[Federal Register Volume 64, Number 61 (Wednesday, March 31, 1999)]
[Notices]
[Pages 15567-15585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7531]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-423-809]


Final Affirmative Countervailing Duty Determination; Stainless 
Steel Plate in Coils from Belgium

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

EFFECTIVE DATE: March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Zak Smith, Stephanie Hoffman, James 
Breeden, or Melani Miller, AD/CVD Enforcement, Group I, Office 1, 
Import Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
0189, 482-4198, 482-1174, or 482-0116, respectively.

Final Determination

    The Department of Commerce determines that countervailable 
subsidies are being provided to producers and exporters of stainless 
steel plate in coils from Belgium. 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 on March 31, 1998, by 
Armco, Inc., Lukens Inc., Butler Armco Independent Union, Zanesville 
Armco Independent Organization, and the United Steelworkers of America, 
AFL-CIO/CLC (``the petitioners'').

Case History

    Since the publication of the preliminary determination in the 
Federal Register on September 4, 1998 (63 FR 47239) (``Preliminary 
Determination''), the following events have occurred:
    We conducted verification in Belgium of the questionnaire responses 
from the Government of Flanders (``GOF''), the Government of Belgium 
(``GOB''), SIDMAR N.V. (``Sidmar''), and ALZ N.V. (``ALZ'') from 
November 9 through November 20, 1998. We postponed the final 
determination of this investigation until March 19, 1999 (see 
Countervailing Duty Investigations of Stainless Steel Plate in Coils 
From Belgium, Italy, the Republic of Korea, and the Republic of South 
Africa; Notice of Extension of Time Limit for Final Determinations, 64 
FR 2195 (January 13, 1999)). The petitioners and ALZ filed case briefs 
on February 10, the GOB filed a case brief on February 11, and we 
received rebuttal briefs from the petitioners and ALZ on February 18, 
1999.

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 (``URAA'') effective January 1, 1995 
(``the Act''). In addition, unless otherwise indicated, all citations 
to the Department of Commerce's (``the Department's'') regulations are 
to the regulations codified at 19 CFR part 351 (April 1998).

Scope of Investigation

    For purposes of this investigation, the product covered is 
stainless steel plate in coils. Stainless steel is an alloy steel 
containing, by weight, 1.2 percent or less of carbon and 10.5 percent 
or more of chromium, with or without other elements. The subject plate 
products are flat-rolled products, 254 mm or over in width and 4.75 mm 
or more in thickness, in coils, and annealed or otherwise heat treated 
and pickled or otherwise descaled. The subject plate may also be 
further processed (e.g., cold-rolled, polished, etc.) provided that it 
maintains the specified dimensions of plate following such processing. 
Excluded from the scope of this investigation are the following: (1) 
Plate not in coils, (2) plate that is not annealed or otherwise heat 
treated and pickled or otherwise descaled, (3) sheet and strip, and (4) 
flat bars.
    The merchandise subject to this investigation is currently 
classifiable in the Harmonized Tariff Schedule of the United States 
(``HTSUS'') at subheadings: 7219.11.00.30, 7219.11.00.60, 
7219.12.00.05, 7219.12.00.20, 7219.12.00.25, 7219.12.00.50, 
7219.12.00.55, 7219.12.00.65, 7219.12.00.70, 7219.12.00.80, 
7219.31.00.10, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 
7219.90.00.60, 7219.90.00.80, 7220.11.00.00, 7220.20.10.10, 
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. 
Although the HTSUS subheadings are provided for convenience and Customs 
purposes, the written description of the merchandise under 
investigation is dispositive.

Injury Test

    Because Belgium 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 Belgium materially injure, or threaten 
material injury to, a U.S. industry. See section 701(a)(2) of the Act. 
On May 28, 1998, 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 Belgium of the subject merchandise 
(see 63 FR 29251 (May 28, 1998)).

Period of Investigation

    The period for which we are measuring subsidies (the ``POI'') is 
calendar year 1997.

Subsidies Valuation Information

Responding Producers

    The GOB identified one producer of the subject merchandise that 
exported to the United States during the POI, ALZ. There are also two 
subsidiaries of ALZ which are involved in the production of the subject 
merchandise, ALBUFIN N.V. (``Albufin'') and AL-FIN N.V. (``Alfin''), 
and we have included any subsidies to these companies in the subsidy 
rate for ALZ. Furthermore, Sidmar owns either directly or indirectly 
100 percent of ALZ's voting shares and is the overall majority 
shareholder of ALZ.

Benchmarks for Long-term Loans and Discount Rates

    ALZ and Sidmar reported that they obtained long-term commercial 
loans contemporaneously with the receipt of certain government loans or 
grants. Where appropriate, we have used these

[[Page 15568]]

company-specific interest rates as the long-term loan benchmark 
interest rate or discount rate (see Comments 5 and 6, below). For those 
years in which ALZ or Sidmar did not receive commercial loans, we are 
using national average rates for long-term, fixed-rate debt. In the 
Preliminary Determination, we used rates reported by the GOF as the 
national average rates. However, as explained in the Interested Party 
Comments section below, we determine that those rates are inappropriate 
benchmarks and have changed our national average benchmarks for this 
final determination. For further discussion on benchmarks and discount 
rates, see Comment 4 in the Interested Party Comments section below.

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 the General Issues Appendix (``GIA'') to the Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Austria, 58 FR 37217, 37225 (July 9, 1993)). However, in British 
Steel plc v. United States, 879 F. Supp. 1254 (CIT 1995) (``British 
Steel I''), the U.S. Court of International Trade (``CIT'') ruled 
against this allocation methodology. In accordance with the CIT'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 CIT on June 4, 1996. See British Steel plc v. 
United States, 929 F. Supp. 426, 439 (CIT 1996) (``British Steel II''). 
In recent countervailing duty investigations, it has been our practice 
to follow the CIT's decision in British Steel II, and to calculated a 
company-specific allocation period for all countervailable non-
recurring subsidies. Thus, for purposes of this investigation we have 
determined the allocation period for non-recurring subsidies using 
company-specific AUL data because it was reasonable and practicable to 
do so.
    As in the Preliminary Determination, we determine that the AUL for 
ALZ is 15 years. In a change from the Preliminary Determination 
however, we have allocated non-tied subsidies received by Sidmar over 
Sidmar's AUL, 19 years.

Equity Methodology

    Consistent with the Department's methodology, the first question in 
analyzing an equity infusion is whether, at the time of infusion, there 
was a market price for newly-issued equity (see GIA, 58 FR 37239). The 
Department will find an equity investment to be inconsistent with the 
usual practice of a private investor if the market-determined price for 
equity is less than the price paid by the government for the same form 
of equity purchased directly from the firm. In this investigation, for 
those years in which market prices do not exist, the Department has 
conducted an equityworthiness analysis of the firm as described in the 
GIA, 58 FR at 37239. See 1985 Debt to Equity Conversion and Purchase of 
ALZ Shares in the program descriptions, below.

I. Programs Determined To Be Countervailable

A. Regional Subsidies under the Economic Expansion Law of 1970

    The 1970 Law offers various incentives to enterprises located 
within designated disadvantaged regions. While the 1970 Law is 
currently administered by the GOF, the GOB originally oversaw the 
implementation of 1970 Law benefits to disadvantaged regions throughout 
Belgium. Pursuant to the overall devolution of power from the GOB to 
the regional governments since the early 1980s, the authority to 
administer the 1970 Law has been transferred to the regional 
governments. With respect to Flanders, many of the 1970 Law subsidy 
programs have been implemented and administered by the GOF since the 
late 1980s and the ``execution modalities'' have been amended by 
several Flemish decrees. Currently, funding for programs under the 1970 
Law is included in a lump sum amount from the GOB as part of the funds 
needed to finance the overall operation of the GOF. The GOF retains 
full authority over the distribution of funds within its budget.
    ALZ received several types of assistance under the 1970 Law (the 
initiation and Preliminary Determination notices identified these 
subsidies as: 1993 Expansion Grant, 1994 Environmental Grants, 
Investment and Interest Subsidies, Accelerated Depreciation, and Real 
Estate Tax Exemption). Most of this assistance was provided after the 
GOF assumed control of the subsidy programs. Therefore, we are treating 
the GOF as the authority providing these subsidies. However, ALZ 
received one grant in 1983 (identified in the initiation notice as 
Investment and Interest Subsidies). Because this grant was received 
prior to the GOF takeover of 1970 Law authority, we consider this one 
grant as having been bestowed by the GOB.
    The GOF framework of economic expansion consists of the 1970 Law 
(for medium and large-sized businesses located in a disadvantaged 
region), the Act of August 4, 1978 (``1978 Act,'' for small businesses 
and one-man companies), and the 1993 Economic Expansion Decree (``1993 
Decree,'' for medium and large-sized businesses not eligible for 
assistance under the 1970 Law). The 1993 Decree replaced the Economic 
Expansion Law of 1959 (``1959 Law'') which was repealed in 1991. These 
laws offer various subsidies designed to promote expansion, employment, 
investment, research and development, and conformance with 
environmental standards (Vlaams Reglement betreffende de 
Milieuvergunning, ``VLAREM''). Because the 1970 Law is part of a 
framework of economic expansion, the question arises whether particular 
assistance provided under the various laws should be considered one 
program for specificity purposes.
    In the Final Affirmative Countervailing Duty Determinations: 
Certain Steel Products from Belgium, 58 FR 37273 (July 9, 1993) 
(``Certain Steel''), we determined that assistance provided under the 
1970 Law complemented that provided under the 1959 Law, because it 
generally increased the amount of assistance for companies located in 
certain development zones. Subsidies provided pursuant to the 1959 Law 
were found not countervailable in the Final Affirmative Countervailing 
Duty Determinations: Certain Steel Products From Belgium, September 7, 
1982 (47 FR 39305) (``Belgian Steel'') because they were not specific. 
Therefore, in Certain Steel, we countervailed benefits under the 1970 
Law only to the extent they exceeded benefits available under the 1959 
Law (see Certain Steel at 37275 and 37289 and Sec. 355.44(n) of the 
Department's 1989 Proposed Regulations (Proposed Rules, Department of 
Commerce, International Trade Administration, Countervailing Duties, 54 
FR 23366, 23380 (May 31, 1989))).
    ALZ has argued for the same treatment in this case. However, as 
noted above, the 1959 Law was repealed in 1991 and replaced with the 
Flemish 1993 Decree. Therefore, the question is whether subsidies 
provided under the current economic expansion laws--the 1978 Act, the 
1993 Decree and the 1970 Law--should be considered as one program for 
specificity purposes. We examined each subsidy received by ALZ and 
Albufin under the context of all three laws and determine that 
environmental grants and

[[Page 15569]]

environmental real estate tax exemptions provided pursuant to these 
laws are integrally linked. For further discussion, see Comment 17 in 
the Interested Party Comments and the Memorandum to Richard Moreland, 
``Specificity of Assistance Provided Pursuant to the Economic Expansion 
Laws,'' dated March 19, 1999 (``Economic Expansion Memorandum''). 
Moreover, we determine that these programs are not specific and, 
therefore, not countervailable. For further discussion, see Comments 18 
and 20 in the Interested Party Comments section.
    The other subsidies received by Albufin under the 1970 Law (i.e., 
the 1993 Expansion Grant, the Real Estate Tax Exemption for Albufin's 
expansion investment, and Accelerated Depreciation) are either not 
available to large companies under the 1993 Decree or the 1978 Act, or, 
in the case of the 1993 Expansion Grant, the 1993 Decree was not in 
effect at the time the subsidy was approved. Therefore, we determine 
that these subsidies provided under the 1970 Law cannot be integrally 
linked with the 1993 Decree or the 1978 Act. For further discussion, 
see Comment 17 in the Interested Party Comments section and the 
Economic Expansion Memorandum.
1. 1993 Expansion Grant
    The GOF gave Albufin a cash grant in 1994 to construct an annealing 
and pickling line. The grant is a financial contribution as described 
in section 771(5)(D)(i) of the Act which provides a benefit to the 
recipient in the amount of the grant. Expansion grants are only 
available to large firms under the 1970 Law, and as noted above, 
benefits under the 1970 Law are available only to firms in certain 
regions of Flanders. On this basis, we determine that this program is 
specific under section 771(5A)(D)(iv) of the Act. Therefore, the 1993 
Expansion Grant received by Albufin is countervailable within the 
meaning of section 771(5) of the Act.
    We further determine that this grant is non-recurring because the 
company could not expect to receive it on an ongoing basis. Because the 
benefit to Albufin was below 0.50 percent of ALZ's sales in the year of 
receipt, we expensed the grant in that year. Thus, Albufin received no 
benefit during the POI.
2. Investment and Interest Subsidies
    The petitioners alleged that ALZ's financial statements for 1996 
and 1997 show entries for ``investment subsidies'' and ``interest 
subsidies.'' According to ALZ, the majority of these figures are 
captured under the heading 1994 Environmental Grants (addressed below). 
However, as mentioned above, in 1983, ALZ received one cash grant from 
the GOB under the old system of assistance. At that time, the 1959 Law 
was still in effect.
    We determine that this grant received by ALZ is countervailable 
within the meaning of section 771(5) of the Act. The 1983 grant is a 
financial contribution as described in section 771(5)(D)(i) of the Act. 
Because the countervailable portion of the assistance was received from 
the GOB pursuant to the 1970 Law and, as mentioned above, benefits 
under the 1970 Law were available only to firms in certain regions of 
the country, we determine that the program is specific under section 
771(5A)(D)(iv) of the Act.
    Furthermore, because cash grants of this nature were also available 
to companies under the 1959 Law, we determine that only the difference 
in the assistance level between the two laws constitutes a 
countervailable benefit (see Certain Steel, 58 FR 37273, 37275). To 
derive the benefit, we calculated the difference in the benefit level 
between what was actually granted pursuant to the 1970 Law and what 
could have been received pursuant to the 1959 Law.
    We further determine that this grant is non-recurring because it 
was not provided on an ongoing basis. In calculating the benefit, we 
applied the Department's standard grant methodology. We divided the 
benefit attributable to the POI by ALZ's total sales during the POI. On 
this basis, we determine the countervailable subsidy to be 0.02 percent 
ad valorem.
3. Accelerated Depreciation
    Article 15 of the 1970 Law allows certain companies to declare 
twice the standard depreciation for assets acquired using grants 
bestowed under the law. The tax benefit is a financial contribution as 
described in section 771(5)(D)(ii) of the Act which provides a benefit 
to the recipient in the amount of the tax savings. Because only 
enterprises situated in certain development zones are eligible to apply 
for accelerated depreciation, we determine that the program is specific 
under section 771(5A)(D)(iv) of the Act. Therefore, we determine that 
this tax benefit received by ALZ is countervailable within the meaning 
of section 771(5) of the Act.
    Albufin, an ALZ subsidiary, received tax savings under this program 
during the POI. In calculating the benefit, we treated the tax savings 
as a recurring benefit and divided it by ALZ's total sales during the 
POI. On this basis, we determine the countervailable subsidy to be 0.50 
percent ad valorem.
4. Expansion Real Estate Tax Exemption
    Pursuant to Article 16 of the 1970 Law, assets acquired using 
benefits received under the 1970 Law may be exempted from real estate 
taxes for up to five years, depending on the extent to which objectives 
of the 1970 Law are achieved. Albufin utilized this tax exemption for 
an expansion project.
    The expansion real estate tax exemption received by Albufin is a 
financial contribution as described in section 771(5)(D)(ii) of the Act 
which provides a benefit to the recipient in the amount of the tax 
savings. As noted above, only the 1970 Law provides tax exemptions for 
expansion investments to large enterprises. Because the 1970 Law only 
provides subsidies to companies located in certain regions, we 
determine that this expansion real estate tax exemption is specific 
under section 771(5A)(D)(iv) of the Act. Therefore, we determine that 
the expansion real estate tax exemption received by Albufin is 
countervailable within the meaning of section 771(5) of the Act.
    Albufin received tax savings under this program during the POI. In 
calculating the benefit, we treated the tax savings as a recurring 
benefit and divided it by ALZ's total sales during the POI. On this 
basis, we determine the countervailable subsidy to be 0.09 percent ad 
valorem.

