[Federal Register Volume 65, Number 24 (Friday, February 4, 2000)]
[Notices]
[Pages 5536-5554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1849]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration

[C-351-831]


Final Affirmative Countervailing Duty Determination: Certain Cold 
Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil

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

EFFECTIVE DATE:  February 4, 2000.

FOR FURTHER INFORMATION CONTACT:  Dana Mermelstein or Javier 
Barrientos, Office of CVD/AD Enforcement VII, Import Administration, 
U.S. Department of Commerce, Room 7866, 14th Street and Constitution 
Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-3208 and 
(202) 482-2243, respectively.

    FINAL DETERMINATION: The Department of Commerce (the Department) 
determines that countervailable subsidies are being provided to 
producers and/or exporters of certain cold-rolled flat-rolled carbon-
quality steel products from Brazil. For information on the estimated 
countervailing duty rates, please see the ``Suspension of Liquidation'' 
section of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

    The petition in this investigation was filed by Bethlehem Steel 
Corporation,

[[Page 5537]]

Gulf States Steel Inc., Ispat Inland, Inc., LTV Steel Company, Inc., 
National Steel Corporation, Steel Dynamics Inc., U.S. Steel Group (a 
unit of USX Corporation), Weirton Steel Corporation, the Independent 
Steelworkers of America and the United Steelworkers of America 
(collectively, ``the petitioners'').

Case History

    Since the publication of our preliminary determination in this 
investigation on October 1, 1999 (Preliminary Affirmative 
Countervailing Duty Determination and Alignment of Final Countervailing 
Duty Determination With Final Antidumping Duty Determination: Certain 
Cold Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64 
FR 53332) (Preliminary Determination), the following events have 
occurred:
    We conducted verification of the countervailing duty questionnaire 
responses from October 21 through October 26, 1999. The final 
determination of this countervailing duty investigation was aligned 
with the final antidumping duty determination (see 64 FR at 53334). On 
December 2, 1999, and December 7, 1999, the Department released its 
verification reports to all interested parties. Respondents submitted a 
case brief on December 15, 1999; petitioners submitted a rebuttal brief 
on December 21, 1999.

Scope of Investigations

    For purposes of this investigation, the products covered are 
certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel 
products, neither clad, plated, nor coated with metal, but whether or 
not annealed, painted, varnished, or coated with plastics or other non-
metallic substances, both in coils, 0.5 inch wide or wider, (whether or 
not in successively superimposed layers and/or otherwise coiled, such 
as spirally oscillated coils), and also in straight lengths, which, if 
less than 4.75 mm in thickness having a width that is 0.5 inch or 
greater and that measures at least 10 times the thickness; or, if of a 
thickness of 4.75 mm or more, having a width exceeding 150 mm and 
measuring at least twice the thickness. The products described above 
may be rectangular, square, circular or other shape and include 
products of either rectangular or non-rectangular 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 beveled or rounded at the edges.
    Specifically included in this scope are vacuum degassed, fully 
stabilized (commonly referred to as interstitial-free (``IF'')) steels, 
high strength low alloy (``HSLA'') steels, and motor lamination steels. 
IF steels are recognized as low carbon steels with micro-alloying 
levels of elements such as titanium and/or niobium added to stabilize 
carbon and nitrogen elements. HSLA steels are recognized as steels with 
micro-alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum. Motor lamination steels contain 
micro-alloying levels of elements such as silicon and aluminum.
    Steel products included in the scope of this investigation, 
regardless of definitions in the Harmonized Tariff Schedules of the 
United States (``HTSUS''), are products in which: (1) Iron 
predominates, by weight, over each of the other contained elements; (2) 
the carbon content is 2 percent or less, by weight, and; (3) none of 
the elements listed below exceeds the quantity, by weight, respectively 
indicated:

1.80 percent of manganese, or
2.25 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 (also called columbium), or
0.15 percent of vanadium, or
0.15 percent of zirconium.

    All products that meet the written physical description, and in 
which the chemistry quantities do not exceed any one of the noted 
element levels listed above, are within the scope of this investigation 
unless specifically excluded. The following products, by way of 
example, are outside and/or specifically excluded from the scope of 
this investigation:
     SAE grades (formerly also called AISI grades) above 2300;
     Ball bearing steels, as defined in the HTSUS;
     Tool steels, as defined in the HTSUS;
     Silico-manganese steel, as defined in the HTSUS;
     Silicon-electrical steels, as defined in the HTSUS, that 
are grain-oriented;
     Silicon-electrical steels, as defined in the HTSUS, that 
are not grain-oriented and that have a silicon level exceeding 2.25 
percent;
     All products (proprietary or otherwise) based on an alloy 
ASTM specification (sample specifications: ASTM A506, A507);
     Non-rectangular shapes, not in coils, which are the result 
of having been processed by cutting or stamping and which have assumed 
the character of articles or products classified outside chapter 72 of 
the HTSUS.
     Silicon-electrical steels, as defined in the HTSUS, that 
are not grain-oriented and that have a silicon level less than 2.25 
percent, and (a) fully-processed, with a core loss of less than 0.14 
watts/pound per mil (.001 inch), or (b) semi-processed, with core loss 
of less than 0.085 watts/pound per mil (.001 inch);
 Certain shadow mask steel, which is aluminum killed cold-
rolled steel coil that is open coil annealed, has an ultra-flat, 
isotropic surface, and which meets the following characteristics:

Thickness: 0.001 to 0.010 inch
Width: 15 to 32 inches

                          Chemical Composition
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Element................................................                C
Weight %...............................................          0.002%
------------------------------------------------------------------------

     Certain flapper valve steel, which is hardened and 
tempered, surface polished, and which meets the following 
characteristics:

    Thickness: 1.0 mm
    Width: 152.4 mm

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element...........................  C                       Si                      Mn                      P                      S
Weight %..........................  0.90-1.05               0.15-0.35               0.30-0.50                0.03                   0.006
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 5538]]


                          Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Tensile Strength.......................   162 Kgf/mm\2\
Hardness...............................   475 Vickers hardness number
------------------------------------------------------------------------


                           Physical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Flatness...............................  < 0.2% of nominal strip width
------------------------------------------------------------------------

    Microstructure: Completely free from decarburization. Carbides are 
spheroidal and fine within 1% to 4% (area percentage) and are 
undissolved in the uniform tempered martensite.

                         Non-metallic Inclusion
------------------------------------------------------------------------
                                                               Area
                                                            percentage
------------------------------------------------------------------------
Sulfide Inclusion.......................................   0.
                                                                     04%
Oxide Inclusion.........................................   0.
                                                                     05%
------------------------------------------------------------------------

    Compressive Stress: 10 to 40 Kgf/mm \2\

                            Surface Roughness
------------------------------------------------------------------------
                 Thickness (mm)                   Roughness (m)
------------------------------------------------------------------------
t0.209..............................  Rz0.5
0.209t0.310.........................  Rz0.6
0.310t0.440.........................  Rz0.7
0.440t0.560.........................  Rz0.8
0.560t.........................................  Rz1.0
------------------------------------------------------------------------

     Certain ultra thin gauge steel strip, which meets the 
following characteristics:
    Thickness: 0.100 mm 7%
    Width: 100 to 600 mm

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S                   Al                  Fe
Weight %.......................  0.07      0.2-0.5             0.05     0.05     0.07     Balance
--------------------------------------------------------------------------------------------------------------------------------------------------------


                          Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Hardness...............................  Full Hard (Hv 180 minimum)
Total Elongation.......................  3%
Tensile Strength.......................  600 to 850 N/mm\2\
------------------------------------------------------------------------


                           Physical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Surface Finish.........................  0.3 micron
Camber (in 2.0 m)......................  3.0 mm
Flatness (in 2.0 m)....................  0.5 mm
Edge Burr..............................  0.01 mm greater than thickness
Coil Set (in 1.0 m)....................  75.0 mm
------------------------------------------------------------------------

     Certain silicon steel, which meets the following 
characteristics:
    Thickness: 0.024 inch .0015 inch
    Width: 33 to 45.5 inches

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
---------------------------------------------------------------------------------------------------------------------------------------- ------------------
Element.....................  C                 Mn                P                 S                 Si                Al
Min. Weight %...............  ................  ................  ................  ................  0.65              ................
Max. Weight %...............  0.004             0.4               0.09              0.009             ................  0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------


                          Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Hardness...............................  B 60-75 (AIM 65)
------------------------------------------------------------------------


[[Page 5539]]


                           Physical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Finish.................................  Smooth (30-60 microinches)
Gamma Crown (in 5 inches)..............  0.0005 inch, start measuring
                                          inch from slit edge
Flatness...............................  20 I-UNIT max.
Coating................................  C3A-.08A max. (A2 coating
                                          acceptable)
Camber (in any 10 feet)................  \1/16\ inch
Coil Size I.D..........................  20 inches
------------------------------------------------------------------------


                           Magnetic Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Core Loss (1.5T/60 Hz) NAAS............  3.8 Watts/Pound max.
Permeability (1.5T/60 Hz) NAAS.........  1700 gauss/oersted typical.
                                         1500 minimum.
------------------------------------------------------------------------

     Certain aperture mask steel, which has an ultra-flat 
surface flatness and which meets the following characteristics:
    Thickness: 0.025 to 0.245 mm
    Width: 381-1000 mm

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element...........................  C                      N                               Al
Weight %..........................   0.01                  0.004 to 0.007                   0.007
----------------------------------------------------------------------------------------------------------------

     Certain annealed and temper-rolled cold-rolled 
continuously cast steel, which meets the following characteristics:

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element.......................  C           Mn          P           S             Si          Al            As         Cu         B          N
Min. Weight %.................  0.02        0.20        ..........  ............  ..........  0.03          .........  .........  .........  0.003
Max. Weight %.................  0.06        0.40        0.02        0.023         0.03        0.08 (Aiming  0.02       0.08       .........  0.008
                                                                     (Aiming                   0.05)                                          (Aiming
                                                                     0.018 Max.)                                                              0.005)
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Non-metallic Inclusions: Examination with the S.E.M. shall not 
reveal individual oxides >1 micron (0.000039 inch) and inclusion groups 
or clusters shall not exceed 5 microns (0.000197 inch) in length.
    Surface Treatment as follows:
    The surface finish shall be free of defects (digs, scratches, pits, 
gouges, slivers, etc.) and suitable for nickel plating.

