[Federal Register Volume 68, Number 90 (Friday, May 9, 2003)]
[Notices]
[Pages 24921-24928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-11620]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-427-815]


Stainless Steel Sheet and Strip in Coils From France: Preliminary 
Results of Second Countervailing Duty Administrative Review

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

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

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SUMMARY: The Department of Commerce is conducting an administrative 
review of the countervailing duty order on stainless steel sheet and 
strip in coils from France for the period January 1, 2001, through 
December 31, 2001. We have preliminarily found that Usinor, the sole 
producer/exporter covered by this review, has received countervailable 
subsidies during the period of review.
    Interested parties are invited to comment on these preliminary 
results.

EFFECTIVE DATE: May 9, 2003.

FOR FURTHER INFORMATION CONTACT: Jesse Cortes, Group I, Office 1, 
Import Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
3986.

SUPPLEMENTARY INFORMATION:

Case History

    The Department published the countervailing duty order on stainless 
steel sheet and strip in coils from France on August 6, 1999. See 
Amended Final Determination: Stainless Steel Sheet and Strip in Coils 
From the Republic of Korea; and Notice of Countervailing Duty Orders: 
Stainless Steel Sheet and Strip in Coils from France, Italy, and the 
Republic of Korea, 64 FR 42923. The Department published the results of 
its first administrative review of the order on October 3, 2002. See 
Stainless Steel Sheet and Strip in Coils from France: Final Results of 
Countervailing Duty Administrative Review, 67 FR 62098 (``First 
Review'').
    On August 6, 2002, the Department published a notice of 
``Opportunity to Request Administrative Review'' of this countervailing 
duty order for calendar year 2001. See Notice of Opportunity to Request 
Administrative Review of Antidumping or Countervailing Duty Order, 
Finding, or Suspended Investigation, 67 FR 50856. We received a review 
request from Ugine SA (``Ugine'') on August 29, 2002. We published the 
initiation of this review on September 25, 2002. See Initiation of 
Antidumping and Countervailing Duty Administrative Reviews, Requests 
for Revocation in Part and Deferral of Administrative Reviews, 67 FR 
60210.
    On October 18, 2002, we issued countervailing duty questionnaires 
to the Commission of the European Union (``EC''), the Government of 
France (``GOF''), and Usinor. We received responses to our 
questionnaires on December 13, 2002 (EC), and December 19, 2002 (GOF 
and Usinor). We issued a supplemental questionnaire to Usinor on 
February 24, 2003, and received Usinor's response on March 20, 2003. We 
received no comments on the responses from Allegheny Ludlum 
Corporation, AK Steel, Inc., North American Stainless, United 
Steelworkers of America, AFL-CIO/CLC, Butler Armco Independent Union, 
and Zanesville Armco Independent Organization (``petitioners'').

[[Page 24922]]

