[Federal Register Volume 64, Number 50 (Tuesday, March 16, 1999)]
[Notices]
[Pages 12982-12993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6288]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-423-806]


Cut-to-Length Carbon Steel Plate From Belgium; Final Results of 
Countervailing Duty Administrative Review

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

ACTION: Notice of Final Results of Countervailing Duty Administrative 
Review.

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SUMMARY: On September 9, 1998, the Department of Commerce (the 
Department) published in the Federal Register its Preliminary Results 
of administrative review of the countervailing duty order on cut-to-
length carbon steel plate from Belgium for the period January 1, 1996 
through December 31, 1996 (63 FR 48188). The Department has now 
completed this administrative review in accordance with section 751(a) 
of the Tariff Act of 1930, as amended. For information on the net 
subsidy for each reviewed company, and for all non-reviewed companies, 
please see the Final Results of Review section of this notice. We will 
instruct the U.S. Customs Service to assess countervailing duties as 
detailed in the Final Results of Review section of this notice.

EFFECTIVE DATE: March 16, 1999.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Eva Temkin, Office of 
CVD/AD Enforcement VI, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
2786.

SUPPLEMENTARY INFORMATION:

Background

    Pursuant to 19 CFR 351.213(b), this review covers only those 
producers or exporters of the subject merchandise for which a review 
was specifically requested. Accordingly, this review covers Fabrique de 
Fer de Charleroi, S.A. (Fafer). This review also covers the period 
January 1, 1996 through December 31, 1996 and 28 programs.
    Since the publication of the Preliminary Results on September 9, 
1998 (63 FR 48188), the following events have occurred. We invited 
interested parties to comment on the Preliminary Results. On October 9, 
1998, case briefs were submitted by Fafer, which exported cut-to-length 
carbon steel plate to the United States during the review period 
(respondent), and Bethlehem Steel Corporation, U.S.

[[Page 12983]]

Steel Group, and Inland Steel Industries, Inc. (petitioners). On 
October 16, 1998, rebuttal briefs were submitted by petitioners and 
respondent.
    In November 1998, the Department conducted verification of the 
government and company questionnaire responses. For additional 
information on verification, see the Verification section of this 
notice. Interested parties submitted comments to the Department's 
verification reports on February 8, 1999 and rebuttal comments on 
February 12, 1999.
    On December 17, 1998, we extended the period for completion of the 
Final Results to 180 days from the date on which the Preliminary 
Results were published pursuant to section 351.221(h)(1) of the 
Department's regulations. See Cut-to-Length Carbon Steel Plate from 
Belgium; Extension of Time Limit for Countervailing Duty Administrative 
Review (63 FR 69612). At the request of petitioners, the Department 
held a public hearing on February 19, 1999.

Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the 
Act). The Department is conducting this administrative review in 
accordance with section 751(a) of the Act. All citations to the 
Department's regulations reference 19 CFR part 351 (1998).

Scope of the Review

    The products covered by this review are certain cut-to-length 
carbon steel plate. These products include hot-rolled carbon steel 
universal mill plates (i.e., flat-rolled products rolled on four faces 
or in a closed box pass, of a width exceeding 150 millimeters but not 
exceeding 1,250 millimeters and of a thickness of not less than 4 
millimeters, not in coils and without patterns in relief), of 
rectangular shape, neither clad, plated nor coated with metal, whether 
or not painted, varnished, or coated with plastics or other nonmetallic 
substances; and certain hot-rolled carbon steel flat-rolled products in 
straight lengths, of rectangular shape, hot rolled, neither clad, 
plated, nor coated with metal, whether or not painted, varnished, or 
coated with plastics or other nonmetallic substances, 4.75 millimeters 
or more in thickness and of a width which exceeds 150 millimeters and 
measures at least twice the thickness, as currently classifiable in the 
Harmonized Tariff Schedule (HTS) under subheadings 7208.31.0000, 
7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 
7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 
7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 
7212.40.5000, and 7212.50.0000. Included in this review are flat-rolled 
products of non-rectangular cross-section where such cross-section is 
achieved subsequent to the rolling process (i.e., products which have 
been ``worked after rolling'')--for example, products which have been 
beveled or rounded at the edges. Excluded from these investigations is 
grade X-70 plate. The HTS subheadings are provided for convenience and 
U.S. Customs Service (Customs) purposes. The written description of the 
scope remains dispositive.

Allocation Methodology

    In British Steel plc. v. United States, 879 F.Supp. 1254 (February 
9, 1995) (British Steel I), the U.S. Court of International Trade (the 
Court) ruled against the allocation period methodology for non-
recurring subsidies that the Department had employed for the past 
decade, a methodology that was articulated in the General Issues 
Appendix (58 FR 37227) appended to Final Affirmative Countervailing 
Duty Determination: Certain Steel Products from Austria; 58 FR 37217 
(July 9, 1993) (GIA). In accordance with the Court's decision on 
remand, the Department determined that the most reasonable method of 
deriving the allocation period for nonrecurring subsidies is a company-
specific average useful life (AUL) of non-renewable physical assets. 
This remand determination was affirmed by the Court on June 4, 1996. 
British Steel plc. v. United States, 929 F.Supp 426, 439 (CIT 1996) 
(British Steel II). Accordingly, the Department has applied this 
methodology to those non-recurring subsidies that have not yet been 
countervailed.
    Fafer submitted an AUL calculation based on depreciation and asset 
values of productive assets reported in its financial statements. 
Fafer's AUL was derived by adding depreciation charges for ten years, 
and dividing these charges by the sum of average gross book value of 
depreciable fixed assets for the related periods. We found this 
calculation to be reasonable and consistent with our company-specific 
AUL objective. Fafer's calculation resulted in an average useful life 
of 26 years. For non-recurring subsidies received prior to the POR and 
which have already been countervailed based on an allocation period 
established in an earlier segment of the proceeding, it is not 
reasonable or practicable to reallocate those subsidies over a 
different period of time. Since the countervailing duty rate in earlier 
segments of the proceeding was calculated based on a certain allocation 
period and the resulting benefit stream, redefining the allocation 
period in later segments of the proceeding would entail taking the 
original grant amount and creating an entirely new benefit stream for 
that grant. Therefore, for purposes of these Final Results, the 
Department is using the original allocation period assigned to each 
nonrecurring subsidy received prior to the POR, which has already been 
countervailed. See Certain Carbon Steel Products from Sweden; Final 
Results of Countervailing Duty Administrative Review, 62 FR 16549 
(April 7, 1997) (Carbon Steel Products from Sweden).

Verification

    As provided in section 782(i) of the Act, we verified information 
submitted by the Government of Belgium (GOB), the Government of 
Wallonia (GOW), and Fafer, except as discussed in the ``Facts 
Available'' section of this notice below. We followed standard 
verification procedures, including meetings with government and company 
officials and examination of relevant accounting and financial records 
and other original source documents. Our verification results are 
outlined in the public versions of the verification reports, which are 
on file in the Central Records Unit (CRU) (Room B-099 of the Main 
Commerce Building).

Facts Available

    Section 776(a)(2) of the Act requires the Department to use facts 
available if an interested party or any other person fails to provide 
information that has been requested by the deadlines for submission of 
the information. In this review, we found at verification that Fafer 
did not report to the Department a loan provided for the purpose of 
producing an audio-visual calling card for foreign businessmen. This 
information was unreported in the questionnaire responses. We used 
information that we obtained at verification about the loan to 
determine the countervailable benefits provided by this program. For 
additional information about the loan, see the New Programs Determined 
to Confer Subsidies section of this notice.
    Moreover, in the Preliminary Results, the Department did not 
countervail cash grants received by Parachevement et Finitions de 
Metaux (PFM) and S.A.

