67 FR 9696, March 4, 2002

DEPARTMENT OF COMMERCE

International Trade Administration

[C-437-805]
 
Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination: Sulfanilic Acid from Hungary

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

ACTION: Notice of preliminary affirmative countervailing duty 
determination and alignment of final countervailing duty determination 
with final antidumping duty determination.

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SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are being provided to producers or exporters 
of sulfanilic acid from Hungary. For information on the estimated 
countervailing duty rates, see infra section on ``Suspension of 
Liquidation.'' We are also aligning the final determination in this 
investigation with the final determination in the companion antidumping 
duty investigation of sulfanilic acid from Hungary.

EFFECTIVE DATE: March 4, 2002.

FOR FURTHER INFORMATION CONTACT: Melani Miller, Office of Antidumping/
Countervailing Duty Enforcement, Group 1, Import Administration, U.S. 
Department of Commerce, Room 3099, 14th Street and Constitution Avenue, 
N.W., Washington, D.C. 20230; telephone (202) 482-0116.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

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

Petitioner

    The petitioner in this investigation is Nation Ford Chemical 
Company (``the petitioner'').

Case History

    The following events have occurred since the publication of the 
notice of initiation in the Federal Register. See Notice of Initiation 
of Countervailing Duty Investigation: Sulfanilic Acid from Hungary, 66 
FR 54229 (October 26, 2001) (``Initiation Notice'').
    On October 22, 2001, we issued countervailing duty questionnaires 
to the Government of Hungary (``GOH'') and to Nitrokemia 2000 Rt. 
(``Nitrokemia 2000''), the only producer/exporter of sulfanilic acid in 
Hungary.
    On November 13, 2001, the petitioner filed a new subsidy allegation 
and also provided new information to supplement its previous 
uncreditworthiness allegation (which the Department had previously 
determined was unsupported). We addressed the issues raised in the 
petitioner's letter in the December 14, 2001 memorandum to Richard W. 
Moreland entitled ``New Subsidy Allegations'' (``New Allegations 
Memorandum''), which is on file in the Department's Central Records 
Unit in Room B-099 of the main Department building.
    On November 28, 2001, we received a response to the Department's 
questionnaire from the GOH. On December 17, 2001, the Department issued 
a supplemental questionnaire to

[[Page 9697]]