Scope of the Review

    The products covered by this countervailing duty order are certain 
stainless steel sheet and strip in coils. Stainless steel is an alloy 
steel containing, by weight, 1.2 percent or less of carbon and 10.5 
percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise covered by this order is currently classifiable in 
the Harmonized Tariff Schedule of the United States (``HTSUS'') at the 
following subheadings: 7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 
7219.13.00.80, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 
7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 
7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 
7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 
7219.33.00.36, 7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 
7219.34.00.05, 7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 
7219.34.00.35, 7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 
7219.35.00.35, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 
7219.90.00.60, 7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 
7220.20.10.10, 7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 
7220.20.60.05, 7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 
7220.20.60.80, 7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 
7220.20.70.60, 7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 
7220.20.90.60, 7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 
7220.90.00.80.
    Although the HTSUS subheadings are provided for convenience and 
customs purposes, the Department's written description of the 
merchandise under investigation is dispositive.
    Excluded from the scope of this order are the following: (1) Sheet 
and strip that is not annealed or otherwise heat treated and pickled or 
otherwise descaled; (2) sheet and strip that is cut to length; (3) 
plate (i.e., flat-rolled stainless steel products of a thickness of 
4.75 mm or more); (4) flat wire (i.e., cold-rolled sections, with a 
prepared edge, rectangular in shape, of a width of not more than 9.5 
mm); and (5) razor blade steel. Razor blade steel is a flat-rolled 
product of stainless steel, not further worked than cold-rolled (cold-
reduced), in coils, of a width of not more than 23 mm and a thickness 
of 0.266 mm or less, containing, by weight, 12.5 to 14.5 percent 
chromium, and certified at the time of entry to be used in the 
manufacture of razor blades. See Chapter 72 of the HTSUS, ``Additional 
U.S. Note'' 1(d).
    Also excluded from the scope of this order are:
    Flapper Valve Steel: Flapper valve steel is defined as stainless 
steel strip in coils containing, by weight, between 0.37 and 0.43 
percent carbon, between 1.15 and 1.35 percent molybdenum, and between 
0.20 and 0.80 percent manganese. This steel also contains, by weight, 
phosphorus of 0.025 percent or less, silicon of between 0.20 and 0.50 
percent, and sulfur of 0.020 percent or less. The product is 
manufactured by means of vacuum arc remelting, with inclusion controls 
for sulphide of no more than 0.04 percent and for oxid of no more than 
0.05 percent. Flapper valve steel has a tensile strength of between 210 
and 300 ksi, yield strength of between 170 and 270 ksi, plus or minus 8 
ksi, and a hardness (Hv) of between 460 and 590. Flapper valve steel is 
most commonly used to produce specialty flapper valves in compressors.
    Suspension Foil: Suspension foil is a specialty steel product used 
in the manufacture of suspension assemblies for computer disk drives. 
Suspension foil is described as 302/304 grade or 202 grade stainless 
steel of a thickness between 14 and 127 microns, with a thickness 
tolerance of plus-or-minus 2.01 microns, and surface glossiness of 200 
to 700 percent Gs. Suspension foil must be supplied in coil widths of 
not more than 407 mm and with a mass of 225 kg or less. Roll marks may 
only be visible on one side, with no scratches of measurable depth. The 
material must exhibit residual stresses of 2 mm maximum deflection and 
flatness of 1.6 mm. over 685 mm length.
    Certain Stainless Steel Foil for Automotive Catalytic Converters: 
This stainless steel strip in coils is a speciality foil with a 
thickness of between 20 and 110 microns used to produce a metallic 
substrate with a honeycomb structure for use in automotive catalytic 
converters. The steel contains, by weight, carbon of no more than 0.030 
percent, silicon of no more than 1.0 percent, manganese of no more than 
1.0 percent, chromium of between 19 and 22 percent, aluminum of no less 
than 5.0 percent, phosphorus of no more than 0.045 percent, sulfur of 
no more than 0.03 percent, lanthanum of less than 0.002 or greater than 
0.05 percent, and total rare earth elements of more than 0.06 percent, 
with the balance iron.
    Permanent Magnet Iron-chromium-cobalt Alloy Stainless Strip: This 
ductile stainless steel strip contains, by weight, 26 to 30 percent 
chromium and 7 to 10 percent cobalt, with the remainder of iron, in 
widths 228.6 mm or less, and a thickness between 0.127 and 1.270 mm. It 
exhibits magnetic remanence between 9,000 and 12,000 gauss, and a 
coercivity of between 50 and 300 oersteds. This product is most 
commonly used in electronic sensors and is currently available under 
priorietary trade names such as ``Arnokrome III.'' \1\
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    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Certain Electrical Resistance Alloy Steel: This product is defined 
as a non-magnetic stainless steel manufactured to American Society of 
Testing and Materials (ASTM) specification B344 and containing, by 
weight, 36 percent nickel, 18 percent chromium, and 46 percent iron, 
and is most notable for its resistance to high-temperature corrosion. 
It has a melting point of 1390 degrees Celsius and displays a creep 
rupture limit of 4 kilograms per square millimeter at 1000 degrees 
Celsius. This steel is most commonly used in the production of heating 
ribbons for circuit breakers and industrial furnaces, and in rheostats 
for railway locomotives. The product is currently available under 
proprietary trade names such as ``Gilphy 36.'' \2\
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    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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    Certain Martensitic Precipitation-hardenable Stainless Steel: This 
high-strength, ductile stainless steel product is designated under the 
Unified Numbering System (UNS) as S45500-grade steel, and contains, by 
weight, 11 to 13 percent chromium and 7 to 10 percent nickel. Carbon, 
manganese, silicon and molybdenum each comprise, by weight, 0.05 
percent or less, with phosphorus and sulfur each comprising, by weight, 
0.03 percent or less. This steel has copper, niobium, and titanium 
added to achieve aging and will exhibit yield strengths as high as 1700 
Mpa and ultimate tensile strengths as high as 1750 Mpa after aging, 
with elongation percentages of 3 percent or less in 50 mm. It is 
generally provided in thicknesses between 0.635 and 0.787 mm, and in 
widths of 25.4 mm. This product is most commonly used in the 
manufacture of television tubes and is

