as one entity for the purpose of 
determining benefits to the subject merchandise from alleged subsidies, 
we have limited our analysis of the equityworthiness of Sidbec to a 
review of Sidbec, Inc.'s financial data. See Final Affirmative 
Countervailing Duty Determinations; Certain Steel Products from France 
(58 FR 37304, July 9, 1993).
    Throughout the period 1982 to 1985, Sidbec, Inc. reported 
substantial losses. Although Sidbec, Inc. reported a profit from 1986 
through 1990, the profits were not of such a magnitude to offset the 
substantial losses suffered from 1982 through 1985. Additionally, 
Sidbec, Inc. again sustained substantial losses in 1991 and 1992. 
Return on equity was either negative or not meaningful (due to a 
negative equity balance) in every year from 1984 through 1988, and in 
1991, and 1992. Additionally, for the years 1984 through 1988, 1991, 
and 1992 Sidbec, Inc. had a negative debt-to-equity ratio, which 
indicated the company's liabilities exceed the company's assets. 
Furthermore, Sidbec, Inc.'s debt-to-equity ratio in 1989 and 1990 was 
significantly high. Therefore, as a result of our analysis, we 
preliminarily determine Sidbec, Inc. to be unequityworthy from 1982 to 
1992.
    Equity Methodology: In measuring the benefit from a government 
equity infusion to an unequityworthy company, the Department compares 
the price paid by the government for the equity to a market benchmark, 
if such a benchmark exists, i.e., the price of publicly traded shares 
of the company's stock or an infusion by a private investor at the time 
of the government's infusion (the latter may not always constitute a 
proper benchmark based on the specific circumstances in a particular 
case).
    Where a market benchmark does not exist, the Department has 
determined in this investigation to continue to follow the methodology 
described in the General Issues Appendix. Following this methodology, 
equity infusions made into an unequityworthy firm are treated as 
grants. Using the grant methodology for equity infusions into an 
unequityworthy company is based on the premise that an 
unequityworthiness finding by the Department is tantamount to saying 
that the company could not have attracted investment capital from a 
reasonable investor in the infusion year based on the available 
information.
    Creditworthiness: When the Department examines whether a company is 
creditworthy, it is essentially attempting to determine if the company 
in question could obtain commercial financing at commonly available 
interest rates. If a company receives comparable long-term financing 
from commercial sources, that company will normally be considered 
creditworthy. In the absence of comparable commercial borrowings, the 
Department examines the following factors, among others, to determine 
whether or not a firm is creditworthy:
    1. Current and past indicators of a firm's financial health 
calculated from that firm's financial statements and accounts;
    2. The firm's recent past and present ability to meet its costs and 
fixed financial obligations with its cash flow; and
    3. Future financial prospects of the firm including market studies, 
economic forecasts, and projects or loan appraisals.
    For a more detailed discussion of the Department's creditworhiness 
criteria, See, e.g., Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from France, 58 FR 37304, (July 
9, 1993) and Final Affirmative Countervailing Duty Determination: 
Certain Steel Products from the United Kingdom, 58 FR 37393 (July 9, 
1993).
    Petitioners have alleged that Sidbec, Inc. and Sidbec-Dosco, Inc. 
were uncreditworthy from 1977 through 1993. In this case, we initiated 
an investigation of Sidbec-Dosco, Inc.'s creditworthiness for the years 
1982 and 1984 through 1988. March Initiation Memo. Additionally, on 
July 1, 1997, we initiated an investigation of Sidbec's 
creditworthiness for the period 1984 through 1993. July Initiation 
Memo. We have limited our analysis to Sidbec, Inc.''s creditworthiness 
and to the period 1980-1992, because petitioners did not allege that 
Sidbec, Inc. or Sidbec-Dosco received any subsidies beyond 1992. To 
determine the creditworthiness of Sidbec, Inc. during the period 1982 
(the year of the first alleged subsidy in the AUL period) through 1992 
(the year of the last alleged subsidy in the AUL period), we have 
evaluated certain liquidity and debt ratios, i.e., quick, current, 
times interest earned, and debt-to-equity, on a consolidated basis. For 
the period 1982 through 1985, the company consistently incurred 
substantial losses. Despite the fact that Sidbec, Inc. reported a 
profit from 1986 through 1990, the company was still thinly capitalized 
and had a high debt-to-equity ratio. Additionally, the interest 
coverage ratio was negative for the years 1991 and 1992 and the 
liquidity ratios (i.e., quick and current ratio) indicated that the 
company may have had difficulty in meeting its short-term obligations. 
Based on our analysis, we preliminarily determine that Sidbec, Inc. was 
uncreditworthy for the years 1982 through 1992.
    Discount Rates: Respondents did not provide company-specific 
information relevant to the appropriate discount rates to be used in 
calculating the countervailable benefit for non-recurring grants and 
equity infusions in this investigation. For the preliminary 
determination, we were unable to find long-term corporate rates (i.e., 
loans or bonds). Currently, we are still seeking information on long-
term rates, and, if we find this information, we will consider it in 
our final determination. Accordingly, we have used the long-term 
government bond rate in Canada published in the International Monetary 
Fund (IMF) International Financial Statistics Yearbook as the discount 
rate, plus a risk premium (because we have preliminarily determined 
Sidbec to be