the GOH; this supplemental questionnaire also included questions 
regarding the new allegations contained in the petitioner's November 13 
letter. On December 18, 2001, the GOH submitted a supplement to its 
original questionnaire response. The GOH submitted a response to the 
Department's supplemental and new programs questionnaire on January 31, 
2002.
    On December 4, 2001, we postponed the preliminary determination in 
this investigation until February 25, 2002. See Sulfanilic Acid from 
Hungary: Postponement of Preliminary Determination of Countervailing 
Duty Investigation, 66 FR 63674 (December 10, 2001).
    Also on December 4, the Department sent letters to all of the 
parties in this proceeding instructing them how to properly file 
submissions with the Department. We did so, in part, because 1) on 
November 28, 2001, Nitrokemia 2000 improperly transmitted to the 
Department, via e-mail, its questionnaire response, but did not 
properly submit a hard-copy response pursuant to 19 CFR 351.303, and 2) 
many of the parties in this proceeding were not serving their 
submissions on other interested parties as required by 19 CFR 351.303. 
This December 4 letter also indicated that Nitrokemia 2000's 
questionnaire response needed to be filed according to the Department's 
filing requirements in order for it to be accepted by the Department.
    On December 10, 2001, Nitrokemia 2000 responded via e-mail to this 
letter, but did not indicate whether it was planning to properly submit 
its questionnaire response. Therefore, on December 11, 2001, we sent a 
second letter to Nitrokemia 2000 notifying Nitrokemia 2000 that it 
needed to properly file its questionnaire response by December 18, 
2001. (All e-mails that were received from Nitrokemia 2000 were 
attached for the record to the subsequent responses that were sent by 
the Department to Nitrokemia 2000.) On December 18, 2001, we received 
another e-mail from Nitrokemia 2000 which stated that Nitrokemia 2000 
would be unable to respond to the Department's questionnaire by 
December 18, 2001 because its manufacturing facilities had been shut 
down for the holidays. Also on December 18, the Department issued a new 
program questionnaire to Nitrokemia 2000 which included questions 
related to the new allegations, noted above.
    On December 21, 2001, we sent a third letter to Nitrokemia 2000 
with respect to the filing of its questionnaire response. In this 
letter, although Nitrokemia 2000 had not actually asked for an 
extension of time to respond to the Department's questionnaire, we gave 
Nitrokemia one last extension until January 14, 2002 to respond to the 
Department's questionnaire. Additionally, we also gave Nitrokemia 2000 
an extension until that same date to respond to the Department's 
December 18, 2001 new program questionnaire.
    On January 11, 2002, Nitrokemia 2000 submitted its questionnaire 
response. Subsequent to this submission, on January 14, 2002, 
Nitrokemia 2000 sent the Department an e-mail indicating that it did 
not intend to submit a response to the Department's new program 
questionnaire, which was due to the Department on January 14. On 
January 16, 2002, we issued a supplemental questionnaire to Nitrokemia 
2000. In this supplemental questionnaire, we gave Nitrokemia 2000 
another opportunity to respond to the new programs questionnaire, 
extending its submission deadline to January 28, 2002. On January 28, 
2002, Nitrokemia 2000 submitted its responses to both the Department's 
supplemental questionnaire and the new programs questionnaire.
    On January 31, 2002, the petitioner submitted comments on the 
questionnaire responses filed by both Nitrokemia 2000 and the GOH. 
Nitrokemia 2000 responded to these comments on February 14, 2002.
    On February 12 and February 19, 2002, the petitioner submitted 
comments on the upcoming preliminary determination.
    Finally, on February 15, 2002, the petitioner requested that the 
Department align the final determination in this investigation with the 
final determination in the companion antidumping duty investigation of 
sulfanilic acid from Hungary. For further information, see infra 
section on ``Alignment with Final Antidumping Duty Determination.''

Period of Investigation

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

Scope of Investigation

    Imports covered by this investigation are all grades of sulfanilic 
acid, which include technical (or crude) sulfanilic acid, refined (or 
purified) sulfanilic acid and sodium salt of sulfanilic acid.
    Sulfanilic acid is a synthetic organic chemical produced from the 
direct sulfonation of aniline and sulfuric acid. Sulfanilic acid is 
used as a raw material in the production of optical brighteners, food 
colors, specialty dyes and concrete additives. The principal 
differences between the grades are the undesirable quantities of 
residual aniline and alkali insoluble materials present in the 
sulfanilic acid. All grades are available as dry, free flowing powders.
    Technical sulfanilic acid, classifiable under the subheading 
2921.42.22 of Harmonized Tariff Schedule (``HTS''), contains 96 percent 
minimum sulfanilic acid, 1.0 percent maximum aniline, and 1.0 percent 
maximum alkali insoluble materials. Refined sulfanilic acid, also 
classifiable under 2921.42.22 of the HTS, contains 98 percent minimum 
sulfanilic acid, 0.5 percent maximum aniline and 0.25 percent maximum 
alkali insoluble materials.
    Sodium salt (sodium sulfanilate), classifiable under HTS subheading 
2921.42.90, is a powder, granular or crystalline material which 
contains 75 percent minimum equivalent sulfanilic acid, 0.5 percent 
maximum aniline based on the equivalent sulfanilic acid content, and 
0.25 percent maximum alkali insoluble materials based on the equivalent 
sulfanilic acid content.
    Although the HTS subheadings are provided for convenience and 
customs purposes, the written description of the scope of this 
investigation is dispositive.

Injury Test

    Because Hungary is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (``ITC'') is required to determine whether imports of the 
subject merchandise from Hungary materially injure, or threaten 
material injury to, a U.S. industry. On November 13, 2001, the ITC made 
its preliminary determination that there is a reasonable indication 
that an industry in the United States is being materially injured by 
reason of imports from Hungary of the subject merchandise. See 
Sulfanilic Acid from Hungary and Portugal, 66 FR 57988 (November 19, 
2001).