[[Page 24923]]

currently available under proprietary trade names such as ``Durphynox 
17.'' \3\
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    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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    Three Specialty Stainless Steels Typically Used in Certain 
Industrial Blades and Surgical and Medical Instruments: These include 
stainless steel strip in coils used in the production of textile 
cutting tools (e.g., carpet knives).\4\ This steel is similar to AISI 
grade 420 but containing, by weight, 0.5 to 0.7 percent of molybdenum. 
The steel also contains, by weight, carbon of between 1.0 and 1.1 
percent, sulfur of 0.020 percent or less, and includes between 0.20 and 
0.30 percent copper and between 0.20 and 0.50 percent cobalt. This 
steel is sold under proprietary names such as ``GIN4 Mo.'' \5\ The 
second excluded stainless steel strip in coils is similar to AISI 420-
J2 and contains, by weight, carbon of between 0.62 and 0.70 percent, 
silicon of between 0.20 and 0.50 percent, manganese of between 0.45 and 
0.80 percent, phosphorus of no more than 0.025 percent, and sulfur of 
no more than 0.020 percent. This steel has a carbide density on average 
of 100 carbide particles per 100 square microns. An example of this 
product is ``GIN5'' steel. The third specialty steel has a chemical 
composition similar to AISI 420 F, with carbon of between 0.37 and 0.43 
percent, molybdenum of between 1.15 and 1.35 percent, but lower 
manganese of between 0.20 and 0.80 percent, phosphorus of no more than 
0.025 percent, silicon of between 0.20 and 0.50 percent, and sulfur of 
no more than 0.020 percent. This product is supplied with a hardness of 
more than Hv 500 guaranteed after customer processing, and is supplied 
as, for example, ``GIN6.''
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    \4\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \5\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
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Period of Review

    The period of review (``POR'') for which we are measuring subsidies 
is January 1, 2001, through December 31, 2001.

Attribution of Subsidies

    Usinor has filed its responses on behalf of its French affiliates 
involved in the manufacture, production or exportation of the subject 
merchandise. These affiliates are: Ugine SA, Imphy Ugine Precision, 
Ugine France Service, Sollac Mediterrannee, Usinor Packaging, Sollac 
Lorraine, Sollac Atlantique, CARLAM, G. Fer, IRSID, and Usinor 
Stainless (hereafter collectively referred to as ``Usinor''). Usinor 
holds a majority interest in all of these companies. Therefore, in 
accordance with 19 CFR 351.525(b)(6)(iii), we have preliminarily 
attributed subsidies received by these companies to the total sales by 
Usinor of French-produced merchandise.

Changes in ownership

    On February 2, 2000, the U.S. Court of Appeals for the Federal 
Circuit (``CAFC''), in Delverde Sri v. United States, 202 F.3d 1360, 
1365 (Fed. Cir. 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.\6\
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    \6\ Final Affirmative Countervailing Duty Determination: Certain 
Steel Products from Austria, 58 FR 37217, 37225 (July 9, 1993).
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    In accordance with the CAFC's finding, the Department developed a 
new change-in-ownership methodology, which was applied in a 
redetermination resulting from a remand order by the Court of 
International Trade (``CIT'') in Allegheny-Ludlum Corp. v. United 
States, No. 99-09-00566 (CIT August 15, 2000) (``Allegheny I''). See 
final Results of Redetermination Pursuant to Court Remand: Allegheny-
Ludlum Corp., et al v. United States (Dept. of Commerce, December 20, 
2000) (``Redetermination I''). In Allegheny I, the CIT reviewed the 
final determination which gave rise to the countervailing duty order 
covered by this review. In Redetermination I, the Department examined 
the privatization of Usinor and found that the pre-privatization 
subsidies continued to benefit subject merchandise exported to the 
United States after Usinor's privatization. Upon review of 
Redetermination I, the CIT again remanded the issue to the Department. 
See Allegheny Ludlum Corp. v. United States, 182 F. Supp. 2d 1357, 1369 
(CIT 2002) (``Allegheny II'').
    On June 3, 2002, the Department issued its second Results of 
Redetermination Pursuant to Court Remand: Allegheny Ludlum Corp., et 
al. v. United States (``Redetermination II''), which the CIT sustained 
on September 24, 2002. See Allegheny Ludlum Corp. v. United States, No. 
99-09-00566, 2002 Ct. Intl. Trade Lexis 114, Slip Op. 2002-114 
(September 24, 2002) (``The  Allegheny Decision''). The Allegheny 
Decision is currently on appeal at the CAFC. Usinor argues that the 
Allegheny Decision rejects as unlawful the change-in-ownership test 
applied by the Department in its Redetermination I. Pending a decision 
from the CAFC, however, we have continued to apply the same change-in-
ownership methodology employed in Redetermination I in these 
preliminary results.
    The first step under this 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.