                                                 Surface Finish
----------------------------------------------------------------------------------------------------------------
                                                        Roughness, RA Microinches (Micrometers)
                                     ---------------------------------------------------------------------------
                                                 Aim                      Min.                     Max.
----------------------------------------------------------------------------------------------------------------
Extra Bright........................  5 (0.1)                   0 (0)                    7 (0.2)
----------------------------------------------------------------------------------------------------------------

     Certain annealed and temper-rolled cold-rolled 
continuously cast steel, which meets the following characteristics:

                                                                                      Chemical Composition
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Element..........................  C                      Si                     Mn                     P                      S                      Al                    N
Weight %.........................  0.08                   0.04                   0.40                   0.03                   0.030.0                0.010-0.025           0.0025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Tolerance....................  5 percent
Guaranteed inside of 15 mm from mill     (aim 4 percent)
 edges.
Width Tolerance........................  -0/+7 mm
Hardness (Hv)..........................  Hv 85-110
Annealing..............................  Annealed
Surface................................  Matte
Tensile Strength.......................  275N/mm\2\
Elongation.............................  36%
------------------------------------------------------------------------

     Certain annealed and temper-rolled cold-rolled 
continuously cast steel, in coils, with a certificate of analysis per 
Cable System International (``CSI'') Specification 96012, with the 
following characteristics:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S

[[Page 5540]]

 
Max. Weight %..................  0.13                 0.60                0.02                0.05
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Base Weight............................  55 pounds
Theoretical Thickness..................  0.0061 inch (+/-10 percent of
                                          theoretical thickness)
Width..................................  31 inches
Tensile Strength.......................  45,000-55,000 psi
Elongation.............................  minimum of 15 percent in 2
                                          inches
------------------------------------------------------------------------

     Certain full hard tin mill black plate, continuously cast, 
which meets the following characteristics:

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element......................  C            Mn           P           S         Si          Al        As          Cu          B           N
Min. Weight %................  0.02         0.20         ..........  ........  ..........  0.03      ..........  ..........  ..........  0.003
Max. Weight %................  0.06         0.40         0.02        0.023     0.03        0.08      0.02        0.08        ..........  0.008 (Aiming
                                                                      (Aiming               (Aiming                                       0.005)
                                                                      0.018                 0.05)
                                                                      Max.)
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Non-metallic Inclusions: Examination with the S.E.M. shall not 
reveal individual oxides >1 micron (0.000039 inch) and inclusion groups 
or clusters shall not exceed 5 microns (0.000197 inch) in length.
    Surface Treatment as follows:
    The surface finish shall be free of defects (digs, scratches, pits, 
gouges, slivers, etc.) and suitable for nickel plating.

                                                 Surface Finish
----------------------------------------------------------------------------------------------------------------
                                                        Roughness, RA Microinches (Micrometers)
                                     ---------------------------------------------------------------------------
                                                 Aim                      Min.                     Max.
----------------------------------------------------------------------------------------------------------------
Stone Finish........................  16 (0.4)                  8 (0.2)                  24 (0.6)
----------------------------------------------------------------------------------------------------------------

     Certain ultra-bright tin mill black plate meeting ASTM 7A 
specifications for surface finish and RA of seven micro-inches or 
lower.
     Concast cold-rolled drawing quality sheet steel, ASTM a-
620-97, Type B, or single reduced black plate, ASTM A-625-92, Type D, 
T-1, ASTM A-625-76 and ASTM A-366-96, T1-T2-T3 Commercial bright/luster 
7a both sides, RMS 12 maximum. Thickness range of 0.0088 to 0.038 
inches, width of 23.0 inches to 36.875 inches.
     Certain single reduced black plate, meeting ASTM A-625-98 
specifications, 53 pound base weight (0.0058 inch thick) with a Temper 
classification of T-2 (49-57 hardness using the Rockwell 30 T scale).
     Certain single reduced black plate, meeting ASTM A-625-76 
specifications, 55 pound base weight, MR type matte finish, TH basic 
tolerance as per A263 trimmed.
     Certain single reduced black plate, meeting ASTM A-625-98 
specifications, 65 pound base weight (0.0072 inch thick) with a Temper 
classification of T-3 (53-61 hardness using the Rockwell 30 T scale).
     Certain cold-rolled black plate bare steel strip, meeting 
ASTM A-625 specifications, which meet the following characteristics:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S
Max. Weight %..................  0.13                 0.60                0.02                0.05
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness..............................  0.0058 inch 0.0003
                                          inch
Hardness...............................  T2/HR 30T 50-60 aiming
Elongation.............................  15%
Tensile Strength.......................  51,000.0 psi 4.0
                                          aiming
------------------------------------------------------------------------

     Certain cold-rolled black plate bare steel strip, in 
coils, meeting ASTM A-623, Table II, Type MR specifications, which meet 
the following characteristics:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   S
Max. Weight %..................  0.13                 0.60                0.04                0.05
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness..............................  0.0060 inch (0.0005
                                          inch)

[[Page 5541]]

 
Width..................................  10 inches (+ \1/4\
                                          to \3/8\ inch/-0)
Tensile strength.......................  55,000 psi max.
Elongation.............................  Minimum of 15 percent in 2
                                          inches
------------------------------------------------------------------------

     Certain ``blued steel'' coil (also know as ``steamed blue 
steel'' or ``blue oxide'') with a thickness of 0.30 mm to 0.42 mm and 
width of 609 mm to 1219 mm, in coil form;
     Certain cold-rolled steel sheet, whether coated or not 
coated with porcelain enameling prior to importation, which meets the 
following characteristics:
    Thickness (nominal): 0.019 inch
    Width: 35 to 60 inches

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C.......................  O......................  B
Max. Weight %.......................  0.004...................  .......................  .......................
Min. Weight %.......................  ........................  0.010..................  0.012
----------------------------------------------------------------------------------------------------------------

     Certain cold-rolled steel, which meets the following 
characteristics:
     Width: >66 inches

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C..................  Mn................  P.................  Si
Max. Weight %..................  0.07...............  0.67..............  0.14..............  0.03
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm)...................  0.800-2.000
Min. Yield Point (MPa).................  265
Max Yield Point (MPa)..................  365
Min. Tensile Strength (MPa)............  440
Min. Elongation %......................  26
------------------------------------------------------------------------

     Certain band saw steel, which meets the following 
characteristics:
    Thickness:  1.31 mm
    Width:  80 mm

                                                                                      Chemical Composition
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Element........................  C                      Si                     Mn                     P                      S                      Cr                     Ni
Weight %.......................  1.2 to 1.3             0.15 to 0.35           0.20 to 0.35            0.03       0.007                  0.3 to 0.5              0.25
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Other properties:
    Carbide: Fully spheroidized having > 80% of carbides, which are 
 0.003 mm and uniformly dispersed
    Surface finish: Bright finish free from pits, scratches, rust, 
cracks, or seams
    Smooth edges.
    Edge camber (in each 300 mm of length):  7 mm arc height
    Cross bow (per inch of width): 0.015 mm max.
     Certain transformation-induced plasticity (TRIP) steel, 
which meets the following characteristics:

Variety 1:

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         Si                       Mn
Min. Weight %.......................  0.09                      1.0                      0.90
Max. Weight %.......................  0.13                      2.1                      1.7
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm)...................  1.000-2.300 (inclusive)
Min. Yield Point (MPa).................  320
Max Yield Point (MPa)..................  480
Min. Tensile Strength (MPa)............  590

[[Page 5542]]

 
Min. Elongation %......................  24 (if 1.000-1.199 thickness
                                          range)
                                         25 (if 1.200-1.599 thickness
                                          range)
                                         26 (if 1.600-1.999 thickness
                                          range)
                                         27 (if 2.000-2.300 thickness
                                          range)
------------------------------------------------------------------------

Variety 2

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         Si                       Mn
Min. Weight %.......................  0.12                      1.5                      1.1
Max. Weight %.......................  0.16                      2.1                      1.9
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm)...................  1.000-2.300 (inclusive)
Min. Yield Point (MPa).................  340
Max Yield Point (MPa)..................  520
Min. Tensile Strength (MPa)............  690
Min. Elongation %......................  21 (if 1.000-1.199 thickness
                                          range)
                                         22 (if 1.200-1.599 thickness
                                          range)
                                         23 (if 1.600-1.999 thickness
                                          range)
                                         24 (if 2.000-2.300 thickness
                                          range)
------------------------------------------------------------------------

Variety 3

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element.............................  C                         Si                       Mn
Min. Weight %.......................  0.13                      1.3                      1.5
Max. Weight %.......................  0.21                      2.0                      2.0
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm)...................  1.200-2.300 (inclusive)
Min. Yield Point (MPa).................  370
Max Yield Point (MPa)..................  570
Min. Tensile Strength (MPa)............  780
Min. Elongation %......................  18 (if 1.200-1.599 thickness
                                          range)
                                         19 (if 1.600-1.999 thickness
                                          range)
                                         20 (if 2.000-2.300 thickness
                                          range)
------------------------------------------------------------------------

     Certain corrosion-resistant cold-rolled steel, which meets 
the following characteristics:

Variety 1

                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   Cu
Min. Weight%...................  ...................  ..................  ..................  0.15
Max. Weight %..................  0.10                 0.40                0.10                0.35
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm)...................  0.600-0.800
Min. Yield Point (MPa).................  185
Max Yield Point (MPa)..................  285
Min. Tensile Strength (MPa)............  340
Min. Elongation........................  31 (ASTM standard 31% = JIS
                                          standard 35%)
------------------------------------------------------------------------

Variety 2

[[Page 5543]]



                                              Chemical Composition
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Element........................  C                    Mn                  P                   Cu
Min. Weight %..................  ...................  ..................  ..................  0.15
Max. Weight %..................  0.05                 0.40                0.08                0.35
----------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness Range (mm)...................  0.800-1.000
Min. Yield Point (MPa).................  145
Max Yield Point (MPa)..................  245
Min. Tensile Strength (MPa)............  295
Min. Elongation %......................  31 (ASTM standard 31%=JIS
                                          standard 35%)
------------------------------------------------------------------------

Variety 3

                                                                  Chemical Composition
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Element......................  C            Si           Mn           P          S            Cu         Ni           Al           Nb, Ti, V,   Mo
                                                                                                                                    B
Max. Weight %................  0.01         0.05         0.40         0.10       0.023        0.15-.35   0.35         0.10         0.10         0.30
--------------------------------------------------------------------------------------------------------------------------------------------------------


                   Physical and Mechanical Properties
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Thickness (mm):........................  0.7
Elongation %:...............  35
------------------------------------------------------------------------

 Porcelain enameling sheet, drawing quality, in coils, 0.014 
inch in thickness, +0.002, -0.000, meeting ASTM A-424-96 Type 1 
specifications, and suitable for two coats.