B. 1985 ALZ Share Subscriptions and Subsequent Transactions (identified 
in the initiation notice as 1985 Debt to Equity Conversion and Purchase 
of ALZ Shares)

    In 1985, the GOB made three share subscriptions in ALZ pursuant to 
the Royal Decree No. 245 of December 31, 1983. This Royal Decree 
allowed the GOB to make preference share subscriptions in the steel 
industry as long as the subscriptions did not exceed one-half of the 
social capital of the company. The Nationale Maatschappig voor de 
Herstructurering van de Nationale Sectoren (``NMNS''), the government 
agency purchasing the shares, acquired common shares and preference 
shares through this plan.
    In analyzing whether these share purchases conferred a benefit on 
ALZ, we must determine whether the GOB investment was inconsistent with 
the usual investment practice of private investors in Belgium. Neither 
ALZ's common nor preference shares were publicly traded. Therefore, we 
have analyzed the circumstances of the transaction.

[[Page 15570]]

    According to ALZ, the price at which the GOB purchased shares in 
ALZ was determined by two separate studies as discussed in ALZ's 
shareholders' meeting of September 26, 1985. These studies were 
performed by an independent accounting firm and a group of experts 
selected by ALZ. In addition, we have performed our own analysis of 
ALZ's financial health at the time of the stock purchase. This analysis 
indicates that the company was equityworthy.
    Pursuant to the Department's equity methodology, a finding of 
equityworthiness means that the Department need not inquire further 
regarding the commercial soundness of a government's purchase of common 
shares. Hence, we determine that the GOB's 1985 purchase of common 
shares was consistent with the usual investment practice of private 
investors in Belgium.
    With respect to ALZ's preference shares, we have applied the 
standard established in Aimcor v. the United States, 871 F. Supp. 447, 
454 (CIT 1994) and Geneva Steel et al. v. United States, 914 F. Supp. 
563, 582 (CIT 1996) (``Geneva Steel'') and analyzed the characteristics 
and the subscription price of the preference stock purchased by the 
GOB. Although the record evidence is mixed, on balance, we have 
determined that the terms at which the GOB ultimately purchased the 
preference shares was consistent with the usual investment practice of 
private investors in Belgium (see memorandum from Team to Richard 
Moreland, ``ALZ Preference Shares,'' public version, dated March 19, 
1999).
    In 1987, the GOB sold ALZ's common shares purchased under the Royal 
Decree No. 245 to Kempense Investeringsvennootschap (``KIV''), a 
company controlled by Sidmar. Based on the relevant record evidence 
concerning this transaction, we have concluded that the GOB did not 
behave as a private investor when selling its shares because it 
accepted a lower price than it otherwise could have obtained for the 
shares. Specifically, the GOB agreed to sell its shares of ALZ common 
stock at the value assigned by a statutory auditor. However, the 
valuation methodology used by the auditor failed to reflect the market 
value of the stock. This is evident because in a relatively 
contemporaneous transaction a private seller of ALZ's shares obtained a 
much higher value. Also, circumstances surrounding the GOB's sale of 
shares to KIV indicate that the GOB may have been willing to accept 
less than the fair value of its shares in order to ensure that the 
shares were purchased by a Belgian company.
    We have determined that the GOB's sale of ALZ's common shares to 
Sidmar constitutes a countervailable subsidy within the meaning of 
section 771(5) of the Act. This program provides a financial 
contribution, as described in section 771(5)(D)(i) of the Act. As 
discussed above, benefits under Royal Decree No. 245 are available only 
to the steel sector. On this basis, we determine that the program is 
specific under section 771(5A)(D) of the Act.
    To calculate the benefits, we took the difference between market 
value for ALZ's common stock and the price paid by Sidmar for the 
stock. We then applied the Department's standard grant methodology and 
divided the benefit attributable to the POI by Sidmar's total 
consolidated sales during the POI. On this basis, we determine the 
countervailable subsidy to be 0.09 percent ad valorem.
    In addition, we determined in our Preliminary Determination that 
Sidmar received a countervailable benefit via the creation of a joint 
venture between Sidmar and the GOB. In this transaction, the GOB 
contributed its ALZ preference shares in exchange for shares in the 
joint venture. However, the Department verified that this transaction 
was structured in such a way that the government maintained ownership 
of ALZ's preference shares. Moreover, it was established at 
verification that Sidmar does not control the company. Thus, Sidmar 
neither controls the ALZ preference shares contributed to this company 
nor can profit from the shares. Accordingly, contrary to our 
Preliminary Determination, we determine that Sidmar did not ``acquire'' 
the preference shares originally purchased by the GOB. Therefore, no 
countervailable benefit was conferred upon Sidmar through the creation 
of the joint venture by Sidmar and the GOB.

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

    SNCI was a public credit institution, which, through medium- and 
long-term financing, encouraged the development and growth of 
industrial and commercial enterprises in Belgium. SNCI was organized as 
a limited liability company and, until 1997, was 50-percent owned by 
the Belgian government. ALZ received investment loans from SNCI which 
were outstanding during the POI. All SNCI loans received by ALZ and 
outstanding during the POI were approved and disbursed after 1986.
    In Certain Steel, we examined whether investment loans from SNCI 
were specific by analyzing whether the steel industry received a 
disproportionate share of loans outstanding (58 FR 37273, 37280-37281). 
We compared the steel industry's share of outstanding loans to the 
share of outstanding loans provided to all other users of the program. 
Although SNCI made loans to many sectors of the Belgian economy, we 
determined that the steel industry had received a disproportionately 
large share of investment loans outstanding in years prior to 1987. 
However, we did not find disproportionality in 1987 and 1988 as the 
steel industry's share of benefits dropped significantly.
    In the Preliminary Determination, we followed the same analysis 
employed in Certain Steel and examined data on outstanding SNCI 
investment loans in 1989 and 1990, and preliminarily determined that 
the steel industry did not receive a disproportionate share of benefits 
in those years. Therefore, for loans approved between 1987 and 1990, we 
preliminarily determined that SNCI investment loans were non-specific 
and, therefore, not countervailable.
    In a change from the analysis used in Certain Steel and the 
Preliminary Determination, we have focused our analysis on the steel 
industry's share of loans approved in a given year rather than that 
industry's share of loans outstanding in a given year. We believe the 
former provides a better indication of whether loans are limited to 
specific industries. Loans outstanding can be affected by other factors 
besides the approval process which are not relevant to a specificity 
determination, such as the terms of loans. Therefore, for the final 
determination, we are modifying our analysis to examine the percentage 
of loans approved for the basic metals industry in each year. On this 
basis, we determine that the steel industry did not receive a 
disproportionate share of SNCI loans for the years 1987 through 1990. 
See Memorandum to Richard Moreland, ``Specificity of SNCI Loans,'' 
dated March 19, 1999 (``SNCI Memorandum'').
    Since the Preliminary Determination, the petitioners provided 
information indicating that the steel industry's share of SNCI loans 
was not completely captured in the data used by the Department because 
it did not include loans provided to the steel industry through 
``coordination centers.'' SNCI classifies loans to coordination centers 
as loans to the ``banking and finance, insurance, business services, 
and renting'' sector. Therefore, the petitioners argue that the data 
should be

[[Page 15571]]

adjusted to account for all loans provided to the steel industry.
    The data we are using for our final determination (loans approved) 
also do not include loans provided to the metals industry through 
coordination centers. However, we observed that in the one instance 
where loans through coordination centers are accounted for in the 
statistics reflecting loans outstanding, the increase in the metals 
industry's share was not significant. See Comment 12 in the Interested 
Party Comments section. Therefore, although we do not have information 
on loans approved through coordination centers, based upon the 
information on the record, we determine that their effect would not 
alter our specificity determination for the years 1987 through 1990. 
See SNCI Memorandum.
    For the period 1991-1995, the GOB did not provide any industry 
usage information for SNCI loans. We requested this information from 
the GOB in both the original and supplemental questionnaires as well as 
in the verification outline. The GOB did provide information for 1996 
and 1997, however, these figures could not be verified. Because the GOB 
failed to provide verifiable information with respect to the loans 
provided since 1991, the Department must use facts available in 
determining whether these loans are specific. See section 776(a) of the 
Act. Moreover, the GOB did not provide an adequate explanation as to 
why it was unable to supply the requested information. GOB officials 
simply stated that they did not have access to the necessary 
information. Therefore, we determine that the GOB did not act to the 
best of its ability and, pursuant to section 776(b) of the Act, are 
applying adverse inferences to determine that SNCI loans provided after 
1991 are specific under section 771(5A)(D)(iii) of the Act. For further 
discussion, see Comment 12 in the Interested Party Comments section.
    To calculate the subsidy conferred by these loans, we used our 
long-term fixed-rate loan methodology. Because the interest rates on 
ALZ's loans were periodically revised, we examined the fixed segment 
which included the POI. We measured the cost savings to ALZ in each 
year of this segment. We then took the present value of each of these 
amounts as of the time the interest rate was revised. Finally, using 
the benchmark as a discount rate, we allocated the subsidy over the 
period of the segment. We then divided the benefit attributable to the 
POI by ALZ's total 1997 sales. On this basis, we determine the 
countervailable subsidy to be 0.04 percent ad valorem.

D. Belgian Industrial Finance Company (``Belfin'') Loans

    Belfin was established by Royal Decree on June 29, 1981, as a mixed 
corporation with 50 percent GOB participation and 50 percent private 
industry participation. In Certain Steel, we determined that Belfin's 
objective is to finance investments needed for the restructuring and 
development of various sectors of industry, commerce, and state 
services. Belfin borrows money in Belgium and on international markets, 
with the benefit of government guarantees, in order to obtain the funds 
needed to make loans to Belgian companies. The government's guarantee 
makes it possible for Belfin to borrow at favorable interest rates and 
to pass the savings along when it lends the funds to Belgian companies. 
Belfin loans to Belgian companies are not guaranteed by the GOB. 
Moreover, these loans carry a one percent commission which is used to 
maintain a guarantee fund to support the GOB's guarantee of Belfin's 
borrowing. ALZ received Belfin loans which were outstanding during the 
POI.
    We determine that this program constitutes a countervailable 
subsidy within the meaning of section 771(5) of the Act. These loans 
provide a financial contribution, as described in section 771(5)(D)(i) 
of the Act, with the benefit equal to the difference between the 
benchmark rate and the rate ALZ pays on these loans. Although the 
objective of Belfin loans is to assist the restructuring and 
development of various sectors, steel companies are the predominant 
recipients of Belfin loans. Therefore, we determine that the Belfin 
loans to the steel industry are specific under section 771(5A) of the 
Act.
    To measure the benefit on these loans, we used our long-term fixed-
rate loan methodology. We divided the subsidy allocated to the POI by 
ALZ's total 1997 sales. On this basis, we determine the countervailable 
subsidy to be 0.00 percent ad valorem.