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

[[Page 24924]]

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.'' According to 
Usinor's 2000 annual report, the government-owned Electricite de France 
continues to own 3.6 percent of Usinor's shares.
    In analyzing whether the producers of merchandise subject to review 
is the same business entity as pre-privatization Usinor, we have 
examined whether Usinor continued the same general business operations, 
retained production facilities, had a continuity of 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 present-day Usinor and 
continue to benefit the subject merchandise during the POR.
1. Continuity of General Business Operations
    Usinor has 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 beginning in 
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). See Usinor 12/19/2002 Questionnaire Response, Exhibit 6 
at 46. This same structure continued after Usinor's privatization in 
1995. Usinor's organizational chart during the original investigation 
shows the same three major products being produced by the same three 
subsidiaries. See Final Affirmative Countervailing Duty Determination: 
Stainless Steel Sheet and Strip in Coils from France, 64 FR 30774, 
30776 (June 8, 1999) (``SSSS from France'').
    In 1994 (prior to the privatization), flat products constituted 55 
percent of consolidated sales, while stainless and specialty products 
constituted 20 and 18 percent respectively. See Usinor 12/19/2002 
Questionnaire Response, Exhibit 6 at 47. In the years following 
privatization (1995-2000), flat carbon steels continued to account for 
between 49 and 58 percent of Usinor's consolidated net sales. See 
Stainless Steel Sheet and Strip in Coils from France; Preliminary 
Results of Countervailing Duty Administrative Review, 67 FR 31774, 
31776 (May 10, 2002) (``First Review Prelim''). Sales of stainless and 
alloy, and specialty steel accounted for between 23 and 25 percent, and 
between 19 and 21 percent, respectively, during the post-privatization 
years, 1995 through 1997. Since then, sales of stainless, alloy, and 
specialty steel have been combined in Usinor's annual report and a 
separate category has been reported for ``processing and 
distribution.'' The combined sales of stainless, alloy and specialty 
steel ranged from 21 to 28 percent of Usinor's consolidated net sales 
over the period 1998-2000, while processing and distribution ranged 
from 6 to 18 percent over the same period. See Id. In 1999, Usinor 
divested itself of its specialty steels business.
    We have also examined whether post-privatization Usinor held itself 
out as the continuation of the previous enterprise (e.g., by retaining 
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 and the construction 
industry was its second largest purchaser, accounting for approximately 
26 percent of Usinor's sales in 1994. See Usinor 12/19/2002 
Questionnaire Response, Exhibit 6, 17-18. In 1997 and 2000, the 
automobile industry was still Usinor's major customer (36 percent of 
Usinor's sales in 1997 and 38 percent in 2000). The construction 
industry has continued as the second largest purchaser: 23 percent in 
1997, and 15 percent in 2000. See First Review Prelim, 67 FR at 31777.
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. A 
comparison of the Prospectus for the 1995 privatization and Usinor's 
1997 Annual Report demonstrates that steel production facilities have 
remained intact. The company has 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. See 
Usinor 12/19/2002 Questionnaire Response, Exhibit 21 and First Review 
Prelim, 67 FR at 31777. 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. See 
First Review Prelim, 67 FR at 31777.
    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 
privatizaton 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 Tariff Act of 1930, as amended 
by the Uruguay Round Agreements Act, effective January 1, 1995 (``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 or 762 review; or (4) any other 
information placed on the record.

[[Page 24925]]

See section 776(b) of the Act; see also, 19 CFR 351.308(a), (b), and 
(c).
    Section 782(d) of the Act requires the Department to inform a 
respondent if 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, is timely, is verifiable, can 
serve as a reliable basis for reaching our determination, and if the 
party has cooperated to the best of its ability in providing responses 
to the Department's questionnaires, section 782(e) of the Act directs 
the Department not to decline to consider deficient submissions.
    In the present review, the GOF did not provide information 
regarding the specificity of benefits under certain programs included 
under Investment/Operating Subsidies reported by Usinor. Instead, the 
GOF responded that ``in view of the multiplicity of programs, the 
noncountervailability of several of them, and the small amounts 
involved, the GOF has not undertaken to provide the requested 
documentation.'' See GOF Questionnaire Response, dated December 19, 
2002, at 6-7. Similarly, the GOF was asked to provide this information 
in the investigation segment of this proceeding and elected not to do 
so. See SSSS from France, 64 FR at 30779-80. Thus, the GOF is aware of 
the specific information needed by the Department and apparently 
possesses responsive information, but has declined to provide it in 
response to our questionnaires.
    Given these circumstances, the Department preliminarily has 
determined to apply facts available, pursuant to section 776(a)(2)(A) 
of the Act. Further, we preliminarily find that an adverse inference is 
warranted in applying facts available because, as noted above, the GOF 
elected not to provide information which it could provide and, hence, 
has not acted to the best of its ability. Verification, if one is 
conducted, is not the appropriate means for gathering this information.
    Because the GOF did not provide information about these programs, 
including the distribution of benefits under the programs, the 
Department is unable to make specificity findings. Therefore, in 
applying adverse facts available, we preliminarily find that these 
programs are de facto specific. See section 771(5A)(D)(ii) of the Act. 
(Our analysis of the financial contribution and benefit under these 
programs is discussed below under ``Investment/Operating Subsidies.'')

