[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Notices]
[Pages 40430-40438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18854]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-427-817]


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 France

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

EFFECTIVE DATE: July 26, 1999.

FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai, Alysia Wilson, and 
Gregory Campbell, Office of Antidumping/Countervailing Duty 
Enforcement, Group I, Import Administration, U.S. Department of 
Commerce, Room 3099, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230; telephone (202) 482-4087, 482-0108, or 482-2239, 
respectively.

Preliminary Determination

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

Petitioners

    The petition in this investigation was filed by the Bethlehem Steel 
Corporation, U.S. Steel Group, Gulf States Steel, Inc., IPSCO Steel 
Inc., and the United Steel Workers of America. (collectively referred 
to hereinafter as 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 25, 1999, we met with representatives from the Government 
of France (GOF) and the European Commission (EC) for a second round of 
consultations.
    On March 17, 1999, we issued countervailing duty questionnaires to 
the GOF, EC, and the producers/exporters of the subject merchandise. On 
April 29, 1999, we postponed the preliminary determination of this 
investigation until 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 Countervailing Duty 
Investigations, 64 FR 23057 (April 29, 1999)).
    On May 11, 1999, we received responses from the GOF and the 
responding companies (Usinor, Sollac S.A., Creusot Loire Industrie S.A. 
and GTS Industries S.A.). On June 4, 1999, we issued supplemental 
questionnaires to the GOF, and responding companies. On June 6, 1999, 
we issued a supplemental questionnaire to the EC.
    In their petition, the petitioners asked the Department to 
reinvestigate whether the 1991 equity infusions by the GOF and Credit 
Lyonnais provided to Usinor conferred a subsidy. These investments were 
found not countervailable in the Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from France, 58 FR 37304, (July 
9, 1993), (Certain Steel From France). At the time this proceeding was 
initiated, we determined that the petitioners had not submitted 
sufficient information to warrant a reinvestigation of these equity 
infusions. On June 10, 1999, the petitioners submitted additional 
information supporting their request. After a review of the 
petitioners' submission, we have determined that the information they 
have provided still does not warrant a reinvestigation of these 
investments. See Memorandum to Richard W. Moreland, Deputy Assistant 
Secretary for AD/CVD Enforcement, ``Petitioners'' Supplemental 
Allegations,'' dated July 16, 1999, on file in the Central Records Unit 
of the Department of Commerce.
    On June 16, 1999, the Department invited interested parties to 
comment regarding the attribution of subsidies between GTS Industries 
(GTS), Sollac, and Creusot-Loire (CLI). Comments were submitted by 
petitioners and respondents on June 28, 1999.
    On June 21, 1999, we received responses to the supplemental 
questionnaires from the EC and on June 23, 1999, from the responding 
companies and the GOF.

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

[[Page 40431]]

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
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

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930,

[[Page 40432]]

as amended by the Uruguay Round Agreements Act effective January 1, 
1995 (the Act). In addition, unless otherwise indicated, all citations 
to the Department's regulations are to our regulations as codified at 
19 CFR part 351 (1998) and Countervailing Duties; Final Rule, 63 FR 
65348 (November 25, 1998) (CVD Regulations).

Injury Test

    Because France is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the U.S. International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from France materially injure, or threaten material 
injury to, a U.S. industry. On April 8, 1999, the ITC published its 
preliminary determination finding that there is a reasonable indication 
that an industry in the United States is being materially injured or 
threatened with material injury by reason of imports from France 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 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, the Republic of Korea, and the Former 
Yugoslav Republic of Macedonia, 64 FR 12959 (March 16, 1999). 
Therefore, in accordance with section 705(a)(1) of the Act, we are 
aligning the final determination in this investigation with the final 
determination in the antidumping investigation of carbon plate from 
France.

Period of Investigation

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

Company History

    The GOF identified Usinor, Sollac S.A., Creusot Loire Industrie 
S.A. (``CLI''), and GTS Industries S.A. (``GTS'') as the only producers 
of the subject merchandise that exported to the United States during 
the POI. Sollac and CLI are wholly-owned subsidiaries of Usinor (a 
holding company), and GTS is an affiliated company.
Usinor
    In 1984, the GOF was a majority shareholder of Usinor. In 1986, 
Usinor was merged with another state-owned company, Sacilor, into a 
single company called Usinor Sacilor. Usinor Sacilor was 100 percent 
owned by the GOF.
    In 1995, Usinor Sacilor was privatized, principally through the 
public sale of shares. In October 1997, the GOF reduced its direct 
shareholdings to 1 percent. As of August 1998, the GOF has no direct 
ownership interest in Usinor but retains a minority indirect interest 
in the company.
GTS
    Prior to 1992, GTS was 89.73 percent owned by Sollac, a direct 
subsidiary of Usinor. In 1992, Sollac transferred its shares in GTS to 
AG der Dillinger Httenwerke (``Dillinger''), a German steel producer. 
In return, Dillinger transferred shares it held in Sollac to Sollac 
which were of an equivalent value. At that time, Dillinger was majority 
owned by DHS-Dillinger Hutte Saarstahl AG (``DHS''), a German holding 
company, which, in turn, was 70 percent owned by Usinor.
    In 1996, Usinor reduced its interest in DHS from 70 to 48.75 
percent. At that time, DHS owned 95.3 percent of Dillinger, which in 
turn, owned 99 percent of GTS.

