[Federal Register Volume 62, Number 149 (Monday, August 4, 1997)]
[Notices]
[Pages 41945-41951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20492]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-428-823]


Preliminary Affirmative Countervailing Duty Determination: Steel 
Wire Rod From Germany

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

EFFECTIVE DATE: August 4, 1997.

FOR FURTHER INFORMATION CONTACT: Cindy Thirumalai or Daniel Lessard, 
Office of Antidumping/Countervailing

[[Page 41946]]

Duty Enforcement, Group 1, Import Administration, U.S. Department of 
Commerce, Room 1874, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone (202) 482-4087 or 482-1778 
respectively.
PRELIMINARY DETERMINATION: The Department preliminarily determines that 
countervailable subsidies are being provided to Saarstahl AG 
(Saarstahl) and Ispat Hamburger Stahlwerke GmbH (IHSW), producers and 
exporters of steel wire rod from Germany. We have also preliminarily 
determined that Walzdraht Hochfeld GmbH (WHG) received de minimis 
subsidies and that we have insufficient information at this time to 
make a determination with respect to Brandenburger Elektrostahlwerke 
GmbH (BES). For information on the estimated countervailing duty rates, 
please 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 2, 1997, we issued countervailing duty questionnaires to 
the Government of the Federal Republic of Germany (GOG), the Government 
of the Free and Hanseatic City of Hamburg (GOH), the Government of 
Saarland (GOS), Saarstahl, BES, IHSW, and WHG. We received responses to 
our questionnaires on May 27, 1997. We issued supplemental 
questionnaires to parties in June and July for which responses were 
receive in the same months. On May 2, 1997, we postponed the 
preliminary determination in this investigation until July 28, 1997 (62 
FR 25172; May 8, 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.
    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 Germany is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the ITC is required to determine 
whether imports of steel wire rod from Germany 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 Germany 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.

Subsidies Valuation Information

Period of Investigation

    The period for which we are measuring subsidies (the ``POI'') is 
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 to determine the allocation period for nonrecurring 
subsidies. See General Issues Appendix appended to Final Affirmative 
Countervailing Duty Determination; Certain Steel Products from Austria 
(58 FR 37217, 37226; July 9, 1993) (General Issues Appendix). 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 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).
    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 company-
specific AULs.
    Based on information provided by Saarstahl and IHSW regarding the 
companies' depreciable assets, the Department has preliminarily 
determined that the appropriate allocation period for Saarstahl and 
IHSW is 10 years. The calculation of allocation periods for WHG and BES 
was unnecessary.

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:


[[Page 41947]]


    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.
    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 creditworthiness 
methodology, see, e.g., Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from France, 58 FR 37304 (July 9, 
1993) or Final Affirmative Countervailing Duty Determination: Certain 
Steel Products from the United Kingdom, 58 FR 37393 (July 9, 1993).
    Petitioners have alleged that Saarstahl was uncreditworthy in 1989 
and between 1993 and 1996. They further allege that Hamburger 
Stahlwerke GmbH (HSW) was uncreditworthy in 1984 and 1994. Because 
neither company received long-term financing in the relevant years, we 
examined other factors to determine the firms' creditworthiness. In 
making our determinations, we examined Saarstahl's and HSW's current, 
quick, and interest/debt coverage ratios in addition to their net 
profit/loss for the three preceding years. Both Saarstahl and HSW 
experienced operating losses in those years (except 1988 for 
Saarstahl), and the financial ratios demonstrate that both companies 
were in poor financial health. The current ratio (current assets 
divided by current liabilities) measures the margin of safety available 
to cover any drop in the value of current assets, while the quick ratio 
(current assets excluding inventory and prepaids divided by current 
liabilities) shows the company's ability to pay its short-term 
liabilities. For both companies, the ratios were very small, 
demonstrating their difficulty in meeting their short-term liabilities 
and interest expenses. Furthermore, the interest/debt coverage ratios 
(net income plus interest expense plus taxes divided by interest 
expense), highlighted the firms' inability to meet existing interest 
payments. We preliminarily determine that Saarstahl was uncreditworthy 
in 1989 and HSW was uncreditworthy in 1994.
    Because Saarstahl did not receive any countervailable benefits from 
the GOS or the GOG following its 1993 bankruptcy, we do not reach the 
question of Saarstahl's creditworthiness for this period. Moreover, 
because IHSW's allocation period is ten years, we are not examining 
subsidies received prior to 1987. Therefore, we do not need to analyze 
HSW's creditworthiness for that period.