E. Industrial Reconversion Zones

Alfin
    Alfin was established as a ``proper'' reconversion company in 1985 
under the reconversion program ``Herstelwet 1984.'' It was financed by 
a government agency, Nationale Investeringsmaatschappij (``NIM'') and 
ALZ. In exchange for its investment, NIM received preferred non-voting 
shares and a two percent annual return on its investment. ALZ is 
obligated to repurchase all of the shares purchased by NIM at the 
issued price over a ten-year period.
    We have used the hierarchical criteria discussed in the 
``Classification of Hybrid Financial Instruments Issue'' section of the 
GIA to examine these shares and find that they constitute debt 
instruments because they have a fixed repayment period.
    We determine that this program constitutes a countervailable 
subsidy within the meaning of section 771(5) of the Act. This program 
provides a financial contribution, as described in section 771(5)(D)(i) 
of the Act. Moreover, because benefits under the ``Herstelwet 1984'' 
law are limited to firms in certain regions of the country, we 
determine that this program is specific under section 771(5A)(D)(iv) of 
the Act.
    To measure the benefit of this loan, we used our long-term fixed-
rate loan methodology. We divided the subsidy allocated to the POI by 
ALZ's total 1997 sales. On this basis, we determine the countervailable 
subsidy to be 0.00 percent ad valorem.
Albufin
    Albufin was established as an ``improper'' reconversion company in 
1989, also under the reconversion program ``Herstelwet 1984.'' It 
received its initial capital from the government (NIM), the Sidmar 
Group (FININDUS), a private company (Klockner Stahl) and ALZ. Because 
Klockner Stahl was a private company at the time of Albufin's 
establishment, and it invested on the same terms as the government, we 
determine that there is no countervailable benefit resulting from the 
establishment of the company. However, as an ``improper'' reconversion 
company, Albufin benefits from a tax exemption on dividend payments and 
is exempt from the capital registration tax. We determine that these 
tax benefits received by Albufin are countervailable subsidies within 
the meaning of section 771(5) of the Act. The tax benefits are a 
financial contribution as described in section 771(5)(D)(ii) of the Act 
which provide a benefit to the recipient in the amount of the tax 
savings. Because benefits under the ``Herstelwet 1984'' law are limited 
to firms in certain regions of the country, we determine that this 
program is specific under section 771(5A)(D)(iv) of the Act.
    During the POI, Albufin did not receive tax savings under the 
capital registration tax but did benefit from the exemption on dividend 
payments. To measure the benefit from this tax exemption, we treated 
the tax savings as a recurring benefit and divided them by ALZ's total 
sales during the POI. On this

[[Page 15572]]

basis, we determine the countervailable subsidy to be 0.05 percent ad 
valorem.

F. Subsidies Provided to Sidmar that are Attributable to ALZ

    As discussed in the ``Responding Producers'' section above, Sidmar 
owns either directly or indirectly 100 percent of ALZ's voting shares 
and is the overall majority shareholder of ALZ. In Certain Steel and in 
the Department's redetermination on remand of Certain Steel, we found 
that Sidmar received several countervailable benefits that were 
attributable to the entire Sidmar group. Because ALZ is a fully 
consolidated subsidiary of Sidmar, any untied subsidies provided to 
Sidmar are attributable to ALZ (see Certain Hot-Rolled Lead and Bismuth 
Carbon Steel Products From the United Kingdom; Final Results of 
Countervailing Duty Administrative Review, 63 FR 18367 (April 15, 1998) 
(``UK Lead and Bismuth'')). Thus, we determine that the following two 
programs provide countervailable benefits to ALZ via its parent 
company, Sidmar.
1. Assumption of Sidmar's Debt
    Between 1979 and 1983, the GOB assumed the interest costs 
associated with medium- and long-term loans for certain steel 
producers, including Sidmar. In exchange for the GOB's assumption of 
financing costs, Sidmar agreed to the conditional issuance of 
convertible profit sharing bonds (``OCPCs'') to the GOB. In 1985, 
Sidmar and the GOB agreed to substitute parts beneficiaires (``PBs'') 
for the OCPCs.
    Consistent with Certain Steel and the attendant litigation, we 
determine that the GOB's initial assumption of interest costs was 
specific under section 771(5A) of the Act. Furthermore, we determine 
that the OCPCs are properly classifiable as debt and that the 
conversion of OCPCs to PBS constituted a debt to equity conversion. 
Comparing the price paid for the PBs to an adjusted market value of 
Sidmar's common stock, we determine that the debt to equity conversion 
provided a benefit to Sidmar as the share transactions were on terms 
inconsistent with the usual practice of a private investor. See Amended 
Final Affirmative Countervailing Duty Determinations; Certain Carbon 
Steel Products From Belgium, 62 FR 37880 (July 15, 1997).
    We determine that this program constitutes a countervailable 
subsidy within the meaning of section 771(5) of the Act. This program 
provides a financial contribution, as described in section 771(5)(D)(i) 
of the Act. As discussed above, benefits under this program were 
available only to certain steel producers. On this basis, we determine 
that the program is specific under section 771(5A)(D)(i) of the Act.
    To measure the benefit from the debt to equity conversion, we 
calculated the premium paid by the government as the difference between 
the price paid by the government for the PBs and the adjusted market 
price of the common shares. We then applied the Department's standard 
grant methodology and divided the benefit attributable to the POI by 
Sidmar's total consolidated sales during the POI. On this basis, we 
determine the countervailable subsidy to be 0.56 percent ad valorem.
2. SidInvest
    The right to establish ``Invests'' was limited to the five national 
industries, including the steel industry. SIDINVEST N.V. 
(``SidInvest'') was incorporated on August 31, 1982, as a holding 
company jointly owned by Sidmar and the Societe Nationale 
d'Investissement, S.A. (``SNI'') (a government financing agency). 
SidInvest was given drawing rights on SNI to finance specific projects. 
The drawing rights took the form of conditional refundable advances 
(``CRAs''), which were interest-free, but repayable to SNI based on a 
company's profitability.
    SidInvest made periodic repayments of the CRAs it had drawn from 
SNI. However, in 1987, the GOB moved to accelerate the repayment of the 
CRAs. The government agency NMNS and SidInvest discussed two options 
including (i) paying back the CRAs at a rate of three percent per year 
and (ii) repaying immediately the discounted value calculated as if the 
full amount were due 32 years later. In early 1988, under the first 
option, SidInvest agreed to pay back the outstanding balance on the 
CRAs at a rate of 3 percent per year.
    Later, in July 1988, an agreement was reached for NMNS to become a 
shareholder in SidInvest by contributing the CRAs owed to the 
government by SidInvest in exchange for SidInvest stock. In a second 
agreement, through a series of transactions the Sidmar group then 
repurchased the SidInvest shares obtained by NMNS.
    Consistent with Certain Steel, we determine that the CRAs were 
interest-free loans with no fixed repayment. However, the various 
agreements that took place on July 29, 1988, changed the CRAs. First, 
it was agreed that repayment would be achieved over 32 years. Second, 
the GOB swapped that repayment obligation for shares in SidInvest and 
sold those shares back to various members of the Sidmar group. The 
benefit to Sidmar in these transactions was that it was able to 
purchase the GOB's shares at too low a price. This occurred because: 
(i) The GOB agreed to accept in payment the net present value of the 
amount due in 32 years and (ii) it calculated the net present value 
using a non-commercial interest rate. The combination of these two 
elements of the July 29, 1988, agreements meant that the GOB forgave a 
considerable portion of the amount it had loaned thru the CRAs.
    We determine that this debt cancellation provides a countervailable 
subsidy within the meaning of section 771(5) of the Act. It is a 
financial contribution within the meaning of section 771(5)(D)(i) of 
the Act. Moreover, because the right to establish ``Invests'' (and, 
consequently, any forgiveness of loans given to the Invests) was 
limited to the five national sectors, we view this debt cancellation as 
being limited to a specific group of industries. On this basis, we 
determine that the benefit is specific under section 771(5A)(D) of the 
Act.
    To measure the benefit arising from the events of July 29, 1988, we 
have deducted from SidInvest's outstanding indebtedness the cash 
received by the GOB. We have treated the remainder as a grant and 
allocated the benefit over Sidmar's AUL. We divided the total benefit 
attributable to the POI by Sidmar's consolidated total sales during the 
POI. On this basis, we determine the countervailable subsidy to be 0.47 
percent ad valorem.
    The analysis here differs from that followed in Certain Steel. In 
Certain Steel, we considered the events of July 29, 1988, to constitute 
two separate events, the creation of a zero-interest, 32-year loan and 
the use of a non-commercial interest rate to calculate the benefit. 
Although useful as an analytical tool, the approach in Certain Steel 
was flawed because it created a loan that was basically repaid the same 
day. Under our standard loan methodology this countervailable loan 
would cease to be countervailable the same day it was forgiven. To 
avoid such an anomaly, we have revised our analytical approach, as 
described above, to capture the full benefit to Sidmar of this 
transaction.

II. Programs Determined To Be Not Countervailable

A. 1994 Environmental Grants

    Pursuant to the 1970 Law, ALZ received several grants for 
environmental investments undertaken to conform its operations with 
VLAREM. As noted above, we determine that environmental grants 
available under the 1970 Law are integrally linked with those available

[[Page 15573]]

under the 1993 Decree and the 1978 Act. Because the combination of 
these laws makes this assistance available to everyone in Flanders, we 
determine that these grants are not de jure specific. See, also, 
Comment 17 in the Interest Party Comments section.
    We also examined usage data provided by the GOF for the years 1995-
1997 and further determine that these grants are not de facto specific. 
Therefore, the 1994 environmental grants are not countervailable. See 
also Economic Expansion Memorandum.
    The GOF requested green light treatment for environmental grants. 
Because these grants are not specific, the green light issue is moot.

B. Environmental Real Estate Tax Exemption

    We preliminarily determined that ALZ did not benefit from this 
program. However, at verification we learned that real estate taxes are 
paid separately from taxes on revenue and that ALZ did benefit from 
these environmental tax exemptions. Accordingly, for purposes of our 
final determination, we have analyzed the countervailability of the 
environmental real estate tax exemptions received by ALZ.
    As noted above, we determine that environmental real estate tax 
exemptions available under the 1970 Law are integrally linked with 
those available under the 1993 Decree and the 1978 Act. Because the 
environmental tax exemptions under the 1970 Law, the 1978 Act, and the 
1993 Decree are generally available, these environmental tax exemptions 
are not de jure specific. Moreover, following the same analysis 
employed for the 1994 Environmental Grants, we determine that these 
environmental tax exemptions are also not de facto specific under 
section 771(5A)(D)(iii) of the Act. Therefore, the environmental real 
estate tax exemptions received by ALZ are not countervailable. See 
Comments 17 and 20 in the Interested Party Comments section and 
Economic Expansion Memorandum.

III. Programs Determined To Be Not Used

    Based upon the information provided in the responses, we determine 
that neither Sidmar nor ALZ applied for or received attributable 
benefits under the following programs during the POI.

A. Government of Belgium Programs

1. Subsidies Provided to Sidmar that are Potentially Attributable to 
ALZ
    a. Water Purification Grants
2. Societe Nationale pour la Reconstruction des Secteurs Nationaux 
(``SNSN'')

B. Government of Flanders Programs

1. Regional subsidies under the 1970 Law
    a. Corporate Income Tax Exemption
    b. Capital Registration Tax Exemption
    c. Government Loan Guarantees
2. Special Depreciation Allowance
3. Preferential Short-Term Export Credit
4. Interest Rate Rebates

C. Programs of the European Commission

1. ECSC Article 54 Loans and Interest Rebates
2. ECSC Article 56 Conversion Loans, Interest Rebates and Redeployment 
Aid
3. European Social Fund Grants
4. European Regional Development Fund Grants
5. Resider II Program
Interested Party Comments
    Comment 1: Sidmar's Sales Denominator. The petitioners argue that 
Sidmar's sales denominator should be adjusted to exclude production 
that occurred outside of Belgium because the subsidies provided to 
Sidmar were not intended to benefit non-Belgian production. In support 
of their argument, the petitioners cite 19 CFR 351.525(7) of the 
Department's new regulations, which states that if a firm has 
production facilities in two or more countries, the Department will 
attribute these subsidies to products produced by the firm within the 
country of the government that granted the subsidy. (See Countervailing 
Duties; Final Rule, 63 FR 65348, 65417 (November 25, 1998) (``Final CVD 
Regulations'')).
    Department Position: We have used Sidmar's sales denominator 
exclusive of all non-Belgian production for purposes of attributing the 
subsidies provided to Sidmar. We believe that it is reasonable to 
presume that the government of a country normally provides subsidies 
for the general purpose of promoting the economic health of that 
country. See GIA at 37231. Sidmar has not offered any information 
rebutting this presumption.
    Comment 2: Sidmar Sales Denominator--Transportation Expenses. The 
petitioners argue that the Department should calculate subsidy benefits 
to ALZ and Sidmar on an f.o.b. basis rather than on the basis of the 
companies' accounting and financial statements. The petitioners note 
that the Final CVD Regulations are clear that sales values should be 
determined on an f.o.b. basis. While ALZ appears to have provided an 
f.o.b. based sales figure at verification, the petitioners contend that 
Sidmar calculated its sales figure on a c.i.f. basis. According to the 
petitioners, Sidmar's calculation of the total sales figure for the 
Sidmar Group's Belgian-located companies is based on the companies' 
revenues, which are reported on a c.i.f. basis. Accordingly, the 
petitioners argue that transportation costs should be subtracted from 
this calculation in order to derive the appropriate f.o.b. sales value.
    ALZ argues that the Department verified that there is no method for 
calculating a consolidated f.o.b. figure for the Sidmar Group, a 
holding company consisting of Sidmar NV and other steel related 
companies. ALZ notes that Sidmar rarely sells on an f.o.b. basis 
because its main markets are in Europe, with the result that its 
products do not go through a port. Furthermore, the Department verified 
that the type of information Sidmar receives in order to calculate the 
consolidated financial statements does not provide any figures on 
transportation costs.
    The respondent further argues that using Sidmar NV's cost 
information to adjust the Sidmar Group's consolidated figures, as 
recommended by petitioners, serves to overestimate the transportation 
costs contained in the consolidated revenue figure. ALZ notes that the 
companies included in the consolidated group are involved in a wide 
variety of activities, some of which do not incur any transportation 
expenses. Accordingly, it is not reasonable to assume that all of these 
companies would incur transportation costs at the same level as Sidmar 
NV. Consequently, according to ALZ, the petitioners' calculation 
derives an ex-factory amount as opposed to an f.o.b. amount. Moreover, 
the petitioners' calculation understates even the ex-factory amount by 
deducting transportation expenses from companies that incur none.
    Department Position: In cases where the company's sales are not 
recorded on an f.o.b. basis, the Department adjusts the sales value to 
conform with the Department's longstanding practice of calculating an 
f.o.b.-based ad valorem subsidy rate, which is consistent with the 
assessment of the countervailing duties. Accordingly, we have adjusted 
certain sales figures of Sidmar's Belgian-located companies by the 
ratio of Sidmar NV's transportation expenses to its total sales. 
However, we have not adjusted the sales figures of companies that are 
not involved in production or manufacturing because these companies 
incur little to no transportation expenses. We believe this to be the 
most

