[Federal Register Volume 67, Number 42 (Monday, March 4, 2002)]
[Notices]
[Pages 9662-9670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5105]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-427-823]


Notice of Preliminary Affirmative Countervailing Duty 
Determination and Alignment of Final Countervailing Duty Determination: 
With Final Antidumping Duty Determination: Certain Cold-Rolled Carbon 
Steel Flat Products From France

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

ACTION: Preliminary determination of countervailing duty investigation.

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SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are being provided to producers or exporters 
of certain cold-rolled carbon steel flat products from France. For 
information on the estimated countervailing duty rates, see section 
below on ``Suspension of Liquidation.''

EFFECTIVE DATE: March 4, 2002.

FOR FURTHER INFORMATION CONTACT: Suresh Maniam at (202) 482-0176; 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230.

Preliminary Determination

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the ``Act'') by 
the Uruguay Round Agreements Act. In addition, unless otherwise 
indicated, all citations to the Department of Commerce's (the 
``Department'') regulations are to our regulations as codified at 19 
CFR part 351 (2001).

The Petitioners

    The petition in this investigation was filed by Bethlehem Steel 
Corp., United States Steel LLC., LTV Steel Co., Inc., Steel Dynamics, 
Inc., National Steel Corp., Nucor Corp., WCI Steel, Inc., and Weirton 
Steel Corp. (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: Certain Cold-Rolled Carbon Steel 
Flat Products From Argentina, Brazil, France, and the Republic of 
Korea, 66 FR 54218 (October 26, 2001) (``Initiation Notice'')).
    On November 3, 2001, we issued countervailing duty questionnaires 
to the Government of France (``GOF''), the European Commission 
(``EC''), and Usinor, a producer/exporter of the subject merchandise 
from France. Our decision to select Usinor to respond to our 
questionnaire is explained in the Memorandum to Susan H. Kuhbach, 
``Respondent Selection,'' dated November 2, 2001, which is on file in 
the Central Records Unit, room B-099 of the main Department building.
    On November 30, 2001, we extended the time limit for the 
preliminary determination of this investigation to January 28, 2002. 
See Certain Cold-Rolled Carbon Steel Flat Products from Argentina, 
Brazil, France, and the Republic of Korea: Extension of Time Limit for 
Preliminary Determinations in Countervailing Duty Investigations, 66 FR 
63523 (December 7, 2001).
    On November 15, 2001, Emerson Electric Co. submitted a request to 
exclude certain merchandise from the scope of this investigation. On 
February 22, 2002, the petitioners submitted an objection to this 
request. See section below on ``Scope of the Investigation: Scope 
Comments'' for an analysis of these submissions and the Department's 
resulting determination.
    We received a response to our countervailing duty questionnaire 
from the EC on December 20, 2001, and from the GOF and Usinor on 
December 21, 2001. On January 2, 2002, the petitioners submitted 
comments regarding these questionnaire responses.
    We issued supplemental questionnaires to the GOF and Usinor on 
January 7, 2002, and received responses to these questionnaires on 
January 16, 2002.
    On January 18, 2002, we further extended the time limit for the 
preliminary determination of this investigation to February 25, 2002. 
See Certain Cold-Rolled Carbon Steel Flat Products from Argentina, 
Brazil, France, and the Republic of Korea: Extension of Time Limit for 
Preliminary Determinations in Countervailing Duty Investigations, 67 FR 
3482 (January 24, 2002).
    On January 24, 2002, we requested that Usinor provide its sales 
values for its French production from 1988 through 2000. See Memorandum 
to File, dated January 24, 2002. Usinor submitted this information on 
January 29, 2002.
    We issued another supplemental questionnaire to Usinor on February 
12,

[[Page 9663]]

2002, and received a response to this questionnaire on February 15, 
2002.

Scope of the Investigation

    For purposes of this investigation, the products covered are 
certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel 
products. For a full description of the scope of this investigation, 
see the Scope Appendix attached to the Notice of Preliminary Negative 
Countervailing Duty Determination and Alignment of Final Countervailing 
Duty Determination With Final Antidumping Duty Determinations: Certain 
Cold-Rolled Carbon Steel Flat Products from Argentina, published 
concurrently with this preliminary determination.

Scope Comments

    In the Initiation Notice, we invited comments on the scope of this 
proceeding. On November 15, 2001, we received a request from Emerson 
Electric Company (``Emerson'') to amend the scope of this 
investigation, as well as the concurrent countervailing and antidumping 
duty investigations pertaining to subject merchandise. Specifically, 
Emerson requested that the scope be amended to exclude all types of 
nonoriented coated silicon electrical steel, whether fully-or semi-
processed, because such products are not treated in the marketplace as 
carbon steel products.
    On February 22, 2002, we received a response to the Emerson request 
from the petitioners. The petitioners objected to excluding these 
products from the scope and have explained that the scope language is 
not overly inclusive with respect to these products. Therefore, we 
determine that nonoriented coated silicon electric steel is within the 
scope of these proceedings.
    The Department has also received several other scope exclusion 
requests in the cold-rolled steel investigations. We are continuing to 
examine these exclusion requests, and plan to reach a decision as early 
as possible in the proceedings. Interested parties will be advised of 
our intentions prior to the final determinations and will have the 
opportunity to comment.