[[Page 41936]]

uncreditworthy), for each year in which there was a non-recurring 
countervailable subsidy.
    Privatization Methodology: In the General Issues Appendix, we 
applied a new methodology with respect to the treatment of subsidies 
received prior to the sale of a company (privatization).
    Under this methodology, we estimate the portion of the purchase 
price attributable to prior subsidies. We compute this by first 
dividing the privatized company's subsidies by the company's net worth 
for each year during a period beginning with the earliest point at 
which non-recurring subsidies would be attributable to the POI (i.e., a 
period equal to the company-specific allocation period) and ending one 
year prior to the privatization. We then take the simple average of the 
ratio of allocable subsidies received by the company in each year over 
the company's net worth in that year. The simple average of the ratios 
of subsidies to net worth serves as a reasonable surrogate for the 
percent that subsidies constitute of the overall value (i.e., net worth 
of the company). Next, we multiply the average ratio by the purchase 
price to derive the portion of the purchase price attributable to 
repayment of prior subsidies. Finally, we reduce the benefit streams of 
the prior subsidies by the ratio of the repayment amount to the net 
present value of all remaining benefits at the time of privatization.
    In the current investigation, we are analyzing the privatization of 
Sidbec-Dosco in the year 1994.
    Based upon our analysis of the petition and the responses to our 
questionnaires, we determine the following:

I. Programs Preliminarily Determined To Be Countervailable

A. 1988 Debt-to-Equity Conversion

    Petitioners allege that Sidbec-Dosco, Inc. received a debt-to-
equity conversion from either the GOC or the GOQ in 1988 based on 
Sidbec-Dosco, Inc.'s 1988 Annual Report. In its supplemental response, 
Sidbec-Dosco (Ispat) stated that a portion of Sidbec Inc.'s debt was 
converted into Sidbec, Inc. capital stock in 1988. Sidbec-Dosco (Ispat) 
stated that the debt consisted of four loans provided to Sidbec, Inc. 
by the GOQ during the period 1982-1985, plus accrued interest. Sidbec-
Dosco (Ispat) explained that every two years the GOQ had extended the 
maturity date for these loans for another two years. According to the 
GOQ, it converted four of Sidbec, Inc.'s debt instruments into equity 
in Sidbec Inc. in 1988 in order to improve Sidbec-Dosco Inc.'s economic 
profile, for the purpose of making it more attractive for 
privatization, partnership, or investment. In the GOQ Act which 
authorized this debt conversion, Sidbec, Inc. was authorized to acquire 
an equivalent amount in shares of Sidbec-Dosco, Inc.
    We have concluded that, consistent with our equity methodology, 
benefits to Sidbec, Inc. occurred at the point when the debt 
instruments (i.e., loans) were converted to capital stock. As discussed 
above, we have preliminarily determined that Sidbec, Inc. was 
unequityworthy from 1982 through 1992. As a result, we consider the 
conversion of debt to capital stock in 1988 to constitute an equity 
infusion inconsistent with the usual investment practice of private 
investors.
    When receipt of benefits under a program is not contingent upon 
exportation, the Department must determine whether the program is 
specific to an enterprise or industry, or group of enterprises or 
industries. Under the specificity analysis, the Department examines 
both whether a government program is limited by law to a specific 
enterprise or industry, or group thereof (i.e., de jure specificity), 
and whether the government program is in fact limited to a specific 
enterprise or industry, or group thereof (i.e., de facto specificity), 
See Section 771(5A)(D) of the Act. We preliminarily determine the 1988 
debt-to-equity conversion to be specific, because it was provided to a 
specific enterprise or industry, Sidbec, Inc.
    For these reasons, we preliminarily determine that the 1988 debt-
to-equity conversion constitutes a countervailable subsidy within the 
meaning of section 771(5) of the Act.
    Consistent with the equity methodology, we followed our standard 
declining balance grant methodology for allocating the benefits from 
the equity infusion stemming from the debt-to-equity conversion. We 
then reduced the benefit stream by applying the privatization 
calculation described in the Privatization section of the General Issue 
Appendix, 58 FR at 37262-3. We divided the benefit by Sidbec-Dosco 
(Ispat) total sales. On this basis, we calculated an estimated net 
subsidy for this program of 3.31 percent ad valorem for Sidbec-Dosco 
(Ispat).

