[Federal Register Volume 65, Number 174 (Thursday, September 7, 2000)]
[Notices]
[Pages 54232-54240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22997]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-201-810]


Certain Cut-to-Length Carbon Steel Plate from Mexico: Preliminary 
Results of Countervailing Duty Administrative Review and Extension of 
Time Limit for Final Results of Countervailing Duty Administrative 
Review

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

ACTION: Notice of preliminary results of countervailing duty 
administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on certain cut-
to-length carbon steel plate from Mexico for the period January 1, 
1998, through December 31, 1998. For information on the net subsidy for 
the reviewed company as well as for non-reviewed companies, please see 
the ``Preliminary Results of Review'' section of this notice. If the 
final results remain the same as these preliminary results of 
administrative review, we will instruct the U.S. Customs Service 
(Customs) to assess countervailing duties as detailed in the 
``Preliminary Results of Review'' section of this notice. Interest 
parties are invited to comment on these preliminary results. (See the 
``Public Comment'' section of this notice).

EFFECTIVE DATE: September 7, 2000.

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

SUPPLEMENTARY INFORMATION:

Background

    On August 17, 1993, the Department published in the Federal 
Register (58 FR 43755) the countervailing duty order on certain cut-to-
length carbon steel plate from Mexico. On August 11, 1999, the 
Department published a notice of ``Opportunity to Request an 
Administrative Review'' (64 FR 43649) of this countervailing duty 
order. We received a timely request for review from Altos Hornos de 
Mexico, S.A. (AHMSA), the respondent company in this proceeding. On 
October 1, 1999, we initiated the review covering the period January 1, 
1998, through December 31, 1998 (64 FR 53318).
    On January 18, 2000, petitioners submitted a new subsidy allegation 
in the above-referenced administrative review. Specifically, 
petitioners alleged that AHMSA received a countervailable loan from 
Banobras, a government development bank. Upon review of the information 
submitted by petitioners, we have declined to initiate on this 
allegation. For more information regarding petitioners' new subsidy 
allegation, see the memorandum, ``New Subsidy Allegations,'' to Melissa 
G. Skinner, Director of Office of AD/CVD Enforcement VI, from the Team, 
dated August 25, 2000, a public document on file in the Central Records 
Unit (CRU), Room B-099 of the Main Department of Commerce Building (New 
Subsidy Allegations Memorandum).
    Petitioners also submitted other comments regarding assumption of 
AHMSA's debt, ``committed investments,'' and the use of uncreditworthy 
benchmarks. Our review of these allegations reveals that these are 
comments on the methodology which petitioners argue should be employed 
by the Department in this administrative review. Therefore, these 
comments do not require an initiation of an alleged subsidy. For more 
information, see the New Subsidy Allegations Memorandum. Thus, because 
we have determined that these allegations concern methodological 
issues, we have addressed the debt assumption and ``committed 
investment'' allegations in the section titled ``Petitioner's Comments 
Concerning `Committed Investment' and Assumption of AHMSA's Debt,'' 
below. We have addressed petitioner's comments regarding the use of 
uncreditworthy benchmarks in the ``Creditworthiness'' section, below.
    On April 11, 2000, we extended the period for completion of the 
preliminary results pursuant to section 751(a)(3) of the Tariff Act of 
1930, as amended (the Act). See Certain Cut-to-Length Carbon Steel 
Plate From Mexico: Extension of Time Limit for Preliminary Results of 
Countervailing Duty Administrative Review (65 FR 19359).

[[Page 54233]]

    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
Accordingly, this review covers AHMSA. This review covers 17 programs.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930 (the Act), as 
amended by the Uruguay Round Agreements Act (URAA) effective January 1, 
1995. 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 65345) (CVD Regulations).

Scope of Review

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

Extension of Final Results

    Section 751(a)(3)(A) of the Act requires the Department to make a 
final determination within 120 days after the date on which the 
preliminary results are published. However, if it is not practicable to 
complete the review within this time period, section 751(a)(3)(A) of 
the Act allows the Department to extend the time period for the final 
results to 180 days. Due to the complex nature of the issues in this 
case, we have determined that it is not practicable to complete the 
final results for this review within the original time limit. 
Therefore, the Department is extending the time limit for the final 
results to 180 days from the date of publication of these preliminary 
results.

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 as 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 administrative review, the Department is considering both 
non-recurring subsidies previously allocated in the initial 
investigation and non-recurring subsidies received since the original 
period of investigation (POI). Regarding non-recurring subsidies 
previously allocated in the initial investigation, the Department is 
using, for the purposes of the preliminary results, the original 
allocation period of 15 years. For non-recurring subsidies received 
since the original investigation, no party to the proceeding claimed 
that the AUL listed in the IRS tables did 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, we have allocated, where applicable, all of 
AHMSA's non-recurring subsidies received since the original 
investigation over 15 years, the AUL listed in the IRS tables for the 
steel industry.

