64 FR 40415, July 26, 1999

DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-827]


Preliminary Affirmative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination: Certain Cut-to-Length Carbon-Quality
Steel Plate From Italy

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

EFFECTIVE DATE: July 26, 1999.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Michael Grossman,
Office of CVD/AD Enforcement II, Import Administration, U.S. Department
of Commerce, Room 4012, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone (202) 482-2786.

PRELIMINARY DETERMINATION: The Department of Commerce (the Department)
preliminarily determines that countervailable subsidies are being
provided to certain producers and exporters of certain cut-to-length
carbon-quality steel plate from Italy. For information on the estimated
countervailing duty rates, please see the ``Suspension of Liquidation''
section of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

    The petition in this investigation was filed by Bethlehem Steel
Corporation, U.S. Steel Group, a Unit of USX Corporation, Gulf States,
Inc., IPSCO Steel Inc., and the United Steelworkers of America (the
petitioners).

Case History

    Since the publication of the notice of initiation in the Federal
Register (see Notice of Initiation of Countervailing Duty
Investigations: Certain Cut-To-Length Carbon-Quality Steel Plate from
France, India, Indonesia, Italy, and the Republic of Korea, 64 FR 12996
(March 16, 1999) (Initiation Notice)), the following events have
occurred: On March 19, 1999, we issued countervailing duty
questionnaires to the Government of Italy (GOI), the European
Commission (EC), and the producers/exporters of the subject merchandise
(CTL plate). On April 21, 1999, we postponed the preliminary
determination of this investigation until no later than July 16, 1999.
See Certain Cut-To-Length Carbon-Quality Steel Plate from France,
India, Indonesia, Italy, and the Republic of Korea: Postponement of
Time Limit for Preliminary Determination of Countervailing Duty
Investigations, 64 FR 23057 (April 29, 1999).
    We received responses to our initial questionnaires from the EC on
May 6, 1999, and the GOI on May 10 and 28, 1999. Palini & Bertoli
S.p.A. (Palini & Bertoli), a producer of the subject merchandise which
had exports to the United States in 1998, submitted its questionnaire
response on May 11, 1999. ILVA Lamiere e Tubi S.p.A. and ILVA S.p.A.
(collectively referred to as ILVA/ILT) submitted their joint
questionnaire response on May 13, 1999. (ILT produced the subject
merchandise which was exported to the United States by ILVA in 1998.)
On May 25, 1999, we issued a supplemental questionnaire to Palini &
Bertoli, and received the company's response on June 14, 1999. On June
1, 1999, we issued supplemental questionnaires to the EC, GOI, and
ILVA/ILT. The supplemental questionnaire responses were submitted by
the EC on June 15, 1999, by ILVA/ILT on June 21, 1999, and by the GOI
on June 22, 1999. We also issued supplemental questionnaires on June
22, 1999, to Palini & Bertoli, and June 29, 1999, to the EC, GOI, and
ILVA/ILT. The responses were submitted on July 6, 1999, by Palini &
Bertoli and the EC, on July 8 and 9, 1999, by the GOI, and July 9,
1999, by ILVA/ILT. On July 13 and 14, 1999, ILVA/ILT submitted
additional information on the record.
    In its supplemental response, Palini & Bertoli indicated that the
company received benefits under two regional government laws during the
POI, i.e., Law 25/65 and Law 30/84. The Department did not receive a
request by petitioners to examine these potential benefits, hence we
did not initiate on these laws in the Initiation Notice. Law 25/65,
adopted by the Regional Government of Friuli-Venezia Giulia, provides
interest contributions on loans taken by small- and medium-sized
enterprises for the construction, enlargement, or technical renovation
of industrial plants throughout the region. Palini & Bertoli received
interest contributions during the POI on one loan contracted in 1990.
Palini & Bertoli also received a capital grant under Law 30/84 of the
Regional Government of Friuli-Venezia Giulia. Regional Law 30/84
provides capital grants to industrial and handicraft enterprises
intending to open new productive sites or to restructure existing
plants within certain mountainous areas of the region. Due to the fact
that this information was brought to the Department's attention just
prior to the preliminary determination, the Department is unable to
make a determination on the countervailability of these programs at
this time. More specifically, the Department does not have sufficient
information to perform an appropriate specificity analysis of the above
mentioned programs. We will request additional and clarifying
information with regard to these programs from Palini & Bertoli and the
Regional Government of Friuli-Venezia Giulia, and will present our
findings in the Final Determination of this investigation.

Scope of Investigation

    The products covered by this scope are certain hot-rolled carbon-
quality steel: (1) universal mill plates (i.e., flat-rolled products
rolled on four faces or in a closed box pass, of a width exceeding 150
mm but not exceeding 1250 mm, and of a nominal or actual thickness of
not less than 4 mm, which are cut-to-length (not in coils) and without
patterns in relief), of iron or non-alloy-quality steel; and (2) flat-
rolled products, hot-rolled, of a nominal or actual thickness of 4.75
mm or more and of a width which exceeds 150 mm and measures at least
twice the thickness, and which are cut-to-length (not in coils).
    Steel products to be included in this scope are of rectangular,
square, circular or other shape and of rectangular or non-rectangular
cross-section where such non-rectangular cross-section is achieved
subsequent to the rolling process (i.e., products which have been
``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Steel products that meet the noted
physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this
scope. Also, specifically included in this scope are high strength, low
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium,
titanium, vanadium, and molybdenum.
    Steel products to be included in this scope, regardless of
Harmonized Tariff Schedule of the United States (HTSUS) definitions,
are products in which: (1) Iron predominates, by weight, over each of
the other contained elements, (2) the carbon content is two percent or
less, by weight, and (3) none of the elements listed below is equal to
or exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or

[[Page 40417]]

0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.

    All products that meet the written physical description, and in
which the chemistry quantities do not equal or exceed any one of the
levels listed above, are within the scope of these investigations
unless otherwise specifically excluded. The following products are
specifically excluded from these investigations: (1) Products clad,
plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades
(formerly AISI grades) of series 2300 and above; (3) products made to
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon
manganese steel or silicon electric steel.
    The merchandise subject to these investigations is classified in
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and
Customs purposes, the written description of the merchandise under
investigation is dispositive.

Scope Comments

    As stated in our notice of initiation, we set aside a period for
parties to raise issues regarding product coverage. In particular, we
sought comments on the specific levels of alloying elements set out in
the description below, the clarity of grades and specifications
excluded from the scope, and the physical and chemical description of
the product coverage.
    On March 29, 1999, Usinor, a respondent in the French antidumping
and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd.
and Pohang Iron and Steel Co., Ltd., respondents in the Korean
antidumping and countervailing duty investigations (collectively the
Korean respondents), filed comments regarding the scope of the
investigations. On April 14, 1999, the petitioners responded to
Usinor's and the Korean respondents' comments. In addition, on May 17,
1999, ILVA/ILT, a respondent in the Italian antidumping and
countervailing duty investigations, requested guidance on whether
certain products are within the scope of these investigations.
    Usinor requested that the Department modify the scope to exclude:
(1) Plate that is cut to non-rectangular shapes or that has a total
final weight of less than 200 kilograms; and (2) steel that is 4'' or
thicker and which is certified for use in high-pressure, nuclear or
other technical applications; and (3) floor plate (i.e., plate with
``patterns in relief'') made from hot-rolled coil. Further, Usinor
requested that the Department provide clarification of scope coverage
with respect to what it argues are over-inclusive HTSUS subheadings
included in the scope language.
    The Department has not modified the scope of these investigations
because the current language reflects the product coverage requested by
the petitioners, and Usinor's products meet the product description.
With respect to Usinor's clarification request, we do not agree that
the scope language requires further elucidation with respect to product
coverage under the HTSUS. As indicated in the scope section of every
Department antidumping and countervailing duty proceeding, the HTSUS
subheadings are provided for convenience and Customs purposes only; the
written description of the merchandise under investigation or review is
dispositive.
    The Korean respondents requested confirmation whether the maximum
alloy percentages listed in the scope language are definitive with
respect to covered HSLA steels.
    At this time, no party has presented any evidence to suggest that
these maximum alloy percentages are inappropriate. Therefore, we have
not adjusted the scope language. As in all proceedings, questions as to
whether or not a specific product is covered by the scope should be
timely raised with Department officials.
    ILVA/ILT requested guidance on whether certain merchandise produced
from billets is within the scope of the current CTL plate
investigations. According to ILVA/ILT, the billets are converted into
wide flats and bar products (a type of long product). ILVA/ILT notes
that one of the long products, when rolled, has a thickness range that
falls within the scope of these investigations. However, according to
ILVA/ILT, the greatest possible width of these long products would only
slightly overlap the narrowest category of width covered by the scope
of the investigations. Finally, ILVA/ILT states that these products
have different production processes and properties than merchandise
covered by the scope of the investigations and therefore are not
covered by the scope of the investigations.
    As ILVA/ILT itself acknowledges, the particular products in
question appear to fall within the parameters of the scope and,
therefore, we are treating them as covered merchandise for purposes of
these investigations.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
regulations codified at 19 CFR part 351 (1998) and to the substantive
countervailing duty regulations published in the Federal Register on
November 25, 1998 (63 FR 65348) (CVD Regulations).