Subsidies Valuation Information

Allocation Period

    Pursuant to 19 CFR 351.524(b), non-recurring benefits 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 stainless steel sheet and strip in coils, the IRS Tables 
prescribe an AUL of 15 years.
    To rebut the presumption in favor of the IRS tables, the 
challenging party must demonstrate 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, Usinor has calculated a company-specific AUL of 
12 years. See Usinor 12/19/2002 Questionnaire Response, Exhibit 26. We 
note, however, that the one allocable subsidy received by Usinor and 
attributed to Ugine, bonds issued by Fonds d'Intervention 
Sid[eacute]rurgique (steel intervention fund) (``FIS''), 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 SSSS from France 
(64 FR at 30778) and Final Affirmative Countervailing Duty 
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From 
France, 64 FR 73277, 73280 (December 29, 1999) (``French Plate''). 
Because the 14-year AUL was calculated using company-specific 
information and the information is more contemporaneous with the 
bestowal of the subsidy in question than the information underlying 
Usinor's 12-year calculation, we have continued to use the 14-year AUL 
to allocate the benefits of the FIS Bonds in this proceeding.
    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 subsides approved under a given program in a 
particular year to sales (total or export, as appropriate) in that 
year. If the amount of subsides is less than 0.5 percent of sales, the 
benefits are expensed in full in the year of receipt rather than 
allocated over the AUL period.

Equityworthiness and Creditworthiness

    In French Certain Steel and SSSS from France, we found Usinor to be 
unequityworthy from 1986 through 1988 and uncreditworthy from 1982 
through 1988. See French Certain Steel, 58 FR 37304, 37305; SSSS from 
France, 64 FR 30774, 30778. No new information has been presented in 
this review to warrant a reconsideration of these findings. Therefore, 
based upon these previous findings of unequityworthiness and 
uncreditworthiness, in this review, we continue to find Usinor 
unequityworthy and uncreditworthy from 1987 through 1988, the years 
relevant to this proceeding.

Benchmarks for Loans and Discount Rates

    As discussed above, we have determined that Usinor was 
uncreditorthy in 1988, the only year in which it received a 
countervailable subsidy which is being allocated over time.
    In accordance with 19 CFR 341.524(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 Service's: 
``Statistical Tables of Default Rates and Recovery Rates'' (February 
1998). For the commercial interest rate charged to creditworthy 
borrowers, we used the average of the following long-term interest 
rates: medium-term credit to 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

[[Page 24926]]

International Monetary Fund. 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 an average long-term interest rate developed in 
SSSC from France for 1989, and on Usinor's company's-specific borrowing 
rate for 1995.

I. Programs Preliminarily Found To Be Countervailable

A. FIS Bonds

    The 1981 Corrected Finance Law granted Usinor the authority to 
issue convertible bonds. In 1983, the FIS 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; SSSS from France, 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 as a matter of law 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. Finally, because Usinor was unequityworthy at the time of the 
infusions, we find that Usinor received benefit in the amount of the 
investments. See Section 771(5)(E)(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 find that a countervailable benefit is being 
bestowed on the subject merchandise. Because the final year of the 
benefit stream for the 1986 infusion was 1999, i.e., prior to this POR, 
we find that there is no countervailable benefit to the subject 
merchandise in this POR for the 1986 conversion. Thus, only the 1988 
equity infusion continues to provide a benefit in the POR.
    Pursuant to 19 CFR 351.507(c), we have treated the 1988 equity 
infusion as a non-recurring subsidy and allocated it over time 
according to 19 CFR 351.524(d). Because Usinor was uncreditworthy in 
1988 (see section above on ``Subsidies Valuation Information: 
Equityworthiness and Creditworthiness''), we used an uncreditorworthy 
discount rate to allocate the benefit of the equity infusion.
    In French Plate, we attributed separately to Usinor and GTS 
Industries S.A. their relative portions of the benefits from the equity 
infusion. See French Plate, 64 FR at 733282. 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 as described in the 
``Changes in Ownership'' section above.
    Dividing the POR benefit attributed to Usinor by Usinor's total 
sales of French-produced merchandise during the POR, we preliminarily 
find Usinor's net subsidy rate for this program to be 1.06 percent ad 
valorem.

