[Federal Register Volume 63, Number 4 (Wednesday, January 7, 1998)]
[Notices]
[Pages 809-827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-271]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-821]


Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination: Certain Stainless Steel Wire Rod From 
Italy

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

EFFECTIVE DATE: January 7, 1998.

FOR FURTHER INFORMATION CONTACT: Kelly Parkhill, Kathleen Lockard, or 
Eric Greynolds, Office of CVD/AD Enforcement VI, Import Administration, 
U.S. Department of Commerce, Room 3099, 14th Street and Constitution 
Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-2786.

Preliminary Determination

    The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are being provided to 
producers and exporters of certain stainless steel wire rod from Italy: 
Cogne Accai Speciali S.r.l. (CAS), Acciaierie Valbruna S.r.l. 
(Valbruna) and Acciaierie di Bolzano S.p.A. (Bolzano). For information 
on the estimated countervailing duty rates, please see the ``Suspension 
of Liquidation'' section of this notice.

Petitioners

    The petition in this investigation was filed by AL Tech Specialty 
Steel Corp.; Carpenter Technology Corp.; Republic Engineered Steels; 
Talley Metals Technology, Inc.; and, United Steelworkers of America, 
AFL-CIO/CLC (the petitioners).

Case History

    Since the publication of the notice of initiation in the Federal 
Register, the following events have occurred. See Notice of Initiation 
of Countervailing Duty Investigation: Certain Stainless Steel Wire Rod 
(``SSWR'') from Italy, 62 FR 45229 (August 26, 1997) (Initiation 
Notice). On September 9, 1997, we issued countervailing duty 
questionnaires to the Government of Italy (GOI), the European 
Commission (EC), and the producers/exporters of the subject 
merchandise. On October 1, 1997, we postponed the preliminary 
determination of this investigation until December 29, 1997 (62 FR 
52085, October 6, 1997).
    On October 2, 1997, we met with representatives of the GOI and the 
EC, pursuant to Article 13 of the Agreement on Subsidies and 
Countervailing Measures (SCM) . We received responses to our initial 
questionnaires from the GOI, the EC, Valbruna/Bolzano, and CAS between 
October 27 and November 4, 1997. Between November 10 and December 3, we 
issued several supplemental questionnaires to the parties. We received 
responses to these supplemental questionnaires between November 24 and 
December 11, 1997. CAS also submitted additional information on its 
calculation of the average useful life of assets on December 16, 1997.

Scope of Investigation

    For purposes of this investigation, certain stainless steel wire 
rod (SSWR or subject merchandise) comprises products that are hot-
rolled or hot-rolled annealed and/or pickled and/or descaled rounds, 
squares, octagons, hexagons or other shapes, in coils, that may also be 
coated with a lubricant containing copper, lime or oxalate. SSWR is 
made of alloy steels containing, by weight, 1.2 percent or less of 
carbon and 10.5 percent or more of chromium, with or without other 
elements. These products are manufactured only by hot-rolling or hot-
rolling, annealing, and/or pickling and/

[[Page 810]]

 or descaling, and are normally sold in coiled form, and are of solid 
cross-section. The majority of SSWR sold in the United States is round 
in cross-sectional shape, annealed and pickled, and later cold-finished 
into stainless steel wire or small-diameter bar.
    The most common size for such products is 5.5 millimeters or 0.217 
inches in diameter, which represents the smallest size that normally is 
produced on a rolling mill and is the size that most wire drawing 
machines are set up to draw. The range of SSWR sizes normally sold in 
the United States is between 0.20 inches and 1.312 inches in diameter. 
Two stainless steel grades SF20T and K-M35FL are excluded from the 
scope of the investigation. The percentages of chemical makeup for the 
excluded grades are as follows:

SF20T

Carbon--0.05 max
Manganese--2.00 max
Phosphorous--0.05 max
Sulfur--0.15 max
Silicon--1.00 max
Chromium--19.00/21.00
Molybdenum--1.50/2.50
Lead added (0.10/0.30)
Tellurium added (0.03 min)

K-M35FL

Carbon--0.015 max
Silicon--0.70/1.00
Manganese--0.40 max
Phosphorous--0.04 max
Sulfur--0.03 max
Nickel--0.30 max
Chromium--12.50/14.00
Lead--0.10/0.30
Aluminum--0.20/0.35

    The products under investigation are currently classifiable under 
subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and 
7221.00.0075 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheadings are provided for convenience 
and customs purposes, the written description of the scope of this 
investigation is dispositive.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act effective January 1, 1995 (the ``Act). 
In addition, unless otherwise indicated, all citations to the 
Department's regulations are to the current regulations as codified at 
19 CFR 351 and published in the Federal Register on May 19, 1997 (62 FR 
27295).

Injury Test

    Because Italy 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 the 
subject merchandise from Italy materially injure, or threaten material 
injury to, a U.S. industry. On September 24, 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 
Italy of the subject merchandise (62 FR 49994).

Alignment with Final Antidumping Duty Determination

    On September 10, 1997, the petitioners submitted a letter 
requesting alignment of the final determination in this investigation 
with the final determination in the companion antidumping duty 
investigations. In accordance with section 705(a)(1) of the Act, we are 
aligning the final determination in this investigation with the final 
antidumping duty determinations in the antidumping investigations of 
certain stainless steel wire rod. See Initiation of Antidumping 
Investigations: Stainless Steel Wire Rod From Germany, Italy, Japan, 
Korea, Spain, Sweden, and Taiwan, 62 FR 45224 (August 26, 1997).

Period of Investigation

    The period for which we are measuring subsidies (the POI) is 
calendar year 1996.

Facts Available

    Section 776(a)(1) of the Act requires the Department to use facts 
available if ``necessary information is not available on the record.'' 
In three instances, information necessary to our analysis of CAS was 
unavailable on the record; therefore, we have resorted to facts 
available as discussed in the ``Change in Ownership'' and ``Allocation 
Period'' sections below.

Company Histories

    The GOI identified three producers of subject merchandise that 
exported the subject merchandise to the United States during the POI: 
CAS, Valbruna, and Bolzano.

CAS

    In the past fifteen years, CAS has undergone several changes in 
organization, name, and ownership. From 1982 to 1984, the facilities in 
Aosta, where the subject merchandise is produced, were part of Nuova 
Sias S.p.A., which was, in turn, wholly-owned by the GOI. From 1984 to 
1987, the Aosta facilities operated under Deltasider S.p.A., a wholly-
owned subsidiary of steel producer Finsider S.p.A. Finsider S.p.A. was, 
in turn, wholly-owned by the Istituto per la Ricostruzione Industriale 
(IRI) of the GOI. In 1987, the Aosta operations were transferred to 
Delta Cogne S.p.A., a newly-created, wholly-owned subsidiary of 
Deltasider S.p.A. In 1988, IRI began the liquidation of Finsider and 
its subsidiaries.
    In 1988, IRI created ILVA S.p.A. as the successor to Finsider; ILVA 
was also wholly-owned by IRI and the GOI. In 1989, the Aosta operations 
were transferred to ILVA. In December 1989, Cogne S.r.l. was created as 
a wholly-owned subsidiary of ILVA S.p.A., which held the Aosta 
operations. Cogne S.r.l. was later named Cogne Acciai Speciali S.p.A. 
(Cogne S.p.A.). From 1990 to 1992, Gruppo Falck S.p.A. (Falck), a 
private company with holdings in steel and real estate, held 22.4 
percent of Cogne S.p.A.''s stock (with the remainder and controlling 
interest held by ILVA). Falck acquired the shares of Cogne S.p.A. by 
exchanging shares of its own subsidiary, Bolzano. By the end of 1992, 
Falck's interest in Cogne S.p.A. was dissolved, and Cogne S.p.A. again 
was wholly-owned by ILVA. Based on the information we have about the 
swap, we understand that neither the initial swap nor the dissolution 
involved any cash transactions.
    In 1991, Robles S.r.l. acquired the land and buildings, e.g. the 
non-productive assets, of the Aosta facilities from Cogne S.p.A. Robles 
S.r.l. was acquired by Compagnie Monegasque de Banque S.A. at the end 
of 1991. In 1992, Cogne S.p.A. acquired the shares of Robles S.r.l., 
which became Cogne S.p.A.''s wholly-owned subsidiary. The name of 
Robles S.r.l. was changed to Cogne Acciai Speciali, S.r.l. (CAS), later 
that year.
    In 1993, ILVA prepared to liquidate or privatize all of its 
subsidiaries, divisions, and productive units, including Cogne S.p.A. 
In preparation for the privatization, Cogne S.p.A. transferred nearly 
all of the assets of the Cogne companies to CAS and assumed nearly all 
of the liabilities. Concurrently, Cogne S.p.A.''s wholly-owned 
subsidiary, CAS, was offered for sale in a bidding process. The sale 
was advertised and open to any outside party. Three parties submitted 
complete bids for CAS. GE. VAL. S.r.l.''s bid was accepted by Cogne 
S.p.A. The CAS shares were transferred based on an initial cash payment 
in 1993, and an additional payment in 1995. The transfer of shares also 
required additional cash payments if CAS turned profits through 1998. 
Cogne S.p.A. was

[[Page 811]]

later folded into ILVA, which was liquidated, in part, and merged, in 
part, into IRITECNA, another IRI company. In 1995, as the result of a 
merger, GE. VAL. S.r.l. became MEG S.A. (MEG). CAS has been wholly-
owned by MEG since that time.

Bolzano and Valbruna

    From 1985 until 1990, Bolzano, a producer of the subject 
merchandise, was a wholly-owned subsidiary of Acciaierie e Ferriere 
Lombarde Falck, the main industrial company of Falck. In 1990, ILVA 
acquired 44.8 percent of the stock in Bolzano. ILVA acquired the shares 
of Bolzano by exchanging shares of its own subsidiary, Cogne S.p.A. 
ILVA also acquired shares in other Gruppo Falck steel companies. In 
1993, ILVA's interest in Bolzano was dissolved, and Falck again held 
virtually all of the stock in Bolzano. Falck decided to sell Bolzano 
based on its company-wide strategic decision to withdraw from the steel 
industry. Falck contacted Valbruna, as a potential buyer, in late 1994. 
Subsequently, the parties entered into negotiations for the transfer of 
Bolzano. Falck and Valbruna are both private parties. Each had a 
valuation of Bolzano done by an independent international auditing 
firm. The valuation studies disagreed, so a third study was 
commissioned by the two parties to determine the net equity and cash 
flow of Bolzano for purposes of finalizing the purchase price. Since 
August 31, 1995, Bolzano has been 99.99 percent-owned by Valbruna, and 
since January 1, 1996, the two companies's financial statements have 
been consolidated.

Affiliated Parties

    In the present investigation, there are affiliated parties (within 
the meaning of section 771(33) of the Act) whose relationship may be 
sufficient to warrant treatment as a single company. In the 
countervailing duty questionnaire, consistent with our past practice, 
the Department defined companies as related where one company owns 20 
percent or more of the other company, or where companies prepare 
consolidated financial statements. See Final Affirmative Countervailing 
Duty Determination: Certain Pasta (``Pasta'') From Italy, 61 FR 30287 
(June 14, 1996) (Pasta). As Valbruna owns and controls Bolzano, the 
companies prepare consolidated financial statements, and both produce 
the subject merchandise, we preliminarily determine that it is 
appropriate to treat the two SSWR producers as a single company. We 
calculated a single countervailing duty rate for these companies by 
dividing their combined subsidy benefits by their consolidated total 
sales, or consolidated export sales, as appropriate.

Change in Ownership

    In the 1993 investigations of Certain Steel Products, we developed 
a methodology with respect to the treatment of non-recurring subsidies 
received prior to the sale of a company. See, Final Countervailing Duty 
Determination; Certain Steel Products from Austria, et. al., 58 FR 
37217 (July 9, 1993) (Certain Steel from Austria). This methodology was 
set forth in the General Issues Appendix (GIA), appended to Certain 
Steel from Austria. The methodology was subsequently upheld by the 
Federal Circuit. See Saarstahl AG v. United States, 78 F.3d 1539 (Fed. 
Cir. 1996); British Steel plc v. United States, 127 F.3d 1471 (Fed. 
Cir. 1997). Under the GIA methodology, we estimate the portion of the 
company's purchase price which is attributable to prior subsidies. To 
make this estimate, we divide the face value of the company's subsidies 
by the company's net worth for each of the years corresponding to the 
company's allocation period. We then take the simple average of these 
ratios, which serves as a reasonable surrogate for the percentage that 
subsidies constitute of the overall value, i.e., net worth, of the 
company. Next, we multiply this average ratio by the purchase price of 
the company to derive the portion of the purchase price that we 
estimate to be a repayment of prior subsidies. Then, the benefit 
streams of the prior subsidies are reduced by the ratio of the 
repayment amount to the net present value of all remaining benefits at 
the time of the change in ownership.
    In the URAA, Congress clarified how the Department should approach 
changes in ownership. Section 771(5)(F) of the Act states that:

    A change in ownership of all or part of a foreign enterprise or 
the productive assets of a foreign enterprise does not by itself 
require a determination by the administrating authority that a past 
countervailable subsidy received by the enterprise no longer 
continues to be countervailable, even if the change in ownership is 
accomplished through an arm's length transaction.

    The Statement of Administrative Action accompanying the URAA, 
reprinted in H.R. Doc. No. 103-316 (1994) (SAA) explains why Section 
771(5)(F) was added to the statute. The SAA at page 928 states:

    Section 771(5)(F) is being added to clarify that the sale of a 
firm at arm's length does not automatically, and in all cases, 
extinguish any prior subsidies conferred. Absent this clarification, 
some might argue that all that would be required to eliminate any 
countervailing duty liability would be to sell subsidized productive 
assets to an unrelated party. Consequently, it is imperative that 
the implementing bill correct such an extreme interpretation.