Injury Test

    Because Italy 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 Italy materially injure, or threaten material
injury to, a U.S. industry. On April 8, 1999, the ITC published its
preliminary determination that there is a reasonable indication that an
industry in the United States is being materially injured, or
threatened with material injury, by reason of imports from Italy of the
subject merchandise (see Certain Cut-to-Length Steel Plate From the
Czech Republic, France, India, Indonesia, Italy, Japan, Korea, and
Macedonia; Determinations, 64 FR 17198 (April 8, 1999)).

Alignment With Final Antidumping Duty Determination

    On July 2, 1999, the petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion

[[Page 40418]]

antidumping duty investigation. See Initiation of Antidumping Duty
Investigations: Certain Cut-To-Length Carbon-Quality Steel Plate from
the Czech Republic, France, India, Indonesia, Italy, Japan, Republic of
Korea, and the Former Yugoslav Republic of Macedonia, 64 FR 12959
(March 16, 1999). In accordance with section 705(a)(1) of the Act, we
are aligning the final determination in this investigation with the
final determinations in the antidumping investigations of certain cut-
to-length carbon-quality steel plate.

Period of Investigation

    The period of investigation for which we are measuring subsidies
(the POI) is calendar year 1998.

Corporate History of ILVA/ ILT <SUP>1</SUP>

    Prior to 1981, the Italian government holding company Istituto per
la Ricostruzione Industriale (IRI), controlled Italy's nationalized
steel industry through its wholly-owned subsidiary, Finsider S.p.A
(Finsider). The steel operations of Finsider were subdivided into three
main companies: Italsider (carbon steel); Terni (stainless and special
steel); and Dalmine (pipe and tube). Italsider was the sector leader
and the primary producer of the subject merchandise. In 1981, the GOI
implemented a restructuring plan, and Finsider was restructured into
several operating companies including Nuova Italsider (carbon steel
flat products); Terni (speciality flat steels); Nuova Sias (special
long products); and other steel product divisions. In the course of the
1981 Restructuring Plan, Italsider transferred all of its assets, with
the exception of certain plants, to Nuova Italsider. Italsider became a
one-company holding company with Nuova Italsider's stock as its primary
asset.
---------------------------------------------------------------------------

    \1\ As discussed in this section, ILVA/ILT's carbon steel
predecessor companies are: Nuova Italsider (1981-1987), Italsider
(1987-1988), ILVA S.p.A. (1989-1993), and ILP (1994-1996).
---------------------------------------------------------------------------

    During 1987, Finsider restructured three of its main operating
companies: Nuova Italsider, Deltasider, and Terni. Nuova Italsider
spun-off its assets to Italsider and transferred its shares in
Italsider to Finsider. Nuova Italsider ceased operations after this
divestment and Finsider had direct ownership of Italsider. Upon
completion of the 1987 restructuring, Italsider re-emerged as the steel
sector's carbon steel products producer.
    Later in 1987, Finsider and its main operating companies
(Italsider, TAS, and Nuova Deltasider) were placed in liquidation and
the GOI subsequently implemented the 1988 Restructuring Plan. The goal
of the 1988 Restructuring Plan was to restructure Finsider and its
operating companies, assembling the group's most productive assets into
a new operating company, ILVA S.p.A. (ILVA S.p.A. or (old) ILVA), which
began operations on January 1, 1989. The 1988 Restructuring Plan, like
the 1981 plan, was submitted and approved by the EC. In accordance with
the plan, ILVA S.p.A. took over some of the assets and liabilities of
the liquidating companies, and Finsider closed certain facilities to
comply with the EC's requirements. With respect to Italsider, part of
the company's liabilities and the majority of its viable assets,
including all the assets associated with the production of carbon steel
flat-rolled products, were transferred to ILVA S.p.A. on January 1,
1989. Non-productive assets and a substantial amount of liabilities
were left behind with Finsider and the liquidating operating companies.
    The facilities retained by ILVA S.p.A were organized into four
primary operating groups: Carbon steel flat products, stainless steel
flat products, stainless steel long products, and seamless pipe and
tube. In 1992, ILVA Lamiere e Tubi (ILT), a carbon steel flat products
operation, was created as a wholly-owned subsidiary of ILVA S.p.A. ILVA
S.p.A. was also the majority owner of a large number of separately
incorporated subsidiaries. Some of these subsidiaries produced various
types of steel products. Others constituted service centers, trading
companies, and an electric power company, among others. ILVA S.p.A.,
together with its subsidiaries, constituted the ILVA Group. The ILVA
Group was wholly-owned by IRI.
    Although, ILVA S.p.A. was profitable in 1989 and 1990, the company
encountered financial difficulties in 1991, and became insolvent by
1993. In October 1993, ILVA S.p.A. entered into liquidation and became
known as ILVA Residua (a.k.a., ILVA in Liquidation). In December 1993,
IRI initiated the splitting of ILVA S.p.A.'s main productive assets
into two new companies: ILVA Laminati Piani (carbon steel flat
products) (ILP) and Acciai Speciali Terni (AST) (speciality and
stainless steel flat products). On December 31, 1993, ILP and AST
became separately incorporated firms in advance of privatization. ILT,
the carbon flat steel products operation, was transferred to ILP as its
wholly-owned subsidiary. The remainder of ILVA S.p.A.'s productive
assets and existing liabilities, along with much of the redundant
workforce, was placed in ILVA Residua.
    On January 1, 1994, ILP was formally established as a separate
corporation. In 1995, 100 percent of ILP was sold through a competitive
public tender managed by IRI with the assistance of Istituto Mobiliare
Italiano (IMI). The sale of ILP was executed through a share purchase
agreement between IRI and a consortium of investors led by Riva Acciaio
S.p.A. (RIVA) and investment companies. The contract of sale was signed
on March 16, 1995, and all shares of ILP were transferred to the
consortium on April 28, 1995. As of that date, the GOI no longer
maintained any ownership interest in ILP or had any ownership interest
in any of ILP's new owners.
    On January 1, 1997, RIVA changed the name of ILP to ILVA S.p.A
(creating the ``new'' ILVA, referred to hereafter as ILVA or (new)
ILVA). ILVA continues to wholly-own ILT. Within RIVA's corporate
structure, ILT, at its Taranto Works facility, produces the subject
merchandise, which is exported to the United States. ILVA, with the
assistance of ILVA Commerciale S.p.A. (ICO), a sales company wholly-
owned by ILVA, is responsible for selling and exporting the subject
merchandise to the United States and other markets.
    As of 1998, RIVA owns and/or controls 82.0 percent of ILVA and two
foreign-incorporated investment companies own the remaining 18.0
percent of ILVA.
    According to ILVA/ILT, Sidercomit Taranto C.S. Lamiere S.r.l.
(Sidercomit) was created in 1992, as an indirect subsidiary of (old)
ILVA. Sidercomit became an operating unit within (new) ILVA in 1997,
and currently operates service centers for the distribution of
merchandise, including the subject merchandise for ILVA/ILT. Any
benefits to Sidercomit under programs that have preliminarily been
found countervailable have been mentioned separately within those
program sections below.

Corporate History of Palini & Bertoli

    Palini & Bertoli, a 100 percent privately-owned corporation, was
incorporated in December 1963. Palini & Bertoli has never been part of
the Italian state-owned steel industry.