B. Investment/Operating Subsidies

    During the period 1987 through the POR, 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 SSSS from France and French Plate, 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 
SSSS from France, 64 FR at 30779, 30788; French Plate, 64 FR at 73282. 
Additionally, in the First Review, the Department also found that 
funding provided under ECSC Article 55 was not countervailable. See 
First Review, 67 FR 62098, and accompanying ``Issues and Decision 
Memorandum,'' at Comment 5. Consistent with these previous findings, we 
have excluded these particular subsidies from the calculation of the 
benefit under this program.
    Other than the exclusions noted above, we preliminarily find 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 section 771(5)(E)(i) of the Act. Also, as 
discussed above under ``Use of Facts Available,'' we preliminarily find 
that these investment and operating subsidies are specific within the 
meaning of section 771(5A)(D)(ii) of the Act. Therefore, consistent 
with SSSS from France, 64 FR at 30779, and French Plate, 64 FR at 
73282, we preliminary find that these investment and operating 
subsidies are countervailable subsidies.
    The investment and operating subsidies provided through 2000 have 
already been determined to be less than 0.5 percent of Usinor's sales 
of French-produced merchandise in the relevant year. See SSSS from 
France, 64 FR at 30780; French Plate, 64 FR at 73283; and the First 
Review, 67 FR at 62098, and accompanying ``Issues and Decision 
Memorandum,'' at 3-4. Therefore, these benefits were expensed in the 
years of receipt, in accordance with 19 CFR 351.524(b)(2).
    To calculate the benefit received during the POR, we divided the 
subsidies received by Usinor in the POR by Usinor's total sales of 
French-produced merchandise during the POR. Accordingly, we 
preliminarily find Usinor's net subsidy rate for this program to be 
0.04 percent ad valorem.

C. Funding for Myosotis Project

    In SSSS from France, we explained that Usinor received grants and 
reimbursable advances from the GOF to fund the Myosotis project under 
three agreements. We found that the amounts received by Usinor between 
1989 and 1993 were properly expensed in the years of receipt and, 
hence, that there was no countervailable subsidy to the subject 
merchandise from these grants. We also found that, under the 1995 
agreement, Usinor received a reimbursable advance from the GOF in 
support of the Myosotis project in 1997. See SSSS from France, 64 FR at 
30780. In the prior review, Usinor reported that it received another 
advance in 1999 under the same 1995 agreement. The 1997 and 1999 
advances were to be repaid in 1999 and 2001, respectively. See First 
Review Prelim, 67 FR at 31779.
    In the instant review, Usinor reported that it recognized the 
entire 1999 advance as a grant during the POR. See Usinor 12/19/2002 
Questionnaire Response at 34. The GOF reported that Usinor made a 
partial repayment on the balance outstanding from the 1997 advance. See 
GOF 12/19/2002 Questionnaire Response at 9.
    As we established in the First Review Prelim, regardless of whether 
we treat the 1997 reimbursable advance as a

[[Page 24927]]

grant, which would have been expensed prior to the POR, or a zero-
interest long-term loan, which would yield a benefit of zero during the 
POR (when rounded to the nearest hundredth), we continue to find that 
the 1997 reimbursable advance does not confer a countervailable benefit 
on subject merchandise during the POR. See First Review Prelim, 67 FR 
31744, 31779.
    With regard to the conversion of the 1999 reimbursable advance into 
a grant during the POR, this conversion constitutes a financial 
contribution within the meaning of section 771(5)(D)(i) of the Act and 
confers a benefit in the amount of the grant under 19 CFR 351.504. The 
Department determined in SSSS from France that assistance to Usinor for 
the Myosotis Project was specific. See SSSS from France, 64 FR at 
30780. We have treated the benefit of the conversion as having occurred 
during the POR. We divided the total amount of the grant portion of the 
1999 advance by Usinor's total sales of French-produced sales during 
the POR (i.e., the year in which the 1999 reimbursable advance was 
converted to and approved as a grant). The result was less than 0.5 
percent. Therefore, we have expensed the entire amount of the converted 
1999 reimbursable advance (i.e., the grant amount) during the POR. See 
19 CFR 351.524(b)(2). To calculate the benefit, we divided the amount 
of the grant by Usinor's total sales of French-produced merchandise 
during the POR, consistent with the provisions of 19 CFR 351.504.
    Therefore, we preliminarily find Usinor's net subsidy rate for the 
2001 conversion of the 1999 reimbursable grant under this program to be 
0.01 percent ad valorem.