Petitioner's Comments Concerning ``Committed Investment'' and 
Assumption of AHMSA's Debt

    Petitioners state that, at the time of privatization, in addition 
to making a cash payment, Grupo Acerero del Norte (GAN) committed to 
future investments in AHMSA.\1\ Petitioners argue that this ``committed 
investment'' is a countervailable subsidy, either directly or 
indirectly. As a direct subsidy, petitioners argue that, in effect, 
Government of Mexico (GOM) funds in the form of revenues foregone by 
not charging the commercial price for AHMSA were provided to AHMSA. As 
an indirect subsidy, petitioners argue that the GOM induced GAN to make 
the investment commitments by accepting a lower sales price and 
crediting 50 percent of any investment commitment when determining the 
winning bid for AHMSA. Petitioners allege the equity investment into 
AHMSA would not have occurred but for the inducement by the GOM.
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    \1\ GAN purchased AHMSA from the Government of Mexico in 1991.
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    In Certain Cut-to-Length Carbon Steel Plate from Mexico: Final 
Results of Countervailing Duty Administrative Review, 65 FR 13368 
(March 13, 2000) (Steel Products 2000), the Department examined the 
``committed investment'' and found it to be not countervailable under 
the prevailing privatization methodology. Specifically, in Comment 5 to 
the Decision Memorandum to Steel Products 2000, we stated:

    ``under the * * * current privatization methodology, the 
Department accounts for the purchase price in the calculation of the 
amount of subsidies passing through to the privatized entity. 
Therefore, if, as in this particular case, the amount of cash paid 
for the privatized company is reduced for committed investment, 
there is a reduction in the presumed amount of the subsidies that 
pass through to the new owner. Otherwise stated, a lower cash price 
increases the amount of the previously bestowed subsidies that pass 
through.''

Petitioners argue, however, that our gamma calculation does not fully 
account for subsidies, such as ``committed investment,'' that are 
provided in the course of privatization.
    Petitioners also argue that, in addition to paying $145 million in 
cash, and committing to make investments in AHMSA, GAN agreed to assume 
$350 million of AHMSA's debt, as part of the privatization transaction. 
Petitioners allege that the GOM agreed to a less

[[Page 54234]]

than market value cash price for AHMSA as an inducement for GAN to 
assume AHMSA's debt, thereby providing an indirect countervailable 
subsidy to AHMSA. Petitioners further argue that, absent this 
inducement, in a normal commercial setting the transaction would not 
have taken place, since the fair market value of AHMSA was considerably 
higher than the cash price paid by GAN.
    In response to these allegations, AHMSA states that the Department 
thoroughly investigated and verified the entire privatization 
transaction in the Final Affirmative Countervailing Duty Determination: 
Certain Steel Products from Mexico, 58 FR 37352 (July 9, 1993) (Steel 
Products from Mexico), and did not find any aspect of the transaction 
countervailable. They further state that with regard to the ``committed 
investment'' allegation, the Department found it to be not 
countervailable in Steel Products 2000 and that no new facts have 
arisen to warrant any further investigation of the allegation at this 
time.
    In light of the United States Court of Appeals for the Federal 
Circuit (CAFC) recent ruling in Delverde, SRL v. United States, 202 
F.3d 1360 (Fed. Cir. 2000) (Delverde), the Department is currently in 
the process of reexamining its privatization methodology. As part of 
this reexamination, we are analyzing GAN's committed investment into 
AHMSA and its assumption of AHMSA's debt.
    We welcome any comments interested parties may have with regard to 
these issues, as well as the appropriate approach the Department should 
take with respect to privatization in general.

Creditworthiness and Calculation of Discount Rate

    We have previously determined AHMSA to be uncreditworthy during the 
years 1983 through 1986. No new information or evidence of changed 
circumstances was presented in this review to warrant any 
reconsideration of these findings. However, because the request for 
this administrative review was filed after January 1, 1999, the 
Department's CVD Regulations now govern this review. As a result, 
though our determination regarding AHMSA's creditworthiness during the 
years 1983 through 1986 remains unchanged, we have, in accordance with 
our CVD Regulations, used a different methodology to calculate AHMSA's 
uncreditworthy discount rates in those years in which AHMSA was 
determined to be uncreditworthy. For those years in which AHMSA was 
determined to be uncreditworthy, we constructed a discount rate for 
uncreditworthy companies, as described in section 351.505(a)(3)(iii) of 
the CVD regulations.
    In Steel Products 2000, the presence of significant, intermittent 
inflation in Mexico's economy resulted in the Department utilizing a 
unique loan-based methodology to calculate the benefit from AHMSA's 
non-recurring subsidies. We explained in Steel Products 2000, that we 
treated the subsidy as a series of loans that were rolled over each 
year at the prevailing nominal interest rate and applied the 
creditworthy or uncreditworthy interest rates in each year depending on 
the company's creditworthy status in that year. See Comment 3 of the 
Decision Memorandum to Steel Products 2000. As explained below in the 
``Inflation Methodology'' section of these preliminary results, we have 
again utilized the loan-based methodology in this administrative 
review.
    In Steel Products from Mexico and Steel Products 2000, we did not 
explicitly address the issue of whether the creditworthy decision for 
this unique methodology should be made at the point of original 
bestowal or on a year-by-year basis.\2\ However, in Steel Products 
2000, we stated that we would consider this issue in any subsequent 
administrative review. See Comment 3 of the Decision Memorandum to 
Steel Products 2000.
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    \2\ We note that no party raised the issue in Steel Products 
from Mexico. In Steel Products 2000, the issue was not raised until 
the filing of the case briefs and, thus, was not addressed during 
that segment of the proceeding.
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    Regarding the discount rate used in the Department's standard grant 
allocation methodology, section 351.524(d)(3)(i) of the CVD Regulations 
states that when allocating a benefit over time and determining the 
annual benefit amount that should be assigned to a particular year, the 
Secretary will select a discount rate based upon the information 
available in the year in which the government agreed to provide the 
subsidy. Regarding the determination of a firm's creditworthy status, 
section 351.505(a)(4)(i) of the CVD Regulations state that a firm will 
be considered uncreditworthy if the Secretary determines that, based on 
information available at the time of the government-provided loan, the 
firm could not have obtained long-term loans from conventional 
commercial sources. Thus, the CVD Regulations make clear that the 
Department should use the discount rate in effect at the time of 
receipt, be it creditworthy or uncreditworthy, when using the standard 
grant allocation methodology to assign an annual benefit amount to a 
particular year.
    As discussed below in the ``Inflation Methodology'' section of 
these preliminary results, the unique circumstances of this case have 
led us to use a loan-based methodology to allocate AHMSA's peso-
denominated non-recurring benefits over time. A key aspect of this 
loan-based methodology is the use of the annual discount rate 
outstanding in each year of the allocation period, as opposed to the 
Department's standard practice of applying to the entire allocation 
period the discount rate outstanding at the time the grant was 
received. Thus, section 351.524(d)(3)(i) of the CVD Regulations does 
not directly address our methodology of non-recurring benefits over 
time. Although this loan-based methodology is a departure from the 
Department's standard grant allocation methodology, for the purposes of 
these preliminary results, we find that the use of the loan based 
methodology is not a sufficient reason to alter the Department's long-
standing practice of applying a firm's creditworthy status (based on 
the firm's creditworthiness at the time of receipt) to the entire 
allocation period. See e.g. Final Affirmative Countervailing Duty 
Determination: Certain Stainless Steel Wire Rod From Italy, 63 FR 
40474, 40478 (July 29, 1998). Thus, for purposes of these preliminary 
results, in those years in which AHMSA received a peso-denominated non-
recurring grant and was determined to be uncreditworthy at the time of 
receipt, we have allocated the benefit over time using the loan-based 
allocation methodology, and we have constructed an annual discount rate 
(i.e. the discount outstanding in each year of the allocation period) 
pursuant to the Department's interest rate methodology for 
uncreditworthy companies, as described in section 351.505(a)(3)(iii) of 
the CVD regulations. In other words, though we have applied a loan-
based methodology that uses an annual discount rate to allocate a non-
recurring benefit to a particular year rather than the Department's 
standard practice of using a fixed discount rate throughout the entire 
allocation period, we have maintained the Department's practice of 
applying a firm's creditworthy status at the time of receipt to the 
entire allocation period.