[[Page 12984]]

Chaleroi Deroulage (CD) CD and PFM (Fafer's subsidiaries) under the Law 
of 1970, because Fafer claimed that these subsidiaries do not produce 
the subject merchandise. At verification, company officials again 
stated that the Fafer's subsidiaries CD and PFM did not manufacture the 
subject merchandise. However, the company inferred in its February 12, 
1999 submission that CD and PFM could possibly produce merchandise 
subject to the order, but that this had not occurred during the POR. 
Moreover, at the public hearing held on February 19, 1999, respondent's 
counsel also clarified that there was no technical reason that the 
equipment owned by CD and PFM could not be used to transform 
downstream, non-subject merchandise into subject merchandise. See 
Transcript of Public Hearing on Cut-to-Length Carbon Steel Plate from 
Belgium dated February 19, 1999 at 55-57.
    On the basis of the fact that CD and PFM can, in their down-stream 
processing, produce merchandise which is covered by the scope of the 
order, we determine that the cash grants under the Law of 1970, a 
program previously found countervailable by the Department, are 
attributable to the total sales of Fafer, including its subsidiaries 
and thus benefitted the subject merchandise during the POR. This 
approach is consistent with our practice to attribute subsidies 
received by one company to the sales of another related company that 
also produces the subject merchandise. Accordingly, we are attributing 
benefits received by CD and PFM to the consolidated group in these 
Final Results. (See Certain Pasta From Italy: Final Results of 
Countervailing Duty Administrative Review 63 FR 43905-43912 (August 17, 
1998.) This also conforms with section 351.525(b)(6)(ii) of the 
Department's final countervailing duty regulations, which explicitly 
states that ``if two (or more) corporations with cross-ownership 
produce the subject merchandise, the Secretary will attribute the 
subsidies received by either or both corporations to the products 
produced by both corporations.'' While these regulations do not govern 
this proceeding, they articulate the Department's practice and 
application of the statute. Cross-ownership clearly exists between CD 
and PFM and the parent company, Fafer; record evidence also shows that 
all companies could produce the merchandise subject to the 
countervailing duty order.
    In our questionnaires, we asked the respondent to provide subsidy 
information for those affiliates that are involved in the production of 
the subject merchandise. If Fafer had accurately reported the 
activities of its affiliates CD and PFM, the Department would have 
asked CD and PFM to respond to the questionnaires with respect to 
particular subsidies. As a result, grants received by affiliated 
companies under the Law of 1970 during the POR were not reported in the 
questionnaire responses. At verification, we found that CD and PFM 
received grants under the Law of 1970 in 1993 and 1996, respectively 
and collected information on these grants. Moreover, Fafer did not 
provide total sales data for CD and PFM.
    Although other subsidies provided under the Law of 1970, such as 
research and development (R&D) assistance, have been found not specific 
after 1988 (see Programs Found Not to Confer Subsidies), we have no 
information on industry specificity for the cash grants program in the 
Walloon region of Belgium after 1988. Therefore, we are using adverse 
facts available and countervailing these grants in these Final Results. 
Section 776(b) of the Act provides that the administering authority may 
use an inference that is adverse to the interests of an interested 
party in selecting from among the facts otherwise available. Such 
adverse inference may include reliance on information derived from (1) 
the petition, (2) a final determination in the investigation under this 
title, (3) any previous review under section 751 or determination under 
section 753, or (4) any other information placed on the record.
    We used information that we obtained at verification about the 
grants provided to affiliated companies to determine the 
countervailable benefits provided by these programs. For additional 
information about these grants to CD and PFM, see the Programs 
Previously Determined to Confer Subsidies sections of this notice. In 
addition, we used facts available to calculate Fafer's consolidated 
sales for the POR, which includes sales of CD and PFM, because sales 
information for these subsidiaries during the POR was not placed on the 
record. An explanation of our calculation is provided in Comment 9 
below.

Analysis of Programs

    Based upon the responses to our questionnaires, the results of 
verification, and written comments from the interested parties, we 
determine the following:

I. Programs Conferring Subsidies

A. Program Previously Determined to Confer Subsidies

1. Cash Grants and Interest Subsidies Under the Economic Expansion Law 
of 1970
    In the Preliminary Results, we found that cash grants and interest 
subsidies under the 1970 Law conferred countervailable subsidies on the 
subject merchandise (see Cut-to-Length Carbon Steel Plate From Belgium 
Preliminary Results of Countervailing Duty Review 63 FR 48188; 48189 
(September 9, 1998) (Preliminary Results)). Our review of the record 
and our analysis of the comments submitted by the interested parties, 
summarized below, has led us to change our preliminary calculations. At 
verification, we obtained more detailed information with which to 
calculate the difference between benefits provided to Fafer in 1982, 
1984, and 1985 under the 1970 Law and the 1959 Law than that used in 
our preliminary calculations.
    In the Preliminary Results, we found this program to be regionally 
specific. As discussed in greater detail below, other subsidies 
provided under the 1970 Law for R&D assistance have been found not 
specific after 1988. (See Research and Development Loan Provided Under 
the Economic Expansion Law of 1970 under the section titled ``Programs 
Found Not to Confer Subsidies'' of this notice. All cash grants and 
interest subsidies provided to Fafer were provided prior to 1988, 
however at verification we found that subsidiaries of Fafer received 
cash grants after 1988. Because we have no specificity information for 
these years and for the reasons outlined in the facts available section 
above, we are treating these grants as regionally specific. Therefore, 
for these Final Results, we are countervailing grants provided after 
1988 to Fafer's affiliates.
    To calculate the benefit in this review for grants received by CD 
and PFM, we employed the standard grant methodology outlined in the 
allocation section of the GIA (58 FR 37227). We allocated the benefit 
from each grant received by CD and PFM over 26 years, Fafer's AUL. As 
the discount rate for grants received by CD and PFM, we used the long-
term prime rates for each year in which grants were provided. (For 
information on the benchmark, see Comment 1 below). We summed the 
benefit amounts attributable to the POR and divided the result by 
Fafer's total consolidated sales during the POR. Accordingly, the net 
subsidy for this program has changed and the subsidy rate is 0.35 
percent ad valorem. 

[[Page 12985]]

B. New Programs Determined to Confer Subsidies

1. Promotion Brochure
    In the Preliminary Results, we found this program did not confer 
subsidies because the loan interest rate was higher than the benchmark 
rate in the year the loan was approved. Our review of the record and 
our analysis of the comments submitted by the interested parties, 
summarized below, has led us to modify our findings from the 
Preliminary Results for this program.
    The Walloon Export Agency (AWEX) administers this program and 
provides assistance to companies in the Walloon region to make 
advertising brochures for international markets. Under this program, 
loans are extended for a five-year period with a fixed annual interest 
rate. However, the company is not required to make interest payments on 
the loan until the five-year period has ended. At the end of this 
period, if the company has met certain targeted sales and profit goals 
generated from exports, as established under the program, the loan must 
be repaid. Fafer received a loan under this program in 1996, the POR. 
We confirmed at verification that Fafer paid no interest on this 
outstanding loan during the POR.
    Under section 771(5A)(B) of the Act, an export subsidy is a subsidy 
that is, in law or in fact, contingent upon export performance, alone 
or as one of two or more conditions. After examination of this program, 
we determine this program to be an export subsidy pursuant to section 
771(5A)(B) of the Act. In addition, by waiving the interest fees on the 
loan, the actions of the Walloon government conferred a benefit in 
accordance with section 771(5)(E)(ii) of the Act. Therefore, we 
determine this program to be countervailable.
    To calculate the benefit from this long-term fixed-rate loan, the 
repayment of which is contingent upon subsequent events, we treated the 
balance on the outstanding loan during the 1996 review period as a 
short-term loan. We measured the interest savings on this outstanding 
loan during the 1996 review period using the long-term prime rate as 
the benchmark (see Comment 1, below.) We then divided the benefit for 
the POR by Fafer's total export sales during the POR. On this basis, we 
determine the net subsidies for this program to be less than 0.005 
percent ad valorem. Our analysis of the comments on this program 
submitted by the interested parties are summarized in Comment 7, below.
2. Audio-Visual Calling Card
    At verification, we found a new program under which Fafer received 
in 1990 a fixed-rate long-term loan to produce an audio-visual calling 
card to present to foreign businessmen. Under the terms of the loan, if 
a company meets targeted sales and profit goals generated from exports, 
it must repay the loan. In addition, companies are not obligated to pay 
interest during the five-year term of the loan. At verification, we 
found that Fafer had not made any interest payments on this outstanding 
loan during the POR.
    Under section 771(5A)(B) of the Act, an export subsidy is a subsidy 
that is, in law or in fact, contingent upon export performance, alone 
or as one of two or more conditions. After examination of this program, 
we determine this program to be an export subsidy pursuant to section 
771(5A)(B) of the Act. In addition, by waiving the interest fees on the 
loan, the actions of the Walloon government conferred a benefit in 
accordance with section 771(5)(E)(ii) of the Act. Therefore, we 
determine this program to be countervailable.
    To calculate the benefit on this loan, the repayment of which is 
contingent upon subsequent events, we treated the balance on the 
outstanding loan during the 1996 review period as a short-term loan. We 
measured the interest savings on this outstanding loan during the 1996 
review period using the long-term prime rate as the benchmark (see 
Comment 1, below.) We then divided the amount allocated to the POR by 
Fafer's total export sales during the POR. On this basis, we determine 
the net subsidy for this program to be less than 0.005 percent ad 
valorem. Our analysis of the comments on this program submitted by the 
interested parties are summarized in Comment 8, below.

