[Federal Register Volume 64, Number 173 (Wednesday, September 8, 1999)]
[Notices]
[Pages 48796-48805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23323]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-201-810]


Certain Cut-to-Length Carbon Steel Plate from Mexico: Preliminary 
Results of Countervailing Duty Administrative Review

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

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

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

EFFECTIVE DATE: September 8, 1999.

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

SUPPLEMENTARY INFORMATION:

Background

    On August 17, 1993, the Department published in the Federal 
Register (58 FR 43755) the countervailing duty order on certain cut-to-
length carbon steel plate from Mexico. On August 11, 1998, the 
Department published a notice of ``Opportunity to Request an 
Administrative Review'' (63 FR 42821) of this countervailing duty 
order. We received a timely request for review from Altos Hornos de 
Mexico, S.A. (AHMSA), the respondent company to this proceeding. On 
September 29, 1998, we initiated the review, covering the period 
January 1, 1997 through December 31, 1997 (63 FR 51893). On November 
13, 1998, petitioners submitted new subsidy allegations. Based on the 
information submitted by petitioners, we initiated an investigation of 
nine of the ten new subsidy allegations made by petitioners. On May 6, 
1999, we extended the period for completion of the preliminary results 
pursuant to section 751(a)(3) of the Tariff Act of 1930, as amended. 
See Certain Cut-to-Length Carbon Steel Plate from Mexico: Postponement 
of Preliminary Results of Countervailing Duty Administrative Review (64 
FR 24370). On June 8 through June 17, 1999, we conducted a verification 
of the questionnaire responses that the Government of Mexico (GOM) and

[[Page 48797]]

AHMSA submitted during this administrative review. The results of our 
verification are contained in the July 8, 1999, memorandum 
``Verification of Government of Mexico's (GOM) Questionnaire Responses 
in the Administrative Review of the Countervailing Duty Order on Cut-
to-length Carbon Steel Plate from Mexico'' to David Mueller, Director 
of Office of AD/CVD Enforcement VI (GOM Verification Report), and the 
July 15, 1999, memorandum ``Verification of AHMSA's Questionnaire 
Responses in the Administrative Review of the Countervailing Duty Order 
on Certain Carbon Steel Plate from Mexico'' to David Mueller, Director 
of Office of AD/CVD Enforcement VI, the public versions of which are on 
file in the Central Records Unit, Room B-099 of the Main Commerce 
Building (AHMSA Verification Report).
    In accordance with 19 C.F.R. 351.213(b), this review covers only 
those producers or exporters for which a review was specifically 
requested. Accordingly, this review covers AHMSA. This review also 
covers twenty-one programs. The deadline for the final results of this 
review is no later than 120 days from the date on which these 
preliminary results are published in the Federal Register.

Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the 
Act). The Department is conducting this administrative review in 
accordance with section 751(a) of the Act. All citations to the 
Department's regulations reference 19 C.F.R. Part 351 (April 1998), 
unless otherwise indicated. Because the request for this administrative 
review was filed before January 1, 1999, the Department's substantive 
countervailing duty regulations, which were published in the Federal 
Register on November 25, 1998 (63 FR 65348), do not govern this review.

Scope of the Review

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

Subsidies Valuation Information

Allocation Period

    In British Steel plc. v. United States, 879 F. Supp. 1254 (CIT 
1995) (British Steel I), the U.S. Court of International Trade (the 
Court) ruled against the allocation period methodology for non-
recurring subsidies that the Department had employed for the past 
decade, a methodology that was articulated in the General Issues 
Appendix appended to the Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from Austria, 58 FR 37217 (July 
9, 1993) (GIA). In accordance with the Court's decision on remand, the 
Department determined that the most reasonable method of deriving the 
allocation period for non-recurring subsidies is a company-specific 
average useful life (AUL) of non-renewable physical assets. This remand 
determination was affirmed by the Court on June 4, 1996. British Steel 
plc. v. United States, 929 F.Supp 426, 439 (CIT 1996) (British Steel 
II).
    However, in administrative reviews where the Department examines 
non-recurring subsidies received prior to the period of review (POR) 
which have been countervailed based on an allocation period established 
in an earlier segment of the proceeding, it is not practicable to 
reallocate those subsidies over a different period of time. Where a 
countervailing duty rate in earlier segments of a proceeding was 
calculated based on a certain allocation period and resulted in a 
certain benefit stream, redefining the allocation period in later 
segments of the proceeding would entail taking the original grant 
amount and creating an entirely new benefit stream for that grant. 
Redefining an allocation period could lead to an increase or decrease 
in the total amount countervailed and, thus, could result in over-or 
under-countervailing the actual benefit.
    In this administrative review, the Department is considering both 
non-recurring subsidies previously allocated in the initial 
investigation and non-recurring subsidies received since the original 
period of investigation (POI). Therefore, for purposes of these 
preliminary results, the Department is using the original allocation 
period of 15 years assigned to each non-recurring subsidy received 
prior to or during the POI. For non-recurring subsidies received since 
the POI, AHMSA submitted an AUL calculation based on depreciation and 
asset values of productive assets reported in its financial statements. 
In accordance with the Department's practice, we derived AHMSA's 
company-specific AUL by dividing the aggregate of the annual average 
gross book values of the firm's depreciable productive fixed assets by 
the firm's aggregated annual charge to depreciation for a 10-year 
period. We found this calculation produced a result that is 
aberrational possibly due to the effect of intermittent periods of high 
inflation. Further, AHMSA's financial statements indicate that the 
company revised the useful life of property, plant and equipment using 
differing annual depreciation rates rather than a straight line 
depreciation methodology. Therefore, for purposes of allocating 
benefits received after 1991 over time, we used a 15-year AUL, which is 
the same AUL that was used in the underlying investigation. See, e.g., 
Final Affirmative Countervailing Duty Determination: Certain Steel 
Products from Mexico, 58 FR 37352, 37356 (July 9, 1993) (Certain Steel 
1993). Use of the 15-year AUL in this instance accords with our 
practice, which is to rely on IRS depreciation tables where company-

[[Page 48798]]

specific AUL data are distortive or otherwise unusable. See, e.g., 
Final Affirmative Countervailing Duty Determination: Certain Hot-Rolled 
Flat-Rolled Carbon-Quality Steel Products From Brazil, 64 FR 38742, 
38746 (July 19, 1999); Final Negative Countervailing Duty 
Determination: Stainless Steel Plate in Coils From the Republic of 
Korea, 64 FR 15530, 15546 (March 31, 1999).