Change in Ownership

A. Background

    In November 1991, the GOM sold all of its ownership interest in 
AHMSA. Prior to privatization, AHMSA was

[[Page 54235]]

almost entirely owned by the GOM. Since November 1991, the GOM has held 
no stock in AHMSA.
    The Department is aware that on June 20, 2000, the CAFC denied the 
Department's petition for rehearing and suggestion for rehearing en 
banc in Delverde. Although this decision addressed a purely private 
change in ownership, it may impact the Department's privatization 
methodology. However, due to the complexity of the issue, the 
Department has not yet completed its analysis of how Delverde may 
affect this proceeding. Accordingly, for purposes of these preliminary 
results, we will 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, as set forth 
below.
    The Department invites interested parties to comment in their case 
briefs on the implications of the Delverde decision on this proceeding.

B. Change in Ownership Calculation Methodology

    Under the Change in Ownership methodology described in the General 
Issues Appendix concerning the treatment of subsidies received prior to 
the sale of a company or the spinning-off of a productive unit, we 
estimated the portion of the purchase price attributable to prior 
subsidies. See the General Issues Appendix (GIA) that is attached to 
the Final Affirmative Countervailing Duty Determination: Certain Steel 
Products From Austria, 58 FR 37217, 37226 (July 9, 1993). We computed 
this by first dividing the privatized company's prior subsidies by the 
company's net worth for each year during the period beginning with the 
earliest point at which non-recurring subsidies would be attributable 
to the POI and ending one year prior to the change in ownership.
    We then took the simple average of the ratios of subsidies to net 
worth. This simple average of the ratios serves as a reasonable 
surrogate for the portion that subsidies constitute of the overall 
value of the company. Next, we multiplied the average ratio by the 
purchase price to derive the portion of the purchase price attributable 
to repayment of prior subsidies. Finally, we reduced the benefit 
streams of the prior subsidies by the ratio of the repayment amount to 
the net present value of all remaining benefits at the time of 
privatization.

Inflation Methodology

    In Steel Products from Mexico, we determined, based on information 
from the GOM, that Mexico experienced significant inflation from 1983 
through 1988. See Steel Products from Mexico, 58 FR 37352, 37355. In 
accordance with past practice, because we found significant inflation 
in Mexico and because AHMSA adjusted for inflation in its financial 
statements, we made adjustments, where necessary, to account for 
inflation in the benefit calculations.
    Because Mexico experienced significant inflation during only a 
portion of the 15-year allocation period, indexing for the entire 
period or converting the non-recurring benefits into U.S. dollars at 
the time of receipt (i.e., dollarization) for use in our calculations 
would have inflated the benefit from these infusions by adjusting for 
inflationary as well as non-inflationary periods. Thus, in Steel 
Products from Mexico, 58 FR 37352, 37355, we used a loan-based 
methodology to reflect the effects of intermittent high inflation. The 
methodology we used in Steel Products from Mexico assumed that, in lieu 
of a government equity infusion/grant, a company would have had to take 
out a 15-year loan that was rolled over each year at the prevailing 
nominal interest rates, which for purposes of our calculations were the 
CPP-based interest rates discussed in the ``Discount Rates'' section of 
this notice. The benefit in each year of the 15-year period equaled the 
principal plus interest payments associated with the loan at the 
nominal interest rate prevailing in that year.
    Since we assumed that an infusion/grant given was equivalent to a 
15-year loan at the current rate in the first year, a 14-year loan at 
current rates in the second year and so on, the benefit after the 15-
year period would be zero, just as with the Department's grant 
amortization methodology. Because nominal interest rates were used, the 
effects of inflation were already incorporated into the benefit. This 
methodology was upheld in British Steel plc v. United States, 127 F.3d 
1471 (Fed. Cir. 1997) (British Steel III).
    In Steel Products 2000, we analyzed information provided by the GOM 
and found that Mexico, again, experienced significant, intermittent 
inflation during the period 1991 through 1997. See page 5 of the 
Decision Memorandum to Steel Products 2000. In addition, in Steel 
Products 2000, we learned at verification that AHMSA continued its 
practice of accounting for inflation in its financial statements. See 
page 5 of the Decision Memorandum to Steel Products 2000. Thus, in 
Steel Products 2000, we used the benefit calculation methodology from 
Steel Products from Mexico, described above, for all non-recurring, 
peso-denominated grants received since the POI. See page 4 of the 
Decision Memorandum to Steel Products 2000.
    No new information or evidence of changed circumstances has been 
presented thus far in this review to warrant any reconsideration of 
these findings. Thus, for the purposes of these preliminary results, we 
have continued to use the benefit calculation methodology from Steel 
Products from Mexico for all non-recurring, peso-denominated grants 
received prior to and since the POI.

