[Federal Register Volume 67, Number 27 (Friday, February 8, 2002)]
[Notices]
[Pages 5991-6001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3122]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-428-833]


Preliminary Affirmative Countervailing Duty Determination and 
Preliminary Negative Critical Circumstances Determination: Carbon and 
Certain Alloy Steel Wire Rod from Germany

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

ACTION: Notice of preliminary affirmative countervailing duty 
determination and preliminary negative critical circumstances 
determination.

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SUMMARY: The Department of Commerce has preliminarily determined that 
countervailable subsidies are being provided to producers or exporters 
of carbon and certain alloy steel wire rod from Germany. For 
information on the estimated countervailing duty rates, see infra 
section on ``Suspension of Liquidation.'' We have also preliminarily 
determined that critical circumstances do not exist with respect to 
imports of carbon and certain alloy steel wire rod from Germany.

EFFECTIVE DATE: February 8, 2002.

FOR FURTHER INFORMATION CONTACT: Melanie Brown or Annika O'Hara, Office 
of Antidumping/Countervailing Duty Enforcement, Group 1, Import 
Administration, U.S. Department of Commerce, Room 3099, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
4987 and (202) 482-3798, respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (``URAA'') effective January 1, 1995 
(``the Act''). In addition, unless otherwise indicated, all citations 
to the Department of Commerce's (``the Department'') regulations are to 
19 CFR Part 351 (April 2001).

Petitioners

    The petitioners in this investigation are Co-Steel Raritan, Inc., 
GS Industries, Keystone Consolidated Industries, Inc., and North Star 
Steel Texas, Inc. (collectively, ``the petitioners'').

Case History

    The following events have occurred since the publication of the 
notice of initiation in the Federal Register (see Notice of Initiation 
of Countervailing Duty Investigations: Carbon and Certain Alloy Steel 
Wire Rod from Brazil, Canada, Germany, Trinidad and Tobago, and Turkey, 
66 FR 49931 (October 1, 2001) (``Initiation Notice'')).
    Due to the large number of producers and exporters of carbon and 
certain alloy steel wire rod (``wire rod'' or ``subject merchandise'') 
in Germany, we decided to limit the number of responding companies to 
the two producers/exporters with the largest volumes of exports to the 
United States during the period of investigation: Ispat Walzdraht 
Hochfeld GmbH (``IWHG'') and Saarstahl AG (``Saarstahl''). See October 
3, 2001 memorandum to Susan Kuhbach, entitled ``Respondent Selection,'' 
which is on file in the Department's Central Records Unit in Room B-099 
of the main Department building (``CRU'').
    On October 9, 2001, the Department decided to initiate an 
investigation of two additional subsidy programs alleged by the 
petitioners in a submission filed on September 13, 2001. Due to the 
lateness of their filing, we were unable to analyze the petitioners' 
allegations before the initiation of this investigation. See October 9, 
2001 memorandum to Richard W. Moreland entitled ``New Subsidy 
Allegations,'' which is on file in the CRU.
    Also on October 9, 2001, we issued countervailing duty (``CVD'') 
questionnaires to the Government of Germany (``GOG'') and the 
producers/exporters of the subject merchandise. We issued a CVD 
questionnaire to the European Commission (``EC'') on October 19, 2001.
    On October 9, we received a request from the petitioners to amend 
the scope of this investigation to exclude certain tire rod. The 
petitioners submitted further clarification with respect to their scope 
amendment request on November 28, 2001. Also on November 28, 2001, the 
five largest U.S. tire manufacturers and the industry trade 
association, the Rubber Manufacturers Association (``the tire 
manufacturers''), submitted comments on the proposed exclusion. On 
January 21, 2002, we received comments on the proposed exclusion of 
tire cord from Tokusen U.S.A., Inc., a manufacturer of steel cord for 
steel belted radial tires. Finally, the tire manufacturers filed a 
letter with the Department on January 28, 2002, affirming the position 
they had taken in their November 28, 2001, submission. See ``Scope 
Comments'' section below.
    On October 18, 2001, the petitioners filed a letter raising several 
concerns with respect to the Department's initiation of this 
investigation and the concurrent CVD investigations of wire rod 
producers in Brazil, Canada, and Trinidad and Tobago. On the same day, 
the petitioners also filed a separate submission objecting to the 
Department's decision not to investigate certain subsidy programs 
alleged specifically for Germany. The Department addressed the 
petitioners' concerns in a December 4, 2001, memorandum to Richard W. 
Moreland entitled ``Petitioners' Objections to Department's Initiation 
Determinations,'' which is on file in the CRU.
    On November 6, 2001, we postponed the preliminary determination in 
this investigation until February 1, 2002, upon request of the 
petitioners. See Carbon and Certain Alloy Steel Wire Rod From Brazil, 
Canada, Germany, Trinidad and Tobago, and Turkey: Postponement of 
Preliminary Determinations of Countervailing Duty Investigations, 66 FR 
57036 (November 14, 2001).
    The GOG and Saarstahl submitted their responses to the Department's 
questionnaire on November 15 and November 21, 2001, respectively. The 
EC responded to our questionnaire on November 26, 2001. IWHG filed its 
response on November 29, 2001, and on the same date, we also received a 
response from Ispat Hamburger Stahlwerke GmbH (``IHSW''), a German 
producer of the subject merchandise affiliated with IWHG (see ``Cross-
ownership'' section below). The petitioners submitted comments on all 
questionnaire responses, except the EC's, on December 21, 2001. The 
Department issued supplemental questionnaires to the GOG, the 
responding companies, and the EC between December 19, 2001, and January 
23, 2002, and received responses to these questionnaires between 
January 11 and 25, 2002.
    On December 5, 2001, the petitioners filed a critical circumstances 
allegation with respect to Brazil, Germany, and Turkey. In a letter 
filed on December 21, 2001, the petitioners extended this allegation to 
include Trinidad and Tobago. See ``Critical Circumstances'' section 
below.
    On December 21, 2001, and January 18, 2002, the petitioners claimed 
that IHSW received a countervailable subsidy in conjunction with the 
1995 change in ownership. The petitioners' description of the subsidy 
arising from

[[Page 5992]]

the change in ownership is proprietary and is further addressed in a 
proprietary February 1, 2002, memorandum to the file entitled 
``Allegation of Additional Subsidies to IHSW in Conjunction with 1995 
Change in Ownership,'' a public version of which is on file in the CRU.
    In their January 18, 2002, submission the petitioners also raised 
other issues for purposes of the Department's preliminary 
determination. On January 25, 2002, we received a response to the 
petitioners' comments on the preliminary determination from Saarstahl.

Period of Investigation

    The period for which we are measuring subsidies is calendar year 
2000.

Scope of Investigation

    The merchandise covered by this investigation is certain hot-rolled 
products of carbon steel and alloy steel, in coils, of approximately 
round cross section, 5.00 mm or more, but less than 19.0 mm, in solid 
cross-sectional diameter.
    Specifically excluded are steel products possessing the above-noted 
physical characteristics and meeting the Harmonized Tariff Schedule of 
the United States (``HTSUS'') definitions for (a) stainless steel; (b) 
tool steel; (c) high nickel steel; (d) ball bearing steel; and (e) 
concrete reinforcing bars and rods. Also excluded are (f) free 
machining steel products (i.e., products that contain by weight one or 
more of the following elements: 0.03 percent or more of lead, 0.05 
percent or more of bismuth, 0.08 percent or more of sulfur, more than 
0.04 percent of phosphorus, more than 0.05 percent of selenium, or more 
than 0.01 percent of tellurium). All products meeting the physical 
description of subject merchandise that are not specifically excluded 
are included in this scope.
    The products under investigation are currently classifiable under 
subheadings 7213.91.3010, 7213.91.3090, 7213.91.4510, 7213.91.4590, 
7213.91.6010, 7213.91.6090, 7213.99.0031, 7213.99.0038, 7213.99.0090, 
7227.20.0010, 7227.20.0090, 7227.90.6051 and 7227.90.6058 of the HTSUS. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the scope of these investigations 
is dispositive.

