[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Notices]
[Pages 40416-40430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18853]



[[Page 40415]]

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Part II





Department of Commerce





_______________________________________________________________________



International Trade Administration



_______________________________________________________________________



Preliminary Affirmative Countervailing Duty Determination and Alignment 
of Final Countervailing Duty Determination With Final Antidumping Duty 
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From 
Italy, France, India, Republic of Korea, and Indonesia; Notices

  Federal Register / Vol. 64, No. 142 / Monday, July 26, 1999 / 
Notices  

[[Page 40416]]



DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-827]


Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination: Certain Cut-to-Length Carbon-Quality 
Steel Plate From Italy

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

EFFECTIVE DATE: July 26, 1999.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Michael Grossman, 
Office of CVD/AD Enforcement II, Import Administration, U.S. Department 
of Commerce, Room 4012, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230; telephone (202) 482-2786.

PRELIMINARY DETERMINATION: The Department of Commerce (the Department) 
preliminarily determines that countervailable subsidies are being 
provided to certain producers and exporters of certain cut-to-length 
carbon-quality steel plate from Italy. For information on the estimated 
countervailing duty rates, please see the ``Suspension of Liquidation'' 
section of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

    The petition in this investigation was filed by Bethlehem Steel 
Corporation, U.S. Steel Group, a Unit of USX Corporation, Gulf States, 
Inc., IPSCO Steel Inc., and the United Steelworkers of America (the 
petitioners).

Case History

    Since the publication of the notice of initiation in the Federal 
Register (see Notice of Initiation of Countervailing Duty 
Investigations: Certain Cut-To-Length Carbon-Quality Steel Plate from 
France, India, Indonesia, Italy, and the Republic of Korea, 64 FR 12996 
(March 16, 1999) (Initiation Notice)), the following events have 
occurred: On March 19, 1999, we issued countervailing duty 
questionnaires to the Government of Italy (GOI), the European 
Commission (EC), and the producers/exporters of the subject merchandise 
(CTL plate). On April 21, 1999, we postponed the preliminary 
determination of this investigation until no later than July 16, 1999. 
See Certain Cut-To-Length Carbon-Quality Steel Plate from France, 
India, Indonesia, Italy, and the Republic of Korea: Postponement of 
Time Limit for Preliminary Determination of Countervailing Duty 
Investigations, 64 FR 23057 (April 29, 1999).
    We received responses to our initial questionnaires from the EC on 
May 6, 1999, and the GOI on May 10 and 28, 1999. Palini & Bertoli 
S.p.A. (Palini & Bertoli), a producer of the subject merchandise which 
had exports to the United States in 1998, submitted its questionnaire 
response on May 11, 1999. ILVA Lamiere e Tubi S.p.A. and ILVA S.p.A. 
(collectively referred to as ILVA/ILT) submitted their joint 
questionnaire response on May 13, 1999. (ILT produced the subject 
merchandise which was exported to the United States by ILVA in 1998.) 
On May 25, 1999, we issued a supplemental questionnaire to Palini & 
Bertoli, and received the company's response on June 14, 1999. On June 
1, 1999, we issued supplemental questionnaires to the EC, GOI, and 
ILVA/ILT. The supplemental questionnaire responses were submitted by 
the EC on June 15, 1999, by ILVA/ILT on June 21, 1999, and by the GOI 
on June 22, 1999. We also issued supplemental questionnaires on June 
22, 1999, to Palini & Bertoli, and June 29, 1999, to the EC, GOI, and 
ILVA/ILT. The responses were submitted on July 6, 1999, by Palini & 
Bertoli and the EC, on July 8 and 9, 1999, by the GOI, and July 9, 
1999, by ILVA/ILT. On July 13 and 14, 1999, ILVA/ILT submitted 
additional information on the record.
    In its supplemental response, Palini & Bertoli indicated that the 
company received benefits under two regional government laws during the 
POI, i.e., Law 25/65 and Law 30/84. The Department did not receive a 
request by petitioners to examine these potential benefits, hence we 
did not initiate on these laws in the Initiation Notice. Law 25/65, 
adopted by the Regional Government of Friuli-Venezia Giulia, provides 
interest contributions on loans taken by small- and medium-sized 
enterprises for the construction, enlargement, or technical renovation 
of industrial plants throughout the region. Palini & Bertoli received 
interest contributions during the POI on one loan contracted in 1990. 
Palini & Bertoli also received a capital grant under Law 30/84 of the 
Regional Government of Friuli-Venezia Giulia. Regional Law 30/84 
provides capital grants to industrial and handicraft enterprises 
intending to open new productive sites or to restructure existing 
plants within certain mountainous areas of the region. Due to the fact 
that this information was brought to the Department's attention just 
prior to the preliminary determination, the Department is unable to 
make a determination on the countervailability of these programs at 
this time. More specifically, the Department does not have sufficient 
information to perform an appropriate specificity analysis of the above 
mentioned programs. We will request additional and clarifying 
information with regard to these programs from Palini & Bertoli and the 
Regional Government of Friuli-Venezia Giulia, and will present our 
findings in the Final Determination of this investigation.

Scope of Investigation

    The products covered by this scope are certain hot-rolled carbon-
quality steel: (1) universal mill plates (i.e., flat-rolled products 
rolled on four faces or in a closed box pass, of a width exceeding 150 
mm but not exceeding 1250 mm, and of a nominal or actual thickness of 
not less than 4 mm, which are cut-to-length (not in coils) and without 
patterns in relief), of iron or non-alloy-quality steel; and (2) flat-
rolled products, hot-rolled, of a nominal or actual thickness of 4.75 
mm or more and of a width which exceeds 150 mm and measures at least 
twice the thickness, and which are cut-to-length (not in coils).
    Steel products to be included in this scope are of rectangular, 
square, circular or other shape and of rectangular or non-rectangular 
cross-section where such non-rectangular cross-section is achieved 
subsequent to the rolling process (i.e., products which have been 
``worked after rolling'')--for example, products which have been 
beveled or rounded at the edges. Steel products that meet the noted 
physical characteristics that are painted, varnished or coated with 
plastic or other non-metallic substances are included within this 
scope. Also, specifically included in this scope are high strength, low 
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum.
    Steel products to be included in this scope, regardless of 
Harmonized Tariff Schedule of the United States (HTSUS) definitions, 
are products in which: (1) Iron predominates, by weight, over each of 
the other contained elements, (2) the carbon content is two percent or 
less, by weight, and (3) none of the elements listed below is equal to 
or exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or

[[Page 40417]]

0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.

    All products that meet the written physical description, and in 
which the chemistry quantities do not equal or exceed any one of the 
levels listed above, are within the scope of these investigations 
unless otherwise specifically excluded. The following products are 
specifically excluded from these investigations: (1) Products clad, 
plated, or coated with metal, whether or not painted, varnished or 
coated with plastic or other non-metallic substances; (2) SAE grades 
(formerly AISI grades) of series 2300 and above; (3) products made to 
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to 
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary 
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon 
manganese steel or silicon electric steel.
    The merchandise subject to these investigations is classified in 
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030, 
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000, 
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050, 
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000, 
7226.91.8000, 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
Customs purposes, the written description of the merchandise under 
investigation is dispositive.

Scope Comments

    As stated in our notice of initiation, we set aside a period for 
parties to raise issues regarding product coverage. In particular, we 
sought comments on the specific levels of alloying elements set out in 
the description below, the clarity of grades and specifications 
excluded from the scope, and the physical and chemical description of 
the product coverage.
    On March 29, 1999, Usinor, a respondent in the French antidumping 
and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd. 
and Pohang Iron and Steel Co., Ltd., respondents in the Korean 
antidumping and countervailing duty investigations (collectively the 
Korean respondents), filed comments regarding the scope of the 
investigations. On April 14, 1999, the petitioners responded to 
Usinor's and the Korean respondents' comments. In addition, on May 17, 
1999, ILVA/ILT, a respondent in the Italian antidumping and 
countervailing duty investigations, requested guidance on whether 
certain products are within the scope of these investigations.
    Usinor requested that the Department modify the scope to exclude: 
(1) Plate that is cut to non-rectangular shapes or that has a total 
final weight of less than 200 kilograms; and (2) steel that is 4'' or 
thicker and which is certified for use in high-pressure, nuclear or 
other technical applications; and (3) floor plate (i.e., plate with 
``patterns in relief'') made from hot-rolled coil. Further, Usinor 
requested that the Department provide clarification of scope coverage 
with respect to what it argues are over-inclusive HTSUS subheadings 
included in the scope language.
    The Department has not modified the scope of these investigations 
because the current language reflects the product coverage requested by 
the petitioners, and Usinor's products meet the product description. 
With respect to Usinor's clarification request, we do not agree that 
the scope language requires further elucidation with respect to product 
coverage under the HTSUS. As indicated in the scope section of every 
Department antidumping and countervailing duty proceeding, the HTSUS 
subheadings are provided for convenience and Customs purposes only; the 
written description of the merchandise under investigation or review is 
dispositive.
    The Korean respondents requested confirmation whether the maximum 
alloy percentages listed in the scope language are definitive with 
respect to covered HSLA steels.
    At this time, no party has presented any evidence to suggest that 
these maximum alloy percentages are inappropriate. Therefore, we have 
not adjusted the scope language. As in all proceedings, questions as to 
whether or not a specific product is covered by the scope should be 
timely raised with Department officials.
    ILVA/ILT requested guidance on whether certain merchandise produced 
from billets is within the scope of the current CTL plate 
investigations. According to ILVA/ILT, the billets are converted into 
wide flats and bar products (a type of long product). ILVA/ILT notes 
that one of the long products, when rolled, has a thickness range that 
falls within the scope of these investigations. However, according to 
ILVA/ILT, the greatest possible width of these long products would only 
slightly overlap the narrowest category of width covered by the scope 
of the investigations. Finally, ILVA/ILT states that these products 
have different production processes and properties than merchandise 
covered by the scope of the investigations and therefore are not 
covered by the scope of the investigations.
    As ILVA/ILT itself acknowledges, the particular products in 
question appear to fall within the parameters of the scope and, 
therefore, we are treating them as covered merchandise for purposes of 
these investigations.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
regulations codified at 19 CFR part 351 (1998) and to the substantive 
countervailing duty regulations published in the Federal Register on 
November 25, 1998 (63 FR 65348) (CVD Regulations).

Injury Test

    Because Italy is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from Italy materially injure, or threaten material 
injury to, a U.S. industry. On April 8, 1999, the ITC published its 
preliminary determination that there is a reasonable indication that an 
industry in the United States is being materially injured, or 
threatened with material injury, by reason of imports from Italy of the 
subject merchandise (see Certain Cut-to-Length Steel Plate From the 
Czech Republic, France, India, Indonesia, Italy, Japan, Korea, and 
Macedonia; Determinations, 64 FR 17198 (April 8, 1999)).

Alignment With Final Antidumping Duty Determination

    On July 2, 1999, the petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determination in the companion

[[Page 40418]]

antidumping duty investigation. See Initiation of Antidumping Duty 
Investigations: Certain Cut-To-Length Carbon-Quality Steel Plate from 
the Czech Republic, France, India, Indonesia, Italy, Japan, Republic of 
Korea, and the Former Yugoslav Republic of Macedonia, 64 FR 12959 
(March 16, 1999). In accordance with section 705(a)(1) of the Act, we 
are aligning the final determination in this investigation with the 
final determinations in the antidumping investigations of certain cut-
to-length carbon-quality steel plate.