Attribution of Subsidies

    The GOF has identified three producers of subject merchandise in 
this investigation: Sollac, CLI and GTS. During the POI, both Sollac 
and CLI are wholly-owned by and consolidated subsidiaries of Usinor. 
With respect to GTS, prior to 1996, it was majority owned by Usinor 
since Usinor held 70 percent of DHS, which in turn, held approximately 
95 percent of Dillinger, GTS' direct parent company. However, since 
1996 and during the entire POI, Usinor's interest in DHS is 48.9 
percent, i.e., slightly less than a majority.
    The issue before the Department is whether the subsidies granted to 
Usinor are attributable to GTS given that GTS is no longer majority-
owned by Usinor. Section 351.525 of the CVD Regulations states that the 
Department will attribute subsidies received by two or more 
corporations to the products produced by those corporations where cross 
ownership exists. According to Sec. 351.525(b)(6)(vi) of the CVD 
Regulations, cross-ownership exists between two or more corporations 
where one corporation can use or direct the individual assets of the 
other corporation in essentially the same ways it can use its own 
assets. The regulations state that this standard will normally be met 
where there is a majority voting ownership interest between two 
corporations. The preamble to the CVD Regulations, identifies 
situations where cross ownership may exist even though there is less 
than a majority voting interest between two corporations: ``in certain 
circumstances, a large minority interest (for example, 40 percent) or a 
`golden share' may also result in cross-ownership.'' (63 FR 65401)
    In this investigation, we have preliminarily determined that 
Usinor's 48.9 percent interest in DHS, the holding company of GTS' 
parent, Dillinger, is insufficient to establish cross-ownership between 
Usinor and GTS. We base this determination on the following facts: (1) 
Usinor has less than a majority voting ownership in DHS; (2) Usinor 
does not have a ``golden share'' in GTS; (3) there is another 
shareholder which effectively controls an equivalent amount of shares 
in DHS; and (4) information submitted by respondents indicates that 
there are certain limitations on the shareholders' ability to control 
Dillinger by virtue of labor's representation on its Supervisory and 
Management Boards. For more information, see Memorandum to Susan 
Kuhbach regarding Treatment of GTS Industries S.A. dated July 16, 1999.
    Therefore, for purposes of this preliminarily determination, we 
have calculated a separate countervailing subsidy rate for GTS. 
However, since GTS was part of the Usinor group for much of the 
allocation period, we have attributed a portion of subsidies received 
by Usinor through 1996 to GTS, see the Change in Ownership section 
below.

Change in Ownership

    In the General Issues Appendix (GIA) attached to the Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Austria, 58 FR 37217, 37226 (July 9, 1993), we applied a new 
methodology with respect to the treatment of subsidies received prior 
to the sale of the company (privatization) or the spinning-off of a 
productive unit.
    Under this methodology, we estimate the portion of the purchase 
price attributable to prior subsidies. We compute this by first 
dividing the privatized company's subsidies by the company's net worth 
for each year during the period beginning with the earliest point at 
which nonrecurring subsidies would be attributable to the POI (i.e., in 
this case, 1985 for Usinor)

[[Page 40433]]