Discount Rates

    In Certain Steel 1993, for those years in which there were non-
recurring grants and equity infusions, we used as our long-term 
benchmark discount rate the Costo Porcentual Promedio (CPP), which is 
the average percentage cost of funds for banks. We note we have 
converted the CPP rate into a discount rate using the formula that has 
been used in past Mexican cases. See e.g. Final Results of 
Countervailing Duty Administrative Review: Porcelain-on-Steel 
Cookingware from Mexico, 57 FR 562, January 7, 1992, (POS Cookware 
1992). We further note that for those years in which there were grants 
and equity infusions and for which the Department had previously 
calculated a benchmark interest rate in a prior case, we used the rates 
calculated in those cases (see, e.g., Final Results of Countervailing 
Duty Administrative Review: Porcelain-on-Steel Cookingware from Mexico, 
56 FR 26064 June 6, 1991, Final Results of Countervailing Duty 
Administrative Review: Ceramic Tile from Mexico, 57 FR 24247, June 8, 
1992 (Ceramic Tile 1992), Final Results of Countervailing Duty 
Administrative Review: Certain Textile Mill Products from Mexico, 56 FR 
12175, March 22, 1991 (Ceramic Tile 1991). In addition, we determined 
AHMSA to be uncreditworthy during the years 1983 through 1986. No new 
information or evidence of changed circumstances was presented in this 
review to warrant any reconsideration of these findings.
    In this administrative review, we have preliminarily determined 
that AHMSA received additional non-recurring grants, countervailable 
loans, and debt forgiveness since the POI. These programs are discussed 
below in the ``Analysis of Programs'' section of this notice. With 
respect to the non-recurring, peso-denominated grants, we have 
preliminarily determined to continue using the CPP as our benchmark 
discount rate. Regarding loans with interest payments outstanding 
during the POR and U.S. dollar-denominated non-recurring grants 
received since the POI, AHMSA submitted company-specific interest rate 
information. During verification, we reviewed AHMSA's short-term and 
long-term commercial loans and have preliminarily determined to use the 
weighted-average of each of these types of loans as our benchmark 
interest and discount rates.

Change in Ownership

(I) Background

    In November 1991, the GOM sold all of its ownership interest in 
AHMSA. Prior to privatization, AHMSA was almost entirely owned by the 
GOM. Since November 1991, the GOM has held no stock in AHMSA. Thus, in 
this administrative review, we are analyzing the privatization of AHMSA 
in 1991 and, for purposes of this preliminary determination, have 
applied the Department's change in ownership methodology described 
below.

(II) Change in Ownership Calculation Methodology

    Under the Change in Ownership methodology described in the GIA 
concerning the treatment of subsidies received prior to the sale of a 
company or the spinning-off of a productive unit, we estimate the 
portion of the purchase price attributable to prior subsidies. In the 
investigation, we computed 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 non-recurring 
subsidies would be attributable to the POI and ending one year prior to 
the change in ownership.
    We then took the simple average of the ratios of subsidies to net 
worth. This simple average of the ratios serves as a reasonable 
surrogate for the portion that subsidies constitute of the overall 
value of the company. Next, we multiplied the average ratio by the 
purchase price to derive the portion of the purchase price attributable 
to repayment of prior subsidies. Finally, we reduced 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.

Inflation Methodology

    In the original investigation of this case, we determined, based on 
information from the GOM, that Mexico experienced significant inflation 
during 1983 through 1988. See Certain Steel 1993, 58 FR at 37355. In 
accordance with past practice, because we found significant inflation 
in Mexico and because AHMSA adjusted for inflation in its financial 
statements, we made adjustments, where necessary, to account for 
inflation in the benefit calculations.
    Because Mexico experienced significant inflation during only a 
portion of the 15-year allocation period, indexing for the entire 
period or converting the non-recurring benefits into U.S. dollars at 
the time of receipt (i.e. dollarization) for use in our calculations 
would have inflated the benefit from these infusions by adjusting for 
inflationary as well as non-inflationary periods. Thus, in Certain 
Steel 1993, 58 FR at 37355, we used a loan-based methodology to reflect 
the effects of intermittent high inflation. The methodology we used in 
Certain Steel 1993 assumed that, in lieu of a government equity 
infusion/grant, a company would have had to take out a 15-year loan 
that was rolled over each year at the prevailing nominal interest 
rates, which for purposes of our calculations were the CPP-based 
interest rates discussed in the ``Discount Rate'' section of this 
notice. The benefit in each year of the 15-year period equaled the 
principal plus interest payments associated with the loan at the 
nominal interest rate prevailing in that year.
    Since we assumed that an infusion/grant given was equivalent to a 
15-year loan at the current rate in the first year, a 14-year loan at 
current rates in the second year and so on, the benefit after the 15-
year period would be zero, just as with the Department's grant 
amortization methodology. Because nominal interest rates were used, the 
effects of inflation were already incorporated into the benefit.
    The methodology recognized that, absent dollarization of the 
subsidy, there was no way given the significant inflation in 1983 
through 1988 to (1) preserve a declining balance in the benefit stream, 
and (2) reflect accurately the effects of significant inflation. The 
methodology used in Certain Steel 1993 recognized that in an 
environment with significant inflation, asset appreciation due to 
inflation can often outweigh normal asset depreciation and cause 
benefits in some years to be higher than in previous years. This 
methodology was upheld in British Steel plc v. United States, 127 F.3d 
1471 (Fed. Cir. 1997) (British Steel III).
    For purposes of the preliminary results of this administrative 
review, we have analyzed information provided by the GOM and have found 
that Mexico, again, experienced significant, intermittent inflation 
during the period 1991 through 1997. See the August 31, 1999, 
memorandum to the file, ``Presence of Significant Intermittent 
Inflation During the POR,'' a public document on file in the Central 
Records Unit, Room B-099 of the Main Commerce Building. In addition, we

[[Page 48799]]

learned at verification that AHMSA continued its practice of accounting 
for inflation in its financial statements. See page 4 of the AHMSA 
Verification Report. Thus, we preliminarily determine to use the 
benefit calculation methodology from Certain Steel 1993, described 
above, for all non-recurring, peso-denominated grants received since 
the POI.