[[Page 15574]]

accurate estimate of the f.o.b. value of Sidmar's sales.
    Comment 3: Sidmar Sales Denominator--Other Income. The petitioners 
argue that the Sidmar Group sales figure includes additional income 
that is inappropriately reported. The petitioners note that Sidmar 
officials calculated the total sales figure for the Group's Belgian-
located companies by adding accounts 70 (``Turnover'') and 74 (``Other 
Operating Income: Miscellaneous'') for each company. The petitioners 
argue that account 74 includes various forms of revenue that were 
derived from sources that bear no relation to Sidmar's operations. 
Accordingly, these sources of revenue could not have benefitted from 
the subsidies under investigation. Therefore, account 74 should be 
removed from Sidmar's sales figure.
    ALZ counters that it is necessary to include ``Other Operating 
Income'' in order to consolidate the revenues of the Sidmar Group's 
Belgian companies. The respondent explains that it totaled the revenues 
of the Sidmar Group companies located in Belgium and reduced this 
amount by each company's intra-group acquisitions. However, the cost 
accounts used to calculate intra-group transactions do not correspond 
exactly to accounts 70 and 74. The respondent notes that while cost 
accounts beginning with the number 60, in which Sidmar subsidiaries 
record purchases, correspond mostly to 70 accounts, some of the items 
included therein correspond to items recorded in the 74 account. Cost 
accounts beginning with the number 61 reflect other costs corresponding 
to account 74. Consequently, reducing the 70 revenue account by the 60 
account serves to understate revenue because some of the items recorded 
in the 60 accounts correspond to revenues recorded in the 74 accounts. 
Therefore, in order to achieve complete correspondence between revenues 
and expenditures, the respondent totaled accounts 70 and 74 and 
deducted from that combined total the intra-group acquisitions 
reflected in accounts 60 and 61. ALZ notes that this was the most 
accurate calculation of the Sidmar Group's Belgian sales given the 
accounting records of each company.
    Department's Position: We verified that the entries recorded in 
Sidmar's account 74 include non-operational income. We did not request 
nor collect additional information as to revenue recorded in account 74 
by the Sidmar Group's Belgian subsidiaries and there is no indication 
that all of the Sidmar Group companies record their revenue using the 
same accounting standard. As noted by respondents, simply deducting the 
60 account from the 70 account results in an understatement of Sidmar's 
operating income. Thus, for purposes of our final determination, we 
have retained in Sidmar's sales denominator the revenue from account 74 
because this is the most accurate information on the record.
    Comment 4: Loan Benchmarks and Discount Rates. Both the petitioners 
and ALZ argue that the national average, long-term benchmark interest 
rates used in the Preliminary Determination are inappropriate because 
they are rates for all outstanding government loans, not commercial 
loans extended in a particular year. The petitioners suggest that the 
Department should use the SNCI rates collected at verification plus a 
15 point spread for the years 1982 to 1997.
    ALZ states that because prime rates are set each day, the 
Department should use the prime rate provided by Kredietbank and 
Generale Bank for the specific day that a loan was approved or an 
interest rate was revised. Because these rates are provided for the 
specific day and length of the loan, they are the best approximations 
of a commercially available interest rate. Short of using these rates, 
ALZ argues that the Department should calculate an annual average 
interest rate from the prime rates collected at verification. Prior to 
1991, when prime rates are not available, ALZ argues that the 
Department should approximate a prime rate from the SNCI rate as was 
done in Certain Steel.
    Department's Position: We agree that the rates used in the 
Preliminary Determination are inappropriate benchmarks because they 
represent rates for total government debt outstanding. Therefore, we 
are changing our benchmark rates for the final determination to reflect 
long-term national averages for commercial debt taken out in each year. 
For years in which there was no company-specific benchmark and in which 
a prime rate is available (i.e., 1991-1993 and 1995-1997), we have used 
the prime rate plus a 15 point spread as our benchmark. This 
methodology comports with information collected at verification (see 
Appendix I of the Memorandum to Susan Kuhbach, ``Verification Report 
for a Private Commercial Bank,'' dated January 25, 1999). However, we 
are not using the prime rate for the specific day that the interest 
rate on the subsidized loan was revised because 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) (``Wire Rod from Italy'').
    For the period prior to 1991, when Belgium did not publish a prime 
rate, we are using the national average interest rate calculated in the 
Certain Steel investigation and used in the recently published 
administrative review of that case. Consistent with both of those 
proceedings, we are using Kredietbank rates for the years 1982 to 1990, 
which were supplied in the Certain Steel investigation, and adding a 
margin of 15 points to these rates. See Certain Steel, 37288-37289 and 
Cut-to-Length Carbon Steel Plate From Belgium; Final Results of 
Countervailing Duty Administrative Review, 64 FR 12982, 12987 (March 
16, 1999).
    We did not approximate a prime rate for the years prior to 1991 as 
ALZ suggested. Although we did construct a prime rate in Certain Steel, 
we only did so to calculate a margin for uncreditworthiness, not to 
calculate the benchmark rate. As stated above, for benchmark rates 
prior to 1991, we used the Kredietbank rates from Certain Steel plus a 
spread.
    Comment 5: ALZ Company-Specific Benchmarks. The petitioners argue 
that company-specific benchmark rates used by the Department in the 
Preliminary Determination for ALZ in 1989 and 1993 are not appropriate 
benchmarks because they are based on a loan which is not a true 
commercial loan. The petitioners maintain that the loan originally 
taken out in 1989 by ALZ, and revised in 1993, should not be used 
because it was linked to a project which also received SNCI financing 
two years earlier. According to the petitioners, because both the 
private bank loan and the SNCI loan were taken out to finance the same 
project, they are part of a consortium loan and the participation of 
SNCI may have affected the terms of the private bank loan. Moreover, 
the petitioners argue that the interest rate revision on this loan used 
to determine the 1993 benchmark rate for ALZ was not applicable until 
1994 and, therefore, should not be used as a benchmark for 1993. 
Instead of using these aforementioned company-specific rates, the 
Department should use the SNCI rates collected from Kredietbank for the 
years 1982 to 1997.
    It is ALZ's position that its 1989 loan is a commercial loan and 
the fact that an SNCI loan was taken out two years earlier to finance 
the same project should have no bearing. In addition, the relevant date 
in determining benchmarks is the date on which the rate is established. 
Therefore, the interest rate revision in 1993 is applicable to 1993.

[[Page 15575]]

    Department's Position: It is the Department's policy to use a 
company-specific benchmark rate to determine the benefit conferred by a 
government loan program. See, e.g., Certain Iron-Metal Castings from 
India; Final Results and Partial Rescission of Countervailing Duty 
Administrative Review, 63 FR 64050, 64057 (November 18, 1998). 
Therefore, where available, we have used ALZ's loans as benchmarks. We 
disagree with the petitioners that ALZ's 1989 loan was not a commercial 
loan merely because the loan was used to finance a project which 
received SNCI financing years earlier. When the loan contract was 
reviewed at verification, there was nothing in the document to indicate 
that the loan was not a commercial loan or was in any way connected 
with the SNCI loan. Therefore, consistent with the Department's 
practice, we are using ALZ's 1989 loan as a company-specific benchmark.
    With regard to the 1993 interest rate revision, we agree with the 
petitioners that while the interest rate revision occurred in 1993 it 
did not go into effect until 1994. Given that this was an interest rate 
revision to an ongoing loan, and the revision would not apply until the 
next year, we are treating this revised rate as a 1994 benchmark. 
Therefore, we are including this interest rate in our calculation of 
the company-specific benchmark for 1994.
    Comment 6: Sidmar Company-Specific Benchmarks. The petitioners 
argue that the company-specific benchmark rate used by the Department 
in the Preliminary Determination for Sidmar in 1988 is not an 
appropriate benchmark because Sidmar's loan does not represent 
comparable commercial financing in terms of structure and maturity. 
Specifically, the petitioners maintain that one of Sidmar's loans was 
not a fixed-rate loan. The petitioners also state that the maturities 
of two of Sidmar's loans used as benchmarks are not comparable to the 
maturity of the subsidized loan. Therefore, the petitioners state that 
the Department should reject Sidmar's 1988 company-specific rate.
    With respect to Sidmar's 1988 loans, ALZ contends that the national 
average interest rate for five-year loans is not more comparable to the 
subsidized loan than Sidmar's company-specific rate. Therefore, the 
Department should continue to use Sidmar's loans for 1988.
    Department's Position: As noted in the comment above, it is the 
Department's policy to use a company-specific benchmark rate in 
determining the benefit conferred by a government loan program. 
Therefore, where available, we used Sidmar loans as benchmarks. 
However, we agree with the petitioners that one of Sidmar's loans taken 
out in 1988 is not a long-term, fixed-rate loan. Therefore, it does not 
provide an appropriate benchmark for our purposes and we are excluding 
that loan from our benchmark calculation. Consequently, we are using a 
recalculated company-specific benchmark rate for Sidmar in 1988. We 
agree with the respondents that Sidmar's company-specific rate 
calculated from its other 1988 loans is a more appropriate benchmark 
than a national average benchmark. The maturity of Sidmar's loans and 
the maturity of the national average interest rate (five-years) do not 
differ enough to warrant deviating from the Department's preference for 
using company-specific benchmarks when available.
    Comment 7: Government Equity Infusions In Sidmar. The petitioners 
allege that the GOB equity infusion into Sidmar in 1984 was made on 
terms inconsistent with the usual investment practice of private 
investors and, therefore, constitute countervailable studies. The 
petitioners base their argument on the GOB's decision to invest in 
these companies without evaluating information typically examined by 
private investors. In support of their position, the petitioners refer 
to Sec. 351.507(a)(4)(ii) of the Final CVD Regulations, which state 
that the government investor must provide ``the information and 
analysis completed prior to the infusion and * * * absent the existence 
or provision of an objective analysis, containing information examined 
by potential private investors considering an equity investment, the 
Secretary will normally consider that the equity infusion provides a 
countervailable benefit.'' The petitioners argue that the information 
on the record demonstrates that the GOB failed to meet this standard 
when it invested in Sidmar.
    Specifically, the petitioners note that the GOB made substantial 
equity investments in Sidmar pursuant to the Claes and Gandois plans. 
The petitioners assert that information on the record establishes that 
the objective of these programs was to restructure and revitalize the 
Belgian steel industry. Thus, the objective and circumstances 
surrounding the investments render it contrary to the behavior of a 
normal private investor. Moreover, the Department previously found the 
Gandois Plan to provide countervailable benefits to steel companies 
because it was ``commissioned and adopted by the GOB * * * specifically 
to assist the Belgian Steel industry.'' See Certain Steel at 37277. The 
petitioners argue that consistent with the GOB's primary objective of 
restructuring the Belgian steel industry regardless of the commercial 
soundness of its investments, the GOB failed to conduct objective 
analyses containing information typically examined by private 
investors.
    ALZ counters that the petitioners' attempt to include a new 
allegation regarding the GOB's purchase of Sidmar's common and 
preference shares in 1984 should be rejected. Pursuant to 
Sec. 351.301(d)(4)(i)(A) of the Department's regulations, the time 
limit for making new allegations is 40 days before the scheduled date 
of the preliminary determination. Moreover, ALZ notes that in Certain 
Steel, the Department refused to examine the common share transaction 
and determined that no countervailable subsidy arose from the preferred 
share transactions.
    Department Position: With respect to the Sidmar share transactions, 
our regulations (at Sec. 351.301(d)(4)(i)(A)) are clear regarding the 
time limit for making new allegations. The petitioners first made this 
allegation in their case brief. Thus, for purposes of our final 
determination, we have not conducted an investigation of the Sidmar 
share transactions because the petitioners did not meet this regulatory 
deadline.
    Comment 8: GOB Decision to Invest in ALZ. With respect to the ALZ's 
common and preference shares purchased in 1985, the petitioners contend 
that the GOB's share valuation methodology and objectives were 
inconsistent with the actions of a reasonable private investor. The 
petitioners argue that by valuing ALZ's shares based on the replacement 
value of its assets, the GOB failed to consider factors that would 
provide a commercial rationale for the investment, such as financial 
performance. Furthermore, the petitioners allege that the GOB was not 
commercially motivated when it purchased ALZ's common stock in order to 
obtain a blocking share of the company's equity. The petitioners assert 
that the GOB's objective to block decisions made by ALZ's major 
stockholders is inconsistent with the usual investment practice of 
private investors.
    ALZ argues that the petitioners ignore the evidence on the record 
regarding the valuation studies conducted in preparation for ALZ's 
share subscription. Citing the minutes of ALZ's General Shareholders' 
meeting, at which it was determined to issue the shares and permit the 
GOB to subscribe them, the respondent notes that return on investment 
was considered in

