[Federal Register Volume 64, Number 66 (Wednesday, April 7, 1999)]
[Notices]
[Pages 16915-16920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8621]



[[Page 16915]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[C-428-812]


Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From 
Germany: Preliminary Results of Countervailing Duty Administrative 
Review

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

ACTION: Notice of Preliminary Results of Countervailing Duty 
Administrative Review

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on certain hot-
rolled lead and bismuth carbon steel products from Germany for the 
period January 1, 1997 through December 31, 1997. For information on 
the net subsidy for the reviewed company as well as for non-reviewed 
companies, please see the Preliminary Results of Review section of this 
notice. If the final results remain the same as these preliminary 
results of administrative review, we will instruct the U.S. Customs 
Service to assess countervailing duties as detailed in the Preliminary 
Results of Review section of this notice. Interested parties are 
invited to comment on these preliminary results. (See the Public 
Comment section of this notice.)

EFFECTIVE DATE: April 7, 1999.

FOR FURTHER INFORMATION CONTACT: Eric B. Greynolds or Robert Copyak, 
Group II, Office of AD/CVD Enforcement VI, Import Administration, U.S. 
Department of Commerce, Room 4012, 14th Street and Constitution Avenue, 
N.W., Washington, D.C. 20230; telephone (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On March 22, 1993, the Department published in the Federal Register 
(58 FR 15325) the countervailing duty order on certain hot-rolled lead 
and bismuth carbon steel products from Germany. On March 11, 1998, the 
Department published a notice of ``Opportunity to Request an 
Administrative Review'' (63 FR 11868) of this countervailing duty 
order. We received a timely request for review from Saarstahl AG 
(Saarstahl), the respondent company to this proceeding. On April 24, 
1998, we initiated the review, covering the period January 1, 1997 
through December 31, 1997, (63 FR 20378). On April 28, 1999, Inland 
Steel Bar Company and USS/KOBE Steel Co. (petitioners) requested that 
the Department conduct verification of information submitted on the 
record in all questionnaire responses.
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
Accordingly, this review covers Saarstahl AG (Saarstahl). This review 
also covers five programs. On November 19, 1998, we extended the period 
for completion of the preliminary results pursuant to section 751(a)(3) 
of the Tariff Act of 1930, as amended. See Hot-Rolled Lead and Bismuth 
Carbon Steel Products from Germany: Extension of the Time Limit for 
Preliminary Results of Countervailing Duty Administrative Review (63 FR 
64235). The deadline for the final results of this review is no later 
than 120 days from the date on which these preliminary results are 
published in the Federal Register.

Applicable Statute

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

Scope of the Review

    The products covered by this investigation are hot-rolled bars and 
rods of nonalloy or other alloy steel, whether or not descaled, 
containing by weight 0.03 percent or more of lead or 0.05 percent or 
more of bismuth, in coils or cut lengths, and in numerous shapes and 
sizes. Excluded from the scope of this investigation are other alloy 
steels (as defined by the Harmonized Tariff Schedule of the United 
States (HTSUS) Chapter 72, note 1 (f)), except steels classified as 
other alloy steels by reasons of containing by weight 0.4 percent or 
more of lead, or 0.1 percent or more of bismuth, tellurium, or 
selenium. Also excluded are semi-finished steels and flat-rolled 
products. Most of the products covered in this review are provided for 
under subheadings 7213.20.00.00 and 7214.30.00.00 of the HTSUS. Small 
quantities of these products may also enter the United States under the 
following HTSUS subheadings: 7213.31.30.00; 7213.31.60.00; 
7213.39.00.30; 7213.39.00.60; 7213.39.00.90; 7213.91.30.00; 
7213.91.45.00; 7213.91.60.00; 7213.99.00; 7214.40.00.10, 7214.40.00.30, 
7214.40.00.50; 7214.50.00.10; 7214.50.00.30, 7214.50.00.50; 
7214.60.00.10; 7214.60.00.30; 7214.60.00.50; 7214.91.00; 7214.99.00; 
7228.30.80.00; and 7228.30.80.50. HTSUS subheadings are provided for 
convenience and Customs purposes. The written description of the scope 
of this proceeding is dispositive.