Analysis of Programs

I. Programs Conferring Subsidies

A. GOM Equity Infusions
    In Certain Steel 1993, 58 FR at 37356, we determined that the GOM 
made equity infusions in AHMSA in 1977, each year from 1979 through 
1987, 1990 and 1991. Shares of common stock were issued for all of 
these infusions and were made annually as part of the GOM's budgetary 
process as per the Federal Law on State Companies. At the time of these 
infusions, AHMSA was almost entirely a government-owned company.
    In Certain Steel 1993, 58 FR at 37356, we found AHMSA to be 
unequityworthy in each year from 1979 through 1987, and in 1990 and 
1991. Accordingly, we determined that the equity infusions by the GOM 
into AHMSA in these years were inconsistent with commercial 
considerations. In addition, because the infusions were made to a 
single enterprise, we determined that they were specific within the 
meaning of the section 771(5A)(D) of the Act. Thus, because these 
equity infusions were specific and inconsistent with commercial 
considerations, we found them to be countervailable. No new information 
or evidence of changed circumstances was presented in this review to 
warrant any reconsideration of these findings.
    To calculate the countervailable benefit in the POR, we used the 
methodology for intermittent, significant inflation described above. We 
then divided the benefit attributable to the POR, adjusted to reflect 
the change in ownership described above, by the total sales of AHMSA 
during the same period. On this basis, we preliminarily determine the 
net subsidy for this program to be 1.54 percent ad valorem for AHMSA.
B. 1986 Assumption of AHMSA's Debt
    In 1986, the GOM negotiated an agreement with AHMSA through which 
the GOM assumed a portion of AHMSA's debt. One part of this debt 
assumption was recorded as a reduction in the company's accumulated 
past losses. For a second part, shares of stock were issued; a third 
part was held for future capital increases for which new stock was 
issued to the GOM in 1987. In Certain Steel 1993, 58 FR at 37356, we 
treated the full amount of debt assumed by the GOM in 1986 as a 
countervailable, non-recurring grant. No new information or evidence of 
changed circumstances was presented in this review to warrant any 
reconsideration of these findings.
    To calculate the countervailable benefit in the POR, we used the 
methodology for intermittent, significant inflation described above. We 
then divided the benefit attributable to the POR, adjusted to reflect 
the change in ownership described above, by the total sales of AHMSA 
during the same period. On this basis, we preliminarily determine the 
net subsidy for this program to be 1.84 percent ad valorem for AHMSA.
C. 1988 and 1990 Debt Restructuring of AHMSA Debt and the Resulting 
Discounted Prepayment in 1996 of AHMSA's Restructured Debt Owed to the 
GOM
    In 1987, the GOM negotiated an agreement with foreign creditors to 
restructure the debt of AHMSA and several other Mexican parastatal 
companies. Under the agreement, the parastatal companies remained 
indebted to the foreign banks. The GOM again negotiated on behalf of 
AHMSA debt restructuring agreements in 1988 and 1990. Under these 
agreements, the GOM purchased AHMSA's debts, which were denominated in 
several foreign currencies, from AHMSA's foreign creditors in exchange 
for GOM debt. The GOM thereby became the creditor for loans included in 
these agreements.
    During the proceeding of Certain Steel 1993, the GOM claimed that 
AHMSA's principal repayment obligations remained the same after the 
debt restructuring. However, in Certain Steel 1993, we could not verify 
that none of AHMSA's principal obligations on its debt was forgiven in 
the 1988 and 1990 debt restructuring agreements. Thus, based upon the 
facts available to the Department at the time of the investigation, we 
assumed that the principal had been forgiven in the amount of the 
discount the GOM had received when purchasing the debt from AHMSA's 
foreign creditors. Thus, we treated the forgiven principal as a non-
recurring grant. During this administrative review, AHMSA claimed that, 
in June 1996, it repaid its restructured debt in the form of a 
discounted prepayment to the GOM, thereby extinguishing its financial 
obligations to the GOM.
    In their November 13, 1998, submission, petitioners allege that 
AHMSA's discounted prepayment of the outstanding principal in 1996 
constituted a partial debt forgiveness on behalf of the GOM. As a 
result of the prepayment, petitioners allege that AHMSA realized an 
extraordinary income gain approximately equal to the difference between 
the principal and the amount of the prepayment. Petitioners allege that 
this extraordinary income provided a countervailable benefit to AHMSA 
because the company repaid the debt at a 26.4 percent discount, which 
is not consistent with commercial terms.
    During the verification of the questionnaire responses submitted 
during this review, we learned that, in order to determine the amount 
of the discounted prepayment that AHMSA was to make in June of 1996, 
the company and the GOM created amortization tables for each of the 
foreign currency loans. Next, they converted these payment streams into 
U.S. dollars and calculated the net present value for each of them. 
Then, they summed the U.S. dollar denominated net present values to 
derive the amount of the discounted prepayment to be made in U.S. 
dollars.
    In this review, we have preliminarily determined that AHMSA's 
discounted prepayment of its 1988 and 1990 restructured debts 
constitutes a countervailable benefit. At verification, we confirmed 
that the amount of AHMSA's discounted prepayment resulted in a 
reduction of the principal owed by AHMSA on this debt. On this basis, 
we preliminarily determine that the difference between the principal 
outstanding on AHMSA's restructured debt and the amount of its 
discounted prepayment constitutes debt forgiveness on the part of the 
GOM. In addition, we preliminarily determine that the benefit was 
conferred in 1996, the year in which the debt forgiveness took place. 
Because the debt forgiveness was made to a single enterprise, we also 
preliminarily determine that it is specific within the meaning of the 
section 771(5A)(D) of the Act.
    Because the principal forgiveness was denominated in U.S. dollars, 
we used the Department's standard non-recurring grant methodology to 
allocate the benefit to the POR. We used as our discount rate, the 
weighted-average of AHMSA's fixed-rate, U.S. dollar loans that were 
received during the year of receipt. We then divided the benefit 
attributable to the POR by AHMSA's total sales in U.S. dollars during 
the same period. On this basis, we preliminarily determine the net 
subsidy