[[Page 15576]]

determining the value of the shares issued, contrary to petitioners' 
contention.
    In addition, ALZ objects to the petitioners' allegation that the 
GOB's purchase of ALZ's common stock in order to gain a blocking share 
of the company's equity is inconsistent with the Department's private 
investor standard. ALZ argues that private investors frequently 
purchase equity in a company specifically in order to obtain a blocking 
share and, thus, gain a measure of control.
    Department Position: The objective of the Department's private 
investor standard is to determine if a particular investment reflects a 
rational assessment of whether a reasonable return on the investment 
would be generated in a reasonable period of time. See GIA 58 FR 37217, 
37249. As noted by respondents, return on investment was analyzed by 
the statutory auditor in determining the value of the preference 
shares. Thus, the GOB's share valuation methodology was consistent with 
our private investor standard.
    Furthermore, the petitioners indicate that methodologies which 
focus on earnings and financial performance are typically used by 
private investors for purposes of valuing private companies. However, 
this represents only one of the valuation approaches available to 
private investors. The replacement value methodology used to estimate 
the value of the preference shares is a common approach for valuing 
privately held companies and, therefore, consistent with the actions of 
a private investor.
    Finally, we agree with the respondent that the GOB's purchase of 
ALZ common shares for purposes of obtaining a blocking share is not 
inconsistent with the actions of a private investor. As verified by the 
Department, the GOB obtained a blocking share in order to protect its 
investment in ALZ. Thus, we determine that the GOB's purchase of ALZ 
common shares was consistent with the usual practice of a private 
investor.
    Comment 9: The Formation of Sidfin International. ALZ argues that 
neither it nor Sidmar received a countervailable benefit through the 
formation of the joint venture, Sidfin International, because Sidmar 
did not acquire ALZ's preference shares. ALZ notes that the Department 
verified that the joint venture was neither controlled by Sidmar nor 
was Sidmar able to benefit from the returns associated with ALZ's 
preferred shares. Thus, regardless of the valuation of the shares 
performed in 1993 at the time of Sidfin creation, Sidmar received no 
benefit from this transaction.
    ALZ further argues that the valuation of ALZ's preference shares in 
this transaction was consistent with a reasonable private investor 
standard. ALZ notes that the parties involved in this transaction, 
including the private company Sidmar, valued their assets according to 
the same standards. The valuation of the assets contributed was also 
reviewed by a statutory auditor. In addition, the respondent contends 
that the Department has previously accepted the use of net present 
value as a reasonable valuation approach for a private investor. See 
Certain Steel, 37278.
    The petitioners argue that Sidmar's audited financial statements 
clearly indicate that Sidfin International is controlled only by 
Sidmar. The admission by Sidmar in a public document provides unbiased 
documentary evidence that, while Sidmar owned only half of Sidfin 
International's shares, it effectively controlled all of the company. 
The petitioners rely on statements made during verification as further 
indication that Sidmar controlled Sidfin.
    Furthermore, the petitioners contend that contrary to respondent's 
claim, private investors do not employ the valuation methodology used 
in this transaction. In support of its argument, ALZ refers to 
Accounting Principles Board Opinion 16 which explains that the NPV is 
used in the context of business combinations to assign a value to debt 
instruments. Conversely, marketable securities such as ALZ's preference 
shares should be valued at the current net realizable value of the 
shares. In the case of ALZ's preference shares, the current net 
realizable value was the market value of the shares at the time of the 
transaction. Thus, for purposes of measuring the benefit conferred by 
the 1993 capitalization of Sidfin International, the petitioners argue 
that the Department should use the market value of ALZ's preference 
shares in 1993 as the benchmark share price rather than the 1985 
subscription price.
    Department's Position: As noted above, we have determined that the 
1993 capitalization of Sidfin International did not involve a sale of 
shares or any other potentially countervailable event. Consequently, 
the valuation methodologies used in this transaction are irrelevant.
    Comment 10: GOB Sale of Common Share--Consistency With Actions of a 
Private Investor. ALZ argues that the GOB's 1987 sale of ALZ's common 
stock to KIV/Sidmar was consistent with the actions of a reasonable 
private investor. ALZ contends that the 1987 transactions reflect pre-
existing contractual relationships among ALZ's shareholders which 
limited the potential buyers of the GOB's shares and, thus, affected 
the GOB's sale of its shares. According to ALZ, these contractual 
relationships created constraints on the GOB's freedom to transfer the 
shares but such constraints were common private investor practices 
among the entities involved in this transaction.
    ALZ explains that, as required by the rights of preemption agreed 
to in 1980 by the GOB, KIV and Klockner Stahl, the GOB was obligated to 
offer its shares of ALZ first to KIV and then to Klockner Stahl before 
it could sell the shares to an outside party. Thus, the GOB structured 
the sale such that it sold the shares to KIV. Subsequently, Sidmar 
gained control of these shares when it acquired KIV. ALZ argues that 
the structure of this transaction enabled the GOB to sell freely 
without violating Klockner Stahl's preemption rights.
    The petitioners counter that the respondent's argument ignores the 
fact that the GOB structured the 1987 transaction to account for 
noncommercial concerns regarding the nationality of potential buyers. 
The petitioners argue that a private investor would not share the GOB's 
concern regarding the nationality of a potential investor. Rather, 
private investors would seek to obtain the highest return for their 
investment. As a result, the GOB neglected a potentially higher 
purchase price offered by Klockner Stahl due to its concern regarding 
the nationality of the investor and, instead, accepted the discounted 
price paid by Sidmar. Thus, the sale of ALZ's common shares by the GOB 
to Sidmar was not consistent with actions of a reasonable private 
investor.
    Department Position: Although the preemption agreements affected 
the transferability of ALZ's shares, the GOB elected not to pursue a 
potentially higher offer by Klockner Stahl and, instead, accepted the 
discounted offer by Sidmar. Moreover, record evidence indicates that 
the GOB and Sidmar structured the 1987 sale of ALZ common shares to 
account for noncommercial concerns regarding the nationality of 
potential buyers. Accordingly, we have determined that the GOB did not 
act as a reasonable private investor.
    Comment 11: GOB Sale of Common Shares. ALZ argues that, consistent 
with the actions of a private investor, the GOB negotiated a purchase 
price for ALZ common shares in ALZ with KIV/Sidmar. After evaluating 
the offer and

[[Page 15577]]

gaining an understanding with Sidmar regarding the protection of the 
GOB's interests in the preferred shares which it retained, the GOB 
determined that the price offered for its shares was reasonable. 
Moreover, a statutory auditor valued the same number of shares held by 
KIV in ALZ at the same price.
    In addition, the respondent maintains that the ALZ stock Sidmar 
purchased later in 1987, which the Department used as a benchmark in 
its preliminary determination, is not comparable. ALZ argues that this 
sale was not constrained by the preemption agreements of 1980. Thus, it 
is logical that a private investor would require a higher price for its 
shares under these circumstances. The respondent also notes that it is 
reasonable to assume that Sidmar was willing to pay a higher price for 
the shares because it was consolidating its holdings in ALZ at the 
time.
    The petitioners assert that the purchase price was significantly 
below the market-determined prices paid at the time of, and prior to, 
the transaction in question. According to the petitioners, the 
arguments offered by the respondent are unsubstantiated and, 
furthermore, conflict with the evidence on the record.
    The petitioners further argue that the share purchase used as the 
benchmark in the Preliminary Determination reflects the market value of 
ALZ stock because it was negotiated between private companies unrelated 
to each other. Given the disparity between the price at which the GOB 
sold the shares to Sidmar, the Department should consider the share 
price received by the GOB to be below the market-determined share 
price.
    Department Position: We agree with the petitioners that, while the 
GOB agreed to sell its shares of ALZ's common stock at the same value 
assigned by a statutory auditor to KIV's shares of ALZ stock, the 
valuation methodology used by the auditor failed to reflect the market 
value of the stock. Pursuant to the Department's equity methodology, we 
have compared the price at which the GOB sold its shares of ALZ common 
stock against a contemporaneous market transaction for purposes of 
measuring the countervailable benefit.
    With respect to the market benchmark used in our Preliminary 
Determination, the relevant record evidence indicates that the 
preemption agreements did affect the transferability of ALZ's shares. 
However, these agreements did not meaningfully restrict the ability of 
the GOB to sell to Klockner Stahl and, thereby, to obtain the market 
price of the shares. Consequently, the market transaction involving 
ALZ's common shares absent these contractual constraints represents a 
comparable benchmark. Thus, we have continued to use this transaction 
as our market benchmark in our final determination.
    Comment 12: SNCI Loans. As noted above in the SNCI Loan section, 
the petitioners argue that the Department erred in its Preliminary 
Determination when it found SNCI loans provided between 1987 and 1990 
to be non-specific, because the usage data did not include all loans 
provided to the steel industry.
    The petitioners further argue that, with respect to SNCI loans 
approved after 1990, the respondents have failed to provide any 
breakdown of benefits by industrial sector between 1991 and 1995, and 
have failed to document how they derived the percentages reported for 
1996 and 1997. Given the respondents' failure to provide the 
information necessary to conduct a specificity analysis, the Department 
should apply adverse facts available and countervail all SNCI loans 
provided to ALZ between 1990 and 1997.
    ALZ argues that in Certain Steel, the Department found that SNCI 
loans not expressly given under a government plan were not specific in 
1987 and 1988, and in its Preliminary Determination, the Department 
extended this finding to include 1989 and 1990. Moreover, ALZ notes 
that an SNCI official explained at verification that SNCI treated 
investment loans to the steel industry in the same manner as loans to 
any other industry and that the steel industry could not have been 
given a disproportionate share of SNCI loans. Therefore, ALZ contends 
that the Department should determine that SNCI loans are not specific 
to the steel industry.
    ALZ further argues that the lack of information on loans through 
coordination centers should not lead to a determination that loans to 
the steel industry are specific because any industry can have a 
coordination center. Therefore, the respondent reasons that if loans to 
the steel industry are underreported because of coordination centers, 
likewise the loans to all industries are also underreported.
    Moreover, ALZ maintains that the use of adverse facts available is 
not appropriate in this case. It argues that U.S. law requires that for 
adverse inferences to be applied in this case, the Department must find 
that a respondent has ``failed to cooperate by not acting to the best 
of its ability to comply with a request for information'' from the 
Department. See section 776(b) of the Act. ALZ states that the GOB 
attempted to accommodate the Department's request for information and 
verification, but the requested information is not available because 
SNCI no longer aggregates the loan usage data in the format requested. 
ALZ argues that the respondents have acted to the best of their 
ability, and the Department should not view any deficiencies in the 
information they have provided as a cause for applying adverse 
inferences in this case.
    Department's Position: We agree with the petitioners that loans 
provided to the steel industry through coordination centers should be 
included in the specificity analysis. However, the petitioners' 
argument overstates the effect of loans through coordination centers on 
the percentage of loans to the steel industry. The 1990 SNCI annual 
report provides specific information on this issue and indicates that 
when coordination center loans to the steel industry are included in 
the calculation for 1990, the steel industry's share of SNCI loans 
increases by 2.3 percent. Instead of employing the petitioners' 
suggestion to include all coordination center loans to industrial 
sectors and adding 10 percentage points to the calculation of loans 
provided to the steel industry, we are accounting for coordination 
centers by using the information specific to the steel industry.
    In addition, we modified our final analysis to include the 
percentage of loans approved in each year, as well as the percentage of 
loans outstanding. When both statistics are taken into account, the 
percentage of SNCI loans directed toward the steel industry greatly 
decreases. Therefore, for the years in which ALZ received SNCI loans 
and for which we have the relevant information (i.e., 1987 through 
1990), we do not find SNCI loans to be specific to the steel industry. 
(See, also, SNCI Memorandum.)
    In response to ALZ's argument that, based upon comments at 
verification, the steel industry did not receive a disproportionate 
share of SNCI loans, we have already determined that SNCI investment 
loans provided in the years 1987-1990 are not specific. However, as 
noted above in the SNCI Loans section, the Department repeatedly 
requested information on the breakdown of loans in the years 1991-1997. 
The GOB did not provide any information for the years 1991-1995 and was 
unable to provide verifiable figures for 1996 and 1997. Therefore, the 
comments made at verification are completely unsubstantiated with 
respect to these years. Moreover, the GOB never

[[Page 15578]]

explained why it could not provide the required data. While SNCI may 
not aggregate the information in the manner requested by the 
Department, the GOB never indicated why the usage information could not 
be collected through other sources. As a result, we determine that the 
GOB did not act to the best of its ability with respect to providing 
the requested information and, pursuant to section 776(b) of the Act, 
we are applying adverse inferences in those years and determine that 
SNCI investment loans are de facto specific for the years 1991-1997.
    Comment 13: Fictive Withholding Tax. The petitioners argue that the 
Department's calculation methodology for SNCI loans should include 
benefits from the Fictive Withholding Tax (``FWT''). The FWT permitted 
lending institutions to deduct a certain percentage of the taxes due on 
interest income from loans to coordination centers and to pass those 
savings on to the coordination centers. As a result, the petitioners 
argue, the GOB provides a financial contribution to the borrower 
through the lender.
    ALZ states that the FWT was available for loans provided to 
coordination centers through any lending institution, not just SNCI. 
Therefore, the benefits from FWT are not specific. In addition, the FWT 
was abolished in 1991 and the ALZ group did not benefit from it after 
1995. Therefore, the program was terminated prior to the POI. Lastly, 
ALZ argues that the FWT had no effect on interest rates paid by ALZ, 
Alfin and Albufin from SNCI. The Department verified that the 
coordination centers did not pass on the savings to the ultimate 
borrowers, but instead retained those savings. Thus, ALZ, Alfin, and 
Albufin did not benefit from the FWT during the time it was in effect 
and the Department should use the interest rates actually paid by the 
ultimate borrowers.
    The petitioners counter that ALZ's attempt to distinguish between 
the rates paid by Al-Center (ALZ's coordination center) and the rates 
paid by ALZ, Alfin and Albufin admits to the preferentiality of the 
loan terms, in particular through the FWT.
    Department's Position: The FWT only applied to loans taken out by 
coordination centers such as Al-Center. Al-Center took out SNCI loans 
under investigation in the years 1987, 1989 and 1990. Because we have 
already determined that SNCI loans provided in those years are not 
specific, this issue is moot.
    Comment 14: GOB Control of SNCI. ALZ argues that SNCI acts like any 
other commercial entity and partial government ownership does not 
change this fact. ALZ cites to Certain Granite Products from Italy, 
(Final Negative Countervailing Duty Determination: Certain Granite 
Products from Italy, 53 FR 27197, 27202 (July 19, 1988)) where it is 
stated that the Department's practice has been to find that ``long-term 
lending * * * in which (a government) has direct or indirect ownership, 
that involves no government program'' does not confer countervailable 
subsidies. Moreover, ALZ cites to the final concurrence memorandum in 
Certain Steel in which the Department found that ``fifty percent 
government ownership does not necessarily lead to the conclusion that 
SNCI operates in other than a commercial fashion.'' Further, ALZ 
contends that SNCI was purchased by ASLK prior to the approval of ALZ's 
1997 loan from SNCI. Therefore, SNCI was not ``government-controlled'' 
or ``government-owned'' and this loan is not countervailable.
    The petitioners state that because ASLK itself was partially owned 
by the GOB, the sale of SNCI to ASLK did not eliminate the GOB control 
and, to the extent it was provided on preferential terms, the 1997 loan 
is countervailable. Moreover, the fact that SNCI was not acting as a 
``commercial lender'' is apparent from the interest rates charged on 
ALZ's investment loans. The preferential terms associated with ALZ's 
SNCI loans prove that SNCI provided ALZ with a countervailable benefit.
    Department's Position: We agree that fifty percent GOB ownership of 
SNCI does not, in and of itself render SNCI loans countervailable. 
However, the fact that SNCI was providing loans at rates lower than 
those otherwise available does indicate that SNCI was not acting as a 
commercial entity. We have examined the record evidence and determined 
that SNCI loans provided between 1991 and 1997 contain all the elements 
of a countervailable subsidy (i.e., specificity, financial 
contribution, and benefit).
    We agree with the petitioners that although ASLK purchased 99 
percent of SNCI in 1995, ASLK continued to remain under GOB control 
through the fall of 1997. Because ALZ's loan was approved in early 
1997, SNCI cannot be considered beyond the control of the government at 
that time and the purchase of SNCI by ASLK does not diminish the 
potential countervailability of the loan.