Analysis of Programs

I. Programs Preliminarily Determined to Confer Subsidies

A. GOM Equity Infusions

    In Steel Products from Mexico, 58 FR 37352, 37356, we determined 
that the GOM made equity infusions into AHMSA in 1977, each year from 
1979 through 1987, 1990 and 1991. Shares of common stock were issued 
for all of these infusions. The GOM made these equity infusions 
annually as part of its budgetary process as per the Federal Law on 
State Companies. At the time of these infusions, AHMSA was almost 
entirely a government-owned company.
    In Steel Products from Mexico, 58 FR 37352, 37356, we found AHMSA 
to be unequityworthy in each year from 1979 through 1987, and in 1990 
and 1991. Accordingly, we determined that the equity infusions by the 
GOM into AHMSA in these years were countervailable. In Steel Products 
2000, we continued to find this program countervailable. See Certain 
Cut-to-Length Carbon Steel Plate from Mexico: Preliminary Results of 
Countervailing Duty Administrative Review, 64 FR 48796, 48799 
(September 8, 1999) (Preliminary Results of Steel Products 2000).\3\ No 
new information or evidence of changed circumstances has been presented 
thus far in this review to warrant any reconsideration of these 
findings. As a result, for the purposes of these preliminary results, 
we continue to find this program countervailable.
    To calculate the countervailable benefit in the POR, we used the 
grant allocation methodology for intermittent, significant inflation 
described above. We then divided the benefit attributable to the POR, 
adjusted to reflect the change in ownership described above,

[[Page 54236]]

by the total sales of AHMSA during the same period. On this basis, we 
preliminarily determine the net subsidy for this program to be 1.55 
percent ad valorem for AHMSA.
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    \3\ This decision was affirmed in the final results of Steel 
Products 2000, but the complete discussion is published in the 
Preliminary Results of Steel Products 2000. Throughout this notice 
there are several instances where we cite the preliminary results 
for our discussion.
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B. 1986 Assumption of AHMSA's Debt

    In 1986, the GOM negotiated an agreement with AHMSA through which 
the GOM assumed a portion of AHMSA's debt. One part of this debt 
assumption was recorded as a reduction in the company's accumulated 
past losses. For a second part, shares of stock were issued; a third 
part was held for future capital increases for which new stock was 
issued to the GOM in 1987. In Steel Products from Mexico, 58 FR 37352, 
37356, we treated the full amount of debt assumed by the GOM in 1986 as 
a countervailable, non-recurring grant. We used the same approach in 
Steel Products 2000. See Preliminary Results of Steel Products 2000, 64 
FR 48796, 48799. No new information or evidence of changed 
circumstances has been presented thus far in this review to warrant any 
reconsideration of these findings. Thus, for purposes of these 
preliminary results, we continue to find that the full amount of debt 
assumed by the GOM in 1986 is a countervailable, non-recurring grant.
    To calculate the countervailable benefit in the POR, we used the 
grant allocation methodology for intermittent, significant inflation 
described above. We then divided the benefit attributable to the POR, 
adjusted to reflect the change in ownership described above, by the 
total sales of AHMSA during the same period. On this basis, we 
preliminarily determine the net subsidy for this program to be 2.21 
percent ad valorem for AHMSA.

C. 1988 and 1990 Debt Restructuring of AHMSA Debt and the Resulting 
Discounted Prepayment in 1996 of AHMSA's Restructured Debt Owed to the 
GOM