[[Page 48800]]

for this program to be 0.53 percent ad valorem for AHMSA.
D. IMIS Research and Development Grants
    The Instituto Mexicano de Investigaciones Siderurgicas (IMIS), or 
the Mexican Institute of Steel Research, was a government-owned 
research and development organization that performed independent and 
joint venture research with the iron and steel industry.
    In Certain Steel 1993, 58 FR at 37359, the Department found that 
IMIS's activities with AHMSA fell into two categories: joint venture 
activities and non-joint venture activities. We determined that IMIS's 
non-joint venture activities with AHMSA were not countervailable. 
However, the Department determined that joint venture activities were 
countervailable, and we treated IMIS's contributions to joint venture 
activities as non-recurring grants and allocated the benefits over 
AHMSA's AUL.
    During verification in Certain Steel 1993, AHMSA submitted new 
information indicating that the company utilized services and generated 
purchase orders related to its activities with IMIS. In Certain Steel 
1993, we found that AHMSA's use of IMIS services was related to its 
joint venture activities and, therefore, was countervailable. In 
addition, because the Department was unable to determine whether the 
purchase orders were related to AHMSA's joint venture activities, we 
determined, as best information available, that funds linked to these 
purchase orders provided countervailable benefits. No new information 
or evidence of changed circumstances was presented in this review to 
warrant any reconsideration of these findings.
    We note that during this administrative review, the GOM reported 
that IMIS was terminated by Government decree on November 4, 1991. 
However, because the allocated benefits of the non-recurring benefits 
that AHMSA received under this program extend into the POR, this 
program continues to confer a countervailable benefit.
    To calculate the countervailable benefit in the POR, we used the 
methodology for intermittent, significant inflation described above. We 
then divided the benefit attributable to the POR, adjusted to reflect 
the change in ownership described above, by the total sales of AHMSA 
during the same period. On this basis, we preliminarily determine the 
net subsidy for this program to be 0.05 percent ad valorem for AHMSA.
E. Pre-privatization Lay-off Financing from the GOM and the 1991 Equity 
Infusion in Connection with the Debt to Equity Swap of PROCARSA
    During the verification of Certain Steel 1993, the Department 
discovered that the GOM loaned AHMSA money to cover the cost of 
personnel lay-offs which the GOM felt were necessary to make AHMSA more 
attractive to potential purchasers. The Department learned that this 
loan did not accrue interest after September 30, 1991. Further, the 
Department learned that the GOM was allowing the privatized AHMSA to 
repay this loan with the transfer of AHMSA assets back to the GOM. The 
assets which AHMSA was using to repay the loan were assets which Grupo 
Acerero del Norte, S.A. de C.V. (GAN), the purchaser of AHMSA, had not 
wished to purchase but which the GOM included in the sale package. See 
Certain Steel 1993, 58 FR at 37360. These assets were characterized as 
``unnecessary assets'' or assets not necessary to the production of 
steel.
    Since the information about this financing and its repayment came 
to light only at verification of the questionnaire responses submitted 
during the investigation, we were unable to determine whether this loan 
relieved AHMSA of an obligation it would otherwise have borne with 
respect to the laid-off workers. Thus, in Certain Steel 1993, 58 FR at 
37361, we calculated the benefit by treating the financing as an 
interest-free loan.
    In the current review, AHMSA has claimed that it extinguished its 
pre-privatization lay-off financing debt with the transfer of these 
``unnecessary assets.'' The record of the investigation indicates that 
these assets were included by the GOM in the sale of AHMSA despite the 
fact that GAN, the purchaser of AHMSA, indicated that it did not wish 
to purchase those assets, and GAN's bid for AHMSA did not include any 
funds for those assets. The record from the investigation further 
indicates that the value of those assets was frozen in November 1991, 
and that, as of that date, the assets were neither depreciated nor 
revalued for inflation, both of which are standard accounting practices 
in Mexico.
    Although a loan that provides countervailable benefits normally 
ceases to do so once it has been fully repaid, we preliminarily 
determine that the manner in which AHMSA has repaid this loan conferred 
a countervailable benefit. AHMSA is repaying the loan with the transfer 
of assets which AHMSA's purchasers did not wish to purchase and which 
they did not pay for. As Certain Steel 1993 indicates, GAN's purchase 
bid specifically detailed the assets which GAN wished to purchase. We 
note that the ``unnecessary assets'' were not included in GAN's 
purchase price offer. The GOM included these assets when GAN's purchase 
of AHMSA took place. Thus, we preliminarily determine that AHMSA's use 
of these ``unnecessary assets,'' assets which were effectively given to 
AHMSA free of charge, to repay this loan, constitutes debt forgiveness 
of this loan. Accordingly, we preliminarily determine that the entire 
amount of the pre-privatization lay-off financing was a non-recurring 
grant received in 1994, the time the loan was forgiven.
    In their November 13, 1998 submission, petitioners allege that, 
with the transfer of the ``unnecessary assets,'' AHMSA received an 
equity infusion in connection with a debt-to-equity swap involving the 
majority government-owned company, Procesadora de Aceros Rasini, S.A. 
de C.V. (PROCARSA). Specifically, petitioners allege that AHMSA 
received the PROCARSA shares and subsequently liquidated them, thereby 
constituting an equity infusion in AHMSA by the GOM.
    During the verification of the questionnaire responses submitted in 
this review, we learned that, in 1991, AHMSA received shares in 
PROCARSA in lieu of an accounts receivable payment that PROCARSA owed 
in approximately the same amount. Furthermore, we learned that AHMSA 
did not liquidate its shareholdings in PROCARSA as petitioners allege. 
Rather, the PROCARSA shareholdings were included as part of the 
``unnecessary assets'' that the company transferred to the GOM as 
payment for the pre-privatization lay-off financing.
    Thus, AHMSA's shares in PROCARSA are among the ``unnecessary 
assets'' that GAN received when it purchased AHMSA in 1991. As with the 
rest of the ``unnecessary assets,'' we preliminarily determine that the 
countervailable benefit arises from AHMSA's use of the shares to repay 
the pre-privatization lay-off financing and not, as petitioners allege, 
from AHMSA's acquisition of the shares.
    To calculate the countervailable benefit in the POR, we used the 
methodology for intermittent, significant inflation described above. We 
then divided the benefit from the pre-privatization lay-off financing, 
including the 1991 equity infusion in connection with the debt to 
equity swap of PROCARSA, attributable to the POR, by the total sales of 
AHMSA during the