Consistent with the URAA and the SAA, the Department continues to 
examine whether non-recurring subsidies benefit a company's production 
after a change in ownership, even one accomplished at arm's length. 
Accordingly, we continue to follow the methodology developed in the GIA 
based on our determination that this methodology does not conflict with 
the change in ownership provision of the URAA. As stated by the 
Department, ``[t]he URAA is not inconsistent with and does not overturn 
the Department's General Issues Appendix Methodology * * * .'' 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) (UK Lead Bar 94). We further 
clarified in UK Lead Bar 94 that, ``[t]he language of Sec. 771(5)(F) of 
the Act purposely leaves discretion to the Department with regard to 
the impact of a change in ownership on the countervailability of past 
subsidies.'' Id. at 58379. The Department has been applying the 
methodology set forth in the GIA. See, e.g., Final Affirmative 
Countervailing Duty Determination: Steel Wire Rod From Trinidad and 
Tobago, 62 FR 55003 (October 22, 1997) (Trinidad and Tobago) and Final 
Affirmative Countervailing Duty Determination: Steel Wire Rod from 
Canada, 62 FR 54972 (October 22, 1997) (Steel Wire Rod from Canada). 
None of the facts in this case indicate that the application of the GIA 
methodology is inappropriate; therefore, we are applying the GIA 
methodology to analyze the changes in ownership of respondent 
companies, CAS and Bolzano.

CAS

    To calculate the amount of the previously bestowed subsidies that 
passed through to CAS, we followed the GIA methodology described above. 
We were unable to calculate the subsidies-to-net worth ratios used in 
the privatization calculation for 1985 and 1986 because the net worth 
information was not available on the record. Therefore, in accordance 
with section 776 of the Act, as facts available, we used an average of 
the years available (1987 through 1992) in the privatization 
calculation. As described in the ``Company Histories'' section above, 
ILVA ceased operations following the

[[Page 812]]

privatization and/or liquidation of all of its subsidiaries, operating 
units, and divisions. For untied non-recurring subsidies provided to 
ILVA (and prior to 1989, ILVA's predecessor, Finsider), Cogne's former 
parent company, we calculated the amount of these untied subsidies 
attributable to Cogne by applying a ratio of Cogne's assets to its 
parent company's assets in the year of receipt of the subsidy. For the 
untied subsidies provided to Finsider in 1985 and 1986, we were unable 
to use an asset ratio in the year of receipt because we did not have 
all of the information necessary. Therefore, in accordance with section 
776 of the Act, as facts available, we used a ratio of Delta Cogne's 
assets to Finsider's assets in 1987, the closest year to the year of 
receipt of the untied subsidies for which we have the information. We 
plan to obtain information on assets for the relevant years for our 
final determination. When calculating the subsidies to net worth ratios 
used in the privatization methodology described above, we included 
Cogne's share of the untied subsidies in the calculation.
    As discussed in the ``Company Histories'' section above, from 1990-
1993, ILVA held a minority interest in Bolzano and Falck held a 
minority interest in Cogne. However, as examined previously by the 
Department, the exchange of shares involved no cash transactions. See 
Final Affirmative Countervailing Duty Determinations: Certain Steel 
Products from Italy, 58 FR 37327 (July 9, 1993) (Certain Steel from 
Italy). In addition, neither Falck nor ILVA acquired a controlling 
interest in the other's subsidiary. The companies were not 
consolidated, and the interest of ILVA and Falck in each other's 
subsidiary was relinquished without financial obligation (see Certain 
Steel from Italy). Based on the record information about the structure 
of the share exchange, we understand the swap involved no financial 
transfers other than the actual shares during acquisition or 
dissolution. Therefore, we do not consider it to constitute a 
legitimate sale which could give rise to the repayment or 
redistribution of subsidies. See, e.g., GIA, 58 FR at 37266. For the 
purpose of this preliminary determination, we have not attributed any 
portion of (1) ILVA's untied subsidies to Bolzano or (2) Falck's untied 
subsidies to CAS.

Bolzano

    To calculate the amount of the previously bestowed subsidies that 
passed through to Bolzano from Falck, we followed the GIA methodology 
which the Department has previously determined is applicable to 
private-to-private changes in ownership to examine the reallocation of 
subsidies. See, e.g., Certain Hot-Rolled Lead and Bismuth Carbon Steel 
Products from the United Kingdom; Final Results of Countervailing Duty 
Administrative Review, 62 FR 53306 (October 14, 1997) (UK Lead Bar 95). 
When Falck sold Bolzano to Valbruna in 1995, it was in the process of 
transferring or closing all of its steel operations. For untied non-
recurring subsidies provided to Falck in the years prior to Bolzano's 
sale to Valbruna, we calculated the amount of these untied subsidies 
attributable to Bolzano by applying a ratio of Bolzano's assets to 
Falck's assets in the year of receipt of the subsidy. When calculating 
the subsidy to net worth ratios used in the methodology described 
above, we included Bolzano's share of the untied subsidies in the 
calculation. Also as described above, we have not attributed any 
portion of ILVA's untied subsidies to Bolzano during the period ILVA 
held a minority interest in Bolzano.

Subsidies Valuation Information

    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 non-recurring subsidies. See GIA, 58 FR at 37227. 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 for non-recurring 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 plc v. United States, 929 F. Supp. 426, 439 (CIT 1996) (British 
Steel II). Thus, we intend to determine the allocation period for non-
recurring subsidies using company-specific AUL data where reasonable 
and practicable. See, e.g., Certain Cut-to-Length Carbon Steel Plate 
from Sweden; Final Results of Countervailing Duty Administrative 
Review, 62 FR 16551 (April 7, 1997).
    In this investigation, the Department has followed the Court's 
decision in British Steel, and examined information submitted by the 
respondent companies as to their average useful life of assets.
    Valbruna/Bolzano: As discussed in the ``Affiliated Parties'' 
section of this notice, we have preliminarily determined that the 
relationship between Valbruna and Bolzano warrants treatment as a 
single company. Therefore, we calculated a single weighted-average AUL 
for Valbruna and Bolzano. Based on the information submitted by the 
firms on the average useful life of their non-renewable physical 
assets, we preliminarily determine that the AUL for Valbruna/Bolzano is 
12 years.
    CAS: When we evaluated the information initially submitted by CAS 
regarding its non-renewable physical assets, we found that the AUL 
calculation included figures which could not be explained by the 
company's submitted financial information. It appeared that the AUL 
calculated by CAS was distorted by the asset valuation methodology 
employed by the company in 1989 and 1993. In addition, it appeared that 
CAS's calculated depreciation for 1994 through 1996 reflected the 
remaining useful life of assets instead of the actual useful life of 
assets, which could have resulted in further distortions. We provided 
CAS with a detailed list of questions to ascertain and clarify the 
source of the discrepancies. On December 16, 1997, CAS submitted 
additional information on its AUL. Based on our examination of this 
information and the other information on the record, we concluded that 
the company's asset valuation methodology in 1989 and use of 
accelerated depreciation from 1994 through 1996 results in a 
calculation that does not reflect a reasonable estimate of the average 
useful life of non-renewable physical assets. Accordingly, based on the 
information available, we conclude that CAS's reported AUL cannot be 
used for purposes of allocating non-recurring subsidies over time.
    We then examined the GOI's tax depreciation schedule for the steel 
sector in Italy to determine whether it reflected average useful life 
of the Italian steel companies and, therefore, could be used as a basis 
for CAS's allocation period. According to the GOI, the depreciation 
schedule was based on information acquired from an industry survey 
conducted in 1988. The depreciation schedule had a 17.5 percent 
depreciation rate for heavy machinery and automated equipment in the 
steel industry, which would result in an AUL of approximately 6 years. 
We asked the GOI to provide the survey and calculations used to 
determine these rates, but the GOI was unable to provide the survey in 
time for this preliminary determination. Therefore, we could not 
examine the information contained in the survey to determine whether 
the depreciation schedule could serve as a reasonable surrogate for 
CAS's

[[Page 813]]

allocation period. We plan to examine this study further to determine 
if it reflects the average useful life of assets for the steel industry 
in Italy, and may be used as a surrogate for CAS's AUL for the final 
determination. However, for purposes of this preliminary determination, 
we do not consider it appropriate to use the tax depreciation schedule 
of approximately six years as the allocation period, when the AUL for 
another producer of the subject merchandise is 12 years. Because there 
are only a few producers of the subject merchandise in Italy, we find 
that the AUL calculated by Valbruna/Bolzano is more appropriately 
representative of the SSWR industry. Therefore, as facts available 
under section 776 of the Act, we preliminarily determine that using 
Valbruna/Bolzano's allocation period of 12 years is appropriate as the 
allocation period of non-recurring subsidies. See Memorandum to the 
File Regarding CAS's AUL Calculation, dated December 29, 1997, on file 
in the Central Records Unit of the Department of Commerce, Room B-099 
(CRU).

Equityworthiness

    In analyzing whether a company is equityworthy, the Department 
considers whether 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;
    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 marketplace for the product under 
consideration.
    For a more detailed discussion of the Department's equityworthiness 
criteria, see the GIA, 58 FR at 37244.
    The Department initiated an investigation of ILVA's 
equityworthiness for the periods 1982 through 1988, and 1991 through 
1993.1 ILVA has previously been found to be unequityworthy 
from 1985 through 1988 and from 1991 through 1992 (see Initiation 
Notice Certain Steel from Italy and Final Affirmative Countervailing 
Duty Determination: Grain-Oriented Electrical Steel from Italy, 59 FR 
18357 (April 18, 1994) (Electrical Steel)). No new information has been 
provided in this investigation that would cause us to reconsider these 
determinations.
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    \1\ As discussed in the ``Allocation Period'' section of this 
notice, the Department has determined the appropriate allocation 
period for non-recurring subsidies received by CAS to be 12 years. 
Therefore, we are not examining ILVA's equityworthiness prior to 
1985.
    In Electrical Steel, we treated equity infusions given to ILVA 
in 1991 and 1992 as interest free loans because they were 
provisional until approved by the EC (the approval was granted in 
1993). In this investigation, we determined that the benefit streams 
from these equity infusions begin in the years they were received, 
thus, we examined ILVA's equityworthiness in 1991 and 1992; we have 
not examined ILVA's equityworthiness in 1993.
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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).
    In this investigation, a market benchmark does not exist. 
Therefore, the Department is following the methodology described in the 
GIA, 58 FR at 37239. See also Trinidad and Tobago, 62 FR at 55004. 
Following this methodology, equity infusions made on terms inconsistent 
with the usual practice of a private investor 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

    As stated in our Notice of Initiation (62 FR 45529), we initiated 
an investigation of ILVA's creditworthiness from 1982 through 1994, 
CAS's creditworthiness from 1994 through 1996, Falck's creditworthiness 
from 1992 through 1994, and Bolzano's creditworthiness from 1995 
through 1996, to the extent that government equity infusions, long-term 
loans, or loan guarantees were provided in those years.2
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    \2\ As discussed in the ``Allocation Period'' section of this 
notice, the Department has determined the appropriate allocation 
period for non-recurring subsidies received by CAS and Valbruna/
Bolzano to be 12 years. Therefore, we have not examined the 
creditworthiness of any company prior to 1985. In addition, because 
CAS was privatized on December 31, 1993, we have not examined ILVA's 
creditworthiness in 1994.
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    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.
    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 
criteria, see, e.g., Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from France, 58 FR 37304 (July 
9, 1993) (Certain Steel from France); and Final Affirmative 
Countervailing Duty Determinations: Certain Steel Products from the 
United Kingdom, 58 FR 37393 (July 9, 1993).

CAS

    ILVA, CAS's former parent company was determined to be 
uncreditworthy from 1985 through 1992 in Electrical Steel. No new 
information has been presented in this investigation that would lead us 
to reconsider this finding. Therefore, we continue to find ILVA 
uncreditworthy from 1985 through 1992. In order to determine whether 
ILVA was uncreditworthy in 1993, in accordance with the Department's 
past practice, we examined financial data for the prior three years. 
See, e.g., Certain Steel from France, 58 FR at 37306. In the years 
relevant to this finding, ILVA consistently had negative operating 
profits, poor cash flow, and difficulty in meeting its short-term 
liabilities as indicated by its financial ratios. See

[[Page 814]]

``Creditworthiness Memorandum,'' dated December 29, 1997, on file in 
the CRU (Creditworthiness Memo).
    CAS did not receive equity infusions, grants, long-term loans, or 
loan guarantees in 1994 and 1995. Therefore, we are not examining CAS's 
creditworthiness in those years. To determine CAS's creditworthiness in 
1996, in accordance with the Department's practice, we analyzed 
financial data for the prior three years provided by CAS. As a result 
of the debt forgiveness associated with the company's privatization in 
1993, the company's poor financial condition improved significantly 
over the next two years. Although CAS incurred large losses in 1993, 
the company was profitable in 1994 and 1995 and its financial ratios in 
those years were at acceptable levels. Therefore, we preliminarily 
determine CAS to be creditworthy in 1996. See Creditworthiness Memo.

Bolzano

    Falck, Bolzano's former parent company, did not receive equity 
infusions, long-term loans or loan guarantees from 1992 through 1994. 
Bolzano did not receive equity infusions, loans or loan guarantees in 
1995 or 1996. Therefore, we are not examining either Falck's or 
Bolzano's creditworthiness in this investigation. See Creditworthiness 
Memo.

Discount Rates

    We used as the discount rate the average long-term loan rate 
available in Italy, based upon a survey of 114 Italian banks reported 
by the Banca D'Italia, the central bank of Italy, since the GOI does 
not maintain information on the national average long-term fixed 
interest rate or the highest long-term fixed interest rate commonly 
available to firms. See Electrical Steel. For any year in which a 
company was uncreditworthy, we calculated the discount rates for 
uncreditworthy firms following the methodology described in the GIA. 
Specifically, we added to the long-term loan rate available in Italy a 
risk premium of 12 percent of the Italian Bankers Association (ABI) 
prime rate.