Alignment with Final Antidumping Duty Determination

    On February 15, 2002, we received a request from the petitioner to 
postpone the final determination in this investigation to coincide with 
the final determination in the companion antidumping (``AD'') 
investigation of sulfanilic acid from Hungary.
    The companion AD investigation and this countervailing duty 
investigation were initiated on the same date and have the same scope. 
See Initiation Notice and Notice of Initiation of Antidumping Duty 
Investigations:

[[Page 9698]]

 Sulfanilic Acid from Hungary and Portugal, 66 FR 54214, 54218 (October 
26, 2001). Therefore, in accordance with section 705(a)(1) of the Act, 
we are aligning the final determination in this investigation with the 
final determination in the companion AD investigation of sulfanilic 
acid from Hungary.

Change in Ownership

    On February 2, 2000, the U.S. Court of Appeals for the Federal 
Circuit (``CAFC'') in Delverde Srl v. United States, 202 F.3d 1360, 
1365 (Fed. Cir. 2000), reh'g en banc denied (June 20, 2000) (``Delverde 
III''), rejected the Department's change-in-ownership methodology as 
explained in the General Issues Appendix of the Final Affirmative 
Countervailing Duty Determination: Certain Steel Products from Austria, 
58 FR 37217, 37225 (July 9, 1993) (``GIA''). The CAFC held that ``the 
Tariff Act, as amended, does not allow Commerce to presume conclusively 
that the subsidies granted to the former owner of Delverde's corporate 
assets automatically 'passed through' to Delverde following the sale. 
Rather, the Tariff Act requires that Commerce make such a determination 
by examining the particular facts and circumstances of the sale and 
determining whether Delverde directly or indirectly received both a 
financial contribution and benefit from the government.'' Delverde III, 
202 F.3d at 1364.
    Pursuant to the CAFC finding, the Department developed a new 
change-in-ownership methodology following the CAFC's decision in 
Delverde III. This new methodology was first announced in a remand 
determination on December 4, 2000, and was also applied in Grain-
Oriented Electrical Steel from Italy; Final Results of Countervailing 
Duty Administrative Review, 66 FR 2885 (January 12, 2001). Likewise, we 
have applied this new methodology in analyzing the changes in ownership 
in this preliminary determination.
    The first step under this new methodology is to determine whether 
the legal person (entity) to which the subsidies were given is, in 
fact, distinct from the legal person that produced the subject 
merchandise exported to the United States. If we determine the two 
persons are distinct, we then analyze whether a subsidy has been 
provided to the purchasing entity as a result of the change-in-
ownership transaction. If we find, however, that the original subsidy 
recipient and the current producer/exporter are the same person, then 
that person benefits from the original subsidies, and its exports are 
subject to countervailing duties to offset those subsidies. In other 
words, we will determine that a ``financial contribution'' and a 
``benefit'' have been received by the ``person'' under investigation. 
Assuming that the original subsidy has not been fully amortized under 
the Department's normal allocation methodology as of the POI, the 
Department would then continue to countervail the remaining benefits of 
that subsidy.
    In making the ``person'' determination, where appropriate and 
applicable, we analyze factors such as (1) continuity of general 
business operations, including whether the successor holds itself out 
as the continuation of the previous enterprise, as may be indicated, 
for example, by use of the same name, (2) continuity of production 
facilities, (3) continuity of assets and liabilities, and (4) retention 
of personnel. No single factor will necessarily provide a dispositive 