[[Page 48801]]

same period. On this basis, we preliminarily determine the net subsidy 
for this program to be 0.74 percent ad valorem for AHMSA.
F. Bancomext Export Loans
    Banco Nacional de Comercio Exterior, S.N.C. (Bancomext) offers a 
government program through which short-term financing is provided to 
producers or trading companies engaged in export activities. These U.S. 
dollar-denominated loans provide financing for working capital (pre-
export loans), and export sales (export loans). AHMSA used this program 
during the POR.
    In Certain Steel 1993, 58 FR at 37357, we determined that, since 
these loans are available only to exporters, Bancomext loans are 
countervailable to the extent that they are provided at preferential 
rates. No new information or evidence of changed circumstances was 
presented in this review to warrant any reconsideration of these 
findings.
    To determine the benefit conferred under the Bancomext export loan 
program, we compared the interest rate charged on these loans to a 
benchmark interest rate. As discussed in the ``Subsidies Valuation'' 
section of this notice, AHMSA submitted company-specific interest rate 
information on short and long-term loans that it received from 
commercial banks. Thus, we used the short-term loans to calculate a 
company-specific, weighted-average, U.S. dollar-denominated benchmark 
interest rate. We compared this company-specific benchmark rate to the 
interest rates charged on AHMSA's Bancomext loans and found that the 
interest rates charged were lower than the benchmark rates. Therefore, 
in accordance with section 771(5)(E)(ii) of the Act, we preliminarily 
determine that this program conferred a countervailable benefit during 
the POR because the interest rates charged on these loans were less 
than what a company otherwise would have had to pay on a comparable 
short-term commercial loan.
    Because eligibility under this program is contingent upon exports, 
we divided the benefit by AHMSA's total export sales in U.S. dollars 
during the POR. On this basis, we preliminarily determine the net 
subsidy for this program to be 0.10 percent ad valorem for AHMSA.
G. PITEX Duty-Free Imports for Companies That Export
    The Programa de Importacion Temporal Para Producir Productos Para 
Exportar, or Program for Temporary Import for Producing Products for 
Export (PITEX), was established by a decree published in the Diario 
Oficial on September 19, 1985, and amended in the Diario Oficial on 
September 19, 1986, and May 3, 1990. The program is jointly 
administered by the Ministry of Commerce and Industrial Development and 
the Customs Administration. Manufacturers who meet certain export 
requirements are eligible for the PITEX program. Those who qualify are 
exempt from paying import duties and the value added tax (VAT) on 
temporarily imported goods that will be used in the production of 
exports. Categories of merchandise eligible for PITEX import duty and 
VAT exemptions are raw materials, packing materials, fuels and 
lubricants, perishable materials, machinery, and spare parts.
    Machinery imported under the PITEX program may only be imported on 
a temporary basis. When the items' temporary status has run out, 
companies must either send the machines back or pay the import duties 
and VAT taxes that were originally exempted. In Certain Steel 1993, 58 
FR at 37359, we found that machinery imported under the PITEX program 
could stay in Mexico for five years initially and, after five years, a 
manufacturer could renew the temporary stay each year. At the 
verification of this review, we learned that the PITEX program was 
amended such that companies that imported machinery under the program 
after 1998 cannot apply for an extension of their import duty exempt 
status. Rather, the period of temporary status is determined as the 
time that the machinery and spare parts take to depreciate. After the 
items are fully depreciated, companies must send them back or pay the 
import duties and VAT that were originally exempted. However, regarding 
machinery imported prior to 1998, we learned at the verification of 
this review that it can remain in Mexico without liability for import 
duties and VAT, provided that the company maintains its PITEX status.
    In accordance with past practice, we determined in Certain Steel 
1993, 58 FR at 37359, that PITEX benefits are countervailable to the 
extent that they provide duty exemptions on imports of merchandise not 
consumed in the production of the exported product. See POS Cookware 
1992, 57 FR at 564, Ceramic Tile 1991, 56 FR at 12178, and Ceramic Tile 
1992, 57 FR at 24248. No new information or evidence of changed 
circumstances was presented in this review to warrant any 
reconsideration of these findings.
    At the verification of this review, we learned that AHMSA used the 
PITEX program to import raw materials, containers and packing 
materials, fuels, perishable items and lubricants, and various 
machinery and equipment. Thus, pursuant to the Department's practice, 
we preliminarily determine that AHMSA's import duty exemptions on spare 
parts, machinery and other items not consumed in the production of the 
exported products are countervailable.
    To calculate the countervailable benefit in the POR, we determined 
the amount of import duty that AHMSA would have paid absent the program 
for each duty exemption that the company received on products not 
consumed in the production of the exported product. Because eligibility 
for this program is contingent upon exports, we divided the benefit 
over AHMSA's total export sales. On this basis, we preliminarily 
determine the net subsidy to be 5.03 percent ad valorem for AHMSA.
    As mentioned above, AHMSA also received VAT exemptions on the 
products imported under the PITEX program. At the verification of this 
review, we learned that PITEX companies receive an exemption on VAT 
because it is understood that they are going to re-export the items at 
a later date. Non-PITEX companies, on the other hand, must pay the VAT 
upon importing the items and receive a reimbursement at a later date. 
The Department has previously determined that when the time-lag for the 
VAT credits that all other companies eventually receive is short, VAT 
exemptions do not confer a measurable time-value-of-money benefit upon 
participating companies that received the VAT exemption. See, e.g., 
Ball Bearings and Parts Thereof From Thailand; Final Results of 
Countervailing Duty Administrative Review, 60 FR 52379, 52373 (October 
6, 1995) (Ball Bearings Final) and Ball Bearings and Parts Thereof From 
Thailand; Preliminary Results of Countervailing Duty Administrative 
Review, 61 FR 34794, 34796 (July 3, 1996) (Ball Bearings Preliminary). 
At the verification of this review, we learned that the amount of time 
that non-PITEX companies had to wait for their VAT credits was not so 
much longer than the amount of time PITEX companies had to wait for 
their credits such that a measurable time-value-of-money benefit was 
conferred on the PITEX companies. Thus, we preliminarily determine that 
the VAT exemptions that AHMSA received under the PITEX program are not 
countervailable.
H. Immediate Deduction
    The immediate deduction program was established in 1987 and was 
subject to ongoing reforms until it was repealed in 1998. It originated 
from Article 163 of Mexico's Income Tax Law enacted in

[[Page 48802]]

