[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