Scope Comments

    In the Initiation Notice, we invited comments on the scope of this 
proceeding. As noted above, on October 9, 2001, we received a request 
from the petitioners to amend the scope of this investigation and the 
companion CVD and AD wire rod investigations. Specifically, the 
petitioners requested that the scope be amended to exclude high carbon, 
high tensile 1080 grade tire cord and tire bead quality wire rod 
actually used in the production of tire cord and bead, as defined by 
specific dimensional characteristics and specifications.
    On November 28, 2001, the petitioners further clarified and 
modified their October 9 request. The petitioners suggested the 
following five modifications and clarifications: (1) Expand the end-use 
language of the scope exclusion request to exclude 1080 grade tire cord 
and tire bead quality that is used in the production of tire cord, tire 
bead, and rubber reinforcement applications; (2) clarify that the scope 
exclusion requires a carbon segregation per heat average of 3.0 or 
better to comport with recognized industry standards; (3) replace the 
surface quality requirement for tire cord and tire bead with simplified 
language specifying maximum surface defect length; (4) modify the 
maximum soluble aluminum from 0.03 to 0.01 for tire bead wire rod; and 
(5) reduce the maximum residual element requirements to 0.15 percent 
from 0.18 percent for both tire bead and tire cord wire rod and add an 
exception for chromium-added tire bead wire rod to allow a residual of 
0.10 percent for copper and nickel and a chromium content of 0.24 to 
0.30 percent.
    Also on November 28, 2001, the tire manufacturers submitted a 
letter to the Department in response to petitioners' October 9, 2001, 
submission regarding the scope exclusion. In this letter, the tire 
manufacturers supported the petitioners' request to exclude certain 
1080 grade tire cord and tire bead wire rod used in the production of 
tire cord and bead.
    Additionally, the tire manufacturers requested that the Department 
clarify whether 1090 grade was covered by the petitioners' exclusion 
request. The tire manufacturers further requested an exclusion from the 
scope of this investigation for 1070 grade wire rod and related grades 
(0.69 percent or more of carbon) because, according to the tire 
manufacturers, domestic production cannot meet the requirements of the 
tire industry.
    The tire manufacturers stated their opposition to defining scope 
exclusions on the basis of actual end use of the product. Instead, the 
tire manufacturers support excluding the product if it is imported 
pursuant to a purchase order from a tire manufacturer or a tire cord 
wire manufacturer in the United States. Finally, the tire manufacturers 
urged the Department to adopt the following specifications to define 
the excluded product: A maximum nitrogen content of 0.0008 percent for 
tire cord and 0.0004 percent for tire bead; maximum weight for copper, 
nickel, and chromium, in the aggregate, of 0.0005 percent for both 
types of wire rod. In their view, there should be no additional 
specifications and tests, as proposed by the petitioners.
    On January 28, 2002, the tire manufacturers responded to the 
petitioners' November 28, 2001 letter. The tire manufacturers continue 
to have three major concerns about the product exclusion requested by 
the petitioners. First, the tire manufacturers urge that 1070 grade 
tire cord quality wire rod be excluded (as it was in the 1999 Section 
201 investigation). Second, they continue to object to defining the 
exclusion by actual end use. Finally, they reiterate their earlier 
position on the chemical specifications for the excluded product.
    On January 21, 2002, the Department received a submission from 
Tokusen U.S.A., Inc. (``Tokusen''), a manufacturer of steel cord used 
in steel belted radial tires, in which Tokusen urged the Department to 
exclude tire cord quality wire rod, including 1070 carbon grade, from 
the scope of this investigation. Tokusen stated that it must have 
dependable sources of tire cord quality rod in order to produce the 
kind of tire cord that U.S. tire manufacturers require. According to 
Tokusen, no U.S. tire manufacturer produces 1080 grade tire cord wire 
rod and only one manufacturer produces 1070 grade tire cord wire rod. 
Tokusen claimed that it would suffer severe damage if the Department 
were to impose import restrictions in the form of countervailing duties 
on foreign-produced tire cord wire rod.
    At this point in the proceeding, we recognize that the interested 
parties have both advocated excluding certain tire rod and tire core 
quality wire rod. However, the Department continues to examine this 
issue. Therefore, for this preliminary determination we have not 
amended the scope, and this preliminary determination applies to the 
scope as described in the Initiation Notice.
    We plan to reach a decision as early as possible in the proceeding. 
Interested parties will be advised of our intentions prior to the final 
determination and will have the opportunity to comment.

Injury Test

    Because Germany is a ``Subsidies Agreement Country'' within the

[[Page 5993]]

meaning of section 701(b) of the Act, the International Trade 
Commission (``ITC'') is required to determine whether imports of the 
subject merchandise from Germany materially injure, or threaten 
material injury to, a U.S. industry. See section 701(a)(2) of the Act. 
On October 15, 2001, the ITC transmitted to the Department its 
preliminary determination that there is a reasonable indication that an 
industry in the United States is being materially injured by reason of 
imports from Germany of the subject merchandise. See Carbon and Certain 
Alloy Steel Wire Rod From Brazil, Canada, Egypt, Germany, Indonesia, 
Mexico, Moldova, South Africa, Trinidad and Tobago, Turkey, Ukraine, 
and Venezuela, 66 FR 54539 (October 29, 2001).

Critical Circumstances

    On December 5, 2001 the petitioners alleged that critical 
circumstances exist with respect to imports of subject merchandise 
from, inter alia, Germany. The petitioners provided the Department with 
additional submissions supporting those allegations on December 19, 27, 
and 28, 2001, and on January 25, 2002. In accordance with 19 CFR 
351.206(c)(2)(i), because the petitioners submitted a critical 
circumstances allegation more than 20 days before the scheduled date of 
the preliminary determination, the Department must issue a preliminary 
critical circumstances determination not later than the date of the 
preliminary determination.
    Section 703(e)(1) of the Act provides that critical circumstances 
exist if the Department determines that there is a reasonable basis to 
believe or suspect that (1) an alleged subsidy is inconsistent with the 
Subsidies Agreement \1\, and (2) there have been massive imports of the 
subject merchandise over a relatively short period of time. In past 
critical circumstances determinations, the Department has only found 
``prohibited subsidies'' under Part II of the Subsidies Agreement to be 
inconsistent with the Subsidies Agreement. See Notice of Preliminary 
Affirmative Countervailing Duty Determination, Preliminary Affirmative 
Critical Circumstances Determination, and Alignment of Final 
Countervailing Duty Determination: Certain Softwood Lumber Products 
from Canada, 66 FR 43186, 43189 (August 17, 2001). In the instant 
investigation, the petitioners argue that the class of subsidies found 
to be inconsistent with the subsidies agreement should be expanded to 
include ``actionable subsidies'' under Part III of the Subsidies 
Agreement.
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    \1\ The term ``Subsidies Agreement'' means the Agreement on 
Subsidies and Countervailing Measures referred to in section 
101(d)(12) of the URAA. (See Sec. 771(8) of the Act).
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    The Department preliminarily determines that critical circumstances 
do not exist with respect to subject merchandise from Germany because 
the petition does not allege that subsidies inconsistent with the 
Subsidies Agreement exist in Germany. Thus, the first requirement of 
Section 703(e)(1) of the Act has not been met. More specifically, the 
petition does not allege any prohibited subsidies (i.e., Part II of the 
Subsidies Agreement). Actionable subsidies, although they may give rise 
to a right to a remedy (e.g., countervailing duties), are not 
inconsistent with the Subsidies Agreement within the meaning of Section 
703(e)(1) of the Act.