Injury Test

    Because France is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the U.S. International Trade 
Commission (``ITC'') is required to determine whether imports of the 
subject merchandise from France materially injure, or threaten material 
injury to, a U.S. industry. On November 19, 2001, the ITC published its 
preliminary determination finding a reasonable indication of material 
injury or threat of material injury to an industry in the United States 
by reason of imports of certain cold-rolled carbon steel flat products 
from France. See Certain Cold-Rolled Steel Products From Argentina, 
Australia, Belgium, Brazil, China, France, Germany, India, Japan, 
Korea, Netherlands, New Zealand, Russia, South Africa, Spain, Sweden, 
Taiwan, Thailand, Turkey, and Venezuela, 66 FR 57985 (November 19, 
2001).

Alignment With Final Antidumping Duty Determination

    On February 21, 2002, the petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determination in the companion antidumping duty investigations 
(see Notice of Initiation of Antidumping Duty Investigations: Certain 
Cold-Rolled Carbon Steel Flat Products from Argentina, Australia, 
Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, 
New Zealand, the People's Republic of China, the Russian Federation, 
South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela, 
66 FR 54198 (October 26, 2001)). The companion antidumping duty 
investigations and this countervailing duty investigation were 
initiated on the same date and have the same scope. Therefore, in 
accordance with section 705(a)(1) of the Act, we are aligning the final 
determination in this investigation with the final determination in the 
antidumping duty investigations of certain cold-rolled carbon steel 
flat products.
    In accordance with section 703(d) of the Act, the suspension of 
liquidation resulting from this preliminary affirmative countervailing 
duty determination will remain in effect no longer than four months.

Period of Investigation

    The period of investigation (``POI'') for which we are measuring 
subsidies is the calendar year 2000.

Changes in Ownership

    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 (Feb. 2, 2000), reh'g en banc denied, 2000 U.S. App. LEXIS 15215 
(June 20, 2000) (``Delverde III''), rejected the Department's change-
in-ownership methodology as explained in the General Issues 
Appendix.\1\ The CAFC held that ``the Tariff Act, as amended, does not 
allow Commerce to presume conclusively that the subsidies granted to 
the former owner of Delverde's corporate assets automatically `passed 
through' to Delverde following the sale. Rather, the Tariff Act 
requires that Commerce make such a determination by examining the 
particular facts and circumstances of the sale and determining whether 
Delverde directly or indirectly received both a financial contribution 
and benefit from the government.'' Id., 202 F.3d at 1364.
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    \1\ Final Affirmative Countervailing Duty Determination: Certain 
Steel Products from Austria, 58 FR 37217, 37225 (July 9, 1993).
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    Pursuant to the CAFC finding, the Department developed a new 
change-in-ownership methodology, first announced in a remand 
determination on December 4, 2000, following the CAFC's decision in 
Delverde III, and also applied in Grain-Oriented Electrical Steel from 
Italy; Final Results of Countervailing Duty Administrative Review, 66 
FR 2885 (January 12, 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

[[Page 9664]]

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.
    In Final Results of Redetermination Pursuant to Court Remand: GTS 
Industries S.A. v. United States, No. 00-03-00118 (December 22, 2000) 
and Final Results of Redetermination Pursuant to Court Remand: 
Allegheny-Ludlum Corp., et al v. United States, No. 99-09-00566 
(December 20, 2000), the Department determined that pre-sale Usinor is 
the same person as respondent Usinor. The following summarizes the 
analysis performed in these remands, which continues to hold true for 
this investigation.

Usinor's Privatization

    Up until the time of Usinor's privatization, Usinor was owned 
(directly or indirectly) by the GOF. Usinor was privatized beginning in 
July 1995, when the GOF and Clindus offered the vast majority of their 
shares in the company for sale. Clindus was a subsidiary of Credit 
Lyonnais, which at that time was controlled by the GOF. After the 
privatization and, in particular, by the end of calendar year 1997, 
82.28 percent of Usinor's shares were held by private shareholders who 
could trade them freely. Usinor's employees owned 5.16 percent of 
Usinor's shares; Clindus, 2.5 percent; and, the GOF, 0.93 percent. The 
remaining 14.29 percent of Usinor's shares were held by the so-called 
``Stable Shareholders.''
    In analyzing whether the producer of merchandise subject to this 
investigation is the same business entity as pre-privatization Usinor, 
we have examined whether Usinor continued the same general business 
operations, retained production facilities, assets and liabilities, and 
retained the personnel of the pre-privatization Usinor. Based on our 
analysis, we have concluded that the privatized Usinor is, for all 
intents and purposes, the same ``person'' as the GOF-owned steel 
producer of the same name which existed prior to the privatization. 
Consequently, the subsidies bestowed on Usinor prior to its 1995 
privatization are attributable to respondent Usinor, and continue to 
benefit Usinor during the POI.