    In 1987, the GOM negotiated an agreement with foreign creditors to 
restructure the debt of AHMSA. The GOM again negotiated on behalf of 
AHMSA debt restructuring agreements in 1988 and 1990. Under these 
agreements, the GOM purchased AHMSA's debts, which were denominated in 
several foreign currencies, from AHMSA's foreign creditors in exchange 
for GOM debt. The GOM thereby became the creditor for loans included in 
these agreements.
    During the investigation of Steel Products from Mexico, the GOM 
claimed that AHMSA's principal repayment obligations remained the same 
after the debt restructuring. However, in Steel Products from Mexico, 
we could not verify that none of AHMSA's principal obligations on its 
debt was forgiven in the 1988 and 1990 debt restructuring agreements. 
Thus, based upon the facts available to the Department at the time of 
the investigation, we assumed that the principal had been forgiven in 
the amount of the discount the GOM had received when purchasing the 
debt from AHMSA's foreign creditors. Accordingly, we treated the 
forgiven principal as a non-recurring grant.
    In Steel Products 2000, AHMSA claimed that, in June 1996, it repaid 
its restructured debt in the form of a discounted prepayment to the 
GOM, thereby extinguishing its financial obligations to the GOM. During 
verification of the questionnaire response submitted during the 
administrative review, we learned that, in order to determine the 
amount of the discounted prepayment that AHMSA was to make in June of 
1996, the company and the GOM created amortization tables for each of 
the foreign currency loans. Next, they converted these payment streams 
into U.S. dollars and calculated the net present value for each of 
them. Then, they summed the U.S. dollar denominated net present values 
to derive the amount of the discounted prepayment to be made in U.S. 
dollars.
    In Steel Products 2000, we determined that AHMSA's discounted 
prepayment of its 1988 and 1990 restructured debts constituted a 
countervailable benefit because AHMSA's discounted prepayment resulted 
in a reduction of the principal owed by AHMSA on this debt. See 
Preliminary Results of Steel Products 2000, 64 FR 48796, 48799. On this 
basis, we determined in Steel Products 2000 that the difference between 
the principal outstanding on AHMSA's restructured debt and the amount 
of its discounted prepayment constituted debt forgiveness on the part 
of the GOM. In addition, we determined that the benefit was conferred 
in 1996, the year in which the debt forgiveness took place. See Id. 
Because the debt forgiveness was made to a single enterprise, we 
determined in Steel Products 2000 that it was specific within the 
meaning of section 771(5A)(D) of the Act. No new information or 
evidence of changed circumstances has been presented thus far in this 
review to warrant any reconsideration of these findings. Thus, for 
purposes of these preliminary results, we continue to find that the 
debt forgiveness under this program is a countervailable, non-recurring 
grant.
    Because the principal forgiven was denominated in U.S. dollars and, 
thus, was unaffected by Mexico's intermittent significant inflation, we 
used the Department's standard non-recurring grant methodology to 
allocate the benefit to the POR. We used as our discount rate the 
weighted-average of AHMSA's fixed-rate, U.S. dollar loans that were 
received during the year of receipt. We then converted the U.S. dollar 
denominated benefit into pesos using the average annual peso/U.S. 
dollar exchange rate for the POR. We then divided the benefit 
attributable to the POR by AHMSA's total sales during the same period. 
On this basis, we preliminarily determine the net subsidy for this 
program to be 0.56 percent ad valorem for AHMSA.

D. IMIS Research and Development Grants

    The Instituto Mexicano de Investigaciones Siderurgicas (IMIS), or 
the Mexican Institute of Steel Research, was a government-owned 
research and development organization that performed independent and 
joint venture research with the iron and steel industry.
    In Steel Products from Mexico, 58 FR 37352, 37359, the Department 
found that IMIS's activities with AHMSA fell into two categories: joint 
venture activities and non-joint venture activities. We determined that 
IMIS's non-joint venture activities with AHMSA were not 
countervailable. However, the Department determined that joint venture 
activities were countervailable, and we treated IMIS's contributions to 
joint venture activities as non-recurring grants.
    During verification in Steel Products from Mexico, AHMSA submitted 
new information indicating that the company utilized services and 
generated purchase orders related to its activities with IMIS. In Steel 
Products from Mexico, we found that AHMSA's use of IMIS services was 
related to its joint venture activities and, therefore, was 
countervailable. In addition, because the Department was unable to 
determine whether the purchase orders were related to AHMSA's joint 
venture activities, we determined, as facts available, that funds 
linked to these purchase orders provided countervailable benefits. We 
used the same approach in Steel Products 2000. See Preliminary Results 
of Steel Products 2000, 64 FR 48796, 48800. No new information or 
evidence of changed circumstances was presented thus far in this review 
to warrant any reconsideration of these findings.

[[Page 54237]]

    During Steel Products 2000, the GOM reported that IMIS was 
terminated by Government decree on November 4, 1991. However, because 
the allocated benefits of the non-recurring benefits that AHMSA 
received under this program extend into the POR, this program continues 
to confer a countervailable benefit.
    To calculate the countervailable benefit in the POR, we used the 
grant allocation methodology for intermittent, significant inflation 
described above. We then divided the benefit attributable to the POR, 
adjusted to reflect the change in ownership described above, by the 
total sales of AHMSA during the same period. On this basis, we 
preliminarily determine the net subsidy for this program to be 0.05 
percent ad valorem for AHMSA.