Duty Absorption

    On April 28, 1998, the Department received a request from 
petitioners to conduct a duty absorption review to determine whether 
Saarstahl absorbed countervailing duties. The issue of whether it is 
appropriate to examine duty absorption in the context of a 
countervailing duty review was considered in the 1997 administrative 
review of the countervailing duty order on lead and bismuth carbon 
steel products from the United Kingdom. The Department concluded that, 
because there is no relationship between the amount of duties absorbed 
and the extent of government subsidization that will take place in the 
future, it is not appropriate to examine duty absorption in a 
countervailing duty reviews. Therefore, we are not conducting a duty 
absorption review in this administrative review. A copy of the decision 
memorandum which elaborates the Department's rationale with regard to 
this issue (see memorandum through Holly A. Kuga, Acting Deputy 
Assistant Secretary for Group II, to Robert S. LaRussa, Assistant 
Secretary for Import Administration, dated March 18, 1999, a public 
document on file in the Central Records Unit, Room B-099 of the Main 
Commerce Building) has been placed on the record of this administrative 
review as a public document from the team to the file, dated March 25, 
1999.

Subsidies Valuation Information

Allocation Period

    In British Steel plc. v. United States, 879 F.Supp. 1254 (February 
9, 1995) (British Steel I), the U.S. Court of International Trade (the 
Court) ruled against the allocation period methodology for non-
recurring subsidies that the Department had employed for the past 
decade, a methodology that was articulated in the General Issues 
Appendix appended to Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from Austria; 58 FR 37217 (July 
9, 1993) (GIA). In accordance with the Court's decision on remand, the 
Department determined that the most reasonable

[[Page 16916]]

method of deriving the allocation period for nonrecurring subsidies is 
a company-specific AUL of non-renewable physical assets. This remand 
determination was affirmed by the Court on June 4, 1996. British Steel 
plc. v. United States, 929 F.Supp 426, 439 (CIT 1996) (British Steel 
II).
    However, in administrative reviews where the Department examines 
non-recurring subsidies received prior to the POR which have been 
countervailed based on an allocation period established in an earlier 
segment of the proceeding, it is not practicable to reallocate those 
subsidies over a different period of time. Since the countervailing 
duty rate in earlier segments of the proceeding was calculated based on 
a certain allocation period and resulted in a certain benefit stream, 
redefining the allocation period in later segments of the proceeding 
would entail taking the original grant amount and creating an entirely 
new benefit stream for that grant. Such a practice may lead to an 
increase or decrease in the total amount countervailed and, thus, would 
result in the possibility of over-or under-countervailing the actual 
benefit. In this administrative review, the Department is considering 
non-recurring subsidies previously allocated in the initial 
investigation. Therefore, for purposes of these final results, the 
Department is using the original allocation period assigned to each 
non-recurring subsidy received prior to the POR. See, e.g., Final 
Results of Countervailing Duty Administrative Review: Industrial 
Phosphoric Acid from Israel, 64 FR 2879 (January 19, 1999) and Final 
Results of Countervailing Duty Administrative Review: Certain Carbon 
Steel Products from Sweden, 62 FR 16549 (April 7, 1997).

Discount Rates

    Pursuant to the Final Results of Redetermination Pursuant to Court 
Remand Regarding The Privatization in Germany: Saarstahl Ag v. United 
States, Consol. Ct. No. 93-04-00219 (June 30, 1997) (Remand 
Determination), we find that Saarstahl was uncreditworthy in 1989 and, 
therefore, have applied the uncreditworthy discount rate from the 
Remand Determination for Saarstahl's calculations.