    The merchandise subject to this investigation is typically 
classified in the HTSUS at subheadings: 7209.15.0000, 7209.16.0030, 
7209.16.0060, 7209.16.0090, 7209.17.0030, 7209.17.0060, 7209.17.0090, 
7209.18.1530, 7209.18.1560, 7209.18.2550, 7209.18.6000, 7209.25.0000, 
7209.26.0000, 7209.27.0000, 7209.28.0000, 7209.90.0000, 7210.70.3000, 
7210.90.9000, 7211.23.1500, 7211.23.2000, 7211.23.3000, 7211.23.4500, 
7211.23.6030, 7211.23.6060, 7211.23.6085, 7211.29.2030, 7211.29.2090, 
7211.29.4500, 7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000, 
7212.40.5000, 7212.50.0000, 7225.19.0000, 7225.50.6000, 7225.50.7000, 
7225.50.8010, 7225.50.8085, 7225.99.0090, 7226.19.1000, 7226.19.9000, 
7226.92.5000, 7226.92.7050, 7226.92.8050, and 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
U.S. Customs Service (``U.S. Customs'') purposes, the written 
description of the merchandise under investigation is dispositive.
    The Department received comments from a number of parties including 
importers, respondents, consumers, and the petitioners, aimed at 
clarifying the scope of these investigations. See Memorandum to Joseph 
A. Spetrini (``Scope Memorandum''), January 18, 2000, for a list of all 
persons submitting comments and a discussion of all scope comments 
including those exclusion requests under consideration at the time of 
the preliminary determination in these investigations.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the 
Act). In addition, unless otherwise indicated, all citations to the 
Department's regulations are to the current regulations as codified at 
19 CFR Part 351 (1999) and to the substantive countervailing duty 
regulations published in the Federal Register on November 25, 1998 (63 
FR 65348)(CVD Regulations).

Injury Test

    Because Brazil is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from Brazil materially injure, or threaten material 
injury to, a U.S. industry. On July 30, 1999, the ITC published its 
preliminary determination that there is a reasonable indication that an 
industry in the United States is being materially injured, or 
threatened with material injury, by reason of imports from Brazil of 
the subject merchandise (64 FR 41458). The Commission transmitted its 
determination in this investigation to the Secretary of Commerce on 
July 19, 1999. The views of the Commission are contained in USITC 
Publication 3214 (July 1999), entitled Certain Cold-Rolled Steel 
Products from Argentina, Brazil, China, Indonesia, Japan, Russia, 
Slovakia, South Africa, Taiwan, Thailand, Turkey, and Venezuela: 
Investigations Nos. 701-TA-393-396 and 731-TA-829-840 (Preliminary).

Period of Investigation

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

Company Histories

    USIMINAS was founded in 1956 as a venture between the Brazilian 
Government, various stockholders and Nippon Usiminas. In 1974, the 
majority interest in USIMINAS was transferred to SIDERBRAS, the 
government holding company for steel interests. The company underwent 
several expansions of capacity throughout the 1980s. In 1990, SIDERBRAS 
was put into liquidation and the Government of Brazil (GOB) decided to 
include its operating companies, including

[[Page 5544]]

USIMINAS, in its National Privatization Program (NPP). In 1991, 
USIMINAS was partially privatized; as a result of the initial auction, 
Companhia do Vale do Rio Doce (CVRD), a majority government-owned iron 
ore producer, acquired 15 percent of USIMINAS's common shares. In 1994, 
the Government disposed of additional holdings, amounting to 16.2 
percent of the company's equity. USIMINAS is now owned by CVRD and a 
consortium of private investors, including Nippon Usiminas, Caixa de 
Previdencia dos Funcionarios do Banco do Brasil (Previ) and the 
USIMINAS Employee Investment Club. CVRD was partially privatized in 
1997, when 31 percent of the company's shares were sold.
    COSIPA was established in 1953 as a government-owned steel 
production company. In 1974, COSIPA was transferred to SIDERBRAS. Like 
USIMINAS, COSIPA was included in the NPP after SIDERBRAS was put into 
liquidation. In 1993, COSIPA was partially privatized, with the GOB 
retaining a minority of the preferred shares. Control of the company 
was acquired by a consortium of investors led by USIMINAS. In 1994, 
additional government-held shares were sold, but the GOB still 
maintained approximately 25 percent of COSIPA's preferred shares. 
During the POI, USIMINAS owned 49.8 percent of the voting capital stock 
of the company. Other principal owners include Bozano Simonsen Asset 
Management Ltd., the COSIPA Employee Investment Club, and COSIPA's 
Pension Fund (FEMCO).
    CSN was established in 1941 and commenced operations in 1946 as a 
government-owned steel company. In 1974, CSN was transferred to 
SIDERBRAS. In 1990, when SIDERBRAS was put into liquidation, the GOB 
included CSN in its NPP. In 1991, 12 percent of the equity of the 
company was transferred to the CSN employee pension fund. In 1993, CSN 
was partially privatized; CVRD, through its subsidiary Vale do Rio Doce 
Navegacao S.A. (Docenave), acquired 9.4 percent of the common shares. 
The GOB's remaining share of the firm was sold in 1994. CSN is now 
owned by Docenave/CVRD and a consortium of private investors, including 
Uniao Comercio e Partipacoes Ltda., Textilia S.A., Previ, the CSN 
Employee Investment Club, and the CSN employee pension fund. As 
discussed above, CVRD was partially privatized in 1997; CSN was part of 
the consortium that acquired control of CVRD through this partial 
privatization.

Attribution of Subsidies

    There are three producers/exporters of the subject merchandise in 
this investigation: USIMINAS, COSIPA, and CSN. As discussed above, 
USIMINAS owns 49.8 percent of COSIPA. The CVD Regulations, at section 
351.525(b)(6)(ii), provide guidance with respect to the attribution of 
subsidies between or among companies which have cross-ownership. 
Specifically, with respect to two or more corporations producing the 
subject merchandise which have cross-ownership, the regulations direct 
us to attribute the subsidies received by either or both corporations 
to the products produced by both corporations. Further, section 
351.525(b)(6)(vi) defines cross-ownership as existing ``between two or 
more corporations where one corporation can use or direct the 
individual assets of the other corporation(s) in essentially the same 
ways it can use its own assets. Normally, this standard will be met 
where there is a majority voting ownership interest between two 
corporations through common ownership of two (or more) 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 at 65401).
    In this investigation, we preliminarily determined that USIMINAS's 
49.8 percent ownership interest in COSIPA is sufficient to establish 
cross-ownership between the two companies because USIMINAS is capable 
of using or directing the individual assets of COSIPA in essentially 
the same ways it can use its own assets. We based this determination on 
the following: (1) USIMINAS has virtually a majority share in COSIPA; 
and (2) the remaining shareholdings are divided among numerous 
shareholders (more than ten), with no one shareholder controlling even 
one-quarter of the shares which USIMINAS controls. See Preliminary 
Determination, 64 FR 53332, 53334-35. We did not learn anything at 
verification which would lead us to change our preliminary 
determination nor did we receive any comments on this issue. Thus, for 
purposes of this final determination, we have continued to calculate 
one subsidy rate for USIMINAS/COSIPA, by adding together their 
countervailable subsidies during the POI and dividing that amount by 
the sum of the two companies' sales during the POI.
    We have also examined the ownership of CSN. We note that during the 
POI, two entities, CVRD and Previ (the pension fund of the Bank of 
Brasil), had meaningful holdings in both USIMINAS and CSN. As these 
entities both have ownership interests in and elect members to the 
Boards of Directors of both companies, we examined whether CSN and 
USIMINAS could, notwithstanding the absence of direct cross-ownership 
between them, have cross-ownership such that their interests are 
merged, and one company could have the ability to use or direct the 
assets of the other through their common investors. CVRD holds 15.48 
percent of USIMINAS and 10.3 percent of CSN (through Docenave); Previ 
holds 15 percent of the common shares of USIMINAS and 13 percent of 
CSN. Both USIMINAS and CSN are controlled through shareholders' 
agreements, which require that the participating shareholders (who 
together account for more than 50 percent of the shares of the company) 
pre-vote issues before the Board of Directors and vote as a block. 
While CVRD and Previ both participate in the CSN shareholders' 
agreement, and thus exercise considerable influence over the use of 
CSN's assets, neither CVRD nor Previ participates in the USIMINAS 
shareholders' agreement and neither CVRD nor Previ has any appreciable 
influence (beyond their respective 15.48 and 15 percent USIMINAS 
shareholdings) over the use of USIMINAS's assets. Therefore, CVRD's and 
Previ's shareholdings in both USIMINAS and CSN are not sufficient to 
establish cross-ownership between those two companies under our 
regulatory standard. This absence of common majority or significant 
minority shareholders led us to preliminarily determine that USIMINAS's 
and CSN's interests have not merged, i.e., one company is not able to 
use or direct the individual assets of the other as though the assets 
were their own. Moreover, we found no other evidence such as golden 
shares or close supplier relationships to lead us to conclude that 
there is indirect cross-ownership. See Preliminary Determination at 
53335. We did not learn anything at verification which would lead us to 
change our preliminary determination nor did we receive any comments on 
this issue. Thus, for the purposes of this final determination, we have 
calculated a separate countervailing duty rate for CSN.

Changes in Ownership

    In the General Issues Appendix (GIA), attached to the Final 
Affirmative

[[Page 5545]]