II. Programs Preliminarily Found To Be Not Countervailable

A. Loans With Special Characteristics (PACS)

    In SSSS from France, we determined that Usinor received a 
countervailable subsidy as a result of the GOF's 1986 conversions of 
PACS into common shares of Usinor. See SSSS from France, 64 FR at 
30779. Because the final year of the benefit stream for this subsidy 
was 1999, i.e., prior to this POR, we preliminarily find that there is 
no countervailable benefit to the subject merchandise in the POR.

B. Shareholders' Advances

    In SSSS from France, we determined that Usinor received a 
countervailable subsidy as a result of shareholder advances made by the 
GOF in 1982-1986. See SSSS from France, 64 FR at 30779. Because the 
final year of the benefit streams for these advances was 1999, i.e., 
prior to this POR, we preliminarily find that there is no 
countervailable benefit to the subject merchandise in the POR.

C. Electric Arc Furnace

    In SSSS from France, we explained that the GOF had agreed to 
provide Usinor with reimbursable advances to support the company's 
efforts to increase the efficiency of the melting process, the first 
stage in steel production. See SSSS from France, 64 FR at 30780. 
Because the first disbursements were not to be made until 1998, i.e., 
after the POI in SSSS from France, the Department found no benefit 
during the POI. See SSSS from France, 64 FR at 30780. In French Plate, 
the Department also found no benefit during the POI (1998), because the 
reimbursable advance was treated as a contingent liability loan and no 
payment would be due on a comparable commercial loan until 1999. See 
French Plate, 64 FR at 73284.
    In the present review, Usinor reported that it received 
reimbursable advances under this program in 1998 and 1999, and that the 
program was phased out in 1999 and 2000. See Usinor 12/19/2002 
Questionnaire Response at 35-36. These advances were approved in 1995, 
with repayments in 2002 and 2005, respectively. Usinor further reported 
that no new advances were received during the POR. See Usinor 12/19/
2002 Questionnaire Response at 36.
    We divided the total amount approved by the GOF for this project by 
Usinor's total sales of French-produced merchandise in 1995, the year 
the reimbursable advances were approved. The result was less than 0.5 
percent. Therefore, if these reimbursable advances were treated as 
grants, they would be expensed prior to the POR. See 19 CFR 
351.505(d)(2) and 351.524(b)(2). Alternatively, we calculated the 
possible benefit to Usinor if the reimbursable advances were treated as 
zero-interest long-term loans. See 19 CFR 351.505(d)(1). The benefit 
(when rounded to the nearest hundredth) is zero during the POR.
    Therefore, we have not analyzed these reimbursable advances further 
and preliminarily find that they do not confer a countervailable 
benefit on the subject merchandise during the POR.

D. Conditional Advances

    In SSSS from France, we explained that Usinor received a 
conditional advance from the GOF in connection with a project aimed at 
developing a new type of steel used in the production of catalytic 
converters. See SSSS from France, 64 FR at 30780. Payments were 
received by Usinor in 1992 and 1995. Repayment of the conditional 
advance was contingent upon sales of the product resulting from the 
project exceeding a set amount. We found that no repayment had been 
made and we treated the advance as a countervailable short-term, 
interest-free loan. In the present review, Usinor reported a balance 
outstanding in the POR and that it received no new assistance under 
this program. See Usinor 12/19/2002 Questionnaire Response at 32.
    Assuming the conditional advance was approved in either 1991 or 
1992, we divided the total amount received by Usinor's total sales of 
French-produced merchandise in each of those years. The result in both 
instances was less than 0.5 percent. Therefore, if the conditional 
advance were treated as a grant, it would have been expended prior to 
the POR. See 19 CFR 351.505(d). Alternatively, we have calculated the 
possible benefit to Usinor if the outstanding amount of the conditional 
advance were treated as a zero-interest long-term loan. See 19 CFR 
351.505(d)(1). The benefit (when rounded to the nearest hundredth) is 
zero during the POR.
    Therefore, we have not analyzed the conditional advance further and 
preliminarily find that it does not confer a countervailable benefit on 
the subject merchandise during the POR.

III. Programs Preliminary Found To Be Not Used

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

A. ESF Grants

    In SSSS from France and French Plate, we found that certain Usinor 
companies had received grants under the European Social Fund (``ESF'') 
for worker training, and that the grants provided countervailable 
subsidies. Normally, the Department treats benefits from worker 
training programs to be recurring. See CFR 351.524(c)(1). However, we 
have found in several cases that ESF grants relate to specific, 
individual projects that require separate approval and, hence, should 
be treated as non-recurring grants. See, e.g., SSSS from France, 64 FR 
at 30781; Final Affirmative Countervailing Duty Determination: Certain 
Stainless Steel Wire Rod from Italy, 63 FR 40474, 40488 (July 29, 
1998).