Change in Ownership

1. General

    On February 2, 2000, the U.S. Court of Appeals for the Federal 
Circuit (``CAFC'') in Delverde Srl v. United States, 202 F.3d 1360, 
1365 (Fed. Cir. 2000), reh'g en banc denied (June 20, 2000) (``Delverde 
III''), rejected the Department's change-in-ownership methodology as 
explained in the General Issues Appendix of the Final Affirmative 
Countervailing Duty Determination: Certain Steel Products from Austria, 
58 FR 37217, 37225 (July 9, 1993).
    Pursuant to the CAFC ruling, the Department has developed a new 
change-in-ownership methodology following the CAFC's decision in 
Delverde III. This new methodology was first announced in a remand 
determination on December 4, 2000, and was also applied in Grain-
Oriented Electrical Steel from Italy; Final Results of Countervailing 
Duty Administrative Review, 66 FR 2885 (January 12, 2001) and Final 
Affirmative Countervailing Duty Determination: Pure Magnesium from 
Israel, 66 FR 49351 (September 27, 2001). Likewise, we have applied 
this new methodology in analyzing the changes in ownership in this 
preliminary determination.
    The first step under this new methodology is to determine whether 
the legal person (entity) to which the subsidies were given is, in 
fact, distinct from the legal person that produced the subject 
merchandise exported to the United States. If we determine the two 
persons are distinct, we then analyze whether a subsidy has been 
provided to the purchasing entity as a result of the change-in-
ownership transaction. If we find, however, that the original subsidy 
recipient and the current producer/exporter are the same person, then 
that person benefits from the original subsidies, and its exports are 
subject to countervailing duties to offset those subsidies. In other 
words, we will determine that a ``financial contribution'' and a 
``benefit'' have been received by the ``person'' under investigation. 
Assuming that the original subsidy has not been fully amortized under 
the Department's normal allocation methodology as of the POI, the 
Department would then continue to countervail the remaining benefits of 
that subsidy.
    In making the ``person'' determination, where appropriate and 
applicable, we analyze factors such as (1) continuity of general 
business operations, including whether the successor holds itself out 
as the continuation of the previous enterprise, as may be indicated, 
for example, by use of the same name, (2) continuity of production 
facilities, (3) continuity of assets and liabilities, and (4) retention 
of personnel. No single factor will necessarily provide a dispositive 
indication of any change in the entity under analysis. Instead, the 
Department will generally consider the post-sale person to be the same 
person as the pre-sale person if, based on the totality of the factors 
considered, we determine the entity in question can be considered a 
continuous business entity because it was operated in substantially the 
same manner before and after the change in ownership.

2. Saarstahl

    As early as 1978, the Government of Saarland (``GOS'') began 
restructuring the steel companies in the Saarland region. This included 
the restructuring and privatization of Saarstahl Volkingen GmbH 
(``Saarstahl Volkingen''). Saarstahl Volkingen's privatization started 
in 1986. At the time, Saarstahl Volkingen was owned by Arbed Luxembourg 
(``Arbed''), a company owned by the Government of Luxembourg. Due to 
continued unprofitability, shares of Saarstahl Volkingen were offered 
to the GOS. Arbed transferred 76 percent of Saarstahl Volkingen's 
shares to the GOS, making Saarstahl Volkingen a majority state-owned 
company.
    In 1989, the GOS started searching for a new investor for Saarstahl 
Volkingen. Usinor-Sacilor, a company owned by the Government of France 
and parent company of the French steel company Dillinger, expressed 
interest in Saarstahl Volkingen and reached an agreement with the GOS 
and Arbed. Under the

[[Page 5994]]

terms of the agreement, (1) Saarstahl (now renamed Saarstahl AG 
(``Saarstahl'')) and Dillinger became wholly-owned subsidiaries of a 
newly created holding company, DHS--Dillinger Hutte Saarstahl AG 
(``DHS''), (2) Usinor-Sacilor invested in DHS, and (3) the GOS and the 
Government of Germany (``GOG'') would forgive Saarstahl Volkingen's 
debt obligations, also known as Ruckzahlungsverpflichtungen (``RZV''), 
to the regional and federal governments and release DHS from any 
obligation to repay Saarstahl Volkingen's guaranteed loans. At the 
conclusion of these transactions, Saarstahl, including its long 
products division that produces the subject merchandise, was owned by 
DHS, which was owned in turn by Usinor-Sacilor, Arbed, and the GOS.
    Bankruptcy proceedings were initiated against Saarstahl in 1993. In 
an attempt to resolve Saarstahl's financial situation, DHS spun off 100 
percent of Saarstahl to the GOS for one German Mark (``DM''). See Final 
Affirmative Countervailing Duty Determination: Steel Wire Rod from 
Germany, 62 FR 54990 (October 22, 1997) (``1997 Wire Rod''). The 
repurchase of Saarstahl by the GOS was intended to support the 
bankruptcy trustees in their efforts to maintain the core operations of 
Saarstahl and to avoid dissolution of the company. Saarstahl was able 
to continue its operations while the bankruptcy proceeded.
    In December 1997, a plan of reorganization was approved by the 
bankruptcy trustees. This reorganization called for the GOS to transfer 
a portion of its shareholdings in Saarstahl to third parties. The 
recipients of this transfer were: (1) AG der Dillinger Huttenwerke 
(``Dillinger''), formerly part of DHS; (2) the Kreditanstalt fur 
Wiederaufbau (``KfW''), a bank funded by the German federal and state 
governments, and; (3) Saarstahl Treuhand, a trust established as part 
of the bankruptcy proceeding to hold and sell the remaining interest in 
Saarstahl. After the share transfer, the GOS held approximately 32 
percent of Saarstahl's shares. The remaining 68 percent were divided as 
follows: Saarstahl Treuhand--28.1 percent; Dillinger--19.9 percent; and 
KfW--20 percent.
    In December 1998, subsequent to the 1997 reorganization, KfW's 
shares were transferred to the Saarstahl Treuhand. In October 1999, the 
GOS sold 5.2 percent of Saarstahl's shares to Dillinger.
    Regarding the 1997 change in ownership, the petitioners argue in 
their January 18, 2002, preliminary determination comments, that the 
new shareholders in Saarstahl should not be considered private 
entities. They argue that Saarstahl Treuhand is a trust that was set up 
and controlled by the GOG because no private investor could be found 
for these shares. They argue further that because of the GOS's 
ownership position in DHS and Dillinger, Dillinger is government-
controlled. Finally, they argue that, because the KfW is a development 
bank of the GOG, shares assigned to it represent no ultimate change in 
the ownership of Saarstahl.
    Consequently, in the petitioners' view, the 1997 transaction was 
not an arm's-length sale, but a continuing effort by the GOS to benefit 
Saarstahl. Furthermore, the 1997 reorganization and the 1999 sale of 
shares to Dillinger by the GOS were merely exchanges of shares between 
governmental entities. Thus, even after the sale, the GOS continued to 
control the company's activities, and there was no effect on 
Saarstahl's operations or its identity.
    For these reasons, the petitioners argue that none of the three 
parties' purchase price can constitute repayment of Saarstahl's 
previously bestowed subsidies. In addition, the petitioners urge the 
Department to treat all of the purchase price as a grant to Saarstahl 
because none of the parties to the privatization made its purchase on 
terms consistent with those of a private investor.
    Saarstahl rebuts the petitioners' contention that the buyers of 
Saarstahl in 1997 were not private actors. Saarstahl argues that 
Saarstahl Treuhand is a private trust established under German law for 
the benefit of bankruptcy creditors and that it is not in any way 
controlled by the government. Regarding Dillinger, Saarstahl states 
that approximately 5 percent of Dillinger's shares are held by 
individual investors and the remaining 95 percent by DHS. They then 
explain that the majority of DHS is owned by Usinor-Sacilor and Arbed, 
which are now private companies. Regarding KfW, Saarstahl argues that 
the administrative record of this proceeding clearly indicates that the 
development bank's decision to invest in Saarstahl was made on terms 
consistent with commercial considerations and, on this basis, its 
payment should be included as part of the purchase price. Thus, 
Saarstahl argues that since all three parties made their decision to 
invest in Saarstahl independent of the GOG and the GOS, the Department 
should determine that 100 percent of the purchase price constitutes 
repayment of Saarstahl's previously bestowed subsidies.
    For the purposes of this preliminary determination, we are not 
treating the 1997 reorganization (or the subsequent share transfers) as 
a change in ownership because we do not view two of the new owners, KfW 
and Saarstahl Treuhand, as private entities. As noted above, KfW is a 
government-owned bank. Saarstahl Treuhand appears to have been created 
simply to hold Saarstahl's stock, including not only the shares it 
purchased in 1997, but also the shares it received from KfW in 1998. 
Although Saarstahl has stated that Saarstahl Treuhand is not controlled 
by the government and that Saarstahl's creditors are the beneficiaries 
of the trust, there is no indication that the money paid by Saarstahl 
Treuhand for the shares it purchased came from private sources. Also, 
the shares it received in 1998 were ``transferred'' from KfW, in 
contrast to the 1999 transaction between the GOS and Dillinger, where 
Dillinger ``acquired'' the shares.
    Under Department practice regarding privatizations, sales ``must 
involve unrelated parties, one of which must be privately-owned.'' (See 
General Issues Appendix, ``Types of Restructuring `Transactions' and 
the Allocation of Previously Received Subsidies'' (58 FR 37266) (July 
9, 1993).) Given that only 25 percent of Saarstahl has been sold to a 
private party, Dillinger, we do not conclude from the evidence that we 
should conduct our ``person'' analysis with respect to the 1997 and 
subsequent transactions.
    Our analysis of the subsidies bestowed through the 1997 
reorganization is discussed below under ``Programs Preliminarily 
Determined to be Countervailable.''