Discount Rates

    Saarstahl reported that German banks set interest rates for long-
term, fixed rate commercial loans in reference to the yield earned on 
public bonds. The company explained that in establishing the interest 
rate for the commercial loans the banks normally add a margin of zero 
percent to two percent to the yield on public offerings depending upon 
the borrower's creditworthiness. Because neither Saarstahl nor IHSW 
provided a company-specific discount rate, we used German public bond 
rate plus a spread of two percent as the discount rate for Saarstahl in 
1989 and IHSW in 1994. This rate represents the highest long-term 
interest rate which we could locate. For Saarstahl in 1989 and IHSW in 
1994, we added a risk premium to establish the uncreditworthy discount 
rate.

Privatization

    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) or the spinning-off of a productive unit.
    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 the period beginning with the earliest point at 
which non-recurring subsidies would be attributable to the POI (i.e., 
in this case 1987 for Saarstahl and IHSW) and ending one year prior to 
the privatization. We then take the simple average of the ratios. The 
simple average of these ratios of subsidies to net worth serves as a 
reasonable surrogate for the percent that subsidies constitute of the 
overall value 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.
    With respect to spin-offs, consistent with the Department's 
position regarding privatization, we analyze the spin-off of productive 
units to assess what portion of the sale price of the productive unit 
can be attributable to the repayment of prior subsidies. To perform 
this calculation, we first determine the amount of seller's subsidies 
that the spun-off productive unit could potentially take with it. To 
calculate this amount, we divide the value of the assets of the spun-
off unit by the value of the assets of the company selling the unit. We 
then apply this ratio to the net present value of the seller's 
remaining subsidies. We next estimate the portion of the purchase price 
going towards repayment of prior subsidies in accordance with the 
privatization methodology outlined above.
    In the current investigation, we are analyzing the privatization of 
Saarstahl in 1989 and subsequent spin-off in 1994. Additionally, we are 
investigating the privatization of IHSW in 1994.
    Based upon our analysis of the petition and the responses to our 
questionnaires, we preliminarily determine the following:

I. Programs Preliminarily Determined To Be Countervailable

A. Saarstahl

1. Forgiveness of Saarstahl's Debt in 1989
    During the period 1978 to 1989, Saarstahl and its predecessor 
companies received massive amounts of assistance from the GOS and GOG. 
Repayment of these funds was contingent upon Saarstahl returning to 
profitability and earning a profit above and beyond the losses 
accumulated after 1978. This contingent repayment obligation was known 
as a Ruckzahlungsverpflichtung or ``RZV.''
    In 1989, the GOS reached an agreement with Usinor-Sacilor to 
combine Saarstahl with AD der Dillinger Huttenwerke (Dillinger) under a 
holding company, DHS-Dillinger Hutte Saarstahl AG (DHS). Pursuant to 
the combination agreement and as a condition for sale, in 1989 the GOG 
and GOS entered into a debt forgiveness contract (Entschuldungsvertrag, 
or ``EV'') which effectively forgave all the outstanding repayment 
obligations owed by Saarstahl to the Governments (i.e., a total of DM 
3.945 billion in debt was forgiven). The EV specified, however, that if 
Saarstahl went bankrupt, the GOG and GOS claims could be revived, but 
their claims would be subordinated to those of all other creditors.
    After several years of unprofitable operation, Saarstahl filed for 
bankruptcy in 1993 under the German Bankruptcy Regulations 
(Konkursordnung). In 1994, the GOS bought Saarstahl back from Usinor 
Sacilor for DM 1. At the time of its bankruptcy, Saarstahl's 
liabilities exceeded its assets by a factor of four, not including its 
liabilities to the GOG and GOS. Both Governments filed