E. Pre-Privatization Lay-Off Financing from the GOM

    During the verification of Steel Products from Mexico, the 
Department discovered that the GOM loaned AHMSA money to cover the cost 
of personnel lay-offs which the GOM felt were necessary to make AHMSA 
more attractive to potential purchasers. The Department learned that 
this loan did not accrue interest after September 30, 1991. Further, 
the Department learned that the GOM was allowing the privatized AHMSA 
to repay this loan with the transfer of AHMSA assets back to the GOM. 
The assets AHMSA was using to repay the loan were assets which GAN, the 
purchaser of AHMSA, had not wished to purchase but which the GOM 
included in the sale package. See Steel Products from Mexico, 58 FR 
37352, 37360. These assets were characterized as ``unnecessary assets'' 
or assets not necessary to the production of steel.
    Since the information about this financing and its repayment came 
to light only at verification of the questionnaire responses submitted 
during the investigation, we were unable to determine whether this loan 
relieved AHMSA of an obligation it would otherwise have borne with 
respect to the laid-off workers. Thus, in Steel Products from Mexico, 
58 FR 37352, 37361, we calculated the benefit by treating the financing 
as an interest-free loan.
    In Steel Products 2000, AHMSA claimed that it extinguished its pre-
privatization lay-off financing debt with the transfer of the 
``unnecessary assets.'' In Steel Products 2000, we noted that the 
record of the investigation indicated that these assets were included 
by the GOM in the sale of AHMSA despite the fact that GAN, the 
purchaser of AHMSA, indicated that it did not wish to purchase those 
assets, and GAN's bid for AHMSA did not include any funds for those 
assets. See Preliminary Results of Steel Products 2000, 64 FR 48796, 
48801. We further noted that the record from the investigation 
indicated that the value of those assets was frozen in November 1991, 
and that, as of that date, the assets were neither depreciated nor 
revalued for inflation, both of which are standard accounting practices 
in Mexico. See Id, at 48801.
    Although in Steel Products 2000, we noted that a loan that provides 
countervailable benefits normally ceases to do so once it has been 
fully repaid, we determined that the benefit to AHMSA was essentially 
in the form of a grant. Specifically, in Steel Products 2000, we 
determined that AHMSA repaid the loan with the transfer of assets which 
AHMSA's purchasers did not wish to purchase and for which they did not 
pay. See Preliminary Results of Steel Products from Mexico, 64 FR 
48796, 48801. Thus, in Steel Products 2000, we determined that AHMSA's 
use of these ``unnecessary assets,'' assets which were effectively 
given to AHMSA free of charge, to repay this loan, constituted debt 
forgiveness of this loan. Accordingly, we determined that the entire 
amount of the pre-privatization lay-off financing was a non-recurring 
grant received in 1994, the time the loan was forgiven. No new 
information or evidence of changed circumstances was presented thus far 
in this review to warrant any reconsideration of these findings. Thus, 
for the purposes of these preliminary results, we continue to find that 
the entire amount of the pre-privatization lay-off financing 
constituted a non-recurring grant received in 1994, the time the loan 
was forgiven.
    To calculate the countervailable benefit in the POR, we used the 
grant allocation methodology for intermittent, significant inflation 
described above. We then divided the benefit from the pre-privatization 
lay-off financing attributable to the POR, by the total sales of AHMSA 
during the same period. On this basis, we preliminarily determine the 
net subsidy for this program to be 0.74 percent ad valorem for AHMSA.

F. Bancomext Export Loans

    Banco Nacional de Comercio Exterior, S.N.C. (Bancomext), or the 
National Bank of Foreign Trade, offers a government program through 
which short-term financing is provided to producers or trading 
companies engaged in export activities. These U.S. dollar-denominated 
loans provide financing for working capital (pre-export loans), and 
export sales (export loans). AHMSA used this program during the current 
POR.
    In Steel Products from Mexico, 58 FR 37352, 37357, we determined 
that, since these loans are available only to exporters, Bancomext 
loans are countervailable to the extent that they are provided at 
preferential rates. We used the same approach in Steel Products 2000. 
See Preliminary Results of Steel Products 2000, 64 FR 48796, 48801. No 
new information or evidence of changed circumstances was presented in 
this review thus far to warrant any reconsideration of these findings.
    To determine the benefit conferred under the Bancomext export loan 
program, we compared the interest rate charged on these loans to a 
benchmark interest rate. AHMSA submitted company-specific interest rate 
information on short and long-term loans that it received from 
commercial banks. We used the short-term loans to calculate a company-
specific, weighted-average, U.S. dollar-denominated benchmark interest 
rate. We compared this company-specific benchmark rate to the interest 
rates charged on AHMSA's Bancomext loans and found that the interest 
rates charged were lower than the benchmark rates. Therefore, in 
accordance with section 771(5)(E)(ii) of the Act, we preliminarily 
determine that this program conferred a countervailable benefit during 
the POR because the interest rates charged on these loans were less 
than what a company otherwise would have had to pay on a comparable 
short-term commercial loan. To derive the benefit in U.S. dollars, we 
subtracted the amount of interest that would have been paid using the 
benchmark interest rate from the amount of interest that AHMSA paid 
under the program.
    Because eligibility under this program is contingent upon exports, 
we divided the benefit by AHMSA's total export sales. Because AHMSA's 
total export sales were denominated in pesos, we converted the benefit 
AHMSA received under this program to pesos using the peso/U.S. dollar 
exchange rate that was outstanding on the date of the interest 
payments. On this basis, we preliminarily determine the net subsidy for 
this program to be 0.43 percent ad valorem for AHMSA.

G. PITEX Duty-Free Imports for Companies That Export

    The Programa de Importacion Temporal Para Producir Productos Para 
Exportar (PITEX), or the Program for Temporary Importation of Products 
for Export, was established by a decree