3. IHSW

    IHSW was created in 1995 through a restructuring and change in 
ownership of its predecessor company, the privately owned Hamburger 
Stahlwerke (``HSW''). Prior to this transaction, there had been at 
least one major restructuring and change in ownership of HSW since the 
company was formed in the 1960s. In a 1984 restructuring, the 
Hamburgische Landesbank (``HLB'') (a bank owned by the Government of 
the Free and Hanseatic City of Hamburg (``GOH'')) provided HSW with a 
credit line in the amount of DM 130 million, which subsequently was 
raised to DM 174 million. A loan guarantee provided by the GOH covered 
up to 60 percent of the credit line and was later extended to cover 100 
percent of the credit. As part of the 1984 restructuring, an agreement 
was made with HLB that any sale or transfer of shares in HSW, as well 
as any liquidation of HSW, was subject to HLB's approval.

[[Page 5995]]

    Due to a downturn in the steel market, HSW's financial situation 
was so precarious in 1993-94 that the company either had to be 
liquidated, which would have resulted in a huge loss for HLB, its main 
creditor, or an investor who would buy HSW had to be found. Based upon 
the conclusions and recommendations in a January 1994 report from the 
consulting firm McKinsey & Co., it was decided to sell HSW. After 
negotiations held in 1993 and 1994 with investors from Germany, Italy, 
and the United Kingdom failed, the GOH commissioned the investment bank 
M.M. Warburg (``Warburg'') to obtain bids for HSW and to negotiate a 
sales contract. Warburg issued a prospectus in August 1994 to start the 
bidding process, which was open to all bidders. Warburg selected a bid 
submitted by Venuda Investments B.V. (``Venuda''), a company in the 
Ispat group, as the winning bid. The Department has no further 
information about the bidding process or any of the competing bids.
    In an agreement dated December 27, 1994, Venuda bought all the 
shares in HSW from its former owner, a private individual, for 10 
million DM. At the same time, Venuda took over HSW's outstanding debt 
to HLB in the amount of DM 154.1 million. Venuda paid DM 60 million to 
HLB for the debt and took the bank's place as HSW's main creditor. The 
DM 60 million amount was calculated according to a formula based on the 
value of HSW's net current assets on December 31, 1994.
    After Venuda's purchase of HSW's shares and debt, it formed a new 
company called Ispat Hamburger Stahlwerke GmbH (i.e., the respondent 
IHSW) which was incorporated on January 13, 1995, and assumed the 
operative business of HSW a month later. The remainder of the ``old 
HSW'' was renamed DSG Dradenauer Stahlgesellschaft GmbH (``DSG''), a 
non-producing company that leased, and later sold, its productive 
assets to IHSW. The debt that Venuda had taken over from HLB stayed on 
DSG's books. According to the questionnaire response, the debt was 
eventually repaid by DSG with the revenues earned from the lease and 
sale of its productive assets.
    Venuda eventually changed its name to Ispat International Holdings 
B.V., which on December 31, 1998, sold its shares in IHSW to another 
holding company in the Ispat Group, Ispat Germany GmbH (``Ispat 
Germany''). In the POI, Ispat Germany was the sole shareholder of IHSW.
    As noted above, in making the ``person'' determination, we 
primarily analyze the following factors while holding that no single 
factor will necessarily provide a dispositive indication of any change 
in the entity under analysis:
    (1) Continuity of general business operations:
    Apart from certain changes in the company's operations such as 
using the services of the Ispat Group's shipping company and selling 
steel in the United States through Ispat America, IHSW continued the 
general business operations of HSW. Even the name of the company 
remained largely the same except for the addition of the word ``Ispat'' 
to indicate that the steel plant was now part of the Ispat Group. 
Indeed, IHSW's product brochure refers to the company as having existed 
for more than 25 years, which obviously includes the time before it was 
purchased by Venuda.
    (2) Continuity of production facilities:
    IHSW used the same production facilities to manufacture the same 
products as HSW.
    (3) Continuity of assets and liabilities:
    As described above, IHSW took over HSW's productive assets, first 
through a leasing arrangement and later by purchasing them. Thus, there 
was continuity of assets. Apart from the forgiveness of HSW's DM 154.1 
million debt to HLB (see ``Analysis of Program'' section below), the 
record is unclear on what happened to the remainder of HSW's 
liabilities.
    (4) Retention of personnel:
    New management personnel was brought into IHSW from the Ispat Group 
after the change in ownership. Also the composition of the board of 
directors changed in its entirety as a result of the sale. Regarding 
the general labor force, IHSW reduced the number of workers by over 100 
individuals in the first five years after the change in ownership. 
However, under the sales contract, IHSW was obliged to maintain a 
minimum workforce of 630 people through 1999.
    Based on our analysis of the four factors listed above, we 
preliminarily determine that IHSW for all intents and purposes was the 
same ``person'' as HSW. Therefore, any non-recurring subsidies obtained 
by HSW will continue to benefit IHSW after the change in ownership.

Subsidies Valuation Information

Allocation Period

    Pursuant to 19 CFR 351.524(b), non-recurring subsidies are 
allocated over a period corresponding to the average useful life 
(``AUL'') of the renewable physical assets used to produce the subject 
merchandise. Section 351.524(d)(2) of the regulations creates a 
rebuttable presumption that the AUL will be taken from the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System (``the IRS Tables''). For wire rod, the IRS Tables prescribe an 
AUL of 15 years.
    In order to rebut the presumption in favor of the IRS tables, the 
challenging party must show that the IRS tables do not reasonably 
reflect the company-specific AUL or the country-wide AUL for the 
industry in question, and that the difference between the company-
specific or country-wide AUL and the IRS tables is significant. (See 19 
CFR 351.524(d)(2)(i).) For this difference to be considered 
significant, it must be one year or greater. (See 19 CFR 
351.524(d)(2)(ii).)
    In this proceeding, Saarstahl and IHSW have pointed to the fact 
that in 1997 Wire Rod, the Department used a country-wide AUL period of 
11 years for Saarstahl and a company-specific AUL period of 10 years 
for IHSW. These companies have urged the Department to use those 
previously-calculated AULs in this proceeding to allocate the benefits 
that were found countervailable in 1997 Wire Rod.
    We preliminarily determine that for both Saarstahl and IHSW, the 
previously calculated AULs rebut the presumption in favor using the 
period from the IRS tables. The AULs are country-wide for the industry 
in question (Saarstahl) or company-specific (IHSW), and they differ 
significantly from the 15 year-period from the IRS tables. As no new 
evidence has been presented to indicate that circumstances with respect 
to the initial AUL decision have changed, use of these periods is 
consistent with the Department's practice of using the same allocation 
period for a given subsidy when that subsidy has been allocated in a 
previous proceeding. See, e.g., Final Affirmative Countervailing Duty 
Determination: Stainless Steel Sheet and Strip from France, 64 FR 
30774, 30778 (June 8, 1999); Final Affirmative Countervailing Duty 
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from 
France, 64 FR 73277, 73280 (December 29, 1999); and Final Affirmative 
Countervailing Duty Determination: Stainless Steel Bar From Italy, 67 
FR 3163 (January 23, 2002) and the accompanying January 15, 2002 Issues 
and Decision Memorandum which is on file in the CRU.
    In the case of IHSW, we are countervailing the same non-recurring 
subsidy in this investigation as in 1997 Wire Rod, i.e., the 1994 debt 
forgiveness. We are, therefore, continuing to use the