Change in Ownership

    In the General Issues Appendix (GIA), appended to the Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Austria, 58 FR 37217, 37226 (July 9, 1993) (Certain Steel from
Austria), we applied a new methodology with respect to the treatment of
subsidies received prior to the sale of a government-owned

[[Page 40419]]

company to a private entity (i.e., privatization), or the spinning-off
(i.e., sale) of a productive unit from a government-owned company to a
private entity.
    Under this methodology, we estimate the portion of the purchase
price attributable to prior subsidies. We do this by first dividing the
sold company's subsidies by the company's net worth for each year
during the period beginning with the earliest point at which non-
recurring subsidies would be attributable to the POI and ending one
year prior to the sale of the company. We then take the simple average
of these ratios. This averaged ratio serves as a reasonable estimate of
the percent that subsidies constitute of the overall value of the
company. Next, we multiply this ratio by the purchase price to derive
the portion of the purchase price attributable to the payment of prior
subsidies. Finally, we reduce the benefit streams of the prior
subsidies by the ratio of the repayment amount to the net present value
of all remaining benefits at the time the company is sold.
    With respect to the spin-off of a productive unit, consistent with
the Department's methodology set out above, we analyze the sale of a
productive unit to determine what portion of the sales price of the
productive unit can be attributable to the repayment of prior
subsidies. To perform this calculation, we first determine the amount
of the seller's subsidies that the spun-off productive unit could
potentially take with it. To calculate this amount, we divide the value
of the assets of the spun-off unit by the value of the assets of the
company selling the unit. We then apply this ratio to the net present
value of the seller's remaining subsidies. The result of this
calculation yields the amount of remaining subsidies attributable to
the spun off productive unit. We next estimate the portion of the
purchase price going towards repayment of prior subsidies in accordance
with the methodology set out above, and deduct it from the maximum
amount of subsidies that could be attributable to the spun-off
productive unit.

Use of Facts Available

    Both the GOI and ILVA/ILT failed to fully respond to the
Department's questionnaires concerning the program ``Debt Forgiveness:
1981 Restructuring Plan.'' Section 776(a)(2) of the Act requires the
use of facts available when an interested party withholds information
that has been requested by the Department, or when an interested party
fails to provide the information requested in a timely manner and in
the form required. In such cases, the Department must use the facts
otherwise available in reaching the applicable determination. Because
the GOI and ILVA/ILT failed to submit the information that was
specifically requested by the Department, we have based our preliminary
determination for this program on the facts available. In addition, the
Department finds that by not providing the requested information,
respondents have failed to cooperate to the best of their abilities.
    In accordance with section 776(b) of the Act, the Department may
use an inference that is adverse to the interests of that party in
selecting from among the facts otherwise available when the party has
failed to cooperate by not acting to the best of its ability to comply
with a request for information. Such adverse inference may include
reliance on information derived from (1) the petition; (2) a final
determination in a countervailing duty or an antidumping investigation;
(3) any previous administrative review, new shipper review, expedited
antidumping review, section 753 review, or section 762 review; or (4)
any other information placed on the record. See 19 CFR 351.308(c). In
the absence of information from the GOI and ILVA/ILT, we consider the
petition, as well as our findings from the final determination of
Certain Steel from Italy to be appropriate bases for a facts available
countervailing duty rate calculation.
    The Statement of Administrative Action accompanying the URAA
clarifies that information from the petition and prior segments of the
proceeding is ``secondary information.'' See Statement of
Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316)
(1994) (SAA), at 870. If the Department relies on secondary information
as facts available, section 776(c) of the Act provides that the
Department shall, to the extent practicable, corroborate such
information using independent sources reasonably at its disposal. The
SAA further provides that to corroborate secondary information means
simply that the Department will satisfy itself that the secondary
information to be used has probative value. However, where
corroboration is not practicable, the Department may use uncorroborated
information. With respect to the program for which we did not receive
complete information from the respondents, the secondary information
was corroborated through exhibits (i.e., financial statements) attached
to the petition. The financial transactions discussed within Finsider's
1984 and 1985 financial statements confirm that the GOI engaged in
transactions which are tantamount to the assumption of debt and debt
forgiveness. Based on such review of the transactions discussed in the
financial statements, we find that the secondary information (i.e., the
petition and Certain Steel from Italy) has probative value and,
therefore, the information regarding the debt forgiveness provided
under the 1981 Restructuring Plan has been corroborated.

Claims for ``Green Light'' Subsidy Treatment

    Section 771(5B) of the Act describes subsidies that are non-
countervailable, the so-called ``green light'' subsidies. Among these
are subsidies to disadvantaged regions. The GOI has requested that
certain of their regional subsidies be considered non-countervailable
under the green light provisions of section 771(5B).
    The GOI has maintained a system of ``extraordinary intervention''
in southern Italy since the 1950's, authorizing aid to the
disadvantaged region. Over time, various laws were passed, including
Decree 218/78, relating to the extraordinary intervention in the South.
In 1986, Law 64/86 was passed in order to consolidate all laws relating
to the extraordinary intervention in the south into one development
policy. Tax exemptions under Decree 218/78, for which the GOI has
requested green light treatment, is considered part of Law 64/86 for
this reason.
    In determining whether a specific subsidy should be accorded green
light status, section 771(5B)(C) of the Act establishes the threshold
that the subsidy be provided pursuant to a general framework of
regional development, i.e., must be part of an internally consistent
and generally applicable regional development policy. The region must
be considered disadvantaged on the basis of neutral and objective
criteria which do not favor certain regions beyond what is appropriate
for the elimination or reduction of regional disparities within this
framework. In Certain Pasta from Italy, 61 FR at 30307, the Department
determined that the GOI did not perform a systematic analysis, using
neutral and objective criteria, in order to identify the regions which
would receive regional development assistance under Law 64/86. There is
no evidence on the record of this investigation that the GOI performed
this necessary analysis. While detailed analysis may have been done by
the EC with respect to its own regional development policy

[[Page 40420]]

concerning Italy, there is no indication that the GOI undertook the
same or similar efforts on a national level.
    In addition, the Act outlines that a subsidy program cannot provide
more aid than is appropriate for reduction of regional disparities and
must include ceilings on the amount of assistance for each project.
There is no evidence on the record that the GOI has given any
consideration to a limit on the amount of assistance that could be
awarded with regard to the program in question. Furthermore, there is
no evidence that the GOI may have been concerned about awarding
potentially disproportionate amounts to particular enterprises or
industries.
    Based on this analysis, we preliminarily determine that subsidies
received under this program do not meet the standard for green light
treatment. Our treatment of the benefits provided under this program is
discussed below in the ``Programs Determined To Be Countervailable''
section of our notice.

Subsidies Valuation Information

Allocation Period

    Section 351.524(d)(2) of the CVD Regulations states that we will
presume the allocation period for non-recurring subsidies to be the
average useful life (AUL) of renewable physical assets for the industry
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class
Life Asset Depreciation Range System and updated by the Department of
Treasury. The presumption will apply unless a party claims and
establishes that these tables do not reasonably reflect the AUL of the
renewable physical assets for the company or industry under
investigation, and the party can establish that the difference between
the company-specific or country-wide AUL for the industry under
investigation is significant.
    On June 21, 1999, ILVA/ILT submitted to the Department four tables
illustrating its company-specific AUL calculations for (old) ILVA, ILP,
ILT, and (new) ILVA, both separately and in combination. Based upon our
analysis of the data submitted by ILVA/ILT regarding the AUL of its
assets, we preliminarily determine that the calculation which takes
into consideration all producers of the subject merchandise over the
past 10 years is the most appropriate AUL calculation. However, because
this calculation does not yield a company-specific AUL which is
significantly different from the AUL listed in the IRS tables, we are
using the 15 year AUL as reported in the IRS tables to allocate non-
recurring subsidies under investigation for ILVA/ILT in the preliminary
calculations.

Equityworthiness

    In measuring the benefit from a government equity infusion, in
accordance with Sec. 351.507 (a)(2) of the Department's CVD
Regulations, the Department compares the price paid by the government
for the equity to actual private investor prices, if such prices exist.
According to Sec. 351.507(a)(3) of the Department's CVD Regulations,
where actual private investor prices are unavailable, the Department
will determine whether the firm was unequityworthy at the time of the
equity infusion. In this case, private investor prices were
unavailable. Therefore, our review of the record has not led us to
change our finding from prior investigations, in which we found ILVA/
ILT's predecessor companies, Nuova Italsider and (old) ILVA,
unequityworthy from 1984 through 1988, and from 1991 through 1992. See,
e.g., Final Affirmative Countervailing Duty Determinations: Certain
Steel Products from Italy, 58 FR 37327, 37328 (July 9, 1993) (Certain
Steel from Italy); Final Affirmative Countervailing Duty Determination:
Certain Stainless Steel Wire Rod from Italy, 63 FR 40,474, 40,477 (July
29, 1998) (Wire Rod from Italy); and Final Affirmative Countervailing
Duty Determination: Stainless Steel Sheet and Strip in Coils from
Italy, 64 FR 30624, 30627 (June 8, 1999) (Sheet and Strip from Italy).
    Section 351.507(a)(3) of the Department's CVD Regulations provides
that a determination that a firm is unequityworthy constitutes a
determination that the equity infusion was inconsistent with usual
investment practices of private investors. The Department will then
apply the methodology described in Sec. 351.507(a)(6) of the
regulations, and treat the equity infusion as a grant. Use of the grant
methodology for equity infusions into an unequityworthy company is
based on the premise that an unequityworthiness finding by the
Department is tantamount to saying that the company could not have
attracted investment capital from a reasonable investor in the infusion
year based on the available information.