Period of Investigation

    The period of investigation for which we are measuring subsidies 
(the POI) is calendar year 1998.

Corporate History of ILVA/ ILT 1

    Prior to 1981, the Italian government holding company Istituto per 
la Ricostruzione Industriale (IRI), controlled Italy's nationalized 
steel industry through its wholly-owned subsidiary, Finsider S.p.A 
(Finsider). The steel operations of Finsider were subdivided into three 
main companies: Italsider (carbon steel); Terni (stainless and special 
steel); and Dalmine (pipe and tube). Italsider was the sector leader 
and the primary producer of the subject merchandise. In 1981, the GOI 
implemented a restructuring plan, and Finsider was restructured into 
several operating companies including Nuova Italsider (carbon steel 
flat products); Terni (speciality flat steels); Nuova Sias (special 
long products); and other steel product divisions. In the course of the 
1981 Restructuring Plan, Italsider transferred all of its assets, with 
the exception of certain plants, to Nuova Italsider. Italsider became a 
one-company holding company with Nuova Italsider's stock as its primary 
asset.
---------------------------------------------------------------------------

    \1\ As discussed in this section, ILVA/ILT's carbon steel 
predecessor companies are: Nuova Italsider (1981-1987), Italsider 
(1987-1988), ILVA S.p.A. (1989-1993), and ILP (1994-1996).
---------------------------------------------------------------------------

    During 1987, Finsider restructured three of its main operating 
companies: Nuova Italsider, Deltasider, and Terni. Nuova Italsider 
spun-off its assets to Italsider and transferred its shares in 
Italsider to Finsider. Nuova Italsider ceased operations after this 
divestment and Finsider had direct ownership of Italsider. Upon 
completion of the 1987 restructuring, Italsider re-emerged as the steel 
sector's carbon steel products producer.
    Later in 1987, Finsider and its main operating companies 
(Italsider, TAS, and Nuova Deltasider) were placed in liquidation and 
the GOI subsequently implemented the 1988 Restructuring Plan. The goal 
of the 1988 Restructuring Plan was to restructure Finsider and its 
operating companies, assembling the group's most productive assets into 
a new operating company, ILVA S.p.A. (ILVA S.p.A. or (old) ILVA), which 
began operations on January 1, 1989. The 1988 Restructuring Plan, like 
the 1981 plan, was submitted and approved by the EC. In accordance with 
the plan, ILVA S.p.A. took over some of the assets and liabilities of 
the liquidating companies, and Finsider closed certain facilities to 
comply with the EC's requirements. With respect to Italsider, part of 
the company's liabilities and the majority of its viable assets, 
including all the assets associated with the production of carbon steel 
flat-rolled products, were transferred to ILVA S.p.A. on January 1, 
1989. Non-productive assets and a substantial amount of liabilities 
were left behind with Finsider and the liquidating operating companies.
    The facilities retained by ILVA S.p.A were organized into four 
primary operating groups: Carbon steel flat products, stainless steel 
flat products, stainless steel long products, and seamless pipe and 
tube. In 1992, ILVA Lamiere e Tubi (ILT), a carbon steel flat products 
operation, was created as a wholly-owned subsidiary of ILVA S.p.A. ILVA 
S.p.A. was also the majority owner of a large number of separately 
incorporated subsidiaries. Some of these subsidiaries produced various 
types of steel products. Others constituted service centers, trading 
companies, and an electric power company, among others. ILVA S.p.A., 
together with its subsidiaries, constituted the ILVA Group. The ILVA 
Group was wholly-owned by IRI.
    Although, ILVA S.p.A. was profitable in 1989 and 1990, the company 
encountered financial difficulties in 1991, and became insolvent by 
1993. In October 1993, ILVA S.p.A. entered into liquidation and became 
known as ILVA Residua (a.k.a., ILVA in Liquidation). In December 1993, 
IRI initiated the splitting of ILVA S.p.A.'s main productive assets 
into two new companies: ILVA Laminati Piani (carbon steel flat 
products) (ILP) and Acciai Speciali Terni (AST) (speciality and 
stainless steel flat products). On December 31, 1993, ILP and AST 
became separately incorporated firms in advance of privatization. ILT, 
the carbon flat steel products operation, was transferred to ILP as its 
wholly-owned subsidiary. The remainder of ILVA S.p.A.'s productive 
assets and existing liabilities, along with much of the redundant 
workforce, was placed in ILVA Residua.
    On January 1, 1994, ILP was formally established as a separate 
corporation. In 1995, 100 percent of ILP was sold through a competitive 
public tender managed by IRI with the assistance of Istituto Mobiliare 
Italiano (IMI). The sale of ILP was executed through a share purchase 
agreement between IRI and a consortium of investors led by Riva Acciaio 
S.p.A. (RIVA) and investment companies. The contract of sale was signed 
on March 16, 1995, and all shares of ILP were transferred to the 
consortium on April 28, 1995. As of that date, the GOI no longer 
maintained any ownership interest in ILP or had any ownership interest 
in any of ILP's new owners.
    On January 1, 1997, RIVA changed the name of ILP to ILVA S.p.A 
(creating the ``new'' ILVA, referred to hereafter as ILVA or (new) 
ILVA). ILVA continues to wholly-own ILT. Within RIVA's corporate 
structure, ILT, at its Taranto Works facility, produces the subject 
merchandise, which is exported to the United States. ILVA, with the 
assistance of ILVA Commerciale S.p.A. (ICO), a sales company wholly-
owned by ILVA, is responsible for selling and exporting the subject 
merchandise to the United States and other markets.
    As of 1998, RIVA owns and/or controls 82.0 percent of ILVA and two 
foreign-incorporated investment companies own the remaining 18.0 
percent of ILVA.
    According to ILVA/ILT, Sidercomit Taranto C.S. Lamiere S.r.l. 
(Sidercomit) was created in 1992, as an indirect subsidiary of (old) 
ILVA. Sidercomit became an operating unit within (new) ILVA in 1997, 
and currently operates service centers for the distribution of 
merchandise, including the subject merchandise for ILVA/ILT. Any 
benefits to Sidercomit under programs that have preliminarily been 
found countervailable have been mentioned separately within those 
program sections below.

Corporate History of Palini & Bertoli

    Palini & Bertoli, a 100 percent privately-owned corporation, was 
incorporated in December 1963. Palini & Bertoli has never been part of 
the Italian state-owned steel industry.

Change in Ownership

    In the General Issues Appendix (GIA), appended to the Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Austria, 58 FR 37217, 37226 (July 9, 1993) (Certain Steel from 
Austria), we applied a new methodology with respect to the treatment of 
subsidies received prior to the sale of a government-owned

[[Page 40419]]

company to a private entity (i.e., privatization), or the spinning-off 
(i.e., sale) of a productive unit from a government-owned company to a 
private entity.
    Under this methodology, we estimate the portion of the purchase 
price attributable to prior subsidies. We do this by first dividing the 
sold company's subsidies by the company's net worth for each year 
during the period beginning with the earliest point at which non-
recurring subsidies would be attributable to the POI and ending one 
year prior to the sale of the company. We then take the simple average 
of these ratios. This averaged ratio serves as a reasonable estimate of 
the percent that subsidies constitute of the overall value of the 
company. Next, we multiply this ratio by the purchase price to derive 
the portion of the purchase price attributable to the payment 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 the company is sold.
    With respect to the spin-off of a productive unit, consistent with 
the Department's methodology set out above, we analyze the sale of a 
productive unit to determine what portion of the sales 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. The result of this 
calculation yields the amount of remaining subsidies attributable to 
the spun off productive unit. We next estimate the portion of the 
purchase price going towards repayment of prior subsidies in accordance 
with the methodology set out above, and deduct it from the maximum 
amount of subsidies that could be attributable to the spun-off 
productive unit.

Use of Facts Available

    Both the GOI and ILVA/ILT failed to fully respond to the 
Department's questionnaires concerning the program ``Debt Forgiveness: 
1981 Restructuring Plan.'' Section 776(a)(2) of the Act requires the 
use of facts available when an interested party withholds information 
that has been requested by the Department, or when an interested party 
fails to provide the information requested in a timely manner and in 
the form required. In such cases, the Department must use the facts 
otherwise available in reaching the applicable determination. Because 
the GOI and ILVA/ILT failed to submit the information that was 
specifically requested by the Department, we have based our preliminary 
determination for this program on the facts available. In addition, the 
Department finds that by not providing the requested information, 
respondents have failed to cooperate to the best of their abilities.
    In accordance with section 776(b) of the Act, the Department may 
use an inference that is adverse to the interests of that party in 
selecting from among the facts otherwise available when the party has 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information. Such adverse inference may include 
reliance on information derived from (1) the petition; (2) a final 
determination in a countervailing duty or an antidumping investigation; 
(3) any previous administrative review, new shipper review, expedited 
antidumping review, section 753 review, or section 762 review; or (4) 
any other information placed on the record. See 19 CFR 351.308(c). In 
the absence of information from the GOI and ILVA/ILT, we consider the 
petition, as well as our findings from the final determination of 
Certain Steel from Italy to be appropriate bases for a facts available 
countervailing duty rate calculation.
    The Statement of Administrative Action accompanying the URAA 
clarifies that information from the petition and prior segments of the 
proceeding is ``secondary information.'' See Statement of 
Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316) 
(1994) (SAA), at 870. If the Department relies on secondary information 
as facts available, section 776(c) of the Act provides that the 
Department shall, to the extent practicable, corroborate such 
information using independent sources reasonably at its disposal. The 
SAA further provides that to corroborate secondary information means 
simply that the Department will satisfy itself that the secondary 
information to be used has probative value. However, where 
corroboration is not practicable, the Department may use uncorroborated 
information. With respect to the program for which we did not receive 
complete information from the respondents, the secondary information 
was corroborated through exhibits (i.e., financial statements) attached 
to the petition. The financial transactions discussed within Finsider's 
1984 and 1985 financial statements confirm that the GOI engaged in 
transactions which are tantamount to the assumption of debt and debt 
forgiveness. Based on such review of the transactions discussed in the 
financial statements, we find that the secondary information (i.e., the 
petition and Certain Steel from Italy) has probative value and, 
therefore, the information regarding the debt forgiveness provided 
under the 1981 Restructuring Plan has been corroborated.