[[Page 5996]]

company-specific 10-year allocation period calculated for IHSW in that 
proceeding.
    Regarding Saarstahl, the two non-recurring subsidies that were 
countervailed in 1997 Wire Rod were received in 1989. Using the 11-year 
AUL period, the benefits of those subsidies expired in 1999, one year 
prior to the POI in this investigation. Therefore, we preliminarily 
find no benefit in the POI from the 1989 subsidies.
    For subsidies to Saarstahl that were not countervailed in 1997 Wire 
Rod, i.e., assistance given in connection with Saarstahl's 1997 
reorganization and the Article 54 ECSC loan (see ``Analysis of 
Programs'' section below), we preliminarily determine that Saarstahl 
has rebutted the presumption in favor of the IRS tables and that the 
allocation period should be 11 years. To rebut the presumption, 
Saarstahl has presented evidence relating to German tax authorities' 
depreciation schedule for assets used by the German steel industry, as 
in 1997 Wire Rod.

Attribution

    19 CFR 351.525(a)(6) directs that the Department will attribute 
subsidies received by certain affiliated companies to the combined 
sales of those companies. Based on our review of the responses, we find 
that ``cross-ownership'' exists with respect to certain companies, as 
described below. We have attributed subsidies received by these 
companies accordingly.
    1. Saarstahl:
    Saarstahl has stated in its questionnaire response that there is 
cross-ownership within the meaning of 19 CFR 351.525(b)(6)(vi) between 
Saarstahl and Saarstahl Burdach. Saarstahl Burdach is a separately 
incorporated subsidiary of Saarstahl which uses Saarstahl employees and 
has only limited capital. The subject merchandise is produced by 
Saarstahl Burdach. Thus, because Saarstahl Burdach is a wholly-owned 
subsidiary of Saarstahl and because Saarstahl Burdach produces the 
subject merchandise, we preliminarily find that cross-ownership exists. 
Accordingly, pursuant to Department regulations, any subsidies received 
by Saarstahl and Saarstahl Burdach will be attributed to the combined 
sales of Saarstahl Burdach. See 19 CFR 351.525(b)(6)(iii).
    2. IHSW, IWHG, and ISRG:
    According to the questionnaire responses, IHSW and IWHG are wholly-
owned subsidiaries of Ispat Germany, a non-producing holding company 
within the larger Ispat Group. Both IHSW and IWHG produce and export 
the subject merchandise. In addition, Ispat Germany has a third 
subsidiary, Ispat Stahlwerk Ruhrort GmbH (``ISRG'') which sells input 
products to IWHG that are primarily dedicated to the production of the 
subject merchandise. On this basis, we preliminarily find that cross-
ownership exists between IWHG, IHSW, and ISRG under 19 CFR 
351.525(b)(6)(iv) and (vi). Accordingly, we have attributed the 
subsidies received by IWHG, IHSW, and ISRG to the combined sales of 
these three companies, net of intercompany sales.

Creditworthiness

    The examination of creditworthiness is an attempt to determine if 
the company in question could obtain long-term financing from 
conventional commercial sources. See 19 CFR 351.505(a)(4). According to 
19 CFR 351.505(a)(4)(i), the Department will generally consider a firm 
to be uncreditworthy if, 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. In making this 
determination, according to 19 CFR 351.505(a)(4)(i)(A)-(D), the 
Department normally examines the following four types of information: 
(1) The receipt by the firm of comparable commercial long-term loans; 
(2) present and past indicators of the firm's financial health; (3) 
present and past indicators of the firm's ability to meet its costs and 
fixed financial obligations with its cash flow; and (4) evidence of the 
firm's future financial position. If a firm has taken out long-term 
loans from commercial sources, this will normally be dispositive of the 
firm's creditworthiness. However, if the firm is government-owned, the 
existence of commercial borrowings is not dispositive of the firm's 
creditworthiness. This is because, in the Department's view, in the 
case of a government-owned firm, a bank is likely to consider that the 
government will repay the loan in the event of a default. See 
Countervailing Duties; Final Rule, 63 FR 65348, 65367 (November 28, 
1998).
    In 1997 Wire Rod, we determined that IHSW was uncreditworthy in 
1994. As discussed in the Initiation Notice, in this investigation, 
petitioners limit their uncreditworthy allegation to 1994, we are 
therefore limiting our creditworthiness investigation of IHSW to the 
same period. No new information or evidence of changed circumstances 
has been presented to warrant a reconsideration of our previous 
finding. We, therefore, preliminarily determine that IHSW was 
uncreditworthy in 1994. Consequently, as noted in the ``Discount and 
Benchmark Rates'' section below, we have included an uncreditworthiness 
premium in the benchmark interest rate for the non-recurring subsidy 
received by IHSW in 1994.
    Regarding Saarstahl, we stated in the Initiation Notice that we 
would examine Saarstahl's creditworthiness in 1989 and in any years 
during the time period 1993 through 1999 in which the company received 
non-recurring subsidies, loans, or loan guarantees. As explained in the 
``Allocation Period'' section above, we have preliminarily determined 
that the appropriate allocation period for Saarstahl is 11 years and we 
are, therefore, not countervailing any subsidies received by Saarstahl 
prior to 1990. Consequently, we have not analyzed Saarstahl's 
creditworthiness in 1989.
    However, with respect to the time period 1993 through 1999, we have 
preliminarily determined that Saarstahl received a long-term loan in 
1996 and a non-recurring subsidy in 1997, as discussed under the 
``Analysis of Programs'' section below. We have, therefore, analyzed 
Saarstahl's creditworthiness in 1996 and 1997.
    To determine Saarstahl's past and present financial health, we 
calculated standard financial ratios from the company's financial 
statements for the 1993-1997 time period because it is the Department's 
standard practice to examine such ratios in the year for which a 
creditworthiness determination is to be made and the three preceding 
years. In addition, we considered other factors such as Saarstahl's 
bankruptcy proceedings that were initiated in 1993, the amount of debt 
that was forgiven in an attempt to sustain Saarstahl's business 
operations and the fact that under all these conditions, the company 
continued to operate at a loss. Based on our review of the above 
factors, we have preliminarily determined that Saarstahl was 
uncreditworthy in both 1996 and 1997. Consequently, as noted in the 
``Discount and Benchmark Rates'' section below, we have included an 
uncreditworthiness premium in the benchmark interest rate for the 
subsidies received by Saarstahl in 1996 and 1997. For further 
discussion, see the February 1, 2002, memorandum to the file entitled 
``Creditworthiness Determination for Saarstahl,'' a public version of 
which is on file in the CRU.

Discount and Benchmark Rates

    All of the allocable, non-recurring subsidies received by IHSW and 
Saarstahl were given in years in which these companies were 
uncreditworthy.

[[Page 5997]]

    In accordance with 19 CFR 351.505(a) and 351.524(c)(3)(i), the 
benchmark and discounts rates for companies considered to be 
uncreditworthy are described in 19 CFR 351.505(a)(3)(iii). To calculate 
this rate, the Department must specify values for four variables: (1) 
The probability of default by an uncreditworthy company; (2) the 
probability of default by a creditworthy company; (3) the long-term 
interest rate for creditworthy borrowers; and (4) the term of the debt.
    For the probability of default by an uncreditworthy company, we 
used the average cumulative default rates for the Caa- to C-rated 
category of companies and for the probability of default by a 
creditworthy company, we used the cumulative default rates for 
investment grade bonds, as shown in Exhibit 28 of ``Historical Default 
Rates of Corporate Bond Issuers, 1920-1997,'' published by Moody's 
Investors Service (February 1998). For the probability of default by a 
creditworthy company, we have used the cumulative default rates for 
investment grade bonds as published in Moody's Investors Service's 
``Statistical Tables of Default Rates and Recovery Rates'' (February 
1998). As the commercial interest rate charged to creditworthy 
borrowers in 1994 and 1996, consistent with 1997 Wire Rod, we used the 
average rate of return on German government bonds in the year of 
approval of each subsidy, plus a spread of 1.75 percent for Saarstahl 
and 1.50 percent for IHSW. As the commercial interest rate charged to 
creditworthy borrowers in 1997, we used the average lending rate on 
long-term fixed-rate loans in Germany. For subsidies countervailed as 
non-recurring grants, we used the respective AUL periods for Saarstahl 
and IHSW as the term of the debt, as these subsidies are being 
allocated over those periods. For Saarstahl's ECSC loan, we used the 
actual term of the loan as the term of the debt.