1. Continuity of General Business Operations

    Usinor produced the same products and remained the same corporation 
at least since the late 1980s. In 1987, Usinor became the holding 
company for the French steel groups, Usinor and Sacilor (the GOF had 
majority ownership of both Usinor and Sacilor since 1981). Usinor's 
principal businesses covered flat products, stainless steel and alloys, 
and specialty products. In 1994, these three product groups were 
produced by three subsidiaries: Sollac, Ugine and Aster (respectively).
    This same structure continued after Usinor's privatization in 1995. 
Usinor's organizational chart during the period of investigation shows 
the same three major products being produced by the same three 
subsidiaries. In 1994 (prior to the privatization), flat products 
contributed 55 percent of consolidated sales, while stainless and 
specialty products contributed 20 and 18 percent respectively. In the 
years following privatization (1995, 1996 and 1997), flat carbon steels 
continued to contribute 49-53 percent of Usinor's consolidated net 
sales, while stainless and alloy, and specialty steel accounted for 23-
25 percent, and 19-21 percent, respectively.
    We have also examined whether post-privatization Usinor held itself 
out as the continuation of the previous enterprise (e.g., did it retain 
the same name). In this instance, Usinor retained its same name and 
there is no indication that the privatized company held itself out as 
anything other than a continuation of pre-privatization Usinor.
    The continuity of Usinor's business operations is also reflected in 
Usinor's customer base. Prior to privatization, the automobile industry 
was a principal purchaser of Usinor's output, accounting for 
approximately 30 percent of Usinor's sales in 1994. In 1997, the 
automobile industry was still Usinor's major customer (36 percent of 
Usinor's sales). The construction industry was the second largest 
purchaser in both years, accounting for 26 and 23 percent, 
respectively.

2. Continuity of Production Facilities

    Neither product lines nor production capacity changed as a result 
of the privatization, except those changes that occurred in an ongoing 
manner in the ordinary course of business. No facilities or production 
lines were added or eliminated specifically as a result of the sale. As 
is clear from a comparison of the Prospectus for the 1995 privatization 
and Usinor's 1997 Annual Report, steel production facilities have 
remained intact. The company continued to focus on an ``all steel'' 
strategy, engaging in all aspects of the steel production process and 
produces a wide variety of steel products. Finally, Usinor's steel 
production facilities did not change their physical locations.

3. Continuity of Assets and Liabilities

    Usinor was sold intact, with all of its assets and liabilities. 
While the GOF continued to own a small percentage of Usinor's shares, 
there is no indication that it retained any of Usinor's assets or 
liabilities.

4. Retention of Personnel

    Usinor's Articles of Incorporation changed as a result of the 
privatization, and the new Articles of Incorporation specified new 
procedures for electing the Board of Directors. New directors were 
elected to the Board under the new procedures. However, Usinor's 
Chairman and Chief Executive Officer remained the same before and after 
the privatization. Similarly, Usinor's workforce did not change.
    Therefore, based on the facts and our analysis of a variety of 
relevant factors, once privatized, Usinor continued to operate, for all 
intents and purposes, as the same ``person'' that existed prior to the 
privatization and, thus, the pre-privatization subsidies continued to 
benefit Usinor even under private ownership.

Use of Facts Available

    Sections 776(a)(2)(A) and (B) of the Act require the use of facts 
available when an interested party withholds information requested by 
the Department, or when an interested party fails to provide 
information required in a timely manner and in the format requested. In 
selecting from among facts available, section 776(b) of the Act 
provides that the Department may use an inference adverse to the 
interests of a party if the Department determines that the party has 
failed to cooperate to the best of its ability. Such adverse inference 
may include reliance on information derived from: (1) The petition; (2) 
a final determination in a countervailing duty or an antidumping duty 
investigation; (3) any previous administrative review, new shipper 
review, expedited antidumping review, section 753 review, or section 
762 review; or (4) any other information placed on the record. See 
Section 776(b) of the Act; see also, 19 CFR 351.308(a), (b), and (c).
    Section 782(d) and 782(e) require the Department to inform a 
respondent if

[[Page 9665]]

there are deficiencies in its responses and allow it a reasonable time 
to correct these deficiencies before the Department applies facts 
available. Even if the information provided is deficient, if it is 
usable without undue difficulty, timely, verifiable, can serve as a 
reliable basis for reaching our determination, and the party has 
cooperated to the best of its ability in providing responses to the 
Department's questionnaires, section 782(e) directs the Department to 
not decline consideration of the deficient submissions.
    In this case, the GOF did not provide the information altogether 
for the Investment/Operating Subsidies, instead answering our question 
by stating ``this question is not readily answerable given the 
multiplicity of programs involved.'' See GOF Questionnaire Response, 
dated December 21, 2001, at II-13. Moreover, in previous proceedings 
where this same program was investigated, the GOF also failed to 
provide the same requested information in response to the same 
question, providing similar answers. See Final Affirmative 
Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality 
Steel Plate from France, 64 FR 73277, 73282 (December 29, 1999) 
(``French Plate'') and Final Affirmative Countervailing Duty 
Determination: Stainless Steel Sheet and Strip from France, 64 FR 
30774, 30779 (June 8, 1999) (``French Stainless''). The relevant pages 
of the questionnaire responses in those investigations have been placed 
on the record of this investigation. See Memorandum to File, 
``Miscellaneous Information'' at Attachment 1 (``Miscellaneous 
Information Memo''). Thus, the GOF was made aware of the specific 
information that the Department needed for its analysis on several 
occasions, yet consistently failed to provide sufficient responses. 
Thus, pursuant to 782(d) and (e), the Department was left with no 
alternative but to apply facts available.
    The GOF never stated why it was not able to provide the information 
requested, just that the answers were not ``readily answerable.'' 
Furthermore, the GOF never requested an extension of time from the 
Department in which it could follow up with more extensive research and 
retrieve the information requested. Instead, the GOF basically informed 
the Department that because the information was not readily answerable, 
it would not answer our request. Furthermore, the GOF stated that it 
would provide further documentation at verification, but the 
Department's regulations state that we do not accept new information at 
verification. 19 CFR 351.301)(b)(1). Based on the GOF's responses and 
all of the information available on the record, we, therefore, do not 
believe the GOF responded to the best of its ability to our 
questionnaire. Because the GOF did not provide the distribution of 
benefits for the investment/operating subsidies, the Department is 
unable to determine the specificity of this program. We therefore find, 
pursuant to sections 776(a) and (b) of the Act, that the use of adverse 
facts available in this case is necessary, and subject to this analysis 
find that the relevant investment/operating subsidy programs were de 
facto specific.