B. 1984-1992 Equity Infusions

    According to information provided in Sidbec-Dosco (Ispat)'s 
response, the GOQ provided an infusion of capital to Sidbec Inc. in 
each year from 1984 to 1992. Additionally, the GOQ stated that it 
assumed the responsibility for certain financial charges of Sidbec-
Normines, which had been shut down in 1984, and paid those charges 
through contributions to Sidbec, Inc. as they came due. Since we have 
preliminarily determined that Sidbec Inc. was unequityworthy from 1982 
through 1992, we consider that these equity infusions were inconsistent 
with the usual investment practice of private investors and constituted 
specific financial contributions in which a benefit was conferred.
    Furthermore, the Department has stated in the past that ``subsidies 
do not diminish or disappear upon the closure of certain facilities but 
rather are spread throughout, and benefit, the remainder of the 
company's operations.'' General Issues Appendix, 58 FR at 37269. 
Therefore, given that these equity infusions relate to Sidbec Inc.'s 
closed mining operations, we preliminarily determine that these equity 
infusions benefit the subject merchandise.
    We analyzed whether the receipt of these equity infusions were 
specific ``in law or fact'' within the meaning of section 771(5A) of 
the Act. We preliminarily determine these equity infusions to be 
specific, because they were provided to a specific enterprise or 
industry, Sidbec, Inc.
    For these reasons, we preliminarily determine that the equity 
infusions received by Sidbec from 1984 to 1992 constitutes 
countervailable subsidies within the meaning of section 771(5) of the 
Act.
    Consistent with the equity methodology, we followed our standard 
declining balance grant methodology for allocating the benefits from 
these equity infusions. We then reduced the benefit stream by applying 
the privatization calculation described in the Privatization section of 
the General Issues Appendix, 58 FR at 37262-3. We divided the total 
benefit by Sidbec-Dosco (Ispat) total sales. On this basis, we 
calculated an estimated net subsidy for this program of 5.25 percent ad 
valorem for Sidbec-Dosco (Ispat).

C. 1983-1992 Grants

    Based on information provided in Sidbec-Dosco (Ispat)'s responses, 
Sidbec Inc. received a grant in each year from 1983 to 1992 from the 
GOQ to compensate for the interest expenses incurred by Sidbec, Inc. to 
finance the discontinued operations of its mining activities. The 
receipt of these grants occurred as follows: (1) Sidbec, Inc. paid its 
share of the interest and principal, as it came due, on loans that were 
taken out to finance Sidbec-Normines; (2) Sidbec, Inc. then issued 
statements to the GOQ for these

[[Page 41937]]