and ending one year prior to the privatization. We then take the simple 
average of the ratios. The simple average of these ratios of subsidies 
to net worth serves as a reasonable surrogate for the percent that 
subsidies constitute of the overall value of the company. Next, we 
multiply the average ratio by the purchase price to derive the portion 
of the purchase price attributable to repayment of prior subsidies. 
Finally, we reduce the benefit streams of the prior subsidies by the 
ratio of the repayment amount to the net present value of all remaining 
benefits at the time of privatization.
    With respect to spin-offs, consistent with the Department's 
position regarding privatization, we analyze the spin-off of productive 
units to assess what portion of the sale price of the productive units 
can be attributable to payment for prior subsidies. To perform this 
calculation, we first determine the amount of the seller's subsidies 
that the spun-off productive unit could potentially take with it. To 
calculate this amount, we divide the value of the assets of the spun-
off unit by the value of the assets of the company selling the unit. We 
then apply this ratio to the net present value of the seller's 
remaining subsidies. We next estimate the portion of the purchase price 
going towards payment for prior subsidies in accordance with the 
privatization methodology outlined above.
    In accordance with the Final Affirmative Countervailing Duty 
Determination: Stainless Steel Sheet and Strip in Coils from France, 64 
FR 30774, (June 8, 1999), (French Stainless), in this investigation we 
have applied the change-in-ownership methodology to the following 
transactions: (1) The sale of Ugine's shares in 1994; (2) the 1994 sale 
of Centrale Siderurgique de Richemont (CSR); (3) the privatization of 
Usinor which spans 1995, 1996, and 1997; (4) the spin-off of assets to 
Entreprise Jean LeFebvre in 1994; and (5) the spin-off of assets to 
FOS-OXY in 1993. Additionally, in this investigation, we have also 
applied our change-in-ownership methodology to Sollac's sale of GTS 
shares to Dillinger in 1992. In 1996, Usinor reduced its interest in 
GTS, see the Attribution section above. We applied our change-in-
ownership methodology to this transaction. However, because of the lack 
of information on the record regarding the amount paid for the shares, 
we have not provided for any reallocation of subsidies to Usinor in 
this transaction. During the course of this investigation, we will 
further examine this transaction.

Subsidies Valuation Information

    Allocation Period: The current investigation includes untied, non-
recurring subsidies to Usinor that were found to be countervailable in 
Certain Steel from France: PACS, FIS, and Shareholders' Advances. 
Because we have already assigned a company-specific allocation period 
of 14 years to those subsidies, we have continued to allocate those 
subsidies over 14 years. See, French Stainless.
    We have found no other allocable non-recurring subsidies received 
by Usinor and GTS in the instant proceeding. However, had there been 
other allocable non-recurring subsidies received we would apply the 
methodology stated in Sec. 351.524(d)(2) of the CVD Regulations. 
Section 351.524(d)(2) 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.
    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, Sec. 351.595 of the CVD Regulations.
    Usinor was found to be uncreditworthy from 1982 through 1988 in 
Certain Steel from France, 58 FR at 37306. 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 Usinor uncreditworthy from 1985 through 1988. See, e.g., Final 
Affirmative Countervailing Duty Determinations: Certain Steel Products 
from Brazil, 58 FR 37295, 37297 (July 9, 1993).
    In the Initiation Notice, we stated that the petitioners provided 
sufficient information in the petition to believe or suspect that 
Usinor was uncreditworthy from 1992 through 1995. Our change-in-
ownership methodology in addition to the fact that Usinor received a 
contingent liability interest free loan under the Myosotis project, 
require the Department to make a creditworthy determination for the 
1992-1995 period.
    Usinor did not provide the information requested by the Department 
to make a creditworthy determination, citing the ``formidable burdens 
which would be involved in responding to the Department's 
Creditworthiness questions.'' Consequently, the Department has decided 
to use facts available in accordance with section 776(a)(2)(A) of the 
Act. Section 776(b) of the Act permits the Department to draw an 
inference that is adverse to the interests of an interested party if 
that party has ``failed to cooperate by not acting to the best of its 
ability to comply with a request for information.'' In this 
investigation, Usinor refused to answer on more than one occasion, the 
creditworthiness questions in the Department's original and 
supplemental questionnaires. Therefore, the Department determines it 
appropriate to use an adverse inference in concluding that the Usinor 
was uncreditworthy in 1992 through 1995.
    Since there was no allegation regarding the creditworthiness of 
GTS, we have not examined whether GTS is creditworthy.
    Benchmarks for Loans and Discount Rates: In accordance with 
Secs. 351.505(a) and 351.524(c)(3)(i) of the CVD Regulations, we used 
Usinor's company-specific cost of long-term, fixed-rate loans, where 
available, for loan benchmarks and discount rates for years in which 
Usinor was creditworthy. For years where Usinor was creditworthy and a 
company-specific rate was not available, we used the rates for average 
yields on long-term private-sector bonds in France as published by the 
OECD.
    For the years in which Usinor was uncreditworthy (see 
Creditworthiness section above), we calculated the discount rates in 
accordance with Sec. 351.524(c)(3)(ii) of the CVD Regulations. To 
construct these benchmark rates, we used the formula described in 
Sec. 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 
rated reported for 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

[[Page 40434]]

Aaa to Baa-rated categories of companies as reported in this 
study.1
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    \1\ 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 (see Exhibit 28).
---------------------------------------------------------------------------

    Based upon our analysis of the petition and the responses to our 
questionnaires, we determine the following:

I. Programs Preliminarily Determined To Be Countervailable

GOF Programs

A. Loans With Special Characteristics (PACS)
    A plan was agreed upon in 1978 to help the principal steel 
companies, Usinor, Sacilor, Chatillon-Neuves-Maisons, and their 
subsidiaries, restructure their massive debt. This plan entailed the 
creation of a steel amortization fund, called the Caisse 
d'Amortissement pour l'Acier (CAPA), for the purpose of ensuring 
repayment of funds borrowed by these companies prior to June 1, 1978. 
In accordance with the restructuring plan of 1978, bonds previously 
issued on behalf of the steel companies and pre-1978 loans from Credit 
National and Fonds de Developpement Economique et Social (FDES) were 
converted into ``loans with special characteristics,'' or PACS. As a 
result of this process, the steel companies were no longer liable for 
the loans and bonds, but did take on PACS obligations.
    In 1978, Usinor and Sacilor converted 21.1 billion French francs 
(FF) of debt into PACS. From 1980 to 1981, Usinor and Sacilor issued 
FF8.1 billion of new PACS. PACS in the amount of FF13.8 billion, FF12.6 
billion and FF2.8 billion were converted into common stock in 1981, 
1986, and 1991, respectively.
    In French Stainless, Certain Steel from France, and Final 
Affirmative Countervailing Duty Determinations: Certain Hot Rolled Lead 
and Bismuth Carbon Steel Products from France, 58 FR 6221 (January 27, 
1993) (Lead and Bismuth), the Department determined that the conversion 
of PACS to common stock in 1986 constituted a countervailable equity 
infusion. No new information or evidence of changed circumstances has 
been submitted in this proceeding to warrant a reconsideration of our 
earlier finding. Therefore, we preliminarily determine that a 
countervailable benefit exists in the amount of the 1986 equity 
infusion in accordance with Sec. 351.507(a)(6) of the CVD Regulations.
    We have treated the 1986 equity infusion as a non-recurring grant 
received in the year the PACS were converted to common stock. Using the 
allocation period of 14 years, the 1986 conversion of PACS continues to 
yield a countervailable benefit during the POI. We used an 
uncreditworthy discount rate to allocate the benefit of the equity 
infusion over time. Additionally, we followed the methodology described 
in the ``Change in Ownership'' section above to determine the amounts 
of the equity infusion appropriately allocated to Usinor and GTS. We 
divided these amounts by Usinor and GTS' total sales of French-produced 
merchandise during the POI. Accordingly, we preliminarily determine the 
countervailable subsidy to be 1.31 percent ad valorem for Usinor and 
0.93 percent ad valorem for GTS.
B. 1986 Shareholders' Advances
    The GOF provided Usinor and Sacilor grants in the form of 
shareholders' advances in 1986. The purpose of these advances was to 
finance the revenue shortfall needs of Usinor and Sacilor while the GOF 
planned for the next major restructuring of the French steel industry. 
These shareholders' advances carried no interest and there was no 
precondition for receipt of these funds. These advances were converted 
to common stock in 1986.
    In French Stainless, Certain Steel from France, and Lead and 
Bismuth, the Department determined that the shareholders' advances 
constituted countervailable grants because no shares were received for 
them. No new information or evidence of changed circumstances has been 
submitted in this proceeding to warrant a reconsideration of our 
earlier finding. Therefore, we continue to find that these grants 
constitute countervailable subsidies within the meaning of section 
771(5) of the Act.
    We have treated the 1986 shareholders' advance as non-recurring 
subsidies received in 1986. Using the allocation period of 14 years, 
these shareholders' advances continue to provide countervailable 
benefits during the POI. We used an uncreditworthy discount rate to 
allocate the benefits of these shareholders' advances over time. 
Additionally, we followed the methodology described in the ``Change in 
Ownership'' section above to determine the amount of the grant 
appropriately allocated to Usinor and GTS. We divided these amounts by 
Usinor and GTS' total sales of French-produced merchandise during the 
POI. Accordingly, we preliminarily determine the countervailable 
subsidy to be 0.54 percent ad valorem for Usinor and 0.38 percent ad 
valorem.
C. Steel Intervention Fund (FIS)
    The 1981 Corrected Finance Law granted Usinor and Sacilor the 
authority to issue convertible bonds. In 1983, the Fonds d'Intervention 
Siderurgique (FIS), or steel intervention fund, was created to 
implement that authority. In 1983, 1984, and 1985, Usinor and Sacilor 
issued convertible bonds to the FIS, which in turn, with the GOF's 
guarantee, floated the bonds to the public and to institutional 
investors. These bonds were converted to common stock in 1986 and 1988.
    In French Stainless, Certain Steel from France and Lead and 
Bismuth, the Department determined that the conversions of FIS bonds to 
common stock in 1986 and 1988 were countervailable equity infusions. No 
new information or evidence of changed circumstances has been submitted 
in this proceeding to warrant a reconsideration of our earlier finding. 
Therefore, we preliminarily determine that a countervailable benefit 
exists in the amounts of the 1986 and 1988 equity infusions in 
accordance with Sec. 351.507(a)(6) of the CVD Regulations.
    We have treated the 1986 and 1988 equity infusions as non-recurring 
subsidies received in the years the FIS bonds were converted to common 
stock. Using the allocation period of 14 years, the 1986 and 1988 FIS 
bond conversions continue to yield a countervailable benefit during the 
POI. We used an uncreditworthy discount rate to allocate the benefits 
of the equity infusions over time. Additionally, we followed the 
methodology described in the ``Change in Ownership'' section above to 
determine the amount of the equity infusion appropriately allocated to 
Usinor and GTS. Dividing these amounts by Usinor and GTS's total sales 
of French-produced merchandise during the POI, we preliminarily 
determine the countervailable subsidy to be 3.46 percent ad valorem for 
Usinor and 2.46 percent ad valorem for GTS.
  D. Investment/Operating Subsidies
    During the period 1987 through 1998, Usinor received a variety of 
small investment and operating subsidies from various GOF agencies as 
well as from the European Coal and Steel Community (ECSC). The 
subsidies were provided for research and development, projects to 
reduce work-related illnesses and accidents, projects to combat water 
pollution, etc. The subsidies are classified as investment, equipment, 
or operating subsidies in the company's