Analysis of Programs

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

I. Programs Preliminarily Determined To Be Countervailable

    1. ECSC Article 54 Loans to Saarstahl:
    Article 54 of the European Coal and Steel Community (``ECSC'') 
Treaty allows the EC to grant loans to coal and steel companies in 
accordance with Articles 50 and 51 of the Treaty. Loans are granted to 
purchase new equipment and to finance modernization but cannot exceed 
50 percent of the total eligible investment. The EC borrows money on 
international capital markets at what the EC in its questionnaire 
response has described as market interest rates. It then re-lends the 
funds to the companies at a slightly higher interest rate to cover the 
EC's costs. According to the EC's questionnaire response, virtually no 
new loans have been granted since 1997 because of the expiration of the 
ECSC Treaty in July 2002.
    Saarstahl received an Article 54 loan in 1991 which was a 
rescheduling of old Article 54 loans taken by Saarstahl in the 1980s. 
As part of Saarstahl's bankruptcy proceedings (see ``Change in 
ownership'' section above), the 1991 loan was partially repaid in 1995 
while the remaining balance was rescheduled as a new loan in an 
agreement dated December 2, 1996. This rescheduled loan, which was 
outstanding in the POI, has a maturity of 10 years and was provided at 
a fixed interest rate of 5.574 percent.
    We preliminarily determine that Article 54 loans confer a 
countervailable subsidy within the meaning of section 771(5) of the 
Act. They are a direct transfer of funds from the EC providing a 
benefit in the amount of the difference between the benchmark interest 
rate and the interest rate paid by Saarstahl. Also, we have found these 
loans to be specific within the meaning of section 771(5A)(D)(i) of the 
Act because they are limited to firms in the coal and steel industries.
    In accordance with 19 CFR 351.505(c)(2), we calculated the benefit 
for the POI by computing the difference between the payments that 
Saarstahl made on its Article 54 loan during the POI and the payments 
the company would have made on a comparable commercial loan. We divided 
this benefit by the combined sales of Saarstahl and Saarstahl Burdach 
in the POI. On this basis, we preliminarily determine the 
countervailable subsidy from rate from this program to be 0.48 percent 
ad valorem for Saarstahl.
    2. Subsidy Provided in Connection with 1997 Reorganization of 
Saarstahl:
    As described above under the ``Change in Ownership'' section, 
Saarstahl's bankruptcy trustees approved a reorganization plan for 
Saarstahl in 1997. Under that plan, the GOS transferred a portion of 
its shareholdings in Saarstahl to KfW, Saarstahl Treuhand, and 
Dillinger. The new owners, as well as the GOS, agreed to make a payment 
totaling DM 120 million to an escrow account. The share paid by each 
was proportional to its ownership of Saarstahl.
    This payment was used to satisfy the claims of Saarstahl's ordinary 
creditors. These claims arose from debt incurred by Saarstahl prior to 
entering the bankruptcy proceeding in 1993. The total debt outstanding 
was DM 1.2 billion. Therefore, the DM 120 million payment by the 
shareholders represented 10 percent of the amount owed to the 
creditors. The bankruptcy trustees believed that this amount of 
repayment would be necessary in order to obtain the creditors' approval 
for the reorganization. With the reorganization, the remaining debt was 
removed from Saarstahl's books.
    We preliminarily determine that the elimination of Saarstahl's debt 
through the bankruptcy proceeding does not confer a subsidy. Bankruptcy 
protection is available to all types of companies in Germany, and 
government- and privately-owned companies are not treated differently. 
Moreover, there is no indication from the record that Saarstahl 
received preferential or differential treatment, or that any discretion 
in the proceeding was exercised in Saarstahl's favor in terms of the 
amount of debt forgiven. Therefore, we preliminarily find that the debt 
elimination that resulted from the bankruptcy proceeding was not 
specific to Saarstahl.
    However, we preliminarily determine that the portion of the DM 120 
million debt that was paid through contributions by the GOS, Saarland 
Treuhand, and KfW is a countervailable subsidy. Although Saarstahl 
Treuhand and KfW received shares in return for their contribution, we 
do not view the transaction as a sale of shares because these entities 
are not private companies. (See ``Change in Ownership'' section above.) 
Instead, we view the cash paid by these companies as a direct payment 
to Saarstahl's creditors to satisfy Saarstahl's debt obligations. 
Regarding the GOS's contribution, the record indicates that it took the 
form of simply canceling debt that was owed to it by Saarstahl, i.e., 
debt forgiveness. Therefore, the benefit to Saarstahl was the amount of 
debt that was paid or forgiven by the KfW, Saarstahl Treuhand, and the 
GOS. These payments are specific because there is no information to 
indicate that these entities made payments to any companies (or their 
creditors) other than Saarstahl.
    To calculate the benefit, we allocated these amounts over 11 years 
using the uncreditworthy discount rate. We divided the benefit 
attributable to the POI by the combined sales of Saarstahl and 
Saarstahl Burdach in the same period. On this basis, we preliminarily

[[Page 5998]]