Benefits Received Pursuant to the 1970 Law

    Comment 15: Interest Rebate. The petitioners argue that the 
Department should countervail the interest rate subsidy found at 
verification even though the relevant loan is no longer outstanding. 
The petitioners base this argument on the Department's practice to 
treat interest rate rebates as a grant if the company does not know if 
the government will provide the rebate when the firm agrees to the 
terms of the loan. Consequently, because the government approval for 
this interest rebate occurred after the loan was approved, the 
Department should treat the interest subsidy as a non-recurring grant.
    ALZ argues that it did not report this interest subsidy because it 
was for a loan which is no longer outstanding. Moreover, ALZ points out 
that the Department made a specific decision to treat interest 
subsidies under the 1970 Law as interest rebates and not grants in 
Certain Steel. ALZ argues that in that case, the Department did so 
because, although the government approval occurred after the loan was 
granted, this approval was merely a ``rubber stamp'' and companies were 
reasonably certain that their application would be approved at the time 
they withdrew the loan. In addition, they knew the precise amount of 
the rebate they would receive and the length of time that it would 
remain in effect.
    Department's Position: In the concurrence memorandum for Certain 
Steel, the Department stated that ``although applicants for the 
interest rebate did not receive approval of their applications until 
about 60 days after receipt of the loan in question, they were, 
nonetheless, reasonably certain that their application would be 
approved. In addition, they knew the precise amount of the rebate they 
would receive and the length of time that it would remain in effect. 
Therefore, we (view) these rebates as interest reductions rather than 
grants.'' Based upon our analysis of the interest rebates in question 
in Certain Steel, we agree with the respondent. Because the loan in 
question was no longer outstanding during the POI, we find that ALZ did 
not benefit from the interest rebate at issue during the POI.
    Comment 16: Applicability of Integral Linkage Analysis. The 
petitioners argue that in Certain Steel, the Department stated that it 
would not conduct an integral linkage analysis of the 1970 Law due to 
the fact that the law was specific in that it provided benefits only to 
firms in certain regions. The petitioners state that no evidence has 
been placed on the record to support a different conclusion in this 
proceeding. Therefore, the Department should determine that the 
subsidies provided pursuant to the 1970 Law are provided

[[Page 15579]]

to a specific enterprise or industry or group of enterprises or 
industries.
    ALZ argues that the Department found in Certain Steel that the 1959 
Law complemented the 1970 Law and, hence, the two should be considered 
together when determining benefit levels. The same situation now exists 
with respect to the 1993 Decree and the 1970 Law, in ALZ's view. 
Therefore, ALZ argues, nothing changed with the replacement of the 1959 
Law by the 1993 Decree--except the level of benefits.
    Department's Position: In Certain Steel, we were examining a 
situation where firms qualifying for benefits under the 1970 Law would 
also qualify for benefits which were ``generally available'' under the 
1959 Law. In situations where a firm can qualify for the same benefit 
(or virtually the same benefit) under two laws, the issue is not one of 
integral linkage, but one of ``tiered benefits.'' Hence, as the 
Department stated in Certain Steel, ``* * * the question of linkage 
does not apply here.'' Instead, we stated, ``we have determined to 
countervail benefits under the 1970 Law only to the extent that they 
exceed benefits available under the 1959 Law. This approach is in 
accordance with our treatment of programs with tiered levels of 
benefits in Granite from Italy.'' (See Certain Steel at 37289)
    In this proceeding, the 1959 Law was replaced by the 1993 Decree. 
To apply the same analysis would require the Department to determine 
that the 1993 Decree is generally available (i.e., neither de jure nor 
de facto specific). ALZ did not receive any benefits under the 1993 
Decree and the record evidence does not allow the Department to fully 
analyze the specificity of the 1993 Decree. The data that is on the 
record includes subsidies provided under both the 1993 Decree and the 
1970 Law and does not distinguish between the monies provided under 
each law. Moreover, the 1993 Decree states that benefits under it are 
provided for investments ``which do not fall under'' the 1970 Law. This 
implies that investments eligible to receive assistance under the 1970 
Law would not receive assistance under the 1993 Decree. Therefore, the 
tiered benefits analysis is not applicable in this case.
    Therefore, in order to view subsidies provided under more than one 
law as constituting a single program, the Department must determine 
that those subsidies are integrally linked. In response to the 
petitioners' argument that benefits under the 1970 Law will always be 
regionally specific, we acknowledge that the 1970 Law provides benefits 
only to specific regions. However, the regional specificity aspect may 
be removed when the 1970 Law is combined with the 1993 Decree and the 
1978 Act. See, also, the Department's Position in Comment 18.
    Comment 17: Integral Linkage. The petitioners argue that the 1993 
Decree should not affect the countervailability of subsidies received 
pursuant to the 1970 Law. Although the 1993 Decree replaced the 1959 
Law, it did so because a 1991 EC Directive stated that the 1959 Law had 
to be revised and benefit levels reduced to be consistent with European 
regulations. The petitioners argue that by itself, this fact suggests 
that the benefits under the 1993 Decree are more limited than those 
available under the 1959 Law. The petitioners state that the 1993 
Decree is distinctly different from both the 1970 Law and the 1959 Law, 
which was found noncountervailable in the 1983 Belgian Steel case. 
Therefore, the Department should not treat the 1993 Decree in the same 
manner that it treated the 1959 Law in Certain Steel.
    The petitioners argue that the eligibility criteria and the 
benefits provided under the 1993 Decree are different from those under 
the 1970 Law or the 1959 Law. Therefore, the benefits received by ALZ 
pursuant to the 1970 Law after the 1959 Law was repealed should be 
countervailed in their entirety. However, the petitioners do not 
disagree with the Department's conclusion in Certain Steel and the 
Preliminary Determination that 1970 Law benefits are not specific when 
assessed against the type and level of benefits available under the 
1959 Law.
    ALZ and the GOB state that the Laws of 1959, 1970, the 1978 Act and 
the 1993 Decree are all part of the same GOF comprehensive program of 
economic expansion and should be considered together in determining 
benefits. Moreover, the record evidence makes clear that the 1993 
Decree replaced the 1959 Law and the only part that the 1991 EC 
directive required to change and, therefore, the only point that 
differs between the two laws is the level of benefits. The GOB further 
argues that it is common knowledge in Belgium that the GOF intended the 
1993 Decree to replace the 1959 Law and that the benefits available 
under the 1993 Decree are the same ones that were available under the 
1959 Law. The record evidence dictates that the Department must 
consider the economic expansion laws as a whole when analyzing any 
benefits received under the 1970 Law. Therefore, consistent with the 
Department's treatment of the 1959 Law in Belgian Steel and Certain 
Steel and with the facts of this case, the Department should only 
countervail benefits under the 1970 Law to the extent they exceed those 
available under the 1993 Decree.
    Department's Position: In Belgian Steel, the Department found the 
1959 Law to be not specific. In Certain Steel, we countervailed 
benefits provided under the 1970 Law only to the extent they exceeded 
those available under the 1959 Law. The 1959 Law was replaced with the 
1993 Decree and the record evidence suggests that the 1959 Law, the 
1970 Law, and the 1993 Decree all have similar types of benefits. In 
addition, the 1978 Act provides the same types of benefits to small 
companies. Moreover, the level and type of environmental assistance 
provided under all laws is identical.
    Section 355.43(b)(6) of the Department's 1989 Proposed Regulations 
requires that in determining whether two programs are integrally 
linked, the Secretary will examine factors such as ``the administration 
of the programs, evidence of a government policy to treat industries 
equally, the purposes of the programs, and the manner of funding the 
programs.'' The evidence on the record of this proceeding suggests 
that, since their inceptions, the 1970 Law, the 1978 Act, and the 1993 
Decree are related to each other and complement each other in the types 
of subsidies offered and the goals they seek to achieve. The 1970 Law 
targets development zones, while the 1978 Act and the 1993 Decree offer 
assistance to companies that cannot receive assistance under the 1970 
Law. The Department confirmed at verification that from the time the 
GOF assumed authority for economic expansion, all laws, including the 
1993 Decree, have promoted similar objectives and have been 
administered by the same authority. Moreover, all applicants go through 
the same approval process, use the same application form for assistance 
(the application form for the 1978 Act is less detailed than the one 
for the 1970 Law and the 1993 Decree), and receive their funding from 
the same source.
    Consistent with Live Swine from Canada; Final Results of 
Countervailing Duty Administrative Reviews (61 FR 52408, 52415 (October 
7, 1996)) which stated that an integral linkage analysis should be 
performed on a ``program by program'' basis, the Department considered 
particular types of assistance under the 1993 Decree, the 1970 Law, and 
the 1978 Act separately to determine whether such programs under each 
law (i.e., expansion grants, environmental grants, etc.) are integrally 
linked for specificity purposes. Given

[[Page 15580]]

this analysis, when looking at the subsidies received by ALZ and 
Albufin, we determine that the environmental grants available under the 
1993 Decree, the 1970 Law, and the 1978 Act are integrally linked. 
Likewise, the environmental real estate tax exemptions available under 
all three laws are also integrally linked. Consequently, for purposes 
of this investigation, we consider environmental grants available under 
all three laws to constitute a single program. Likewise, we consider 
environmental real estate tax exemptions available under all three laws 
to constitute a single program. For further information on integral 
linkage, see Economic Expansion Memorandum.
    Comment 18: Specificity of Environmental Grants. ALZ argues that 
the 1994 Environmental Grants are not countervailable because the 
evidence on the record shows that they are not de jure or de facto 
specific when examined in the context of the 1970 Law, the 1978 Act, 
and the 1993 Decree.
    Department's Position: As noted in Comment 17 above, we determine 
that the environmental grants available under the 1970 Law are 
integrally linked with those available under the 1993 Decree and the 
1978 Act. Since environmental grants under all of these laws are 
generally available, these grants are not de jure specific. Moreover, 
after analyzing the usage data for the environmental grants bestowed 
under the 1993 Decree and the 1970 Law, we observed that these 
environmental grants are provided to 35 distinct industry groupings and 
that the steel industry did not receive a disproportionate share of 
benefits. Therefore, we determine that the environmental grants are 
also not de facto specific. For further discussion, see Economic 
Expansion Memorandum.
    Comment 19: Green Light Treatment for Environmental Grants. We 
received several comments from interested parties on green light 
issues. ALZ and the GOB argued that the environmental grants qualified 
for green light treatment under section 771(5B)(D) of the Act. The 
petitioners disputed this assertion and argued that all of the criteria 
for green light treatment had not been met. Specifically, the 
petitioners argued that the assertion that there was no manufacturing 
cost savings had not been sufficiently documented.
    Department's Position: Although the Department conducted some green 
light analysis in the Preliminary Determination, we did not make a 
green light determination because more information was needed. Because 
in the final determination we determine that the environmental grants 
are not specific, the Department need not determine whether this 
subsidy meets all the criteria for green light treatment.
    Comment 20: Real Estate Tax Exemptions. ALZ argues that the 
environmental real estate tax exemption is not specific and, therefore, 
does not provide a countervailable subsidy. In support of its argument, 
ALZ notes that the Department verified that ALZ's real estate tax 
exemptions were tied to the environmental projects approved for 
assistance under the 1970 Law. Moreover, the Department verified that 
the 1993 Decree, the 1970 Law, and the 1978 Law allow the same real 
estate tax exemption for ecological adaptions. Thus, the environmental 
real estate tax exemption is neither de jure nor de facto specific 
because any company in Flanders that made ecological adaptions can 
qualify for the real estate tax exemption.
    Should the Department determine that the real estate tax exemption 
is countervailable, ALZ argues that the alleged subsidy rate should be 
calculated only on those investments eligible for the exemption. ALZ 
explains that it initially calculated the tax exemption for all 
investments approved to receive this exemption because it does not 
track the amount of taxes not paid. However, certain investments were 
not eligible for the exemption during the POI because they had not been 
completed by 1996. Thus, the calculations were corrected and 
resubmitted. ALZ contends that the Department should use the corrected 
figures for purposes of calculating the alleged benefit.
    The petitioners comment that ALZ failed to address the expansion 
real estate tax exemptions received by Albufin in conjunction with the 
1993 Expansion Grant. The Department preliminarily determined that the 
1993 Expansion Grant conferred a countervailable benefit upon Albufin. 
Accordingly, the Department should continue to countervail the real 
estate tax exemptions benefits provided to Albufin for purposes of its 
final determination.
    Department Position: As stated above, we've determined that the 
environmental real estate tax exemptions received by ALZ are not 
specific and, therefore, not countervailable. See, also, Economic 
Expansion Memorandum at 10.
    With respect to the expansion real estate tax exemption received by 
Albufin, we affirm our preliminary determination that this subsidy is 
regionally specific because only the 1970 Law provides expansion real 
estate tax exemptions to large-sized enterprises. Therefore, firms must 
be situated in a development zone to receive this real estate tax 
exemption. Since the expansion real estate tax exemption received by 
Albufin is specific, we are continuing to countervail it.
    Comment 21: Accelerated Depreciation Methodology. ALZ and the GOB 
argue that accelerated depreciation should be treated as a tax deferral 
rather than a tax exemption. In support of its argument, ALZ refers to 
the Department's 1997 proposed rules, in which the Department 
recognized that its existing methodology ``focused on the tax savings, 
but has not acknowledged the later tax increases.'' See Countervailing 
Duties, 62 FR 8818, 8835 (February 26, 1997). Furthermore, ALZ contends 
that the treatment of accelerated depreciation as a tax deferral rather 
than a tax exemption is a basic accounting principle. See A.N. Mosich 
and E. John Larsen, Intermediate Accounting, (6th ed. 1987), 617. ALZ 
further argues that the U.S. tax law and U.S. courts have also 
recognized that accelerated depreciation in a tax deferral rather than 
a tax exemption. In order to calculate the benefit, ALZ suggests 
treating the deferred taxes as an interest-free contingent loan. This 
methodology allows the Department the opportunity to address changes in 
the tax laws or a company's financial position.
    The petitioners argue that the Department should reject ALZ's 
argument because it contradicts the agency's longstanding approach to 
measuring benefits from accelerated depreciation. The petitioners refer 
to the Final CVD Regulations, in which the Department reaffirmed its 
practice of treating accelerated depreciation as a tax exemption 
without regard for any later tax increases that may be incurred. See 
Final CVD Regulations, 65376. According to the Department, the 
speculation inherent in giving a company credit for a contingent tax 
liability that it may never incur supports the continued treatment of 
accelerated depreciation benefits as tax exemptions. See Extruded 
Rubber Thread from Malaysia, 57 FR 38472 (August 25, 1992).
    The petitioners also contend that ALZ has offered no evidence that 
compels the Department to modify its current methodology. Rather, the 
petitioners note that the respondent relies primarily on authorities 
such as accounting texts and the U.S. tax law, none of which are 
concerned with the implications of accelerated depreciation benefits in 
the context of the countervailing duty law.