II. Programs Found Not to Confer Subsidies

A. Societe Nationale de Credite a l'Industrie (SNCI) Loans

    In the Preliminary Results, we found that this program did not 
confer subsidies during the POR. Our analysis of the comments submitted 
by the interested parties, summarized below, has not led us to change 
our findings from the Preliminary Results. 

B. Exhibition Stands

    In the Preliminary Results, we found this program did not confer 
subsidies during the POR. Our analysis of the comments submitted by the 
interested parties, summarized below, has not led us to change our 
findings from the Preliminary Results. 

C. Research and Development Loan Provided Under the Economic Expansion 
Law of 1970

    In the Preliminary Results, we found that this program conferred 
subsidies during the POR based on our finding in the Final Affirmative 
Countervailing Duty Determinations: Certain Steel Products From Belgium 
(Final Determination) 58 FR 37273; 37275 (July 9, 1993) that the 1970 
Economic Expansion Law was regionally specific. However, at 
verification, we found that the authority for administering the law of 
1970 has devolved to the regional governments. This new information led 
us to examine the specificity of R&D assistance provided under the 1970 
Law in the context of the Walloon region rather than Belgium. On the 
basis of this analysis, we determine that this program is not specific 
in fact or in law. (See Memorandum to Holly A. Kuga from David Mueller 
dated March 8, 1999, Decision Memorandum Re: Specificity of the 
Research and Development (R&D) Aid in the 1996 Countervailing Duty 
Administrative Review of Certain Cut-to-Length Carbon Steel Products 
from Belgium, public version on file in room B-099 of the main Commerce 
Building.) Our analysis of the comments on this program, submitted by 
the interested parties, are summarized in Comment 10 below.

III. Programs Found to be Not Used

    In the Preliminary Results we found that the producers and/or 
exporters of the subject merchandise did not apply for or receive 
benefits under the following programs:

A. Resider Program
B. European Commission-approved Grants
C. Early Retirement
D. The ``Invests'
E. SNSN
F. FSNW
G. Belgian Industrial Finance Company (Belfin) Loans
H. Government-Guaranteed Loans issued pursuant to the Economic 
Expansion Laws of 1959 and 1970
I. Programs under the 1970 Law
    1. Exemption of the Corporate Income Tax for Grants
    2. Accelerated Depreciation Under Article 15
    3. Exemption from Real Estate Taxes
    4. Exemption from the Capital Registration
J. ECSC Article 54 Loans and Loan Guarantees
K. ECSC Redeployment Aid
L. European Social Funds Grants
M. Interest Rate Subsidies Provided by Copromex
N. Employment Premiums
O. Short-term Export Credit

[[Page 12986]]

P. New Community Instrument Loans
Q. European Regional Development Fund Aid
R. ECSC Interest Rebates under Article 54
S. ECSC Conversion Loans under Article 56
T. ECSC Interest Rebates under Article 56

    Our analysis of the comments submitted by the interested parties, 
summarized below, has not led us to change our findings from the 
Preliminary Results.

Analysis of Comments

Comment 1: Kreditbank Interest Rates vs. the IMF Rates

    Petitioners argue that in the Preliminary Results, the Department 
used an incorrect benchmark interest rate for SNCI Loan 3. According to 
petitioners, the Department used as its benchmark, the 1988 annual 
Kreditbank interest rate instead of the Kreditbank interest rate for 
the month in which the loan was approved. Petitioners assert that the 
monthly Kreditbank interest rate is the correct rate and that by adding 
an appropriate spread to this base rate, the Department will find that 
the loan was provided on favorable terms. Petitioners assert that 
during the summer of 1988, interest rates fluctuated significantly, and 
that this justifies the use of the monthly Kreditbank interest rate 
rather than an annual average interest rate.
    Petitioners argue that between June and September 1988, the Belgian 
prime interest rate reported by the International Monetary Fund (IMF) 
rose substantially. According to petitioners, the IMF prime rate 
represents the maximum rate charged by deposit money banks to prime 
borrowers. Petitioners assert that the Kreditbank interest rates used 
in the Preliminary Results contradict the IMF rates because: (1) The 
basis points added to loans extended to firms that the Department 
labels as uncreditworthy is substantially lower than the IMF prime rate 
for September 1988; and (2) during the three month period in 1988 when 
the IMF rates rose 125 basis points, the Kreditbank rate rose by only 
23 basis points.
    Petitioners argue that there are two explanations for the 
discrepancies between the Kreditbank rates and those reported by the 
IMF. First, Kreditbank interest rates could be for longer terms than 
the IMF prime rate, which covers short-term and medium-term loans. 
Petitioners maintain that this explanation is not likely because long-
term interest rates are usually higher than short-term rates, and a 
comparison of Belgian government bond rates of differing maturities 
supports this relationship during 1988. Second, Kreditbank loans could 
be secured by collateral or have other features that make them lower 
risk loans than the loans upon which the IMF prime rate is based. In 
either case, the petitioners reiterate their assertion that the 
Kreditbank rate is an inappropriate benchmark.
    Moreover, petitioners argue that information collected at 
verification demonstrates that the benchmark rate used in the 
Preliminary Results understates the cost of borrowing in Belgium 
because: (1) The average margin for a Kreditbank loan is 70 basis 
points while the benchmark rate used in the Preliminary Results 
includes only a margin of 15 basis points; and (2) the benchmark rate 
does not include upfront fees that several of the bankers indicate are 
commonly used. Petitioners maintain that the IMF reports the maximum 
prime rate to eliminate the effect of the upfront fees indicated in the 
banking verification report. (See Verification Report for Private 
Commercial Banks dated January 22, 1999, public versions on file in 
room B-099 of the main Commerce Building at 1). Petitioners also assert 
that Fafer does not have any type of customer relationship with 
Kreditbank because it had no long-term commercial debt and there is no 
evidence on the record that demonstrates that Fafer has ever borrowed 
from Kreditbank. Petitioners argue that Fafer probably borrowed from 
SNCI because it could not procure funds elsewhere.
    Petitioners further argue that the verification reports show that 
the IMF rates submitted to the Department for use as the benchmark 
rates are reliable. Petitioners maintain that they have demonstrated 
that the IMF data accurately reflects the Belgian market at a 
particular point in time, September 1988. Moreover, petitioners claim 
that if the Department uses the IMF benchmark, it will, in the case of 
Fafer's SNCI loans, find that the benchmark rate is higher than the 
program interest rates. Thus, the Department will make the correct 
determination that SNCI loans were provided at rates that were 
inconsistent with commercial considerations. Since these loans are 
specific and provided at favorable preferential rates, petitioners 
maintain that the Department should countervail Fafer's SNCI loans in 
these Final Results.
    Petitioners argue that the Department can not use Kreditbank rates 
as a benchmark, because at the time Fafer borrowed from SNCI, 
Kreditbank rates were not available to Fafer. Petitioners further argue 
that Kreditbank interest rates are inappropriate in this case for a 
national average benchmark because they are a single bank's interest 
rate.
    As another alternative for the IMF rates, petitioners suggest using 
LIBOR plus 70 basis points. Petitioners maintain that the commercial 
bankers cited in the verification reports identified LIBOR as a common 
basis of lending in Belgium and the 70 basis points is the mid-point of 
the spreads cited by the bankers. In conclusion, petitioners maintain 
than no matter which benchmark rate the Department selects, it should 
use a monthly rate rather than an average annual rate, in light of the 
fluctuations noted above.
    Fafer argues that petitioners did not understand the source for the 
Kreditbank interest rate used in the Department's calculation. Fafer 
maintains that this interest rate was derived by averaging Kreditbank's 
four published rates for 1988 and adding a 15 basis point spread to 
obtain the national average to the year. Fafer claims that the base 
interest rate used to determine benefits for this loan was not a 
specific rate in Kreditbank's schedule, but the average of 1988 
published rates. Thus, petitioners' concerns are moot because the 
Department has incorporated the 15 point spread in its national average 
rate for 1988. In response to petitioners' claim that the bank 
verification report indicates that the average margin for a Kreditbank 
loan is 70 basis points, Fafer asserts that the same bankers who cited 
the 70 average basis points also noted that the number of basis points 
can fluctuate depending on the circumstances and in some cases could be 
zero. Moreover, Fafer claims that these bankers do not indicate that 
for the year in question the average of 70 basis points was applicable.
    Respondent also argues that the Department has selected the 
Kreditbank rates in accordance with it's hierarchy for selecting 
comparable benchmark rates as stated in the Final Determination 58 FR 
37273 (July 9, 1993). In compliance with its hierarchy of selecting a 
benchmark for the long-term loan, the Department first sought company-
specific information on lending. Because this information was not 
available for Fafer, the Department went to the next level of its 
hierarchy, and used a national, average long-term rate. Respondent 
asserts that the Department's decision to use Kreditbank rates as the 
national long-term interest rates are consistent with its practice for 
long-term variable rate loans as described in the 1997 Proposed 
Regulations. (See Notice of Proposed Rulemaking and Request for Public 
Comments, 62 FR 8818 (February 26,