[[Page 41948]]

claims against the Saarstahl bankruptcy estate based on the RZV debt 
that was conditionally forgiven in 1989. These EV-related claims were 
rejected by the bankruptcy trustee as invalid in 1995. The GOG and GOS 
chose not to appeal the rejection of their bankruptcy claims, on the 
grounds that the subordination of their claims made the likelihood of 
recovery very small, and not worth the high cost of litigating the 
matter.
    In the Final Affirmative Countervailing Duty Determination: Certain 
Hot Rolled Lead and Bismuth Carbon Steel Products from Germany, 58 FR 
6233, 6234 (January 27, 1993) (Lead and Bismuth), we found that 
Saarstahl's RZV and related government debt were effectively forgiven 
by the 1989 EV, thus conferring a countervailable benefit on Saarstahl 
as of 1989. Respondents have argued that the attempt to revive the RZVs 
by the GOG and the GOS disqualifies the signing of the 1989 EV as the 
countervailable event. However, as noted above, the EV-related 
bankruptcy claims of the GOS and GOG were rejected as invalid by the 
bankruptcy trustee. Thus, the 1993 bankruptcy proceeding left 
completely undisturbed the provisions of the 1989 EV agreement. 
Respondents further argue that the RZVs were worthless at the time of 
the EV. However, this argument was rejected in Lead and Bismuth (58 FR 
6233, 6237) and the Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from Germany, 58 FR 37315, 37323 
(July 9, 1993) (Certain Steel) and the attendant litigation. See 
Saarstahl AG v. United States, 1997 CIT LEXIS 62, slip op. 97-67 (CIT 
1997) and British Steel plc v. United States, 936 F. Supp. 1053, 1069-
70 (CIT 1996).
    Therefore, we preliminarily determine that the debt forgiveness 
constitutes a financial contribution in 1989 within the meaning of 
section 771(5) of the Act. It is a direct transfer of funds from the 
GOG and GOS providing a benefit in the amount of the debt forgiveness, 
DM 3.945 billion. Because it was a one time event, we consider it to be 
a non-recurring grant. Additionally, we analyzed whether the debt 
forgiveness provided to Saarstahl was specific ``in law or in fact,'' 
within the meaning of section 771(5A) of the Act. Consistent with Lead 
and Bismuth (58 FR 6233) and Certain Steel (58 FR 37315), we find that 
the debt forgiveness provided to Saarstahl was limited to a specific 
enterprise or industry because it was provided to one company.
    To calculate the countervailable subsidy, we used our standard 
declining balance grant methodology. The amount of subsidy allocated to 
the POI was adjusted in accordance with our privatization methodology 
(described above) to reflect the privatization of Saarstahl in 1989 and 
the spin-off of Saarstahl from DHS 1994. We then divided the portion of 
the benefit attributable to the POI by the total sales of Saarstahl 
during the same period. On this basis, we determine the countervailable 
subsidy for this program to be 16.92 percent ad valorem for Saarstahl.
2. Assurance of Liquidity Provided to Private Banks by the GOS
    Toward the end of 1985, the GOS presented a long-term restructuring 
plan for Saarstahl to Saarstahl's creditors and requested that they 
forgive loans in the amount of DM 350 million. In a February 20, 1986 
letter from the banks to the GOS, the banks agreed to forgive DM 217.33 
million of debt owed to them by Saarstahl (DM 216.82 of which was 
forgiven in 1989), if the GOG and GOS fulfilled certain prerequisites. 
Two of the prerequisites were that the Governments forgive all debt 
owed to them by Saarstahl and that the GOS secure the future liquidity 
of Saarstahl. In an April 4, 1986 letter from the Governor of Saarland 
responding to the banks, the GOS agreed to forgive all debts owed to it 
by Saarstahl and to secure the liquidity of Saarstahl as it had in the 
past.
    We preliminarily determine that in assuring the future liquidity of 
Saarstahl the GOS provided a financial contribution to Saarstahl. 
Specifically, this assurance granted a ``potential direct transfer of 
funds'' within the meaning of section 771(5). By assuring the future 
liquidity of Saarstahl, the GOS effectively guaranteed that Saarstahl 
would have the funds to satisfy its future obligations, which included 
the outstanding debt owed to the banks. This assurance was consistent 
with the GOS's long history of supporting Saarstahl. We also 
preliminarily determine that the assurance was provided to a specific 
enterprise or industry, Saarstahl.
    While the GOS's assurance of future liquidity resembled a loan 
guarantee, it differed in certain important aspects from loan 
guarantees typically examined by the Department. First, the GOS did not 
promise to take responsibility for payment of the debt owed to the 
banks if Saarstahl failed to perform. Rather, the GOS reached an 
agreement with the private banks whereby the GOS would maintain 
Saarstahl's liquidity (i.e., Saarstahl's ability to service its 
outstanding debts). Additionally, other characteristics of a typical 
loan guarantee which potentially confer a benefit were not manifested 
in the liquidity assurance. For example, the assurance did not 
necessarily affect the amount that Saarstahl paid on the outstanding 
loans in the form of fees and interest costs--the typical indicators of 
the benefit from a loan guarantee. Rather, the consequence of the 
assurance was that Saarstahl received partial debt forgiveness from the 
banks. Because of this, we are calculating the benefit conferred by the 
liquidity assurance as the amount of debt forgiven.
    To calculate the countervailable subsidy, we followed the 
methodology described in the Forgiveness of Saarstahl's Debt in 1989 
section, above. We then divided the portion of the benefit attributable 
to the POI by the total sales of Saarstahl during the same period. On 
this basis, we determine the countervailable subsidy for this program 
to be 0.93 percent ad valorem for Saarstahl.