Change in Ownership

(I) Background
    In the investigation of this proceeding, we examined Saarstahl's 
changes in ownership prior to 1991. Specifically, in 1986, Arbed, a 
company owned by the Government of Luxemburg, transferred 76 percent of 
Saarstahl's shares to the Government of Saarland (GOS), making 
Saarstahl a majority state-owned company. The GOS then began a search 
for a new investor for Saarstahl. Usinor-Sacilor, a company owned by 
the Government of France, expressed interest in Saarstahl. In 1989, the 
GOS and Usinor-Sacilor reached an agreement in which: (1) the two steel 
companies in Saarland, Saarstahl Volingen Gmbh. (Saarstahl) and 
Dillinger Huttenwerke (Dillinger) would merge to form DHS Dillinger 
Hutte Saarstahl AG (DHS); (2) Usinor-Sacilor would buy the newly 
created DHS; and (3) in return for Usinor-Sacilor's purchase of DHS, 
the GOS and the Government of Germany (GOG) would forgive Saarstahl's 
debt obligations, also known as Ruckzahlungsverpflichtungen (RZVs), to 
the regional and federal governments and release the company from any 
obligation to repay Saarstahl's guaranteed loans. The last step of the 
change in ownership took place in 1989 with the transfer of the long 
products business from DHS to a newly-formed company, Saarstahl AG.
    In the investigation of this case, the Department found that the 
cancellation of Saarstahl's debts constituted countervailable 
subsidies. See Final Affirmative Countervailing Duty Determination: 
Certain Hot Rolled Lead and Bismuth Carbon Steel Products from Germany, 
58 FR 6233, 6233 (January 27, 1993) (Lead and Bismuth). Further, the 
Department determined that the change in ownership transaction did not 
alter the effect of these previously bestowed subsidies. In the 1993 
certain steel products investigations, the Department modified its 
position in Lead and Bismuth concerning changes in ownership. 
Specifically, the Department stated that it could no longer be assumed 
that the entire amount of subsidies passes through to the new owners 
after a change in ownership. Rather, when a company is sold, even 
partially, a portion of the sales price represents repayment of prior 
subsidies. See GIA, 58 FR at 37263. As a result of this change, the 
Department, pursuant to the Remand Determination: Certain Hot Rolled 
Lead and Bismuth Carbon Steel Products from Germany, (October 12, 
1993), altered its original determination regarding the effects of 
privatization on subsidies previously received by Saarstahl so that it 
conformed with the methodology described in the GIA. This change in 
ownership methodology was upheld in Saarstahl AG v. United States, 78 
F. 3d 1539 (Fed. Cir. 1996) and British Steel plc v. Untied States, 127 
F.3d 1471 (Fed. Cir. 1997).
    In the recent investigation of steel wire rod from Germany, we 
included in our change of ownership calculations the 1994 transaction 
under which Usinor-Sacilor, via DHS, spun-off 100 percent of Saarstahl 
AG to the GOS for DM 1. See Final Affirmative Countervailing Duty 
Determination: Steel Wire Rod from Germany (German Wire Rod), 62 FR 
54990, (October 22, 1997) (German Wire Rod). Respondents have reported 
in this administrative review that, in 1997, the GOS transferred the 
majority of its shareholdings in Saarstahl to three parties: (1) 
Saarstahl Treuhand, (2) AG der Dillinger Huttenwerke (Dillinger), and 
(3) Kreditanstalt fur Wiederaufbau (Kreditanstalt). Prior to this 
transfer, the GOS held approximately 99.9 percent of Saarstahl's 
shares. After the share transfer, the GOS held approximately 32 percent 
of the company's shares. The remaining 68 percent was divided as 
follows: Saarstahl Treuhand--28.1 percent, Dillinger--19.9 percent, and 
Kreditanstalt--20 percent.
    Regarding the 1997 privatization, petitioners argue in their March 
11, 1999, submission that the new shareholders in Saarstahl should not 
be considered private entities. They argue that Saarstahl Treuhand is a 
trust that was set up and is controlled by the GOG because no private 
investor could be found for these shares. They argue that the GOS 
(through its ownership of Saarstahl) is an owner of the parent company 
of Dillinger and, therefore, Dillinger is government-controlled. They 
also argue that, because the Kreditanstalt is a development bank of the 
GOG, shares assigned to it represent no ultimate change in the 
ownership of Saarstahl. On this basis, petitioners argue that none of 
the three parties' purchase price can constitute repayment of 
Saarstahl's previously bestowed subsidies. In addition, petitioners 
argue that the Department should treat all of the purchase price as a 
grant to Saarstahl because none of the parties to the privatization 
made its purchase on terms consistent with those of a private investor.
    In its March 22, 1999, submission, respondent rebuts petitioners' 
contention that the buyers of Saarstahl in 1997 were not private 
actors. Respondent argues that Saarstahl Treuhand is a private trust 
established under German law for the benefit of bankruptcy creditors 
and that it is not, in any way, controlled by the government. Regarding 
Dillinger, respondent states that approximately 5 percent is held by 
individual investors