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 certain cold-rolled carbon steel flat 
products, 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. 19 CFR 
351.524(d)(2)(i). For this difference to be considered significant, it 
must be one year or greater. 19 CFR 351.524(d)(2)(ii).
    In this proceeding, Usinor has calculated a company-specific AUL of 
12 years. We note, however, that the one allocable subsidy received by 
Usinor, FIS Bonds, has previously been allocated over a company-
specific AUL of 14 years. The 14-year AUL was calculated in a remand 
determination involving the Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from France, 58 FR 37304 (July 9, 
1993) (``French Certain Steel'') and was subsequently used to allocate 
this same subsidy in French Plate and French Stainless. Because the 14-
year AUL was calculated using company-specific information more 
contemporaneous with the bestowal of the subsidy in question, we have 
continued to use the 14-year AUL to allocate the benefits of the FIS 
bonds in this proceeding. See French Plate, 64 FR at 73293.
    For non-recurring subsidies to Usinor, we applied the ``0.5 percent 
expense test'' described in 19 CFR 351.524(b)(2). Under this test, we 
compare the amount of subsidies approved under a given program in a 
particular year to sales (total or export, as appropriate) in that 
year. If the amount of subsidies is less than 0.5 percent of sales, the 
benefits are allocated to the year of receipt rather than being 
allocated over the AUL period.

Equityworthiness and Creditworthiness

    In French Certain Steel, we found Usinor to be unequityworthy from 
1986 through 1988 and uncreditworthy from 1982 through 1988. No new 
information has been presented in this investigation to warrant a 
reconsideration of these findings. Therefore, based upon these previous 
findings of unequityworthiness and uncreditworthiness, in this 
investigation, we continue to find Usinor unequityworthy and 
uncreditworthy from 1987 through 1988, the years relevant to this 
investigation.

Benchmarks for Loans and Discount Rates

    As discussed above, we have determined that Usinor was 
uncreditworthy in 1988, the only year in which it received a 
countervailable subsidy which is being allocated over time.
    In accordance with 19 CFR 351.524(d)(3)(ii), the discount rate for 
companies considered uncreditworthy is the rate described in 19 CFR 
351.505(a)(3)(iii). To calculate that 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 
have used the average cumulative default rates reported for the Caa-to 
C-rated category of companies as published in Moody's Investors 
Service, ``Historical Default Rates of Corporate Bond Issuers, 1920-
1997'' (February 1998). For the probability of default by a 
creditworthy company, we used the cumulative default rates for 
investment grade bonds as published in Moody's Investor Services: 
``Statistical Tables of Default Rates and Recovery Rates'' (February 
1998). See Miscellaneous Information Memo at Attachment 2. For the 
commercial interest rate charged to creditworthy borrowers, we used the 
average of the following long-term interest rates: medium-term credit 
to

[[Page 9666]]

enterprises, equipment loan rates as published by the OECD, cost of 
credit rates published in the Bulletin of Banque de France, and private 
sector bond rates as published by the International Monetary Fund. See 
Miscellaneous Information Memo at Attachment 3. For the term of the 
debt, we used the AUL period for Usinor, as the equity benefits are 
being allocated over that period.
    To measure the benefit from reimbursable advances received by 
Usinor, we relied on the average, short-term interest rate in France as 
reported in the International Financial Statistics, as published by the 
International Monetary Fund (See Miscellaneous Information Memo at 
Attachment 4). Usinor did not report a company-specific short term 
interest rate.