Claims for ``Green Light'' Subsidy Treatment

    Section 771(5B) of the Act describes subsidies that are non-
countervailable, the so-called ``green light'' subsidies. Among these 
are subsidies to disadvantaged regions. The GOI has requested that 
certain of their regional subsidies be considered non-countervailable 
under the green light provisions of section 771(5B).
    The GOI has maintained a system of ``extraordinary intervention'' 
in southern Italy since the 1950's, authorizing aid to the 
disadvantaged region. Over time, various laws were passed, including 
Decree 218/78, relating to the extraordinary intervention in the South. 
In 1986, Law 64/86 was passed in order to consolidate all laws relating 
to the extraordinary intervention in the south into one development 
policy. Tax exemptions under Decree 218/78, for which the GOI has 
requested green light treatment, is considered part of Law 64/86 for 
this reason.
    In determining whether a specific subsidy should be accorded green 
light status, section 771(5B)(C) of the Act establishes the threshold 
that the subsidy be provided pursuant to a general framework of 
regional development, i.e., must be part of an internally consistent 
and generally applicable regional development policy. The region must 
be considered disadvantaged on the basis of neutral and objective 
criteria which do not favor certain regions beyond what is appropriate 
for the elimination or reduction of regional disparities within this 
framework. In Certain Pasta from Italy, 61 FR at 30307, the Department 
determined that the GOI did not perform a systematic analysis, using 
neutral and objective criteria, in order to identify the regions which 
would receive regional development assistance under Law 64/86. There is 
no evidence on the record of this investigation that the GOI performed 
this necessary analysis. While detailed analysis may have been done by 
the EC with respect to its own regional development policy

[[Page 40420]]

concerning Italy, there is no indication that the GOI undertook the 
same or similar efforts on a national level.
    In addition, the Act outlines that a subsidy program cannot provide 
more aid than is appropriate for reduction of regional disparities and 
must include ceilings on the amount of assistance for each project. 
There is no evidence on the record that the GOI has given any 
consideration to a limit on the amount of assistance that could be 
awarded with regard to the program in question. Furthermore, there is 
no evidence that the GOI may have been concerned about awarding 
potentially disproportionate amounts to particular enterprises or 
industries.
    Based on this analysis, we preliminarily determine that subsidies 
received under this program do not meet the standard for green light 
treatment. Our treatment of the benefits provided under this program is 
discussed below in the ``Programs Determined To Be Countervailable'' 
section of our notice.

Subsidies Valuation Information

Allocation Period

    Section 351.524(d)(2) of the CVD Regulations states that we will 
presume the allocation period for non-recurring subsidies to be the 
average useful life (AUL) of renewable physical assets for the industry 
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class 
Life Asset Depreciation Range System and updated by the Department of 
Treasury. The presumption will apply unless a party claims and 
establishes that these tables do not reasonably reflect the AUL of the 
renewable physical assets for the company or industry under 
investigation, and the party can establish that the difference between 
the company-specific or country-wide AUL for the industry under 
investigation is significant.
    On June 21, 1999, ILVA/ILT submitted to the Department four tables 
illustrating its company-specific AUL calculations for (old) ILVA, ILP, 
ILT, and (new) ILVA, both separately and in combination. Based upon our 
analysis of the data submitted by ILVA/ILT regarding the AUL of its 
assets, we preliminarily determine that the calculation which takes 
into consideration all producers of the subject merchandise over the 
past 10 years is the most appropriate AUL calculation. However, because 
this calculation does not yield a company-specific AUL which is 
significantly different from the AUL listed in the IRS tables, we are 
using the 15 year AUL as reported in the IRS tables to allocate non-
recurring subsidies under investigation for ILVA/ILT in the preliminary 
calculations.

Equityworthiness

    In measuring the benefit from a government equity infusion, in 
accordance with Sec. 351.507 (a)(2) of the Department's CVD 
Regulations, the Department compares the price paid by the government 
for the equity to actual private investor prices, if such prices exist. 
According to Sec. 351.507(a)(3) of the Department's CVD Regulations, 
where actual private investor prices are unavailable, the Department 
will determine whether the firm was unequityworthy at the time of the 
equity infusion. In this case, private investor prices were 
unavailable. Therefore, our review of the record has not led us to 
change our finding from prior investigations, in which we found ILVA/
ILT's predecessor companies, Nuova Italsider and (old) ILVA, 
unequityworthy from 1984 through 1988, and from 1991 through 1992. See, 
e.g., Final Affirmative Countervailing Duty Determinations: Certain 
Steel Products from Italy, 58 FR 37327, 37328 (July 9, 1993) (Certain 
Steel from Italy); Final Affirmative Countervailing Duty Determination: 
Certain Stainless Steel Wire Rod from Italy, 63 FR 40,474, 40,477 (July 
29, 1998) (Wire Rod from Italy); and Final Affirmative Countervailing 
Duty Determination: Stainless Steel Sheet and Strip in Coils from 
Italy, 64 FR 30624, 30627 (June 8, 1999) (Sheet and Strip from Italy).
    Section 351.507(a)(3) of the Department's CVD Regulations provides 
that a determination that a firm is unequityworthy constitutes a 
determination that the equity infusion was inconsistent with usual 
investment practices of private investors. The Department will then 
apply the methodology described in Sec. 351.507(a)(6) of the 
regulations, and treat the equity infusion as a grant. Use of the grant 
methodology for equity infusions into an unequityworthy company is 
based on the premise that an unequityworthiness finding by the 
Department is tantamount to saying that the company could not have 
attracted investment capital from a reasonable investor in the infusion 
year based on the available information.

Creditworthiness

    When the Department examines whether a company is creditworthy, it 
is essentially attempting to determine if the company in question could 
obtain commercial financing at commonly available interest rates. See, 
e.g., Final Affirmative Countervailing Duty Determinations: Certain 
Steel Products from France, 58 FR 37304 (July 9, 1993), and Final 
Affirmative Countervailing Duty Determination: Steel Wire Rod from 
Venezuela, 62 FR 55014 (October 21, 1997). The Department will consider 
a firm to be uncreditworthy if it is determined that, based on 
information available at the time of the government-provided loan, the 
firm could not have obtained a long-term loan from conventional 
sources. See Sec. 351.505(a)(4)(i) of the CVD Regulations.
    Italsider, Nuova Italsider, and (old) ILVA were found to be 
uncreditworthy from 1977 through 1993. See Certain Steel from Italy, 58 
FR at 37328-29, Wire Rod from Italy, 63 FR at 40477, and Sheet and 
Strip from Italy, 64 FR at 30627. No new information has been presented 
in this investigation that would lead us to reconsider these findings. 
Therefore, consistent with our past practice, we continue to find 
Italsider, Nuova Italsider, and (old) ILVA uncreditworthy from 1977 
through 1993. We did not analyze ILP's, (new) ILVA's, or ILT's 
creditworthiness in the years 1994 through 1998, because the companies 
did not negotiate new loans with the GOI or EC during these years.

Benchmarks for Long-Term Loans and Discount Rates

    Consistent with the Department's finding in Wire Rod from Italy, 63 
FR at 40477 and Sheet and Strip from Italy, 64 FR at 30626-30627, we 
have based our discount rates on the Italian Bankers' Association (ABI) 
rates. The ABI rate represents a long-term interest rate provided to a 
bank's most preferred customers with established low-risk credit 
histories. In calculating the interest rate applicable to a borrower, 
commercial banks typically add a spread ranging from 0.55 percent to 
4.0 percent onto the ABI rate, which is determined by the company's 
financial health.
    Additionally, information on the record indicates that the 
published ABI rates do not include amounts for fees, commissions, and 
other borrowing expenses. While we do not have information on the 
expenses that would be applied to long-term commercial loans, the GOI 
supplied information on the borrowing expenses on overdraft loans for 
1997, as an approximation of expenses on long-term commercial loans. 
This information shows that expenses on overdraft loans range from 6.0 
to 11.0 percent of interest charged. Such expenses, along with the 
applied spread, raise the effective interest rate

[[Page 40421]]

that a company would pay. Because it is the Department's practice to 
use effective interest rates, where possible, we are including an 
amount for these expenses in the calculation of our effective benchmark 
rates. See Sec. 351.505(a)(1) of the CVD Regulations. Therefore, we 
have added the average of the spread (i.e., 2.28 percent) and borrowing 
expenses (i.e., 8.5 percent of the interest charged) to the yearly ABI 
rates to calculate the effective discount rates.
    For the years in which ILVA/ILT or their predecessor companies were 
uncreditworthy (see Creditworthiness section above), we calculated the 
discount rates in accordance with the formula for constructing a long-
term interest rate benchmark for uncreditworthy companies as stated in 
section 351.505(a)(3)(iii) of the CVD Regulations. This formula 
requires values for the probability of default by uncreditworthy and 
creditworthy companies. For the probability of default by an 
uncreditworthy company, we relied on the average cumulative default 
rates reported for the Caa to C-rated category of companies as 
published in Moody's Investors Service, ``Historical Default Rates of 
Corporate Bond Issuers, 1920-1997'' (February 1998). For the 
probability of default by a creditworthy company, we used the average 
cumulative default rates reported for the Aaa to Baa-rated categories 
of companies as reported in this study.2 For non-recurring 
subsidies, the average cumulative default rates for both uncreditworthy 
and creditworthy companies were based on a 15 year term, since all of 
ILVA/ILT's allocable subsidies were based on this allocation period.
---------------------------------------------------------------------------

    \2\ We note that since publication of the CVD Regulations, 
Moody's Investors Service no longer reports default rates for Caa to 
C-rated category of companies. Therefore for the calculation of 
uncreditworthy interest rates, we will continue to rely on the 
default rates as reported in Moody Investor Service's publication 
dated February 1998 (at Exhibit 28).
---------------------------------------------------------------------------

    In addition, ILVA/ILT had two long-term, fixed-rate loans under 
ECSC Article 54 outstanding during the POI, each denominated in U.S. 
dollars. Therefore, we have selected a U.S. dollar-based interest rate 
as our benchmark. See Sec. 351.505(a)(2)(i) of the CVD Regulations. 
Consistent with Wire Rod from Italy, 63 FR at 40486, we have used as 
our benchmark the average yield to maturity on selected long-term 
corporate bonds as reported by the U.S. Federal Reserve, since both of 
these loans were denominated in U.S. dollars. We used these rates since 
we were unable to find a long-term borrowing rate for loans denominated 
in U.S. dollars in Italy. Because ILVA was uncreditworthy in the year 
these loans were contracted, we calculated the uncreditworthy benchmark 
rates as per Sec. 351.505(a)(3)(iii) of the CVD Regulations.