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and the remaining 95 percent is held by DHS. They then explain that the 
majority of DHS is owned by the private companies Usinor-Sacilor S.A. 
and ARBED S.A. Regarding Kreditanstalt, respondent argues that the 
administrative record of this proceeding clearly indicates that the 
development bank's decision to invest in Saarstahl was made on terms 
consistent with commercial considerations and, on this basis, its 
payment should be included as part of the purchase price. Thus, 
respondent argues that since all three parties made their decision to 
invest in Saarstahl independent of the GOG and the GOS, the Department 
should determine that 100 percent of the purchase price constitutes 
repayment of Saarstahl's previously bestowed subsidies.
    In this administrative review, we are analyzing the privatization 
of Saarstahl in 1989, its subsequent spin-off in 1994, and the 
company's partial privatization in 1997. For purposes of this 
preliminary determination, we have applied the Department's change in 
ownership methodology for the 1989 privatization and the 1994 spin-off. 
However, we have not applied the change in ownership methodology for 
the 1997 reorganization. In light of petitioner's arguments that the 
new shareholders should not be considered private entities and that the 
purchase price constituted a countervailable grant, we are considering 
whether to treat contributions by the new shareholder as grants or as 
repayment of prior subsidies. We will gather further information 
regarding the 1997 change in ownership, and we will consider the 
comments submitted on the record by interested parties. We note that 
all information submitted on the record pertaining to this issue will 
be subject to verification and further analysis.
(II) Change in Ownership Calculation Methodology
    Under the Change in Ownership methodology described in the GIA 
concerning the treatment of subsidies received prior to the sale of a 
company or the spinning-off of a productive unit, we estimate the 
portion of the purchase price attributable to prior subsidies. We 
compute this by first dividing the privatized company's subsidies by 
the company's net worth for each year during the period beginning with 
the earliest point at which nonrecurring subsidies would be 
attributable to the POR (in this case 1983) and ending one year prior 
to the change in ownership.
    As in German Wire Rod, we have modified this methodology with 
respect to Saarstahl. See 62 FR 54991. Specifically, we calculated the 
ratios in question by including in the calculation the assistance that 
Saarstahl received prior to privatization in the year the assistance 
was received. We did so even though we do not consider this prior 
assistance, at the it was received, to be nonrecurring in nature, and, 
thus, allocable over time.
    We then take the simple average of the ratios of subsidies to net 
worth. This simple average of the ratios serves as a reasonable 
surrogate for the portion subsidies constitute of the overall value of 
the company. Next, we multiply the average ratio by the purchase price 
to derive the portion of the purchase price attributable to repayment 
of prior subsidies. Finally, we reduce the benefit streams of the prior 
subsidies by the ratio of the repayment amount to the net present value 
of all remaining benefits at the time of privatization.
    With respect to spin-offs, consistent with the Department's 
position regarding privatization, we analyze the spin-off of productive 
units to assess what portion of the sale price of the productive unit 
can be attributable to the repayment of prior subsidies. To perform 
this calculation, we first determine the amount of the seller's 
subsidies that the spun-off productive unit could potentially take with 
it. To calculate this amount, we divide the value of the assets of the 
spun-off unit by the value of the assets of the company selling the 
unit. We then apply this ratio to the net present value of the seller's 
remaining subsidies. We next estimate the portion of the purchase price 
going towards repayment of prior subsidies in accordance with the 
privatization methodology outlined above.