I. Programs Preliminarily Determined To Be Countervailable

Programs of the Government of Italy

A. Benefits Associated with Finsider-to-ILVA Restructuring
    As discussed in the ``Company Histories'' section above, in 1988, 
Finsider was liquidated, and its assets (and those of its subsidiaries 
such as Delta Cogne) were transferred to the new steel holding/
operating company, ILVA S.p.A. This liquidation and asset transfer was 
examined in Certain Steel from Italy and Electrical Steel, and found to 
provide countervailable benefits to the production of the merchandise 
subject to those investigations. Because of the complexity of the 
reorganization examined in Electrical Steel, the Department focused on 
the benefits specifically provided to the ILVA specialty steels 
division, formerly known as Terni Accai Speciali (TAS), the producer of 
subject merchandise in that investigation. In Electrical Steel, the 
Department found that the reorganization transferred TAS's productive 
assets to ILVA while a significant portion of the liabilities and 
losses were left in TAS and were later assumed by IRI. Because both 
ILVA and Finsider were wholly-owned by IRI, which was owned by the GOI, 
the Department found that the transfer of assets, but not liabilities, 
between the companies provided a countervailable benefit to the 
specialty steels division of ILVA, and the subject merchandise, in 
Electrical Steel.
    In this investigation, we have a similar situation, which is 
further complicated by the subsequent liquidation of ILVA. In order to 
determine the countervailable benefit from the 1988/1989 restructuring, 
the Department would normally focus on the liabilities left in the 
shell company. However, there were significant changes in the 
liabilities and assets for Delta Cogne (the Finsider subsidiary that 
was liquidated) and Cogne S.r.l. (the ILVA subsidiary that was created 
in 1989 and received the assets of Delta Cogne) between the two years. 
We have been unable to obtain a clear picture of the circumstances of 
this restructuring, in part because of the subsequent changes in 
ownership of CAS, detailed in the ``Company Histories'' section above. 
From the evidence on the record, it is unclear whether Delta Cogne's 
liabilities were assumed, or whether they were reduced through the sale 
of assets. Therefore, in this preliminary determination, we have not 
focused on the distribution of liabilities between Delta Cogne and 
Cogne S.r.l. Rather, we have focused on the changes in shareholders's 
equity in Delta Cogne in 1988 and Cogne S.r.l. in 1989.
    Under Articles 2446 and 2447 of the Italian Civil Code, companies 
are required to cover their losses through net worth--share capital 
plus retained earnings. The shareholder is required to subscribe to 
additional shares or place the company in liquidation if the corporate 
capital falls below the minimum level. As the sole shareholder of Delta 
Cogne, Finsider (wholly-owned by IRI) held this obligation for Delta 
Cogne. After the restructuring, ILVA (wholly-owned by IRI) held this 
obligation for Cogne S.r.l. Thus, we focused on the specific losses 
attributable to Delta Cogne, as shown by the changes in shareholders's 
equity and losses recorded on the balance sheet of Delta Cogne in 1988 
and the balance sheet of Cogne S.r.l. in 1989, the period after the 
transfer. Due to the complexity of the restructuring, we have concluded 
that focusing on the changes between the balance sheets of the two 
Cogne companies would more accurately capture the assistance provided 
to the production of the subject merchandise, instead of focusing on 
the total debt forgiveness provided by IRI in connection with the 
creation of ILVA (see, e.g., Electrical Steel).
    In 1988, Delta Cogne's share capital was 200 billion lire, with 
over 79 billion lire of losses for that year and over 90 billion lire 
in losses brought forward. In 1989, Cogne S.r.l.'s share capital was 
slightly above 150 billion lire with no losses for the year and none 
brought forward. The difference in the value of share capital between 
the two Cogne companies does not account for the losses the company had 
accrued at that time. The net result is that over 120 billion lire in 
losses remained with Finsider and were covered by IRI. The financial 
contribution to Cogne is the amount of Delta Cogne's losses that were 
covered by IRI when Cogne S.r.l. was created.
    Because Cogne S.r.l. was assigned the assets of Delta Cogne but not 
the losses for which the company was also responsible, its financial 
position improved with the restructuring. Based on our analysis of the 
distribution of assets and losses from Delta Cogne to Cogne S.r.l., we 
preliminarily determine that Cogne S.r.l. received a financial 
contribution within the meaning of section 771(5) of the Act, in the 
amount of the losses it was not required to assume which were later 
covered by the GOI through IRI. See, e.g., Certain Steel from Austria. 
As restructuring benefits were provided only to the state-owned steel 
sector in Italy, we find the program to be specific within the meaning 
of section 771(5A)(D) of the Act.
    To calculate the benefit, we treated the undistributed losses to 
Cogne S.r.l. as a grant given in 1989. We further determine that the 
distribution of losses is non-recurring, because the restructuring of 
the Italian public steel sector required authorization from IRI, the 
GOI, and the EC. We allocated this grant over 12 years as discussed in 
the

[[Page 815]]

``Allocation'' section above, and applied the Department's standard 
methodology for non-recurring grants. Because the company was 
uncreditworthy in the year of receipt, we applied a discount rate that 
included a risk premium. We then applied the methodology described in 
the ``Change in Ownership'' section of this notice. We divided the 
benefit attributable to the POI by CAS's total sales during the POI. On 
this basis, we preliminarily determine the countervailable subsidy to 
be 4.68 percent ad valorem for CAS.
B. Equity Infusions to ILVA and Finsider
    The GOI, through IRI, provided equity infusions to Finsider, ILVA's 
predecessor, in 1985 and 1986. IRI also provided equity infusions to 
ILVA in 1991 and 1992.
    We preliminarily determine that under section 771(5)(E)(i) of the 
Act, the equity infusions into Finsider in 1985 and 1986 and into ILVA 
in 1991 and 1992 confer a benefit in the amount of each infusion 
because the GOI investments were not consistent with the usual 
investment practice of private investors (see discussion of 
``Equityworthiness'' above). These equity infusions are specific within 
the meaning of section 771(5A)(D) of the Act because they were limited 
to Finsider and ILVA. Accordingly, we find that the equity infusions to 
Finsider and ILVA are countervailable subsidies within the meaning of 
section 771(5) of the Act.
    As explained in the ``Subsidies Valuation Information'' section, we 
have treated equity infusions into unequityworthy companies as grants 
given in the year the infusion was received. We have further determined 
these infusions to be non-recurring subsidies because each required a 
separate authorization from ILVA's or Finsider's shareholder (IRI). 
Consistent with the Department's past practice, these equity infusions 
are considered to be untied subsidies and, as such, benefit all of the 
company's domestic production (see, e.g., Steel Wire Rod from Canada, 
and UK Lead Bar 95). Since CAS has been privatized, we followed the 
methodology outlined in the ``Change in Ownership'' section above to 
determine the amount of each equity infusion attributable to CAS after 
the privatization. Because the company was uncreditworthy in the year 
of receipt, we applied a discount rate that included a risk premium. We 
then divided the benefit allocated to the POI by CAS's total sales 
during the POI. On this basis, we preliminarily determine the net 
subsidy to be 3.58 percent ad valorem for CAS.
C. Pre-Privatization Assistance and Debt Forgiveness
    As discussed in the ``Company Histories'' section above, in 1992, 
Cogne S.p.A. acquired the shares of Robles S.r.l., later changing the 
company's name to Cogne Acciai Speciali S.r.l. (CAS). According to the 
GOI, the primary purpose in the creation of CAS was for the eventual 
privatization of the Aosta facility. Initially, CAS held some of the 
productive assets and the land on its books, while Cogne S.p.A. held 
the remaining assets. In 1993, the land held by CAS was transferred to 
Cogne S.p.A. However, from a financial perspective, the two companies 
were one; assets flowed between the two without restriction.
    During 1993, Cogne S.p.A. (and its owner, ILVA) decided to sell its 
shares of CAS through a bidding process. According to CAS's 
questionnaire response, at the same time, Cogne S.p.A. also entered 
into a liquidation process, similar to a bankruptcy proceeding under 
the Italian Civil Code. Concurrently, Cogne S.p.A. and ILVA entered 
into negotiations with the Autonomous Region of Valle d'Aosta for the 
purchase of the land and buildings of the Aosta facility (see ``Valle 
d'Aosta Assistance'' below). Through this bidding process which was 
finalized as of December 31, 1993, a private company bought the shares 
of CAS from Cogne S.p.A. and the new owner took control of the company 
in April 1994. During this entire period, production of merchandise 
continued. The land and buildings were sold to the Autonomous Region of 
Valle d'Aosta, which then leased them back to the now-privatized CAS. 
According to the GOI questionnaire response, Cogne S.p.A. remained as a 
shell company, and was later folded into ILVA; ILVA was eventually 
liquidated in part and merged in part into IRITECNA, another IRI 
subsidiary company.
    An examination of the financial statements of Cogne S.p.A. and CAS 
as of December 31, 1993, shows how the assets and liabilities were 
divided between the two companies in preparation for privatization. CAS 
had losses of 33 billion lire, liabilities of 161 billion lire, and 7 
billion lire in share capital. Cogne S.p.A. had losses of 257 billion 
lire, 411 billion worth of unaccounted liabilities, and 10 billion lire 
worth of share capital. CAS received nearly all of the assets of Cogne 
S.p.A. Cogne S.p.A. retained nearly all of the liabilities. These 
liabilities had to be paid, assumed, or forgiven. The 1993 financial 
statement of Cogne S.p.A. also indicates that the distribution of 
assets and liabilities between the companies, and the consequences 
thereof, was recognized by Cogne S.p.A.'s owner, ILVA: at the point of 
CAS's privatization, ILVA issued a guarantee for Cogne S.p.A.'s 
liabilities for 380 billion lire. Thus, we conclude that the 
distribution of the assets and liabilities between CAS and Cogne S.p.A. 
at the time of privatization was made with the knowledge and approval 
of ILVA, Cogne's owner, and ILVA's owner, IRI. At the point of 
privatization, CAS was relieved of its obligations on a significant 
portion of the liabilities the Cogne companies had accrued. CAS has 
stated that ILVA was forced to cover these liabilities because it was 
Cogne S.p.A.'s sole shareholder and, therefore, like any sole 
shareholder (government-owned or private) responsible for the 
liabilities under Italian Law. However, according to the GOI, the 
liabilities assumed by ILVA, were later covered by IRI. The Department 
has consistently treated IRI as a government agency, and IRI's 
assumption of liabilities as countervailable. See, e.g., Electrical 
Steel.
    Based on the information submitted, we conclude that this ultimate 
assumption of Cogne S.p.A.'s liabilities by IRI was part of the 3.5 
trillion lire of ILVA's debts that were covered by a GOI aid package 
which was authorized by the EC. The complexity of the transactions 
involved in the internal restructuring and ultimate privatization of 
CAS is comparable to that of the benefits associated with Finsider-to-
ILVA restructuring program described above. Thus, instead of focusing 
on the total amount of ILVA's debt forgiven or assumed by the GOI, and 
finding the amount attributable to CAS, we chose to focus our analysis 
on the benefits provided to CAS through the assumption of Cogne 
S.p.A.'s liabilities. See, e.g., Electrical Steel, 59 FR at 18366.
    In previous cases, the Department has treated forgiven liabilities 
as a countervailable subsidy because the forgiven debt confers a 
benefit on the production of the new entity (see, e.g., Electrical 
Steel, 59 FR at 18359; Trinidad and Tobago, 62 FR at 5506). Therefore, 
we preliminarily find that, in connection with the privatization of 
CAS, the GOI (through IRI) provided a financial contribution, which 
provides a benefit in the amount of 411 billion lire to cover the 
liabilities that were not transferred to the newly privatized entity. 
The pre-privatization assistance is specific under section 771(5A)(D) 
of the Act because it was provided to one