I. Programs Preliminarily Determined to Be Countervailable

A. FIS Bonds

    The 1981 Corrected Finance Law granted Usinor the authority to 
issue convertible bonds. In 1983, the Fonds d'Intervention Siderurgique 
(``FIS''), or steel intervention fund, was created to implement that 
authority. In 1983, 1984, and 1985, Usinor issued convertible bonds to 
the FIS, which in turn, with the GOF's guarantee, floated the bonds to 
the public and to institutional investors. These bonds were converted 
to common stock in 1986 and 1988.
    In several previous cases, the Department has treated these 
conversions of Usinor's FIS bonds into equity as countervailable equity 
infusions. See French Certain Steel, 58 FR at 37307; French Plate, 64 
FR at 73282; French Stainless, 64 FR at 30779; and Final Affirmative 
Countervailing Duty Determinations: Certain Hot Rolled Lead and Bismuth 
Carbon Steel Products From France, 58 FR 6221, 6224 (January 27, 1997). 
These equity infusions were limited to Usinor and were, therefore, 
specific within the meaning of section 771(5A)(D)(i) of the Act. Also, 
these equity infusions provided a financial contribution to Usinor 
within the meaning of section 771(5)(D)(i) of the Act.
    No new information or evidence of changed circumstances has been 
submitted in this proceeding to warrant a reconsideration of our past 
findings. Therefore, we determine that a countervailable benefit exists 
in the amount of the equity infusions in accordance with section 
771(5)(E)(i) of the Act. In this investigation, because the 1986 
conversion has already been fully allocated over the AUL prior to the 
POI, only the 1988 equity infusions continue to provide a benefit in 
the POI.
    We have treated the 1988 equity infusion as a non-recurring subsidy 
pursuant to 19 CFR 351.507(c). Because Usinor was uncreditworthy in 
1988 (see section above on ``Subsidies Valuation Information: 
Equityworthiness and Creditworthiness''), we used an uncreditworthy 
discount rate to allocate the benefit of the equity infusion.
    In French Plate, we attributed separately to Usinor and GTS 
Industries S.A. (``GTS'') their relative portions of the benefits from 
the equity infusion. 64 FR at 73282. We have continued to do so in this 
proceeding. We note, however, that the amount attributed to the 
respective companies differs from the amounts in French Plate. This is 
because of the revisions to the Department's change-in-ownership 
methodology since the French Plate determination. To calculate the 
benefit attributable to GTS, we first divided GTS's sales in 1995 (the 
year prior to which Usinor ownership fell below 50 percent) by Usinor's 
consolidated sales of French produced merchandise in 1995. We then 
multiplied this ratio by Usinor's percentage ownership in GTS in 1996. 
The resulting percentage was multiplied by the total 1988 equity 
infusion to determine the benefit to GTS. The remaining amount of the 
equity infusion was attributed to Usinor.
    Dividing the allocated benefit to Usinor in the POI by Usinor's 
total sales of French-produced merchandise during the POI, we 
preliminarily determine Usinor's net subsidy rate for this program to 
be 1.13 percent ad valorem.

B. Investment/Operating Subsidies

    During the period 1987 through the POI, Usinor received a variety 
of small investment and operating subsidies from various GOF agencies 
and from the European Coal and Steel Community (``ECSC''). These 
subsidies were provided to Usinor for research and development, 
projects to reduce work-related illnesses and accidents, projects to 
combat water pollution, etc. The subsidies are classified as 
investment, equipment, or operating subsidies in the company's 
accounts, depending on how the funds are used.
    In French Plate and French Stainless, the Department determined 
that the funding provided to Usinor by the water boards (les agences de 
l'eau) and certain work/training grants were not countervailable. See 
64 FR at 73282; 64 FR at 30779 and 30782. Therefore, consistent with 
these previous cases, we have not investigated these programs in this 
proceeding.
    For the remaining programs, the GOF did not answer our questions 
regarding the distribution of funds, stating instead that, in the GOF's 
view, these ``question[s are] not readily answerable given the 
multiplicity of programs involved.'' As noted earlier, the GOF never 
why it would not be possible to provide the requested information. It 
also never asked the Department for an extension of time in which it 
could successfully research and retrieve the requested information. 
Instead, the GOF basically informed the Department that because the 
information was not ``readily answerable,'' it would not answer our 
request. We, therefore, do not believe that the GOF acted to the best 
of its ability when it refused to provide the requested information.
    Accordingly, the Department has drawn an adverse inference (as done 
in French Plate, 64 FR at 73282 and French Stainless, 64 FR at 30779) 
by concluding that the investment and operating subsidies (except those 
provided by the water boards and certain work/training contracts) are 
specific within the meaning of section 771(5A)(D) of the Act. See 
section above on ``Use of Facts Available.''
    We also determine that the investment and operating subsidies 
provide a financial contribution, as described in section 771(5)(D)(i) 
of the Act, and a benefit as described in 771(5)(E)(i). Accordingly, we 
find this program to be countervailable.
    The investment and operating subsidies provided in years prior to 
1999 were already determined to be less than 0.5 percent of Usinor's 
sales of French-produced merchandise in the relevant year and expensed 
in the relevant year of receipt (see French Plate, 64 FR at 73283 and 
French Stainless, 64 FR at 30780). Therefore, because it is not 
possible for these subsidies to benefit Usinor in the POI, we have not 
further examined them. The amount of investment and operating subsidies 
in 1999 was also less than 0.5 percent of Usinor's sales of French-
produced merchandise in 1999. Therefore, this benefit was also expensed 
in the years of receipt (1999), in accordance with 19 CFR 
351.524(b)(2).
    To calculate the benefit received during the POI, we divided the 
subsidies received by Usinor in the POI by Usinor's total sales of 
French-produced merchandise during the POI. Accordingly, we 
preliminarily determine Usinor's net subsidy rate for this program to 
be 0.19 percent ad valorem.

[[Page 9667]]

II. Programs Preliminarily Determined To Be Not Countervailable

A. Shareholder Advances After 1986

    According to Usinor's 1991 financial statements, the funds in the 
shareholder advances account were the funds provided by the GOF under 
the Societes de Developpement Industriel (``SODI'') program. Because we 
preliminarily find the funds received under the SODI program to not be 
countervailable (see discussion below), these advances are likewise not 
countervailable. However, at verification, we intend to examine the 
source of the funds in the shareholder advances account to determine if 
these funds are indeed SODI funds.