Analysis of Programs

I. Programs Conferring Subsidies

A. Government Forgiveness of Saarstahl Debt in 1989
    During the period 1978 to 1989, Saarstahl and its predecessor 
companies received large amounts of assistance from the GOS and the GOG 
in the form of RZVs. Repayment of these RZVs became contingent upon 
Saarstahl returning to profitability and earning a profit above and 
beyond the losses accumulated after 1978.
    In 1989, the GOS reached an agreement with Usinor-Sacilor to 
combine Saarstahl with Dillinger under a holding company, DHS. Pursuant 
to the combination agreement and as a condition for sale, in 1989 the 
GOG and GOS entered into a debt forgiveness contract 
(Entschuldungsvertrag, or EV) which effectively forgave all the 
outstanding repayment obligations owed by Saarstahl to the two 
Governments (i.e., a total of DM 3.945 billion in debt was forgiven). 
The EV specified, however, that if Saarstahl went bankrupt, the GOG and 
GOS claims could be revived, but their claims would be subordinated to 
those of all other creditors.
    After several years of unprofitable operation, Saarstahl filed for 
bankruptcy in 1993 under the German Bankruptcy Regulations 
(Konkursordnung). In 1994, the GOS bought Saarstahl back from Usinor-
Sacilor for DM 1. At the time of its bankruptcy, Saarstahl's 
liabilities exceeded its assets by a factor of four, not including its 
liabilities to the GOG and GOS. Both Governments filed claims against 
the Saarstahl bankruptcy estate based on the RZV debt that was 
conditionally forgiven in 1989. These EV-related claims were rejected 
by the bankruptcy trustee as invalid in 1995 on the grounds that the 
degree of their subordination resulted in the fact that the GOG and GOS 
would never be repaid. The GOG and GOS chose not to appeal the 
rejection of their bankruptcy claims, on the grounds that the 
subordination of their claims made the likelihood of recovery very 
small, and not worth the high cost of litigating the matter.
    In Lead and Bismuth, 58 FR at 6234, we found that Saarstahl's RZVs 
and similar related debt were forgiven by the 1989 EV, thus conferring 
a countervailable benefit on Saarstahl as of 1989. This was also the 
Department's finding in Certain Steel and German Wire Rod. No new 
information or evidence of changed circumstances was presented in this 
review to warrant any reconsideration of these findings.
    To calculate the countervailable benefit in the POR, we used our 
standard declining balance grant methodology. We then divided the 
benefit attributable to the POR, adjusted to reflect the changes in 
ownership described above, by the total sales of Saarstahl during the 
same period. On this basis, we preliminarily determine the net subsidy 
for this program to be 11.61 percent ad valorem for Saarstahl.
B. Debt Forgiveness by Private Banks in 1989
    Toward the end of 1985, the GOS presented a long-term restructuring 
plan for Saarstahl to Saarstahl's creditors and requested that they 
forgive loans in the amount of DM 350 million. In 1986, the private 
banks agreed to forgive DM 217.33 million of debt owed to them by 
Saarstahl (DM 216.82 of which was forgiven in 1989), if the GOG and GOS 
fulfilled certain prerequisites. Two of