Creditworthiness

    When the Department examines whether a company is creditworthy, it
is essentially attempting to determine if the company in question could
obtain commercial financing at commonly available interest rates. See,
e.g., Final Affirmative Countervailing Duty Determinations: Certain
Steel Products from France, 58 FR 37304 (July 9, 1993), and Final
Affirmative Countervailing Duty Determination: Steel Wire Rod from
Venezuela, 62 FR 55014 (October 21, 1997). The Department will consider
a firm to be uncreditworthy if it is determined that, based on
information available at the time of the government-provided loan, the
firm could not have obtained a long-term loan from conventional
sources. See Sec. 351.505(a)(4)(i) of the CVD Regulations.
    Italsider, Nuova Italsider, and (old) ILVA were found to be
uncreditworthy from 1977 through 1993. See Certain Steel from Italy, 58
FR at 37328-29, Wire Rod from Italy, 63 FR at 40477, and Sheet and
Strip from Italy, 64 FR at 30627. No new information has been presented
in this investigation that would lead us to reconsider these findings.
Therefore, consistent with our past practice, we continue to find
Italsider, Nuova Italsider, and (old) ILVA uncreditworthy from 1977
through 1993. We did not analyze ILP's, (new) ILVA's, or ILT's
creditworthiness in the years 1994 through 1998, because the companies
did not negotiate new loans with the GOI or EC during these years.

Benchmarks for Long-Term Loans and Discount Rates

    Consistent with the Department's finding in Wire Rod from Italy, 63
FR at 40477 and Sheet and Strip from Italy, 64 FR at 30626-30627, we
have based our discount rates on the Italian Bankers' Association (ABI)
rates. The ABI rate represents a long-term interest rate provided to a
bank's most preferred customers with established low-risk credit
histories. In calculating the interest rate applicable to a borrower,
commercial banks typically add a spread ranging from 0.55 percent to
4.0 percent onto the ABI rate, which is determined by the company's
financial health.
    Additionally, information on the record indicates that the
published ABI rates do not include amounts for fees, commissions, and
other borrowing expenses. While we do not have information on the
expenses that would be applied to long-term commercial loans, the GOI
supplied information on the borrowing expenses on overdraft loans for
1997, as an approximation of expenses on long-term commercial loans.
This information shows that expenses on overdraft loans range from 6.0
to 11.0 percent of interest charged. Such expenses, along with the
applied spread, raise the effective interest rate

[[Page 40421]]

that a company would pay. Because it is the Department's practice to
use effective interest rates, where possible, we are including an
amount for these expenses in the calculation of our effective benchmark
rates. See Sec. 351.505(a)(1) of the CVD Regulations. Therefore, we
have added the average of the spread (i.e., 2.28 percent) and borrowing
expenses (i.e., 8.5 percent of the interest charged) to the yearly ABI
rates to calculate the effective discount rates.
    For the years in which ILVA/ILT or their predecessor companies were
uncreditworthy (see Creditworthiness section above), we calculated the
discount rates in accordance with the formula for constructing a long-
term interest rate benchmark for uncreditworthy companies as stated in
section 351.505(a)(3)(iii) of the CVD Regulations. This formula
requires values for the probability of default by uncreditworthy and
creditworthy companies. For the probability of default by an
uncreditworthy company, we relied on 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 average
cumulative default rates reported for the Aaa to Baa-rated categories
of companies as reported in this study.<SUP>2</SUP> For non-recurring
subsidies, the average cumulative default rates for both uncreditworthy
and creditworthy companies were based on a 15 year term, since all of
ILVA/ILT's allocable subsidies were based on this allocation period.
---------------------------------------------------------------------------

    \2\ We note that since publication of the CVD Regulations,
Moody's Investors Service no longer reports default rates for Caa to
C-rated category of companies. Therefore for the calculation of
uncreditworthy interest rates, we will continue to rely on the
default rates as reported in Moody Investor Service's publication
dated February 1998 (at Exhibit 28).
---------------------------------------------------------------------------

    In addition, ILVA/ILT had two long-term, fixed-rate loans under
ECSC Article 54 outstanding during the POI, each denominated in U.S.
dollars. Therefore, we have selected a U.S. dollar-based interest rate
as our benchmark. See Sec. 351.505(a)(2)(i) of the CVD Regulations.
Consistent with Wire Rod from Italy, 63 FR at 40486, we have used as
our benchmark the average yield to maturity on selected long-term
corporate bonds as reported by the U.S. Federal Reserve, since both of
these loans were denominated in U.S. dollars. We used these rates since
we were unable to find a long-term borrowing rate for loans denominated
in U.S. dollars in Italy. Because ILVA was uncreditworthy in the year
these loans were contracted, we calculated the uncreditworthy benchmark
rates as per Sec. 351.505(a)(3)(iii) of the CVD Regulations.

I. Programs Determined To Be Countervailable

Government of Italy Programs
A. Equity Infusions to Nuova Italsider and (old) ILVA \3\
---------------------------------------------------------------------------

    \3\ In the Initiation Notice, these equity infusions were
separately listed as ``Equity Infusions into Italsider/Nuova
Italsider'' and ``Equity Infusions into ILVA.''
---------------------------------------------------------------------------

    The GOI, through IRI, provided new equity capital to Nuova
Italsider or (old) ILVA in every year from 1984 through 1992, except in
1987, 1989, and 1990. We preliminarily determine that these equity
infusions constitute countervailable subsidies within the meaning of
section 771(5)(B)(i) of the Act. These equity infusions constitute
financial contributions, as described in section 771(5)(D)(i) of the
Act. Because they were not consistent with the usual investment
practices of private investors (see Equityworthiness section above),
the equity infusions confer a benefit within the meaning of section
771(5)(E)(i) of the Act. Because these equity infusions were limited to
Finsider and its operating companies, Nuova Italsider and (old) ILVA,
we preliminarily determine that they are specific within the meaning of
section 771(5A)(D)(iii) of the Act.
    We have treated these equity infusions as non-recurring subsidies
given in the year the infusion was received because each required a
separate authorization. We allocated the equity infusions over a 15
year AUL. Because Nuova Italsider and (old) ILVA were uncreditworthy in
the years the equity infusions were received, we constructed
uncreditworthy discount rates to allocate the benefits over time. See
``Subsidies Valuation Information'' section, above.
    For equity infusions originally provided to Nuova Italsider, a
predecessor company that produced carbon steel plate, we examined these
equity infusions as though they had flowed directly through (old) ILVA
to ILP when ILP took the carbon steel flat product assets out of (old)
ILVA. Accordingly, we did not apportion to the other operations of
(old) ILVA any part of the equity infusions originally provided
directly to Nuova Italsider. While we acknowledge that it would be our
preference to look at equity infusions into (old) ILVA as a whole and
then apportion an amount to ILP when it was spun-off from (old) ILVA,
we find our approach in this case to be the most feasible since
information on equity infusions provided to the non-carbon steel
operations of (old) ILVA is not available. For the equity infusions to
(old) ILVA, however, we did apportion these by asset value to all (old)
ILVA operations in determining the amount applicable to ILP.
    We applied the repayment portion of our change in ownership
methodology to all of the equity infusions described above to determine
the subsidy allocable to ILP after its privatization. We divided this
amount by ILVA/ILT's total consolidated sales during the POI. On this
basis, we preliminarily determine the net countervailable subsidy to be
2.76 percent ad valorem for ILVA/ILT. Palini & Bertoli did not receive
any equity infusions from the GOI.
B. Debt Forgiveness: 1981 Restructuring Plan
    The GOI reported that the objective of the 1981 Restructuring Plan
was to redress the economic and financial difficulties the iron and
steel industry was realizing in the early 1980's. The GOI stated that
this plan, which extended to 1985, due to the prolonged crisis within
the sector, envisaged financial interventions to aid in the recovery of
the Finsider group. As discussed above in the ``Use of Facts
Available'' section, the GOI and ILVA/ILT failed to submit complete
information in regard to the assistance provided under the 1981
Restructuring Plan. Therefore, based on the facts available, we
preliminarily determine that certain financial transactions conducted
in association with the 1981 Restructuring Plan are countervailable
subsidies.
    Following Italsider's transfer of all its company facilities to
Nuova Italsider in September 1981, Italsider held 99.99 percent of
Nuova Italsider's shares. In 1983, Italsider was placed in liquidation.
While in liquidation, Italsider sold its shares of Nuova Italsider to
Finsider in December 1994. The sales price was 714.6 billion lire. As
part of this payment, Finsider assumed Italsider's debts owed to IRI of
696.4 billion lire. The difference between the 714.6 billion lire and
696.4 billion lire was paid directly by Finsider to Italsider.
    On December 31, 1984, Finsider also granted to Italsider a non-
interest bearing loan of 563.5 billion lire to cover losses realized
from the liquidation. A matching provision was also made to Finsider's
``Reserve for