[[Page 12987]]

1997)). Respondent asserts that under section 351.504(a)(1) of the 1997 
Proposed Regulations the Department uses comparable commercial loans to 
determine the benefit on a government-provided loan. According to 
respondent, the Department states in proposed section 351.504(a)(5) 
that for long-term loans the Department will use a comparable long-term 
loan. If the firm has no comparable commercial loans, as in Fafer's 
case, respondent asserts that the Department will use an average 
interest rate for comparable commercial loans, which it did in this 
review by applying the Kreditbank rates.
    In response to petitioners' argument that the benchmark rate does 
not include ``upfront fees'' and is therefore unreasonable, Fafer 
maintains that only one of the bankers interviewed stated in his 
explanation of the Belgian banking system that up-front fees exist and 
could affect the interest rate. Fafer further asserts that this banker 
did not state that it was the normal banking practice in Belgium and 
that Fafer would be required to pay such fees.
    In response to petitioners' claim that the IMF prime rate should be 
the benchmark, Fafer argues that the IMF prime rate is a short-term 
rate which should not be applied as a benchmark for Fafer's long-term 
variable interest rate loan. According to Fafer, the company received 
SNCI loan 3 on June 10, 1983 and was able to renegotiate the interest 
rate periodically. Fafer claims that although the Department's practice 
may be to treat long-term, variable rate loans as a series of short-
term loans, the loan was not initially negotiated and received in 1988. 
Fafer asserts that in 1988, it was not possible to withdraw from the 
1983 loan it was repaying and negotiate for a new loan with other 
commercial banks for a lower rate as petitioners suggest. With regard 
to this loan, Fafer maintains that its only option was to renegotiate 
the interest rate, which it did at the time short-term interest rates 
began to fall. Moreover, Fafer supports the Department's application of 
the average of Kreditbank rates for 1988 as the appropriate national 
average long-term variable interest rate.
    In reply to petitioners' claim that the benchmark is not reliable 
because Fafer has no lending history and thus, did not have a special 
relationship with Kreditbank, Fafer reasserts that it has no long-term 
loans during the years in question; therefore, no bank is likely to 
have a better lending history with the company. Fafer argues that 
petitioners are incorrectly interpreting the verification report and 
maintains that the bankers in the verification report only indicate 
that a bank's relationship with its customer can influence the interest 
rate. Fafer argues that nowhere in the verification report or in the 
record does it state that a company without such a relationship with 
the bank would not be able to obtain the average rate, which is the 
benchmark.
    Moreover, Fafer contends that, at verification in this review, the 
Department found that there was no support for using the IMF rate as a 
benchmark because it does not reflect the realities of banking in 
Belgium. Fafer further argues that the verification report shows that 
the Kreditbank rate is the correct benchmark because it is a specific 
country rate that takes into account the actual and highly competitive 
Belgian bank lending environment.
    Fafer argues that, at the time the loan was renegotiated in 1988, 
fifteen years of repayment remained, and that comparing a 15-year loan 
to a short-term loan would not be appropriate.
    Moreover, Fafer maintains that because the company has been 
completely responsible for repayment of the 1983 SNCI loan since 1990, 
and the commercial loan rates applicable to such a long-term loan have 
fallen below the rate still applicable to the SNCI loan, the Department 
does not have a basis for determining the government-provided loan 
provided a benefit to Fafer in these Final Results.
    Department's Position: Petitioners suggest that the Department 
compare the SNCI loan, a government-provided long-term loan, to a 
monthly benchmark, using the month in which the SNCI loan agreement was 
renegotiated. In making the comparison of long-term government-provided 
loans to comparable commercial loans, the Department's practice is to 
use an annual average interest rate during the year in which the loan 
was received. (See Final Affirmative Countervailing Duty Determination: 
Certain Stainless Steel Wire Rod From Italy 63 FR 40474 (July 29, 
1998)). We do not agree with petitioners argument that fluctuations in 
the IMF interest rates for Belgium for a few months during 1988 
warrants the use of a monthly benchmark instead of an annual benchmark 
for all loans during the POR. Therefore, we are continuing to use an 
average annual rate as the benchmark and discount rates in these Final 
Results.
    Petitioners also assert that the Department should use IMF rates as 
the benchmark for long-term lending in these Final Results. At 
verification, we discussed this possibility with commercial bankers, 
and none supported the IMF rates as a reasonable reflection of 
commercial market interest rates. (See Verification Report for 
Commercial Banks dated January 22, 1999). In fact, the bankers strongly 
indicated that these rates would not serve as an appropriate benchmark 
for long-term lending in Belgium. Bank officials also indicated that 
with regard to long-term lending, there is much competition among 
Belgian banks which puts a downward pressure on commercial interest 
rates. During the POR, bankers indicated that Belgian long-term 
interest rates were based on the Belgian prime rate. (See Verification 
Report for Commercial Banks dated January 22, 1999).
    We agree with the respondent that IMF rates should not be used 
because they do not reflect market rates on long-term lending. As 
stated in the Final Determination, where the respondent did not have 
long-term loans from commercial banks during or before the year in 
which the terms of the government-provided loan were established, we 
used a national, average long-term rate. See 58 FR 37273; 37288-37289 
(July 8, 1993). Consistent with our approach in the Final 
Determination, the Department has chosen the Kreditbank benchmark as a 
national average interest rate because these rates apply to long-term 
commercial loans in Belgian currency. In the Final Determination, we 
explained that the verified Kreditbank rates can have a margin between 
0 to 30 basis points, and we used the average estimate of this spread, 
15 basis points, in our calculations. Accordingly, in these Final 
Results, we are using as our benchmark the same rates as in the Final 
Determination, the fixed long-term rates provided by Kreditbank, to 
determine the benefit for non-recurring cash grants under the Law of 
1970 that we have previously allocated in the original investigation, 
and the SNCI long-term loan renegotiated prior to 1992. Moreover, with 
regard to SNCI Loan 3, we will continue to use the annual average 
benchmark that was established in the original investigation.
    With regard to benchmark rates for the period since the 
investigation (1992 through the 1996 POR), at verification we 
determined that the most appropriate benchmark rate would be based on 
the prime rates of the major commercial banks. We collected information 
on commercial long-term lending rates in Belgium from KBC (the bank 
resulting from the merger of Kreditbank with Cera Bank). Bank officials 
provided the prime rates which are the base rate of commercial banks in 
Belgium for credits with a term of five years or more. These prime 
rates are

[[Page 12988]]

based on the banks' cost of funding, the interest rate swap (IRS) and 
include a 40 to 50 basis points spread. Consequently, we have used 45 
basis points as the average point spread above the IRS rate which is 
included in these prime rates. Bank officials also indicated at 
verification that the margin on long-term loans is, on average, 70 
basis points above the IRS rate. Because we verified that the average 
spread was 70 basis points above the IRS rate, we added 25 basis points 
to the prime rate in our calculations to obtain our benchmark.