B. IHSW

994 IHSW Debt Forgiveness
    In 1984, Hamburgische Landesbank Girozentrale (HLB), a bank wholly 
owned by the GOH, provided HSW with a line of credit in the amount of 
DM 130 million. The line of credit was granted for a period of one year 
and was renewed every year until 1994. Pursuant to a Kreditauftrag 
between the GOH and HLB, in the event that HSW failed to service this 
debt, the GOH was obligated to compensate the HLB for 60 percent of the 
credit line (i.e., DM 78 million). In 1992 and 1993, HSW suffered 
significant losses, and the HLB refused to extend the credit line. At 
that point, the GOH instructed the HLB to extend HSW's line of credit, 
and the GOH and HLB entered into an agreement extending the 
Kreditauftrag so that the GOH assumed responsibility for the total 
amount loaned to HSW under the line of credit. At the beginning of 
1994, the line of credit totaled approximately DM 174 million. While 
the Department will not consider a loan provided by a government-owned 
bank to be a loan provided by the government, per se, the actions taken 
by the GOH in 1984, 1992, and 1993 pursuant to the Kreditauftrag 
clearly demonstrate that the HLB (a bank wholly-owned by the GOH) was 
acting on behalf of the GOH in this instance.
    In 1994, HSW was sold to Venuda Investments B.V. (Venuda), IHSW's 
parent company. At the time of privatization, the line of credit 
totaled DM 167.5. Under the terms of the sale, Venuda paid DM 10 
million for HSW.

[[Page 41949]]

With respect to the line of credit, DM 154 million of the total was 
sold to Venuda for approximately DM 60 million according to a formula 
based on the net current asset value of HSW in 1994 (i.e., the 
difference between current assets and liabilities (less the debt owed 
to HLB)). Although the sale of HSW was structured to have two 
components, the sale of shares and the sale of debt, we have treated 
this as a single transaction and we consider the payments made by 
Venuda (i.e., DM 10 million and DM 60 million) to represent the price 
paid for HSW. The remainder of the credit line, DM 13.4 million 
representing ``non-cash'' deposits (e.g., LCs, drafts, etc.), was 
repaid to HLB by HSW in early 1995.
    Based on our view of the sale of HSW, i.e., that the proceeds from 
both the share and debt purchase comprise the sale price, we 
preliminarily determine that in the year that HSW was sold the DM 154 
million owed by HSW under the line of credit was forgiven. This debt 
forgiveness constitutes a financial contribution in the form of a 
direct transfer of funds from the GOH providing a benefit in the amount 
of DM 154 million in 1994. Moreover, we analyzed whether the program is 
specific ``in law or in fact,'' within the meaning of section 771(5)(A) 
of the Act. Since the debt forgiveness was only provided to one 
company, we preliminarily determine that it is limited to a specific 
enterprise.
    To calculate the countervailable subsidy, we used our standard 
grant methodology. Although HSW was sold in 1994, the company received 
no nonrecurring subsidies prior to the year of privatization and within 
its allocation period (i.e., during the period 1987 through 1993). 
Consequently, under our privatization methodology none of the purchase 
price paid to the GOH constitutes repayment of prior subsidies. Thus, 
we allocated the subsidy according to our grant methodology and divided 
the benefit attributable to the POI by the total sales of IHSW during 
the same period. On this basis, we determine the countervailable 
subsidy for this program to be 5.54 percent ad valorem for IHSW.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Saarstahl