[[Page 40422]]

Losses on Investments and Securities,'' to cover the losses of the
liquidation of Italsider. Following a shareholders' meeting of Finsider
on December 30, 1985, the amount of 563.5 billion lire was disbursed to
cover the losses of Italsider and Italsider's state of liquidation was
revoked.
    In Certain Steel from Italy, the Department determined that the
1981 Restructuring Plan merely shifted assets and debts within a family
of companies, all of which were owned by Finsider, and ultimately, by
the GOI. Therefore, we determined that both the 696.4 billion lire
assumption of debt and the 563.5 billion lire debt forgiveness were
specifically limited to the steel companies and constitute
countervailable subsidies. See Certain Steel from Italy, 58 FR at
37330. No new factual information or evidence of changed circumstances
has been provided to the Department in this instant investigation to
warrant a reconsideration of the earlier determination that the debt
assumption and debt forgiveness are countervailable subsidies.
Therefore, consistent with our treatment of these transactions in
Certain Steel from Italy, we preliminarily determine that the 1984
assumption of debt and 1985 debt forgiveness constitute countervailable
subsidies within the meaning of section 771(5)(B)(i) of the Act. In
accordance with Certain Steel from Italy, debt assumption and debt
forgiveness are treated as grants which constitute financial
contributions under section 771(5)(D)(i) of the Act. The transactions
also confer benefits to the recipient within the meaning of section
771(5)(E)(i) of the Act, in the amount of the debt coverage. Because
the debt assumption and debt forgiveness were limited to Italsider,
ILVA/ILT's predecessor, we preliminarily determine that these
transactions are specific within the meaning of section 771(5A)(D)(iii)
of the Act.
    To calculate the benefit, we have treated the assumption of debt
and debt forgiveness to Italsider as non-recurring subsidies because
each transaction was a one-time, extraordinary event. We allocated the
1984 debt assumption and 1985 debt forgiveness over a 15 year AUL. See
the ``Allocation Period'' section, above. In our grant formula, we used
constructed uncreditworthy discount rates based on our determination
that Italsider was uncreditworthy in 1984 and 1985. See ``Benchmark for
Long-Term Loans and Discount Rates'' and ``Creditworthiness'' sections,
above. As with the equity infusions made into Nuova Italsider and (old)
ILVA, we have treated the assumption of debt and debt forgiveness as
though the transactions had flowed directly through (old) ILVA to ILP.
To determine the amount appropriately allocated to ILP after its
privatization, we followed the methodology described in the ``Change in
Ownership'' section above. We divided this amount by ILVA/ILT's total
consolidated sales during the POI. On this basis, we preliminarily
determine the net countervailable subsidy to be 1.10 percent ad valorem
for ILVA/ILT. Palini & Bertoli did not receive any benefit under this
program.
C. Debt Forgiveness: 1988 Restructuring Plan
    As discussed above in the ``Corporate History of ILVA/ILT'' section
of this notice, the GOI liquidated Finsider and its main operating
companies in 1988, and assembled the group's most productive assets
into a new operating company, ILVA S.p.A. (i.e., (old) ILVA). The
Finsider restructuring plan was developed at the end of 1987, and was
approved by the GOI on June 14, 1988, and by the EC on December 23,
1988. The objective of the plan was to restore the industrial,
financial, and economic balance to the public iron and steel-making
sector in Italy. The restructuring plan included the voluntary
liquidation by IRI of Finsider, and IRI's assumption of the debts not
covered by the sale of assets of the companies being liquidated. IRI
was the sole owner of Finsider, and therefore, the party responsible
for payment of the debts of Finsider's liquidation.
    A transfer of assets and liabilities from Finsider to (old) ILVA
was to be accomplished at the latest by March 31, 1989. Upon completion
of the 1988 Restructuring Plan, (old) ILVA owned Finsider's productive
assets and a small portion of the group's liabilities. Included in the
transfer were the productive portions of the flat-rolled facilities
located at Taranto, Genoa, and Novi Ligure.<SUP>4</SUP> The liquidating
companies retained the non-productive assets and the vast majority of
the liabilities, which had to be repaid, assumed, or forgiven. Thus,
while (old) ILVA emerged from the process with a positive net worth,
the other companies were left with capital structures in which their
liabilities greatly exceeded the liquidation value of their assets.
---------------------------------------------------------------------------

    \4\ The subject merchandise which ILT produced and (new) ILVA
exported to the United States in 1998, was produced at the Taranto
facilities.
---------------------------------------------------------------------------

    We preliminarily determine that certain financial transactions
associated with the 1988 Restructuring Plan constituted countervailable
subsidies. In 1988, IRI established a fund of 2,943 billion lire to
cover losses which Finsider would realize while in liquidation. As of
December 31, 1988, Finsider had accumulated losses in excess of its
equity. In order to prevent Finsider from becoming insolvent during
1989, IRI utilized 1,364 billion lire of the fund to forgive debts it
was owed by Finsider to cover the losses.
    Later in 1990, IRI forgave debts it was owed by Finsider when it
purchased (old) ILVA's stock from Finsider and Terni for 2,983 billion
lire. The 2,983 billion lire was used to pay off the liquidation
companies' debts which existed at the time of the sale.
    In Certain Steel from Italy, we found IRI's purchase of ILVA's
stock to be a countervailable subsidy because it effectively forgave
Finsider's debts. Though ILVA/ILT, in its July 8, 1999 response, does
not dispute that IRI purchased (old) ILVA's stock in 1990, the company
disagrees with our earlier characterization that the share purchase was
an act of debt forgiveness. We disagree with ILVA/ILT and preliminarily
find that IRI's purchase of (old) ILVA's stock to be tantamount to debt
forgiveness; however, we will seek further clarification of the stock
purchase transaction from ILVA/ILT and the GOI.
    In the February 16, 1999 petition, petitioners also alleged that
IRI forgave approximately 1.9 trillion lire of Finsider's debt in 1991.
They note that the Department countervailed such an amount in Certain
Steel from Italy. In the instant investigation, both the GOI and ILVA/
ILT reported that neither party has record information of such debt
forgiven by IRI in 1991. We reviewed the petitioners' allegation and
the documentation submitted to support their claim that IRI provided
debt forgiveness of 1.9 trillion lire in 1991. In particular, we note
that Finsider's 1989 Annual Report at page 12 states that: ``During the
fiscal year, your company [Finsider] recorded losses totaling 1,568
billion lire; therefore, the circumstances reoccur for which the
shareholder IRI later renounced its own credits necessary to cover the
difference.''
    Because Finsider realized a net loss of 1,568 billion lire for
fiscal year 1989, in order to avoid insolvency of the company, as in
1988, IRI should have forgiven the 1,568 billion lire it was due from
Finsider to cover the company's losses in excess of equity during 1990.
However, according to IRI's 1990 Annual Report, IRI did not forgive the
1,568 billion lire by drawing down from the fund it established in
1988, to cover Finsider's losses while in liquidation. Since we cannot
track with any degree