indication of any change in the entity under analysis. Instead, the 
Department will generally consider the post-sale person to be the same 
person as the pre-sale person if, based on the totality of the factors 
considered, we determine the entity in question can be considered a 
continuous business entity because it was operated in substantially the 
same manner before and after the change in ownership.
    There are two potential changes in ownership to be examined in this 
investigation: the creation of Nitrokemia 2000 in late 1997-1998, and 
Nitrokemia 2000's privatization in November/December 2000.
    With respect to Nitrokemia 2000's creation in 1997-1998, we have 
preliminarily determined that no change-in-ownership analysis is 
required. According to record information, in November 1997, Nitrokemia 
Rt., a state-owned company, began an internal reorganization based on a 
decision by the GOH. As part of this reorganization, many of Nitrokemia 
Rt.'s production facilities, including its sulfanilic acid production 
facilities, were transferred to a newly created fully-owned subsidiary 
of Nitrokemia Rt., Nitrokemia 2000. Then, in May of 1998, Nitrokemia 
Rt. transferred Nitrokemia 2000 to the Hungarian State Privatization 
and Holding Company (``APV''), the Hungarian government entity 
responsible for privatizing state-owned shares and assets, in order for 
it to be sold to private investors.
    According to Department practice regarding privatizations, sales 
``must involve unrelated parties, one of which must be privately-
owned.'' (See GIA, 58 FR at 37266, ``Types of Restructuring 
'Transactions' and the Allocation of Previously Received Subsidies.'') 
Because all of the parties involved in this transaction were related in 
that they were all owned by the GOH, we do not conclude from the 
evidence on the record that we should conduct our ``person'' analysis 
with respect to the 1997-1998 transactions.
    With respect to Nitrokemia 2000's privatization, in November/
December 2000, 85 percent of Nitrokemia 2000 was sold to Nitrokemia 
Invest Kft., a group of Nitrokemia 2000 managers and executives, while 
the remaining 15 percent was offered for sale to company workers with 
the contingency that, if the company workers did not want the shares, 
the remaining 15 percent would be purchased by Nitrokemia Invest Kft. 
Record evidence indicates that Nitrokemia Invest Kft. was the sole 
bidder to respond to the call for tenders by APV. APV's call for tender 
specified that any prospective bidders must pay for the purchase of the 
company in cash only, and that bidders must agree to release APV from 
its role as guarantor of Nitrokemia 2000's Hungarian forint (``HUF'') 2 
billion loan. The tender offer also required bidders to not reduce 
employment at Nitrokemia 2000 by more than 10 percent within the first 
three years after purchasing the company. Finally, the tender offer 
required the buyer and Nitrokemia 2000 to ``tolerate and facilitate, 
according to their ability, the continuation and earliest possible 
completion of the environmental clean-up work taking place on the 
Nitrokemia Industrial site, as well as the earliest possible 
determination of the normal environmental state of the industrial 
site.''
    As noted above, in making the ``person'' determination, we analyze 
factors such as the continuity of general business operations, the 
continuity of production facilities, the continuity of assets and 
liabilities, and the retention of personnel. According to both the GOH 
and Nitrokemia 2000, the sale of Nitrokemia 2000 at the end of 2000 
resulted in no changes in any of these aspects of Nitrokemia 2000. 
Therefore, for the preliminary determination, we are attributing 
subsidies received by Nitrokemia 2000 prior to its privatization to 
Nitrokemia's sales during all of the POI.