1981 and repealed in 1987. The immediate deduction mechanism was 
available only for certain fixed assets that had not been previously 
used in Mexico. The immediate deduction was not available for pre-
operation expenses or for deferred expenses and costs. The GOM's stated 
purpose of the immediate deduction program was to promote investment by 
allowing the future deduction of the investments, at their present 
value, at the time of the investment. The immediate deduction option 
only applied to property used permanently within Mexico but outside the 
metropolitan areas of Mexico City, Guadalajara, and Monterrey. With 
respect to small firms (i.e., firms with a gross income of 7 million 
pesos or less), the location restriction does not apply. We note that 
the small firm classification does not apply to AHMSA. Immediate 
deduction could be taken, at the election of the tax-payer, in the tax 
year in which the investments in qualifying fixed assets were made, in 
the year in which these assets were first used, or in the following 
year. No prior approval by the GOM was required to use the immediate 
deduction option.
    We preliminarily determine that the immediate deduction program is 
specific to a region pursuant to section 771(5A)(D)(iv) of the Act. In 
this case, the ``designated geographical region'' comprises all of 
Mexico except Mexico City, Guadalajara, and Monterrey. The Department 
has previously found other GOM programs to be regionally specific based 
on a comparable designated region. For example, in Portland Hydraulic 
Cement and Cement Clinker From Mexico; Final Results of Administrative 
Review of Countervailing Duty Order, 50 FR 51732 (December 19, 1985), 
the Department explained that so-called Certificates of Fiscal 
Promotion, or CEPROFIs, were regionally specific because they were not 
available in Mexico City and certain other cities in two states near 
Mexico City. See also Final Affirmative Countervailing Duty 
Determination: Ceramic Tile from Mexico, 47 FR 20012 (May 10, 1982). 
Pursuant to section 771(5)(D)(ii) of the Act, we preliminarily 
determine that to extent that the GOM is not collecting tax revenue 
that is otherwise due from AHMSA, it is providing a financial 
contribution. Pursuant to section 771(5)(E) of the Act, because the 
immediate deduction program relieves certain companies of a tax burden 
that they would have otherwise incurred this program confers a benefit 
equal to the tax savings.
    At verification, we learned that the immediate deduction program 
does not change the taxable income declared by the company. Rather, the 
program changes the amount of deductions that a company can take on 
taxable income. The immediate deduction program is not an accelerated 
depreciation program, which Mexico does not have. Mexican companies 
eligible to use immediate deduction basically have two choices. 
Companies can either depreciate according to the normal depreciation 
schedule in Mexico, or they can take a one-time immediate deduction on 
the future depreciation of the item discounted back to its present 
value. If companies take the immediate deduction, they will not be able 
to claim all of the deductions that they would otherwise be able to 
take if they had utilized the standard straight line depreciation 
method. In other words, only a certain percentage of the value of the 
assets (as prescribed by law) are used in the immediate deduction 
calculation. Regarding the net present value calculation used to derive 
the immediate deduction, it is made at market rates as specified in the 
program legislation.
    At verification, we learned that losses (for tax purposes) can be 
carried forward for 10 years and that the immediate deduction figure is 
part of that loss carried forward. Therefore, the amount of the 
immediate deduction can be carried forward for up to 10 years.
    In order to calculate the benefit from the immediate deduction 
program, we examined AHMSA's tax returns from 1991, the year AHMSA 
began using the program, to 1996, the year of the tax return filed 
during the POR. Since the amount a company elects to take as an 
immediate deduction, as well as all losses, can be carried forward for 
10 years, we summed the immediate deduction amounts from all the years 
prior to the first year in which AHMSA had a taxable profit, which was 
1995. We subtracted the 1995 taxable profit from the total amount of 
available immediate deductions and then compared the result to the 
taxable profit for 1996 to determine the amount of the tax reduction 
based on the use of the immediate deduction program. To arrive at the 
actual benefit we multiplied the amount of the reduction in taxable 
income by Mexico's corporate income tax rate. We then divided the 
benefit over AHMSA's total sales. On this basis, we preliminarily 
determine the net subsidy to be 6.48 percent ad valorem for AHMSA. We 
invite comments on this methodology particularly with respect to 
whether and how we should account for normal depreciation in the 
quantification of the benefit under this program.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Committed Investment
    In the 1991 privatization, GAN purchased AHMSA from the GOM. In 
addition to paying a certain amount in cash, and assuming a portion of 
AHMSA's debt, GAN committed to investing another large sum of money in 
AHMSA. In their November 13, 1998, submission, petitioners allege that 
the committed investment provides a countervailable subsidy because it 
is revenue ``otherwise due to the GOM from GAN's purchase of AHMSA, 
revenue which the GOM forewent'' in exchange for requiring GAN to make 
additional investments in AHMSA. Petitioners allege that these 
investments would not have otherwise occurred, as AHMSA was 
unequityworthy at the time (see Certain Steel 1993, 58 FR at 37354). 
Therefore, petitioners contend that the investment commitment 
constitutes a ``funding mechanism'' within the meaning of the statute, 
to which the GOM made payment by foregoing revenue otherwise due and 
which the GOM required GAN to use for the purposes of additional 
investments in AHMSA. As equity investments into an unequityworthy 
company, petitioners allege that the committed investment constitutes a 
financial contribution which confers a benefit. In addition, 
petitioners allege that this benefit is specific to AHMSA because this 
component of the privatization bid formula was limited to AHMSA.
    After carefully analyzing the committed investment, we disagree 
with petitioners' contention that it conferred a benefit upon AHMSA. 
The record evidence does not support petitioner's claim that GAN would 
not have made these investments into AHMSA absent its express 
commitment to the GOM to do so. In fact, the record establishes that 
GAN invested more than was agreed to under the terms of its arrangement 
with the GOM. Therefore, we preliminarily determine that the committed 
investment did not confer a countervailable benefit upon AHMSA. Because 
there is no benefit, we need not reach the decision whether the 
committed investment agreement constituted a financial contribution.
B. Corporacion Mexicana de Investigacion en Materiales, S.A. de C.V. 
(COMIMSA)
    Although IMIS was terminated in 1991, its equity was used to 
establish the Corporacion Mexicana de Investigacion en Materiales, S.A. 
de C.V. (COMIMSA), an organization charged with continuing certain 
activities of

[[Page 48803]]