I. Programs Determined To Be Countervailable

Government of Italy Programs
A. Equity Infusions to Nuova Italsider and (old) ILVA \3\
---------------------------------------------------------------------------

    \3\ In the Initiation Notice, these equity infusions were 
separately listed as ``Equity Infusions into Italsider/Nuova 
Italsider'' and ``Equity Infusions into ILVA.''
---------------------------------------------------------------------------

    The GOI, through IRI, provided new equity capital to Nuova 
Italsider or (old) ILVA in every year from 1984 through 1992, except in 
1987, 1989, and 1990. We preliminarily determine that these equity 
infusions constitute countervailable subsidies within the meaning of 
section 771(5)(B)(i) of the Act. These equity infusions constitute 
financial contributions, as described in section 771(5)(D)(i) of the 
Act. Because they were not consistent with the usual investment 
practices of private investors (see Equityworthiness section above), 
the equity infusions confer a benefit within the meaning of section 
771(5)(E)(i) of the Act. Because these equity infusions were limited to 
Finsider and its operating companies, Nuova Italsider and (old) ILVA, 
we preliminarily determine that they are specific within the meaning of 
section 771(5A)(D)(iii) of the Act.
    We have treated these equity infusions as non-recurring subsidies 
given in the year the infusion was received because each required a 
separate authorization. We allocated the equity infusions over a 15 
year AUL. Because Nuova Italsider and (old) ILVA were uncreditworthy in 
the years the equity infusions were received, we constructed 
uncreditworthy discount rates to allocate the benefits over time. See 
``Subsidies Valuation Information'' section, above.
    For equity infusions originally provided to Nuova Italsider, a 
predecessor company that produced carbon steel plate, we examined these 
equity infusions as though they had flowed directly through (old) ILVA 
to ILP when ILP took the carbon steel flat product assets out of (old) 
ILVA. Accordingly, we did not apportion to the other operations of 
(old) ILVA any part of the equity infusions originally provided 
directly to Nuova Italsider. While we acknowledge that it would be our 
preference to look at equity infusions into (old) ILVA as a whole and 
then apportion an amount to ILP when it was spun-off from (old) ILVA, 
we find our approach in this case to be the most feasible since 
information on equity infusions provided to the non-carbon steel 
operations of (old) ILVA is not available. For the equity infusions to 
(old) ILVA, however, we did apportion these by asset value to all (old) 
ILVA operations in determining the amount applicable to ILP.
    We applied the repayment portion of our change in ownership 
methodology to all of the equity infusions described above to determine 
the subsidy allocable to ILP after its privatization. We divided this 
amount by ILVA/ILT's total consolidated sales during the POI. On this 
basis, we preliminarily determine the net countervailable subsidy to be 
2.76 percent ad valorem for ILVA/ILT. Palini & Bertoli did not receive 
any equity infusions from the GOI.
B. Debt Forgiveness: 1981 Restructuring Plan
    The GOI reported that the objective of the 1981 Restructuring Plan 
was to redress the economic and financial difficulties the iron and 
steel industry was realizing in the early 1980's. The GOI stated that 
this plan, which extended to 1985, due to the prolonged crisis within 
the sector, envisaged financial interventions to aid in the recovery of 
the Finsider group. As discussed above in the ``Use of Facts 
Available'' section, the GOI and ILVA/ILT failed to submit complete 
information in regard to the assistance provided under the 1981 
Restructuring Plan. Therefore, based on the facts available, we 
preliminarily determine that certain financial transactions conducted 
in association with the 1981 Restructuring Plan are countervailable 
subsidies.
    Following Italsider's transfer of all its company facilities to 
Nuova Italsider in September 1981, Italsider held 99.99 percent of 
Nuova Italsider's shares. In 1983, Italsider was placed in liquidation. 
While in liquidation, Italsider sold its shares of Nuova Italsider to 
Finsider in December 1994. The sales price was 714.6 billion lire. As 
part of this payment, Finsider assumed Italsider's debts owed to IRI of 
696.4 billion lire. The difference between the 714.6 billion lire and 
696.4 billion lire was paid directly by Finsider to Italsider.
    On December 31, 1984, Finsider also granted to Italsider a non-
interest bearing loan of 563.5 billion lire to cover losses realized 
from the liquidation. A matching provision was also made to Finsider's 
``Reserve for

[[Page 40422]]

Losses on Investments and Securities,'' to cover the losses of the 
liquidation of Italsider. Following a shareholders' meeting of Finsider 
on December 30, 1985, the amount of 563.5 billion lire was disbursed to 
cover the losses of Italsider and Italsider's state of liquidation was 
revoked.
    In Certain Steel from Italy, the Department determined that the 
1981 Restructuring Plan merely shifted assets and debts within a family 
of companies, all of which were owned by Finsider, and ultimately, by 
the GOI. Therefore, we determined that both the 696.4 billion lire 
assumption of debt and the 563.5 billion lire debt forgiveness were 
specifically limited to the steel companies and constitute 
countervailable subsidies. See Certain Steel from Italy, 58 FR at 
37330. No new factual information or evidence of changed circumstances 
has been provided to the Department in this instant investigation to 
warrant a reconsideration of the earlier determination that the debt 
assumption and debt forgiveness are countervailable subsidies. 
Therefore, consistent with our treatment of these transactions in 
Certain Steel from Italy, we preliminarily determine that the 1984 
assumption of debt and 1985 debt forgiveness constitute countervailable 
subsidies within the meaning of section 771(5)(B)(i) of the Act. In 
accordance with Certain Steel from Italy, debt assumption and debt 
forgiveness are treated as grants which constitute financial 
contributions under section 771(5)(D)(i) of the Act. The transactions 
also confer benefits to the recipient within the meaning of section 
771(5)(E)(i) of the Act, in the amount of the debt coverage. Because 
the debt assumption and debt forgiveness were limited to Italsider, 
ILVA/ILT's predecessor, we preliminarily determine that these 
transactions are specific within the meaning of section 771(5A)(D)(iii) 
of the Act.
    To calculate the benefit, we have treated the assumption of debt 
and debt forgiveness to Italsider as non-recurring subsidies because 
each transaction was a one-time, extraordinary event. We allocated the 
1984 debt assumption and 1985 debt forgiveness over a 15 year AUL. See 
the ``Allocation Period'' section, above. In our grant formula, we used 
constructed uncreditworthy discount rates based on our determination 
that Italsider was uncreditworthy in 1984 and 1985. See ``Benchmark for 
Long-Term Loans and Discount Rates'' and ``Creditworthiness'' sections, 
above. As with the equity infusions made into Nuova Italsider and (old) 
ILVA, we have treated the assumption of debt and debt forgiveness as 
though the transactions had flowed directly through (old) ILVA to ILP. 
To determine the amount appropriately allocated to ILP after its 
privatization, we followed the methodology described in the ``Change in 
Ownership'' section above. We divided this amount by ILVA/ILT's total 
consolidated sales during the POI. On this basis, we preliminarily 
determine the net countervailable subsidy to be 1.10 percent ad valorem 
for ILVA/ILT. Palini & Bertoli did not receive any benefit under this 
program.
C. Debt Forgiveness: 1988 Restructuring Plan
    As discussed above in the ``Corporate History of ILVA/ILT'' section 
of this notice, the GOI liquidated Finsider and its main operating 
companies in 1988, and assembled the group's most productive assets 
into a new operating company, ILVA S.p.A. (i.e., (old) ILVA). The 
Finsider restructuring plan was developed at the end of 1987, and was 
approved by the GOI on June 14, 1988, and by the EC on December 23, 
1988. The objective of the plan was to restore the industrial, 
financial, and economic balance to the public iron and steel-making 
sector in Italy. The restructuring plan included the voluntary 
liquidation by IRI of Finsider, and IRI's assumption of the debts not 
covered by the sale of assets of the companies being liquidated. IRI 
was the sole owner of Finsider, and therefore, the party responsible 
for payment of the debts of Finsider's liquidation.
    A transfer of assets and liabilities from Finsider to (old) ILVA 
was to be accomplished at the latest by March 31, 1989. Upon completion 
of the 1988 Restructuring Plan, (old) ILVA owned Finsider's productive 
assets and a small portion of the group's liabilities. Included in the 
transfer were the productive portions of the flat-rolled facilities 
located at Taranto, Genoa, and Novi Ligure.4 The liquidating 
companies retained the non-productive assets and the vast majority of 
the liabilities, which had to be repaid, assumed, or forgiven. Thus, 
while (old) ILVA emerged from the process with a positive net worth, 
the other companies were left with capital structures in which their 
liabilities greatly exceeded the liquidation value of their assets.
---------------------------------------------------------------------------

    \4\ The subject merchandise which ILT produced and (new) ILVA 
exported to the United States in 1998, was produced at the Taranto 
facilities.
---------------------------------------------------------------------------

    We preliminarily determine that certain financial transactions 
associated with the 1988 Restructuring Plan constituted countervailable 
subsidies. In 1988, IRI established a fund of 2,943 billion lire to 
cover losses which Finsider would realize while in liquidation. As of 
December 31, 1988, Finsider had accumulated losses in excess of its 
equity. In order to prevent Finsider from becoming insolvent during 
1989, IRI utilized 1,364 billion lire of the fund to forgive debts it 
was owed by Finsider to cover the losses.
    Later in 1990, IRI forgave debts it was owed by Finsider when it 
purchased (old) ILVA's stock from Finsider and Terni for 2,983 billion 
lire. The 2,983 billion lire was used to pay off the liquidation 
companies' debts which existed at the time of the sale.
    In Certain Steel from Italy, we found IRI's purchase of ILVA's 
stock to be a countervailable subsidy because it effectively forgave 
Finsider's debts. Though ILVA/ILT, in its July 8, 1999 response, does 
not dispute that IRI purchased (old) ILVA's stock in 1990, the company 
disagrees with our earlier characterization that the share purchase was 
an act of debt forgiveness. We disagree with ILVA/ILT and preliminarily 
find that IRI's purchase of (old) ILVA's stock to be tantamount to debt 
forgiveness; however, we will seek further clarification of the stock 
purchase transaction from ILVA/ILT and the GOI.
    In the February 16, 1999 petition, petitioners also alleged that 
IRI forgave approximately 1.9 trillion lire of Finsider's debt in 1991. 
They note that the Department countervailed such an amount in Certain 
Steel from Italy. In the instant investigation, both the GOI and ILVA/
ILT reported that neither party has record information of such debt 
forgiven by IRI in 1991. We reviewed the petitioners' allegation and 
the documentation submitted to support their claim that IRI provided 
debt forgiveness of 1.9 trillion lire in 1991. In particular, we note 
that Finsider's 1989 Annual Report at page 12 states that: ``During the 
fiscal year, your company [Finsider] recorded losses totaling 1,568 
billion lire; therefore, the circumstances reoccur for which the 
shareholder IRI later renounced its own credits necessary to cover the 
difference.''
    Because Finsider realized a net loss of 1,568 billion lire for 
fiscal year 1989, in order to avoid insolvency of the company, as in 
1988, IRI should have forgiven the 1,568 billion lire it was due from 
Finsider to cover the company's losses in excess of equity during 1990. 
However, according to IRI's 1990 Annual Report, IRI did not forgive the 
1,568 billion lire by drawing down from the fund it established in 
1988, to cover Finsider's losses while in liquidation. Since we cannot 
track with any degree