[[Page 15581]]

Therefore, the Department should continue to use its current 
methodology for purposes of its final determination.
    Department Position: It is our practice to treat the tax savings 
from accelerated depreciation as a tax exemption rather than a tax 
deferral because we cannot be certain that the benefits of an 
accelerated depreciation program will be offset by higher taxes in the 
future. See Final Affirmative Countervailing Duty Determinations: 
Certain Steel Products from Germany, 58 FR 37315, 37324-25, (July 9, 
1993). Such factors as changes in tax provisions and government tax 
policies, the provision of additional future tax benefits, or the 
possibility that the recipient company is in a tax loss position in the 
future might prevent higher taxes from materializing. Therefore, for 
purposes of our final determination, we have continued to countervail 
the tax savings received from accelerated depreciation.
    Comment 22: Accelerated Depreciation--Albufin. ALZ contends that 
even if the Department continues to treat accelerated depreciation as a 
tax exemption rather than a tax deferral, Albufin did not benefit from 
this program after 1997. The respondent notes that in fiscal year 1997 
Albufin decided not to participate in this program. Therefore, there is 
no benefit from accelerated depreciation after the POI. Consequently, 
no benefit from accelerated depreciation is applicable to any entries 
potentially subject to countervailing duties.
    The petitioners contend that the respondent's argument conflicts 
with Department practice. Citing 19 CFR 351.509(b), the petitioners 
assert that Albufin received a benefit in 1997 in conjunction with 
taxes paid for the 1996 tax year when it filed its tax return in 1997. 
According to the petitioners, the fact that Albufin did not apply for 
accelerated depreciation with respect to taxes incurred in 1997 and 
payable in 1998 has no bearing on the POI.
    Department Position: We agree with petitioners. Pursuant to 
Sec. 355.48(b)(4) of the 1989 Proposed Regulations, the Secretary 
normally will consider the benefit as having been received on the date 
on which the recipient firm would otherwise have had to pay the taxes 
associated with the exemption or remission. Normally, this date will be 
the date on which the firm filed its tax return. Therefore, for 
purposes of our final results, we have countervailed the benefit 
Albufin received in conjunction with taxes paid in 1997 for the 1996 
fiscal year.
    Comment 23: Treatment of Public Investment in Alfin. ALZ argues 
that the Department's classification of the NIM's investment in Alfin 
as a loan was inappropriate and that the Department should instead 
treat it as a noncountervailable equity investment. In the first 
instance, ALZ argues that, under the Department's hybrid financial 
instrument methodology, NIM's investment should be treated as equity 
because each criterion of the Department's analysis of hybrid financial 
instruments indicates that the investment was equity and not debt.
    With respect to the first criterion (Expiration/Maturity Date/
Repayment Obligation), ALZ states that NIM's shares in Alfin are 
properly characterized as equity because they do not have an 
expiration/maturity date nor is there a repayment obligation on the 
part of the ``debtor.'' Specifically, ALZ argues that, unlike a loan 
which has a specific expiration date, the shares in question never 
expire, rather they are being purchased by ALZ (a private shareholder) 
and not being repaid by Alfin (the supposed ``debtor''). According to 
respondent, because ALZ's purchase does not eliminate the shares, a 
repayment is not indicated. ALZ also argues that, while its requirement 
to purchase the shares is legally enforceable in court, it differs from 
the requirement to repay a debt because no legal action can be taken 
against the ``debtor,'' Alfin.
    ALZ argues that because NIM's dividends are paid from profit, must 
be specifically declared by the board, and are conditional rather than 
guaranteed, NIM's shares are properly characterized as equity rather 
than debt under the second criterion (Guaranteed Interest or 
Dividends). As for the third criterion (Ownership Rights), ALZ argues 
that NIM does have ownership rights, as evidenced by NIM's appointment 
of half of the Board of Directors and by the fact that the shares carry 
a dividend and, thus, NIM has a claim on the profits of the firm. As 
for the last criterion (Seniority), ALZ states that NIM's shares do not 
have a liquidation priority over other shares and, thus, creditors 
would come before NIM in the event of a liquidation which indicates 
that the shares are properly characterized as equity.
    ALZ also argues that, when applying the hybrid financial instrument 
methodology, the Department should review all the relevant 
characteristics of a financial instrument rather than apply a strict 
hierarchy. ALZ notes that while the Department has stated that it will 
end its analysis when a characteristic is clearly indicative of debt or 
equity, its practice has been to review all of the relevant 
characteristics in making a determination. ALZ cites to the GIA (at 
37254) where the Department made a determination in the Final 
Affirmative Countervailing Duty Determinations: Certain Steel Products 
From France, 58 FR 37304 (July 9, 1993) on more than one criteria. In 
further support of its argument, ALZ cites to the CIT's decision in 
Inland Steel, 967 F. Supp. at 1273, in which the CIT discussed 
characteristics outside of the Department's stated hierarchy. ALZ also 
cites to the preamble of the final regulations in which the Department 
stated that it would be premature to codify the treatment of its 
hierarchy. Thus, ALZ contends that the Department does not have a 
practice of adhering to a strict hierarchy or of examining only the 
above four criteria and, thus, the Department should consider all 
relevant characteristics and determine that, when viewed in their 
entirety, Alfin's shares must be classified as equity.
    Finally, ALZ argues that NIM's investment was consistent with that 
of a reasonable private investor and, thus, does not provide a 
countervailable subsidy. ALZ contends that it is the Department's 
practice to compare the price paid by the private investor with that 
paid by the government. If this practice is followed, ALZ notes, the 
Department will find that the terms of shares subscribed to by NIM were 
better than the terms of those purchased by the private investor. Thus, 
because NIM paid the same price paid by the private investor the 
transaction did not provide a countervailable subsidy.
    The petitioners argue that the Department's treatment of NIM's 
investment as debt instead of equity was appropriate and consistent 
with Department practice. Specifically, petitioners note that the 
Department states in the GIA that ``once a characteristic is clearly 
indicative of debt or equity, we will stop our analysis and categorize 
the hybrid as debt or equity.'' Thus, according to petitioners, to the 
extent that NIM's investment had a repayment obligation it should be 
classified as debt. The petitioners argue that the Department verified 
that ALZ is required to repay the principal over the course of ten 
years and, thus, NIM's shares contain a repayment obligation and are 
more appropriately categorized as debt.
    The petitioners also disagree with ALZ's contention that because 
ALZ (the private shareholder) is buying the shares from NIM instead of 
Alfin (the ``debtor'') it is not a debt instrument. The petitioners 
state that the Department's hierarchy does not require that repayment 
be made by the debtor

[[Page 15582]]

because the key fact is that the shares have a repayment obligation.
    Finally, the petitioners argue that if the Department does 
categorize NIM's investment in Alfin as equity instead of debt, the 
Department should find the investment inconsistent with the practice of 
private investors and not use ALZ's subscription in Alfin as a 
benchmark. On the latter point, petitioners argue that in fact NIM did 
not purchase its shares on the same terms as ALZ, but paid a 
significant premium. In the petitioners' view this demonstrates that 
NIM's involvement was on noncommercial terms. According to petitioners, 
because NIM involved itself in a noncommercial manner it impacted the 
reasonableness of the investment and, thus, altered ALZ's evaluation of 
the commercial reasonableness of the project. Thus, the petitioners 
argue that the share price paid by ALZ is distorted and unacceptable as 
a commercial benchmark.
    Further, the petitioners argue that NIM's investment was 
inconsistent with the practice of private investors, for two additional 
reasons. First, NIM failed to evaluate the commercial reasonableness of 
its investment prior to making its decision. Second, the shares 
purchased by NIM offered an unreasonably low rate of return. Based on 
these factors, petitioners argue that NIM's investment was inconsistent 
with the practice of private investors and, thus, countervailable.
    Department's Position: We are continuing to categorize NIM's 
investment in Alfin as debt. As stated in the GIA (at 37254), ``even if 
the instrument has no pre-set repayment date, but a repayment 
obligation exists when the instrument is provided, the instrument has 
characteristics more in line with loans then equity.'' NIM's investment 
in Alfin was in accordance with the Economic Recovery Law of July 31, 
1984 (Herstelwet 1984). Under the law, the contract amongst the parties 
must contain an undertaking by the private shareholders that they will 
repurchase the shares representing the public contribution at the 
issuing price. Furthermore, ``the repurchase must be effected at the 
rate of one-tenth per year, from the fourth to the thirteenth calendar 
year following that in which the shares were issued.'' Additionally, we 
found at verification that ALZ, in accordance with the contract, has 
been repurchasing the shares. Thus, a repayment obligation clearly 
existed with a pre-set repayment date. Based on the above, we find that 
the instrument has characteristics more in line with a loan than 
equity.
    With respect to ALZ's argument that the Department must look at all 
relevant information in making such a determination, we note that our 
practice is to consider, in order, the four criteria for determining 
the nature of hybrid financial instruments and stop our analysis when 
one characteristic is clearly indicative of debt or equity. In this 
case, ALZ's repayment obligation is clearly indicative of debt under 
the first criterion and, thus, it is not necessary to address the other 
criteria. Even if other evidence reflects equity rather than debt, we 
have found that a repayment obligation bears such significance and 
outweighs other evidence that the instrument should be properly 
categorized as debt. In Geneva Steel, the CIT held that this 
hierarchical method of classifying hybrid instruments is based on a 
permissible construction of the Act and is in accord with Congressional 
intent. See Geneva Steel at 578-79. Thus, in reviewing all relevant 
information on the record, we continue to find that this financial 
instrument is properly classified as debt.
    Because we are affirming our preliminary determination that this 
financial instrument is properly treated as a loan, it is not necessary 
to address the other issues raised by ALZ and petitioners with respect 
to the commercial reasonableness of NIM's investment.
    Comment 24: Attribution of Sidmar and Sidmar Group Subsidies to 
ALZ. ALZ argues that while a company may exercise considerable control 
over its consolidated subsidiaries, if there is an insufficient 
identity of interests between the parent and its subsidiary, the 
Department has not allocated untied subsidies to the subsidiary. See 
Wire Rod from Italy (in which we stated, ``if there is an insufficient 
identity of interest among the corporate group, the Department will 
consider these facts and determine whether it is appropriate to 
attribute subsidies to the consolidated group holdings''). Respondent 
argues that such a situation exists here in that Sidmar and ALZ have an 
insufficient identity of purpose. ALZ notes that Sidmar has 
considerable interests in other businesses, is a producer of carbon 
steel, and does not produce stainless steel. Further, ALZ notes that 
both companies use different distribution systems for their products. 
ALZ also points out that Sidmar's ownership interest in ALZ was 
insignificant when the the alleged subsides were provided.
    ALZ notes that if the Department finds a countervailable subsidy 
provided to a company within the Sidmar Group, the Department must base 
any attribution analysis on the relationship between ALZ and the 
company in question, not between Sidmar and ALZ. Specifically, ALZ 
argues that because SidInvest and ALZ have never had any direct 
ownership interest in one another, the Department's practice with 
respect to parent companies does not apply to this situation. While ALZ 
admits that the two companies may be affiliated, it notes that the 
Department's practice has been to consider subsidies to affiliated 
parties only when both parties are involved in the production or 
distribution of the subject merchandise or if there is a specific pass-
through of subsidies. ALZ argues that neither of these two situations 
exists with respect to SidInvest and ALZ and, moreover, there is no 
convergence of interests between the two companies, as SidInvest's list 
of investments does not indicate significant involvement in steel 
production or distribution.
    ALZ makes a similar argument with respect to the relationship 
between it and Sidfin. Specifically, ALZ notes that while Sidfin does 
have an ownership interest in ALZ, the interest is not controlling and, 
thus, no cross-ownership is indicated. Also, ALZ argues that it did not 
receive any financing nor waive any obligation out of the government's 
transaction with Sidfin and, thus, no benefit can be attributed to ALZ. 
Finally, ALZ argues that Sidmar's 1985 debt-to-equity conversion should 
not be attributed to ALZ because the assumption of the loans was tied 
to Sidmar's carbon steel activities.
    The petitioners argue that while Sidmar and ALZ may produce 
different products and use different distribution systems, these facts 
have no bearing on the question of whether subsidies provided to Sidmar 
should be attributed to ALZ. The petitioners note that the Department 
has a basic rule for determining whether subsidies should be attributed 
amongst companies when cross-ownership exists. Specifically, the 
petitioners cite to the Department's Final CVD Regulations which state 
that subsidies should be attributed when ``the interests of two 
corporations have merged to such a degree that one corporation can use 
or direct the individual assets (or subsidy benefits) of the other 
corporation in essentially the same ways it can use its own assets (or 
subsidy benefits).'' See Final CVD Regulations, Sec. 351.525(b)(6)(vi). 
The petitioners note that since 1987 Sidmar has, either directly or 
indirectly, controlled ALZ. Prior to 1987, according to the 
petitioners, both Sidmar and ALZ were under common ownership of