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the prerequisites were that the Governments forgive all debt owed to 
them by Saarstahl and that the GOS secure the future liquidity of 
Saarstahl. In 1986, the GOS agreed to forgive all debts owed to it by 
Saarstahl and to secure the liquidity of Saarstahl as it had in the 
past.
    In the investigation of this case, we determined that the 1989 
forgiveness of principal by private banks in the amount of DM 216.82 
constituted a countervailable subsidy. See Lead and Bismuth, 58 FR 
6233-34; See also, German Wire Rod, 62 FR at 54991. No new information 
or evidence of changed circumstances was presented in this review to 
warrant any reconsideration of that finding.
    To calculate the countervailable subsidy, we followed the 
methodology described in the ``Government Forgiveness of Saarstahl's 
Debt in 1989'' section of the notice, above. We then divided the 
benefit attributable to the POR, adjusted to reflect the changes in 
ownership described above, by the total sales of Saarstahl during the 
same period. On this basis, we preliminarily determine the net subsidy 
for this program to be 0.64 percent ad valorem for Saarstahl.
C. Worker Assistance Program (ECSC Redeployment Aid Under Article 
56(2)(b)
    Under Article 56(2)(b) of the European Coal and Steel Community 
(ECSC) Treaty, persons employed in the iron, steel, and coal industries 
who lose their jobs may receive assistance for social adjustment. This 
assistance is provided to workers affected by restructuring measures, 
particularly workers withdrawing from the labor market into early 
retirement and workers forced into unemployment. The ECSC disburses 
assistance under this program on the condition that the affected 
country makes an equivalent contribution. During the POR, payments were 
made to Saarstahl, on behalf of its workers, under Article 56(2)(b).
    In Lead and Bismuth, 58 FR at 6235, the Department determined that 
the portion of ECSC payments (i.e. 50 percent) made under this program 
during the POI, 1991, was not countervailable because the funds for 
this program came from the ECSC's operational budget, which is funded 
by levies on the companies. In Lead and Bismuth, the Department also 
previously found that the portion funded by the GOG was countervailable 
to the extent that the GOG's payments relieved Saarstahl of an 
obligation to its laid-off workers that the company would otherwise 
have incurred. See Lead and Bismuth, 58 FR at 6235.
    In German Wire Rod, the Department determined this program to be 
countervailable but distinguished between GOG worker assistance 
payments relating to the social plan established in conjunction with 
Saarstahl's bankruptcy in 1993, and GOG worker assistance payments made 
pursuant to the company's pre-bankruptcy social plans. See 62 FR at 
54993. In that investigation, the Department reasoned that Saarstahl's 
bankruptcy social plan provides the maximum allowable benefits to 
workers under German bankruptcy law and that, therefore, the knowledge 
of ECSC 56(2)(b) benefits did not affect the company's social plan 
obligations. Thus, the Department determined that GOG payments relating 
to Saarstahl's bankruptcy social plan are not countervailable. Id.
    In this administrative review, we have followed the approach taken 
in German Wire Rod and, therefore, preliminarily determine that only 
the worker assistance payments received pursuant to Saarstahl's pre-
bankruptcy social plans are countervailable. Because a company can 
expect to receive the benefits on an ongoing basis, we have limited our 
analysis to funds received during the POR, 1997. In situations where 
the company and its workers are aware at the time of their negotiations 
that the government will be making contributions to the workers' 
benefits, the Department's practice is to treat half of the amount paid 
by the government as benefitting the company. See, GIA, 58 FR at 37225. 
In the GIA, the Department stated that when the government's 
willingness to provide assistance is known at the time the contract is 
being negotiated, this assistance is likely to have an effect on the 
outcome of the negotiations. In these situations, the Department will 
assume that the differences between what the workers would have 
demanded and what the company would have preferred to have paid would 
have been split between the parties, with the result that one-half of 
the government payment goes to relieving the company of an obligation 
that would otherwise exist. See, GIA, 58 FR at 37256. This methodology 
was upheld in LTV Steel Co. v. United States, 985 F. Supp. 95, 116 (CIT 
1997).
    Consistent with Department's practice described above, the benefit 
to Saarstahl is one-half the amount paid to the workers by the GOG 
under the pre-bankruptcy social plan. To calculate the benefit under 
this program, we divided this amount by Saarstahl's total sales during 
the POR. On this basis, we preliminarily determine the net subsidy to 
Saarstahl under this program to be 0.06 percent ad valorem.

II. Program Preliminarily Determined to be Not Countervailable

A. ECSC Research and Development Assistance Under Article 55
    Under Article 55 of the ECSC Treaty, assistance is available to 
promote technical and economic research relating to the production and 
increased use of coal and steel, and to occupational safety in the coal 
and steel industries. Since the end of 1986, this program has been 
funded solely through levies on steel producing companies.
    During the POR, Saarstahl received research and development 
assistance related to calcium treated and aluminum deoxidized steels 
with high sulfur content under the ECSC Article 55 program.
    In Final Affirmative Countervailing Duty Determination: Certain 
Steel Products from Belgium, 58 FR 37273, 37285, (July 9, 1993), the 
Department found this program to be not countervailable because funding 
under this program was provided by levies on participating steel 
companies and because the program stipulates that the results of 
research conducted under Article 55 must be made publicly available.
    No new information or evidence of changed circumstances has been 
submitted in this proceeding to warrant reconsideration of this 
determination. Therefore, for purposes of this preliminary 
determination, we find this program not countervailable.