Use of Facts Available

    Section 776(a)(2) of the Act provides that ``if an interested party 
or any other person (A) withholds information that has been requested 
by the [Department] under this title, (B) fails to provide such 
information by the deadlines for

[[Page 9699]]

submission of the information or in the form and manner requested, 
subject to subsections (c)(1) and (e) of section 782, (C) significantly 
impedes a proceeding under this title, or (D) provides such information 
but the information cannot be verified as provided in section 782(i), 
the [Department] shall, subject to section 782(d), use the facts 
otherwise available in reaching the applicable determination under this 
title.''
    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 it determines that a party has failed to 
cooperate to the best of its ability.
    In their responses, both the GOH and Nitrokemia 2000 failed to 
answer many of the Department's numerous and repeated questions 
relating to the alleged forgiveness of environmental liabilities and 
the subsequent transfer of Nitrokemia 2000 to APV for privatization. 
For instance, in our original questionnaire, we asked both the GOH and 
Nitrokemia 2000 to describe the process by which Nitrokemia 2000 and 
Nitrokemia Rt. were divided, how it was determined which company would 
receive the assets and liabilities, how the finances of the companies 
were divided, and the amount of the outstanding environmental 
liabilities. We also asked the respondents to submit financial 
statements and/or annual reports for both Nitrokemia 2000 and 
Nitrokemia Rt. Neither the GOH nor Nitrokemia 2000 provided the 
required information, stating only that Nitrokemia 2000 was responsible 
for any liabilities generated from its current production. The same 
questions were also left unanswered in supplemental questionnaires, 
despite several extensions being granted to the respondents and the 
respondents having almost a month to reply to the supplemental 
questions.
    We also asked the parties to respond to several questions relating 
to the creditworthiness of Nitrokemia 2000 in 1998. Neither respondent 
answered these questions, even after we provided another opportunity to 
Nitrokemia 2000 to answer the questions after it originally stated that 
it would not respond to the creditworthiness questionnaire at all.
    Moreover, as noted in the ``Case History'' section, above, although 
the GOH provided a prompt and timely response to the Department's 
original questionnaire, Nitrokemia 2000 did not properly file its 
questionnaire response until almost a month and a half after the 
questionnaire response was due. Although Nitrokemia 2000 never formally 
requested an extension, the Department gave Nitrokemia 2000 three 
subsequent opportunities to provide its response to the questionnaire. 
Additionally, the GOH in its responses repeatedly indicated that only 
the company had much of the requested information, even though the GOH 
owned Nitrokemia 2000 through its state privatization company, APV, 
through almost the end of the POI.
    Based on the above discussion, we preliminarily determine that the 
respondents withheld information requested by the Department relating 
to the alleged forgiveness of environmental liabilities and Nitrokemia 
2000's creditworthiness in 1998 pursuant to section 776(a)(2) of the 
Act. Moreover, we preliminarily determine that an adverse inference is 
justified with respect to the alleged forgiveness of environmental 
liabilities and Nitrokemia 2000's creditworthiness in 1998 pursuant to 
776(b) of the Act because the respondents, as discussed above, have 
failed to cooperate to the best of their abilities.
    With respect to Nitrokemia 2000's creditworthiness in 1998, as 
adverse facts available, we preliminarily determine that Nitrokemia 
2000 was uncreditworthy in 1998. See, infra, further discussion in the 
``Creditworthiness'' section.
    As for the forgiveness of the environmental liabilities, as adverse 
facts available, we preliminarily determine that a financial 
contribution exists pursuant to section 771(5)(D)(i) in the form of 
debt forgiveness, with the benefit being the portion of the debt 
forgiveness attributable to Nitrokemia 2000 during the POI pursuant to 
19 CFR 351.508. As adverse facts available, we determined that the 
total amount of the liability is HUF 7.5 billion, the average amount of 
the HUF 5 to 10 billion estimates provided in the petition. See, infra, 
``Analysis of Programs'' section for a more detailed discussion of the 
attribution of the benefit amount to Nitrokemia 2000 and the benefit 
calculation itself.
    When employing an adverse inference, the statute indicates the 
Department may rely upon information derived from, inter alia, the 
petition. In doing so, however, the Department should ``to the extent 
practicable'' corroborate the information from independent sources 
reasonably at its disposal. See Statement of Administrative Action 
accompanying H.R. 5110 (H.R. Doc. No. 103-316) (1994), at 870 regarding 
use of ``secondary'' information. In this case, with respect to 
Nitrokemia 2000's creditworthiness in 1998, several independent 
newspaper articles included in the petition indicate that Nitrokemia 
was not in sound financial condition in 1998. Moreover, Nitrokemia 
Rt.'s 1998 financial statements and financial ratios show that the 
company was losing money at that time, and that the company was not in 
good financial condition. (See New Allegations Memorandum for a further 
discussion of Nitrokemia's creditworthiness analysis.)
    As for Nitrokemia's environmental liabilities, we found several 
independent news articles (in addition to the news articles and study 
done by the U.S. Foreign Commercial Service in Hungary, which were both 
included in the petition) that show that the amount of environmental 
liabilities are approximately HUF 5 to 10 billion. Therefore, we 
determine that the facts available information in question has 
probative value, and that we may appropriately rely upon it.