IMIS. The GOM has reported that COMIMSA's activities are comprised of 
manufacturing parts and providing services such as: environmental 
engineering; structural integrity; lubricants; computers and software; 
project engineering; and, laboratory analysis and testing.
    During verification we learned that COMIMSA acts as a supplier to 
AHMSA for laboratory analysis services and specifically engineered 
products for which COMIMSA holds the exclusive production rights. The 
products sold to AHMSA are mostly items for which COMIMSA's 
predecessor, IMIS, developed and obtained the design patents. These are 
usually key parts for important equipment. We learned at verification 
that since AHMSA has to purchase these items only from COMIMSA the 
prices are very high compared to similar items purchased from other 
suppliers. AHMSA has attempted to purchase the design patents, but 
COMIMSA has refused to sell them. We found no evidence that COMIMSA 
provided AHMSA with any research and development assistance. At 
verification we found that in situations where COMIMSA was a sole 
supplier of a particular item AHMSA, consistent with its policy of 
attempting to minimize sole supplier situations, sought out and found 
alternative suppliers that could perform some of the maintenance and 
installation services associated with these items.
    Because COMIMSA's dealings with AHMSA consist primarily of selling 
goods and services, the only relevant analysis in determining whether 
or not a countervailable benefit has been provided by COMIMSA would be 
under the ``Adequate Remuneration'' standard codified at section 
771(5)(E)(iv) of the Act. Given the fact that AHMSA has (1) paid very 
high prices on items for which COMIMSA has exclusive design rights, (2) 
attempted to purchase the design rights for items COMIMSA produces for 
AHMSA, (3) consistently attempted to find alternative suppliers to 
COMIMSA, and (4) has gone to outside suppliers for installation and 
maintenance of items purchased from COMIMSA, we preliminarily determine 
that COMIMSA is not providing its goods and services to AHMSA at less 
than ``adequate remuneration.'' COMIMSA's behavior is more consistent 
with that of a monopoly supplier for certain items, i.e., it is selling 
above adequate remuneration. Therefore, we find that COMIMSA's 
provision of goods and services to AHMSA does not provide a 
countervailable benefit.
C. Waiver of Taxes on AHMSA Purchase of Fundadora de Monterrey, S.A. de 
C.V. (FMSA)
    In Certain Steel 1993, 58 FR at 37365, the Department found that in 
1991, a portion of the assets of Fundadora de Monterrey, S.A. de C.V. 
(FMSA) was sold together with AHMSA. Petitioners argued then that the 
Department should have countervailed the GOM's waiver of sales and 
title taxes on the FMSA assets. In Certain Steel 1993, 58 FR at 37365, 
we determined that, although the FMSA assets purchased along with AHMSA 
should have been subject to sales and title taxes, we would not 
consider the issue in reaching our final determination because the FMSA 
assets did not produce subject merchandise at the time of the 
investigations. However, in their November 13, 1998, submission, 
petitioners allege that the FMSA assets began producing subject 
merchandise in 1994, thus making the waiver of taxes a countervailable 
event that conferred a benefit to AHMSA's production.
    In accordance with the Department's practice, benefits in the form 
of tax waivers are expensed in the year of receipt. Thus, given that 
the event in question occurred outside of the POR, the issue of whether 
FMSA produced subject merchandise at the time of the alleged tax waiver 
is moot. Therefore, we preliminarily determine this program to be not 
countervailable.
D. Discounted Freight Rates
    In their November 13, 1998, submission petitioners provided AHMSA's 
1993 annual report, which shows that negotiations between AHMSA and 
Ferrocarriles Nacionales de Mexico (FNM), the national railroad, led to 
a 9.2% reduction in freight tariffs for the company in 1993. 
Petitioners allege that these rail rates are preferential and therefore 
the GOM, through its state-owned railroad, provided rail services to 
AHMSA for less than adequate remuneration. Based on the information 
that was reasonably available to them at the time, petitioners alleged 
that AHMSA may have received similar benefits during the years 1994 
through 1997.
    Section 771(5)(E)(iv) of the Act states that a benefit shall 
normally be treated as conferred when ``goods and services are provided 
for less than adequate remuneration.'' To the extent that AHMSA's 
negotiated freight tariffs are less than what other companies could 
receive for the same services, a countervailable benefit may be 
conferred. However, we must first determine if this program, i.e., 
discounts on freight rates by the government-owned railroad, is 
specific according to section 771 (5A)(D) of the Act and is therefore 
countervailable.
    We found at verification that during the POR FNM was still 
government-owned. FNM, the government entity running the railroads, had 
an established policy of providing discounts according to the volume of 
material transported on its rails. We also found that a very large 
number of companies across a wide range of industries, including AHMSA, 
constituted ``big accounts'' that were eligible for the largest volume-
based discounts. Industries represented in the ``big accounts'' 
categories include the cement, auto parts, agriculture, beer, steel, 
and mining industries. The deepest discount was only available to 
customers, including AHMSA, that provided their own rolling stock. We 
verified that the discounts were made public and that they applied 
equally to every customer eligible for volume discounts. We verified 
that benefits under this program are widely and evenly distributed 
throughout the sectors with no sector receiving a disproportionate 
amount. Because the discounts provided by FNM are not limited to a 
specific enterprise or industry, or group of enterprises or industries, 
we preliminarily determine that they are not countervailable.
E. ALTEX
    In their November 13, 1998, submission petitioners claim that the 
ALTEX program is designed to provide registered exporters with 
administrative and financial assistance for product promotion. Under 
the ALTEX program, assistance is limited to companies with export sales 
of at least U.S.$2 million annually or companies with export sales of 
at least 40 percent of gross sales. Companies must maintain a positive 
trade balance. In addition to administrative and financial assistance 
for promotion, petitioners allege that ALTEX entities are provided with 
PITEX program benefits (companies that export a certain percentage of 
their goods do not pay duties on imports used in the production of 
exported goods). Petitioners further allege that immediate VAT refunds 
and increased financial support from the GOM in the form of debt 
supplied at preferred interest rates through Bancomext, are additional 
benefits available to exporters that qualify under the ALTEX program.
    At verification we learned that the ALTEX program provides 
administrative facilities to exporters in the form of immediate VAT 
reimbursements. We asked government officials to describe the benefits 
of being