III. Other Program Examined

BRITE/EuRAM Research and Development Project (BRITE/EuRAM Project)
    Under the BRITE/EuRAM Project, participants receive research and 
development assistance in the form of grants from the European 
Community (EC). In order to receive the assistance, participants must 
make a formal proposal to the EC for the funding of a specific research 
and development project. Applicants whose proposals have been accepted 
then enter into a contract with the EC in which such items as the scope 
of the project, project goals, applicant reporting requirements and EC 
payments are established.
    During the POR, Saarstahl received grants from the EC under the 
BRITE/EuRAM Project for the development of a project entitled, ``World 
Class Performance for Wire Drawing through Improved Quality of the 
Manufacturing Process (WIREMAN).'' According to the

[[Page 16919]]

EC and Saarstahl, the objective of the WIREMAN project was to minimize 
waste and resource usage in the drawing process with the main focus of 
the project on the processing of steelcord for use in the manufacture 
of tires.
    Because the research and development assistance related to this 
program is tied to merchandise other than subject merchandise, we 
preliminarily determine that this assistance did not benefit 
Saarstahl's production of subject merchandise during the POR. (For 
further discussion, see the Memorandum to the File, ``BRITE/EuRAM 
Project,'' dated March 31, 1999, on file in the Central Records Unit 
(CRU)). We note that we intend to verify the EC's and Saarstahl's 
statements as they relate to the tying of benefits under this program 
to merchandise other than subject merchandise.

IV. Programs About Which More Information Is Needed

Subsidies Leading Up to the 1997 Reorganization
    In this administrative review, petitioners argue that information 
contained in Saarstahl's financial statements indicates that Saarstahl 
claimed large write-offs of loans and other liabilities both in 1996 
and in 1997. They argue that the Department should analyze these write-
offs within an overall context of Saarstahl's operation as a 
government-owned but bankrupt company and its reorganization out of 
bankruptcy in 1997.
    In its original July 20, 1998, questionnaire response, Saarstahl 
explained that it was unable to submit the 1997 financial data 
requested by the Department because it had not yet completed its 
financial statements for 1997. Saarstahl submitted its financial 
statements for 1997 on the record on January 15, 1999. In a submission 
dated February 9, 1999, petitioners raised the issue of potentially 
large amounts of debt forgiveness and grants leading up to the 1997 
reorganization. On February 26, 1999, Saarstahl submitted a 
questionnaire response containing further information regarding its 
large amounts of extraordinary income and writeoffs. On March 11, 1999, 
upon reviewing this new information, petitioners suggested that the 
Department should consider whether, as in the years leading up to the 
1989 reorganization, massive debt forgiveness and additional government 
contributions allowed Saarstahl to remain an ongoing concern and emerge 
from its bankruptcy. Additionally, petitioners suggest that Saarstahl 
may have been forgiven value-added taxes that it owed. Saarstahl 
addressed petitioners claims in a submission dated March 22, 1999. In 
general, Saarstahl argues that its bankruptcy proceeding was handled in 
full accordance with German law and that the forgiveness of debts as a 
result of bankruptcy is not countervailable, in accordance with the 
Department's practice.
    The issues raised by petitioners regarding Saarstahl's operation as 
a government-owned bankrupt company and the nature of its extraordinary 
income and write-offs leading up to its reorganization in 1997 merit 
further examination in this administrative review. Due to the delayed 
submission of Saarstahl's financial data for 1997, these issues were 
raised with very little time for the Department to collect all of the 
information needed to examine them fully. While the Department 
preliminarily concludes that the information on the record is 
insufficient to demonstrate the existence of a countervailable program, 
the Department will consider the issues further and gather additional 
information, which will be subject to verification. Among other things, 
we will examine: (1) the terms of Saarstahl's bankruptcy, (2) its 
operation as a going concern during bankruptcy, (3) the relationship 
between Saarstahl and its creditors, (4) the nature of its liabilities, 
(5) the terms of the 1997 reorganization, (6) the establishment of the 
purchase price, (7) the nature of Saarstahl debt writeoffs, and (8) the 
relationship between the new shareholders and the governments of 
Saarstahl and Germany. We will consider whether Saarstahl's writeoffs 
of liabilities leading up to the 1997 reorganization constitute 
countervailable subsidies, whether it received countervailable 
subsidies in the form of tax forgiveness, and whether the sale of 
Saarstahl provided the company with countervailable grants. After we 
collect additional information and conduct verification, we will 
prepare an analysis memorandum addressing all of the pertinent issues 
surrounding Saarstahl's reorganization in 1997. Prior to issuing our 
final determination, we intend to provide all parties the opportunity 
to comment on our analysis.
Verification
    As provided in section 782(i) of the Act, we intend to verify the 
information submitted by the Governments of Germany and Saarland and 
Saarstahl. In addition, we will schedule our verification so that all 
parties to the proceeding will have ample time to comment on our 
findings prior to the publication of our final results of this 
administrative review.