[[Page 40423]]

of certainty what became of Finsider's indebtedness to IRI in 1990, or 
in subsequent fiscal years, we will gather information on what became 
of the 1,568 billion lire of losses in the context of seeking 
clarification of the assistance provided under the 1988 Restructuring 
Plan.
    Also, in the GOI's July 8, 1999 response, the government reported 
that, in addition to the debt forgiveness IRI provided to Finsider in 
1989, IRI disbursed 205 billion lire as authorized by the EC, to cover 
losses before plant closures. ILVA/ILT, however, in its July 8, 1999 
response, stated that IRI provided 738 billion lire to cover losses and 
expenditures during the liquidation process. For purposes of this 
preliminary determination, we conclude, based on the information 
provided to the Department by ILVA/ILT, that IRI provided 738 billion 
lire to Finsider to cover losses in 1989. However, because the 
information submitted on the record with respect to the assistance IRI 
provided to cover losses during the liquidation process is ambiguous, 
we will seek further clarification of the assistance provided from the 
GOI and ILVA/ILT at verification.
    Consistent with our determination in Certain Steel from Italy, we 
preliminarily determine that the debt forgiveness and coverage of 
losses, which IRI provided in 1989 and 1990, constitute countervailable 
subsidies within the meaning of section 771(5)(B)(i) of the Act. In 
accordance with our practice, debt forgiveness and coverage of losses 
are treated as grants which constitutes a financial contribution under 
section 771(5)(D)(i) of the Act, and provides a benefit in the amount 
of the debt coverage. Because the debt forgiveness and coverage of 
losses were received by only (old) ILVA, a predecessor company of ILVA/
ILT, we preliminarily determine that the debt coverage is specific 
under section 771(5A)(D)(iii) of the Act. See Certain Steel from Italy, 
58 FR at 37330.
    To determine the benefit from these subsidies, we have treated the 
amount of debt forgiveness and coverage of losses provided under the 
1988 Restructuring Plan as non-recurring grants because they were one-
time, extraordinary events. In its July 8, 1999 response, ILVA/ILT 
reported that (old) ILVA did not receive all of Finsider's assets when 
the company was established. ILVA/ILT provided an asset allocation 
table, which demonstrates that only 68.4 percent of Finsider's assets 
were transferred to (old) ILVA. In performing the preliminary 
calculations, we applied this percentage to the total amount of debt 
forgiveness and coverage of losses provided to Finsider in 1989 and 
1990, to determine the amount of debt coverage attributable to (old) 
ILVA. Because (old) ILVA was uncreditworthy in 1989 and 1990, the years 
in which the assistance was provided, we used constructed 
uncreditworthy discount rates to allocate the benefits over time. We 
allocated the debt coverage provided in 1989 and 1990, over a 15 year 
AUL. See the ``Subsidies Valuation Information'' section, above.
    We also apportioned the debt coverage by asset value to all (old) 
ILVA operations in determining the amount applicable to ILP. We next 
applied the repayment portion of our change in ownership methodology to 
the debt forgiveness to determine the amount of the subsidy allocable 
to ILP after its privatization. We divided this amount by ILVA/ILT's 
total consolidated sales during the POI. On this basis, we 
preliminarily determine the net countervailable subsidy to be 3.64 
percent ad valorem for ILVA/ILT. Palini & Bertoli did not receive any 
benefit under this program.
D. Debt Forgiveness: 1993-1994 Restructuring Plan, ILVA-to-ILP 
5
---------------------------------------------------------------------------

    \5\ This program was referred to as ``Debt Forgiveness Given in 
the Course of Privatization in Connection with the 1993-1994 
Restructuring Plan'' in the Initiation Notice (see 64 FR at 13000).
---------------------------------------------------------------------------

    During 1992 and 1993, (old) ILVA incurred heavy financial losses, 
which compelled IRI to place the company into liquidation. In December 
1993, the Italian government proposed to the EC a plan to restructure 
and privatize (old) ILVA by the end of 1994. The reorganization 
provided for splitting (old) ILVA's main productive assets into two new 
companies, ILP and AST. ILP would consist of the carbon steel flat 
production of (old) ILVA, receiving the Taranto facilities. AST would 
consist of the speciality and stainless steel production. The rest of 
(old) ILVA's productive assets (i.e., tubes, electricity generation, 
specialty steel long products, and sea transport), together with the 
bulk of (old) ILVA's existing debt and redundant work force were placed 
in a third entity known as ILVA Residua. Under the restructuring plan, 
ILVA Residua would sell those productive units it could and then would 
be liquidated, with IRI (i.e., the Italian government) absorbing the 
debt.
    As of December 31, 1993, the majority of (old) ILVA's viable 
manufacturing activities had been separately incorporated (or 
``demerged'') into either AST or ILP; ILVA Residua was primarily a 
shell company with liabilities far exceeding assets, although it did 
contain some operating assets that were later spun-off. In contrast, 
AST and ILP, ready for sale, had operating assets and relatively modest 
debt loads. The liabilities remaining with ILVA Residua had to be 
repaid, assumed, or forgiven. On April 12, 1994, the EC, through the 
94/259/ECSC decision, approved the GOI's restructuring and 
privatization plan for (old) ILVA and IRI's intention to cover ILVA 
Residua's remaining liabilities.
    We preliminarily determine that ILP (and consequently the subject 
merchandise) received a countervailable subsidy in 1993, within the 
meaning of section 771(5)(B)(i) of the Act, when the bulk of (old) 
ILVA's debt was placed in ILVA Residua, rather than being 
proportionately allocated to AST and ILP. In addition to the debt that 
was placed in ILVA Residua, we preliminarily determine that the asset 
write-downs which (old) ILVA took in 1993, as part of the 
restructuring/privatization plan, are countervailable subsidies under 
section 771(5)(B)(i) of the Act. The write-down of assets in 1993 
officially removed the assets from (old) ILVA's books and, thus, 
increased the losses to be covered in liquidation. It is the 
Department's position that when losses, which are later covered by a 
government, can be tied to specific assets those assets bear the 
liability for the losses that resulted from the write-downs. See Final 
Affirmative Countervailing Duty Determination: Grain-Oriented 
Electrical Steel from Italy, 59 FR 18357, 18359 (April 18, 1994) 
(Electrical Steel from Italy). The 1993 financial statement of (old) 
ILVA identifies that the write-downs can be tied to the specific 
assets.
    We preliminarily determine that the amount of debt and losses 
resulting from the asset write-downs that should have been attributable 
to ILP, but were instead placed with ILVA Residua, was equivalent to 
debt forgiveness for ILP at the time of its demerger. In accordance 
with our practice, debt forgiveness is treated as a grant which 
constitutes a financial contribution under section 771(5)(D)(i) of the 
Act, and provides a benefit in the amount of the debt forgiveness.
    We also preliminarily determine, based on record evidence, that the 
liquidation process of (old) ILVA did not occur under the normal 
application of a provision of Italian law, and therefore, the debt 
forgiveness is de facto specific under section 771(5A)(D)(iii)(II) of 
the Act. As stated above, the liquidation of (old) ILVA was done in the 
context of a massive restructuring/privatization plan of the

[[Page 40424]]

Italian steel industry undertaken by the GOI and approved and monitored 
by the EC. Because (old) ILVA's liquidation was part of an extensive 
state-aid package to privatize the Italian state-owned steel industry, 
and the debt forgiveness was received by only privatized (old) ILVA 
operations, we preliminarily find that the assistance provided under 
the 1993-1994 Restructuring Plan is de facto specific. In support of 
this preliminary finding, we note the EC's 94/259/ECSC decision, in 
which the Commission identified the restructuring of (old) ILVA as a 
single program, the basic objective of which was the privatization of 
the ILVA steel group by the end of 1994. As set forth in the EC's 
decision, the 1993-1994 Restructuring Plan was limited by its terms to 
(old) ILVA and the benefits of the plan were received by only (old) 
ILVA's successor companies.
    Consistent with the methodology that we employed in the final 
determination of Sheet and Strip from Italy, the amount of liabilities 
that we attributed to ILP is based on the gross liabilities left behind 
in ILVA Residua, as reported in the EC's 10th Monitoring Report. See 64 
FR at 30628. In calculating the amount of unattributable liabilities 
remaining after the demerger of ILP, we started with the most recent 
``total comparable indebtedness'' amount from the 10th Monitoring 
Report, which represents the indebtedness, net of debts transferred in 
the privatization of ILVA Residua's operations and residual asset 
sales, of a theoretically reconstituted, pre-liquidation (old) ILVA. In 
order to calculate the total amount of unattributed liabilities which 
amount to countervailable debt forgiveness, we made the following 
adjustments to this figure: for the residual assets that had not 
actually been liquidated as of the 10th and final Monitoring Report; 
for assets that comprised SOFINPAR, a real estate company (because 
these assets were sold prior to the demergers of AST and ILP); for the 
liabilities transferred to AST and ILP; for income received from the 
privatization of ILVA Residua's operations; for the amount of the asset 
write-downs specifically attributable to AST, ILP, and ILVA Residua 
companies; and for the amount of debts transferred to Cogne Acciai 
Speciali (CAS), an ILVA subsidiary that was left behind in ILVA Residua 
and later spun off, as well as the amount of (old) ILVA debt attributed 
to CAS and countervailed in Wire Rod from Italy, (see, 63 FR at 40478).
    The amount of liabilities remaining represents the pool of 
liabilities that were not individually attributable to specific (old) 
ILVA assets. We apportioned this debt to AST, ILP, and operations sold 
from ILVA Residua based on their relative asset values. We used the 
total consolidated asset values reported in AST's and ILP's financial 
statements for the year ending December 31, 1993. For ILVA Residua, we 
used the sum of the purchase price plus debts transferred as a 
surrogate for the viable asset value of the operations sold from ILVA 
Residua. Because we subtracted a specific amount of ILVA's gross 
liabilities attributed to CAS in Wire Rod from Italy, we did not 
include its assets in the amount of ILVA Residua's privatized assets. 
Also, we did not include in ILVA Residua's viable assets those assets 
sold to IRI, because the sale does not represent sales to a non-
governmental entity. To the amount of liabilities apportioned to ILP, 
we added the write-downs that were tied to the asset pool which ILP 
took when it was separately incorporated from (old) ILVA.
    We have treated the debt forgiveness to ILP as a non-recurring 
subsidy because it was a one-time, extraordinary event. The discount 
rate we used in our grant formula was a constructed uncreditworthy 
benchmark rate based on our determination that (old) ILVA was 
uncreditworthy in 1993. See ``Benchmarks for Long-Term Loans and 
Discount Rates'' and ``Creditworthiness'' sections, above. We followed 
the methodology described in the ``Change in Ownership'' section above 
to determine the amount appropriately allocated to ILP after its 
privatization. We divided this amount by ILVA/ILT's total consolidated 
sales during the POI. On this basis, we preliminarily determine the net 
countervailable subsidy to be 12.40 percent ad valorem for ILVA/ILT. 
Palini & Bertoli did not receive any benefits under this program.
E. Capital Grants to Nuova Italsider Under Law 675/77
    The Department has investigated Law 675/77 in prior investigations. 
See, e.g., Certain Steel from Italy, 58 FR at 37330-31, and the Final 
Affirmative Countervailing Duty Determination: Stainless Steel Plate in 
Coils from Italy, 64 FR 15508, 15513-14 (March 31, 1999) (Plate in 
Coils from Italy). In Certain Steel from Italy, we learned that Law 
675/77 created a framework for planned intervention by the GOI in the 
economy. The law provided financial incentives to industrial firms in 
certain sectors that submitted development, restructuring, and 
conversion plans for production facilities. In total, eleven sectors 
were identified as eligible for assistance. The types of funding 
provided under Law 675/77 included: (1) Interest payments on bank loans 
and bond issues; (2) low interest loans granted by the Ministry of 
Industry; (3) grants for companies located in the South; (4) grants for 
personnel retraining; and (5) increased VAT reductions for firms 
located in the Mezzogiorno area. In that prior investigation, we found 
that (old) ILVA and its predecessor companies received direct mortgage 
loans, interest contributions, and capital grants between 1977 and 
1991, under Law 675/77.
    In Certain Steel from Italy, we verified that of the ten sectors 
which received Law 675/77 funding, steel accounted for 36.4 percent of 
the total funding provided under Law 675/77. On this basis we 
determined that assistance provided to steel companies under Law 675/77 
is limited to a specific enterprise or industry, or group of 
enterprises or industries. We therefore found countervailable capital 
grants which (old) ILVA and its predecessor companies received under 
Law 675/77.
    In the instant investigation, the GOI and ILVA/ILT reported that 
Italsider applied for a capital grant in 1981, for an investment 
project at the Taranto plant. The GOI approved the application in 1982, 
and awarded a grant of 125,040 million lire to Nuova Italsider. The 
capital grant was disbursed in four tranches in the years 1985 and 
1987. The GOI stated that the capital grant program was established in 
1977, to support the development of regions in the south of Italy. The 
only eligibility criterion for the receipt of this ``one-time'' 
assistance was the location of factories in the south of Italy.
    Consistent with our finding in Certain Steel from Italy, we 
preliminarily determine that this program constitutes a countervailable 
subsidy within the meaning of section 771(5)(B)(i) of the Act. The 
capital grants constitute a financial contribution under section 
771(5)(D)(i) of the Act providing a benefit in the amount of the 
grants. Because the steel sector was found to be the dominant user of 
Law 675/77 and the capital grants were limited to enterprises located 
in the south of Italy, we preliminarily determine that the program is 
specific under section 771(5A)(D)(iii) of the Act.
    To determine the benefit, we have treated the capital grants as 
non-recurring subsidies because the receipt of the grants was a one-
time, extraordinary event. Because the benefit to Nuova Italsider is 
greater than 0.5 percent of the company's sales for 1982 (the year in 
which the grant was approved), we allocated the benefit over a 15 year 
AUL. See Sec. 351.524(b)(2) of the CVD Regulations. We applied the