Creditworthiness

    The examination of creditworthiness is an attempt to determine if 
the company in question could obtain long-term financing from 
conventional commercial sources. See 19 CFR 351.505(a)(4). According to 
19 CFR 351.505(a)(4)(i), the Department will generally consider a firm 
to be uncreditworthy if, based on information available at the time of 
the government-provided loan, the firm could not have obtained long-
term loans from conventional commercial sources. In making this 
determination, according to 19 CFR 351.505(a)(4)(i), the Department 
normally examines the following four types of information: 1) the 
receipt by the firm of comparable commercial long-term loans; 2) 
present and past indicators of the firm's financial health; 3) present 
and past indicators of the firm's ability to meet its costs and fixed 
financial obligations with its cash flow; and 4) evidence of the firm's 
future financial position. If a firm has taken out long-term loans from 
commercial sources, this will normally be dispositive of the firm's 
creditworthiness. However, if the firm is government-owned, the 
existence of commercial borrowings is not dispositive of the firm's 
creditworthiness. This is because, in the Department's view, in the 
case of a government-owned firm, a bank is likely to consider that the 
government will repay the loan in the event of a default. See 
Countervailing Duties; Final Rule, 63 FR 65348, 65367 (November 28, 
1998).
    In this investigation, we are examining Nitrokemia 2000's

[[Page 9700]]

creditworthiness in 1998. Neither the GOH nor Nitrokemia 2000 provided 
a response to the Department's uncreditworthiness questions. Thus, as 
discussed, supra, in the ``Use of Facts Available'' section, we 
preliminarily determine, as facts available, that Nitrokemia 2000 was 
uncreditworthy in 1998.

Subsidies Valuation Information

Allocation Period

    Pursuant to 19 CFR 351.524(b), non-recurring subsidies are 
allocated over a period corresponding to the AUL of the renewable 
physical assets used to produce the subject merchandise. 19 CFR 
351.524(d)(2) 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 sulfanilic acid, 
the IRS Tables prescribe an AUL of 11 years. Neither Nitrokemia 2000 
nor any other interested party disputed this allocation period. 
Therefore, we have used the 11-year allocation period for Nitrokemia 
2000.

Benchmarks for Discount Rates and Loans

    Because we found Nitrokemia 2000 to be uncreditworthy in 1998 (see, 
supra, section on ``Creditworthiness''), we have calculated the long-
term uncreditworthy discount rate for 1998 in accordance with 19 CFR 
351.524(d)(3)(ii).
    In accordance with 19 CFR 351.524(d)(3)(ii), the discount rate for 
companies considered uncreditworthy is the rate described in 19 CFR 
351.505(a)(3)(iii). To calculate that rate, the Department must specify 
values for four variables: (1) the probability of default by an 
uncreditworthy company; (2) the probability of default by a 
creditworthy company; (3) the long-term interest rate for creditworthy 
borrowers; and (4) the term of the debt.
    For the probability of default by an uncreditworthy company, we 
have used the average cumulative default rates reported for the Caa- to 
C- rated category of companies as published in Moody's Investors 
Service, ``Historical Default Rates of Corporate Bond Issuers, 1920-
1997'' (February 1998). For the probability of default by creditworthy 
companies, we used the cumulative default rates for investment grade 
bonds as published in Moody's Investor Services: ``Statistical Tables 
of Default Rates and Recovery Rates'' (February 1998). For the 
commercial interest rate charged to creditworthy borrowers, we used the 
weighted-average rate on fixed-rate long-term enterprise sector loans 
in Hungary as reported by the National Bank of Hungary. For the term of 
the debt, we used the average cumulative default rates for both 
uncreditworthy and creditworthy companies based on an 11-year term, 
since the AUL in this investigation is 11 years.