[[Page 816]]

company, CAS, through ILVA and the IRI. Accordingly, we find that the 
pre-privatization assistance in the form of debt forgiveness is a 
countervailable subsidy within the meaning of section 771(5) of the 
Act.
    We treat the undistributed liabilities as a grant to CAS, received 
at the time of privatization. Because this grant was part of the pre-
privatization activities, and thus was a one-time occurrence, we find 
that this assistance is non-recurring. To calculate the benefit, we 
applied the Department's standard non-recurring grant methodology, set 
forth in the ``Allocation'' section of the GIA. Because the company was 
uncreditworthy in 1993, we applied a discount rate that included a risk 
premium. We also applied the methodology described in the ``Change in 
Ownership'' section above. We then divided the benefit allocated to the 
POI by CAS's total sales. On this basis, we preliminarily determine the 
countervailable subsidy to be 21.28 percent ad valorem for CAS.
    Petitioners also alleged that CAS was provided with a restructuring 
fund at the time of privatization that provided countervailable 
assistance to the company. According to CAS and the GOI, when CAS was 
privatized it was given a restructuring fund of 105 billion lire to 
cover the approximately 33 billion lire in losses that were transferred 
with the company, and for other costs associated with the transfer. The 
restructuring fund was created from an additional transfer of assets to 
CAS from Cogne S.p.A. just prior to privatization. We found no 
indication of capital infusions by ILVA, IRI, or the GOI before this 
restructuring fund was established. We preliminarily determine that any 
benefit from this restructuring fund has been captured by 
countervailing the net liabilities left in Cogne S.p.A., because the 
net liabilities left in Cogne, S.p.A. would have been reduced if the 
restructuring fund had not been transferred to CAS. Therefore, we 
preliminarily determine that the restructuring fund is already 
accounted for in the assumption of liabilities discussed above.
D. Capacity Reduction Payments Under Law 193/1984
    Among the benefits provided by Law 193/1984 were payments to 
companies in the private steel sector which achieved capacity 
reductions consistent with an agreement by the European Coal and Steel 
Community (ECSC). This program was examined and found countervailable 
in Certain Steel from Italy (58 FR at 37332-3), based on the 
availability of benefits only to the private steel sector. No new 
information or evidence of changed circumstances has been submitted in 
this proceeding to warrant reconsideration of this finding.
    Valbruna received payments for capacity reduction in 1985 and 1986. 
Falck received payments in 1985. These payments were determined to be 
non-recurring grants. Id. To calculate the benefit attributable to 
Valbruna/Bolzano during the POI from the grants to Falck, we first 
determined the amount of Falck's grants attributable to Bolzano at the 
time the grants were given, using the ratio of Bolzano's assets to 
Falck's assets. We then allocated this amount over Valbruna/Bolzano's 
AUL to determine the benefit in each year. We then determined the 
amount of the benefit which remained with Bolzano after Bolzano was 
acquired by Valbruna in 1995, consistent with the methodology described 
in the ``Change in Ownership'' section above.
    To calculate the benefit attributed to Valbruna/Bolzano from the 
grants Valbruna received, we allocated the grants over Valbruna/
Bolzano's AUL to determine the benefit in each year. We then summed the 
benefit amounts attributable to the POI from Falck's and Valbruna's 
grants and divided the total benefit by Valbruna/Bolzano's total sales. 
On this basis, we preliminarily determine the countervailable subsidy 
to be 0.12 percent ad valorem for Valbruna/Bolzano.
E. Law 796/76 Exchange Rate Guarantees
    Law 796/76 established a program to minimize the risk of exchange 
rate fluctuations on foreign currency loans. All firms that had 
contracted foreign currency loans from the ECSC or the Council of 
Europe Resettlement Fund (CER) could apply to the Ministry of the 
Treasury (MOT) to obtain the guarantee. Under the program, loan 
payments are calculated based on the lira-foreign currency exchange 
rate in effect at the time the loan was approved. The program 
establishes a floor and ceiling for exchange rate fluctuations, 
limiting the maximum fluctuation a borrower would face to two percent. 
If the lire depreciated against the foreign currency, the MOT paid the 
difference between the ceiling rate and the actual rate. If the lire 
appreciated against the foreign currency, the MOT collected the 
difference between the floor rate and the actual rate.
    The Department previously found the steel industry to be a dominant 
user of the exchange rate guarantees provided under Law 796/76, and on 
this basis, determined that the program was specific, and therefore, 
countervailable. See Final Affirmative Countervailing Duty 
Determination: Small Diameter Circular Seamless Carbon and Alloy Steel 
Standard, Line and Pressure Pipe (``Seamless Pipe'') from Italy, 60 FR 
31992, 31996 (June 19, 1995). No new information or evidence of changed 
circumstances has been submitted in this proceeding to warrant 
reconsideration of this finding. This program provides a financial 
contribution to the extent that the lire depreciates against the 
foreign currency beyond the two percent band and provides a benefit in 
the amount of the difference between the two percent ceiling rate and 
the actual exchange rate.
    We note that the program was terminated effective July 10, 1991, by 
Decree Law 333/91. However, payments continue on loans that were 
outstanding after that date. Bolzano was the only producer who used 
this program, and it received payments in 1996 on loans outstanding 
during the POI.
    Once a loan is approved for exchange rate guarantees, payments are 
automatic and made on a yearly basis throughout the life of the loan. 
Therefore, we treat the payments as recurring grants. To calculate the 
countervailable subsidy, we used our standard grant methodology for 
recurring grants and expensed the benefits in the year of receipt. We 
divided the total payments received in 1996 on the two loans by the 
value of Valbruna/Bolzano's total sales in 1996. On this basis, we 
preliminarily determine the countervailable subsidy to be 0.08 percent 
ad valorem for Valbruna/Bolzano.
F. Law 227/77 Export Loans and Remission of Taxes
    Under Law 227/77, the Mediocredito Centrale S.p.A. (Mediocredito), 
a GOI-owned development bank, provides interest subsidies on export 
credit financing. Under the program, the Mediocredito makes an interest 
contribution to offset the cost of a supplier's or buyer's credit 
financed by an Italian or foreign commercial bank. The holder of the 
loan contract pays a fixed, low-interest rate on export credits taken 
out through the program with a commercial bank. The Mediocredito 
guarantees a specified variable market rate, and pays the lender any 
shortfall between the guaranteed market rate and the fixed rate 
provided to the borrower. If the market rate falls below the rate 
provided to the borrower, the Mediocredito receives the difference. 
Interest payments are assessed on an annual basis, with contributions 
made by the Mediocredito every six months. In order to obtain the 
interest subsidy,

[[Page 817]]

an application which includes the export supply contract and the 
commercial loan agreement must be submitted to the Mediocredito. Upon 
approval, Mediocredito notifies the borrower of the new terms and 
conditions.
    The export credit financing under Law 227/77 provides a financial 
contribution within the meaning of section 771(5)(D) of the Act and 
confers a benefit in the amount of Mediocredito's interest 
contribution. The Department's practice is to treat export loan 
programs, through which the government provides a benefit to the 
foreign importer, the same as programs that provide benefits directly 
to the exporter. See e.g., Final Affirmative Countervailing Duty 
Determination: Steel Wheels from Brazil, 54 FR 15523 (April 18, 1989) 
and Porcelain-on-Steel Cookingware from Mexico: Final Results of 
Countervailing Administrative Review, 56 FR 26064 (June 6, 1991). The 
contribution is made in connection with the exportation of the 
merchandise and provides a direct benefit to the production and 
distribution of products. We also find that Law 227/77 export financing 
is specific under 771(5A)(B) because it is provided solely to finance 
exports. Therefore, we preliminarily determine that Law 227/77 export 
financing constitutes a countervailable subsidy within the meaning of 
section 771(5) of the Act.
    The GOI reported that under Law 227/77, ``[i]nterest subsidies are 
provided within the guidelines of the international agreement OECD 
Consensus'' and as such would qualify for an Item (k) exemption (GOI 
October 28, 1997, Questionnaire Response, on file in the CRU). Annex I 
to the WTO Agreement on Subsidies and Countervailing Measures contains 
the Illustrative List of prohibited export subsidies. Item (k) of Annex 
1 states that certain export financing programs are not considered to 
be prohibited export subsidies if certain conditions are met, namely, 
``* * * if a Member is a party to an international undertaking on 
official export credits * * * or if in practice, a Member applies the 
interest rate provisions of the relevant undertaking * * * .''
    We are aware of the exemption under Item (k); however, we are 
unable to determine whether the interest rate available under Law 227/
77 conforms with the OECD guidelines. We are countervailing the 
assistance provided by this program in accordance with our benefit-to-
recipient standard (see SAA at 928) and will continue to examine this 
issue for the final determination.
    CAS and Bolzano did not use this program. Valbruna used this 
program for a supply contract with its affiliated U.S. subsidiary, 
Valmix Corporation, which entered into a loan contract for purposes of 
importing merchandise manufactured by Valbruna. The term of the loan 
was 18 months and during the course of this financing arrangement, the 
Mediocredito made interest contributions to Valmix's commercial lender.
    In order to obtain Law 227/77 export financing, a company must have 
already obtained a commercial loan. Thus, a company does not know at 
the time it takes out the commercial loan whether it will receive the 
reduced interest rate available under Law 227/77. Therefore, we 
consider these interest contributions to be grants. Because Law 227/77 
provides on-going interest contributions over the life of the loan, we 
find that it provides recurring grants. See GIA. We divided the total 
amount paid by the Mediocredito on the Valmix loan during the POI by 
Valbruna/Bolzano's total exports to the United States. On this basis, 
we preliminarily determine the countervailable subsidy to be 0.15 
percent ad valorem for Valbruna/Bolzano.

Programs of the Regional Governments

A. Valle d'Aosta Regional Assistance Associated with the Sale of CAS
    As discussed in the ``Company Histories'' section above, in 1993, 
the GOI privatized CAS. While the company operations were sold in a 
bidding process to the company's present owners, the land and buildings 
were sold to the Autonomous Region of Valle d'Aosta. The Regional 
Council of Valle d'Aosta, under Regional Law 4 of January 26, 1993, 
authorized negotiations with the ILVA Group for the acquisition of the 
property and buildings, including the hydroelectric plants which were 
the property of ILVA Centrali Elettrische S.p.A. (ICE). This ``urgent'' 
law also outlined a plan for the Region to reclaim and recover the 
environmental condition of the industrial area of Cogne. As also stated 
in the law, a fundamental goal was ``to enhance the industrial 
activities of `Cogne S.p.A.' in order to ensure adequate employment 
levels.''
    Protocol agreements for the triangular transaction were signed by 
the Region, ILVA, and GE. VAL. S.r.l., the purchaser of CAS's shares 
(now MEG), on November 19, 1993. The Region, through its wholly-owned 
financing corporation, Finaosta S.p.A., agreed to (1) purchase the 
land, including the ICE hydroelectric plants for 150 billion lire, in 
five annual installments, (2) to construct a waste plant, (3) to cover 
the costs of environmental reclamation on the land, up to 32 billion 
lire in accordance with a third-party estimate, and (4) to supply 
electricity directly to CAS from the ICE plants. These commitments were 
conditional upon ILVA entering into a contract with a private party for 
the transfer of CAS by December 31, 1993, and transferring CAS with a 
restructuring fund. The purchaser of CAS's shares agreed to (1) to 
vacate and abandon areas of the property not used in production 
activity and (2) to guarantee that at least 800 employees would be 
employed by CAS after privatization.
    Because of the complex nature of these transactions, which included 
different elements that were alleged to provide subsidies to CAS, we 
have analyzed each section separately as detailed below.
    1. Purchase of the Cogne Industrial Site. Under section 771(5) of 
the Act, in order for a subsidy to be countervailable it must, inter 
alia, confer a benefit. In the case of goods or services, a benefit is 
normally conferred if the goods or services are provided for less than 
adequate remuneration, or, in the case of the government acquiring 
goods, for more than adequate remuneration. The adequacy of 
remuneration is normally determined in relation to prevailing market 
conditions for the good or service provided in the country of 
exportation. Section 771(5)(E) of the Act states, ``[p]revailing market 
conditions include price, quality, availability, marketability, 
transportation, and other conditions of purchase or sale.'' Problems 
can arise in applying this standard when the government is the sole 
purchaser of the good or service in the country or within the area 
where the respondent is located. In these situations, there may be no 
alternative market prices available in the country (e.g., private 
prices, competitively-bid prices, or other types of market reference 
prices). Hence, it becomes necessary to examine other options for 
determining whether the good has been purchased for more than adequate 
remuneration. This consideration of other options in no way indicates a 
departure from our preference for relying on market conditions in the 
relevant country, specifically market prices, when determining whether 
a good or service is being purchased at a price which reflects adequate 
remuneration. See, e.g., Final Affirmative Countervailing Duty 
Determination: Steel Wire Rod from Germany, 62 FR 54990 (October 22, 
1997) (German Wire Rod) at 54994.

[[Page 818]]