[[Page 15583]]

either the GOB or Arbed. Based on the above, the petitioners argue that 
this overlapping ownership is sufficient to attribute subsidies 
received by Sidmar to ALZ.
    On a specific level, the petitioners argue that SidInvest's 
relationship with ALZ is sufficient to allocate subsidies received by 
SidInvest to ALZ. They base this argument on the fact that Sidmar has a 
common ownership interest in both SidInvest and ALZ, thereby 
establishing a degree of cross-ownership that supports attribution of 
subsidies received by SidInvest to ALZ. The petitioners argue that 
while SidInvest is not the parent of ALZ and SidInvest has no ownership 
or control over ALZ, such facts have no bearing on the Department's 
attribution of subsidies because SidInvest is a non-producing financial 
subsidiary of Sidmar. Given this status, petitioners argue that 
SidInvest is more properly treated as a holding or parent company and, 
thus, any benefits it receives are attributable to ALZ. Petitioners 
point to Wire Rod from Italy, in which the Department attributed equity 
infusions received by different companies, all of whom were owned by a 
government holding company, in support of their argument.
    With respect to subsidies received by Sidfin, the petitioners argue 
that the record establishes that Sidfin is a non-producing holding 
company controlled by the GOB and that the GOB also controls a 
significant portion of ALZ. Thus, the petitioners contend that because 
Sidfin is a non-producing holding company, subsidies related to Sidfin 
are attributable to ALZ's sales. Furthermore, the petitioners argue 
that Sidfin's degree of ownership in ALZ is adequate to establish 
cross-ownership and, thus, subsidies should be attributed between these 
companies.
    With respect to ALZ's argument Sidmar's 1985 debt-to-equity 
conversion should not be attributed to ALZ because the benefit was tied 
to Sidmar's carbon steel activities, the petitioners argue that the 
subsidy was provided in conjunction with the government's restructuring 
plans for the entire steel sector, not just carbon steel. Secondly, the 
petitioners note that the Department treated the subsidy as a debt-to-
equity conversion in the Preliminary Determination and, therefore, it 
is an untied subsidy.
    Department's Position: As in the Preliminary Determination, we are 
attributing the benefits from non-recurring untied subsidies received 
by Sidmar, including subsidies related to SidInvest to the consolidated 
operations of the Sidmar Group which includes ALZ. This is consistent 
with the Department's practice that attributes untied subsidies to the 
company's total domestically-produced sales. See GIA at 37267.
    With respect to the subsidies received by Sidmar, when the parent 
company of a consolidated group receives untied subsidies, such as 
equity infusions, these domestic subsidies are normally attributed to 
the consolidated group. See Certain Hot-Rolled Lead and Bismuth Carbon 
Steel Products From the United Kingdom; Final Results of Countervailing 
Duty Administrative Review, 62 FR 53306, 53311 (October 14, 1997). In 
this case, we have attributed untied subsidies received by Sidmar to 
the consolidated sales of that company, including the sales of ALZ. We 
disagree with ALZ that there is an insufficient identity of interest 
between ALZ and Sidmar to do this. Sidmar currently owns 100 percent of 
ALZ's voting shares. Also, Sidmar apparently saw that its business 
interests would be advanced by making ALZ part of the Sidmar Group 
because it moved from a minority ownership position to a 100 percent 
ownership interest over time.
    With respect to subsidies received by SidInvest, consistent with 
Certain Steel, we are treating the subsidies received as untied 
benefits to the Sidmar Group. Thus, because ALZ is a member of the 
Sidmar Group, benefits are properly attributed to ALZ. Specifically, in 
Certain Steel, we stated, ``. . . any subsidies provided to SidInvest 
are not tied to SidInvest or to the specific activities in which it 
invested. Instead, any benefits flow to the Sidmar Group as a whole.'' 
See Certain Steel at 37282.
    Finally, as we have not found any benefits resulting from the 
Sidfin transactions, it is not necessary to discuss their attribution.
    Comment 25: SidInvest Transactions. ALZ argues that, in the 
Preliminary Determination, the Department overstated the amount of 
benefit provided to ALZ through the SidInvest transactions. ALZ notes 
that the Department's practice is to find that the benefit from a loan 
lasts for the life of the loan. Thus, according to ALZ, the Department 
inappropriately allocated benefits from the creation of the 32 year 
loan to the POI. Specifically, ALZ argues that since 1988 the loan has 
been off SidInvest's books and, thus, under the Department's practice 
there can be no benefit from this loan since 1988.
    ALZ also argues that the Department should make the following 
calculation changes. First, it argues that when conducting the expense 
test, the Department should use the consolidated sales of the Sidmar 
Group because any benefit found to have been provided from the 
SidInvest transaction is attributable to the entire group. Lastly, ALZ 
argues that the Department did not take into account a payment by 
SidInvest, and the payment should be deducted from the difference 
between the net present value of the balance of the outstanding loan 
and the shares received by the government in return for the loan.
    The petitioners state that the Department should affirm its 
treatment of the SidInvest transactions in the Preliminary 
Determination. However, petitioners argue that if the Department finds 
that the benefit from the 32 year loan ceased in 1988, the Department 
should treat the transaction as a debt-to-equity conversion. According 
to petitioners, the agreement between the GOB and SidInvest indicates 
that the government's contribution to SidInvest was made up of the 
balance of debt instruments that comprised the 32 year loan. 
Furthermore, petitioners argue that the debt-to-equity conversion was 
made on terms inconsistent with the practice of private investors 
because there is no evidence that the GOB based its decision on any 
studies that provided an objective assessment of the investment and 
because the GOB sold its shares to Sidmar at a price below their 
commercial value.
    Department's Position: We are continuing to find a benefit arising 
from these transactions. However, as discussed above, we have revisited 
our analytical approach. We believe the revised approach more 
accurately reflects the benefit to Sidmar from the transactions that 
occurred on July 29, 1988. In particular, we are no longer treating the 
first step in this transaction as the creation of a 32-year loan. 
Instead, we now consider that the series of transactions effectively 
canceled the debt owed to the GOB by SidInvest, and we have treated the 
amount of debt forgiveness as a grant.
    We agree with ALZ that the benefits incurred from the SidInvest 
transactions are attributable to the entire group and, thus, when 
determining whether the benefit should be expensed in the year of 
receipt, we have used the consolidated sales of the Sidmar Group. 
However, upon conducting the expense test we have not found that the 
subsidy is expensed in the year of receipt, rather the benefit is being 
allocated over Sidmar's AUL.
    With respect to the payment made by SidInvest to the government, we 
agree that the payment should be taken into account and have done so 
for purposes of this final determination. However, while ALZ has argued 
that the payment should be deducted from the difference

[[Page 15584]]

between the net present value of the balance of the outstanding loan 
and the shares received by the government in return for the loan as it 
was in 1988, we have instead deducted the payment prior to the creation 
of the loan. The transactions in question occurred on the same day. On 
that day SidInvest made various cash payments to the government. We 
view the cash payments made on that day as reductions in the total 
amount of money owed to the government by SidInvest. If we were to 
deduct the payment after taking the net present value, the benefit 
conferred to SidInvest by the transactions would be understated.
    Comment 26: Assumption of Sidmar's Debt. ALZ and the GOB argue that 
the Department should not have initiated an investigation of this 
program because the Department determined in Certain Steel that it did 
not provide a countervailable subsidy and the petitioners have not 
provided any new information that would change that determination. ALZ 
argues that the reliance on a redetermination that was later vacated as 
new information is inappropriate because any decision that was vacated 
should be treated as if it never existed. Thus, ALZ argues that no new 
information was ever presented in this case that would justify the 
Department's departure from its normal practice to not reconsider a 
determination unless new information is presented. ALZ further argues 
that, in investigating this program, the Department has deviated from 
the Act and the WTO Agreement on Subsidies and Countervailing Measures 
because both require a petition to include sufficient evidence of a 
subsidy. When the Department receives a petition that does not meet 
this requirement, ALZ argues that the Department should not initiate an 
investigation and, thus, in this case the Department must terminate its 
investigation immediately.
    ALZ also argues that the GOB's receipt of the PBs was consistent 
with a reasonable private investor standard because the value of the 
shares received by the government was consistent with the GOB's 
financial contribution. Specifically, ALZ cites to the different terms 
of the shares and notes that all of the terms are consistent with 
commercial considerations and, thus, consistent with Aimcor, we should 
not find a countervailable subsidy from the issuance of the PBs.
    The petitioners argue that the Department properly initiated an 
investigation of this program because the petition contained sufficient 
evidence of a subsidy. The petitioners note that in their petition they 
cited to the Amended Final Affirmative Countervailing Duty 
Determination: Certain Carbon Steel Products from Belgium, 62 FR 37880 
(July 15, 1997), in which the Department concluded that the debt to 
equity conversion was inconsistent with commercial considerations. The 
petitioners disagree with ALZ's contention that this determination 
should not be relevant because of the order of vacatur. Rather, the 
petitioners note that the Department has already rejected ALZ's 
argument on this point when it was raised following the initiation.
    The petitioners also argue that ALZ's argument is not consistent 
with Aimcor, because in the Aimcor decision the CIT noted that even if 
a company is equityworthy, it does not necessarily follow that a 
purchase of stock from such a company is consistent with commercial 
considerations. The petitioners then note that in this case the issue 
before the Department is not whether the terms were consistent with 
commercial considerations, but whether the investment price paid by the 
GOB was more than the value of the shares received by the GOB.
    Department's Position: ALZ is incorrect in stating that the 
petitioners did not provide sufficient evidence of a subsidy. In fact, 
the petitioners cited to our amended final determination, in which we 
found that Sidmar received a countervailable subsidy from this program. 
The fact that the decision affirming our remand was vacated does not 
nullify the factual record and development of agency practice resulting 
from the proceeding. See Memorandum to Richard Moreland, ``Initiation 
of Certain Programs Alleged to benefit ALZ,'' dated June 18, 1998. The 
petitioners are also correct in noting that the issue at question is 
not whether the terms of the PBs were consistent with the reasonable 
private investor standard, but rather if the price paid for the PBs was 
consistent with the price a reasonable private investor would pay. In 
this case, the record indicates that the share transactions were on 
terms inconsistent with the usual practice of a private investor 
because the government paid more for the shares than a reasonable 
private investor would pay. Thus, a countervailable subsidy was 
provided to Sidmar.

Verification

    In accordance with section 782(i) of the Act, we verified the 
information used in making our final determination. We followed 
standard verification procedures, including meeting with government and 
company officials, and examining relevant accounting records and 
original source documents. Our verification results are outlined in 
detail in the public versions of the verification reports, which are on 
file in the Central Records Unit of the Department of Commerce, Room B-
099.

Suspension of Liquidation

    In accordance with section 705(c)(1)(B)(i) of the Act, we have 
calculated an individual subsidy rate for ALZ, the sole manufacturer of 
the subject merchandise. Because ALZ is the only respondent in this 
case, ALZ's rate will also serve as the ``all others'' rate. We 
determine that the total estimated net countervailable subsidy rate is 
1.82 percent ad valorem for ALZ.
    In accordance with our preliminary determination, we instructed the 
U.S. Customs Service to suspend liquidation of all entries of stainless 
steel plate in coils from Belgium which were entered or withdrawn from 
warehouse for consumption on or after September 4, 1998, the date of 
the publication of our preliminary determination in the Federal 
Register. In accordance with section 703(d) of the Act, we instructed 
the U.S. Customs Service to discontinue the suspension of liquidation 
for merchandise entered on or after January 2, 1999, but to continue 
the suspension of liquidation of entries made between September 4, 1998 
and January 1, 1999. We will reinstate suspension of liquidation under 
section 706(a) of the Act if the ITC issues a final affirmative injury 
determination, and will require a cash deposit of estimated 
countervailing duties for such entries of merchandise in the amounts 
indicated above. If the ITC determines that material injury, or threat 
of material injury, does not exist, this proceeding will be terminated 
and all estimated duties deposited or securities posted as a result of 
the suspension of liquidation will be refunded or canceled.

ITC Notification

    In accordance with section 705(d) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all non-privileged and non-proprietary information related to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    If the ITC determines that material injury, or threat of material 
injury, does not exist, this proceeding will be

[[Page 15585]]

terminated and all estimated duties deposited or securities posted as a 
result of the suspension of liquidation will be refunded or canceled. 
If, however, the ITC determines that such injury does exist, we will 
issue a countervailing duty order.

Return or Destruction of Proprietary Information

    In the event that the ITC issues a final negative injury 
determination, this notice will serve as the only reminder to parties 
subject to Administrative Protective Order (``APO'') of their 
responsibility concerning the return or destruction of proprietary 
information disclosed under APO in accordance with 19 CFR 355.34(d). 
Failure to comply is a violation of the APO.
    This determination is published pursuant to sections 705(d) and 
777(i) of the Act.

    Dated: March 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7531 Filed 3-30-99; 8:45 am]
BILLING CODE 3510-DS-D