Worker Assistance Under Article 56(2)(b)
    Under Article 56(2)(b) of the ECSC Treaty, persons employed in the 
iron, steel and coal industries who lose their jobs may receive 
assistance for social adjustment. This assistance is provided to 
workers affected by restructuring measures, particularly workers 
withdrawing from the labor market into early retirement and workers 
forced into unemployment. The ECSC disburses assistance under this 
program on the condition that the affected country makes an equivalent 
contribution. In 1993 through 1995, a supplementary assistance program 
was available to help displaced steel workers affected by massive 
restructuring in the industry. The supplementary program provided 
additional payments for early retirement (max. ECU 5,000/worker), 
redeployment measures (max. ECU 4,000/worker), and unemployment 
measures (max. 2,000 ECU/worker).
    During the POI, Saarstahl received payments for its workers under 
Article 56(2)(b). These payments reimbursed Saarstahl for payments it 
had made to its workers.
    When analyzing programs which provide assistance to the workers of 
a company, the Department examines whether the program in question 
relieves the company of an obligation it normally would otherwise 
incur. As we noted in Certain Steel (58 FR 37315, 37320), German 
companies have no legal obligations to compensate severed employees, 
except to the extent that they assume obligations under a social plan. 
Because Saarstahl had no social plan in effect during the POI, the ECSC 
assistance did not relieve Saarstahl of an obligation it otherwise 
would have had. Thus, we preliminarily determine that the ECSC benefits 
provided to Saarstahl are not countervailable.

B. IHSW

Provision of Land Lease
    Pursuant to a 1986 lease agreement between HSW and the GOH, IHSW 
leases land located in the port of Hamburg from the GOH. The GOH owns 
approximately one third of the commercial and industrial land in the 
port area and leases that land under approximately 500 different lease 
agreements. The GOH lease rates in the port area are established by the 
Office of the Appraisal Committee for Property Values (Appraisal 
Committee), an autonomous body which records and analyzes agreements 
relating to the purchase and sale of land in Hamburg. According to the 
GOH questionnaire response, the lease rates are set according to such 
factors as: (1) Market value of property, (2) potential for use and 
facilities available in specific areas, (3) rentals for comparable 
areas being used, and (4) terms and conditions being paid in other 
Northern ports.
    The GOH uses a standard lease for all enterprises in the port area. 
The lease has four rate categories which are based on the size and 
location of the property (e.g., land-locked vs. direct water access). 
Thus, IHSW's lease contains the same terms as all other lease 
agreements signed with enterprises in the port area.
    Because IHSW pays a standard rate charged by the GOH to all 
enterprises leasing land similar to IHSW's and because these prices 
appear to be set in reference to market conditions, we preliminarily 
determine that IHSW's lease rate provides adequate remuneration to the 
GOH and, thus, is not countervailable. Prior to our final 
determination, we will attempt to obtain further information with 
respect to the number and diversity of industries to which the GOH 
leases land in the port of Hamburg and private lease rates for land 
comparable to that of IHSW in the port area.

III. Programs for Which Additional Information Is Required

    BES has claimed that each of the programs under which it received 
government assistance is a noncountervailable subsidy to a 
disadvantaged region in accordance with section 771(5B)(C) of the Act. 
For purposes of the final determination, we will be seeking more 
information and giving further consideration to whether 
noncountervailable subsidies are being provided to BES under the 
following programs:
    1. Improvement of the Regional Economies Act Investment Grants.
    2. Investment Allowance Act Grants.
    3. Special Depreciation Pursuant to Section Four of the Regional 
Development Law.
    We are also seeking additional information as to any subsidies 
which BES may have received during the period 1990 through 1992 and the 
circumstances surrounding the sale of the plant which effectively 
became BES.