    In order to determine whether Valle d'Aosta acquired the Cogne 
industrial area for more than adequate remuneration, we would normally 
have compared this acquisition to a similar market transaction, e.g., a 
comparable sale of commercial real estate. The Autonomous Region of 
Valle d'Aosta provided information on the market for industrial land 
within its borders. The Region indicated that because of the location 
and terrain of its land, there is very little viable industrial 
property. The Region reported that it has purchased other industrial 
areas, but that the largest was only 12 hectares, in comparison to the 
100 hectares of the Cogne industrial site. Therefore, we understand 
that there are no private purchases of industrial sites comparable in 
size to the Cogne industrial property that are representative of the 
prevailing market conditions by which to assess the adequacy of 
remuneration for the purchase of the Cogne industrial site. We also 
found no information about any other market transactions that could 
serve as an appropriate benchmark in determining the adequacy of 
remuneration.
    We next turned to the actual purchase price for the site to examine 
whether this price was determined in reference to market principles. 
The acquisition price that the Region paid for the Cogne industrial 
site was determined by a third-party study, undertaken by a private 
firm. We examined a copy of this study provided by the Region. At the 
Region's request, the Descriptive Report provided by American Appraisal 
Italia S.r.l., presented estimated purchase prices for the Cogne 
industrial site based on valuation of the land and buildings contained 
in the area. The appraisal included a detailed inventory of the many 
buildings and structures on the property, which could continue to be 
used, and the costs involved to destroy the others. The study was 
conducted in reference to market-based principles and included a 
thorough examination of the value of the property, including estimates 
based on different scenarios for the future use of the property. We 
understand that this appraisal was used by the parties in their 
negotiations. Based on our examination, we conclude that the prices 
contained in the Appraisal are a reasonable benchmark for determining 
whether the price paid by the Region was determined in reference to 
market conditions. Because the price paid for the Cogne industrial area 
was not more than the estimates, we preliminarily determine that the 
Autonomous Region of Valle d'Aosta did not acquire the site for more 
than adequate remuneration. Therefore, we preliminarily determine that 
the purchase of the Cogne industrial site does not constitute a subsidy 
within the meaning of section 771(5) of the Act.
    2. Lease of Cogne Industrial Site. Under section 771(5) of the Act, 
in order for a subsidy to be countervailable it must, inter alia, 
confer a benefit. In the case of goods or services, a benefit is 
normally conferred if the goods or services are provided for less than 
adequate remuneration. The adequacy of remuneration is normally 
determined in relation to prevailing market conditions for the good or 
service provided in the country of exportation. Section 771(5)(E) of 
the Act states, ``[p]revailing market conditions include price, 
quality, availability, marketability, transportation, and other 
conditions of purchase or sale.'' Problems can arise in applying this 
standard when the government is the sole supplier of the good or 
service in the country or within the area where the respondent is 
located. In these situations, there may be no alternative market prices 
available in the country (e.g., private prices, competitively-bid 
prices, or other types of market reference prices). Hence, it becomes 
necessary to examine other options for determining whether the good has 
been provided for less than adequate remuneration. The Department has 
recognized several options with respect to the leasing of land, ``to 
examine whether the government has covered its costs, whether it has 
earned a reasonable rate of return in setting its rates and whether it 
applied market principles in determining its prices.'' See e.g., German 
Wire Rod at 54994. This consideration of other options in no way 
indicates a departure from our preference for relying on market 
conditions in the relevant country, specifically market prices, when 
determining whether a good or service is being provided at a price 
which reflects adequate remuneration.
    The Region agreed in the 1993 protocol agreement to lease part of 
the acquired industrial site to CAS. That agreement also explains that 
the Region decided to undertake the transaction, because ``* * * of the 
seriousness of the general economic situation and that of the steel 
industry at the present time, [the Region] has decided to intervene 
with actions specifically aimed at fostering the continuation of this 
activity, with the precise objective of protecting jobs * * * .'' The 
landlord-tenant relationship between CAS and the Region was developed 
based on the understandings and stipulations enumerated in the protocol 
agreements and Regional Law No. 17 of 1994.
    Until an official lease was signed between CAS and Struttura Valle 
d'Aosta S.r.l. (Structure), a company wholly-owned by the Region, CAS's 
use of the Cogne site was governed by a lease which had been signed by 
CAS and Cogne S.p.A. The protocol agreements required that this lease 
be established for a transition period. The Region accepted the terms 
of lease established between the two affiliated Cogne companies until 
another could be negotiated. An official lease between Structure and 
CAS was not signed until April 1996. The terms of the CAS-Structure 
contract granted CAS a 30-year lease. The lease required CAS to vacate 
certain areas and buildings between the beginning of 1995 and the end 
of 1996. Under both the CAS-Cogne S.p.A. lease and the CAS-Structure 
lease, the annual rent of 770 million lire was due in quarterly 
deferred payments. The lease also stipulated that CAS held 
responsibility for extraordinary maintenance.
    We would normally evaluate the adequacy of remuneration of lease 
rates in reference to an alternative market price, e.g., lease rates of 
comparable commercial real estate. However, as discussed above, there 
is little industrial property in Valle d'Aosta. We also understand that 
there is no comparable commercially leased property in the region. 
Unlike the situations examined by the Department in other cases, there 
are no other leases that could possibly serve as a benchmark for 
determining the adequacy of remuneration. See, e.g., German Wire Rod 
and Trinidad and Tobago.
    We therefore examined the Structure-CAS lease to see if its terms 
appear to reflect normal market conditions. Most of the lease 
provisions establish CAS's obligations to return part of the property 
it formerly occupied, the time limits for the removal of its equipment, 
the incentives for meeting the deadlines, and the penalties for failing 
to meet these deadlines. We note that the lease includes a clause under 
which CAS is entitled to a payment for vacating the agreed-upon areas 
within the specified time limits. However, CAS reported that it has not 
received such a payment to date. The lease also contains provisions 
relating to the disposal of industrial waste because Valle d'Aosta has 
not constructed the waste disposal facility discussed in the protocol 
agreement. Other clauses regarding indemnity, taxes, etc., seem 
comparable to those likely to be in a lease between two private 
parties, and appear to reflect

[[Page 819]]

conditions that would be set for a normal commercial lease.
    However, as noted in the preamble of the lease, the Structure-CAS 
lease was intended to further implement the protocol agreements. The 
preamble of the protocol agreements states, ``* * * the Region, which 
is aware that the steel production activity carried on, at the present 
time, by Cogne constitutes a very significant reality in the economic 
and industrial structure of Valle d'Aosta, and is also aware of the 
seriousness of the general economic situation and that of the steel 
industry at the present time, has decided to intervene with actions 
specifically aimed at fostering the continuation of this activity, with 
the precise objective of protecting jobs * * *'' (emphasis added). The 
parties specifically agreed that under the protocol agreement CAS would 
maintain at least 800 employees at the facility. These goals would not 
normally be included in an agreement negotiated between private 
parties; a lessee would not normally be obligated to commit to a 
certain employment level. Also, in response to our questions about the 
return on its investment, the Region of Valle d'Aosta clarified its 
goals related to the transaction, stating ``* * * it is not possible 
for use [sic] to provide within this context a detailed financial 
analysis of the time required to recoup the costs and the annual 
estimated rate of return on the investment made by the Region at the 
time the purchase was made * * * as such an analysis would not take 
into account the social, environmental and urban renewal 
considerations, which it should be stressed were decisive for the 
decision to approve the Regional Law that authorized the purchase.'' A 
private actor considering the purchase leaseback of real estate would 
normally undertake a detailed financial analysis before leasing a large 
piece of property. Thus, we preliminarily conclude that the 
negotiations between CAS and the Autonomous Region of Valle d'Aosta 
were not conducted in reference to normal market considerations.
    We then turned to the terms establishing the lease rates in order 
to determine whether the Region charged a lease rate that reflects an 
adequate return on its investment. Because we have no market leases 
with which to compare this lease, we determined that it was appropriate 
to construct a reference price for the lease of the land, using 
standard real estate analysis principles. See, e.g., Edward John 
Golden, The Art and Science of Real Estate Investment Analysis (1980). 
The type of transaction presented here is normally called a purchase 
leaseback: the Region purchased the land and now leases it back to the 
former owner/occupant. In evaluating a purchase leaseback, one way to 
conceptualize the transaction is to think of it as an asset that is 
being borrowed. In a lease, an asset is borrowed for a set period of 
time and the price of the transaction is normally established based on 
the value of the use of the asset over time. There are several ways to 
value commercial property over time, the most conservative of which 
accounts for the depreciation of the buildings. Only the value 
associated with the buildings is amortized; land values are held 
constant and the benchmark price reflects only the interest paid with 
respect to the land.
    In the instant case, the market value of the land and buildings 
covered by the lease was established by the third party appraisal 
discussed above. We used the purchase price for the land and buildings 
currently used by CAS (not including the vacated property). We would 
have adjusted for the depreciation of the buildings over time by 
amortizing their value. However, because we did not have a breakdown of 
the value of the land and buildings, we could not make this adjustment. 
We will examine this issue further for our final determination. In 
addition, we noted that according to the GOI, Italian law obligates 
landlords to cover the costs of extraordinary maintenance. Under the 
Structure-CAS lease, CAS was assigned the obligation to perform 
extraordinary maintenance and the parties negotiated a rate which would 
take those maintenance costs into consideration. Although CAS reported 
costs for extraordinary maintenance during the years of the lease, we 
were unable to examine fully these costs to ensure that the values 
reported by CAS as extraordinary maintenance did not include work more 
appropriately termed normal maintenance. In addition, we did not have 
the information to calculate an adjustment to our benchmark for the 
cost of extraordinary maintenance. Therefore, we did not make an 
adjustment for maintenance for the preliminary determination. We will 
also examine this issue for our final determination.
    To determine if the lease was established consistent with market 
principles, we examined the return to the Region of Valle d'Aosta on 
their investment in the industrial site. Thus, we multiplied the value 
of the asset, i.e., the price paid by the Region for the land and 
buildings, by an interest rate that represents the return an investor 
would expect to earn on an alternative investment. For this preliminary 
determination, we used the average interest rate on treasury bonds as 
reported by the Banca D'Italia. However, the Department normally does 
not use government interest rates in benchmark calculations. See, e.g., 
Final Affirmative Countervailing Duty Determination Oil Country Tubular 
Goods from Israel, 52 FR 1649 (January 15, 1987). Therefore, we will 
seek a rate for the final determination that may be more indicative of 
market behavior. We used this analysis to establish a benchmark for 
determining whether the annual lease rate charged by the Region 
reflected adequate remuneration. We compared this amount to the amount 
actually paid by CAS during the POI. Based on this comparison, we found 
that the Region is not receiving an adequate rate of return on its 
investment. This finding corroborates our conclusion that the lease 
terms were not established based on normal market conditions. 
Therefore, we preliminarily determine that the lease was provided for 
less than adequate remuneration.
    Through this lease, the Autonomous Region of Valle d'Aosta made a 
financial contribution to CAS within the meaning of section 
771(5)(D)(iii) of the Act, equal to the difference between what would 
have been paid annually in a lease established in accordance with 
market conditions and what was actually paid. The lease is specific 
within the meaning of section 771(5A)(D) of the Act, because the lease 
rate is limited to CAS. Therefore, we preliminarily determine that the 
CAS industrial lease is a countervailable subsidy within the meaning of 
section 771(5) of the Act.
    To calculate the benefit, we found the difference between the 
amount that would have been paid during the POI if the lease rate had 
been determined with reference to market conditions and the amount 
actually paid. We divided the amount by CAS's total sales in 1996. On 
this basis, we preliminarily determine the countervailable subsidy to 
be 0.53 percent ad valorem for CAS.
    3. Provision of Electricity. As described above, the Autonomous 
Region of Valle d'Aosta also acquired the shares of ICE, the operator 
of the hydroelectric plants, which is now known as Compagnia Valdostana 
delle Acque S.p.A. (Valdostana), when it purchased the Cogne industrial 
site. The Region planned to supply electricity directly to CAS, and had 
applied to establish a consortium, with CAS as a shareholder, to sell 
directly to customers instead of to ENEL, the National Electricity 
Board. Petitioners alleged that this provision of electricity may 
constitute a countervailable subsidy under section 771(5) of the Act.

[[Page 820]]

However, according to Valle d'Aosta and the GOI, the application to 
establish the consortium has not been approved and Valdostana has not 
been permitted to supply electricity to CAS. Instead, Valdostana 
continues to sell its production to the National Electricity Board, 
ENEL. CAS purchases electricity from ENEL in accordance with the 
standard provisions applied to other commercial electricity users in 
Italy. Therefore, as Valdostana has not created a special consortium to 
provide electricity to CAS, and CAS appears to obtain its electricity 
through ENEL like other firms in Italy, we preliminarily find that this 
program does not exist.
    4. Waste Plant. As described above, Valle d'Aosta agreed to 
construct a waste plant, for CAS and other users, as one of the terms 
of the protocol agreements. Petitioners alleged that the construction 
of the waste plant, which would have been used by CAS, constituted a 
countervailable subsidy. However, Valle d'Aosta reported that the waste 
plant is still in the planning stages and construction has not begun. 
Also, there is no indication from information on the record that funds 
have yet been expended on this facility. However, we will continue to 
examine this issue for the final determination. Based on the above, we 
preliminarily determine that this program does not exist.
    5. Loans Provided to CAS to Transfer Its Property. In the protocol 
agreements of November 1993, the Autonomous Region of Valle d'Aosta 
agreed to provide financing through Finaosta S.p.A. for the costs 
involved with the transfer of CAS property off the portion of the site 
not subject to the lease. After the environmental reclamation of the 
land, Valle d'Aosta planned to develop facilities for small and medium-
sized enterprises on this portion of the site. Accordingly, the 
Regional Council authorized this financing in Law 37 of August 30, 
1995. The law authorized financing up to 25 billion lire, ``to cover 
the expenses for the transfer of installations, warehouses, utilities 
and offices from the area.'' See Questionnaire Response from the GOI, 
dated October 28, 1997, on file in the CRU. While the financing was 
discussed in the protocol agreements, we found no indication in the 
appraisal, or elsewhere, that these loans were factored into the 
purchase price for the land. Therefore, we are analyzing the transfer 
loans as a separate subsidy event to determine whether they are 
countervailable.
    Finaosta provided this financing in three separate loan agreements 
over 1996 and 1997 with the interest rate set at 50 percent of the 
Rendistato interest rate (as published in SOLE 24 Ore) for each loan. 
Under the terms of each loan contract, a deferred six-month payback 
schedule was established. Each tranche received an eighteen-month, 
interest-free grace period.
    In accordance with ECSC procedures, the GOI notified this loan to 
the EC for evaluation of whether it constituted ``State assistance'' to 
CAS. In its decision of June 15, 1995, the EC determined that the loan 
was not aid, but instead an indemnity to CAS. The EC found that the 
total savings from the reduced interest rate, estimated at 4.6 billion 
lire, was less than the cost of the transfers, 4.9 billion lire, 
according to an independent estimate. The EC also stated that the 
Autonomous Region of Valle d'Aosta had unilaterally terminated part of 
CAS's lease (for the property to be vacated), and the loan represented 
compensation for the costs associated with the partial termination of 
the contract by the landlord.
    Notwithstanding the EC's determination, we conclude from the facts 
presented in this proceeding that the transfer loan is not an 
indemnity. Pursuant to the protocol agreements, all parties agreed that 
CAS would vacate part of the property before any lease was signed. The 
transfer of property from part of the land was one of the conditions of 
the leaseback. From the information on the record, there is no 
indication that the lease, or any of the other agreed-upon 
stipulations, was unilaterally terminated. In addition, according to 
the protocol agreements, the Autonomous Region of Valle d'Aosta agreed 
to provide ``financing'' for the costs. CAS reported that it submitted 
invoices and estimates to Finaosta in order to receive each individual 
loan. CAS also reported that an independent appraiser estimated the 
cost of the relocation at 4.945 billion lire (see submission from CAS, 
dated December 17, 1997, on file in the CRU).
    Thus, we compared the interest rate provided under these loans to 
the average interest rates on medium and long-term loans as established 
by the GOI's survey and found that the rate provided was lower. 
Therefore, through these transfer loans, the Region of Valle d'Aosta 
made a financial contribution that provided a benefit to the recipient 
in the difference between what CAS pays on these loans and what CAS 
would pay on a comparable commercial loan. The transfer loans are de 
jure specific within the meaning of section 771(5)(D) of the Act, 
because their provision is limited, by law, to CAS. Therefore, we 
preliminarily determine that the transfer loans are a countervailable 
subsidy within the meaning of section 771(5) of the Act.
    In the POI, CAS received a benefit from one of the relocation 
loans. To calculate the benefit, we employed the Department's standard 
long-term loan methodology. See, e.g., GIA. We divided the benefit by 
the 1996 sales of CAS. On this basis, we preliminarily determine the 
countervailable subsidy to be 0.37 percent ad valorem for CAS.
B. Valle d'Aosta Regional Law 64/92
    Law 64/92 of the autonomous region of Valle d'Aosta provides 
funding to cover up to 30 percent of the cost of installing 
environmentally-friendly industrial plants in the province. 
Administered by the Industry, Craft, and Energy Department (ICED), the 
program was initiated in 1993. Any firm in Valle d'Aosta may apply to 
the ICED to have part of its costs covered for a specific 
environmentally friendly project. According to the application 
procedures established by the ICED, a firm must submit a separate 
application for each individual project. A technical consultant 
committee appointed by the ICED evaluates each application to determine 
whether the proposed project would reduce environmental pollution in 
the province. Each project must receive the approval of the technical 
consultant committee in order to receive funding from the Regional 
Authority. Once a project is approved, the Regional Authority will 
provide a grant of up to 30 percent of the cost of the project. These 
grants provide a financial contribution within the meaning of section 
771(5)(D)(i) of the Act.
    We analyzed whether the program is specific in law (de jure 
specificity), or in fact (de facto specificity), within the meaning of 
section 771(5A)(D) (i) and (iii) of the Act. We examined the 
eligibility criteria contained in the law, and find that the law is not 
de jure specific because the enacting legislation does not explicitly 
limit eligibility to an enterprise or industry or group thereof. We 
then examined data on the provision of assistance under this program to 
determine whether Law 64/92 meets the criteria for de facto specificity 
under section 771(5A)(D)(iii) of the Act. Since the inception of the 
program, the authorities have approved the applications of nine firms 
in several different industries. While this alone would be sufficient 
for a finding of de facto specificity because there are only a few 
companies in a few industries that have received assistance under this 
program, we also examined data on the value of grants given to these 
firms. CAS and a firm in the food and beverage industry received close 
to two-thirds of