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).
    Under this methodology, we estimate the portion of the company's 
purchase price which is attributable to prior subsidies. We compute 
this estimate by first dividing the face value of the company's 
subsidies by the company's net worth for each of the years 
corresponding to the company's allocation period, ending one year prior 
to the privatization. We then take the simple average of these ratios, 
which serves as a reasonable surrogate for the percentage that 
subsidies constitute of the overall value, i.e., net worth, of the 
company. Next, we multiply the purchase price of the company by this 
average ratio to derive the portion of the purchase price that we 
estimate to reflect the repayment of prior subsidies. Then, we reduce 
the benefit streams of the prior subsidies by the ratio of the 
repayment/reallocation amount to the net present value of all remaining 
benefits at the time of the change in ownership. For this final 
determination, we have conformed our net present value calculation with 
the methodology outlined in the GIA. See GIA 58 FR at 37263.
    In the current investigation, we are analyzing the privatizations 
of USIMINAS, COSIPA and CSN, including the various partial 
privatizations. In conducting these analyses, to the extent that 
government-owned or controlled companies purchased shares, we have not 
applied our methodology to that percentage of the acquired shares equal 
to the percentage of government ownership in the partially government-
owned purchaser (notwithstanding respondents' arguments on this issue 
which are discussed below in Comment 6). We have also adjusted certain 
figures included in the privatization calculations to account for 
inflationary accounting practices. Further, we accounted for CVRD's 
1997 partial privatization by making the same adjustments to USIMINAS 
and CSN's calculations described in Final Affirmative Countervailing 
Duty Determination: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel 
Products from Brazil (Brazil Hot-Rolled Final) 64 FR 38742, 38745, 
38752 (Department's Position on Comment 3).
    In Brazil Hot-Rolled Final, we also noted the use of privatization 
currencies, i.e., certain existing government bonds, privatization 
certificates and frozen currencies, and examined them in the context of 
our privatization methodology. We obtained information about the use 
and valuation of the privatization currencies that were used in the 
NPP, and we learned about how privatization currencies were valued in 
the context of the privatization auctions. Specifically, we found that 
the GOB accepted most of these currencies at their full redeemable 
value (face value discounted according to the time remaining until 
maturity). Additionally, foreign debt and restructuring bonds (MYDFAs) 
were accepted at 75 percent of their redeemable value. Many of the 
government bonds that were accepted as privatization currencies were 
routinely trading at a discount on secondary markets. However, no data 
or estimation of the applicable discounts was provided for the record 
in that investigation. See Brazil Hot-Rolled Final at 38745. Further, 
it was common knowledge that these bonds traded at a significant 
discount in these markets, and that investors actively traded to obtain 
the cheapest bonds in order to maximize their positions in the 
privatization auctions. The value of the bonds varied depending on the 
instrument's yield and length to maturity and traded within a range of 
40 percent to 90 percent of the redeemable value, i.e., with a discount 
ranging from 10 percent to 60 percent. Because various issues of bonds 
were accepted as privatization currencies, with different yields and 
terms, precise valuation data was not available. However, public 
information from the record of the hot-rolled investigation, 
subsequently placed on the record of this investigation, indicates that 
during the period 1991 through 1994 most bonds traded with discounts 
ranging from 40 to 60 percent on average. Privatization Certificates 
(CPs), which banks were forced to purchase and could only be used in 
the privatization auctions, traded at a discount of approximately 60 
percent on average; MYDFAs traded at 30 percent of their face value, 
i.e., at a discount of 70 percent. See Brazil Hot-Rolled Final, 64 FR 
at 38745.
    In the hot-rolled investigation, we concluded that some adjustment 
to the purchase price of the companies was warranted because of the use 
of privatization currencies in the auctions. See Brazil Hot-Rolled 
Final, at 38745, 38752 (the Department's Position on Comment 3). 
Although this issue is discussed further in Comments 6 and 7 below, no 
further information has been provided in the record of this 
investigation which would enable us to refine or otherwise cause us to 
change the approach we developed in the hot-rolled investigation. Thus, 
we have followed the same approach and have applied a 30 percent 
discount to the MYDFAs. In addition, as we did in the hot-rolled 
investigation, we have applied a 60 percent discount to the CPs. See 
Id. For the remaining privatization currencies, in the Brazil Hot-
Rolled Final, we applied a 50 percent discount as facts available, 
which reflected an average of the range of discounts estimated. Because 
no information has been provided in this investigation which accurately 
indicates the relevant secondary market discounts for these 
instruments, and in accordance with section 776(a) of the Act, we are 
again applying, as facts available, the 50 percent discount to the 
remaining privatization currencies.

Subsidies Valuation Information

Allocation Period

    Section 351.524(d)(2) of the CVD Regulations states that we will 
presume the allocation period for non-recurring subsidies to be the 
average useful life (AUL) of renewable physical assets for the industry 
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class 
Life Asset Depreciation Range System and updated by the Department of 
Treasury. The presumption will apply unless a party claims and 
establishes that these tables do not reasonably reflect the AUL of the 
renewable physical assets for the company or industry under 
investigation, and the party can establish that the difference between 
the company-specific or country-wide AUL for the industry under 
investigation is significant.
    In this investigation, no party to the proceeding has claimed that 
the AUL listed in the IRS tables does not reasonably reflect the AUL of 
the renewable physical assets for the firm or industry under 
investigation. Therefore, in accordance with section 351.524(d)(2) of 
the CVD Regulations, and for the purposes of this final determination, 
we are using the 15-year AUL as reported for the steel industry in the 
IRS tables to allocate the non-recurring subsidies under investigation.

Equityworthiness

    In accordance with section 351.507 (a)(1) of the Department's CVD 
Regulations, a government-provided equity infusion confers a benefit to 
the extent that the investment decision is inconsistent with the usual 
investment practice of private investors, including

[[Page 5546]]

the practice regarding the provision of risk capital, in the country in 
which the equity infusion is made. See also section 771(5)(E)(i) of the 
Act. In Preliminary Determination, we determined that there was no 
reason to change our findings from prior investigations, i.e., that the 
respondent companies were unequityworthy (in the relevant years) as 
follows: (1) COSIPA was unequityworthy from 1977 through 1989, and 1992 
through 1993; (2) USIMINAS was unequityworthy from 1980 through 1988; 
and (3) CSN was unequityworthy from 1977 through 1992. Final 
Affirmative Countervailing Duty Determinations: Certain Steel Products 
from Brazil, 58 FR 37295, 37297 (July 9, 1993) (1993 Certain Steel 
Final; Brazil Hot-Rolled Final, 64 FR at 38746. We note that because 
the Department determined that it is appropriate to use a 15-year 
allocation period for non-recurring subsidies, equity infusions 
provided prior to 1984 no longer provide benefits in the POI. None of 
the parties has submitted information or argument, nor is there 
evidence of changed circumstances which would cause us to reconsider 
these determinations.

Equity Methodology

    Section 351.507(a)(3) of the Department's CVD Regulations provides 
that a determination that a firm is unequityworthy constitutes a 
determination that the equity infusion was inconsistent with usual 
investment practices of private investors. The applicable methodology 
is described in section 351.507(a)(6) of the regulations, which 
provides that the Department will treat the equity infusion as a grant. 
Use of the grant methodology for equity infusions into an 
unequityworthy company is based on the premise that an 
unequityworthiness finding by the Department is tantamount to saying 
that the company could not have attracted investment capital from a 
reasonable investor in the infusion year based on the available 
information.

Creditworthiness

    To determine whether a company is uncreditworthy, the Department 
must examine whether the firm could have obtained long-term loans from 
conventional commercial sources based on information available at the 
time of the government-provided loan. See section 351.505(a)(4) of the 
CVD Regulations. In this context, the term ``commercial'' refers to 
loans taken out by the firm from a commercial lending institution or 
debt instruments issued by the firm in a commercial market. See section 
351.505(a)(2)(ii) of the CVD Regulations.
    The Department has previously determined that respondents were 
uncreditworthy in the following years: USIMINAS, 1984-1988; COSIPA, 
1984-1989 and 1991-1993; and CSN 1984-1992. See Certain Steel from 
Brazil, 58 FR at 37297; Brazil Hot-Rolled Final, 64 FR at 38746-38747. 
The parties have not presented any new information or arguments that 
would lead us to reconsider these findings.

Discount Rates

    From 1984 through 1994, Brazil experienced persistent high 
inflation. There were no long-term fixed-rate commercial loans made in 
domestic currencies during those years that could be used as discount 
rates. As in the Certain Steel Final (58 FR at 37298) and the Brazil 
Hot-Rolled Final (64 FR 38745-38746), we have determined that the most 
reasonable way to account for the high inflation in the Brazilian 
economy through 1994, and the lack of an appropriate Brazilian discount 
rate, is to convert the non-recurring subsidies into U.S. dollars. If 
available, we applied the exchange rate applicable on the day the 
subsidies were received, or, if unavailable, the average exchange rate 
in the month the subsidies were received. Then we applied, as the 
discount rate, a long-term dollar lending rate. Therefore, for our 
discount rate, we used data for U.S. dollar lending in Brazil for long-
term non-guaranteed loans from private lenders, as published in the 
World Bank Debt Tables: External Finance for Developing Countries. This 
conforms with our practice in Certain Steel Final (58 FR at 37298); 
Brazil Hot-Rolled Final (64 FR at 38746); and, Final Affirmative 
Countervailing Duty Determination: Steel Wire Rod from Venezuela, 62 FR 
55014, 55019, 55023 (October 21, 1997).
    As discussed above, we have determined that USIMINAS, COSIPA, and 
CSN were uncreditworthy in the years in which they received equity 
infusions. Section 351.505 (a)(3)(iii) of the CVD Regulations directs 
us regarding the calculation of the benchmark interest rate for 
purposes of calculating the benefits for uncreditworthy companies: To 
calculate the appropriate rate for uncreditworthy companies, the 
Department must identify values for the probability of default by 
uncreditworthy and creditworthy companies. For the probability of 
default by an uncreditworthy company, we normally rely on the average 
cumulative default rates reported for the Caa to C-rated category of 
companies as published in Moody's Investors Service, ``Historical 
Default Rates of Corporate Bond Issuers, 1920-1997'' (February 
1998).\1\ See 19 CFR 351.505(a)(3)(iii). For the probability of default 
by a creditworthy company, we used the cumulative default rates for 
Investment Grade bonds as reported by Moody's. We established that this 
figure represents a weighted average of the cumulative default rates 
for Aaa to Baa-rated companies. See September 24, 1999, Memorandum to 
the File, ``Conversations and correspondence regarding the weighted 
average default rates of corporate bond issuers as published by 
Moody's,'' on file in the Central Records Unit, Room B-099 of the main 
Commerce building (CRU). The use of the weighted average is appropriate 
because the data reported by Moody's for the Caa to C-rated companies 
are also weighted averages. See Id. For non-recurring subsidies, we 
used the average cumulative default rates for both uncreditworthy and 
creditworthy companies based on a 15-year term, since all of the non-
recurring subsidies examined were allocated over a 15-year period.
---------------------------------------------------------------------------

    \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 (at Exhibit 28).
---------------------------------------------------------------------------

I. Programs Determined To Be Countervailable

A. Pre-1992 Equity Infusions

    The GOB, through SIDERBRAS, provided equity infusions to USIMINAS 
(1984 through 1988), COSIPA (198 through 1989 and 1991) and CSN (1984 
through 1991) that have previously been investigated by the Department. 
See Certain Steel from Brazil, 58 FR at 37298; Brazil Hot-Rolled Final, 
64 FR at 38747-38748.
    For the reasons discussed above, we preliminarily determined that 
under section 771(5)(E)(i) of the Act, the equity infusions into 
USIMINAS, COSIPA and CSN were not consistent with the usual investment 
practices of private investors (see ``Equityworthiness'' section 
above). Thus, these infusions constitute financial contributions within 
the meaning of section 771(5)(D) of the Act and confer a benefit in the 
amount of each infusion. These equity infusions are specific within the 
meaning of section 771(5A)(D) of the Act because they were limited to 
each of the companies. Accordingly, we preliminarily determined that 
the pre-1992 equity infusions are countervailable subsidies within the

[[Page 5547]]

meaning of section 771(5) of the Act. See Preliminary Determination, 64 
FR at 53337. No parties have provided any new information or argument 
which would lead us to reconsider this determination.
    As explained in the ``Equity Methodology'' section above, we treat 
equity infusions into unequityworthy companies as grants given in the 
year the infusion was received. These infusions are non-recurring 
subsidies in accordance with section 351.524(c)(1) of the CVD 
Regulations. Consistent with section 351.524(d)(3)(ii) of the CVD 
Regulations, because USIMINAS, COSIPA and CSN were uncreditworthy in 
the relevant years (the years the equity infusions were received), we 
applied a discount rate that takes into account the differences between 
the probabilities of default of creditworthy and uncreditworthy 
borrowers. From the time USIMINAS, COSIPA and CSN were privatized, we 
have been following the methodology outlined in the ``Changes in 
Ownership'' section above to determine the amount of each equity 
infusion attributable to the companies after privatization. We continue 
to rely on this methodology except for the selection of the discount 
rate as discussed above.
    For CSN, we summed the benefits allocable to the POI from all 
equity infusions and divided by CSN's total sales during the POI. For 
USIMINAS/COSIPA, we summed the benefits allocable to the POI from all 
of the equity infusions and divided this amount by the combined total 
sales of USIMINAS/COSIPA during the POI. On this basis, we determine 
the net subsidy to be 5.75 percent ad valorem for CSN and 6.16 percent 
ad valorem for USIMINAS/COSIPA.