amounts relating to the discontinued mining operations; and (3) the 
GOQ, after obtaining the necessary budgetary authority, issued checks 
to Sidbec, Inc. to cover these expenses. According to the GOQ, to 
process a request for these funds, approval was needed from four 
agencies (i.e., the Quebec Ministry of Industry and Commerce, the 
Treasury Board, the National Assembly and the Executive Counsel). Once 
the approval process was completed, the GOQ issued a decree providing 
funding to Sidbec, Inc. (or its subsidiaries). See July 3, 1997 GOQ 
response, Exhibit H.
    As these grants related to Sidbec Inc.'s closed mining operations, 
we preliminarily determine that they benefitted Sidbec Inc.'s remaining 
operations, which include the subject merchandise. See General Issues 
Appendix, 58 FR at 37269.
    We analyzed whether the receipt of these grants was specific ``in 
law or fact,'' within the meaning of section 771(5A) of the Act. These 
grants were not received as part of any wider government program. 
Instead, they were provided by the GOQ for the sole purpose of paying 
debt incurred by Sidbec-Normines, Sidbec, Inc.'s unsuccessful mining 
operation. Therefore, we preliminarily determine these grants to be 
specific under section 771(5A)(D) of the Act.
    For these reasons, we preliminarily determine that the grants 
Sidbec, Inc. received constitute countervailable subsidies within the 
meaning of section 771(5) of the Act.
    The GOQ has claimed these benefits were recurring in nature, in 
that they were granted automatically based on Quebec's having 
previously assumed responsibility for the finance charges pertaining to 
the discontinued mining operations. However, for each year's grant to 
cover the finance charges, the GOQ had to seek budgetary authority 
prior to issuing Sidbec's grant. Therefore, government approval was 
necessary prior to receipt of each individual subsidy. Moreover, the 
benefits from the program were clearly exceptional, and once the 
financial charges were paid off, the program did not continue into the 
future. The Department has stated that ``the element of ``government 
approval'' relates to the issue of whether the program provides 
benefits automatically, essentially as an entitlement, or whether it 
requires a formal application and/or specific government approval prior 
to the provision of each yearly benefit. The approval of benefits under 
the latter type of program cannot be assumed and is not automatic.'' 
General Issues Appendix, 58 FR at 37226. Therefore, we preliminarily 
determine these grants to be non-recurring benefits and have allocated 
them over Sidbec's AUL.
    To calculate the countervailable subsidy, we followed our standard 
declining balance grant methodology, as discussed above. We reduced the 
benefit stream by applying the privatization calculation described in 
the Privatization section of the General Issues Appendix, 58 FR at 
37262-3. We divided the benefit attributable to the POI by Sidbec-Dosco 
(Ispat) sales during the same period. On this basis, we determine the 
countervailable subsidy for this program to be 0.99 percent ad valorem 
for Sidbec-Dosco (Ispat).

II. Programs Preliminarily Determined To Be Not Countervailable

A. Canadian Steel Trade Employment Congress Skill Training Program

    The GOC, through the Human Resources Development Canada (HRDC) and 
provincial regional governments provide financial support to private-
sector-led human resource projects through the Sectoral Partnerships 
Initiative (SPI). SPI has been active in over eighty Canadian 
industrial sectors, including steel through the Canada Steel Trade and 
Employment Congress (CSTEC). CSTEC's activities are divided into two 
types of assistance: 1) worker adjustment assistance, for unemployed 
steel workers; and 2) skills training assistance, for currently 
employed workers.
    With regard to the worker adjustment assistance, funds flowing from 
HRDC do not go to the companies, but rather to unemployed workers in 
the form of assistance for retraining costs or income support.
    With regard to training, the GOC maintains that CSTEC provides 
funds only for what it describes as ``additional training.'' Additional 
training is training that is over-and-above ``established training'; 
essentially, it is training the company would provide even without 
CSTEC funding. The amount of ``additional training'' required 
determines the amount of CSTEC funding from the government. The GOC 
matches 50 percent of the amount of ``additional training'' in the 
annual training plans and budgets up to the maximum allowable 
contribution. However, other information in the GOC's questionnaire 
response suggests that the GOC funding supports both ``established 
training'' and ``additional training''; the cost of the ``additional 
training'' is merely an element in the formula which determines the 
GOC's funding level. In addition, regardless of whether the company 
would have provided the training at issue without CSTEC funding, it 
remains clear that this program provides for the training of currently 
employed steel workers and therefore benefits the steel industry.
    According to the GOC and CSTEC documents on the record, CSTEC rules 
prohibit the use of CSTEC funds for assistance that the companies are 
required to provide by law or under a collective bargaining agreement, 
or would have provided in the absence of CSTEC funding. Based on the 
record information, we preliminarily determine that funds received by 
Sidbec-Dosco (Ispat), Stelco and Ivaco from CSTEC for worker adjustment 
and training purposes did not provide countervailable benefits during 
the POI, as record evidence shows these companies were not relieved of 
any obligations.

B. 1987 Grant to Sidbec-Dosco, Inc.

    Petitioners alleged that in 1987, Sidbec-Dosco, Inc. received a 
grant from the GOQ. In its questionnaire response, Sidbec-Dosco (Ispat) 
stated that the GOQ did not provide a contribution in 1987. 
Additionally, the GOQ stated in its questionnaire response that it did 
not provide a grant July 24, 1997 to Sidbec-Dosco, Inc. in 1987.
    Sidbec-Dosco (Ispat) described the circumstances concerning the 
1987 debt-to-equity conversion in its business proprietary response of 
July 2, 1997. Based on the information provided therein, (see, the 
Department's Memorandum to The File: Programs that the Department of 
Commerce has Determined to be Non-Countervailable, dated July 28, 1997 
which is in the public file (public version) in the Central Records 
Unit, Room B-099 of the Department of Commerce), we preliminarily 
determine that no countervailable benefits were conferred through this 
program.