Comment 2: The Use of Varying Levels of Benefit Analysis to Countervail 
Benefits Received Under the Economic Expansion Law of 1970

    In the Preliminary Results, the Department countervailed the 
benefits received from the cash grants under the 1970 Law only to the 
extent that they exceeded the benefits available under the July 17, 
1959 Law (1959 Law) which had been found generally available. 
Petitioners maintain that this methodology is not consistent with 
section 355.44(n) of the Department's 1989 Proposed Regulations and 
past practice in applying the tiered benefits analysis only to benefits 
under a single program. Petitioners claim that the Department departed 
from its prior practice in the original investigation and applied the 
tiered benefits analysis to the 1959 Law and the 1970 Law which are two 
separate programs. (See 1989 Proposed Regulations, 54 FR at 23382). 
Petitioners argue that the record evidence does not support the use of 
a varying levels of benefit analysis.
    According to petitioners, the Department only analyzes two separate 
programs together in the context of an ``integral linkage'' analysis, 
in which the specificity of the two programs are examined as one. 
Petitioners cite the 1997 Proposed Regulations (62 FR 8825) and state 
that the circumstances that lead to analyzing two programs as a single 
program include circumstances ``where two or more programs have the 
same particular purpose, bestow the same type of benefits, and confer 
similar levels of benefits on similarly situated firms.'' (See Notice 
of Proposed Rulemaking and Request for Public Comments, 62 FR 8818 
(February 26, 1997).
    Petitioners argue that in this case the 1959 Law and the 1970 Law 
provide different types and levels of benefits, and can not be 
considered a single program. For instance, the 1970 Law provides 
accelerated depreciation, income tax exemption for cash grants, and 
assistance for research and development, commercial program, and 
management studies. More importantly, petitioners argue, record 
evidence in this review suggests that the 1959 Law no longer exists. 
Petitioners assert that by 1980, the 1959 Law had been repealed for the 
Brussels-Capital region and the Flemish region. Petitioners assert that 
even if the 1959 Law continued to exist through 1991, the record 
indicates it was specific to the Walloon region after 1980 and can not 
be the basis for a varying levels of benefit analysis. Accordingly, in 
the Final Results, the Department should at a minimum countervail fully 
the cash grants received under the Law of 1970 after August 31, 1991, 
when the 1959 Law ceased to exist.
    Petitioners further assert that the GOB's verification report in 
the original investigation indicates that the July 18, 1959 law (a 
separate 1959 Law) was repealed on December 30, 1970. Petitioners 
maintain that to the extent that this 1959 law is used in the 
Department's varying level of benefits methodology, there is no basis 
for the tiered levels of benefit analysis with regard to both previous 
and new countervailable subsidies.
    In rebuttal, Fafer argues that the Department's tiered-benefits 
analysis for the same cash grants under consideration in this review 
was upheld by the U.S. Court of International Trade in Geneva Steel et 
al. V United States, 914 F. Supp. 563 (CIT 1996) (Geneva Steel). Fafer 
asserts that in Geneva Steel, the Court held that, the Department's 
regulations do not limit the tiered-benefit analysis to a single 
program. Fafer claims that petitioners' assertion, that these programs 
can not be deemed a single program because there are certain 
differences in the benefits received under the 1959 and 1970 Laws, 
contradicts the Court's holding in Geneva Steel, in which the Court 
ruled that the tiered-benefits analysis is not limited to a single 
program. Furthermore, Fafer maintains that the verification reports of 
the GOB and the GOW in this review indicate that these laws joined to 
form a part of a larger whole of GOB's programs to support Belgian 
economic development policy. According to Fafer, this treatment of the 
1959 and 1970 laws supports the Department's findings in the Final 
Determination and the Preliminary Results that the 
noncountervailability of the 1959 law limits the countervailability of 
the 1970 law.
    Furthermore, Fafer argues that contrary to petitioners claims, 
there is neither new factual information nor legal circumstances that 
warrant re-examination of the two-tiered benefits analysis in this 
review. Fafer argues that petitioners do not provide the proper 
evidence to substantiate their claim that the 1959 Law was repealed in 
1980. Rather, the information cited by petitioners indicates that the 
1959 Law was repealed for the Brussels-Capital region and the Flemish 
region in 1991. Fafer contends that the July 17, 1959 Law is the legal 
basis for its cash grants received in the early 1980s, not the July 18, 
1959 Law, as petitioners suggest. Moreover, Fafer asserts that the 
Department's verification reports in this review indicate that, 
contrary to petitioners assertions, the 1959 Law continued past the 
years Fafer received benefits.
    In addition, Fafer maintains that the record evidence in this 
review indicates that only the level of subsidies differed between the 
1959 and 1970 Laws, even after the administration of the program was 
transferred to the GOW. Fafer claims that because it has not received 
any new benefits under the 1970 law from the time of the original 
investigation, to abandon the two-tiered analysis in this review would 
be an usurpation of the Court's decision in Geneva Steel. Thus, the 
Department does not have a basis for departing from its tiered-benefits 
analysis in these Department's Position: In the Final Determination we 
found cash grants and interest subsidies under the Law of 1970 to be 
specific because eligibility was limited to firms located in certain 
regions. However, because the same benefits were provided under the 
1959 Law, which was found to be generally available (see Certain Steel 
Products from Belgium 47 FR 39304; 39305 (September 7, 1982,) we 
countervailed benefits under the 1970 Law only to the extent that they 
exceeded benefits available under the 1959 Law. Based on the evidence 
in the record of that case, we determined that this treatment was in 
accordance with tiered levels of benefits in Final Negative 
Countervailing Duty Determination: Certain Granite Products from Italy, 
53 FR 27197 (July 19, 1988). In Geneva Steel, the CIT affirmed the 
Department's decision on this issue, noting that it was consistent with 
prior practice.
    At verification in this review, we confirmed that the 1959 Law was 
in effect in the Flanders and the Brussels-Capital regions of Belgium 
prior to 1992, the period covered in the investigation. Therefore, 
benefits under the 1959 Law were generally available in Belgium at the 
time Fafer received its cash grants and interest rate subsidies 
examined in the Final Determination. Moreover, there is no new evidence 
on the record in this review that warrants a change in

[[Page 12989]]

this review of our finding in the Final Determination, that firms 
qualifying for benefits under the 1970 Law would also qualify for 
benefits under the 1959 Law. Therefore, we are not changing our 
treatment of these subsidies received by Fafer prior to 1988 in these 
Final Results.

Comment 3: Amortization of Countervailable Grants Using the Mid-Year 
Convention

    Petitioners argue that instead of using its standard amortization 
method, the ``annuity due'' method, the Department should use the 
``mid-year convention'' method to countervail the cash grants. 
According to petitioners, the ``mid-year convention'' method of 
amortizing subsidies is more accurate with respect to the commercial 
reality of a company's ongoing production and sales activity because it 
presumes that benefits are being used throughout the year and that 
generally subsidies are being received in the middle of the year of 
benefit. In contrast, the ``annuity due'' method is inconsistent with 
commercial reality because it presumes that subsidies are always 
received at the beginning of the year and that the subsidy benefits 
allocated to that year are immediately expensed at that time. Moreover, 
petitioners maintain that the mid-year convention method is consistent 
with other allocation methods that the Department uses. For example, in 
the remand determination in British Steel I, the Department reaffirmed 
that financial events that occur sometime within a specific year should 
be deemed to have occurred at the mid-point of the year to eliminate 
any bias. (See Final Results of Redetermination Pursuant to Court 
Remand on General Issue of Allocation, Case No. C-100-004 at 42 n.5 
(June 30, 1995.) Petitioners assert that the Department's current 
allocation method is not consistent with British Steel I because it 
does not eliminate bias by taking into account events that occur at the 
mid-point of the year.
    In addition, petitioners claim that the mid-year convention is 
consistent with the Department's view that a subsidy is deemed received 
by a company on the actual date of receipt. Petitioners claim that this 
method would, on average, more accurately reflect the date of receipt 
across all programs.
    Fafer argues that the Department has chosen to use the annuity due 
method, and that the application of a different allocation methodology 
is equivalent to a reallocation of subsidies for which the Department 
has established benefit streams. Fafer maintains that the Department 
has stated that in cases where an allocation period has been 
established in an earlier segment of a proceeding, it will not 
reallocate subsidies over a different period of time. In conclusion, 
Fafer argues that the Department should continue to apply its standard 
amortization methodologies in these Final Results.
    Department's Position: The formula for allocating non-recurring 
benefits over time, which was used in this review, has been a part of 
the Department's longstanding practice since it appeared in the 
Subsidies Appendix to Certain Cold-Rolled Carbon Steel Flat Products 
from Argentina, 49 FR 18006 (April 26, 1984). As explained in the 
Preamble to Countervailing Duties; Final Rule, 19 CFR Part 351, at 205 
(November 25, 1998), we examined several alternative methodologies, 
including the mid-year methodology and found these methodologies unduly 
complicated. Our current methodology, which was applied in this case, 
has been uncontroversial and worked well in past cases. Therefore, we 
see no compelling need to change our methodology in this review and 
have continued to apply our long-standing allocation methodology for 
non-recurring grants in these Final Results.