B. GOB Debt-for-Equity Swaps Provided to COSIPA in 1992 and 1993

    Prior to COSIPA's privatization, and on the recommendation of a 
consultant who examined COSIPA, the GOB made two debt-for-equity swaps 
in 1992 and 1993. We previously examined these swaps and determined 
that they were not consistent with the usual investment practices of 
private investors; constituted a financial contribution within the 
meaning of section 771(5)(D) of the Act; and, therefore conferred 
benefits on COSIPA in the amount of each conversion. See Brazil Hot-
Rolled Final, 64 FR at 38747. These debt-for-equity swaps are specific 
within the meaning of section 771(5A)(D)(i) of the Act because they 
were limited to COSIPA. Accordingly, we preliminarily determined that 
the GOB debt-for-equity swaps provided to COSIPA in 1992 and 1993 are 
countervailable subsidies within the meaning of section 771(5) of the 
Act. See Preliminary Determination, 64 FR at 53337. No party has 
provided any new information or argument which would lead us to 
reconsider this determination.
    Each debt-for-equity swap constitutes an equity infusion in the 
year in which the swap was made. As such, we have treated each debt-
for-equity swap as a grant given in the year the swap was made in 
accordance with section 351.507(b) of the CVD Regulations. Further, 
these swaps, as equity infusions, are non-recurring in accordance with 
section 351.524(c)(1) of the CVD Regulations. Because COSIPA was 
uncreditworthy in the years of receipt, we applied a discount rate 
consistent with section 351.524(d)(3)(ii) of the CVD Regulations as 
discussed in the ``Discount Rates'' section above. Since COSIPA has 
been privatized, we followed the methodology outlined in the ``Changes 
in Ownership'' section above to determine the amount of each debt-for-
equity swap attributable to the company after privatization. We divided 
the benefit allocable to the POI from these debt-for-equity swaps by 
the combined total sales of USIMINAS/COSIPA. On this basis, we 
determine the net subsidy to be 4.44 percent ad valorem for USIMINAS/
COSIPA.

C. GOB Debt-for-Equity Swaps Provided to CSN in 1992

    Prior to CSN's privatization, and on the recommendation of a 
consultant who examined CSN, in 1992, the GOB converted some CSN debt 
into GOB equity in CSN. In this investigation, we initiated on this 
debt-for-equity swap as a straight equity infusion (see Initiation 
Notice 64 FR 34204), but subsequent to our initiation, in the Brazil 
Hot-Rolled Final, we determined that it constituted a debt-for-equity 
swap (64 FR at 38748). In the Brazil Hot-Rolled Final , we determined 
that this swap was not consistent with the usual investment practices 
of private investors and therefore conferred countervailable benefits 
on CSN in the amount of the swap. See Id. Thus, we preliminarily 
determined that, pursuant to sections 771(5)(D) and (E)(i) of the Act, 
this debt-for-equity swap constitutes a financial contribution which 
confers a benefit in the amount of the swap (see ``Equityworthiness'' 
section above). This debt-for-equity swap is specific within the 
meaning of section 771(5A)(D) of the Act because it is limited to CSN. 
Accordingly, we preliminarily determined that the GOB debt-for-equity 
swap provided to CSN in 1992 is a countervailable subsidy within the 
meaning of section 771(5) of the Act. See Preliminary Determination, 64 
FR at 53337. No parties have provided any new information or argument 
which would lead us to reconsider this determination.
    This debt-for-equity swap constitutes an equity infusion in the 
year in which the swap was made. As such, we have treated this debt-
for-equity swap as a grant given in the year the swap was made in 
accordance with section 351.507(b) of the CVD Regulations. Further this 
swap, as an equity infusion, is non-recurring in accordance with 
section 351.524(c)(1) of the CVD Regulations. Because CSN was 
uncreditworthy in the years of receipt, we applied a discount rate 
consistent with section 351.524(d)(3)(ii) of the CVD Regulations as 
discussed in the ``Uncreditworthy Rate'' section above. Since CSN has 
been privatized, we followed the methodology outlined in the ``Changes 
in Ownership'' section above to determine the amount of the debt-for-
equity swap attributable to the company after privatization. We divided 
the benefit allocable to the POI from the equity infusion by CSN's 
total sales during the POI. On this basis, we determine the net subsidy 
to be 1.39 percent ad valorem for CSN.

II. Program for Which the Investigation Was Rescinded

Negotiated Deferrals of Tax Liabilities

    In Preliminary Determination (64 FR at 53338), we rescinded our 
investigation of tax deferrals negotiated by COSIPA and CSN which 
petitioners had alleged provided them with countervailable subsidies. 
Our rescission was based on the Department's then-recent final 
determination that this program is not countervailable. See Brazil Hot-
Rolled Final, 64 FR at 38748-38749; Memorandum to the File, 
Countervailing Duty Investigation of Certain Cold-Rolled Flat-Rolled 
Carbon-Quality Steel Products from Brazil, August 2, 1999, on file in 
CRU.

Interested Party Comments

Comment 1: Privatization

    Respondents argue that 19 U.S.C. 1677(5)(B) and Article 1.1. of the 
WTO Agreement on Subsidies and Countervailing Measures (SCM) require 
the Department to find that there is a financial contribution which 
confers a benefit before concluding that there is a countervailable 
subsidy. Because, according to respondents, the statute plainly 
requires the Department to examine, on a continuing basis, the 
contribution, the benefit and the causal

[[Page 5548]]

connection between the two, respondents argue that it is insufficient 
to identify a financial contribution, made in the past, to a company 
owned by the government, and then presume irrebuttably that this 
contribution confers a benefit to the company after it has changed 
ownership. Rather, the Department must analyze all subsequent events 
(including changes in ownership, dividends received, and corporate 
restructurings) in order to determine how and whether prior financial 
contributions could benefit the companies and products under 
investigation.
    Respondents cite the Department's practice of recognizing the 
cessation of subsidies when a countervailable grant is subsequently 
returned to the government or a countervailable loan is fully repaid, 
both ``subsequent events'' which extinguish the subsidy. Respondents 
characterize privatization as another such ``subsequent event'' which 
must be considered in examining whether a privatized company benefits 
from pre-privatization subsidies. Respondents argue that the 
preliminary determination itself, with its ``payback'' analysis, 
concedes that privatization disrupts the required causal connection 
between the financial contribution and the benefit. Furthermore, 
respondents claim that the Department cannot use the stated lack of an 
obligation to consider the effect of every subsidy in determining 
whether a countervailable benefit exists (i.e., to conduct an ``effects 
test'') as an excuse for failing to consider the subsequent events in 
these circumstances. Respondents state that their position is not 
premised on requiring an analysis of the effects of all subsidies in 
all circumstances, but rather on a less burdensome reading of the 
statute and the SCM that requires consideration of whether a certain 
limited universe of ``significant events'' subsequent to a subsidy may 
eliminate the benefits of that subsidy (consistent with long-standing 
practice as discussed above). Any other reading of the statute, 
according to respondents, renders 19 U.S.C. 1677(5)(F) an unnecessary 
amendment of the law.
    Respondents further argue that the proper consideration of a 
``subsequent event'' in this case, the arm's-length privatization of 
the companies, would necessarily lead to the conclusion that pre-
privatization subsides were eliminated. Without an analytical basis to 
believe or presume that subsidies have been passed through after an 
arm's length transaction, respondents believe the Department must 
conclude that the post-privatization owners do not benefit from pre-
privatization subsidies. Respondents rely on the example of Company A 
which purchases a machine with government assistance and then sells the 
machine to Company B at market price to illustrate that the benefit of 
the government assistance remains with Company A; there is no pass-
through of advantage or benefit to Company B or the products it may 
produce with the machine. The same conclusion is necessary when Company 
B purchases all of the assets and liabilities of (government-owned) 
Company A. The new owner does not enjoy any advantage. Respondents 
purport that the owners of a company and their relationship with the 
assets of the company are critical to any analysis of whether a company 
has received any benefit from some past financial contribution; when 
the owners change in an arm's-length privatization, an important 
dynamic within the company is altered and the entire company changes. 
Because the Department has overlooked the relevance of the new post-
privatization owners, respondents conclude that the analysis is 
necessarily incomplete.
    Respondents further note the changes in ownership and control which 
resulted from the privatizations of all three companies, and argue that 
the manner in which the new controlling owners acquired their interests 
in the companies (arm's-length transactions) preclude the new owners 
from enjoying any benefit or unfair advantage. Respondents cite the 
preamble of the CVD Regulations which state that ``where a firm does 
not pay less for its inputs than it would have to pay * * * as a result 
of a government financial contribution, it would be very difficult to 
contend that a benefit exists'' (63 FR at 65361) and argue that because 
the new owners did not pay less when they acquired the companies, it is 
``difficult to contend that a benefit exists.''
    Finally, respondents note that the fact the GOB retained some 
residual or indirect interest in the privatized companies does not 
preserve prior subsidies or convey new subsidies to the respondent 
companies. Nor does it undermine respondents' conclusion that the new 
owners and companies did not enjoy any advantage or benefit from pre-
privatization subsidies during the POI.
    Petitioners note that respondents' arguments are identical to those 
respondents made, and the Department rejected, in the Brazil Hot-Rolled 
Final. According to petitioners, respondents have neither addressed the 
bases for the Department's previous rejection of these arguments nor 
provided any new argument or information which would warrant a change 
in the Department's response to these arguments.
    Department's Position: We disagree with respondents. In accordance 
with the statute (sections 771(5)(B) and 771(5)(E) of the Act), the 
Department has found that COSIPA, CSN and USIMINAS continue to benefit 
from pre-privatization equity infusions. We have examined the facts of 
this case in light of the above-cited provisions and find that the 
methodology we follow is in accordance with the Act. As petitioners 
noted, the Departments' privatization/change-in-ownership methodology 
has been upheld by the Courts regardless of the amendments to the Act 
by the URAA. See Saarstahl AG v. United States, 78 F.3d 1539 (Fed. Cir. 
1996) (Saarstahl II); Inland Steel Bar Co. v. United States, 86 F.3d 
1174 (Fed. Cir. 1996) (Inland II); and, Delverde SrL v. United States, 
24 F. Supp. 2d 314 (Ct. Int'l Trade 1998) (Delverde II).
    The Department has satisfied both 19 U.S.C. 1677(5)(B) (section 
771(5)(B) of the Act) and Article 1.1. of the SCM in this 
investigation. We found that the GOB provided financial contributions 
to respondents, in the form of equity infusions and debt-for-equity 
conversions in the above-mentioned years which conferred 
countervailable benefits through the POI. In accordance with the 
Department's standard methodology, the benefits from these subsidies 
were allocated over time. Neither of the above-mentioned provisions 
requires the Department to revisit these determinations.
    Under both the SCM and the Act, the Department has the discretion 
to determine the impact of a change in ownership on the 
countervailability of past subsidies. The Department has consistently 
applied its privatization/change-in-ownership methodology to determine 
the impact that a privatization/change in ownership has on pre-
privatization subsidies. However, we have not done this by re-
identifying or re-valuing the benefit of the subsidy based on events as 
of the time when the ownership of the subsidized company changed. The 
Department identifies and values the subsidy as of the time of the 
subsidy bestowal and does not revisit this determination. As 
petitioners correctly note, the Department is not required to examine 
the effects of subsidies, i.e., trace how benefits are used by 
companies and whether they provide competitive advantages. Instead, the 
Department's methodology addresses the impact of the change in 
ownership on the allocation of pre-privatization subsidies. The 
Department's methodology accounts for the impact that the change in 
ownership