[[Page 821]]

the total assistance awarded, with each firm receiving approximately 
one-third of the total assistance. The remaining third of the 
assistance was distributed to the other seven firms. As such, CAS 
received a disproportionate share of the total assistance under this 
program. On this basis, we find Law 64/92 to be de facto specific 
within the meaning of section 771(5A)(D)(iii) of the Act. Therefore, we 
preliminarily determine that Law 64/92 provides a countervailable 
subsidy within the meaning of section 771(5) of the Act.
    CAS received funding for three projects under this law: two were 
approved in 1995 and one was approved in 1996. As CAS submitted a 
separate application to the regional authority for each project, we are 
treating the grants received under this program as non-recurring (see 
GIA). However, the total of the two grants approved in 1995 did not 
exceed 0.5 percent of sales in 1995. As such, these grants would be 
attributable solely to 1995 and would not be allocated over time (see 
GIA). In addition, the grant approved in 1996 is also less than 0.5 
percent of sales in 1996. As such, we are allocating the entire value 
of this grant to the POI.
    To calculate the countervailable subsidy, we divided the total 
amount of the 1996 grant by the value of CAS's total sales. On this 
basis, we preliminarily determine the countervailable subsidy to be 
0.02 percent ad valorem for CAS.
C. Valle d'Aosta Regional Law 12/87
    Law 12/87 of the Autonomous Region of Valle d'Aosta funds the 
promotion of commercial activities of local firms in other regions of 
Italy, and abroad. The Law became effective in 1987, and is 
administered by the ICED. Under the provisions of the Law, funding can 
only be provided to companies for participation in shows, fairs, and 
exhibitions in Italy and abroad, and for participation in delegations 
for commercial promotion abroad. Companies apply for funding up to 30 
percent of costs for promotional activities in Italy (up to 10 million 
lire) and 40 percent of the costs for promotional activities abroad (up 
to 15 million lire). CAS submitted three applications for funding under 
this program. The region approved and funded two of the proposals, both 
in 1996: a grant of 15 million lire for participation in the Singapore 
Wire & Cable Fair and a grant of 12.7 million lire for participation in 
the Dusseldorf Wire Fair. While neither show was held in the United 
States, both included numerous U.S. participants.
    Law 12/87 provides a financial contribution within the meaning of 
section 771(5) of the Act, and provides a benefit to the recipient in 
the amount of the grant. The Department has recognized that general 
export promotion programs, programs which provide only general 
informational services, do not constitute countervailable subsidies. 
(See, e.g., Fresh Cut Flowers from Mexico, 49 FR 15007 (1984)). 
However, where such activities promoted a specific product, or provided 
financial assistance to a firm, we have found the programs to 
constitute export subsidies. (See, e.g., Fresh Atlantic Groundfish from 
Canada, 51 FR 10041 (1986); and Fresh Cut Flowers from Israel, 52 FR 
3316 (1987)). Because financial assistance under this law was provided 
to CAS for the promotion of its exports, we preliminarily find the 
assistance to CAS constitutes an export subsidy within the meaning of 
section 771(5A)(B) of the Act.
    We find that the grants received under this program are non-
recurring because they are exceptional rather than ongoing events (see 
GIA.) Each project funded by a grant requires a separate application 
and approval by the regional authority. However, the grants did not 
exceed 0.5 percent of CAS's total exports in the year they were 
received. Therefore, in accordance with our practice, we allocated the 
entire amount of the grant to the year of receipt. We divided the total 
amount of the two grants by the value of CAS's total exports during the 
POI. On this basis, we preliminarily determine the countervailable 
subsidy to be 0.01 percent ad valorem for CAS.
D. Province of Bolzano Assistance: Purchase and Leaseback of Bolzano 
Industrial Site
    As discussed in the ``Company Histories'' section above, in 1995, 
Falck sold Bolzano to Valbruna. Concurrent with the change in 
ownership, Falck and Bolzano entered into negotiations to sell the 
Bolzano industrial site land to the Province of Bolzano. Two pieces of 
property (land and buildings) were subject to these negotiations, the 
``Stabilimento Sede,'' which was owned by Bolzano, and the 
``Stabilimento Erre,'' owned by Immobiliare Toce, a subsidiary of 
Gruppo Falck with real estate holdings. The purchase price for the 
Stabilimento Sede and Stabilimento Erre, approximately 63 billion lire, 
was established by the cadastral office of the Province. The Province 
paid for the property in full, with funds authorized under the 
Provincial Council Resolution 850 of February 20, 1995. Valbruna 
entered into concurrent negotiations with the Province for a long-term 
lease of the Bolzano industrial site.
    1. Purchase of Bolzano Industrial Site. Under section 771(5) of the 
Act, in order for a subsidy to be countervailable it must, inter alia, 
confer a benefit. In the case of goods or services, a benefit is 
normally conferred if the goods or services are provided for less than 
adequate remuneration, or, in the case of the government acquiring 
goods, for more than adequate remuneration. In assessing the adequacy 
of remuneration of this transaction, we have applied the standards 
discussed in the ``Purchase of the Cogne Industrial Site'' above.
    In order to determine whether the Province of Bolzano acquired the 
Bolzano industrial site for more than adequate remuneration, we would 
normally have compared this acquisition to a similar market transaction 
in the Province. Although the Province of Bolzano provided some 
information on the provincial territory and market for industrial 
property, like the Autonomous Region of Valle d'Aosta, there is very 
little industrial property in the Province. The Province reported that 
only 530 hectares are occupied by industrial firms. The Province also 
reported that no other property transactions occurred around the time 
that it purchased the Bolzano industrial site. Thus, we understand that 
there are no private purchases of industrial sites comparable in size 
to the Bolzano property that are representative of the prevailing 
market conditions by which to assess the adequacy of remuneration for 
the purchase of the Bolzano industrial area. As such, there is no 
information on the record about other market transactions that could 
serve as an appropriate benchmark in determining whether the Province 
purchased the property for more than adequate remuneration.
    Valbruna indicated that it had agreed to purchase the Bolzano site 
at the price determined by the province, if the province and Falck were 
unable to reach an agreement for the purchase of the property. While 
Valbruna was a party to the series of transactions, as a private party, 
its interests would not have been served by agreeing to pay an inflated 
price for the property. Therefore, Valbruna can be considered an 
uninterested third party for purposes of evaluating whether the price 
of the property was established in reference to market conditions. 
Since Valbruna agreed to pay the price determined by the cadastral 
office if the province did not purchase the site, we preliminarily 
determine that the price the Province of Bolzano paid was established 
in accordance with normal market

[[Page 822]]

conditions. On this basis, we conclude that the Province of Bolzano did 
not purchase the Bolzano industrial site for more than adequate 
remuneration. Therefore, we preliminarily determine that the purchase 
of the Bolzano industrial site does not constitute a subsidy within the 
meaning of section 771(5) of the Act.
    2. Lease of Bolzano Industrial Site. As discussed above, under 
section 771(5) of the Act, in order for a subsidy to be countervailable 
it must, inter alia, confer a benefit. In the case of goods or 
services, a benefit is normally conferred if the goods or services are 
provided for less than adequate remuneration, or, in the case of the 
government acquiring goods, for more than adequate remuneration. In 
assessing the adequacy of remuneration of this lease agreement, we 
applied the standards discussed in the ``Lease of the Cogne Industrial 
Site'' above.
    Concurrent with the sale of Bolzano and the sale of the property, 
Valbruna/Bolzano began negotiations with the Province of Bolzano to 
lease the Bolzano industrial site (including the Stabilimento Sede and 
the Stabilimento Erre) from the Province. Valbruna/Bolzano and the 
Province of Bolzano signed a thirty-year lease on July 31, 1995, for 
the Bolzano industrial site.
    With respect to the lease of land and buildings, adequacy of 
remuneration would normally be evaluated in reference to an alternative 
market price, e.g., lease rates of comparable commercial real estate. 
However, as described above, there is little comparable commercial 
property in the Province. We also understand that there is no 
comparable commercially-leased property in the Province which could be 
used to establish a benchmark to evaluate the adequacy of remuneration 
in Valbruna/Bolzano's lease. The Province did provide some information 
on two leases it has with other private parties, however, the amount of 
property covered by these leases is much smaller than that covered by 
the Valbruna/Bolzano lease, and therefore, inappropriate for comparison 
purposes. Thus, there are no other leases that could possibly serve as 
a benchmark for determining the adequacy of remuneration.
    We therefore examined the lease for the Bolzano industrial site to 
determine whether its terms reflected normal market conditions. In 
general, the terms of the lease appear to reflect conditions that would 
be set for a normal commercial lease. However, as discussed in the 
public version of the November 4, 1997, response of the GOI (public 
version on file in the CRU), the lease requires Valbruna/Bolzano to 
maintain a minimum employment level of 650 employees at Bolzano. We 
note that this minimum employment level requirement can be waived under 
certain circumstances, such as technological improvement. 
Notwithstanding the waiver provision, however, the record evidence 
indicates that the Province of Bolzano intended to preserve jobs at the 
Bolzano facility through this lease. Although the Province claimed that 
it includes similar requirements in the leases it has offered other 
parties, we do not find this clause to be indicative of normal market 
considerations because such employment obligations would not normally 
be included in agreements negotiated between private parties. Thus, we 
preliminarily conclude that the negotiations between Valbruna/Bolzano 
and the Province of Bolzano were not conducted in reference to normal 
market considerations.
    We then turned to the terms establishing the lease rates in order 
to determine whether the Province of Bolzano charged a lease rate that 
reflects adequate remuneration. Because we have no market leases with 
which to compare this lease, we determined that it was appropriate to 
construct a reference price for the property using standard real estate 
analysis principles, as described in the ``Valle d'Aosta'' section 
above. We again followed the most conservative methodology in valuing 
the asset over time. In the instant case, the value of the property was 
found to be equivalent to a market-determined price. We would have made 
an adjustment to account for the depreciation of the buildings over 
time by amortizing their value. However, as we did not have a breakdown 
of the value of the land and buildings, we could not make this 
adjustment. We plan to add amortization of buildings to the calculated 
lease rate for the final determination.
    According to the GOI, Italian law obligates landlords to cover the 
cost of extraordinary maintenance. Under the lease, Valbruna/Bolzano 
was assigned the obligation to perform extraordinary maintenance and 
the parties negotiated a rate which would take those maintenance costs 
into consideration. However, we did not have the information to 
calculate an adjustment to our benchmark for the cost of extraordinary 
maintenance. Therefore, we did not make such an adjustment for the 
preliminary determination. We will examine this issue for our final 
determination.
    As described above, we used this analysis as a benchmark for 
determining whether the region obtained an adequate return on its 
investment, because we had no comparable market-determined leases to 
use in determining the adequacy of remuneration. Thus, we multiplied 
the value of the asset, i.e., the price paid by the Region for the land 
and buildings, by an interest rate that represents the return an 
investor would expect to earn on an alternative investment. As 
described above, for this preliminary determination, we used the 
average interest rate on treasury bonds as reported by the Banca 
D'Italia. We used this analysis to establish a benchmark for 
determining whether the annual lease rate charged by the region 
reflected adequate remuneration. We compared this amount to the amount 
actually paid by Valbruna/Bolzano during the POI. Based on this 
comparison, we found that the Region is not receiving an adequate rate 
of return on its investment. This finding corroborates our conclusion 
that the lease terms were not establish based on normal market 
conditions. Therefore, we preliminarily find that the lease was 
provided for less than adequate remuneration. Through this lease, the 
Province of Bolzano made a financial contribution to Valbruna/Bolzano 
within the meaning of section 771(5)(D) of the Act, equal to the 
difference between what would have been paid annually in a lease 
established in accordance with market conditions, and what was actually 
paid. The lease is specific within the meaning of section 771(5A)(D) of 
the Act, because the lease rate is limited to Valbruna/Bolzano. 
Therefore, we preliminarily determine that the Bolzano industrial lease 
is a countervailable subsidy within the meaning of section 771(5) of 
the Act.
    To calculate the benefit, we found the difference between the 
amount that would have been paid during the POI if the lease had been 
determined with reference to market conditions and the amount that 
actually was paid. We divided this amount by Valbruna/Bolzano's total 
sales in 1996. On this basis, we preliminarily determined the 
countervailable subsidy to be 0.47 percent ad valorem for Valbruna/
Bolzano.
    3. Lease Exemption. Under the Province of Bolzano-Valbruna/Bolzano 
lease, Valbruna/Bolzano agreed to assume certain environmental 
reclamation costs instead of paying rent for the first two years of the 
lease. The GOI stated in its public version of the November 4, 1997, 
response that these costs were, in fact, more than the uncollected rent 
to date. However, in order to determine whether the nonpayment of rent 
for the first two