Comment 4: Amortization Period Based on the IRS Class Asset Life Tables

    Petitioners claim that the Department's company-specific average 
useful life (AUL) methodology is flawed as is demonstrated by Fafer's 
resulting calculation of an AUL that exceeds the period over which the 
company actually depreciates its assets. Petitioners assert that 
Fafer's calculated 26-year AUL is not acceptable given Fafer's 
admission that no assets are depreciated for more than 20 years and 
most assets are depreciated over 15 years or less. Moreover, 
petitioners argue that the Department's company-specific AUL 
methodology will provide inconsistent results when two companies with 
similar asset bases use different depreciation methods. According to 
petitioners, the Department's company-specific AUL methodology has not 
been mandated by a Court or reviewing body, and is not required by any 
international agreement. Therefore, petitioners contend that the 
Department should return to the 15 year AUL period based on the 
Internal Revenue Service (IRS) class asset life tables in these Final 
Results.
    In rebuttal, Fafer asserts that petitioners recognize that Fafer 
derived its 26-year company-specific average useful life according to 
the Department's instructions which were based on the CIT's decision in 
British Steel I and upheld by the Court in British Steel II. Fafer 
maintains that in British Steel I, the Court ruled against using the 
IRS Class Asset Life Table to derive the allocation for non-recurring 
subsidies. Fafer contends that as a result, the Department determined 
``the most reasonable method of deriving the allocation period for the 
nonrecurring subsidies is a company-specific average useful life of 
non-renewable physical assets.'' See 63 FR at 48189.
    In addition, Fafer contends that using the 15-year IRS amortization 
rule would be in conflict with the tenets of the URAA that give 
deference to the standards and generally accepted accounting principles 
of the country and the company under investigation or review. Fafer 
asserts that the company-specific AUL determined by the Department was 
derived from questionnaire responses based on Fafer's own data. 
Therefore, Fafer argues that a factually derived AUL should not be 
altered for the convenience of the IRS rule, which does not 
sufficiently address the actual allocation and accounting methods in 
this review. Department's Position: As stated in our Preliminary 
Results, we have applied in this administrative review the methodology 
affirmed in the remand determination British Steel II 929 F.Supp. 426, 
439 (CIT 1996). With regard to petitioners' claim that the Department's 
methodology is flawed because Fafer's calculated AUL does not 
correspond to the company's reported maximum depreciation rate of 20 
years, a company's asset depreciation schedule for accounting purposes 
does not always correspond to the productive life of these assets. We 
explain in the Preamble to the Department's 1997 Regulations that 
assets that are in service, even if they have been fully depreciated, 
are included in the AUL calculation. See 62 FR 8818; 8828 (February 26, 
1997). In Fafer's case for example, several assets in use since the 
1960s that had been fully depreciated in accordance with the company's 
accounting policy, such as the electric arc furnace, the four high 
rolling mill, and the continuous caster, have been included in the AUL 
calculation. Therefore, Fafer's depreciable lives for accounting 
purposes are not commensurate with the AUL calculation which includes 
the values of fully depreciated assets while they are still in service. 
Accordingly, we are using Fafer's company-specific AUL of 26 years to 
allocate non-recurring grants that were not previously allocated in the 
original investigation.

[[Page 12990]]

Comment 5: The Countervailability of Grants Received by Fafer's 
Consolidated Subsidiaries

    Petitioners argue that in the Preliminary Results, the Department 
failed to countervail grants provided since the original investigation 
to two of Fafer's affiliates, PFM and CD. Petitioners assert that PFM 
and CD are almost wholly-owned by Fafer and are fully consolidated with 
Fafer. Moreover, both of these companies are located within Fafer's 
production facilities. Petitioners maintain that at verification, the 
Department found that PFM and CD received cash grant subsidies under 
the Law of 1970. In addition, petitioners contend that the verification 
proves that these grants benefitted subject merchandise. Therefore, 
petitioners argue that the Department should countervail these grants 
in the Final Results of this review.
    Petitioners note that at verification in this review, the 
Department found that the two grants received by PFM in 1996 were for 
sheet metal finishing and painting and for sand blasting and painting 
of flat, steel or nonferrous products, prior to their production. The 
grant received by CD in 1993 was for an uncoiling machine. Petitioners 
dispute company officials claims made at verification that the steel 
coils that CD and PFM decoil, which are produced on a STECKEL mill, 
were too thin to be cut-to-length carbon steel plate and that PFM's 
processing equipment was not related to the production of the subject 
merchandise because the subject merchandise was not painted, sand 
blasted, or otherwise treated. Petitioners acknowledge that coils 
produced on the STECKEL mill which are sold in coils could be outside 
the scope of this countervailing duty order on cut-to-length carbon 
steel plate. However, petitioners assert that if these same coils are 
decoiled and cut, they are within the scope of this order. Petitioners 
contend that at verification, the Department observed that decoiling 
and slitting of steel in coils occurs at CD and PFM's facilities. 
Moreover, petitioners argue that the Fafer verification report 
indicates that coils made on the STECKEL mill are less than 10 mm 
thick, while the scope of the order covers plate as thin as 4 mm. 
Finally, petitioners note that at verification of the 1995-1996 
administrative review of the antidumping duty order on cut-to-length 
carbon steel plate, the Department found that PFM's production line 
``is used mainly for carbon steel products, both structural and 
pressure vessel'' and that CD ``is used to process carbon, alloy, and 
stainless steel coils.'' 1
---------------------------------------------------------------------------

    \1\  (See Verification of Cost of Production and Constructed 
Value Data dated March 24, 1997, public version on file in CRU).
---------------------------------------------------------------------------

    Petitioners contend that Fafer has not demonstrated that the grants 
to CD and PFM are tied to products other than the subject merchandise. 
Petitioners further argue that the evidence on the record indicates 
that the decoiling machine is used to produce cut-to-length plate, or 
at least can be used to produce the subject merchandise. Moreover, 
petitioners argue that contrary to the official's claim at verification 
(that PFM's grant to purchase sand blasting and painting equipment was 
unrelated to the subject merchandise because ``the subject merchandise 
did not have any of these finishings,'' (see Fafer's Verification 
Report at 6)) the countervailing duty order includes all plate products 
``whether or not painted, varnished, or coated with plastics or other 
nonmetallic substances.'' See Preliminary Results, 63 FR 48189. 
Petitioners further claim that according to the publication Iron and 
Steel Works of the World, plates up to 3,000mm wide produced by the 
STECKEL mill have been available since 1994 from Fafer. See Iron and 
Steel Works of the World at 25 (Metal Bulletin Books 12th ed.) (1997).
    Petitioners also dispute Fafer's claim that CD and PFM did not 
engage in any financial transactions with Fafer, noting that the 
company does not cite any record evidence to support this assertion. 
Petitioners contend that subsidies to CD's and PFM's should be included 
in the numerator because the production services that they perform for 
Fafer-produced and sold products is included in the denominator (i.e., 
Fafer's total sales). Thus, petitioners claim, CD's and PFM's value-
added is a part of Fafer's reported total sales and grants these 
companies received must be included in the numerator.
    In response, Fafer argues that there is no evidence on the record 
that indicates that Fafer's subsidiaries, CD and PFM, produced the 
subject merchandise during the POR. According to Fafer, petitioners 
acknowledge that coils made on a STECKEL mill are potentially outside 
the scope of the countervailing duty order. Then, Fafer asserts, 
further finished coils should also be outside the scope. Moreover, in 
support of its assertion that subsidies to CD and PFM in any case would 
not be attributable to Fafer, the company cites section 351.524(b)(6) 
of the Department's 1997 proposed regulations, which state that ``[t]he 
Secretary normally will attribute a subsidy to the products produced by 
the corporation that received the subsidy.''
    Fafer claims that the company's sales of subject merchandise to the 
U.S. during the POR did not include any of the processing described by 
petitioners at either of the two subsidiaries. Fafer further maintains 
that the company verification report indicates that CD and PFM own 
their own facilities and do not have the production equipment that 
Fafer does. Fafer contends that although petitioners argue that the 
machinery at CD and PFM could be used to process subject merchandise, 
in fact, Fafer's shipment of the subject merchandise to the U.S. during 
the POR did not have any processing done at CD or PFM. Therefore, Fafer 
argues the issue is whether it produced subject merchandise that was 
exported to the U.S. which benefitted from the further processing at CD 
and PFM.
    Fafer contends that countervailing CD and PFM's grants in these 
final results would contradict the Court of International Trade's 
rulings in Aimcor et. al. v. U.S. 18 CIT 1117; 871 F. Supp 447, (1994), 
and Armco, Inc. v. U.S. (Armco), 14 CIT 211; 733 F. Supp. 1514 (1990). 
Specifically, Fafer asserts that under these Court decisions, a subsidy 
received by a subsidiary may not be countervailed against products 
exported by the parent company, unless the subsidy was tied to the 
subject merchandise exported by the parent.
    Department's Position: We reject respondent's assertion that in 
order for subsidies to CD and PFM to be countervailable, the exports of 
the subject merchandise to the United States during the POR must have 
been processed by CD or PFM. Initially, such an approach is not 
required by the countervailing duty statute, which specifically states 
that ``the administering authority is not required to consider the 
effect of the subsidy in determining a subsidy exists.'' Section 
771(5)(C) of the Act. Under Fafer's approach, however, the Department 
would be required to examine specific sales from subsidized 
subsidiaries that are capable of producing subject merchandise to 
determine, on a sale by sale basis, whether the merchandise exported to 
the U.S. ``passed-through'' the subsidiary. Then, and only then, under 
respondent's approach, would a subsidiary's countervailable subsidies 
be attributable to the subject merchandise. Presumably, this approach 
could lead the Department to countervail such non-recurring subsidies 
in one review, but not in another. Such an approach leads to absurd 
results and is simply not