C. 1987 Debt-to-Equity Conversion

    Petitioners alleged that, in 1987, Sidbec-Dosco, Inc. received an 
equity infusion from either the GOC or GOQ. Specifically, petitioners 
stated that Sidbec, Inc. (which was wholly-owned by the GOQ) converted 
loans to Sidbec-Dosco, Inc. into Sidbec-Dosco, Inc. shares. Both the 
GOC and the GOQ stated in their respective responses that they did not 
provide a debt-to-equity conversion for Sidbec-Dosco, Inc. or Sidbec, 
Inc. in 1987.
    Sidbec-Dosco (Ispat) described the circumstances concerning the 
1987 debt-to-equity conversion in its business proprietary response of 
July 2, 1997. Based on the information provided therein, (see, the 
Department's

[[Page 41938]]

Memorandum to The File: Programs that the Department of Commerce has 
Determined to be Non-Countervailable, dated July 28, 1997 which is in 
the public file (public version) in the Central Records Unit, Room B-
099 of the Department of Commerce), we preliminarily determine that no 
countervailable benefits were conferred through this program.

III. Programs Preliminarily Determined To Be Not Used

A. Industrial Development of Quebec

    The Industrial Development of Quebec (IDQ) is a law administered by 
the Societe de Developpement Industriel du Quebec (SDI), a Quebec 
agency that funds a wide range of industrial development projects in 
many industrial sectors. Under Article 2(a) of the IDQ, SDI provided 
funding to help companies utilize modern technologies in order to 
``increase efficiency and exploit the natural resources of Quebec.'' 
See GOQ July 3, 1997 response at page 12. Specifically, grants are in 
the form of interest rebates to finance the project. SDI would review a 
company's application to determine whether the project met the purpose 
of Article 2(a) and whether the company had the financial and technical 
ability to carry out the project. The GOQ reported that the IDQ was 
available to any manufacturing company in Quebec. The criteria for 
selection were: (1) the rate of growth in the product market that the 
proposed project would serve; (2) the productivity of the firm applying 
for the grant; and (3) the potential for the project to serve markets 
outside of Quebec. However, in 1982, GOQ rescinded Article 2(a) 
authorizing SDI to provide these grants.
    Ivaco received funding in 1984 and 1985 which had been authorized 
under Article 2(a) prior to the program's rescission in 1982. With 
respect to the grants received by Ivaco under this program, we analyzed 
the total amount of funding Ivaco received in each year, and we have 
determined that the benefits Ivaco recovered under this program for 
each year constituted a de minimis portion (i.e., less than 0.5 
percent) of total sales value, and therefore should be expensed in each 
year they were received. Accordingly, we preliminarily determine that 
this program has not conferred a countervailable subsidy to Ivaco 
during the POI.

B. Contributed Surplus

    On July 1, 1997, we initiated an investigation on petitioners' 
allegation that C$ 51.7 million in contributed surplus constituted a 
countervailable subsidy. On July 16, 1997, we received Sidbec-Dosco 
(Ispat)'s response to our questionnaire. Sidbec-Dosco (Ispat) stated 
that this contributed surplus was related to a capital expenditure 
program for fixed assets, and all of the assistance was received prior 
to 1980. Additionally, the GOQ stated in its response that Sidbec, Inc. 
received these funds from the GOQ and the GOC prior to Sidbec, Inc.'s 
AUL period. The GOC stated in its response that its database does not 
contain any record of financial assistance provided to Sidbec, Inc. in 
1982 or 1983.
    Therefore, based on record information about this alleged subsidy, 
we preliminarily determine that these funds did not provide 
countervailable benefits during the POI.

C. Payments Against Accumulated Grants Receivable

    On July 1, 1997, we initiated an investigation on petitioners' 
allegation that C$ 43.8 million in Payments against accumulated grants 
receivable constituted a countervailable subsidy. On July 16, 1997, we 
received Sidbec-Dosco (Ispat)'s response to our questionnaire. Sidbec-
Dosco (Ispat) stated that these grants receivable are included in the 
amount of grants that went to the discontinued mining operations of 
Sidbec-Normines.
    Therefore, based on record information about these grants 
receivable, we preliminarily determine that these funds did not provide 
countervailable benefits during the POI.