[[Page 823]]

years constituted a countervailable subsidy to Valbruna/Bolzano, we 
examined whether or not the Province of Bolzano would have been 
responsible for these environmental reclamation costs.
    Under Italian law, the landlord would normally bear the 
responsibility for pre-existing environmental costs under a normal 
lease agreement. Valbruna/Bolzano reported some of the projects 
undertaken and their associated costs connected with this environmental 
reclamation. Most of the projects undertaken by Valbruna/Bolzano in 
exchange for the non-payment of rent related only to the plant and 
equipment owned by the company. The Province would not have had an 
obligation to undertake costs associated with plant and equipment it 
did not own. We preliminarily find that the relief from rent payment 
for the first two years of the Valbruna/Bolzano industrial lease 
provides a financial contribution within the meaning of section 
771(5)(D)(ii) of the Act, in the form of revenue forgone, which 
provides a benefit in the amount of rent that would normally have been 
collected.
    We preliminarily determine that the lease exemption was specific 
under section 771(5A)(D) of the Act because it was provided to a single 
enterprise, Valbruna/Bolzano. Therefore, we preliminarily determine 
that the exemption from payment of rent under the lease of the Bolzano 
industrial site provides a countervailable subsidy under section 771(5) 
of the Act.
    To calculate the countervailable subsidy, we treated the exemption 
as a grant. Because the exemption from payment of the lease is limited 
to a specific period of time, which could not be extended without 
extraordinary government action, we find that it is non-recurring (see 
GIA). The lease stipulates payments every six months. Therefore, we 
treat each nonpayment as a non-recurring grant. There was one 
nonpayment in 1995, two in 1996, and one after the POI. Because the 
total amount in each year was less than 0.5 percent of Valbruna/
Bolzano's total sales in the year of receipt, we allocate the grants to 
the year of receipt. Thus, we have allocated the full amount of the 
grants received during 1996 to the POI, in accordance with the 
Department's practice. We divided the grants received in 1996 by 
Valbruna/Bolzano's total sales. On this basis, we preliminarily 
determine the countervailable subsidy to be 0.38 percent ad valorem for 
Valbruna/Bolzano.

Programs of the European Commission

A. ECSC Article 54 Loans
    Article 54 of the 1951 ECSC Treaty established a program to provide 
industrial investment loans directly to the iron and steel industries 
to finance modernization and the purchase of new equipment. Eligible 
companies apply directly to the EC for up to 50 percent of the cost of 
an industrial investment project. The Article 54 loan program is 
financed by loans taken out by the EC, which are then refinanced at 
slightly higher interest rates than those at which the EC obtained 
them.
    The Department has found Article 54 loans to be specific in several 
proceedings, including Electrical Steel, Certain Steel from Italy, and 
UK Lead Bar 94, because loans under this program are provided only to 
the iron and steel industries. No new information or evidence of 
changed circumstances has been submitted in this proceeding to warrant 
reconsideration of this finding. This program provides a financial 
contribution within the meaning of section 771(5)(D)(i) of the Act to 
the extent that it provides loans with an interest rate less than what 
the recipient would pay on a comparable commercial loan and provides a 
benefit to the recipient in the difference between the amount paid on 
the loan and the amount which would be paid on a comparable commercial 
loan.
    Valbruna did not use this program. Bolzano and CAS received Article 
54 loans. Bolzano had two loans outstanding during the POI, one 
denominated in U.S. Dollars, the other in Dutch Guilders. CAS received 
one Article 54 loan with a variable interest rate on which no interest 
or principal were due during the POI. Consistent with the Department's 
loan methodology, the benefit would be received after the POI, and 
thus, the program is not used.
    With respect to the loans to Bolzano, we would have used as a 
benchmark interest rate a long-term borrowing rate for loans 
denominated in the appropriate foreign currency in Italy. However, we 
were unable to find such rates. Therefore, we used the average yield to 
maturity on selected long-term corporate bonds as reported by the U.S. 
Federal Reserve for the loan denominated in U.S. dollars, and the long-
term bond rate in the Netherlands as reported by the International 
Monetary Fund for the loan denominated in guilders.3 We then 
compared the cost of the benchmark financing for each loan to the 
financing Bolzano received under the program and found that both loans 
provided a financial contribution. To calculate the benefit in the POI, 
we employed the Department's standard long-term loan methodology. We 
calculated the grant equivalent and allocated it over the life of each 
loan. We also applied the methodology discussed in the ``Change in 
Ownership'' section above. We divided the benefit allocated to the POI 
by the 1996 sales of Valbruna/Bolzano. On this basis, we preliminarily 
determine the countervailable subsidy to be 0.02 percent ad valorem for 
Valbruna/Bolzano.
---------------------------------------------------------------------------

    \3\ We note that Bolzano entered into the loan contract for the 
loan denominated in U.S. dollars in 1979. However, the interest rate 
for that loan was renegotiated in 1992. Therefore, we have treated 
it as a new loan from that point and used a 1992 benchmark.
---------------------------------------------------------------------------

II. Programs Preliminarily Determined To Be Not Countervailable

A. Law 46: Deliberazione Grants under the Technological Innovation Fund

    Under the Deliberazione Law 46/82, Technological Innovation Fund 
(FIT), the GOI provides grants to companies for projects that contain a 
high degree of technological innovation. The program is administered 
through the Ministry of Industry. Eligibility criteria were established 
by the Interdepartmental Committee for Economic Planning (CIPI) in a 
resolution dated March 30, 1983, and a special technical committee 
evaluates all applications.
    Each application must include a detailed description of the 
proposed technical project, which is evaluated by the technical 
committee on both its scientific and industrial merits and economic and 
environmental impact. If a proposal is deemed successful, the company 
will be termed ``innovative'' or ``highly innovative'' and then will 
become eligible for funding at 35 percent or 50 percent, respectively. 
The Ministry of Industry, acting on the opinions of the CIPI, then 
issues a decree declaring a specific company and project eligible for 
benefits. Through Law 46, the GOI makes a financial contribution that 
provides a benefit in the form of grants or low-interest loans. 
Valbruna, Bolzano, Delta Cogne (a CAS predecessor company), and Falck 
received assistance under this program during the allocation periods.
    We analyzed whether the program is specific in law (de jure 
specificity), or in fact (de facto specificity), within the meaning of 
section 771(5A)(D) (i) and (iii) of the Act. First, we examined the 
eligibility criteria contained in the law. The CIPI resolutions 
identified the

[[Page 824]]

following broad categories as priority sectors for eligibility and 
participation in the program: automobile and automotive components, 
electronics, steel, aerospace, chemicals, motorcycle, agri-food, and 
environmental. Small and medium-sized enterprises from any sector are 
also eligible to participate in the program. We find that the FIT 
portion of Law 46/82 is not de jure specific because the enacting 
legislation, by including all small and medium enterprises, does not 
explicitly limit eligibility to a specific enterprise or industry or 
group thereof.
    We then examined data on the distribution of assistance under this 
program to determine whether the Deliberazione program meets the 
criteria for de facto specificity under section 771(5A)(D)(iii) of the 
Act. We found Law 46 Deliberazione benefits were distributed to a large 
number of firms in a wide variety of industries. The GOI also provided 
information on the sector-specific provision of benefits under the 
program. The electronics and chemicals industries received the largest 
percent of assistance provided to any of the sectors. In addition, 
``other industries'' not specifically named received a large percentage 
of assistance. We found that the steel sector received 1.5 percent of 
total benefits awarded, and did not receive more than 3 percent of 
annual benefits awarded in any single year covered by the allocation 
periods. The steel industry received far less than a number of the 
other industries. Therefore, we preliminarily determine that the Law 
46/82 Deliberazione program is not specific under section 771(5A)(D) of 
the Act.
    We sought information from the GOI to determine whether export 
performance was a factor in determining eligibility for Deliberazione 
benefits. The GOI responded that export performance was not an 
eligibility criterion, but did indicate that a high percentage of 
exports, in terms of turnover, is one of the criteria examined under 
the economic impact analysis. Based on the information on the record, 
we do not find that the Law 46/82 Deliberazione Fund for Technological 
Innovation program meets the definition of an export subsidy within the 
meaning of section 771(5A)(B) of the Act. However, we will continue to 
examine whether provision of Law 46 Deliberazione assistance may be 
contingent upon export performance for the final determination.

B. Law 451/94 Early Retirement Benefits

    Under Article 8 of Law 451/94, the GOI authorized an early 
retirement program to be implemented between 1994 and 1996. Under this 
program, a maximum of 15,500 (later amended to 17,100) workers could be 
retired early. Under Law 451/94, employees in the public and private 
iron and steel sector become eligible for retirement at age 50 for men 
and 47 for women. In order to qualify, the worker must have had 15 
years of contributions to the early retirement program (under the 
provisions of Decree Law 503/92) or at least 30 years of regular 
contributions. The program was implemented to meet Italy's commitments 
for capacity reductions under the ECSC plan for rationalization of the 
iron and steel sector.
    The provisions of Law 451/94 are similar to the early retirement 
provisions the Department has examined in prior cases (e.g., Law 181/
89, 193/84 and 223/91 in Certain Steel from Italy and Electrical 
Steel). The GOI, through the program, makes a contribution to the 
retirement program to allow each participating worker to retire with a 
full pension. These programs were designed to ease the collateral 
impact of the steel crises, allowing workers to retire instead of 
facing large numbers of layoffs.
    The Department's practice with respect to early retirement and 
other prepension programs is articulated in the GIA, 58 FR at 37255: 
``. . . in order for worker assistance programs to be countervailable, 
the company must be relieved of an obligation it would otherwise have 
incurred.'' In Certain Steel from Italy, we found that because of 
social unrest, companies could not layoff workers at will, thus early 
retirement programs provided a countervailable benefit because they 
allowed companies to reduce their payrolls. However, in Electrical 
Steel, the Department reversed this finding, determining that, when a 
company lays off workers, the company actually faces higher costs when 
a worker uses an early retirement provision instead of a standard 
severance package.
    In this investigation, we examined whether Law 451/94 and similar 
provisions relieved any company of obligations to its workers. Bolzano 
is the only company that had workers retire under Law 451/94 during or 
before the POI. According to that company and the GOI, companies are 
able to lay off or fire workers at will. The obligations to those 
workers are dictated by Italian Labor Law. Pursuant to Article 2120 of 
the Italian Civil Code, workers are provided a minimum notice period 
and severance pay of approximately one month's salary. In order to 
participate in the early retirement program, workers, through the 
company, must apply to the GOI for consideration. Companies must 
continue to pay salaries until the applications are settled, through 
the end of the month following the approval of the application. 
Therefore, companies face the same, if not greater, financial 
commitments to their workers under Law 451/94 as they do under Article 
2120 of the Italian Civil Code which governs obligations to workers in 
all industries. Accordingly, we preliminarily determine that Law 451/94 
did not relieve companies of any obligation that they normally would 
incur, and, as such, we preliminarily find that Law 451/94 is not 
countervailable.

C. Law 308/82

    In response to our request for information on ``other subsidies'' 
in the questionnaire, the GOI reported that Valbruna received grants 
for energy conservation under Law 308/82. However, this program was 
found to be non-countervailable in Certain Steel from Italy because it 
provided benefits to a wide variety of industries, with no sector 
receiving a disproportionate amount. No new information or evidence of 
changed circumstances has been submitted in this proceeding to warrant 
reconsideration of this determination.