B. GOF Advances for SODIs

    In French Certain Steel, we investigated advances made to SODIs 
prior to 1991 and found them not countervailable. 58 FR at 37310-11. In 
French Plate, we initiated an investigation of SODI advances after 
1991. 64 FR at 73295. The information submitted by the petitioners in 
French Plate in support of investigating the advances to SODIs after 
1991 was 1) an apparent discrepancy between the funding received from 
the GOF by Usinor and the funds ultimately loaned out by Usinor to the 
SODIs, and 2) the notification of the SODI program by the EU to the 
WTO. In French Plate, we did not make a final determination as to this 
program's countervailability because the allegation was not initiated 
upon in time to solicit adequate, verified information from all of the 
necessary respondents. Id.
    In response to our questionnaires in this proceeding, Usinor has 
provided the amounts it received from the GOF and the amounts Usinor 
loaned to the SODIs. While the amounts received from the GOF do not 
match exactly the amounts loaned out by Usinor in any given year, over 
the entire period in which Usinor was receiving funds from the GOF, it 
did loan out all the funds it received from the GOF. Therefore, after 
1991, the program continued to operate as it did prior to 1991. 
Consequently, for the reasons articulated in French Certain Steel, we 
preliminarily determine that the post-1991 SODI advances do not confer 
a countervailable subsidy on Usinor.
    Moreover, a notification of a program to the WTO is not, in and of 
itself, a sufficient basis to find the program countervailable. In this 
respect, we note, but do not rely on, Article 25.7 of the Agreement on 
Subsidies and Countervailing Measures, which states that notification 
of a measure does not prejudge either the measure's legal status or the 
nature of the measure. Thus, while notification of a program to the WTO 
may have warranted investigation of the measure, based on our 
investigation of the program, we have found that it is not a 
countervailable subsidy.
    In the petition, the petitioners have alleged that the GOF funds 
were compensation for SODI expenses, and raised questions about the 
recording of SODI funds in Usinor's accounting records, whether and how 
repayments of loaned funds by the SODIs to Usinor were made, whether 
and how repayments of SODI advances by Usinor to the GOF were made, and 
Usinor's handling of any surplus funds. We intend to seek further 
information regarding these issues for our final determination.

C. Funding for Electric Arc Furnaces

    In 1996, the GOF agreed to provide assistance in the form of 
reimbursable advances to support Usinor's research and development 
efforts regarding electric arc furnaces. The first disbursal of funds 
occurred on July 22, 1998, and the second on August 31, 1999.
    We preliminarily find that this program provides a financial 
contribution because it is a direct transfer of funds, as described in 
section 771(5)(D)(i) of the Act. Regarding specificity, the GOF stated 
that, in 1997, FF 2 billion of assistance was provided to 190 projects 
under the general Grands Projects Innovants (``GPI'') program, and that 
only three of the 39 projects selected in 1997 were in the raw 
materials sector (the sector that includes steel).
    We preliminarily determine that the information reported by the GOF 
does not provide a basis for finding benefits under this program to be 
non-specific. First, Usinor's project was approved in 1996. However, 
the data provided by the GOF addresses 1997. Second, there is no 
information regarding the amount of benefits received by the companies 
in the raw material sector. Stating that it does not collect such 
information, the GOF did not provide the Department with any 
information indicating the actual distribution of benefits by company 
or by industry.
    Regarding the benefit provided by this assistance, Usinor states 
that the amount of the advances is so small that any benefit would be 
virtually immeasurable.
    Based upon our review of the amounts, we agree with Usinor that if 
we treated the disbursements as grants in the year they were received, 
the benefits would be expensed prior to the POI. Alternatively, if we 
treated the reimbursable advances as short-term, zero interest 
contingent liabilities, consistent with 19 CFR 351.505(d)(i), the 
benefit to Usinor in the POI is 0.00 percent ad valorem. Therefore, we 
find no countervailable subsidy under this program.
    This finding of non-countervailability is based upon the amounts 
received by Usinor to date under this program. Should Usinor receive 
additional funding under this program in the future, we will re-examine 
the program's countervailability at that time.

D. Funding for Myosotis Project

    Since 1988, Usinor has been developing a continuous thin-strip 
casting process, called ``Myosotis,'' in a joint venture with the 
German steelmaker, Thyssen. The Myosotis project is intended to 
eliminate the separate hot-rolling stage of Usinor's steelmaking 
process by transforming liquid metal directly into a coil between two 
to five millimeters thick.
    To assist in this project, the GOF, through the Ministry of 
Industry and Regional Planning and L'Agence pour la Maitrise de 
L'energie (``AFME''), entered into three agreements with Usinor (in 
1989) and Ugine (in 1991 and 1995). The first agreement, dated December 
27, 1989, provided three payments, one in 1989, one in 1991, and one in 
1993. The second agreement, between Ugine and the AFME, covered the 
cost of some equipment for the project. This second agreement resulted 
in two disbursements to Ugine from the AFME, one in 1991 and one in 
1992. The third agreement, with Ugine, dated July 3, 1995, provided 
interest-free reimbursable advances for the final two-year stage of the 
project, with the goal of casting molten steel from ladles to produce 
thin strips. The first reimbursable advance under this agreement was 
made in 1997. Repayment of one-third of the reimbursable advance was 
due July 31, 1999. The remaining two-thirds are due for repayment on 
July 31, 2001.
    In French Plate and French Stainless, we found these grants and 
advances to be countervailable. 64 FR at 73283 and 64 FR at 30780. 
However, the grants under the 1989 and 1991 agreements were found to be 
less than 0.5 percent of sales in the year of receipt and, therefore, 
expensed in the year of receipt. Id. Therefore, because it is not 
possible for these grants to benefit Usinor in the POI, we have not 
examined them further. The 1997 advance, however, was treated as a 
short-term interest-free loan in French Plate and French Stainless. Id.