IV. Programs for Which Additional Information Is Required

A. 1982 Assistance to Sidbec-Dosco, Inc.

    Petitioners alleged that in 1982, Sidbec-Dosco, Inc. received an 
infusion of emergency funds, either in the form of a grant or an equity 
infusion, from the GOQ. In its questionnaire and supplemental 
questionnaire responses, Sidbec-Dosco (Ispat) stated that neither 
Sidbec-Dosco, Inc. nor Sidbec, Inc. received funds in the form of 
equity infusions from either the GOC or the GOQ during 1982. Likewise, 
both the GOC and the GOQ stated in their respective responses that they 
did not provide any infusions in the form of equity to either Sidbec-
Dosco, Inc. or Sidbec, Inc. in 1982. However, during our review of the 
questionnaire responses, the GOC, GOQ, Sidbec, Inc. and Sidbec-Dosco 
(Ispat) did not provide an affirmative statement stating the neither 
the GOC or GOQ provided grants to either Sidbec, Inc. or Sidbec-Dosco, 
Inc. in 1982. Therefore, we are still seeking information on this 
alleged program and the countervailability of this program will be 
addressed in our final determination.
Verification
    In accordance with section 782(i) of the Act, we will verify the 
information submitted by respondents prior to making our final 
determination.
Suspension of Liquidation
    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated individual rates for each of the companies under 
investigation. As noted above, Ivaco and Stelco reported that they both 
received funds under the CSTEC program. However, we have preliminarily 
determined that the CSTEC program is not countervailable. Additionally, 
we have determined that the IDQ program did not constitutes a 
countervailable subsidy, because the benefit would be de minimis.
    To calculate the all others rate, we weight-averaged the individual 
company rates by each company's exports of the subject merchandise to 
the United States. However, because Stelco and Ivaco's rates are zero, 
we are using Sidbec-Dosco (Ispat)'s rate as the All Others rate.
    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of steel 
wire rod from Canada, except those of Ivaco and Stelco, which are 
entered, or withdrawn from warehouse, for consumption on or after the 
date of the publication of this notice in the Federal Register, and to 
require a cash deposit or bond for such entries of the merchandise in 
the amounts indicated below. Because the estimated net subsidy for 
Ivaco and Stelco is de minimis they are exempt from the suspension of 
liquidation. This suspension will remain in effect until further 
notice.

------------------------------------------------------------------------
                                                                   Ad   
                                                                valorem 
                   Manufacturers/exporters                        rate  
                                                               (percent)
------------------------------------------------------------------------
Sidbec-Dosco (Ispat).........................................       9.55
Ivaco, Inc...................................................          0
Stelco, Inc..................................................          0
All Others...................................................       9.55
------------------------------------------------------------------------

ITC Notification
    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all non-privileged and nonproprietary information relating to this 
investigation. We will allow the ITC

[[Page 41939]]

access to all privileged and business proprietary information in our 
files, provided the ITC confirms that it will not disclose such 
information, either publicly or under an administrative protective 
order, without the written consent of the Assistant Secretary for 
Import Administration.
    If our final determination is affirmative, the ITC will make its 
final determination within 45 days after the Department makes its final 
determination.
Public Comment
    In accordance with 19 CFR 355.38, we will hold a public hearing, if 
requested, to afford interested parties an opportunity to comment on 
this preliminary determination. The hearing will be held on September 
22, 1997, at the U.S. Department of Commerce, Room 3708, 14th Street 
and Constitution Avenue, N.W., Washington, D.C. 20230. Individuals who 
wish to request a hearing must submit a written request within 30 days 
of the publication of this notice in the Federal Register to the 
Assistant Secretary for Import Administration, U.S. Department of 
Commerce, Room 1874, 14th Street and Constitution Avenue, N.W., 
Washington, DC 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number of participants; (3) the 
reason for attending; and (4) a list of the issues to be discussed. In 
addition, eight copies of the business proprietary version and three 
copies of the nonproprietary version of the case briefs must be 
submitted to the Assistant Secretary no later than September 8, 1997. 
Eight copies of the business proprietary version and three copies of 
the nonproprietary version of the rebuttal briefs must be submitted to 
the Assistant Secretary no later than September 15, 1997. An interested 
party may make an affirmative presentation only on arguments included 
in that party's case or rebuttal briefs. Written arguments should be 
submitted in accordance with 19 CFR 355.38 and will be considered if 
received within the time limits specified above. 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. 
If this investigation proceeds normally, we will make our final 
determination by October 14, 1997.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Date: July 28, 1997.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-20490 Filed 8-1-97; 8:45 am]
BILLING CODE 3510-DS-P