[[Page 40425]]

change in ownership methodology to the capital grant to determine the 
subsidy allocable to ILP after its privatization. We divided this 
amount by ILVA/ILT's total consolidated sales for the POI. On this 
basis, we preliminarily determine the net countervailable subsidy to be 
0.13 percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this 
program.
F. Early Retirement Benefits
    Law 451/94 was created to conform with EC requirements of 
restructuring and capacity reduction of the Italian steel industry. Law 
451/94 was passed in 1994, and enabled the Italian steel industry to 
implement workforce reductions by allowing steel workers to retire 
early. During the 1994-1996 period, and into January 1997, Law 451/94 
provided for the early retirement of up to 17,100 Italian steel 
workers. Benefits applied for during this period continue until the 
employee reaches his/her natural retirement age, up to a maximum of ten 
years.
    In the final determinations of Plate in Coils from Italy and Sheet 
and Strip from Italy, 64 FR at 15514-15 and 64 FR at 30629-30, 
respectively, the Department determined that early retirement benefits 
provided under Law 451/94 are countervailable subsidies under section 
771(5)(B)(i) of the Act. Law 451/94 provides a financial contribution, 
as described in section 771(5)(D)(i) of the Act, because Law 451/94 
relieves the company of costs it would have normally incurred by having 
to employ individuals until the normal age of retirement. Also, because 
Law 451/94 was developed for, and exclusively used by, the steel 
industry, we determined that Law 451/94 is specific within the meaning 
of section 771(5A)(D)(iii) of the Act. No new factual information or 
evidence in the instant investigation has led us to change our prior 
findings that early retirements under Law 451/94 are countervailable.
    As we have in the recent final determinations of Plate in Coils 
from Italy and Sheet and Strip from Italy, we treated one-half of the 
amount paid by the GOI as benefitting the company. Recognizing that ILP 
\6\ would have been required to enter into negotiations with the unions 
before laying off workers, it is impossible for the Department to 
determine the outcome of those negotiations absent Law 451/94. At one 
extreme, the unions might have succeeded in preventing any lay offs. If 
so, the benefit to ILP would be the difference between what it would 
have cost to keep those workers on the payroll and what ILP actually 
paid under Law 451/94. At the other extreme, the negotiations might 
have failed and ILP would have incurred only the minimal costs 
described under the so-called ``Mobility'' provision of Law 223/91, 
which identifies the minimum payment the company would incur when 
laying off workers permanently. Then the benefit to ILP would have been 
the difference between what it would have paid under Mobility and what 
the company actually paid under Law 451/94.
---------------------------------------------------------------------------

    \6\ On December 31, 1993, (old) ILVA's main productive assets 
were spun into two new companies: ILVA Laminati Piani (carbon steel 
flat products) (ILP) and Acciai Speciali Terni (speciality and 
stainless steel products) (AST).
---------------------------------------------------------------------------

    We have no basis for believing either of these extreme outcomes 
would have occurred. It is clear, given the EC regulations, that ILP 
would have laid off workers. However, we do not believe that ILP would 
have simply fired the workers without reaching accommodation with the 
unions. The GOI has indicated that failure to negotiate a separation 
package with the unions would likely lead to strikes, lawsuits and 
general social unrest. Therefore, we have proceeded on the assumption 
that ILP's early retirees would have received some support from ILP.
    In attempting to determine the level of post-employment support 
that ILP would have negotiated with its unions, we examined the 
situation facing (old) ILVA before ILP and AST were spun off. By the 
end of 1993, (old) ILVA had established an overall plan for terminating 
redundant workers--a plan that would ultimately affect both ILP and 
AST. Under this plan, early retirees would first be placed on a 
temporary worker assistance measure under Law 223/91, Cassa 
Integrazione Guadagni--Extraordinario (CIG-E), while waiting for the 
passage of Law 451/94, and then would receive benefits under Law 451/94 
when implemented. During the verification of Plate in Coils from Italy 
and Sheet and Strip from Italy, the Department learned from AST 
officials that workers were indeed receiving temporary benefits under 
CIG-E while they were awaiting the passage of Law 451. See Results of 
AST Verification, Memorandum to the File, dated February 3, 1999 
(public version of the document is available on the public file in the 
Central Records Unit (CRU) of the Department, Room B-099). This 
indicates that, at the time an agreement was being negotiated with the 
unions and the labor ministry on the terms of the lay offs, (old) ILVA 
and its workers were aware that government contributions would 
ultimately be made to workers' benefits. In such situations, i.e., 
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 prior practice was to treat half of 
the amount paid by the government as benefitting the company. We have 
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. While we 
continue to adhere to this logic in the preamble to the CVD 
Regulations, we stated that we would examine the facts of each case to 
determine the appropriate portion of the funds to be considered 
countervailable. See CVD Regulations, 63 FR at 65380.
    With respect to ILP and its workers, we preliminarily determine 
that, under Italian Law 223, ILP would be required to negotiate with 
its unions about the level of benefits that would be made to workers 
permanently separated from the company. Since (old) ILVA and its unions 
were aware at the time of their negotiations that the GOI would be 
making payments to those workers under Law 451/94, some portion of the 
payment is countervailable. However, based on the record before us, we 
have no basis for apportioning the benefit. Therefore, for the 
preliminary determination, we consider the benefit to ILVA/ILT to be 
one half of the amount paid to the workers by the GOI under Law 451/94. 
We will verify this program further to determine the appropriate 
benefit.
    Consistent with the Department's practice, we have treated benefits 
to ILVA/ILT under Law 451/94 as recurring grants expensed in the year 
of receipt. To calculate the benefit received by ILVA/ILT during the 
POI, we multiplied the number of employees by employee type (blue 
collar, white collar, and senior executive) who retired early by the 
average salary by employee type. Since the GOI was making payments to 
these workers equaling 80 percent of their salary, we attributed one-
half of that amount to ILVA/ILT. Therefore, we multiplied the total 
wages of the early retirees by 40 percent. We then divided this total 
amount by ILVA/ILT's total consolidated sales during the POI. On this 
basis, we preliminarily determine a net countervailable subsidy to be 
1.41 percent ad valorem for ILVA/ILT.
    As mentioned in the ``Corporate History of ILVA/ILT'' section of 
this notice, in October 1993, (old) ILVA entered into liquidation and 
became known as ILVA Residua (a.k.a., ILVA in Liquidation). In December 
1993, IRI

[[Page 40426]]

initiated the splitting of (old) ILVA's main productive assets into two 
new companies, ILP and AST. On December 31, 1993, ILP and AST became 
separately incorporated firms. The remainder of (old) ILVA's productive 
assets and existing liabilities, along with much of the redundant 
workforce, was placed in ILVA Residua. By placing much of this 
redundant workforce in ILVA Residua, ILP and AST were able to begin 
their respective operations with a relatively ``clean slate'' in 
advance of their privatizations. ILP and AST were relieved of having to 
assume their respective portions of those redundant workers that were 
placed in ILVA Residua and received early retirement benefits under Law 
451/94. We have, therefore, determined that ILVA/ILT has received a 
countervailable benefit during the POI since it was relieved of a 
financial obligation that would otherwise have been due.
    In order to calculate the benefit received by ILVA/ILT during the 
POI, we first needed to determine the appropriate number of early 
retirees in ILVA Residua that originally should have been apportioned 
to ILP. To determine this number, we took the asset value of ILP in 
relation to the asset value of (old) ILVA at the time of the spin-off 
of ILP. We multiplied this percentage by the total number of ILVA 
Residua early retirees. It was then necessary to estimate the numbers 
and salaries of early retirees by employee type since the GOI did not 
provide this information. To do this, we applied the same ratios of 
workers by employee type as ILP retired, and applied this to ILVA 
Residua. We also used the same salaries of ILVA/ILT employees by worker 
type. As we did with ILP early retirees, we then multiplied the number 
of employees, by employee type, by the average salary by employee type. 
Since the GOI was making payments to these workers equaling 80 percent 
of their salary, we attributed one-half of that amount to ILVA/ILT. 
Therefore, we multiplied the total wages of the early retirees by 40 
percent. We then divided this total amount by ILVA/ILT's total 
consolidated sales during the POI. On this basis, we preliminarily 
determine a net countervailable subsidy to be 0.67 percent ad valorem 
for ILVA/ILT.
    The Sidercomit unit of ILVA/ILT also received early retirement 
benefits under Law 451/94 separately from ILVA/ILT. As we did with 
ILVA/ILT, we multiplied the total wages of the early retirees by 40 
percent and then divided this amount by the total consolidated sales of 
ILVA/ILT during the POI. On this basis, we preliminarily determine the 
net countervailable subsidy to be less than 0.005 percent ad valorem 
for ILVA/ILT.
    Upon consolidation of the above determined rates, we preliminarily 
determine a total net countervailable subsidy of 2.08 percent ad 
valorem for ILVA/ILT under Law 451/94 for the POI. Palini & Bertoli did 
not use this program.
G. Exemptions From Taxes
    Presidential Decree 218/1978 exempted firms operating in the 
Mezzogiorno from the local income tax (ILOR) and the profits tax 
(IRPEG). Companies are eligible for full exemption from the 16.2 
percent ILOR tax on profits arising from eligible projects in the 
Mezzogiorno and less developed regions of the center-north for ten 
consecutive years after profits first arise. New companies undertaking 
productive activities in the Mezzogiorno are entitled to a full 
exemption from the 37 percent IRPEG tax on profits for ten consecutive 
years after the project is completed. We preliminarily determine that 
exemptions from ILOR and IRPEG taxes are countervailable subsidies in 
accordance with section 771(5)(B)(i) of the Act. These tax exemptions 
constitute financial contributions under section 771(5)(D)(ii) of the 
Act since revenue that is otherwise due is being foregone. Because 
these exemptions are limited to a group of enterprises or industries 
within a designated geographical region, they are specific in 
accordance with section 771(5A)(D)(iv). Benefits resulting from ILOR 
and IRPEG tax exemptions were found to be countervailable in Certain 
Steel from Italy, 58 FR at 37334-35.
    ILT received an exemption from the IRPEG tax in 1998. In order to 
calculate the benefit, we multiplied ILT's total profits that would 
otherwise have been subject to IRPEG by the IRPEG tax rate of 37 
percent. We then divided the result by ILVA/ILT's total consolidated 
sales during the POI to determine the ad valorem benefit. On this 
basis, we preliminarily determine the net countervailable subsidy to be 
1.07 percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this 
program.
H. Exchange Rate Guarantees Under Law 796/76
    Law 796/76 established a program to minimize the risk of exchange 
rate fluctuations on foreign currency loans. All firms that contract 
foreign currency loans from the European Coal and Steel Community 
(ECSC) or the Council of Europe Resettlement Fund (CERF) could apply to 
the Ministry of the Treasury (MOT) to obtain an exchange rate 
guarantee. The MOT, through the Ufficio Italiano di Cambi (UIC), 
calculates loan payments based on the lire-foreign currency exchange 
rate in effect at the time the loan is contracted (i.e., the base 
rate). The program establishes a floor and ceiling for exchange rate 
fluctuations, limiting the maximum fluctuation a borrower would face to 
two percent above or below the base rate. If the lire depreciates more 
than two percent against the foreign currency, a borrower is still able 
to purchase foreign currency at the established (guaranteed) ceiling 
rate. The MOT absorbs the loss in the amount of the difference between 
the guaranteed rate and the actual rate. If the lire appreciates 
against the foreign currency, the MOT realizes a gain in the amount of 
the difference between the floor rate and the actual rate.
    This program was terminated effective July 10, 1992, by Decree Law 
333/92. However, the pre-existing exchange rate guarantees continue on 
any loans outstanding after that date. Italsider contracted two loans, 
one in 1978, the other in 1979. Both of these loans were ultimately 
transferred to ILVA/ILT. These two foreign currency denominated loans 
were outstanding during the POI and exchange rate guarantees applied to 
both.
    We preliminarily determine that this program constitutes a 
countervailable subsidy within the meaning of section 771(5)(B)(i) of 
the Act. This program provides a financial contribution, as described 
in section 771(5)(D)(i) of the Act, to the extent that the lire 
depreciates against the foreign currency beyond the two percent limit. 
When this occurs, the borrower receives a benefit in the amount of the 
difference between the guaranteed rate and the actual exchange rate.
    During the verification of the GOI in the Plate in Coils from Italy 
and Sheet and Strip from Italy investigations, GOI officials explained 
that over the last decade, roughly half of all guarantees made under 
this program were given to coal and steel companies. See Results of 
Verification of the Government of Italy, Memorandum to the File, dated 
February 3, 1999 (public version of the document is available on the 
public file in the CRU, Room B-099). This is consistent with the 
Department's finding in a previous proceeding that the Italian steel 
industry has been a dominant user of the exchange rate guarantees 
provided under Law 796/76. See Final Affirmative Countervailing Duty 
Determination: Small Diameter Circular Seamless Carbon and Alloy Steel 
Standard, Line and Pressure Pipe From Italy, 60 FR 31996 (June 19, 
1995). Therefore, we determine that the