[[Page 9668]]

    The 1995 agreement for the reimbursable advance was made between 
the GOF and Ugine (a Usinor subsidiary which does not produce subject 
merchandise). However, in its supplemental questionnaire response, 
Usinor acknowledged that the technology being developed with these 
funds would also benefit carbon steel flat products (which includes 
subject merchandise). See Usinor Supplemental Questionnaire Response, 
dated January 16, 2002, at 12. Consequently, we have analyzed these 
reimbursable grants in this investigation.
    We preliminarily find the reimbursable advance is a financial 
contribution, as described in section 771(5)(D)(i) of the Act. 
Regarding specificity, for the reasons described above regarding 
assistance for Usinor's development of an electric arc furnace, the 
information provided by the GOF does not provide a basis for finding 
this program non-specific. Regarding the benefit of the Myosotis 
assistance, Usinor has argued that the amount of the reimbursable 
advances is so small that any possible benefit would be immeasurable.
    We agree with Usinor. If we treat the entire amount of the 
reimbursable advance received in 1997 as a grant in that year, the 
benefit would be less than 0.5% of total sales in that year, and would, 
thus, be expensed prior to the POI.
    Alternatively, we could measure the benefit by treating a portion 
of the reimbursable advance as a grant and the remainder as a zero-
interest contingent liability. According to Article 7a of the Myosotis 
Agreement (see GOF December 21, 2001 Questionnaire Response, at Exhibit 
10, p. 5), and as stated above, Usinor was required to reimburse a 
portion of the advance on July 31, 1999 and the remainder on July 31, 
2001. Article 7a additionally states that ``[t]he portion of the 
advance which may not have been reimbursed pursuant to [this agreement] 
shall acquire the status of a subsidy. [T]he Beneficiary shall retain 
possession of this amount.'' Usinor has stated that it made only one 
payment thus far, in September 2001 (after the POI).
    In light of this, the amount that was due on July 31, 1999, could 
be viewed as a grant received at the time the repayment was due. 
Dividing this grant by Usinor's sales in 1999, the benefit is less than 
0.5 percent of sales in 1999, and, hence, would be expensed prior to 
the POI. The amount that was due on July 31, 2001, however, pursuant to 
19 CFR 351.505(d)(1), and consistent with French Plate, is being 
treated as a short-term, zero-interest contingent liability loan.
    Treating the portion to be reimbursed on July 31, 2001, as a zero-
interest contingent liability, we multiplied the amount outstanding by 
the short-term interest rate described in the section above ``Subsidies 
Valuation Information: Benchmarks for Loans and Discount Rates.'' Since 
Usinor would have been required to make an interest payment on a 
comparable commercial loan during the POI, we calculated the benefit as 
the amount that would have been due during the POI. Dividing these 
interest savings by Usinor's sales of French-produced merchandise 
during the POI, the benefit to Usinor in the POI is 0.00 percent ad 
valorem. Therefore, we find no countervailable subsidy under this 
program.
    This finding of non-countervailability is based upon the amounts 
received by Usinor to date under this program. Should Usinor receive 
additional funding under this program in the future, we will re-examine 
the program's countervailability at that time.

E. ECSC Article 56 Funding

    According to the petitioners, ECSC Article 56 funds are targeted to 
promote employment and economic revitalization in regions of declining 
steel activity. Both steel-related and non-steel-related industries are 
eligible for assistance. Conversion loans are provided at reduced rates 
of interest and may be granted directly to companies or as global loans 
to financial institutions which then issue sub-loans to individual 
companies. Borrowers may also qualify for interest subsidies on all or 
part of a conversion loan, contingent upon the geographic location of 
the recipient or on the recipient agreeing that some percentage of the 
new jobs created will be reserved primarily for unemployed steel 
workers.
    The EC states that Usinor did not benefit from this program because 
it merely acts as a conduit in advancing ECSC Article 56 funds to SODIs 
which, in turn, re-loan the funds to small- and medium-sized 
businesses.
    We preliminarily find that, because Usinor was acting only as a 
conduit for Article 56(2)(a) funds for the benefit of third-party 
companies, Usinor receives no benefit under this program and, hence, no 
countervailable subsidy.
    However, it is not clear at this stage how Usinor handles the 
repayment of loan funds from loan recipients (i.e., what are the 
repayment terms, what does Usinor do with the repaid funds, and what 
are the repayment terms with the government). We intend to seek further 
information regarding these issues for our final determination.

F. 1995 Capital Increase

    The petitioners have alleged that, by authorizing a capital 
increase of FF 5 billion at the time of Usinor's 1995 privatization, 
the GOF conferred a benefit upon Usinor in the amount of the increased 
capital. Specifically, they argue that the GOF ``directed or 
entrusted'' private entities to infuse capital into Usinor.
    As an initial matter, we note that the arguments set forth by the 
petitioners may constitute a subsidy allegation made in untimely 
manner. According to 19 CFR 351.301(d)(4)(i)(A) of the Department's 
regulations, a subsidy allegation in an investigation is due no later 
than 40 days before the scheduled date of the preliminary 
determination. The record shows that the first instance on which the 
petitioners presented this particular argument was a submission dated 
February 19, 2002, merely seven days before the scheduled date of the 
preliminary determination (February 25, 2001). We note that their 
allegation does not rely on any new information developed in the course 
of this investigation. Nor did the alleged changes in the Department's 
practice occur after the filing of the petition. Nevertheless, in light 
of the obligation under section 775 of the Act to investigate potential 
subsidies discovered in the course of an investigation, we have 
reviewed the evidence on the record of this proceeding regarding the 
new shares issued by Usinor in connection with its privatization.
    The capital increase identified by the petitioners was previously 
examined in French Stainless and French Plate. In those proceedings, we 
determined that the GOF did not forego any revenue by authorizing this 
capital increase. 64 FR at 30787. We also stated that we did not reach 
the issue of whether private investors were ``entrusted'' to provide a 
subsidy because we found that no subsidy existed. Id. Therefore, we 
found that no countervailable subsidy was conferred by this capital 
increase.
    The petitioners in this proceeding have asked the Department to 
analyze this capital increase again based on their allegation that 
Usinor was unequityworthy at the time of the capital increase. The 
petitioners also point to developments in the Department's practice 
since French Stainless and French Plate, the Department's treatment of 
committed investments, and 19 CFR 351.507(a)(4)(i) and (ii).