[[Page 40423]]

of certainty what became of Finsider's indebtedness to IRI in 1990, or
in subsequent fiscal years, we will gather information on what became
of the 1,568 billion lire of losses in the context of seeking
clarification of the assistance provided under the 1988 Restructuring
Plan.
    Also, in the GOI's July 8, 1999 response, the government reported
that, in addition to the debt forgiveness IRI provided to Finsider in
1989, IRI disbursed 205 billion lire as authorized by the EC, to cover
losses before plant closures. ILVA/ILT, however, in its July 8, 1999
response, stated that IRI provided 738 billion lire to cover losses and
expenditures during the liquidation process. For purposes of this
preliminary determination, we conclude, based on the information
provided to the Department by ILVA/ILT, that IRI provided 738 billion
lire to Finsider to cover losses in 1989. However, because the
information submitted on the record with respect to the assistance IRI
provided to cover losses during the liquidation process is ambiguous,
we will seek further clarification of the assistance provided from the
GOI and ILVA/ILT at verification.
    Consistent with our determination in Certain Steel from Italy, we
preliminarily determine that the debt forgiveness and coverage of
losses, which IRI provided in 1989 and 1990, constitute countervailable
subsidies within the meaning of section 771(5)(B)(i) of the Act. In
accordance with our practice, debt forgiveness and coverage of losses
are treated as grants which constitutes a financial contribution under
section 771(5)(D)(i) of the Act, and provides a benefit in the amount
of the debt coverage. Because the debt forgiveness and coverage of
losses were received by only (old) ILVA, a predecessor company of ILVA/
ILT, we preliminarily determine that the debt coverage is specific
under section 771(5A)(D)(iii) of the Act. See Certain Steel from Italy,
58 FR at 37330.
    To determine the benefit from these subsidies, we have treated the
amount of debt forgiveness and coverage of losses provided under the
1988 Restructuring Plan as non-recurring grants because they were one-
time, extraordinary events. In its July 8, 1999 response, ILVA/ILT
reported that (old) ILVA did not receive all of Finsider's assets when
the company was established. ILVA/ILT provided an asset allocation
table, which demonstrates that only 68.4 percent of Finsider's assets
were transferred to (old) ILVA. In performing the preliminary
calculations, we applied this percentage to the total amount of debt
forgiveness and coverage of losses provided to Finsider in 1989 and
1990, to determine the amount of debt coverage attributable to (old)
ILVA. Because (old) ILVA was uncreditworthy in 1989 and 1990, the years
in which the assistance was provided, we used constructed
uncreditworthy discount rates to allocate the benefits over time. We
allocated the debt coverage provided in 1989 and 1990, over a 15 year
AUL. See the ``Subsidies Valuation Information'' section, above.
    We also apportioned the debt coverage by asset value to all (old)
ILVA operations in determining the amount applicable to ILP. We next
applied the repayment portion of our change in ownership methodology to
the debt forgiveness to determine the amount of the subsidy allocable
to ILP after its privatization. We divided this amount by ILVA/ILT's
total consolidated sales during the POI. On this basis, we
preliminarily determine the net countervailable subsidy to be 3.64
percent ad valorem for ILVA/ILT. Palini & Bertoli did not receive any
benefit under this program.
D. Debt Forgiveness: 1993-1994 Restructuring Plan, ILVA-to-ILP
<SUP>5</SUP>
---------------------------------------------------------------------------

    \5\ This program was referred to as ``Debt Forgiveness Given in
the Course of Privatization in Connection with the 1993-1994
Restructuring Plan'' in the Initiation Notice (see 64 FR at 13000).
---------------------------------------------------------------------------

    During 1992 and 1993, (old) ILVA incurred heavy financial losses,
which compelled IRI to place the company into liquidation. In December
1993, the Italian government proposed to the EC a plan to restructure
and privatize (old) ILVA by the end of 1994. The reorganization
provided for splitting (old) ILVA's main productive assets into two new
companies, ILP and AST. ILP would consist of the carbon steel flat
production of (old) ILVA, receiving the Taranto facilities. AST would
consist of the speciality and stainless steel production. The rest of
(old) ILVA's productive assets (i.e., tubes, electricity generation,
specialty steel long products, and sea transport), together with the
bulk of (old) ILVA's existing debt and redundant work force were placed
in a third entity known as ILVA Residua. Under the restructuring plan,
ILVA Residua would sell those productive units it could and then would
be liquidated, with IRI (i.e., the Italian government) absorbing the
debt.
    As of December 31, 1993, the majority of (old) ILVA's viable
manufacturing activities had been separately incorporated (or
``demerged'') into either AST or ILP; ILVA Residua was primarily a
shell company with liabilities far exceeding assets, although it did
contain some operating assets that were later spun-off. In contrast,
AST and ILP, ready for sale, had operating assets and relatively modest
debt loads. The liabilities remaining with ILVA Residua had to be
repaid, assumed, or forgiven. On April 12, 1994, the EC, through the
94/259/ECSC decision, approved the GOI's restructuring and
privatization plan for (old) ILVA and IRI's intention to cover ILVA
Residua's remaining liabilities.
    We preliminarily determine that ILP (and consequently the subject
merchandise) received a countervailable subsidy in 1993, within the
meaning of section 771(5)(B)(i) of the Act, when the bulk of (old)
ILVA's debt was placed in ILVA Residua, rather than being
proportionately allocated to AST and ILP. In addition to the debt that
was placed in ILVA Residua, we preliminarily determine that the asset
write-downs which (old) ILVA took in 1993, as part of the
restructuring/privatization plan, are countervailable subsidies under
section 771(5)(B)(i) of the Act. The write-down of assets in 1993
officially removed the assets from (old) ILVA's books and, thus,
increased the losses to be covered in liquidation. It is the
Department's position that when losses, which are later covered by a
government, can be tied to specific assets those assets bear the
liability for the losses that resulted from the write-downs. See Final
Affirmative Countervailing Duty Determination: Grain-Oriented
Electrical Steel from Italy, 59 FR 18357, 18359 (April 18, 1994)
(Electrical Steel from Italy). The 1993 financial statement of (old)
ILVA identifies that the write-downs can be tied to the specific
assets.
    We preliminarily determine that the amount of debt and losses
resulting from the asset write-downs that should have been attributable
to ILP, but were instead placed with ILVA Residua, was equivalent to
debt forgiveness for ILP at the time of its demerger. In accordance
with our practice, debt forgiveness is treated as a grant which
constitutes a financial contribution under section 771(5)(D)(i) of the
Act, and provides a benefit in the amount of the debt forgiveness.
    We also preliminarily determine, based on record evidence, that the
liquidation process of (old) ILVA did not occur under the normal
application of a provision of Italian law, and therefore, the debt
forgiveness is de facto specific under section 771(5A)(D)(iii)(II) of
the Act. As stated above, the liquidation of (old) ILVA was done in the
context of a massive restructuring/privatization plan of the

[[Page 40424]]