Analysis of Programs

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

I. Program Preliminarily Determined to Be Countervailable

Forgiveness of Environmental Liabilities
    According to record evidence, Nitrokemia 2000 was created in 
November 1997 as a fully-owned subsidiary of Nitrokemia Rt. through an 
internal reorganization. Record evidence indicates that, as part of 
this reorganization, Nitrokemia 2000 was given responsibility for 
Nitrokemia Rt.'s viable operations, including its sulfanilic acid 
operations. Nitrokemia Rt. continued to be responsible for the 
company's poorly-performing operations, as well as all of the company's 
previous environmental liabilities generated by the plants' operations 
prior to the division. Information on the record from the petition 
indicates that these liabilities were valued between HUF 5 billion and 
10 billion.
    Then, in May 1998, Nitrokemia 2000 was transferred from Nitrokemia 
Rt. to APV in order for the GOH to begin preparations for 
privatization. We preliminarily determine that it was at this point 
that Nitrokemia 2000 was completely removed from the environmental 
responsibilities that had been generated in the past. Although the 
split from Nitrokemia Rt. had begun in November 1997, because 
Nitrokemia was a fully-owned subsidiary of Nitrokemia Rt. until May 
1998, Nitrokemia 2000 was still potentially impacted by these 
environmental liabilities while Nitrokemia Rt. was still its parent 
company. However, once Nitrokemia 2000 was transferred to APV, the 
split between Nitrokemia Rt. and Nitrokemia 2000 was completed, and 
Nitrokemia 2000 was removed from its previous environmental 
liabilities.
    As discussed, supra, in the ``Use of Facts Available'' section, we 
have, as facts available, preliminarily determined that the removal of 
Nitrokemia 2000's responsibility for any environmental clean-up 
liabilities is a countervailable subsidy. Specifically, as adverse 
facts available, we preliminarily determine that a financial 
contribution exists pursuant to section 771(5)(D)(i) in the form of 
debt forgiveness, with the benefit being the portion of the debt 
forgiveness that is attributable to Nitrokemia 2000. As adverse facts 
available, we determined that the appropriate amount of the total 
environmental forgiveness is HUF 7.5 billion, the average amount of the 
estimates provided in the petition. Finally, we also preliminarily 
determine that the debt forgiveness is specific pursuant to section 
771(5A)(D) because it was limited to Nitrokemia.
    According to Nitrokemia 2000's and Nitrokemia Rt.'s 1998 financial 
statements (which were submitted by the petitioner along with 
Nitrokemia 2000's 1999 and 2000 annual reports and Nitrokemia Rt.'s 
financial statements), following the split of the two companies, 
Nitrokemia 2000 received 53 percent of the assets of the former 
company. Therefore, in order to determine the amount of the benefit 
attributable to Nitrokemia 2000, we attributed 53 percent of the total 
environmental liabilities, noted above as HUF 7.5 billion, to 
Nitrokemia 2000.
    This methodology is consistent with the methodology we used in the 
Final Affirmative Countervailing Duty Determination: Stainless Steel 
Plate in Coils from Italy, 64 FR 15508, 15513 (March 31, 1999) (``SSPC 
Italy''). In SSPC Italy, we found that when ILVA S.p.A. was demerged 
into three separate entities, only one of the three entities that were 
created in the split received the former ILVA's liabilities, leaving 
the other two entities free of ILVA's former debt. We determined that 
the forgiveness of debt in that instance was a countervailable subsidy 
to the two companies that did not receive any of the liabilities, and 
based the amount of the benefit attributable to the company under 
investigation in that case on the relative asset allocations of the 
companies that were formed from ILVA's assets.
    We treated the debt forgiveness to Nitrokemia 2000 as a non-
recurring grant consistent with 19 CFR 351.524 because it was a one-
time, extraordinary event. Because Nitrokemia was uncreditworthy in 
1998, the year in which the debt forgiveness took place, we used the 
uncreditworthy discount rate described in the ``Subsidies Valuation 
Information'' section, above. Finally, we divided the amount allocated 
to the POI from this debt forgiveness attributable to Nitrokemia 2000 
by Nitrokemia 2000's total sales during the POI. Accordingly, we 
preliminarily determine that a countervailable benefit of 10.69 percent 
ad valorem exists for Nitrokemia 2000.