III. Programs For Which We Need More Information

A. Province of Bolzano Law 25/81

    The Province of Bolzano established programs under Law 25/81 to aid 
the commercial development of the province. In general, under this law, 
the province provides grants to companies whose technical fixed assets 
are below 8.5 billion lire, and targets advanced technology, energy 
consumption, and ecology projects. However, there are separate and 
distinct eligibility requirements set forth and benefits provided under 
Article 14 of Law 25/81. Under Article 14, companies in the 
manufacturing and mining sectors with at least 20 employees may qualify 
for restructuring grants. Unlike funding provided under other 
provisions of the law, there are no limitations on capital investment 
for companies which qualify for benefits under Article 14 (and Article 
22 for conversion benefits). Therefore, we find it appropriate to 
examine Article 14 of law 25/81 as a separate program. See, e.g., Live 
Swine from Canada; Final Results of Countervailing Duty Administrative 
Review, 62 FR 18087, 18091 (April 14, 1997). Under Article 14 of Law 
25/81, the Province of Bolzano provides

[[Page 825]]

financial contributions in the form of grants and low-interest loans.
    Bolzano received restructuring grants pursuant to Article 14 in the 
years 1983, 1985, 1987, and 1988. It also received loans under Article 
14, all of which were repaid prior to the POI. It did not receive 
assistance under any other Article of this law.
    We note that on July 17, 1996, the EC found in its decision 
numbered 96/617/ECSC that the aid granted to Bolzano was illegal 
because it was not notified to the EC, and was ``incompatible with the 
common market pursuant to Article 4(c) of the ECSC treaty.'' See 
October 27, 1997, response of the EC, public version on file in the 
CRU. As a result, the EC ordered that all grants and loans made to 
Bolzano after January 1, 1986, be repaid. According to the EC's policy, 
Bolzano was not required to repay benefits conferred prior to January 
1, 1986.
    As discussed in the ``Company Histories'' section above, Falck sold 
Bolzano to Valbruna in 1995. According to the terms of the sale, Falck 
retained the liability for repayment of these benefits should the EC 
decide against Bolzano. Thus, the level of benefits attributable to 
production of subject merchandise does not change subsequent to the 
sale of Bolzano.
    We analyzed whether Article 14 of Law 25/81 is specific in law (de 
jure specificity), or in fact (de facto specificity), within the 
meaning of section 771(5A)(D) (i) and (iii) of the Act. We examined the 
eligibility criteria contained in Article 14, and found that the 
Article is not de jure specific because the enacting legislation does 
not explicitly limit eligibility to an enterprise or industry or group 
thereof. While the Province of Bolzano provided general information on 
the amount of benefits awarded per year under the entire law, we do not 
have information on the distribution of benefits under Article 14 of 
Law 25/81. Since we must examine distribution under Article 14 to 
determine if the program is specific, it is necessary to gather 
additional information from the Province of Bolzano. Therefore, for the 
purposes of this preliminary determination, we do not have enough 
information to evaluate whether Article 14 of Law 25/81 is specific 
under the Act. However, we will continue to examine whether Article 14 
of Law 25/81 assistance may be de facto specific for the final 
determination.

B. European Social Fund

    The European Social Fund (ESF) is one of the Structural Funds 
operated by the EC. The ESF was established in 1957 to improve workers' 
opportunities and raise their standards of living. It is based on 
Articles 123-128, 130(a)-130(e) of the EEC Treaty. The ESF principally 
provides vocational training and employment aids. There are five 
objectives identified under the ESF for funding: Objective 1 covers 
projects located in underdeveloped regions, Objective 2 covers areas in 
industrial decline, Objective 3 relates to employment of persons under 
25, Objective 4 relates to restructuring companies, and Objective 5 
relates to agricultural areas. The ESF provides funding for projects to 
train workers and promote employment. While funding is ultimately 
approved and provided by the EC, each Member State, in this case the 
GOI, is responsible for selecting plans to submit to the Commission. 
Each project must conform with the priorities and timetables approved 
by the Commission. All EC funding for Italian projects is paid to the 
Italian Ministry of the Treasury in ECUs. The Ministry then distributes 
funding to the approved participants, including national matching 
funds. Funds are distributed in three sections: one part upon approval 
of the project; one part after the program has been monitored; and the 
third after the conclusion of the program. Most projects last three to 
five years.
    While the ESF funds general employment programs around the EU, 
under certain circumstances, companies may receive funding directly to 
implement training programs, or to recruit new employees. When provided 
to a company, the ESF provides a financial contribution to recipients 
which provides a benefit to the recipient in the form of a grant. 
Cogne, Valbruna, and Bolzano received ESF grants.
    The Department has examined the ESF grant program in previous 
investigations and found it to be regionally specific within the 
meaning of section 771(5A) of the Act, because benefits have been 
provided under Objectives 1, 2, or 5(b) (see, e.g., Pasta). However the 
companies in this investigation received grants under Objectives 3 and 
4. The EC indicated that Objectives 3 and 4 are broad initiatives that 
allow participation from companies in all areas. In Pasta, however, the 
Department found that only companies located in Objective 1, 2, or 5(b) 
regions received funds directly under this program. Since Cogne, 
Valbruna, and Bolzano are located in Objective 2 regions, the program 
may still be regionally-specific. Even though the companies implemented 
projects that received approval under Objective 3 and/or 4, the ESF may 
have provided funds directly to these companies because of their 
locations in Objective 2 regions. However, based on the information on 
the record, we are unable to determine whether the companies received 
funds due to their location. In addition, we were unable to obtain 
information on the distribution of assistance under Objectives 3 and 4. 
Therefore, we do not have enough information to make a determination on 
whether the assistance provided to Cogne, Valbruna and Bolzano is 
specific. We will continue to examine whether this assistance is 
specific for the final determination.

IV. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the companies under investigation 
did not apply for or receive benefits under the following programs 
during the POI:

A. Grants for Interest Payments Under Law 193/1984

    Article 3 of Law 193/1984, which came into effect on May 31, 1984, 
provided grants for interest payments on medium-term loans outstanding 
between January 1, 1983, and September 7, 1984 (three months after the 
law came into effect). These grants reduced the rate of interest on 
medium-term financing to 11 percent, with no reduction to exceed 10 
percentage points. This program was available only to steel companies 
with medium-term debts outstanding during the period indicated. Bolzano 
received a grant for interest payments on two loans incurred during 
this period; Valbruna received interest payment grants in 1985 and 1986 
for payments corresponding to debts on bond issuances which were 
outstanding during the eligibility period. Cogne did not receive any 
grants for interest payments under this program.
    Because Bolzano was aware that it would receive grants on interest 
payments for loans provided after May 31, 1984, we treat Bolzano's 
grants as reduced-interest loans. However, because the loans for which 
Bolzano received interest payment grants were repaid in full prior to 
the POI, there is no benefit attributable to the POI. Thus, Bolzano 
effectively did not use this program during the POI.
    At the time Valbruna made its bond issuances, the company did not 
know that the GOI would provide grants for interest payments under law 
193/1984. Therefore, we are treating the assistance on interest 
payments on the two bond issuances as grants. Because Valbruna did not 
receive the grants on an ongoing basis, the Department considers this

[[Page 826]]

program to be non-recurring and therefore employed its standard non-
recurring grant methodology (see GIA).
    However the grants on interest payments Valbruna received in the 
years 1985 and 1986 were less than 0.5 percent of Valbruna's total 
sales in each of those years. Therefore, in accordance with the 
Department's practice, these non-recurring grant amounts are allocated 
to the year of receipt. Thus, Valbruna received no benefit under this 
program during the POI.

B. Law 46 and 706 Grants for Capacity Reduction

    Article 20 of Law 46/1982 provided capital account grants for 
private steel companies that reduced their production capacity of raw, 
semi-finished, or rolled steel by closing down plants which were 
technologically obsolete or had marginal economic viability. The grants 
provided up to 100,000 lire for every ton of raw steel capacity which 
was reduced and up to 150,000 lire for every ton of semi-finished or 
rolled capacity which was reduced. In Certain Steel from Italy (58 FR 
37333), the Department found that capacity reduction grants under Law 
46 were specific because they were available only to companies in the 
private steel sector. Falck received grants in 1983 and 1984, which are 
outside the 12 year allocation period we are using in this 
investigation. Cogne, as a government-owned steel company, was 
presumably ineligible for grants under this program. However, the 
record evidence compiled in this investigation to date does not 
definitively state that only the private steel sector could receive 
assistance, and information on the record indicates that the GOI 
provided grants to one steel company in the Valle D'Aosta, where Cogne 
is located. Although, for purposes of this preliminary determination, 
we have concluded that benefits under this program were not used, we 
will request clarification on which company in Valle d'Aosta received 
grants under this program.
    Section 4 of Decree Law 706/1985 was designed to complete the steel 
sector restructuring program and was a follow-on to the Law 46 capacity 
reduction program. It provided capital investment grants to steel 
producers which reduced production capacity by scrapping the rolling 
mills and the furnaces producing long products. None of the companies 
under investigation received grants under this program.

C. ECSC Article 56(2)(b) Retraining Grants

    In 1994, Bolzano received a grant under the ECSC Article 56(2)(b). 
This grant was referenced on a line item of its financial statements, 
which led us, in part, to initiate on the ``subsidies for operating 
expenses and easy-term funds'' program (see Initiation Notice and 
``Programs Determined Not to Exist'' section below). This program has 
been examined in several investigations by the Department and found to 
provide recurring benefits (see e.g., German Wire Rod). No information 
or evidence of changed circumstances has been submitted during this 
proceedings to warrant reconsideration of the recurring nature of the 
program. Therefore, since the grants were received in 1994, there are 
no benefits attributable to the POI and the program was not used.

D. Resider (II) Program

    The Resider program was established by the EC to fund projects for 
the reclamation of steel areas. The Resider II program funds projects 
for the period 1993 through 1999. The Autonomous Region of Valle 
d'Aosta received funding under this program in 1996 to clean up the 
environmental damage on the Cogne industrial land that CAS no longer 
occupies. According to CAS, the GOI, and the EC, there is no connection 
between the benefits provided under this program and CAS. The 
assistance was provided after the land was purchased by the Autonomous 
Region of Valle d'Aosta. Further, as discussed in the ``Valle d'Aosta 
Assistance'' section above, the appraised value of the Cogne industrial 
site was reduced based on the costs of the reclamation. However, given 
the close proximity of the CAS facility to the area under reclamation, 
we will continue to examine whether CAS benefits from the reclamation 
project.

E. Law 675

    1. IRI Bonds. We note that Delta Cogne, a predecessor of CAS, was 
assigned 54 billion lire worth of IRI debenture bonds on which the GOI 
made interest contributions between 1986 and 1993. In 1994, presumably 
because of the privatization of CAS, the bonds were assigned to another 
party. According to CAS, the bonds remained with Cogne S.p.A. 
Therefore, we believe that any debt obligation for which CAS may have 
been relieved would be captured in the ``Pre-Privatization Assistance'' 
program described above. During verification, we plan to examine the 
payment of interest contributions by the GOI and the assignment of the 
bonds. However, we preliminarily find that no benefits were provided to 
the subject merchandise under this program during the POI, and as such, 
this program was not used.
    2. Mortgage Loans
    3. Personnel Retraining Aid
    4. Interest Grants on Bank Loans

F. Debt Forgiveness: 1981 Restructuring Plan

G. Law 481/94

H. Decree Law 120/89

I. Law 394/81 Export Marketing Grants and Loans

J. Law 488/92 and Legislative Decree 96/93

K. Law 341/95 and Circolare 50175/95

L. Valle d'Aosta Regional Law 16/88

M. Valle d'Aosta Regional Law 3/92

N. Bolzano Regional Law 44/92

O. Interest Rebates on ECSC Article 54 Loans

P. ECSC Article 56 Loans

Q. European Regional Development Fund

V. Programs Preliminarily Determined Not To Exist

    Based on information provided by the GOI, we preliminarily 
determined that the following programs do not exist:

A. R&D Grants to Valbruna

    We initiated on this program based on information contained in the 
petition regarding a program that provided research and development 
grants, which was discussed in an EC publication. According to the GOI, 
this program is the same as the Law 46 Deliberazione technological 
innovation program discussed in the ``Programs Preliminarily Determined 
To Be Not Countervailable'' section above. Accordingly, we 
preliminarily determine that this program does not exist.

B. Subsidies for Operating Expenses and ``Easy Term'' Funds

    We initiated on this program based upon information contained in 
the petition and references in the annual reports of Valbruna and 
Bolzano, indicating receipt of ``subsidies for operating expenses'' and 
``easy term funds.'' However, the companies reported that the line 
items in the annual reports refer to other programs examined in this 
investigation: European Social Fund, Law 308/82, and ECSC Article 
56(2)(b) Retraining Aid.

[[Page 827]]

C. 1993 European Commission Funds

    We initiated on this program based on information in the petition 
indicating that the EC may have funded bailouts for state-owned and 
private-owned steel producers in Italy. However, based on information 
submitted on the record of this proceeding, the EC was examining the 
GOI's program. Therefore, it appears this program is identical to the 
Pre-Privatization Assistance program discussed above in the ``Programs 
Preliminarily Determined To Be Countervailable'' section of this 
notice.

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 discussed in the ``Affiliated Parties'' section of 
this notice, we calculated a single rate for Valbruna/Bolzano. To 
calculate the ``all others'' rate, we weight-averaged the company rates 
by each company's exports of the subject merchandise to the United 
States.
    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of certain 
stainless steel wire rod from Italy, 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. We 
also note that pursuant to section 705(a)(1) of the Act, this 
investigation is now aligned with the antidumping investigations of 
certain stainless steel wire rod.

Ad Valorem Rate

------------------------------------------------------------------------
                                                                  Net   
                      Producer/Exporter                         subsidy 
                                                                 rate % 
------------------------------------------------------------------------
CAS..........................................................      30.47
Valbruna/Bolzano.............................................       1.22
All Others...................................................      19.48
------------------------------------------------------------------------

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 nonprivileged 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, 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 351.310, 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 to 
be held on March 9, 1998, at the U.S. Department of Commerce, 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 B-099, 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; and, (3) 
to the extent practicable, an identification of the arguments to be 
raised at the hearing. In addition, six copies of the business 
proprietary version and six copies of the nonproprietary version of the 
case briefs must be submitted to the Assistant Secretary no later than 
50 days from the date of publication of the preliminary determination. 
As part of the case brief, parties are encouraged to provide a summary 
of the arguments not to exceed five pages and a table of statutes, 
regulations, and cases cited. Six copies of the business proprietary 
version and six copies of the nonproprietary version of the rebuttal 
briefs must be submitted to the Assistant Secretary no later than 55 
days from the date of publication of the preliminary determination. 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 351.309 and will be 
considered if received within the time limits specified above.
    This determination is published pursuant to section 703(f) of the 
Act.

    Dated: December 29, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-271 Filed 1-6-98; 8:45 am]
BILLING CODE 3510-DS-P