[[Page 48804]]

designated as an ALTEX company. GOM officials explained that it usually 
takes about 60 days for the GOM to reimburse non-ALTEX companies while 
only taking 15 days to reimburse ALTEX companies. Regarding eligibility 
requirements, GOM officials said that exports must constitute 40 
percent of participating companies' sales or a minimum of 2 million 
U.S. dollars of their total sales.
    In addition to receiving VAT redemptions on an expedited basis, GOM 
officials explained that ALTEX companies are eligible to receive 
detailed import and export information on a product-specific basis for 
free while non-ALTEX companies must pay a nominal amount for access to 
the information. We learned, however, that the fee paid by non-ALTEX 
companies is very nominal such that the differential between ALTEX and 
non-ALTEX companies is not significant.
    We also learned at verification that loans, such as the type of 
loans offered under the Bancomext program, are not offered under the 
ALTEX program. We verified that enrollment under the ALTEX program does 
not have any bearing on the bestowal of loans under the Bancomext 
program. In addition, benefits under the ALTEX program that are 
described in the program legislation are listed under a section that is 
separate from the section in which the Bancomext program is discussed, 
thereby indicating that the two programs are not related.
    Regarding VAT refunds, we verified that the ALTEX program was 
intended to reduce the amount of time exporters had to wait for VAT 
refunds. We found that, according to the law, ALTEX companies are 
supposed to receive their refunds in 7 days as opposed to non-ALTEX 
companies that usually must wait approximately 50 days. Companies have 
the option of reimbursement in the following month or they can apply 
the credit to any VAT payments due the following month.
    The Department has previously determined that when the time-lag for 
VAT credits that all other companies eventually receive is short, VAT 
exemptions do not confer a measurable time-value-of-money benefit upon 
participating companies that received the VAT exemption. See, e.g., 
Ball Bearings Final, 60 FR at 52373 and Ball Bearings Preliminary, 61 
FR at 37796. As in these cited cases, the time difference between ALTEX 
company refunds and non-ALTEX company refunds was not long enough to 
confer a time-value-of-money benefit. Thus, we preliminarily determine 
that the accelerated VAT refunds under the ALTEX program are not 
countervailable.

III. Other Program Examined

A. NAFINSA
    Nafinsa provides long-term financing to Mexican enterprises in 
various geographical areas of Mexico. Until December 31, 1988, Nafinsa 
acted as a first-tier bank, i.e., a commercial bank, providing funds 
directly to Mexican firms. In 1989, Nafinsa began acting as a second-
tier bank--a bank which acts as an intermediary between various 
international lending organizations and Mexican commercial banks. 
During the POR, Nafinsa acted only as a second-tier bank for new loans. 
We found during verification that Nafinsa still administers loans 
granted prior to 1989 for which it acted as the first-tier bank and 
long-term loans previously taken out under the FONEI program. AHMSA had 
a Nafinsa long-term loan outstanding during the POR, for which Nafinsa 
acted as a second tier bank.
    We learned at verification that in its capacity as a second-tier 
bank Nafinsa establishes a rate to be charged to the commercial banks 
after which the banks and the companies independently negotiate the 
final interest rate. The GOM has no involvement in the negotiating 
process between the commercial banks and companies. The core rate that 
Nafinsa charges to commercial banks is the same regardless of the size 
of the ultimate recipient. We verified that the commercial banks were 
free to determine the interest rate charged to the companies. We found 
that, while the government does not know which company will ultimately 
receive the loan at the time the money is lent to the commercial bank, 
the banks must eventually inform Nafinsa of the ultimate recipient via 
an annual report that participating banks must submit to the GOM. AHMSA 
had one outstanding NAFINSA loan with principal and interest during the 
POR. The company received this loan from a commercial bank which acted 
as the first tier bank for the financing. This was a long-term variable 
rate loan.
    To determine the benefit we compared the interest rate charged on 
this loan to a benchmark interest rate. As discussed in the ``Subsidies 
Valuation'' section of this notice, AHMSA submitted company-specific 
interest rate information on short and long-term loans that it received 
from commercial banks. Thus, we used the long-term variable rate loans 
to calculate a company-specific, weighted-average, U.S. dollar-
denominated benchmark interest rate. We compared this company-specific 
benchmark rate to the interest rates charged on AHMSA's Nafinsa loan 
and found that the interest rates charged were higher than the 
benchmark rate. Therefore, we preliminarily determine that this program 
did not confer a countervailable benefit during the POR because the 
interest rates charged on this loan was higher than what a company 
otherwise would have had to pay on a comparable long-term commercial 
loan.

IV. Programs Not Used

A. Bancomext Short-Term Import Financing
B. FONEI Long-Term Financing
C. Export Financial Restructuring
D. Bancomext Trade Promotion Services and Technical Support
E. ECEX
F. Article 15 & 94 Loans

Preliminary Results of Review

    In accordance with 19 C.F.R. 351.221(b)(4)(i), we have calculated 
an individual subsidy rate for AHMSA, the producer/exporter subject to 
this administrative review. For the period January 1, 1997 through 
December 31, 1997, we preliminarily determine the net subsidy for AHMSA 
to be 16.31 percent ad valorem. If the final results of this review 
remain the same as these preliminary results, the Department intends to 
instruct the U.S. Customs Service to assess countervailing duties for 
AHMSA at 16.31 percent ad valorem of the f.o.b. invoice price on all 
shipments of the subject merchandise from AHMSA, entered, or withdrawn 
from warehouse, for consumption on or after the date of publication of 
the final results of this review.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 19 
C.F.R. 355.22(b). Pursuant to 19 C.F.R. 355.22(c), for all companies 
for which a review was not requested, duties must be assessed at the 
cash deposit rate, and cash deposits must continue to be collected, at 
the rate previously ordered. As such, the countervailing duty cash 
deposit rate applicable to a company can no longer change, except 
pursuant to a request for a review of that company. See Federal-Mogul

[[Page 48805]]

Corporation and The Torrington Company v. United States, 822 F. Supp. 
782 (CIT 1993) and Floral Trade Council v. United States, 822 F. Supp. 
766 (CIT 1993) (interpreting 19 C.F.R. 353.22(e), the antidumping 
regulation on automatic assessment, which is identical to 19 C.F.R. 
355.22(g)). Therefore, the cash deposit rates for all companies except 
those covered by this review will be unchanged by the results of this 
review.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to non-reviewed companies covered by this 
order are those established in the most recently completed 
administrative proceeding conducted under the URAA. If such a review 
has not been conducted, the rate established in the most recently 
completed administrative proceeding pursuant to the statutory 
provisions that were in effect prior to the URAA amendments is 
applicable. See Certain Steel 1993. These rates shall apply to all non-
reviewed companies until a review of a company assigned these rates is 
requested. In addition, for the period January 1, 1997 through December 
31, 1997, the assessment rates applicable to all non-reviewed companies 
covered by this order are the cash deposit rates in effect at the time 
of entry.

Public Comment

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

    Dated: August 31, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-23323 Filed 9-7-99; 8:45 am]
BILLING CODE 3510-DS-P