[[Page 40427]]

program is specific under section 771(5A)(D)(iii)(II) of the Act.
    Once a loan is approved for exchange rate guarantees, access to 
foreign exchange at the established rate is automatic and occurs at 
regular intervals throughout the life of the loan. Therefore, we are 
treating the benefits under this program as recurring grants. ILVA/ILT 
and its predecessor companies from which these loans were transferred, 
paid a foreign exchange commission fee to the UIC for each payment 
made. We determine that this fee qualifies as an ``* * * application 
fee, deposit, or similar payment paid in order to qualify for, or to 
receive, the benefit of the countervailable subsidy.'' See section 
771(6)(A) of the Act. Thus, for the purposes of calculating the 
countervailable benefit, we have added the foreign exchange commission 
to the total amount ILVA/ILT paid under this program during the POI. 
See Wire Rod from Italy, 63 FR at 40479.
    Under this program, we have calculated the total countervailable 
benefit as the difference between the total loan payment due in foreign 
currency, converted at the current exchange rate, less the sum of the 
total loan payment due in foreign currency converted at the guaranteed 
rate and the exchange rate commission. We divided this amount by ILVA/
ILT's total consolidated sales during the POI. On this basis, we 
preliminarily determine the net countervailable subsidy to be 0.07 
percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this 
program.
European Commission Programs
A. ECSC Loans Under Article 54
    Article 54 of the 1951 ECSC Treaty established a program to provide 
industrial investment loans directly to the member iron and steel 
industries to finance modernization and purchase new equipment. 
Eligible companies apply directly to the EC (which administers the 
ECSC) for up to 50 percent of the cost of an industrial investment 
project. The Article 54 loans are generally financed on a ``back-to-
back'' basis. In other words, upon granting loan approval, the ECSC 
borrows funds (through loans or bond issues) at commercial rates in 
financial markets which it then immediately lends to steel companies at 
a slightly higher interest rate. The mark-up is to cover the costs of 
administering the Article 54 program.
    We preliminarily determine that these loans constitute a 
countervailable subsidy within the meaning of section 771(5)(B)(i) of 
the Act. This program provides a financial contribution, as described 
in section 771(5)(D)(i) of the Act, which confers a benefit to the 
extent the interest rate is less than the benchmark interest rate. The 
Department has found Article 54 loans to be specific in several 
proceedings, including Electrical Steel from Italy, 59 FR at 18362, 
Certain Steel from Italy, 58 FR at 37335, and Plate in Coils from 
Italy, 64 FR at 15515, because loans under this program are provided 
only to iron and steel companies. The EC has also indicated on the 
record of this investigation that Article 54 loans are only available 
to steel and coal companies which fall within the scope of the ECSC 
Treaty. Therefore, we preliminarily determine that this program is 
specific pursuant to section 771(5A)(D)(i) of the Act.
    ILVA/ILT had two long-term, fixed-rate loans outstanding during the 
POI, each denominated in U.S. dollars. These loans were contracted by 
Italsider, one in 1978 and one in 1979. Consistent with Wire Rod from 
Italy, 63 FR at 40486, we have used as our benchmark the average yield 
to maturity on selected long-term corporate bonds as reported by the 
U.S. Federal Reserve, since both of these loans were denominated in 
U.S. dollars. We used these rates since we were unable to find a long-
term borrowing rate for loans denominated in U.S. dollars in Italy. The 
interest rate charged on both of ILVA/ILT's two Article 54 loans was 
lowered part way through the life of the loan. The interest rate on the 
loan contracted in 1978 was lowered in 1987, and the rate on the loan 
contracted in 1979 was lowered in 1992. Therefore, for the purpose of 
calculating the benefit, we have treated these loans as if they were 
contracted on the date of this rate adjustment. Because ILVA was 
uncreditworthy in the year these loans were contracted, 1987 and 1992 
(based on the interest rate adjustments mentioned above), we calculated 
the uncreditworthy benchmark rate as per section 351.505 (a)(3)(iii) of 
the CVD Regulations. See ``Benchmark for Long-Term Loans and Discount 
Rates'' section, above.
    To calculate the benefit under this program, pursuant to section 
351.505(c)(2) of the CVD Regulations, we employed the Department's 
long-term fixed-rate loan methodology. We compared ILVA/ILT's interest 
rates on the two loans to our benchmark interest rate for 
uncreditworthy companies on interest paid by ILVA/ILT during the POI. 
We then divided the benefit by ILVA/ILT's total consolidated sales 
during the POI. On this basis, we preliminarily determine the net 
countervailable subsidy to be 0.02 percent ad valorem for ILVA/ILT. 
Palini & Bertoli did not use this program.
    ILVA/ILT was also repaying four ECSC loans under Article 54 during 
the POI that were taken by ILP for the construction of housing for coal 
and steel industry workers. Funding for these loans came entirely from 
the ECSC operational budget, which is composed of levies imposed on 
coal and steel producers, investment income on those levies, guarantee 
fees and fines paid to the ECSC, and interest received from companies 
that have obtained loans from the ECSC. Consistent with previous 
determinations, because ECSC funding is based on producer levies, we 
find these loans to be not countervailable. See Electrical Steel from 
Italy, 59 FR at 18364 and Certain Steel from Italy, 58 FR at 37336.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Law 308/82
    Law 308/82 was initiated on May 29, 1982, and repealed on January 
15, 1991. The GOI and ILVA/ILT reported that Italsider was approved for 
a grant for investments that reduced energy consumption at the Taranto 
facilities in 1983. ILP received payment of the grant in 1996. In 
Certain Steel from Italy, we learned that Law 308/82 provided grants to 
encourage lower energy consumption and the use of renewable energy 
sources. In that prior investigation, we verified that Law 308 grants 
were provided to a wide range of industries and confirmed the amount of 
grants provided to each industrial sector. We found that benefits under 
Law 308/82 were widely and fairly evenly distributed throughout the 
sectors with no sector receiving a disproportionate amount. Therefore, 
because Law 308/82 grants were not limited to a specific enterprise or 
industry, or group of enterprises or industries, we determined them to 
be not countervailable. See Certain Steel from Italy, 58 FR at 37336. 
No new factual information or evidence of changed circumstances has 
been provided to the Department in this instant investigation to 
warrant the Department to revisit its earlier determination that grants 
provided under Law 308/82 are not countervailable.
B. Unpaid Portion of Payment Price for ILP
    In the February 16, 1999 petition, petitioners alleged that the GOI 
effectively gave RIVA a zero-interest loan on a portion of the contract 
price agreed to by RIVA for ILP, because RIVA has not paid the full 
contract price for

[[Page 40428]]

ILP. RIVA reported that the company entered into arbitration after the 
transfer of ownership of ILP in April 1995. RIVA stated that it did not 
invoke arbitration to challenge the purchase price of ILP, but invoked 
arbitration to obtain an indemnity from pre-existing and unreported 
liabilities in accordance with the indemnification provision of the 
contract of sale. The dispute concerns whether IRI owes RIVA a sum of 
money as indemnification for liabilities, which RIVA has potentially 
incurred as a result of the acquisition of ILP. To preserve its 
leverage in the dispute and ensure that the company will obtain relief 
in the event that it is awarded indemnification by the arbitration 
panel, RIVA has withheld payment of amounts due to IRI under the 
contract of sale.
    We inquired about the arbitration procedure and whether any Italian 
company which purchases either a government-owned or private entity can 
enter into arbitration to remedy a dispute. RIVA reported that Article 
25 of the contract of sale provides for arbitration under the rules of 
the International Chamber of Commerce (ICC). Any company in Italy that 
purchases another company from either the government or a private 
seller can include such an arbitration provision in the contract of 
sale. Article 806 of the Italian Civil Code authorizes the use of 
arbitration to settle litigation. Because the arbitration which RIVA 
invoked to obtain an indemnity from liabilities was provided under the 
rules of the ICC and the Italian Civil Code, we preliminarily determine 
that the monetary amount, which RIVA has withheld from IRI for the 
purchase of ILP, is not tantamount to a zero-interest loan provided by 
the government.