Italian steel industry undertaken by the GOI and approved and monitored
by the EC. Because (old) ILVA's liquidation was part of an extensive
state-aid package to privatize the Italian state-owned steel industry,
and the debt forgiveness was received by only privatized (old) ILVA
operations, we preliminarily find that the assistance provided under
the 1993-1994 Restructuring Plan is de facto specific. In support of
this preliminary finding, we note the EC's 94/259/ECSC decision, in
which the Commission identified the restructuring of (old) ILVA as a
single program, the basic objective of which was the privatization of
the ILVA steel group by the end of 1994. As set forth in the EC's
decision, the 1993-1994 Restructuring Plan was limited by its terms to
(old) ILVA and the benefits of the plan were received by only (old)
ILVA's successor companies.
    Consistent with the methodology that we employed in the final
determination of Sheet and Strip from Italy, the amount of liabilities
that we attributed to ILP is based on the gross liabilities left behind
in ILVA Residua, as reported in the EC's 10th Monitoring Report. See 64
FR at 30628. In calculating the amount of unattributable liabilities
remaining after the demerger of ILP, we started with the most recent
``total comparable indebtedness'' amount from the 10th Monitoring
Report, which represents the indebtedness, net of debts transferred in
the privatization of ILVA Residua's operations and residual asset
sales, of a theoretically reconstituted, pre-liquidation (old) ILVA. In
order to calculate the total amount of unattributed liabilities which
amount to countervailable debt forgiveness, we made the following
adjustments to this figure: for the residual assets that had not
actually been liquidated as of the 10th and final Monitoring Report;
for assets that comprised SOFINPAR, a real estate company (because
these assets were sold prior to the demergers of AST and ILP); for the
liabilities transferred to AST and ILP; for income received from the
privatization of ILVA Residua's operations; for the amount of the asset
write-downs specifically attributable to AST, ILP, and ILVA Residua
companies; and for the amount of debts transferred to Cogne Acciai
Speciali (CAS), an ILVA subsidiary that was left behind in ILVA Residua
and later spun off, as well as the amount of (old) ILVA debt attributed
to CAS and countervailed in Wire Rod from Italy, (see, 63 FR at 40478).
    The amount of liabilities remaining represents the pool of
liabilities that were not individually attributable to specific (old)
ILVA assets. We apportioned this debt to AST, ILP, and operations sold
from ILVA Residua based on their relative asset values. We used the
total consolidated asset values reported in AST's and ILP's financial
statements for the year ending December 31, 1993. For ILVA Residua, we
used the sum of the purchase price plus debts transferred as a
surrogate for the viable asset value of the operations sold from ILVA
Residua. Because we subtracted a specific amount of ILVA's gross
liabilities attributed to CAS in Wire Rod from Italy, we did not
include its assets in the amount of ILVA Residua's privatized assets.
Also, we did not include in ILVA Residua's viable assets those assets
sold to IRI, because the sale does not represent sales to a non-
governmental entity. To the amount of liabilities apportioned to ILP,
we added the write-downs that were tied to the asset pool which ILP
took when it was separately incorporated from (old) ILVA.
    We have treated the debt forgiveness to ILP as a non-recurring
subsidy because it was a one-time, extraordinary event. The discount
rate we used in our grant formula was a constructed uncreditworthy
benchmark rate based on our determination that (old) ILVA was
uncreditworthy in 1993. See ``Benchmarks for Long-Term Loans and
Discount Rates'' and ``Creditworthiness'' sections, above. We followed
the methodology described in the ``Change in Ownership'' section above
to determine the amount appropriately allocated to ILP after its
privatization. We divided this amount by ILVA/ILT's total consolidated
sales during the POI. On this basis, we preliminarily determine the net
countervailable subsidy to be 12.40 percent ad valorem for ILVA/ILT.
Palini & Bertoli did not receive any benefits under this program.
E. Capital Grants to Nuova Italsider Under Law 675/77
    The Department has investigated Law 675/77 in prior investigations.
See, e.g., Certain Steel from Italy, 58 FR at 37330-31, and the Final
Affirmative Countervailing Duty Determination: Stainless Steel Plate in
Coils from Italy, 64 FR 15508, 15513-14 (March 31, 1999) (Plate in
Coils from Italy). In Certain Steel from Italy, we learned that Law
675/77 created a framework for planned intervention by the GOI in the
economy. The law provided financial incentives to industrial firms in
certain sectors that submitted development, restructuring, and
conversion plans for production facilities. In total, eleven sectors
were identified as eligible for assistance. The types of funding
provided under Law 675/77 included: (1) Interest payments on bank loans
and bond issues; (2) low interest loans granted by the Ministry of
Industry; (3) grants for companies located in the South; (4) grants for
personnel retraining; and (5) increased VAT reductions for firms
located in the Mezzogiorno area. In that prior investigation, we found
that (old) ILVA and its predecessor companies received direct mortgage
loans, interest contributions, and capital grants between 1977 and
1991, under Law 675/77.
    In Certain Steel from Italy, we verified that of the ten sectors
which received Law 675/77 funding, steel accounted for 36.4 percent of
the total funding provided under Law 675/77. On this basis we
determined that assistance provided to steel companies under Law 675/77
is limited to a specific enterprise or industry, or group of
enterprises or industries. We therefore found countervailable capital
grants which (old) ILVA and its predecessor companies received under
Law 675/77.
    In the instant investigation, the GOI and ILVA/ILT reported that
Italsider applied for a capital grant in 1981, for an investment
project at the Taranto plant. The GOI approved the application in 1982,
and awarded a grant of 125,040 million lire to Nuova Italsider. The
capital grant was disbursed in four tranches in the years 1985 and
1987. The GOI stated that the capital grant program was established in
1977, to support the development of regions in the south of Italy. The
only eligibility criterion for the receipt of this ``one-time''
assistance was the location of factories in the south of Italy.
    Consistent with our finding in Certain Steel from Italy, we
preliminarily determine that this program constitutes a countervailable
subsidy within the meaning of section 771(5)(B)(i) of the Act. The
capital grants constitute a financial contribution under section
771(5)(D)(i) of the Act providing a benefit in the amount of the
grants. Because the steel sector was found to be the dominant user of
Law 675/77 and the capital grants were limited to enterprises located
in the south of Italy, we preliminarily determine that the program is
specific under section 771(5A)(D)(iii) of the Act.
    To determine the benefit, we have treated the capital grants as
non-recurring subsidies because the receipt of the grants was a one-
time, extraordinary event. Because the benefit to Nuova Italsider is
greater than 0.5 percent of the company's sales for 1982 (the year in
which the grant was approved), we allocated the benefit over a 15 year
AUL. See Sec. 351.524(b)(2) of the CVD Regulations. We applied the

[[Page 40425]]

change in ownership methodology to the capital grant to determine the
subsidy allocable to ILP after its privatization. We divided this
amount by ILVA/ILT's total consolidated sales for the POI. On this
basis, we preliminarily determine the net countervailable subsidy to be
0.13 percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this
program.
F. Early Retirement Benefits
    Law 451/94 was created to conform with EC requirements of
restructuring and capacity reduction of the Italian steel industry. Law
451/94 was passed in 1994, and enabled the Italian steel industry to
implement workforce reductions by allowing steel workers to retire
early. During the 1994-1996 period, and into January 1997, Law 451/94
provided for the early retirement of up to 17,100 Italian steel
workers. Benefits applied for during this period continue until the
employee reaches his/her natural retirement age, up to a maximum of ten
years.
    In the final determinations of Plate in Coils from Italy and Sheet
and Strip from Italy, 64 FR at 15514-15 and 64 FR at 30629-30,
respectively, the Department determined that early retirement benefits
provided under Law 451/94 are countervailable subsidies under section
771(5)(B)(i) of the Act. Law 451/94 provides a financial contribution,
as described in section 771(5)(D)(i) of the Act, because Law 451/94
relieves the company of costs it would have normally incurred by having
to employ individuals until the normal age of retirement. Also, because
Law 451/94 was developed for, and exclusively used by, the steel
industry, we determined that Law 451/94 is specific within the meaning
of section 771(5A)(D)(iii) of the Act. No new factual information or
evidence in the instant investigation has led us to change our prior
findings that early retirements under Law 451/94 are countervailable.
    As we have in the recent final determinations of Plate in Coils
from Italy and Sheet and Strip from Italy, we treated one-half of the
amount paid by the GOI as benefitting the company. Recognizing that ILP
\6\ would have been required to enter into negotiations with the unions
before laying off workers, it is impossible for the Department to
determine the outcome of those negotiations absent Law 451/94. At one
extreme, the unions might have succeeded in preventing any lay offs. If
so, the benefit to ILP would be the difference between what it would
have cost to keep those workers on the payroll and what ILP actually
paid under Law 451/94. At the other extreme, the negotiations might
have failed and ILP would have incurred only the minimal costs
described under the so-called ``Mobility'' provision of Law 223/91,
which identifies the minimum payment the company would incur when
laying off workers permanently. Then the benefit to ILP would have been
the difference between what it would have paid under Mobility and what
the company actually paid under Law 451/94.
---------------------------------------------------------------------------

    \6\ On December 31, 1993, (old) ILVA's main productive assets
were spun into two new companies: ILVA Laminati Piani (carbon steel
flat products) (ILP) and Acciai Speciali Terni (speciality and
stainless steel products) (AST).
---------------------------------------------------------------------------