[[Page 5549]]

has on the measurement of the benefit from pre-privatization subsidies, 
by allocating, or apportioning, subsidies between the buyer and the 
seller, as reflected by the purchase price. As the Department said in 
Stainless Steel Plate in Coils from Italy, ``[o]ur methodology 
recognizes that a change in ownership has some impact on the allocation 
of previously-bestowed subsidies and, through an analysis based on the 
facts of each transaction, determines the extent to which the subsidies 
pass through to the buyer.'' 64 FR at 15518. Thus, our methodology is 
wholly consistent with 19 U.S.C. 1677(5)(F) (section 771 (5)(F) of the 
Act) and, contrary to respondent's argument, provides the analytical 
basis for determining whether and to what extent subsidies have passed 
through to the privatized company or remain, in whole or in part, with 
the seller.
    In addition, we remind respondents that section 701(a)(1) of the 
Act directs the Department to determine whether a countervailable 
subsidy is being provided ``with respect to the manufacture, 
production, or export of a class or kind of merchandise.'' We note that 
the same terminology is also reflected in the SCM (Article 10, footnote 
36). Given this focus on the manufacture, production, and/or 
exportation of merchandise, the focus of the inquiry here should not be 
on the new owners of the company and how they may or may not have 
benefitted from the privatization transaction. Instead, as provided for 
in section 701(a)(1) of the Act and in Article 10, footnote 36 of the 
SCM, we have focused on the activities of the company, rather than its 
ownership structure. Our privatization methodology has accounted for 
the change in the ownership of the company conducting these activities. 
Thus, we have measured the amount of the benefit that passes through 
this transaction as respondent companies continued to manufacture, 
produce and export subject merchandise.
    In addition, respondents' reliance on the discussion of inputs in 
the preamble of the CVD Regulations is misplaced. Contrary to the 
suggestion in respondents' argument here, the regulations' discussion 
of inputs does not reflect any change in the Department's approach to 
the identification of a ``benefit'' under Section 771(5)(B). Rather, it 
simply reflects the Department's longstanding practice of identifying 
the ``benefit'' as of the time of the subsidy bestowal, which, in the 
input context, is when the input was provided by the government. It is 
true that the Department will look at whether the firm paid what the 
input was worth, but the more fundamental point is that this method of 
identifying the benefit is based solely on events as of the time of the 
subsidy bestowal. It is not based in any way on an analysis of post-
subsidy bestowal events or how the market value of the subsidy may have 
changed in the years following the subsidy bestowal.
    Finally, we note that we have properly analyzed the GOB's residual 
and indirect interests in companies during the POI in the context of 
our standard privatization methodology. We have not considered shares 
bought by government-owned companies in privatization auctions as 
privatizations; these transactions do not reflect the change in 
ownership of the shares from government to private ownership, but 
rather a transfer from one government holding to another. However, when 
such companies were themselves privatized, we have made adjustments to 
reflect the changes in ownership at that time.

Comment 2: Impact of WTO Panel Decision on Privatization

    Respondents argue that U.S. law and international obligations 
require the Department to incorporate the holdings of the recent WTO 
panel report on privatization in all subsequent proceedings involving 
privatization issues. The WTO panel reviewing three recent 
administrative reviews of the countervailing duty order on hot-rolled 
lead and bismuth carbon steel products from the United Kingdom issued a 
preliminary report (which was not public) attacking the Department's 
determination that subsidies bestowed prior to the privatization of a 
government-owned company pass through to the privatized company. 
Essentially, according to respondents, the WTO panel concluded that all 
prior subsidies are extinguished by a privatization achieved through an 
arm's length transaction. Further, according to respondents, the panel 
decision indicates that the Department's long-standing approach to 
privatization is inconsistent with the principles and obligations of 
the SCM. Respondents cite the Charming Betsy doctrine (see Murray 
Schooner v. Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804)), for the 
proposition that an act of Congress should not be construed to violate 
international obligations if any other possible construction remains. 
Respondents further note that under the WTO, a panel report is a 
``clarification'' of the principles embodied in a WTO Agreement, and 
therefore, to the extent a WTO panel report identifies an inconsistency 
between the practice of a WTO Member and a WTO Agreement, the report 
informs the Member how it must adjust its practice to conform with its 
existing international obligations under the agreement. Respondents 
argue that to the extent the panel report identifies inconsistencies 
between U.S. practice and the SCM, the United States is obligated to 
address those inconsistencies in general; any Department decision 
subsequent to the panel report that does not reflect the panel's 
interpretations of the SCM will be inconsistent with U.S. obligations 
under the SCM. A failure to comport Department actions with the panel 
report, according to respondents, would certainly result in a remand by 
a reviewing court.
    Respondents note that, in response to the adverse panel report, as 
an alternative to incorporating the principles of the report in its 
practice, the United States may, under WTO procedures, elect to 
compensate the European Union for the nullification and impairment of 
its rights under the SCM. However, respondents urge the Department not 
to take this course of action, arguing that the WTO panel's 
clarification of the rights and obligations of Members under the SCM 
will remain, i.e., the U.S. will remain obligated to render its 
decisions under the countervailing duty law in accordance with the 
panel report. Should the Department continue to issue decisions that 
conflict with the panel report, respondents argue that the United 
States will remain vulnerable to a series of challenges that it has 
nullified and impaired the rights of WTO Members. Finally, respondents 
note that the failure to implement the WTO report will be directly 
contrary to the United States' strong position that the integrity of 
the WTO dispute resolution process can only be preserved by members' 
compliance with panel rulings, however adverse.
    Petitioners argue that the Department should disregard respondents' 
arguments as they are predicated on an interim and confidential panel 
report. Petitioners cite the Final Affirmative Countervailing Duty 
Determination; Certain Cut-to-Length Carbon-Quality Steel Plate from 
France, 64 FR 73277 (December 29, 1999) and Final Affirmative 
Countervailing Duty Determination; Certain Cut-to-Length Carbon-Quality 
Steel Plate from Italy, 64 FR 73244 (December 29, 1999), wherein the 
Department stated ``this was an interim (i.e., preliminary) 
confidential report. As such, it is inappropriate for the parties or 
the Department to comment on it.'' Id. at 73271. Petitioners

[[Page 5550]]

further argue that even if the panel report were relevant to the 
current investigation, respondents' arguments about the legal 
significance of the report are mistaken. First, petitioners argue that 
it is premature to discuss any implementation of the panel report, 
which has not yet been circulated among WTO members (and which cannot 
be considered for adoption until 20 days thereafter). Furthermore, 
petitioners note that the United States has the right to request that 
the report be reviewed by the Appellate Body, and argue that the report 
itself may be riddled with errors and the Department should not 
implement erroneous findings that remain subject to reversal on appeal.
    Second, petitioners note that U.S. law expressly prohibits the 
implementation of the panel report in the instant investigation. 
According to petitioners, the relevant statutory provision prohibits 
the amendment, rescission, or modification of regulations or practices 
found by a panel or Appellate Body to be inconsistent with any of the 
Uruguay Round Agreements unless and until the appropriate congressional 
committees have been consulted; the Trade Representative has sought 
advice from relevant private sector advisory committees; the agency or 
department head has provided an opportunity for public comment on a 
proposed modification through its publication in the Federal Register; 
the Trade Representative has submitted a report to the appropriate 
congressional committees regarding the proposed modification; the Trade 
Representative and the agency head have consulted with the appropriate 
congressional committees on the proposed contents of the final rule; 
and, the final rule or other modification had been published in the 
Federal Register. See 19 U.S.C. 3533(g)(1). Thus, petitioners conclude 
that it would be unlawful for the Department to change its practice 
with regard to privatization until the statutorily mandated actions 
have been fulfilled.
    Finally, petitioners argue that the panel report has no binding 
effect in U.S. law, dismissing respondents' interpretation of the 
Charming Betsy doctrine. Petitioners state that respondents are 
mistaken in assuming the WTO panel report would provide the basis for 
the Court of International Trade (CIT) to overturn a final 
determination in this investigation that subsidies persist after 
privatization because case law shows that the Department may make its 
own determination regarding U.S. international obligations, and the CIT 
will give deference to those determinations, regardless of GATT or WTO 
panel reports to the contrary.
    Department's Position: As a threshold matter, we disagree with 
respondents that our international obligations under the SCM require a 
change in our approach to privatization in the instant case. Although 
the panel report has now been circulated to all WTO Members and is no 
longer confidential, petitioners are correct in noting that unless and 
until the panel report is adopted by the membership, the United States 
has no obligation with respect to the report. As of now, the report has 
not been adopted. It is therefore premature to consider what 
obligations, if any, the report may impose on the United States.
    Even if it were not premature for the Department to reconsider our 
approach to privatization in light of the adverse panel report, and it 
were otherwise appropriate to do so, we agree with petitioners that, 
under 19 U.S.C. 3533(g)(1), a ``regulation or practice may not be 
amended, rescinded, or otherwise modified in the implementation of such 
report unless and until'' the very specific statutory obligations 
therein provided are fulfilled.
    Thus, we continue to determine that a portion of subsidies bestowed 
on a government-owned company prior to privatization continues to 
benefit the production of the privatized company.