determine the countervailable subsidy rate for this program to be 1.12 
percent ad valorem.
    We note that the Department also included in its investigation 
certain tax write-offs that allegedly were received by Saarstahl as 
part its reorganization process. Saarstahl has claimed that the tax 
write-offs it received were two types. First, Dillinger sought 
reimbursement for VAT liabilities which it paid on behalf of the 
Saarstahl corporate group. The VAT had already been received by the GOG 
and Dillinger was simply requesting to be reimbursed by Saarstahl 
through the bankruptcy proceedings. Second, VAT liabilities associated 
with trade accounts payable were discharged when the accounts payable 
were discharged under the bankruptcy proceeding.
    Because these liabilities were addressed under the bankruptcy 
proceedings in the same manner as claims by other creditors of 
Saarstahl, we find that the tax write-offs were not specific to 
Saarstahl under section 771(5A)(D)(i) of the Act. On this basis, we 
preliminarily determine that the tax write-offs did not convey a 
countervailable subsidy to Saarstahl.
    3. Forgiveness of IHSW's Debt in 1994:
    As described in the ``Change in Ownership'' section above, Venuda 
took over HSW's DM 154.1 million debt to HLB in connection with 
Venuda's purchase of HSW. Venuda paid HLB approximately DM 60 million 
for the debt and took the bank's place as HSW's main creditor. The DM 
154.1 million debt was left on the books of ``old HSW,'' which was 
later renamed DSG (see ``Change in Ownership'' section above). Thus, 
the subject merchandise producer under investigation, IHSW, was not 
burdened by the DM 154.1 million debt owed by its predecessor company, 
HSW.
    In 1997 Wire Rod, we found that the DM 154.1 million debt owed by 
HSW to HLB was forgiven. In that determination, we stated that while 
the Department will not consider a loan provided by a government-owned 
bank to be a loan provided by the government per se, the actions taken 
by the GOH during the period 1984 through 1994 regarding the provision 
of the credit line clearly demonstrated that HLB was acting on behalf 
of the GOH in this instance. In this investigation we have further 
reviewed the record, which includes the prospectus issued by Warburg in 
connection with the sale of HSW. According to the prospectus, HSW was 
financed through several loans extended by HLB, partly within the 
framework of the GOH's business promotion program. It further states 
that HLB raised HSW's line of credit upon instructions from the GOH. 
Thus, there is further evidence that HLB acted on behalf of the GOH.
    In 1997 Wire Rod, we found that the debt forgiveness constituted a 
financial contribution in the form of a direct transfer of funds from 
the GOH, providing a benefit in the amount of DM 154.1 million received 
by IHSW in 1994. We also analyzed whether the program was specific 
within the meaning of section 771(5)(A) of the Act. Since the debt 
forgiveness was provided to only one company, HSW, we determined that 
it was limited to a specific enterprise in accordance with section 
771(5A)(D)(i) of the Act. No new information or evidence of changed 
circumstances has been presented in this investigation to warrant a 
reconsideration of our previous findings. We, therefore, continue to 
find that the debt forgiveness provided a countervailable subsidy 
within the meaning of section 771(5) of the Act.
    In accordance with 19 CFR 351.508(c), we have treated the debt 
forgiveness as a non-recurring subsidy. Because the same subsidy was 
allocated over time in 1997 Wire Rod, we did not undertake the 0.5 
percent test described in 19 CFR 351.524(b)(2) in this investigation. 
To calculate the net subsidy rate from this program, we used our 
standard grant allocation methodology as described in 19 CFR 
351.524(d)(1). We divided the benefit allocated to the POI by the 
combined total sales of IHSW, IWHG, and ISRG, net of intercompany sales 
(see ``Cross-ownership'' section above). On this basis, we 
preliminarily determine the countervailable subsidy rate for this 
program to be 2.49 percent ad valorem for IHSW, IWHG, and ISRG.
    4. ECSC Article 56 Worker Readaptation Aid to ISRG:
    Under Article 56 of the ECSC Treaty, persons employed in the coal 
and steel industries who lose their jobs due to restructuring may 
receive readaptation aid for social adjustment. Payments from the EC 
are conditional upon an at least equivalent contribution from the 
government of the country in which the affected industry is located.
    According to the EC's response, Article 56 worker assistance 
disbursed by the EC is funded from the ECSC's operational budget. The 
Department has previously found that because the ECSC's operational 
budget is funded by levies on coal and steel companies, the portion of 
the aid financed by the EC is not countervailable. See, e.g., 1997 Wire 
Rod, 62 FR at 54993 and Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from Germany, 58 FR 37315, 
37320-21 (July 9, 1993) (``Certain Steel from Germany'').
    Regarding the portion of the assistance that is financed by the 
national government, we have in two previous countervailing duty 
investigations of the German steel industry determined that only half 
of the amount paid by the GOG constitutes a countervailable subsidy if 
a social plan is in effect for the recipient company (see Certain Steel 
from Germany, 58 FR at 37321 and 1997 Wire Rod, 62 FR at 54993).
    ISRG received assistance under this program in the POI. However, 
there is no information on the record as to whether ISRG had a social 
plan in place when it received the Article 56 readaptation aid. 
Therefore, we determine preliminarily that the entire portion of the 
grant funded by the GOG (i.e., one half of the total amount received by 
ISRG) conferred a countervailable subsidy within the meaning of section 
771(5) of the Act. The grant is a direct transfer of funds from the 
GOG, providing a benefit in the amount of the aid. Also, we have found 
this grant to be specific within the meaning of section 771(5A)(D)(i) 
of the Act because it is limited to firms in the coal and steel 
industries.
    Worker assistance is a type of subsidy that the Department normally 
treats as recurring grants in accordance with 19 CFR 351.524(c). We, 
therefore, calculated the benefit by dividing half of the amount of the 
grant received by ISRG by the combined total sales of IHSW, IWHG, and 
ISRG, net of intercompany sales (see ``Cross-ownership'' section 
above).
    On this basis, we preliminarily determine the countervailable 
subsidy rate for this program to be 0.04 percent ad valorem.

II. Programs Preliminarily Determined To Be Not Countervailable

1. Research and Development Assistance to Saarstahl
    On August 30, 2000, in accordance with its obligations under the 
European Steel Aid Code, the GOG notified the EC of its intention to 
provide research and development (``R&D'') assistance to Saarstahl for 
a project involving the development of steels for thixoforging. On 
October 18, 2000, the EC approved the GOG's R&D aid to Saarstahl. 
According to a March 21, 2001, report from the EC, the R&D project, 
entitled ``New Materials for Key Technologies of the 21st Century'' 
(``MaTech''), was developed to ``improve materials and steels for 
thixoforging.'' However, the

[[Page 5999]]

R&D grant, which covers the period of April 2001 to March 2004, was not 
disbursed until April 4, 2001, i.e., after the POI.
    However, in the course of our investigation, we discovered evidence 
that Saarstahl had received other R&D grants prior to the POI. Since 
all these grants were smaller than 0.5 percent of the company's total 
sales in the year of approval, we expensed them in the year of receipt. 
See 19 CFR 351.524(b)(2). We plan to obtain additional information at 
verification concerning this finding.
    On this basis, we preliminarily determine that the R&D assistance 
to Saarstahl did not provide a countervailable benefit in the POI.
2. ECSC Article 56 Worker Readaptation Aid to Saarstahl
    In the POI, Saarstahl received Article 56 readaptation aid from the 
EC and the GOG for workers taking early retirement or becoming 
unemployed. As noted above, the EC has stated that Article 56 
assistance paid by the EC originated from the ECSC's operational 
budget. Also, as noted above, the Department has previously found that 
because the ECSC's operational budget is funded by levies on coal and 
steel companies, the portion of the aid financed by the EC is not 
countervailable.
    With respect to the portion of the aid funded by the GOG, Saarstahl 
has stated that the readaptation aid received in the POI was paid to 
the company's workers under the 1993 bankruptcy social plan. In 1997 
Wire Rod, the Department determined that Article 56 assistance received 
under the bankruptcy social plan was not countervailable. See 1997 Wire 
Rod, 62 at 54993. No new information or evidence of changed 
circumstances has been presented to warrant a reconsideration of this 
finding.
    On this basis, we preliminarily determine that the Article 56 
readaptation aid received by Saarstahl in the POI is not 
countervailable.
3. Ecological Tax Scheme
    The purpose of the 1999 ecological tax reform laws is two-fold: (1) 
To reduce energy consumption and environmental pollution, and (2) to 
increase employment in Germany. The laws consist of the Act Introducing 
the Ecological Tax Reform, dated March 24, 1999, and the Act on 
Continuation of the Ecological Tax Reform, dated December 16, 1999. 
These two Acts increased the excise taxes on mineral oil and 
electricity. The revenue generated by these taxes is used to lower non-
wage labor costs, particularly social security contributions. By 
lowering such labor costs, the GOG hopes to create more jobs.
    Companies in the manufacturing, agricultural, and forestry sectors 
can apply for a 20 percent reduction of the tax rate if they pay more 
than DM 1,000 in excise taxes on electricity and mineral oils (except 
fuels for motor vehicles). Companies created before January 1, 1998, 
that are particularly affected by the higher energy taxes may under 
certain circumstances receive an additional reduction of these taxes.
    The GOG has stated that in the POI, the total value of the tax 
reductions on electricity and mineral oils was DM 4.4 billion. Around 
100,000 companies used the basic level of the program while another 
2,500 companies received the additional tax reduction.
    The documentation submitted by the GOG shows that all industries in 
the manufacturing, agricultural, and forestry sectors with a tax 
liability of over DM 1,000 could use this tax program. There is no 
indication that the tax reductions are directed to a specific industry 
or enterprise, or to a specific group of industries or enterprises. 
Thus, we preliminarily determine that this tax program is not de jure 
specific.
    Regarding actual use of the program, the GOG has stated that it 
does not have any statistics showing the number of enterprises in 
individual sectors or geographical regions that used the program. The 
GOG has, however, stated that there were a total of 37 steel companies 
in Germany in the POI. Because of the contrast between the relatively 
small number of steel companies compared to the very large number of 
users of the tax program and the total size of the tax reductions (DM 
4.4 billion), we preliminarily conclude that this program is not de 
facto specific to an industry or enterprise, or to a specific group of 
industries or enterprises.
    On this basis, we preliminarily determine that the ecological tax 
scheme is not countervailable because it does not meet the specificity 
criteria in section 771(5A)(D) of the Act.
4. Subsidy to Saarstahl Resulting From Delaying the Repeal of a Tax 
Exemption Under the 1997 Act on the Continuation of Company Tax Reform
    This program is not listed in the Initiation Notice because the 
Department initiated an investigation of the program in an October 9, 
2001 memorandum to Richard W. Moreland entitled ``New Subsidy 
Allegations,'' which is on file in the CRU.
    Before the 1997 corporate tax reform, German tax law, which is 
universally applicable, exempted bankrupt companies from paying taxes 
on gains resulting from debt forgiveness that had been provided to 
these companies as part of a restructuring plan. In October 1997, the 
German parliament passed a comprehensive corporate tax reform under 
which such tax exemptions would be repealed. The new corporate tax law 
was originally planned to go into effect retroactively from January 1, 
1997.
    According to the GOG, there were numerous protests against the 
retroactive effect of the repeal of the tax exemption, as well as 
against certain other measures in the tax act, because the retroactive 
nature of these provisions did not give bankrupt companies a chance to 
adapt their restructuring plans to the new law. In light of these 
protests, it was decided to delay the repeal of the tax exemption, as 
well as certain other provisions of the new tax act, until January 1, 
1998.
    We find no record evidence for the petitioners' claim that the 
repeal was postponed specifically to help Saarstahl, which had declared 
bankruptcy in 1993. The repeal simply meant that all bankrupt companies 
in Germany could continue to follow the old tax law for another year 
until the repeal went into effect on January 1, 1998. Moreover, the GOG 
has indicated that a large number of protests against the retroactive 
nature of the repeal were received by the finance ministries in several 
of the German Lander (states) as well as by the Federal Ministry of 
Finance. Thus, it appears that many bankrupt companies other than 
Saarstahl felt that they would be negatively affected by the 
retroactive tax repeal. Against this background, we preliminarily find 
that the delay of the repeal of the tax exemption was neither de jure, 
nor de facto, specific to an enterprise or industry, or to a group of 
enterprises or industries in Germany.
    On this basis, we preliminarily determine that the delay in the 
repeal of the tax exemption for bankrupt companies is not 
countervailable because it does not meet the specificity criteria in 
section 771(5A)(D) of the Act.
5. Treuhandanstalt Assistance
    We initiated an investigation of this program based on the final 
determination in Certain Steel from Germany in which we found 
Treuhandanstalt (``THA/BvS'') assistance to provide countervailable 
benefits (see 58 FR 37319). However, in the subsequent 1997 Wire Rod 
investigation, we determined that the program was not countervailable. 
The questionnaire responses filed in the instant investigation indicate 
that none