III. Programs Preliminarily Determined To Be Not Used

Government of Italy Programs
1. Lending From the Ministry of Industry Under Law 675/77
    ILVA/ILT reported that at the time of its privatization the company 
became responsible for certain loan obligations of its predecessor 
companies. ILVA/ILT were responsible for repaying the loans under Law 
675/77, which were applicable to those facilities that produce the 
subject merchandise. Repayment obligations on these loans ended in 
December 1997. The GOI and ILVA/ILT both reported that no new loans 
have been provided under Law 675/77 since 1987. Because there were no 
loans provided under Law 675/77 outstanding in 1998, we preliminarily 
determine that the program was not used during the POI by ILVA/ILT.
2. Interest Contributions Under Law 675/77
    ILVA/ILT reported that an interest contribution was received in 
1998, against a loan provided under Law 675/77. Because the loan 
against which the interest contribution was received was repaid in full 
in December 1997, we preliminarily determine that this program was not 
used during the POI. It is the Department's policy to treat interest 
contributions as countervailable on the date the company made the 
corresponding interest payments, despite any delay in the receipt of 
the interest contributions. This is so because the company's 
entitlement to the interest contributions was automatic when it made 
the interest payments. Therefore, we find, for purposes of the benefit 
calculation, that the interest contributions were received at the time 
the interest payments were made. See e.g., Stainless Steel Sheet & 
Strip, and Final Affirmative Countervailing Duty Determination: Oil 
Country Tubular Goods from Italy, 60 FR 33577, 33579 (June 28, 1995) 
(Oil Country Tubular Goods from Italy).
3. Law 305/89
    ILVA/ILT reported that (old) ILVA, its predecessor company, applied 
for a grant under Law 305/89 in 1990. The GOI approved (old) ILVA's 
application in 1991, and awarded the company a grant of 2.2 billion 
lire. Because payment of the grant was delayed, ILP received a portion 
of the grant in 1994, and ILVA/ILT received payment of the remaining 
portion of the grant in 1996. We applied the 0.5 percent allocation 
test against the full grant amount approved in 1991. See section 
351.524(b)(2) of the CVD Regulations. We calculated the benefit under 
Law 305/82 as less than 0.5 percent ad valorem of (old) ILVA's sales in 
1991. Therefore, even if we preliminarily determined that Law 305/89 is 
countervailable, the grant would be expensed in the years of receipt, 
1994 and 1996. Because the grant would be expensed and not provide any 
benefit to ILVA/ILT during the POI, we preliminarily determine that Law 
305/89 was not used by ILVA/ILT.
4. Interest Grants for ``Indirect Debts'' Under Law 750/81
    In 1984, Nuova Italsider received a residual payment of 25.3 
billion lire against interest grants provided in the fiscal years 1982 
and 1983. Because we do not know what portion of the 1984 payment was 
approved in 1982, and what portion was approved in 1983, to determine 
whether the 1984 grant payment should be allocated or expensed, we 
assumed, for purposes of the 0.5 percent allocation test, that the 
residual amount was approved in 1984. See Sec. 351.524(b)(2) of the CVD 
Regulations. On this basis, we calculated the benefit of the 1984 
interest grant to be less than 0.5 percent ad valorem of Nuova 
Italsider's sales in 1984. Therefore, because the interest grant is 
expensed in the year of receipt, we preliminarily determine that this 
program was not used during the POI by ILVA/ILT.
5. Capital Grants Under Law 218/78
    The GOI reported that (old) ILVA received a grant in 1988, under 
Law 218/78. The original grant amount was approved in 1978. We applied 
the 0.5 percent test against the full grant amount approved in 1978. 
See Sec. 351.524(b)(2) of the CVD Regulations. We calculated the 
benefit as less than 0.5 percent ad valorem of Italsider's sales in 
1978. Additionally, Sidercomit received a grant in 1996, that was 
approved in 1995. We applied the 0.5 percent test against the full 
grant amount approved in 1995. We calculated the benefit as less than 
0.5 percent ad valorem of ILP's sales in 1995. Therefore, even if we 
determined that this program is countervailable, the above-mentioned 
grants would be expensed in the respective years of receipt. Because 
the grants would be expensed and would not provide any benefit to ILVA/
ILT during the POI, we preliminarily determine that capital grants were 
not used.
6. Urban Redevelopment Packages Under Law 181/89
    ILVA/ILT and its predecessor companies, ILP and (old) ILVA, 
received grants under Law 181/89 between 1991 and 1997. No grants were 
received during the POI. Because the approved amount of each grant, 
separately, was less than 0.5 percent of total sales of ILVA/ILT (or 
predecessor company) in the corresponding year, we would expense the 
benefit of each approved grant in that year. See Sec. 351.524(b)(2) of 
the CVD Regulations. Therefore, since the grants would be expensed in 
the years of receipt, and ILVA/ILT would not realize any benefit during 
the POI, we preliminarily determine that Urban Redevelopment Packages 
under Law 181/89 was not used.

[[Page 40429]]

7. Closure Payments Under Law 481/94 and Predecessor Law
8. Closure Grants Under Laws 46 and 706
9. Decree Law 120/89
10. Law 488/92
11. Law 341/95 Tax Concessions
12. Interest Rate Reductions Under Law 902
13. Interest Contributions Under the Sabatini Law
14. Export Marketing Grants Under Law 394/81
15. Law 549/95: Tax Exemptions on Reinvested Profits for Steel 
Producers in Objective 1, 2, and 5(B) Areas
European Commission Programs
1. European Social Fund (ESF)
    The GOI has reported ESF grants were provided to Nuova Italsider, 
Italsider and (old) ILVA from 1985 through 1993. Because the amount of 
each grant, separately, was less than 0.5 percent of total sales of 
Nuova Italsider, Italsider or (old) ILVA (depending on the year of 
receipt) in the corresponding year, we would expense the benefit of 
each grant payment received in that year. See Sec. 351.524(b)(2) of the 
CVD Regulations.
    ILVA/ILT has reported that ESF payments were also made to ILP in 
1994 and 1995, and to ILVA/ILT in 1998, for projects having taken place 
in 1994 and 1995. ILVA/ILT has reported that ESF funding was not used 
for training of ILVA/ILT employees, but for other initiatives in the 
Mezzogiorno region. ILVA/ILT has provided documentation that payments 
received by the company were solely for goods and services to IRI that 
were provided by ILP and ILVA/ILT.
    With regard to ESF grants and payments received, because the 
amounts would either be expensed in the corresponding years of receipt, 
or were simply payments received for invoiced goods and services, ILVA/
ILT would not see any benefit during the POI. Therefore, we 
preliminarily determine that the European Social Fund was not used.
2. Interest Rebates on ECSC Article 54 Loans
3. ECSC Conversion Loans, Interest Rebates, Restructuring Grants and 
Traditional and Social Aid Under Article 56
4. ERDF Aid
5. Resider and Resider II (Commission Decision 88/588)

IV. Programs Preliminarily Determined Not To Exist

1. Additional Debt Forgiveness in the Course of Privatization
2. Grants to ILVA to Cover Closure and Liquidation Expenses as Part of 
the 1993-1994 Privatization Plan
3. Working Capital Grants to ILVA in 1993
    With respect to the programs 1, 2, and 3 listed above, the GOI 
reported in its May 10, 1999 questionnaire response that all monetary 
assistance (old) ILVA received in the course of the 1993-1994 
Restructuring Plan was effected in the EC Decision 94/259/ECSC of April 
12, 1994. There were no additional debt forgiveness or grants provided 
as part of the 1993-1994 Restructuring Plan. Therefore, we preliminary 
determine that these programs do not exist.
4. Personnel Retraining Grants Under Law 675/77
    The GOI reported that personnel retraining grants provided under 
Law 675/77 were terminated in 1987. The government stated that the 
resources provided under this program were allocated over the years 
1981 through 1987. The GOI reported that no other law providing 
personnel retraining grants or financial allocations under Law 675/77 
have been approved since 1987.
5. VAT Reductions Under Law 675/77
    The GOI reported that the tax reductions referred to in section 18 
of Law 675 of August 12, 1977, were terminated effective March 29, 
1991. Pursuant to section 14(3) of Law 64 of March 1, 1986, section 18 
of Law 675/77, applied for a period of five years from the date of 
promulgation of the law.
6. Grants to ILVA
7. Grants to RIVA/ILP

Verification

    In accordance with section 782(i)(1) of the Act, we will verify the 
information submitted by respondents prior to making our final 
determination.

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we 
calculated an individual subsidy rate for ILVA/ILT and Palini & 
Bertoli. We preliminarily determine that the total estimated net 
countervailable subsidy rate is 23.27 percent ad valorem for ILVA/ILT 
and 0.0 percent ad valorem for Palini & Bertoli. The All Others rate is 
23.27 percent ad valorem, which is the rate calculated for ILVA/ILT. 
See section 705(c)(5)(A) of the Act.

------------------------------------------------------------------------
               Company                         Net subsidy rate
------------------------------------------------------------------------
ILVA/ILT............................  23.27% ad valorem.
Palini & Bertoli....................  0.0% ad valorem.
All Others..........................  23.27% ad valorem.
------------------------------------------------------------------------

    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of certain 
cut-to-length carbon-quality steel from Italy, which are entered or 
withdrawn from warehouse, for consumption on or after the date of the 
publication of this notice in the Federal Register, and to require a 
cash deposit or bond for such entries of the merchandise in the amounts 
listed above. Since the estimated preliminary net countervailing duty 
rate for Palini & Bertoli is zero, the company will be excluded from 
the suspension of liquidation. This suspension will remain in effect 
until further notice.

ITC Notification

    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all nonprivileged and nonproprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    If our final determination is affirmative, the ITC will make its 
final determination within 45 days after the Department makes its final 
determination.

Public Comment

    In accordance with 19 CFR 351.310, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
this preliminary determination. The hearing is tentatively scheduled to 
be held 57 days from the date of publication of the preliminary 
determination at the U.S.

[[Page 40430]]

Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. Individuals who wish to request a hearing must 
submit a written request within 30 days of the publication of this 
notice in the Federal Register to the Assistant Secretary for Import 
Administration, U.S. Department of Commerce, Room 1870, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230. Parties should confirm 
by telephone the time, date, and place of the hearing 48 hours before 
the scheduled time.
    Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number of participants; and, (3) 
to the extent practicable, an identification of the arguments to be 
raised at the hearing. In addition, six copies of the business 
proprietary version and six copies of the non-proprietary version of 
the case briefs must be submitted to the Assistant Secretary no later 
than 50 days from the date of publication of the preliminary 
determination. As part of the case brief, parties are encouraged to 
provide a summary of the arguments not to exceed five pages and a table 
of statutes, regulations, and cases cited. Six copies of the business 
proprietary version and six copies of the non-proprietary version of 
the rebuttal briefs must be submitted to the Assistant Secretary no 
later than 5 days from the date of filing of the case briefs. An 
interested party may make an affirmative presentation only on arguments 
included in that party's case or rebuttal briefs. Written arguments 
should be submitted in accordance with 19 CFR 351.309 and will be 
considered if received within the time limits specified above.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: July 16, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-18853 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P