[[Page 54238]]

published in the Diario Oficial, a GOM publication equivalent to the 
Federal Register, on September 19, 1985, and amended in the Diario 
Oficial on September 19, 1986, and May 3, 1990. The program is jointly 
administered by the Ministry of Commerce and Industrial Development and 
the Customs Administration. Manufacturers who meet certain export 
requirements are eligible for the PITEX program. Those who qualify are 
exempt from paying import duties and the value added tax (VAT) on 
temporarily imported goods that will be used in the production of 
exports. Categories of merchandise eligible for PITEX import duty and 
VAT exemptions are raw materials, packing materials, fuels and 
lubricants, perishable materials, machinery, and spare parts.
    Machinery imported under the PITEX program may only be imported on 
a temporary basis. When the items' temporary status has run out, 
companies must either send the machines back or pay the import duties 
and VAT taxes that were originally exempted. In Steel Products from 
Mexico, 58 FR 37352, 37359, we found that machinery imported under the 
PITEX program could stay in Mexico for five years initially and, after 
five years, a manufacturer could renew the temporary stay each year. 
During the verification of the questionnaire responses submitted during 
Steel Products 2000, we learned that the PITEX program was amended such 
that companies that imported machinery under the program after 1998 
cannot apply for an extension of their import duty exempt status. 
Rather, the period of temporary status is determined as the time that 
the machinery and spare parts take to depreciate. After the items are 
fully depreciated, companies must send them back or pay the import 
duties and VAT that were originally exempted. However, for machinery 
imported prior to 1998, we learned at the verification of this review 
that it can remain in Mexico without liability for import duties and 
VAT, provided that the company maintains its PITEX status.
    In Steel Products from Mexico, 58 FR 37352, 37359, we determined 
that PITEX benefits were countervailable to the extent that they 
provide duty exemptions on imports of merchandise not consumed in the 
production of the exported product. We used the same approach in Steel 
Products 2000. See Preliminary Results of Steel Products 2000, 64 FR 
48796,48801. In addition, in Steel Products 2000 we determined that the 
VAT exemptions on imported inputs that received by AHMSA were not 
countervailable. See Comment 6 of the Decision Memorandum to Steel 
Products 2000. No new information or evidence of changed circumstances 
was presented in this review thus far to warrant any reconsideration of 
these findings.
    During the POR AHMSA used the PITEX program to import raw 
materials, containers and packing materials, fuels, perishable items 
and lubricants, and various machinery and equipment. Pursuant to 
section 351.519(a)(1)(ii) of the CVD Regulations, we preliminarily 
determine that AHMSA's import duty exemptions on spare parts, machinery 
and other items not consumed in the production of the exported products 
are countervailable.
    To calculate the countervailable benefit in the POR, we determined 
the amount of import duty that AHMSA would have paid absent the program 
for each duty exemption that the company received on products not 
consumed in the production of the exported product. An exemption from 
payment on import duties is normally considered a recurring benefit 
and, thus, is expensed in the year of receipt. See section 
351.524(c)(1) of the CVD Regulations. Because eligibility for this 
program is contingent upon exports, we divided the benefit over AHMSA's 
total export sales. On this basis, we preliminarily determine the net 
subsidy to be 3.65 percent ad valorem for AHMSA.

H. Immediate Deduction

    The immediate deduction program was established in 1987 and was 
subject to ongoing reforms until it was repealed in 1998. The immediate 
deduction mechanism was available only for certain fixed assets that 
had not been previously used in Mexico. The immediate deduction was not 
available for pre-operation expenses or for deferred expenses and 
costs. The GOM's stated purpose for the immediate deduction program was 
to promote investment by allowing the future deduction of the 
investments, at their present value, at the time of the investment. The 
immediate deduction option only applied to property used permanently 
within Mexico but outside the metropolitan areas of Mexico City, 
Guadalajara, and Monterrey. With respect to small firms (i.e., firms 
with a gross income of 7 million pesos or less), the location 
restriction did not apply. The small firm classification does not apply 
to AHMSA. Immediate deduction could be taken, at the election of the 
tax-payer, in the tax year in which the investments in qualifying fixed 
assets were made, in the year in which these assets were first used, or 
in the following year. No prior approval by the GOM was required to use 
the immediate deduction option.
    In Steel Products 2000, we determined that the immediate deduction 
program was specific to a region pursuant to section 771(5A)(D)(iv) of 
the Act. Under the immediate deduction program, the ``designated 
geographical region'' comprises all of Mexico except Mexico City, 
Guadalajara, and Monterrey. See Preliminary Results of Steel Products 
2000, 64 FR 48796, 48802. In Steel Products 2000, we also determined 
that pursuant to section 771(5)(D)(ii) of the Act, the immediate 
deduction program provides a financial contribution to the extent that 
the GOM is not collecting tax revenue that is otherwise due from AHMSA. 
See Id at 48802. We further determined in Steel Products 2000 that 
pursuant to section 771(5)(E) of the Act, the immediate deduction 
program relieves certain companies of a tax burden that they would have 
otherwise incurred absent the program and, thus, confers a benefit 
equal to the tax savings. See Id at 48802. No new information or 
evidence of changed circumstances was presented in this review thus far 
to warrant any reconsideration of these findings.
    In Steel Products 2000, we learned that the immediate deduction 
program does not change the taxable income declared by the company. 
Rather, the program changes the amount of deductions that a company can 
take on taxable income. The immediate deduction program is not an 
accelerated depreciation program, which Mexico does not have. Mexican 
companies eligible to use immediate deduction basically have two 
choices. Companies can either depreciate according to the normal 
depreciation schedule in Mexico, or they can take a one-time immediate 
deduction on the future depreciation of the item discounted back to its 
present value. If companies take the immediate deduction, they will not 
be able to claim all of the deductions that they would otherwise be 
able to take if they had utilized the standard straight line 
depreciation method. In other words, only a certain percentage of the 
value of the assets (as prescribed by law) are used in the immediate 
deduction calculation. Regarding the net present value calculation used 
to derive the immediate deduction, it is made at market rates as 
specified in the program legislation. See Id at 48802. In Steel 
Products 2000, we further learned that losses (for tax purposes) can be 
carried forward for 10 years and that the immediate deduction figure is 
part of that loss carried forward. Therefore, the