[[Page 9669]]

    Regarding the petitioners' claim that Usinor was unequityworthy in 
1995, the petitioners have cited the company's poor performance in the 
years proceeding the privatization. Under 19 CFR 351.507(a)(4)(i)(B), 
we consider past indicators of performance, but we also consider, under 
19 CFR 351.507(a)(4)(i)(D), equity investments by private investors. 
Given that 75 percent of Usinor's shares previously owned by the 
government were purchased by private investors in the 1995 
privatization, we believe that investment in the company was consistent 
with the practice of private investors (see section 771(5)(E)(i) of the 
Act).
    Regarding the petitioners' reference to changes in the Department's 
practice, we do not believe the two precedents cited by the petitioners 
(Certain Cut-to-Length Carbon Steel Plate From Mexico: Final Results of 
Countervailing Duty Administrative Review, 66 FR 14549 (March 13, 2001) 
and Final Affirmative Countervailing Duty Determination: Certain Hot-
Rolled Carbon Steel Flat Products from Argentina, 66 FR 37007 (July 16, 
2001)) lead us to view this transaction differently. As noted above, we 
found no revenue forgone as a result of this capital increase. Also, 
because Usinor was equityworthy at the time, private investors have not 
been entrusted or directed to provide a subsidy. Finally, 19 CFR 
351.507(a)(4)(ii) addresses situations where a government did not 
preform a study prior to an investment. In this instance, the investors 
are private entities.
    Based on the above, we preliminarily do not find this allegation to 
be a basis for finding a subsidy.

III. Programs Preliminarily Determined To Be Not Used

    Based on the information provided in the responses, we determine 
that neither Usinor nor its affiliated companies that produce subject 
merchandise received benefits under the following programs during the 
POI:

A. Repayable Grant to Sollac for ``Pre-Coating'' Technology

    Usinor claims that, while Sollac was approved for funding under 
this program, no funds have yet been disbursed. Therefore, there is no 
benefit during the POI.

B. Tax Subsidies Under Article 39

C. ESF Grants

    While the Department normally treats benefits from worker training 
programs to be recurring (see 19 CFR 351.524(c)(1)), we have found in 
several cases that European Social Fund (``ESF'') grants relate to 
specific, individual projects that require separate approval. See, 
e.g., French Stainless at 30781.
    Usinor records ESF benefits as investment/operating subsidies. 
Because we find, for 1999, that these subsidies were less than 0.5 
percent of Usinor's total sales of French produced merchandise in 1999, 
any benefits in 1999 would have been expensed in 1999. In addition, for 
the POI, Usinor claims it did not receive any benefits under the ESF 
program.

D. ECSC Article 54 Loans

E. ERDF Funding

F. Funding Under Resider and Resider II

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:

------------------------------------------------------------------------
                                                             Net subsidy
                     Producer/Exporter                           rate
                                                              (percent)
------------------------------------------------------------------------
Usinor.....................................................         1.32
All Others.................................................         1.32
------------------------------------------------------------------------

    In accordance with sections 777A(e)(2)(B) and 705(c)(5)(A), we have 
set the ``all others'' rate as Usinor's rate, because it is the only 
company which was individually investigated.
    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of certain 
cold-rolled carbon steel flat products from France for exports 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 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

    In accordance with 19 CFR 351.310, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
this preliminary determination. The hearing is tentatively scheduled to 
be held 57 days from the date of publication of this preliminary 
determination, at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW, Washington, DC 20230. Individuals who wish to 
request a hearing must submit a written request within 30 days of the 
publication of this notice in the Federal Register to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230. 
Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number of participants; (3) the 
reason for attending; and (4) a list of the issues to be discussed. An 
interested party may make an affirmative presentation only on arguments 
included in that party's case brief and may make a rebuttal 
presentation only on arguments included in that party's rebuttal brief. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    In addition, six copies of the business proprietary version and six 
copies of the nonproprietary version of the case briefs must be 
submitted to the Assistant Secretary no later than 50 days from the 
publication of this notice. As part of the case brief, parties are 
encouraged to provide a summary of the arguments not to exceed five 
pages and a table of statutes, regulations, and cases cited. Six copies 
of the business proprietary version and six copies of the 
nonproprietary version of the rebuttal briefs must be submitted to the 
Assistant Secretary no later than 5 days after the filing of case 
briefs. Written arguments should be submitted in accordance with 19 CFR 
351.309 and

[[Page 9670]]

will be considered if received within the time limits specified above.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: February 25, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-5105 Filed 3-1-02; 8:45 am]
BILLING CODE 3510-DS-P