[[Page 40435]]

accounts, depending on how the funds are used.
    In French Stainless, the Department determined that the funding 
provided to Usinor by the water boards (les agences de l'eau) and 
certain work/training grants were not countervailable. Therefore, we 
are not investigating those programs in this proceeding.
    For the remaining amounts in these accounts, including certain 
work/training grants that differed from those found not countervailable 
in French Stainless, the GOF did not provide any information regarding 
the distribution of funds, stating that, in the GOF's view, the total 
amount of investment and operating subsidies received by Usinor was 
``insignificant and would * * * be expensed.'' Given the GOF's failure 
to provide the requested information, we are using ``facts available'' 
in accordance with section 776(a)(2)(A) of the Act. Further, section 
776(b) of the Act permits the Department to draw an inference that is 
adverse to the interests of an interested party if that party has 
``failed to cooperate by not acting to the best of its ability to 
comply with a request for information.'' In this investigation, the GOF 
has refused to answer the Department's repeated requests for data 
regarding the distribution of grant funds. Therefore, the Department 
determines it appropriate to use an adverse inference in concluding 
that the investment and operating subsidies (except those provided by 
the water boards and certain work/training contracts) are specific 
within the meaning of section 771(5A)(D) of the Act.
    We also determine that the investment and operating subsidies 
provide a financial contribution, as described in section 771(5)(D)(i) 
of the Act, in the form of a direct transfer of funds from the GOF and 
the ECSC to Usinor, providing a benefit in the amount of the grants.
    For the investment and operating subsidies received in the years 
prior to the POI, we have followed the methodology in French Stainless. 
Since these subsidies were less than 0.5 percent of Usinor's sales of 
French-produced merchandise, we have expensed these grants in the years 
of receipt, in accordance with Sec. 351.524 (b)(2) of the Department's 
new regulations. To calculate the benefit received during the POI, we 
divided the subsidies received by Usinor in the POI by Usinor's total 
sales of French-produced merchandise during the POI. Accordingly, we 
determine the countervailable subsidy to be 0.11 percent ad valorem. 
GTS use of investment and operating subsidies is discussed below.
E. Subsidies Provided Directly to GTS
    GTS' 1996 condensed financial statements include a ``capital 
subsidy'' in the amount of FF 2.1 million. GTS claims that this amount 
reflects the unamortized balance of a grant that was provided to GTS 
pursuant to an agreement dated December 29, 1987, between the GOF and 
Usinor. The grant was given to support the development of a machine for 
the accelerated cooling of heavy plate during the hot-rolling process. 
The grant was provided in two disbursements made in 1988 and 1990.
    The GOF responded to the Department's questions on this capital 
subsidy stating that because of its size, the amounts would be expensed 
in a period outside the POI. Therefore, the GOF did not provide 
information on the distribution of other grants that might have been 
given under the same program.
    We preliminarily determine that the total amount approved in 1987 
was less than 0.5 percent of Usinor's sales of French-produced 
merchandise in 1987. Therefore, we preliminarily determine that these 
grants do not confer a countervailable subsidy in the POI.
F. Myosotis Project
    Since 1988, Usinor has been developing a continuous thin-strip 
casting process called ``Myosotis,'' in a joint venture with the German 
steelmaker, Thyssen. The Myosotis project is intended to eliminate the 
separate hot-rolling stage of Usinor's steelmaking process by 
transforming liquid metal directly into a coil between two to five 
millimeters thick.
    To assist this project, the GOF, through the Ministry of Industry 
and Regional Planning and L'Agence pour la Maitrise de L'Energie 
(AFME), entered into three agreements with Usinor Sacilor (in 1989) and 
Ugine (in 1991 and 1995). The first agreement, dated December 27, 1989, 
provided three payments made in 1989, 1991, and 1993. The second 
agreement between Ugine and the AFME covered the cost of some equipment 
for the project. This agreement resulted in two disbursements to Ugine 
from the AFME in 1991 and 1992. The third agreement with Ugine, dated 
July 3, 1995, provided interest-free reimbursable advances for the 
final two-year stage of the project, with the goal of casting molten 
steel from ladles to produce thin strips. The first reimbursable 
advance under this agreement was made in 1997. Repayment of one-third 
of the reimbursable advance is due July 31, 1999. The remaining two-
thirds are due for repayment on July 31, 2001.
    In French Stainless, the Department determined that funding 
associated with the 1989 and 1991 contracts constituted countervailable 
subsidies within the meaning of section 771(5) of the Act. Furthermore, 
since the GOF did not provide any information indicating that the 
grants were provided to other companies in France, the Department 
determined that the grants were specific within the meaning of section 
771(5A)(D) of the Act. No new information has been submitted to warrant 
a reconsideration of our earlier finding. Therefore, we continue to 
find that the grants associated with the Myosotis 1989 and 1991 
contracts constitute countervailable subsidies within the meaning of 
section 771 (5) of the Act. Because the amounts received under the 1989 
and 1991 contracts were less than 0.5 percent of Usinor's sales during 
their respective year of approval, these grants were expensed in the 
years of receipt. See CVD Regulations, 64 FR at 65415.
    With respect to the reimbursable advance received in 1997, the GOF 
has requested that we find this subsidy non-countervailable under 
section 771(5B)(B)(ii)(II) of the Act, i.e., that this is a green-light 
subsidy. We have preliminarily determined that we do not need to 
address the issue whether this subsidy is countervailable because the 
benefit of the reimbursable advance during the POI is less than 0.00 
percent. As stated in the preamble to the CVD Regulations:

    [W]e will not consider claims for green light status if the 
subject merchandise did not benefit from the subsidy during the 
period of investigation or review. Instead, consistent with the 
Department's existing practice, the green light status of a subsidy 
will be considered only in an investigation or review of a time 
period where the subject merchandise did benefit from the subsidy.

See, CVD Regulations, 63 FR at 65388.

    To measure whether any benefit was received during the POI, we 
treated this advance as a long-term interest free loan, consistent with 
our finding in French Stainless (see, 64 FR at 30780). Additionally, in 
accordance with Sec. 351.505 (d)(1) of the Department's new 
regulations, we are treating this reimbursable advance as a contingent 
liability loan because the GOF has indicated that repayment of the loan 
is contingent on the success of the project (see, CVD Regulations 63 FR 
65410). We used as our benchmark, a long-term fixed rate loan 
consistent with Sec. 351.505 (a)(2)(iii) of the Department's 
regulations. Since Usinor would have been required to make an interest

[[Page 40436]]

payment on a comparable commercial loan during the POI (see, French 
Stainless), we calculated the benefit from the reimbursable advance as 
the amount that would have been due during the POI. Dividing these 
interest savings by Usinor's sales of French-produced merchandise 
during the POI, the benefit is 0.00 percent.

EC Programs

European Social Fund
    The European Social Fund (ESF), one of the Structural Funds 
operated by the EC, was established in 1957 to improve workers' 
employment opportunities and to raise their living standards. The main 
purpose of the ESF is to make employing workers easier and to increase 
the geographical and occupational mobility of workers within the 
European Union. It accomplishes this by providing support for 
vocational training, employment, and self-employment.
    Like the other EC Structural Funds, the ESF seeks to achieve six 
different objectives explicitly identified in the EC's framework 
regulations for Structural Funds: Objective 1 is to promote development 
and structural adjustment in underdeveloped regions; Objective 2 is to 
assist areas in industrial decline; Objective 3 is to combat long-term 
unemployment and to create jobs for young people and people excluded 
from the labor market; Objective 4 is to assist workers adapting to 
industrial changes and changes in production systems; Objective 5 is to 
promote rural development; and Objective 6 is to aid sparsely populated 
areas in northern Europe.
    The member states are responsible for identifying and implementing 
the individual projects that receive ESF financing. The member states 
also must contribute to the financing of the projects. In general, the 
maximum benefit provided by the ESF is 50 percent of the project's 
total cost for projects geared toward Objectives 2, 3, 4, and 5b (see 
below), and 75 percent of the project's total cost for Objective 1 
projects. For all programs implemented under Objective 4 in France, 35 
percent of the funding comes from the EC, 25 percent from the GOF, and 
the remaining 40 percent from the company.
    According to the questionnaire responses, CLI received an ESF grant 
for an Objective 4 project. The amount received during the POI was a 
portion of a larger total ESF grant authorized for CLI in 1996.
    The Department considers worker assistance programs to provide a 
countervailable benefit to a company when the company is relieved of a 
contractual or legal obligation it would otherwise have incurred. See, 
Sec. 357.513(a) of the CVD Regulations. Only limited information was 
provided in the questionnaire responses about the purpose of this 
grant. Therefore, we are unable to determine whether it relieved CLI of 
any legal or contractual obligations. Likewise, with regard to 
specificity, the EC has not provided complete information about the 
distribution of ESF grants.
    Consequently, the Department has decided to use facts available in 
accordance with section 776(a)(2)(A) of the Act. Section 776(b) of the 
Act permits the Department to draw an inference that is adverse to the 