[[Page 24928]]

    Because ESF grants are non-recurring subsidies and potentially 
allocable over time, we reviewed SSSS from France and French Plate 
regarding past disbursements to Usinor under this program. In SSSS from 
France, we determined that ESF grants received in 1995 and 1997 were 
less than 0.5 percent of Ugine's sales in those years. Hence, the 
benefits of those ESF grants were expensed in the years of receipt. See 
SSSS from France, 64 FR 30781. In French Plate, an ESF grant received 
in 1998 by CLI, a Usinor subsidiary, was also expensed in the year of 
receipt. In the First Review, we determined that the program was not 
used in 2000. See First Review, 67 FR at 62098, and the accompanying 
``Isseus and Decision Memorandum,'' at ``Programs Determined To Be Not 
Used.'' Therefore, we find that ESF grants received by Usinor and its 
affiliates prior to the POR do not confer a countervailable benefit on 
the subject merchandise during the POR. Moreover, in the present 
review, Usinor reported that it did not receive any additional ESF 
grants during the POR. See 12/19/2002 Response at 36.

B. Export Financing under Natexis Banque Programs

C. DATAR Regional Development Grants (PATs)

D. DATAR 50 Percent Taxing Scheme

E. DATAR Tax Exemption for Industrial Expansion

F. DATAR Tax Credit for Companies Located in Special Investment Zone

G. DATAR Tax Credits for Research

H. GOF Guarantees

I. Long-term Loans from CFDI

J. Resider I and II Programs

K. Youthstart

L. ECSC Article 54 Loans

M. ECSC Article 56(2)(b) Redeployment/Readaptation Aid

N. ERDF Grants

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for Usinor. For the period January 1, 2001, 
through December 31, 2001, we preliminarily find Usinor's net subsidy 
rate to be 1.11 percent. The calculations will be disclosed to the 
interested parties in accordance with section 351.224(b) of the 
regulations.
    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct the U.S. Bureau 
of Customs and Border Protection (``BCBP'') to collect cash deposits of 
estimated countervailing duties at the rate of 1.11 percent on the 
f.o.b. value of all shipments of the subject merchandise from Usinor 
and its affiliates that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of the final results of 
this administrative review.
    For companies that were not named in our notice initiating this 
administrative review, we will instruct BCBP to collect cash deposits 
of estimated countervailing duties at the most recent company-specific 
or country-wide rate applicable to the company. Accordingly, the cash 
deposit rates that will be applied to non-reviewed companies covered by 
this order are those established in the Amended Final Determination: 
Stainless Steel Sheet and Strip in Coils From the Republic of Korea; 
and Notice of Countervailing Duty Orders: Stainless Steel Sheet and 
Strip in Coils From France, Italy, and the Republic of Korea, 64 FR 
42923 (August 6, 1999). These rates shall apply to all non-reviewed 
companies until a review of a company assigned these rates is 
requested.
    While the countervailing duty deposit rate for Usinor and its 
affiliates may change as a result of this administrative review, we 
have been enjoined from liquidating any entries of the subject 
merchandise after August 6, 1999. Consequently, we do not intend to 
issue liquidation instructions for these entries until such time as the 
injunction, issued on December 22, 1999, is lifted.

Public Comment

    Interested parties may submit written arguments in case briefs 
within 30 days of the date of publication of this notice. See 19 CFR 
351.309(c)(ii). Rebuttal briefs, limited to issues raised in case 
briefs, may be filed not later than five days after the date of filing 
the case briefs. 19 CFR 351.309(d)(1). Parties who submit briefs in 
this proceeding should provide a summary of the arguments not to exceed 
five pages and a table of statutes, regulations, and cases cited. 
Copies of case briefs and rebuttal briefs must be served on interested 
parties in accordance with 19 CFR 351.303(f).
    Interested parties may request a hearing within 30 days after the 
date of publication of this notice. Any hearing, if requested, 
ordinarily will be held two days after the scheduled date for 
submission of rebuttal briefs. 19 CFR 351.310(c).
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under 19 CFR 351.309(c)(ii), are due. 19 CFR 
351.305(b).
    The Department will publish a notice of the final results of this 
administrative review within 120 days from the publication of these 
preliminary results.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: May 5, 2003.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration
[FR Doc. 03-11620 Filed 5-8-03; 8:45 am]
BILLING CODE 3510-DS-M