Comment 3: Valuation of Equity Infusion Benefits

    Respondents argue that the Department's practice of treating equity 
infusions into unequityworthy companies like grants necessarily 
overstates the benefits of such infusions and, contrary to 19 U.S.C. 
1671(a), results in the Department countervailing more than the net 
benefits actually received by the company. Respondents maintain that 
the Department's methodology fails to recognize the basic differences 
between equity investments and grants: Grants are unaccompanied by 
financial obligations; equity investments are accompanied by the 
obligations to generate a return (i.e., to pay dividends) and to cede a 
claim on the company's assets to the investor. Respondents argue that, 
in examining government equity investments, the Department must measure 
the degree to which the firm is relieved of these two obligations. 
Respondents note that in examining other forms of subsidization, the 
Department recognizes the ability of a company to offset completely the 
benefits of the subsidy, for example, by adjusting the interest rate 
upward on a loan at a preferential interest rate until it reaches 
parity with market rates. Respondents concede that it may be reasonable 
to treat the equity infusions as grants in a case in which there were 
demonstrably no costs to the company receiving the equity, but argue 
that there is no basis in law or fact for the Department's irrebuttable 
presumption that unequityworthy companies incur absolutely no costs in 
connection with government investments.
    If the Department persists in treating equity infusions like 
grants, respondents argue for a change in methodology in which the 
Department recognizes all post-equity infusion events, including 
privatization; increases in net worth; and, the payment of dividends to 
the investor prior to the end of the POI. Only by ``netting out'' these 
identifiable and related costs, respondents argue, can the Department 
comply with its statutory mandate not to countervail more than the net 
benefit.
    Petitioners again note that respondents' arguments with respect to 
equity methodology are identical to those considered and rejected by 
the Department in the Hot-Rolled Steel Final. Petitioners maintain that 
respondents have ignored the Department's reasoning in the Hot-Rolled 
Steel Final and, thus, have presented no reason for the Department 
change that reasoning.
    Department's Position: As they did in the Hot-Rolled Steel Final, 
respondents are once again basically arguing a return to the ``rate of 
return shortfall'' methodology (RORS), which the Department rejected in 
1993 because it relied on an ex post facto analysis of events and 
represented a cost-to-government analysis of the benefit. The 
Department instead determined that the grant methodology was the most 
appropriate for analyzing the benefit from an equity infusion into an 
unequityworthy company. As the Department said in the GIA, 58 FR at 
37239:


[u]sing the grant methodology for equity infusions into 
unequityworthy companies is based on the premise that an 
unequityworthiness finding by the Department is tantamount to saying 
that the company could not have attracted investment capital from a 
reasonable investor in the infusion year based on the available 
information. Thus, neither the benefit nor the equityworthiness 
determination should be reexamined post hoc since such information 
could not have been known to the investor at the time of the 
investment. Therefore, the grant methodology, when used for equity 
infusions into unequityworthy companies * * * should not be adjusted 
based on subsequent events (e.g., dividends, profits).

The Department has consistently applied the grant methodology to

[[Page 5551]]

measure the benefit from equity infusions into unequityworthy companies 
since 1993. See, e.g., Certain Steel from Brazil; Final Affirmative 
Countervailing Duty Determination: Grain-Oriented Electrical Steel from 
Italy, 59 FR 18357 (March 18, 1994); Final Affirmative Countervailing 
Duty Determination: Steel Wire Rod from Venezuela, 62 FR 55014 (October 
22, 1997); and Final Affirmative Countervailing Duty Determination; 
Stainless Steel Plate in Coils from Belgium, 64 FR 15567, 15569 (March 
31, 1999). This methodology has been upheld by the Court. See British 
Steel plc v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel 
I). Respondents' argument that equity investments impose additional 
costs on companies is not relevant and has been rejected by the Court. 
We have found respondents to be unequityworthy as discussed in the 
``Equityworthiness'' section above. This finding has not been disputed 
by respondents. Our finding of unequityworthiness is akin to saying 
that private investors would not have invested capital in the firm. 
Therefore, we have continued to use the grant methodology to measure 
the benefit of equity infusions (and debt-for-equity conversions), as 
discussed in the ``Equity Methodology'' section above.

Comment 4: Exchange Rate Issues

    Respondents take issue with the exchange rates the Department used 
in the calculations for the preliminary determination. While the 
Department used official monthly average exchange rates from the 
Central Bank of Brazil to convert to dollars most of the equity 
infusions examined, the Department used daily exchange rates from the 
Dow Jones Business Information Service to convert to dollars four of 
the equity infusions examined. Respondents argue that the Department's 
use of the Dow Jones rates is both inaccurate and inconsistent and the 
Department should use the official Central Bank of Brazil exchange 
rates (which respondents have provided in their questionnaire 
responses) for all currency conversions. Respondents cite an example of 
a daily exchange rate for which the Dow Jones rate differs by nearly 
twenty percent from the Central Bank rate, resulting in overstating the 
dollar value of the relevant equity infusion. Furthermore, respondents 
note that an official Central Bank rate is intrinsically superior for 
the purposes of a countervailing duty proceeding, and is more 
consistent in that the Department is using Central Bank monthly average 
rates for most of the currency conversions in the calculations.
    Petitioners argue that respondents have provided no reason for the 
Department to doubt the reliability of the Dow Jones data, and 
therefore no reason to change the interest rates used in the 
calculations.
    Department's Position: For the calculations for the preliminary 
determination, we used the monthly average exchange rates provided in 
the questionnaire responses, published in the Suma Economica, and 
sourced from the Central Bank of Brazil. Where we used daily exchange 
rates, the data provided by respondents did not meet our needs: 
although it came from the same source, it was not clear whether the 
exchange rates provided were ``buy'' or ``sell'' rates, or an average 
of the two. Since the Department uses an average of the ``buy'' and 
``sell'' rates, we sought and used another source for that data, the 
exchange rates maintained on Import Administration's web site. For this 
final determination, we have now identified and used another public 
source of the appropriate exchange rate data: the Central Bank of 
Brazil's web site. As indicated in the calculation memorandum for these 
final results (on file in CRU), daily exchange rate data is available 
from the Central Bank of Brazil back to 1985. We used this data to 
calculate the average of the ``buy'' and ``sell'' rates, and also to 
calculate the monthly average exchange rates we used. Exchange rate 
data for 1984 was unavailable from the Central Bank's web site; for 
1984 we used the exchange rate data reported by respondents, which is 
published in the Suma Economica and sourced from the Central Bank of 
Brazil.

Comment 5: Repayment Calculations

    Respondents argue that the gamma ratio used in the Department's 
privatization methodology does not properly reflect the proportion of 
the purchase price that represents repayment of prior subsidies; they 
maintain that an average of infusion values to net worth ratios over 
time does not provide a meaningful ratio. Respondents instead suggest 
comparing the present value of the unamortized pre-privatization 
infusions (at the time of the infusion) to the total net worth of the 
company at the time of privatization. They hold that this approach more 
properly accounts for the difference between a company that received an 
infusion ten years prior to subsidization from a company that receives 
the same infusion the year before privatization.
    Once again, petitioners note that respondents have forwarded the 
same arguments considered and rejected by the Department in Brazil Hot-
Rolled Steel Final. According to petitioners, respondents have not 
provided any reason for the Department to deviate from the position 
articulated at that time.
    Department's Position: As we did in the Brazil Hot-Rolled Steel 
Final and for this final determination, we have continued to calculate 
gamma using historical subsidy and net worth data. The gamma 
calculation serves as a reasonable estimate of the percent that 
subsidies constitute of the overall value of the company. This 
methodology has been upheld by the courts in Saarstahl II, Delverde II, 
and British Steel plc v. United States, 929 F. Supp. 426, 439 (CIT 
1996). Respondents' criticism of the Department's current methodology 
centers on their belief that the average of subsidies to net worth does 
not take into account the timing of the receipt of subsidies and the 
corresponding net present value of the subsidies. We note that while 
gamma itself does not factor in the net present value of the subsidies, 
the results of the gamma calculation are applied to the present value 
of the remaining benefit streams at the time of privatization. Thus, 
our current calculations, as a whole, do account for the present value 
of the remaining benefits at the time of privatization.

Comment 6: Adjustments to Purchase Prices in Privatizations

    Respondents argue that the Department incorrectly adjusted the 
purchase prices downward to account for both the use of privatization 
currencies and the acquisition of shares by CVRD. Respondents argue 
that the relevant value of the currencies, in identifying the purchase 
price of the companies, is the present value of the currencies, the 
amount at which the currencies were accepted by the GOB. Respondents 
hold that this value is correct because it represents the value of the 
debt that the GOB retired through the sales. Further, the GOB had a 
real liability equal to the present value of the instrument and the 
value of this liability, retired through the transaction, must be used 
in the calculation as it attempts to identify the amount of subsidy 
``paid back'' to the government in the privatization. Respondents state 
that the value of the privatization currencies to the purchasers of the 
shares is irrelevant. They provide examples of different currency 
exchange rates and different bond values to illustrate the point that 
the value to the GOB remains the same in each scenario. In short, 
respondents note that when measuring the value of subsidies, the 
Department focuses exclusively on the value of the subsidy to the 
recipient, at