[[Page 12991]]

required under law or practice. Again, as stated in the GIA, ``nothing 
in the statute directs the Department to consider the use to which 
subsidies are put or their effect on the recipient's subsequent 
performance * * *. nothing in the statute conditions countervailability 
on the use or effect of a subsidy. Rather, the statute requires the 
Department to countervail an allocated share of the subsidies received 
by producers, regardless of their effect.'' 58 FR at 37260; see also 
British Steel v. United States, 879 F. Supp. 1254, 1298 (CIT 1995) 
(British Steel), appeals docketed, Nos. 96-1401 to -06 (Fed. Cir. June 
21, 1996); British Steel Corp v. United States, 9 CIT 85, 95-96, 605 F. 
Supp. 286, 294-95 (1985) (``[I]t is unnecessary to trace the use'' of 
funds), citing Michelin Tire Corp. v. United States, 4 CIT 252, 255 
(1982), vacated on agreed statement of facts, 9 CIT 38 (1985).
    As outlined above, in the Facts Available section of this notice 
because of the level of affiliation and the fact that both subsidiaries 
are capable of producing subject merchandise, it is appropriate to 
attribute CD and PFM's cash grants to Fafer's total sales including 
sales of the subsidiaries.
    We also disagree with respondent's assertion that the Court's 
decisions in Aimcor and Armco do not permit the attribution of CD and 
PFM's benefits to Fafer. Respondent reliance on these cases for the 
proposition that the Department may not attribute countervailable 
benefits to subsidiary companies to sales of the parent company, unless 
the parent's shipment of the subject merchandise exported to the U.S. 
during the POR was processed by the subsidiaries, is misplaced. The 
facts in Aimcor and Armco are substantially different from those in the 
instant review. In Aimcor, the relationship between parent and 
subsidiary was the critical factor in determining whether subsidies to 
the subsidiary are attributable to the parent company. Moreover, the 
issue in Aimcor was whether a subsidy had been bestowed at all. The 
issue was not whether countervailable subsidies that had been bestowed 
on a wholly-owned subsidiary were attributable to the parent company.
    Furthermore, the Court's ruling in Armco does not support Fafer's 
position. As we noted in 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) the court 
understood that attribution decisions in the Department's cases 
``turn[ed] essentially upon the Department's findings in particular 
cases.'' (See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products 
From the United Kingdom; Final Results of Countervailing Duty 
Administrative Review 63 FR 18367; 18371 (April 15, 1998). The court 
also recognized that ``the Department has attributed benefits received 
by one company to a related company.'' Id. (emphasis in original). 
Accordingly, we do not agree that Armco represents an endorsement of 
respondent's position of not attributing subsidies received by a 
subsidiary to the parent company.

Comment 6: Tax Subsidies Under the Law of 1970

    According to petitioners, in Preliminary Affirmative Countervailing 
Duty Determination and Alignment of Final Countervailing Duty 
Determination with Final Antidumping Duty Determination: Stainless 
Steel Plate in Coils from Belgium (Stainless Steel), the Department 
found additional tax subsidies under Articles 15 and 16 of the Law of 
1970. See Stainless Steel, 63 FR 47239 at 47242 (September 4, 1998). 
Under Article 15, firms can declare twice the standard depreciation for 
assets acquired using grants received under the 1970 Law, and under 
Article 16, assets obtained with 1970 Law grants can be exempted from 
real estate taxes for up to five years. Petitioners assert that the 
Department preliminarily found both of these programs countervailable 
and calculated the subsidy rate from the accelerated depreciation 
program and the real estate tax exemption program to be 0.49 percent ad 
valorem and 0.04 percent ad valorem, respectively.
    Petitioners contend that at verification Fafer and the GOW 
maintained that Fafer had not received any benefits under these 
programs, however, they failed to include the use of these programs by 
CD and PFM, Fafer's affiliates. Petitioners argue that the verification 
exhibits show that PFM may have benefitted from these programs. 
Moreover, petitioners assert that because Fafer failed to disclose 
benefits under these programs, the Department should use facts 
available and apply the rates calculated in Stainless Steel to 
calculate the benefits received by Fafer in these Final Results.
    In rebuttal to petitioners' assertion that PFM's double 
depreciation should be applied to Fafer, respondent maintains that PFM 
was not involved in the production, processing, or export of the 
subject merchandise to the U.S. during the POR. Fafer contends that the 
verification reports indicate that it did not receive these tax 
subsidies and that such benefits were not attached to its exports. In 
conclusion, Fafer asserts that PFM's supposed benefits from accelerated 
depreciation should not be included in the calculation of Fafer's net 
subsidy rate in these Final Results.
    Department's Position: Although PFM's verification exhibits 
indicate that it was approved to receive assistance under additional 
tax programs under the Law of 1970, we have no evidence on the record 
that PFM actually received these benefits during the POR. With respect 
to real estate taxes, information collected at verification indicates 
that CD and PFM did not use these grants to purchase real estate. 
Moreover, with regard to benefits from accelerated depreciation, 
Fafer's consolidated financial statement, which includes PFM, indicates 
that the consolidated group did not use accelerated depreciation for 
financial reporting purposes during the POR. Therefore, we are not 
including benefits to PFM from these programs in the calculation of 
Fafer's net subsidy rate in these Final Results. We will, however, 
examine benefits under these programs provided to Fafer's affiliates, 
CD and PFM in future administrative reviews.

Comment 7: Promotion Brochure Loan

    Petitioners argue that in the Preliminary Results, the Department 
incorrectly found that the fixed-rate, long-term loan Fafer received 
for the publication of the promotion brochure did not provide 
countervailable benefits, because the Department compared the interest 
rate paid on the loan to (an inaccurate) benchmark rate, that was lower 
than the program rate. Petitioners also assert that the Department 
confirmed at verification that no interest was paid on this loan during 
the POR. Furthermore, petitioners argue that the verification reports 
indicate that Fafer does not anticipate paying any interest on the loan 
which is granted on a contingent basis. The loan agreement indicates 
that the company does not have to make any payments on this loan until 
after five years, at which time the firm is required to pay only if the 
targeted export sales volume and profit level has been obtained during 
the five year period. Petitioners maintain that the likelihood of Fafer 
meeting the contingent export sales and profit target levels is 
unlikely. Therefore, the Department should treat this loan as a grant 
pursuant to section 351.505(d)(2) of the Department's regulations in 
these Final Results. If not, petitioners assert that this loan should 
at a minimum be treated as an interest-free contingent liability loan 
under

[[Page 12992]]

section 351.505(d)(1) of the Department's regulations.
    In rebuttal, Fafer argues that the Department should not 
countervail the export promotion brochure loan. Fafer maintains that 
although the loan was received in 1996, the end result of the loan will 
not be known until it matures. According to Fafer, there is no 
information pertaining to whether this loan will be forgiven or whether 
it will be repaid at the fixed rate specified in the agreement. Fafer 
argues that until the loan matures and it is known whether it will be 
repaid and at what rate of interest it is repaid, there may be no 
benefit. On the other hand, if at maturity the total amount of the loan 
is not repaid, Fafer contends that the portion of the loan that is 
unpaid would be treated as a grant in the year the loan is forgiven. 
Further, Fafer argues that even assuming the loan is not repaid, the 
only amount to be considered during the POR would be the annual amount 
of interest for part of 1996. Fafer maintains that the benefit from 
this scenario is less than 0.00015 percent and should not be included 
in the countervailing duty rate in these Final Results.
    Department's Position: We agree with petitioners that this loan 
provides countervailable benefits during the POR. However, at 
verification we found that the assistance provided under this program 
was an outstanding loan during the POR, and that this loan had not yet 
been forgiven. Moreover, the respondent had no knowledge of whether it 
would meet the targeted export goals which would result in repayment of 
the loan. Because the loan under this program has not yet been 
converted into a grant, we are treating this assistance as a contingent 
liability loan in these Final Results. See New Programs Determined to 
Confer Subsidies section above for a detailed description of the 
calculation of this subsidy.