interests of an interested party if that party has ``failed to 
cooperate by not acting to the best of its ability to comply with a 
request for information.'' Since Usinor, the GOF and the EC failed to 
provide complete information to the Department, we preliminarily 
determine it appropriate to use an adverse inference in concluding that 
in receiving the ESF grant that CLI was relieved of an obligation, and 
that the ESF grant is specific within the meaning of section 771(5A)(D) 
of the Act.
    We preliminarily determine that the 1998 ESF grant is 
countervailable within the meaning of section 771(5) of the Act. The 
grant is a financial contribution, as described in section 771(5)(D)(i) 
of the Act, which provides a benefit to the recipient in the amount of 
the grant.
    The Department normally expenses the benefits from worker-related 
subsidies in the year in which the recipient is relieved of a payment 
it would normally incur. See, CVD Regulations at 63 FR 65412. Dividing 
the amount of CLI's 1998 ESF grant by CLI's total 1998 sales yields a 
countervailable subsidy of 0.00 percent ad valorem for this program.

II. Programs Preliminarily Determined Not To Be Countervailable

GOF Programs

A. 1994 Purchase of Power Plant for Excessive Remuneration
    The Department initiated an investigation of this program prior to 
the issuance of the final determination of French Stainless. In French 
Stainless, the Department investigated whether the purchase of the 
Richemont power plant by Electricite de France (EDF), a government-
owned entity, was an arm's-length transaction for full market value. 
The Department determined that while FF 1 billion represented a large 
gain over the book value of CSR's physical assets, the purchase price 
included an exclusive supply contract from EDF to Usinor's factories in 
the Lorraine region. Moreover, the transaction price was supported by 
reasonable estimates of projected costs and revenues. Therefore, the 
Department determined this transaction was an arm's-length transaction 
for full-market value and that EDF's purchase of Richemont did not 
constitute a countervailable subsidy within the meaning of section 
771(5) of the Act.
    In this investigation, the petitioners stated that to the extent 
that the Department determines that the transaction is for full-market 
value based on the commitments by Usinor to purchase power from EDF, 
evidence suggests that EDF canceled the contract obligating Usinor to 
purchase electricity exclusively from EDF. Specifically, the 
petitioners point to a note in Usinor's 1996 financial statements which 
states that ``other income mainly includes the positive impact (MF 250) 
of a compensation received from EDF and relating to the termination of 
a distribution contract''.
    As indicated in the our Initiation Checklist and in an additional 
Memorandum to the File through Susan Kuhbach, dated June 2, 1999, the 
Department indicated that it is terminating its investigation into 
those programs found not countervailable in French Stainless. In French 
Stainless, the Department determined that the 1994 Richemont power 
plant transaction was a market-based transaction. The information 
contained in Usinor's 1996 financial statements cited by the 
petitioners describes an event that occurred two years after the 
investigated transaction and there is no indication that the 1996 
compensation from EDF relates to the Richemont transaction. Therefore, 
we do not consider this information sufficient to reconsider our prior 
determination in French Stainless.
B. GOF Conditional Advance
    In French Stainless, the Department learned on verification that 
Usinor received an interest-free conditional advance from the GOF. This 
advance was provided through the Ministry of Industry to support a 
project aimed at developing a new type of steel used in the production 
of catalytic converters. Ugine, Sollac, and two unaffiliated companies 
participated in the project and each company received a portion of the 
total project funding provided by the GOF. Ugine received its first 
payment in 1992 and a second payment in 1995. There is no information 
on the record