[[Page 5552]]

the time the subsidy is received. Thus, respondents urge the Department 
to focus, in this instance, on the value received by the government, 
i.e., the present value of the privatization currencies used to 
purchase privatized companies; it is the perspective of the recipient 
that is consistently relevant.
    In addition, respondents note that in Certain Steel from Brazil, 
the Department examined the privatization of USIMINAS, was aware of the 
secondary market trading of the privatization currencies, and did not 
adjust USIMINAS's purchase price. Therefore, respondents argue, the 
hot-rolled steel investigation represented a departure from the 
Department's earlier approach, a departure which was not adequately 
explained and which does not now provide the basis for the adjustment 
to purchase price.
    Finally, respondents disagree with the treatment of shares 
purchased by CVRD in the privatizations. Respondents state that CVRD's 
share purchases were made on commercial terms, a fact which is 
supported by the participation of other private investors in those 
privatization auctions, and thus the purchase price should not be 
discounted for CVRD's participation. Respondents note that the 
verification reports reinforce this conclusion and state they cannot be 
penalized for a GOB investment made on terms consistent with commercial 
considerations.
    Petitioners support the Department's preliminary adjustments to 
account for the market value of privatization currencies. Petitioners 
state that record evidence demonstrates that the currencies traded at 
deep discounts from their face values on secondary markets. Petitioners 
state that the statute and practice reveal a strong preference for 
using market-determined prices to make valuation decisions. They hold 
that because the GOB could purchase the securities on the secondary 
market, just like any private investors, the value to the GOB was 
exactly the same as the market value.
    Department's Position: As a threshold matter, respondents' 
arguments are identical to those considered and rejected by the 
Department in the Brazil Hot-Rolled Final (64 FR at 38751). With no new 
arguments to consider (and no new information developed in the course 
of this investigation), we continue to view respondents' arguments 
regarding the valuation of privatization currencies as flawed. 
Respondents are correct in noting that the GOB retired debts equal to 
the present value of the currencies accepted in exchange for shares. 
However, that fact is not relevant to our analysis of the purchase 
price in the privatization transaction; the proper value of the 
purchase price to use in the privatization calculation is the market 
selling price of the company. Since the purchase price was partially 
accounted for by privatization currencies and those currencies were 
discounted on secondary markets, the market selling price of the 
company is partially composed of the market value of the privatization 
currencies. As we stated in the Brazil Hot-Rolled Final, to use the 
present value of the currencies when determining the purchase price 
would be to overstate the cash, market value of the purchase price. As 
petitioners correctly point out, it is the Department's preference to 
use market values in calculations where possible. The discounted value 
accurately represents the market value of the currencies, and therefore 
the price paid by participants in the privatization auctions. That the 
GOB accepted those currencies at present value is irrelevant to our 
analysis of the purchase price. With respect to respondents' argument 
about our examination of the currencies in Certain Steel from Brazil, 
we reiterate the point articulated in the Brazil Hot-Rolled Final (64 
FR at 38751). While the fact that privatization currencies were used to 
acquire USIMINAS shares was documented in the record of that case, the 
parties did not have the opportunity to comment on the final 
privatization methodology applied and the implications that various 
facts in evidence may have had on this methodology. Furthermore, in 
Certain Steel from Brazil, and the companion cases, the Department 
developed its privatization methodology, and applied it for the first 
time in the final determinations. We have gained experience with the 
methodology since that time. In this investigation, we have properly 
determined that privatization currencies were overvalued by the GOB and 
that the discounted, market value should be used in the privatization 
calculation as discussed above. We have used the discounted value best 
supported by record evidence.
    Finally, we disagree with respondents with respect to the treatment 
of CVRD share purchases. Government purchases of government assets 
cannot be seen properly as a ``privatization'' or ``change in 
ownership'' that would give rise to a reallocation of subsidies between 
buyer and seller. Instead, these transactions represent a transfer of 
government funds from one account to another. Thus, we have continued 
to remove the CVRD purchases from the calculation as discussed above. 
In addition, we note that we have accounted for the 1997 partial 
privatization of CVRD in the calculations.

Comment 7: Not All Privatization Currencies Used in Privatizations Were 
Acquired at Discounted Prices

    Respondents argue that the Department's valuation of the 
privatization currencies mistakenly assumes that all currencies were 
acquired by the users on the secondary market at a discount. They point 
to the Privatization Certificates (CPs), which banks were forced to 
purchase under the Collar Plan for 100 percent of their value, and 
SIDERBRAS debentures which SIDERBRAS creditors were given in lieu of 
receiving debt payment. Respondents state that many banks chose to use 
the CPs in privatization auctions, as holders of other privatization 
currencies also did, exchanging one-to-one for shares, rather than 
trade them on the secondary market. They maintain that if instruments 
used in privatization auctions were not actually acquired on the 
secondary market, a secondary market discount cannot be applied. 
Similarly, even if the instruments were trading in a secondary market 
at a premium, respondents argue, no adjustment for market value would 
be appropriate. Thus, respondents argue, there is no basis for the 
Department to assume that all currencies used in the privatization 
auctions were acquired at discounts on the secondary market and 
information in the record indicates that some of the currencies were 
either used by their original owners who had come by them as a result 
of the GOB's debt restructuring plan or borrowed on commercial terms 
from BNDES (the GOB development bank); to continue to adjust the 
purchase price for the secondary market discounts is to apply an 
adverse inference without justification.
    Petitioners believe that to focus on the acquisition price of the 
privatization currencies is to focus on the wrong moment in time. The 
relevant question, according to petitioners, is not what price was paid 
in the past to acquire the currencies, but what were the currencies 
worth at the time they were used to make purchases in the GOB 
privatization auctions.
    Department's Position: As discussed in the previous comment, the 
appropriate measure of the value of the privatization currencies is not 
their cost to their holders at the time of acquisition (be that at the 
time the original instruments were issued, when they were acquired on 
the secondary market, or when they were borrowed

[[Page 5553]]

from another holder), but their value in the secondary market at the 
same time they were used in privatization auctions. This represents the 
value that the holders could have realized, in the alternative, through 
a commercial transaction at the time of the privatization auctions. The 
secondary market provides the commercial ``benchmark'' for evaluating 
whether the value the GOB attributed to the currencies was appropriate, 
and whether the purchase price represents something with a comparable 
market value. The secondary market discounts which are supported on the 
record indicate that the GOB overvalued the currencies in the 
privatization auctions and that the purchase price is tainted by the 
GOB's overvaluation. We agree with petitioners that the statute 
expresses a preference for using market-determined prices when 
examining government actions, and we have appropriately examined the 
respondents' purchase prices through the lens of the discounted 
secondary market trading in privatization currencies.

Comment 8: Asymmetrical Comparisons in the Gamma Calculations

    Respondents urge the Department to correct the gamma calculation to 
overcome the asymmetry inherent in ratios which mix the use of 
historical figures and figures corrected for inflation, i.e., the 
numerators and denominators should be expressed in the same terms. They 
argue that the Department can correct this inaccuracy by ensuring that 
the ratios are expressed in the same terms, and recommend accomplishing 
this by converting to dollars the numerators and denominators.
    Petitioners argue that the asymmetry results from respondents 
having reported unusable data. Petitioners note that respondents' 
proposed correction works entirely to respondents' advantage by 
resulting in a higher repayment ratio. Petitioners note that in 
accordance with CIT rulings, respondents are not entitled to benefit 
from their failure to satisfy the Department's requests for 
information; thus for any year in which the Department does not have 
the appropriate information, petitioners urge the Department to assume 
the ratio is zero.
    Department's Position: We agree, in part, with respondents and 
petitioners. In calculating the gamma ratio, we would prefer to compare 
historical subsidies with historical net worth, or indexed subsidies 
with indexed net worth. For purposes of the preliminary determination, 
we used the same information that we used in the Brazil Hot-rolled 
Final. In that case, we had some years for which the data was 
symmetrical and some years for which we only had historical subsidies 
and indexed net worth. Since the preliminary determination, we have 
reexamined the financial statements on the record, and have found that 
for a number of additional years, the financial statements do provide 
an inflation-adjusted subsidies value. Therefore, we have been able to 
calculate a symmetrical comparison for the following years: for 
USIMINAS and COSIPA for the relevant years from 1988 (except 1992 for 
COSIPA) forward and for CSN from 1987 forward (except 1992). For all 
other years, we have continued to calculate the gamma ratios as we did 
in the preliminary determination. We agree with petitioners that 
respondents have not demonstrated that their proposed modification 
yields a more symmetrical or accurate comparison in the gamma ratios 
than the ratios we calculated for the preliminary determination. 
However, we disagree with petitioners that we should adversely assume 
that the ratio is zero since for all of the years, we have information 
on either historical or indexed subsidy values and net worth.

Comment 9: Corrections Made at Verification

    Respondents contend that the Department's calculations for this 
final determination should include the corrected POI sales figures 
which were presented and verified at verification. The figures which 
were corrected were: the USIMINAS total sales value; the volume and 
value of COSIPA exports of subject merchandise to the United States; 
and, the volume and value of CSN total sales and the value of CSN 
exports of the subject merchandise to the United States.
    Department's Position: We agree with respondents and have used the 
corrected figures in our calculations for this final determination. The 
Department normally accepts minor corrections to submitted information 
at verification, and the opportunity to make minor corrections was 
included in the verification outlines that were used to prepare for 
verification. The corrected figures were verified in accordance with 
our standard verification procedures; thus, we have used them in the 
calculations.

Verification

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

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we 
calculated a combined ad valorem rate for USIMINAS and COSIPA and an 
individual rate for CSN. The total estimated net countervailable 
subsidy rates are stated below.

------------------------------------------------------------------------
                  Company                         Net subsidy rate
------------------------------------------------------------------------
IMINAS/COSIPA.............................  10.60% ad valorem.
CSN.......................................  7.14% ad valorem.
All Others................................  9.21% ad valorem.
------------------------------------------------------------------------

    In accordance with our preliminary affirmative determination, we 
instructed the U.S. Customs Service to suspend liquidation of all 
entries of cold-rolled flat-rolled carbon-quality steel products from 
Brazil which were entered, or withdrawn from warehouse, for consumption 
on or after October 1, 1999, the date of the publication of our 
preliminary determination in the Federal Register. In accordance with 
section 703(d) of the Act, which provides that suspension ordered after 
the preliminary determination may not remain in effect for more than 
four months, we will instruct the U.S. Customs Service to discontinue 
the suspension of liquidation for merchandise entered on or after 
January 29, 2000 but to continue the suspension of liquidation of 
entries made between October 1, 1999 and January 29, 2000.
    We will reinstate suspension of liquidation under section 706(a) of 
the Act if the ITC issues a final affirmative injury determination, and 
will require a cash deposit of estimated countervailing duties for such 
entries of merchandise in the amounts indicated above.

ITC Notification

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

[[Page 5554]]

Assistant Secretary for Import Administration.
    If the ITC determines that material injury, or threat of material 
injury, does not exist, this proceeding will be terminated and all 
estimated duties deposited or securities posted as a result of the 
suspension of liquidation will be refunded or canceled. If, however, 
the ITC determines that such injury does exist, we will issue a 
countervailing duty order.

Destruction of Proprietary Information

    In the event that the ITC issues a final negative injury 
determination, this notice will serve as the only reminder to parties 
subject to Administrative Protective Order (APO) of their 
responsibility concerning the destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 351.305(a)(3). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to sections 705(d) and 
777(i) of the Act.

    Dated: January 18, 2000.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 00-1849 Filed 2-3-00; 8:45 am]
BILLING CODE 3510-DS-P