[[Page 6000]]

of the respondents used the program in the POI.
    On this basis, we preliminarily determine that this program is not 
countervailable.

III. Programs Preliminarily Determined Not To Have Been Used

    Based on the information provided in the responses, we 
preliminarily determine that no responding companies applied for or 
received benefits under the following programs during the POI:
    1. 1979 Investment Allowance Act:
    The GOG has submitted documentation indicating that the 1979 
Investment Allowance Act was repealed on December 31, 1989. After the 
repeal, no benefits under this Act were granted after December 31, 
1990. Depending on the length of the allocation period, German 
companies may still receive residual benefits from this program, which 
we countervailed as a non-recurring grant in a recent final 
determination in a countervailing duty investigation (see Low Enriched 
Uranium From Germany, the Netherlands, and the United Kingdom, 66 FR 
65903 (December 21, 2001)). However, there is no indication that any of 
the respondent companies in this investigation received such residual 
benefits under the 1979 Investment Allowance Act.
    2. Joint Program: Upswing East.
    3. Aid for Closure of Steel Operations.
    4. Consolidation Funds.
    5. Special Depreciation.
    6. ECSC Loan Guarantees.
    7. ECSC Interest Rate Rebates.
    8. Regional Subsidies under the 1999 Investment Allowance Act:
    This program was initiated under the name ``Subsidies Offered by 
the German Federal Government to Companies in Brandenburg'' in an 
October 9, 2001 memorandum to Richard W. Moreland entitled ``New 
Subsidy Allegations,'' which is on file in the CRU.

IV. Programs Preliminarily Determined To Have Been Terminated

    Based on the information provided in the responses, we 
preliminarily determine that the following programs have been 
terminated:
    1. Structural Improvement Assistance Aids:
    The Department determined in Certain Corrosion-Resistant Carbon 
Steel Flat Products; Cold-Rolled Carbon Steel Flat Products; and Cut-
to-Length Carbon Steel Plate Products from Germany; Final Results of 
Full Sunset Reviews, 65 FR 47407 (August 2, 2000), that the Structural 
Improvement Aids program had ceased to provide any countervailable 
benefits to the producers of the subject merchandise. See the July 27, 
2000 ``Issues and Decision Memorandum'' accompanying this sunset 
review, which is on file in the CRU.
    1. Ruhr District Action Program:
    The Department determined in Certain Corrosion-Resistant Carbon 
Steel Flat Products; Cold-Rolled Carbon Steel Flat Products; and Cut-
to-Length Carbon Steel Plate Products from Germany; Final Results of 
Full Sunset Reviews, 65 FR 47407 (August 2, 2000), that the Structural 
Improvement Aids program had ceased to provide any countervailable 
benefits to the producers of the subject merchandise. See the July 27, 
2000 ``Issues and Decision Memorandum'' accompanying this sunset 
review, which is on file in the CRU.

Verification

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

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we 
calculated an individual rate for each manufacturer of the subject 
merchandise. We preliminarily determine the total estimated net 
countervailable subsidy rates to be:

------------------------------------------------------------------------
             Producer/Exporter                    Net subsidy rate
------------------------------------------------------------------------
Saarstahl AG..............................  1.60 percent ad valorem.
Ispat Walzdraht Hochfeld GmbH.............  2.53 percent ad valorem.
Ispat Hamburger Stahlwerke GmbH...........  2.53 percent ad valore.
Ispat Stahlwerk Ruhrort GmbH..............  2.53 percent ad valorem.
All Others................................  1.84 percent ad valorem.
------------------------------------------------------------------------

    In accordance with sections 777A(e)(2)(B) and 705(c)(5)(A), we have 
calculated the ``all others'' rate as the weighted average rate of 
Saarstahl's and IHSW's, IWHG's and ISRG's net subsidy rates. The 
suspension of liquidation resulting from this preliminary affirmative 
CVD determination will remain in effect no longer than four months in 
accordance with section 703(d) of the Act.
    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of wire rod 
from Germany which are entered, or withdrawn from warehouse, for 
consumption on or after the date of the publication of this notice in 
the Federal Register, and to require a cash deposit or bond for such 
entries of the merchandise in the amounts indicated above. This 
suspension will remain in effect until further notice.

ITC Notification

    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all nonprivileged and nonproprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    In accordance with section 705(b)(2) of the Act, if our final 
determination is affirmative, the ITC will make its final determination 
within 45 days after the Department makes its final determination.

Public Comment

    Case briefs for this investigation must be submitted no later than 
one week after the issuance of the last verification report. Rebuttal 
briefs must be filed within five days after the deadline for submission 
of case briefs. A list of authorities relied upon, a table of contents, 
and an executive summary of issues should accompany any briefs 
submitted to the Department. Executive summaries should be limited to 
five pages total, including footnotes. Section 774 of the Act provides 
that the Department will hold a public hearing to afford interested 
parties an opportunity to comment on arguments raised in case or 
rebuttal briefs, provided that such a hearing is requested by an 
interested party. If a request for a hearing is made in this 
investigation, the hearing will tentatively be held two days after the 
deadline for submission of the rebuttal briefs at the U.S. Department 
of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230. Parties should confirm by telephone the time, date, and place of 
the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) the party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
Oral

[[Page 6001]]

presentations will be limited to issues raised in the briefs.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: February 2, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-3122 Filed 2-7-02; 8:45 am]
BILLING CODE 3510-DS-P