[[Page 40437]]

indicating exactly when Sollac received payment. According to the 
agreement between the GOF and the participating companies, repayment of 
the advance was contingent upon sales of the product resulting from 
this project exceeding a set amount. The Department learned in French 
Stainless, that since this condition has not been met, the entire 
amount of the advance received by Ugine remained outstanding in 1997. 
Usinor did not provide information indicating the outstanding balance 
of the loans during the POI.
    The responding companies have indicated that the GOF conditional 
advance is for a project aimed at developing a new type of steel for 
catalytic converters which does not cover subject merchandise. 
Additionally, the width of this product does not fall within the width 
range of the subject merchandise as specified in the scope section of 
this notice. Therefore, the Department preliminarily determines that 
this program is tied to non-subject merchandise.

III. Other Programs

A. Electric Arc Furnaces

    In 1996, the GOF agreed to provide assistance in the form of 
reimbursable advances to support Usinor's research and development 
efforts regarding electric-arc furnaces. The first disbursal of funds 
occurred on July 17, 1998. Repayment of the reimbursable advances will 
begin on July 31, 2002.
    Since these advances may someday be repaid, we are treating them as 
contingent liability loans. (See, Sec. 351.505(d)(1) of the CVD 
Regulations). Under the methodology specified in the Department's new 
regulations, the benefit occurs when payment would have been made on a 
comparable commercial loan. (See, Sec. 351.505(b) of the CVD 
Regulations). Information provided at verification in the French 
Stainless case indicates that Usinor would make interest payments on 
its long-term loans on an annual basis. Likewise, information from the 
Department's discussions in French Stainless with private banks in 
France confirms that such a payment schedule would not be considered 
atypical of general French banking practices. See French Stainless, 64 
FR at 30780. Accordingly, we have assumed that a payment on a 
comparable commercial loan taken out by Usinor at the time of this 
reimbursable advance would not be due until the year 1999.
    Given that no payment would be due during the POI, we preliminarily 
determine that there is no benefit to Usinor from these reimbursable 
advances during the POI. Consequently, we have not addressed whether 
this reimbursable advance is countervailable.

IV. Programs Preliminarily Determined To Be Not Used

    Based on the information provided in the responses, we determine 
that responding companies did not apply for or receive benefits under 
the following programs during the POI:

GOF Programs

A. Shareholders Guarantees
B. Long-Term Loans from CFDI
C. Subsidies Provided Directly To GTS

EC Programs

A. Resider and Resider II Program
B. ECSC Article 54 Loans
C. ECSC Article 56(2)(b) Redeployment/Readaptation Aid
D. Grants from the European Regional Development Fund (ERDF)

V. Programs Preliminarily Determined Not To Exist

    In French Stainless, we determined that the alleged program did not 
exist: ``Soft Loans from Credit Lyonnais''. Therefore, we are not 
pursuing this allegation further in this investigation.

Verification

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

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for Usinor and GTS the sole manufacturers 
of the subject merchandise. We preliminarily determine that the total 
estimated net countervailable subsidy rate is 5.42 percent ad valorem 
for Usinor and 3.77 percent ad valorem for GTS. The All Others rate is 
3.84 percent, which is the weighted average of the rates for both 
companies. In accordance with section 703(d) of the Act, we are 
directing the US Customs Service to suspend liquidation of all entries 
of certain cut-to-length carbon-quality steel plate from France which 
are entered, or withdrawn from warehouse, for consumption on or after 
the date of the publication of this notice in the Federal Register, and 
to require a cash deposit or bond for such entries of the merchandise 
in the amounts indicated above. 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, Import Administration.
    In accordance with section 705(b)(2) of the Act, 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 this preliminary 
determination, at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue N.W., 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, D.C. 20230. 
Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number of participants; (3) the 
reason for attending; and (4) a list of the issues to be discussed. An 
interested party may make an affirmative presentation only on arguments 
included in that party's case brief and may make a rebuttal 
presentation only on arguments included in that party's rebuttal brief. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    In addition, six copies of the business proprietary version and six 
copies of the nonproprietary version of the case briefs must be 
submitted to the Assistant Secretary no later than 50 days from the 
publication of this notice. As part of the case brief, parties are 
encouraged to provide a summary of the arguments not to exceed five 
pages and a table of statutes, regulations, and cases cited. Six copies 
of the business proprietary version and six copies of the 
nonproprietary version of the rebuttal briefs must be submitted to the 
Assistant Secretary no later than 5 days

[[Page 40438]]

after the filing of case 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. 99-18854 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P