Preliminary Results of Review

    In accordance with 19 CFR 355.221(b)(4)(i), we have calculated an 
individual subsidy rate for Saarstahl, the producer/exporter subject to 
this administrative review. For the period January 1, 1997 through 
December 31, 1997, we preliminarily determine the net subsidy for 
Saarstahl to be 12.31 percent ad valorem. If the final results of this 
review remain the same as these preliminary results, the Department 
intends to instruct the U.S. Customs Service to assess countervailing 
duties for Saarstahl at 12.31 percent ad valorem. The Department also 
intends to instruct the U.S. Customs Service (Customs) to collect a 
cash deposit of 12.31 percent of the f.o.b. invoice price on all 
shipments of the subject merchandise from Saarstahl, entered, or 
withdrawn from warehouse, for consumption on or after the date of 
publication of the final results of this review.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 19 CFR 
355.22(b). Pursuant to 19 CFR 355.22(c), for all companies for which a 
review was not requested, duties must be assessed at the cash deposit 
rate, and cash deposits must continue to be collected, at the rate 
previously ordered. As such, the countervailing duty cash deposit rate 
applicable to a company can no longer change, except pursuant to a 
request for a review of that company. See Federal-Mogul Corporation and 
The Torrington Company v. United States, 822 F. Supp. 782 (CIT 1993) 
and Floral Trade Council v. United States, 822 F. Supp. 766 (CIT 1993) 
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic 
assessment, which is identical to 19 CFR 355.22(g)). Therefore, the 
cash deposit rates for all companies except those covered by this 
review will be unchanged by the results of this review.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent

[[Page 16920]]

company-specific or country-wide rate applicable to the company. 
Accordingly, the cash deposit rates that will be applied to non-
reviewed companies covered by this order are those established in the 
most recently completed administrative proceeding conducted under the 
URAA. If such a review has not been conducted, the rate established in 
the most recently completed administrative proceeding pursuant to the 
statutory provisions that were in effect prior to the URAA amendments 
is applicable. See Lead Bar. These rates shall apply to all non-
reviewed companies until a review of a company assigned these rates is 
requested. In addition, for the period January 1, 1997 through December 
31, 1997, the assessment rates applicable to all non-reviewed companies 
covered by this order are the cash deposit rates in effect at the time 
of entry.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of 
publication of this notice. Pursuant to 19 CFR 351.309, interested 
parties may submit written comments in response to these preliminary 
results. Case briefs must be submitted within 30 days after the date of 
publication of this notice, and rebuttal briefs, limited to arguments 
raised in case briefs, must be submitted no later than five days after 
the time limit for filing case briefs. Parties who submit argument in 
this proceeding are requested to submit with the argument: (1) A 
statement of the issue, and (2) a brief summary of the argument. Case 
and rebuttal briefs must be served on interested parties in accordance 
with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, within 30 
days of the date of publication of this notice, interested parties may 
request a public hearing on arguments to be raised in the case and 
rebuttal briefs. Unless the Secretary specifies otherwise, the hearing, 
if requested, will be held two days after the date for submission of 
rebuttal briefs, that is, thirty-seven days after the date of 
publication of these preliminary results.
    The Department will publish the final results of this 
administrative review, including the results of its analysis of issues 
raised in any case or rebuttal brief or at a hearing.
    This administrative review is issued and published in accordance 
with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1) 
and 19 U.S.C. 1677f(i)(1)).

    Dated: March 31, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-8621 Filed 4-6-99; 8:45 am]
BILLING CODE 3510-DS-P