[[Page 9701]]

II. Program Preliminarily Determined to Not Be Countervailable

Restructuring Assistance Provided to Nitrokemia 2000
    Nitrokemia 2000's 1998 financial statements show that its issued 
capital at the time of its inception was HUF 4,653,360,000, which is 
HUF 2 billion more than the issued capital transferred from Nitrokemia 
Rt. according to Nitrokemia Rt's financial statements.
    In its response, Nitrokemia 2000 reported that this HUF 2 billion 
increase over the invested capital provided by Nitrokemia Rt. was the 
result of cash received through a bond offering at its inception, and 
not a cash infusion by the GOH as alleged by the petitioner. Therefore, 
because there is no evidence of a financial contribution from the GOH 
as described in section 771(5)(D) of the Act, we preliminarily 
determine that this increase in Nitrokemia 2000's invested capital in 
1998 is not a countervailable subsidy pursuant to section 771(5) of the 
Act.
    However, in their responses, both the GOH and Nitrokemia 2000 
report that Nitrokemia 2000 received a government guarantee on a loan 
that was outstanding during the POI. Specifically, according to 
Nitrokemia 2000's financial statements and annual reports, Nitrokemia 
2000 received a government guarantee for an HUF 2 billion loan that it 
took out in January 2000. This loan was repaid as of December 19, 2000 
when the company was privatized pursuant to the requirements put forth 
in the APV tender.
    While we do not currently have sufficient information to further 
analyze this loan guarantee for the preliminary determination, pursuant 
to section 775(1) of the Act, we will be requesting additional 
information on the nature of this loan guarantee from the GOH and 
Nitrokemia 2000 prior to the final determination.

Verification

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

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we 
calculated an individual rate for the only company under investigation, 
Nitrokemia 2000.
    With respect to the ``all others'' rate, section 705(c)(5)(A)(ii) 
of the Act provides that if the countervailable subsidy rates 
established for all exporters and producers individually investigated 
are determined entirely under section 776 of the Act, the Department 
may use any reasonable method to establish an ``all others'' rate for 
exporters and producers not individually investigated. In this case, 
although the rate for the only investigated company is based on facts 
available under section 776 of the Act, there is no other information 
on the record upon which we could determine an ``all others'' rate. As 
a result, in accordance with sections 777A(e)(2)(B) and 
705(c)(5)(A)(ii), we have used the rate for Nitrokemia 2000 as the 
``all others'' rate.
    We preliminarily determine the total estimated net countervailable 
subsidy rate for Nitrokemia 2000 to be the following:

------------------------------------------------------------------------
                                                                   Net
                       Producer/Exporter                         Subsidy
                                                                  Rate
------------------------------------------------------------------------
Nitrokemia 2000 Rt............................................    10.69%
All Others....................................................    10.69%
------------------------------------------------------------------------

    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all unliquidated entries 
of sulfanilic acid from Hungary for Nitrokemia 2000 and for any non-
investigated exporters that entered, or were withdrawn from warehouse, 
for consumption on or after the date of the publication of this notice 
in the Federal Register, and to require a cash deposit or bond for such 
entries of the merchandise in the amounts indicated above. This 
suspension will remain in effect until further notice. However, this 
suspension of liquidation may not remain in effect for more than four 
months pursuant to section 703(d)(3) of the Act.

ITC Notification

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

Public Comment

    Case briefs for this investigation must be submitted no later than 
one week after the issuance of the last verification report. Rebuttal 
briefs must be filed within five days after the deadline for submission 
of case briefs. A list of authorities relied upon, a table of contents, 
and an executive summary of issues should accompany any briefs 
submitted to the Department. Executive summaries should be limited to 
five pages total, including footnotes.
    Section 774 of the Act provides that the Department will hold a 
public hearing to afford interested parties an opportunity to comment 
on arguments raised in case or rebuttal briefs, provided that such a 
hearing is requested by an interested party. If a request for a hearing 
is made in this investigation, the hearing will tentatively be held two 
days after the deadline for submission of the rebuttal briefs at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) the party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
Oral presentations will be limited to issues raised in the briefs.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    February 25, 2002
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-5103 Filed 3-1-02; 8:45 am]
BILLING CODE 3510-DS-S