Comment 8: Promotion Audio-Visual Loan

    Petitioners argue that at verification, the Department found that 
Fafer had received an interest-free loan in 1990 to produce an audio-
visual calling card. Petitioners assert that the agreement for this 
loan indicates that the company must repay the loan only if it obtains 
the minimum volume and profit increases in export sales required within 
the five year time period which begins at the closing of the first 
fiscal year in which the loan is received. Petitioners also maintain 
that although the loan agreement indicates that the loan was interest-
free for only five years, there is no indication that Fafer paid any 
interest or made any repayment on the principle. Moreover, petitioners 
contend that on April 7, 1997, the GOW converted the loan into a grant, 
and Fafer subsequently wrote the loan off its books and amortized the 
amount.
    Petitioners argue that this loan, which was forgiven in 1997, 
should be countervailed as a grant during the POR because Fafer knew 
that the contingency, the minimum threshold level increase in exports 
and profits, would not be met in 1996, the POR. Moreover, petitioners 
maintain that the Department should further countervail the portion of 
the subsidy which was an interest free loan until the time of 
forgiveness.
    Department's Position: We agree with petitioners that the loan for 
an audio-visual calling card found at verification conferred benefits 
during the POR. Our calculation of the benefit from this program is 
described above under the section titled ``New Programs Determined to 
Confer Subsidies.'' We found at verification that this loan was 
outstanding during the POR and became a grant in 1997, subsequent to 
the POR. Therefore, we have treated this assistance as a contingent 
liability interest-free loan in these Final Results and calculated the 
benefit using information collected at verification as discussed in the 
Facts Available section of this notice.

Comment 9: Fafer's Consolidated Sales Value

    Petitioners argue that since two of Fafer's consolidated 
subsidiaries received countervailable subsidies during the POR, the 
Department should use Fafer's consolidated sales value as the 
denominator instead of the unconsolidated sales value used in the 
Preliminary Results. Petitioners maintain that the Department sought 
data on consolidated sales at verification and Fafer claimed that it 
was unable to calculate consolidated sales on a calendar year basis. 
Accordingly, petitioners argue that the Department should use facts 
available to calculate the consolidated sales value and use this 
information as the denominator in these Final Results.
    In rebuttal, Fafer argues that it has provided sufficient 
information regarding the fiscal/calendar year and that the company 
also submitted half-year data to assist in tracking company records. 
Fafer contests petitioners' suggestion of constructing consolidated 
sales based on percentage factors, especially since the sales of 
Fafer's subsidiaries are not at issue. Fafer asserts that the 
verification report supports the Preliminary Results in which the 
Department used Fafer's unconsolidated sales. Accordingly, Fafer argues 
unconsolidated sales should be used in the Department's calculations of 
these Final Results.
    Department's Position: Because we are finding that grants provided 
under the 1970 Law to Fafer's subsidiaries, CD and PFM, conferred 
countervailable benefits on the subject merchandise during the POR (see 
Comment 5 above), we must include their sales in the denominator to 
determine the subsidy rate. Fafer's consolidated sales for the POR have 
not been submitted in this review, notwithstanding Department requests 
for this information, and we were not able to obtain this information 
at verification. Therefore, in accordance with Section 776(a) of the 
Act, we have used facts available to derive Fafer's consolidated sales. 
To calculate Fafer's consolidated sales, we reduced Fafer's 
unconsolidated sales for the POR, by the same percentage difference 
between Fafer's 1995/96 fiscal year consolidated and unconsolidated 
sales in the company's financial statements. We applied this ratio to 
Fafer's reported unconsolidated 1996 sales to obtain an estimated 
denominator for the POR. We are using this calculated consolidated 
sales figure in these Final Results.

Comment 10: Green Light Treatment for the Research and Development Loan 
(R&D Loan) Under the Law of 1970

    Fafer first maintains that the Department did not provide any 
substantive reason for denying its green light claim for the Research 
and Development Loan (R&D Loan) in the preliminary results, and that 
the claim should be considered for these final results. According to 
Fafer, the R&D Loan meets the greenlight criteria of section 771(5B)(B) 
of the Act.
    According to petitioners, the Department correctly rejected Fafer's 
claim that the interest-free R&D loan should be treated as a green 
light subsidy in the preliminary results. Petitioners assert that the 
Department properly rejected Fafer's claim on both a procedural and 
substantive grounds. Moreover, petitioners argue that Fafer has not 
demonstrated that the R&D loan meets the statutory criteria for green 
light claims under the conditions of the SCM Agreement.
    Petitioners also argue that because interest subsidies under the 
1970 Law are specific, the interest-free loan is countervailable. 
Petitioners contend that the Department stated in its preliminary 
results that this program was specific because it provides incentives 
to promote economic development in designated development zones.

[[Page 12993]]

Petitioners assert that this determination is consistent with the final 
determination in which the Department found all grants and interest 
subsidies provided under the 1970 Law to be specific and 
countervailable.
    Petitioners contend that subsequent to the preliminary results of 
this review, the GOB made a new specificity claim. Specifically, 
petitioners maintain that the GOB claims that the first part of the 
1970 Law deals with aid to development zones and is regionally 
specific, while the second part of the 1970 Law involves research and 
development programs and is generally available. Petitioners argue that 
the record does not support this claim.
    Petitioners assert that Article 25 of the 1970 law, under which 
this subsidy was granted, does not indicate that assistance under this 
Article is generally available. Petitioners argue that at verification, 
the Department found that this subsidy was provided under Article 25 of 
the 1970 Law and that equivalent benefits were not available to firms 
outside of the development zone areas. Thus, petitioners contend, 
benefits bestowed under this program were regionally specific at the 
time Fafer received its benefits.
    Further, petitioners argue that to the extent Article 25 subsidies 
were changed by later amendments to the 1970 Law, these amendments do 
not affect the specificity of Fafer's loan. Petitioners contend that at 
verification the Department found that Article 25 had been replaced by 
the Walloon Decree of July 5, 1990. However, petitioners argue this 
change was not implemented until September 29, 1994. Petitioners assert 
that Fafer applied for its loan in 1988, was approved for the loan in 
1989, and received all payments by 1992, years before changes to this 
program took place. Therefore, petitioners argue that Fafer has not 
demonstrated that this program is not specific.
    Department's Position: As noted above, in the section titled 
Programs Found Not to Confer Subsidies, on the basis of our findings at 
verification, we find this program to be not specific in these final 
results. See (See Memorandum to Holly A. Kuga from David Mueller dated 
March 8, 1999, Decision Memorandum Re: Specificity of the Research and 
Development (R&D) Aid in the 1996 Countervailing Duty Administrative 
Review of Certain Cut-to-Length Carbon Steel Products From Belgium, 
public version on file in room B-099 of the main Commerce Building.) 
Accordingly, we have not addressed Fafer's claim for green light 
status.

Final Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for each producer/exporter subject to this 
administrative review. For the period January 1, 1996 through December 
31, 1996, we determine the net subsidy for Fafer to be 0.35 percent ad 
valorem.
    As provided for in the Act, any rate less than 0.5 percent ad 
valorem in an administrative review is de minimis. Accordingly, the 
Department intends to instruct Customs to liquidate, without regard to 
countervailing duties, shipments of the subject merchandise from Fafer 
exported on or after January 1, 1996, and on or before December 31, 
1996. Also, the cash deposits required for these companies will be 
zero.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in 777A(e)(2)(B) of the Act. The requested review will 
normally cover only those companies specifically named. See 19 CFR 
351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which 
a review was not requested, duties must be assessed at the cash deposit 
rate, and cash deposits must continue to be collected at the rate 
previously ordered. As such, the countervailing duty cash deposit rate 
applicable to a company can no longer change, except pursuant to a 
request for a review of that company. See Federal-Mogul Corporation and 
The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and 
Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993). 
Therefore, the cash deposit rates for all companies except those 
covered by this review will be unchanged by the results of this review.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to non-reviewed companies covered by this 
order will be the rate for that company established in the most 
recently completed administrative proceeding conducted under the URAA. 
If such a review has not been conducted, the rate established in the 
most recently completed administrative proceeding pursuant to the 
statutory provisions that were in effect prior to the URAA amendments 
is applicable. See Final Determination. These rates shall apply to all 
non-reviewed companies until a review of a company assigned these rates 
is requested. In addition, for the period January 1, 1996 through 
December 31, 1996, the assessment rates applicable to all non-reviewed 
companies covered by this order are the cash deposit rates in effect at 
the time of entry.
    This notice serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 355.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are issued and published in 
accordance with section 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 
1675(a)(1) and 19 U.S.C. 1677f(i)(7)).

    Dated: March 8, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-6288 Filed 3-15-99; 8:45 am]
BILLING CODE 3510-DS-P