IV. Programs Preliminarily Determined To Be Not Used

A. Saarstahl

Post-Bankruptcy Subsidies to Saarstahl

B. IHSW

    In 1984, HSW emerged from bankruptcy proceedings and was taken over 
by a limited partnership called Protei Produktionsbeteiligungen GmbH & 
Co. KG (Protei). Because Protei was financially unable to provide New 
HSW with equity, the HLB ``loaned'' DM 20 million to Protei. The DM 20 
million financing was provided to HLB by the GOH. HSW used this capital 
to purchase

[[Page 41950]]

the assets and business of Old HSW from its receiver.
    According to the terms of the contract which provided these funds, 
repayment became due from the profits of Protei which, in turn, were 
derived from HSW's profits. The contract also provided that Protei 
could not liquidate HSW without the approval of HLB and HLB reserved 
rights regarding the appointment of management and members of the 
supervisory committee. Between 1987 and 1988, DM 2.8 million in 
``principal'' payments and DM 2.7 million in ``interest'' were paid by 
HSW leaving an unpaid balance of DM 17.2 million.
    We have preliminarily determined that the DM 20 million ``loan'' to 
Protei should be treated as equity received in 1984 in light of the 
terms of the financing. Although the money was given in the form of a 
loan to Protei, the circumstances of the loan indicate that the funds 
were more in the nature of equity. First, as noted above, payments on 
the loan were contingent on HSW being profitable: So, if the company 
never became profitable, there was no obligation for the loan to be 
repaid. Second, under the terms of the loan, Protei relinquished pro 
rata its share of profits from HSW based on the ratio between the DM 20 
million loan and the total share capital of HSW. Hence, HLB's share of 
any future profits generated by HSW would be calculated as if the loan 
were paid-in capital. Third, although the loan was made to Protei, 
neither of the partners in the limited partnership was liable for the 
loan, suggesting that the Protei served as a mechanism for the GOH to 
invest in HSW. Fourth, as noted above, the lender, HLB, imposed 
numerous conditions on Protei which served to insert HLB into important 
management decisions affecting HSW. Finally, when this loan was 
examined by the Commission of the European Communities (the Commission) 
to determine whether it constituted state aid, the Commission 
determined that the loan should be considered as risk capital. Among 
the data developed by the Commission was a statement by the German 
government that the GOH ``was exposed to financial risk fully 
comparable to the risk a shareholder injecting risk capital has to bear 
without becoming owner of the company.'' (The Commission's decision is 
printed in the Official Journal of the European Communities, No L 78, 
Vol 39, March 28, 1996, at pp. 31 ff.) While the Commission's 
characterization of this loan as equity is not dispositive, their 
reasoning in this instance is consistent with our preliminary analysis.
    Given our preliminary determination that the DM 20 million loan in 
1984 should be treated as equity and, in light of HSW's AUL of 10 
years, this 1984 equity infusion would not give rise to benefits in the 
POI even if the infusion were a countervailable subsidy. Therefore, we 
are treating this equity as well as two other programs as ``not used':
    1. 1984 Equity Infusion Through Protei.
    2. 1984 Steel Investment Allowance Grant.
    3. 1984 Federal Ministry for Research and Technology (BMFT) Grant.
    Other programs that were not used by IHSW:
    4. 1984 Structural Improvement Assistance Grant.
    5. 1984 Loan Guarantee to HSW.
Verification
    In accordance with section 782(i) of the Act, we will verify the 
information submitted by respondents prior to making a 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. WHG reported that the only subsidy it received was 
research and development assistance pursuant to the Industrial 
Technology Program of the State of North-Rhine/Westphalia. Even 
assuming this assistance constituted a countervailable subsidy, the 
benefit would be de minimis. Therefore, we preliminarily determine that 
WHG would be excluded from any potential countervailing duty order with 
respect to merchandise produced and exported by WHG.
    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. We did not include in the weighted-average rate the 
companies with zero or de minimis subsidy rates.
    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 Germany, except those of BES and WHG, 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. This suspension will remain in effect until 
further notice.

Ad Valorem Rate

Saarstahl  17.85 percent
IHSW  5.54 percent
All Others  11.13 percent
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 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 is tentatively scheduled 
for 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

[[Page 41951]]

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 
on October 14, 1997.
    This determination is published pursuant to sections 703(f) and 
771(i) of the Act.

    Dated: July 28, 1997.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-20492 Filed 8-1-97; 8:45 am]
BILLING CODE 3510-DS-U