[[Page 54239]]

amount of the immediate deduction can be carried forward for up to 10 
years. See Id at 48802.
    To calculate the benefit under this program, we first had to derive 
the amount of deductions that AHMSA would have been able to apply 
towards its accruable income using a straight-line method of 
depreciation for the assets for which AHMSA claimed an immediate 
deduction and then compare that amount to the deductions that AHMSA had 
available under the immediate deduction program.
    In accordance with the method used in Steel Products 2000, we 
determined the amount of depreciation that AHMSA would have claimed 
using the straight-line method in each year that the firm used the 
immediate deduction program by applying straight-line depreciation 
rates, as supplied by the GOM, to the same physical assets that AHMSA 
was eligible to depreciate under the immediate deduction method. See 
page 7 of the Decision Memorandum to Steel Products 2000.
    To arrive at the benefit, we calculated the difference between the 
amount of immediate deduction claimed during the POR and the amount of 
deduction that would have been available to AHMSA using normal 
straight-line depreciation and multiplied this difference by Mexico's 
corporate income tax rate. Because the tax allowances earned under the 
immediate deduction program and the tax allowances that would have been 
earned under the straight-line depreciation method were greater than 
AHMSA's taxable income in 1997, we have determined that the company 
would not have had to use any tax allowances carried forward from prior 
years in order to reduce its taxable income in 1997 to zero.
    Thus, when calculating the difference between the amount of 
immediate deduction claimed in the POR and the amount of deduction that 
would have been available to AHMSA using normal straight-line 
depreciation, we have not included any of the losses carried forward 
from prior years that would have been available for use on the tax 
return that AHMSA filed during the POR. We then divided the benefit 
over AHMSA's total sales. On this basis, we preliminarily determine the 
net subsidy to be 1.53 percent ad valorem for AHMSA.

II. Programs Preliminarily Determined To Be Not Used

A. Bancomext Short-Term Import Financing
B. FONEI Long-Term Financing
C. Export Financing Restructuring
D. Bancomext Trade Promotion Services and Technical Support
E. Empresas de Comercio Exterior (ECEX) or Foreign Trade Companies 
Program
F. Article 15 & 94 Loans
G. Nafinsa Long-Term Loans

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for the producer/exporter subject to this 
administrative review. For the period January 1, 1998, through December 
31, 1998, we preliminarily determine the net subsidy for AHMSA to be 
10.72 percent ad valorem. If the final results of this review remain 
the same as these preliminary results, the Department intends to 
instruct Customs to assess countervailing duties for AHMSA at 10.72 
percent ad valorem of the f.o.b. invoice price on all shipments of the 
subject merchandise from AHMSA, entered, or withdrawn from warehouse, 
for consumption on or after the date of publication of the final 
results of this review.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 19 CFR 
351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which 
a review was not requested, duties must be assessed at the cash deposit 
rate, and cash deposits must continue to be collected, at the rate 
previously ordered. As such, the countervailing duty cash deposit rate 
applicable to a company can no longer change, except pursuant to a 
request for a review of that company. See Federal-Mogul Corporation and 
The Torrington Company v. United States, 822 F. Supp. 782 (CIT 1993) 
and Floral Trade Council v. United States, 822 F. Supp. 766 (CIT 1993) 
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic 
assessment, which is identical to 19 CFR 355.22(g)). Therefore, the 
cash deposit rates for all companies except those covered by this 
review will be unchanged by the results of this review.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to non-reviewed companies covered by this 
order are those established in the most recently completed 
administrative proceeding conducted under the URAA. If such a review 
has not been conducted, the rate established in the most recently 
completed administrative proceeding pursuant to the statutory 
provisions that were in effect prior to the URAA amendments is 
applicable. See Certain Steel 2000, 65 FR 13368. These rates shall 
apply to all non-reviewed companies until a review of a company 
assigned these rates is requested. In addition, for the period January 
1, 1998, through December 31, 1998, the assessment rates applicable to 
all non-reviewed companies covered by this order are the cash deposit 
rates in effect at the time of entry.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of the public 
announcement of this notice. Pursuant to 19 CFR 351.309, interested 
parties may submit written comments in response to these preliminary 
results. Unless otherwise indicated by the Department, case briefs must 
be submitted within 30 days after the date of publication of this 
notice, and rebuttal briefs, limited to arguments raised in case 
briefs, must be submitted no later than five days after the time limit 
for filing case briefs, unless otherwise specified by the Department. 
Parties who submit argument in this proceeding are requested to submit 
with the argument: (1) a statement of the issue, and (2) a brief 
summary of the argument. Parties submitting case and/or rebuttal briefs 
are requested to provide the Department copies of the public version on 
disk. Case and rebuttal briefs must be served on interested parties in 
accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, 
within 30 days of the date of publication of this notice, interested 
parties may request a public hearing on arguments to be raised in the 
case and rebuttal briefs. Unless the Secretary specifies otherwise, the 
hearing, if requested, will be held two days after the date for 
submission of rebuttal briefs, that is, thirty-seven days after the 
date of publication of these preliminary results.
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under

[[Page 54240]]

administrative protective order no later than 10 days after the 
representative's client or employer becomes a party to the proceeding, 
but in no event later than the date the case briefs, under 19 CFR 
351.309(c)(ii), are due. The Department will publish the final results 
of these administrative reviews, including the results of its analysis 
of issues raised in any case or rebuttal brief or at a hearing.
    This administrative review is issued and published in accordance 
with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1) 
and 19 U.S.C. 1677f(i)(1)).

    Dated: August 30, 2000.
Troy H. Cribb,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-22997 Filed 9-6-00; 8:45 am]
BILLING CODE 3510-DS-U