    We have no basis for believing either of these extreme outcomes
would have occurred. It is clear, given the EC regulations, that ILP
would have laid off workers. However, we do not believe that ILP would
have simply fired the workers without reaching accommodation with the
unions. The GOI has indicated that failure to negotiate a separation
package with the unions would likely lead to strikes, lawsuits and
general social unrest. Therefore, we have proceeded on the assumption
that ILP's early retirees would have received some support from ILP.
    In attempting to determine the level of post-employment support
that ILP would have negotiated with its unions, we examined the
situation facing (old) ILVA before ILP and AST were spun off. By the
end of 1993, (old) ILVA had established an overall plan for terminating
redundant workers--a plan that would ultimately affect both ILP and
AST. Under this plan, early retirees would first be placed on a
temporary worker assistance measure under Law 223/91, Cassa
Integrazione Guadagni--Extraordinario (CIG-E), while waiting for the
passage of Law 451/94, and then would receive benefits under Law 451/94
when implemented. During the verification of Plate in Coils from Italy
and Sheet and Strip from Italy, the Department learned from AST
officials that workers were indeed receiving temporary benefits under
CIG-E while they were awaiting the passage of Law 451. See Results of
AST Verification, Memorandum to the File, dated February 3, 1999
(public version of the document is available on the public file in the
Central Records Unit (CRU) of the Department, Room B-099). This
indicates that, at the time an agreement was being negotiated with the
unions and the labor ministry on the terms of the lay offs, (old) ILVA
and its workers were aware that government contributions would
ultimately be made to workers' benefits. In such situations, i.e.,
where the company and its workers are aware at the time of their
negotiations that the government will be making contributions to the
workers' benefits, the Department's prior practice was to treat half of
the amount paid by the government as benefitting the company. We have
stated that when the government's willingness to provide assistance is
known at the time the contract is being negotiated, this assistance is
likely to have an effect on the outcome of the negotiations. While we
continue to adhere to this logic in the preamble to the CVD
Regulations, we stated that we would examine the facts of each case to
determine the appropriate portion of the funds to be considered
countervailable. See CVD Regulations, 63 FR at 65380.
    With respect to ILP and its workers, we preliminarily determine
that, under Italian Law 223, ILP would be required to negotiate with
its unions about the level of benefits that would be made to workers
permanently separated from the company. Since (old) ILVA and its unions
were aware at the time of their negotiations that the GOI would be
making payments to those workers under Law 451/94, some portion of the
payment is countervailable. However, based on the record before us, we
have no basis for apportioning the benefit. Therefore, for the
preliminary determination, we consider the benefit to ILVA/ILT to be
one half of the amount paid to the workers by the GOI under Law 451/94.
We will verify this program further to determine the appropriate
benefit.
    Consistent with the Department's practice, we have treated benefits
to ILVA/ILT under Law 451/94 as recurring grants expensed in the year
of receipt. To calculate the benefit received by ILVA/ILT during the
POI, we multiplied the number of employees by employee type (blue
collar, white collar, and senior executive) who retired early by the
average salary by employee type. Since the GOI was making payments to
these workers equaling 80 percent of their salary, we attributed one-
half of that amount to ILVA/ILT. Therefore, we multiplied the total
wages of the early retirees by 40 percent. We then divided this total
amount by ILVA/ILT's total consolidated sales during the POI. On this
basis, we preliminarily determine a net countervailable subsidy to be
1.41 percent ad valorem for ILVA/ILT.
    As mentioned in the ``Corporate History of ILVA/ILT'' section of
this notice, in October 1993, (old) ILVA entered into liquidation and
became known as ILVA Residua (a.k.a., ILVA in Liquidation). In December
1993, IRI

[[Page 40426]]

initiated the splitting of (old) ILVA's main productive assets into two
new companies, ILP and AST. On December 31, 1993, ILP and AST became
separately incorporated firms. The remainder of (old) ILVA's productive
assets and existing liabilities, along with much of the redundant
workforce, was placed in ILVA Residua. By placing much of this
redundant workforce in ILVA Residua, ILP and AST were able to begin
their respective operations with a relatively ``clean slate'' in
advance of their privatizations. ILP and AST were relieved of having to
assume their respective portions of those redundant workers that were
placed in ILVA Residua and received early retirement benefits under Law
451/94. We have, therefore, determined that ILVA/ILT has received a
countervailable benefit during the POI since it was relieved of a
financial obligation that would otherwise have been due.
    In order to calculate the benefit received by ILVA/ILT during the
POI, we first needed to determine the appropriate number of early
retirees in ILVA Residua that originally should have been apportioned
to ILP. To determine this number, we took the asset value of ILP in
relation to the asset value of (old) ILVA at the time of the spin-off
of ILP. We multiplied this percentage by the total number of ILVA
Residua early retirees. It was then necessary to estimate the numbers
and salaries of early retirees by employee type since the GOI did not
provide this information. To do this, we applied the same ratios of
workers by employee type as ILP retired, and applied this to ILVA
Residua. We also used the same salaries of ILVA/ILT employees by worker
type. As we did with ILP early retirees, we then multiplied the number
of employees, by employee type, by the average salary by employee type.
Since the GOI was making payments to these workers equaling 80 percent
of their salary, we attributed one-half of that amount to ILVA/ILT.
Therefore, we multiplied the total wages of the early retirees by 40
percent. We then divided this total amount by ILVA/ILT's total
consolidated sales during the POI. On this basis, we preliminarily
determine a net countervailable subsidy to be 0.67 percent ad valorem
for ILVA/ILT.
    The Sidercomit unit of ILVA/ILT also received early retirement
benefits under Law 451/94 separately from ILVA/ILT. As we did with
ILVA/ILT, we multiplied the total wages of the early retirees by 40
percent and then divided this amount by the total consolidated sales of
ILVA/ILT during the POI. On this basis, we preliminarily determine the
net countervailable subsidy to be less than 0.005 percent ad valorem
for ILVA/ILT.
    Upon consolidation of the above determined rates, we preliminarily
determine a total net countervailable subsidy of 2.08 percent ad
valorem for ILVA/ILT under Law 451/94 for the POI. Palini & Bertoli did
not use this program.
G. Exemptions From Taxes
    Presidential Decree 218/1978 exempted firms operating in the
Mezzogiorno from the local income tax (ILOR) and the profits tax
(IRPEG). Companies are eligible for full exemption from the 16.2
percent ILOR tax on profits arising from eligible projects in the
Mezzogiorno and less developed regions of the center-north for ten
consecutive years after profits first arise. New companies undertaking
productive activities in the Mezzogiorno are entitled to a full
exemption from the 37 percent IRPEG tax on profits for ten consecutive
years after the project is completed. We preliminarily determine that
exemptions from ILOR and IRPEG taxes are countervailable subsidies in
accordance with section 771(5)(B)(i) of the Act. These tax exemptions
constitute financial contributions under section 771(5)(D)(ii) of the
Act since revenue that is otherwise due is being foregone. Because
these exemptions are limited to a group of enterprises or industries
within a designated geographical region, they are specific in
accordance with section 771(5A)(D)(iv). Benefits resulting from ILOR
and IRPEG tax exemptions were found to be countervailable in Certain
Steel from Italy, 58 FR at 37334-35.
    ILT received an exemption from the IRPEG tax in 1998. In order to
calculate the benefit, we multiplied ILT's total profits that would
otherwise have been subject to IRPEG by the IRPEG tax rate of 37
percent. We then divided the result by ILVA/ILT's total consolidated
sales during the POI to determine the ad valorem benefit. On this
basis, we preliminarily determine the net countervailable subsidy to be
1.07 percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this
program.
H. Exchange Rate Guarantees Under Law 796/76
    Law 796/76 established a program to minimize the risk of exchange
rate fluctuations on foreign currency loans. All firms that contract
foreign currency loans from the European Coal and Steel Community
(ECSC) or the Council of Europe Resettlement Fund (CERF) could apply to
the Ministry of the Treasury (MOT) to obtain an exchange rate
guarantee. The MOT, through the Ufficio Italiano di Cambi (UIC),
calculates loan payments based on the lire-foreign currency exchange
rate in effect at the time the loan is contracted (i.e., the base
rate). The program establishes a floor and ceiling for exchange rate
fluctuations, limiting the maximum fluctuation a borrower would face to
two percent above or below the base rate. If the lire depreciates more
than two percent against the foreign currency, a borrower is still able
to purchase foreign currency at the established (guaranteed) ceiling
rate. The MOT absorbs the loss in the amount of the difference between
the guaranteed rate and the actual rate. If the lire appreciates
against the foreign currency, the MOT realizes a gain in the amount of
the difference between the floor rate and the actual rate.
    This program was terminated effective July 10, 1992, by Decree Law
333/92. However, the pre-existing exchange rate guarantees continue on
any loans outstanding after that date. Italsider contracted two loans,
one in 1978, the other in 1979. Both of these loans were ultimately
transferred to ILVA/ILT. These two foreign currency denominated loans
were outstanding during the POI and exchange rate guarantees applied to
both.
    We preliminarily determine that this program constitutes a
countervailable subsidy within the meaning of section 771(5)(B)(i) of
the Act. This program provides a financial contribution, as described
in section 771(5)(D)(i) of the Act, to the extent that the lire
depreciates against the foreign currency beyond the two percent limit.
When this occurs, the borrower receives a benefit in the amount of the
difference between the guaranteed rate and the actual exchange rate.
    During the verification of the GOI in the Plate in Coils from Italy
and Sheet and Strip from Italy investigations, GOI officials explained
that over the last decade, roughly half of all guarantees made under
this program were given to coal and steel companies. See Results of
Verification of the Government of Italy, Memorandum to the File, dated
February 3, 1999 (public version of the document is available on the
public file in the CRU, Room B-099). This is consistent with the
Department's finding in a previous proceeding that the Italian steel
industry has been a dominant user of the exchange rate guarantees
provided under Law 796/76. See Final Affirmative Countervailing Duty
Determination: Small Diameter Circular Seamless Carbon and Alloy Steel
Standard, Line and Pressure Pipe From Italy, 60 FR 31996 (June 19,
1995). Therefore, we determine that the

[[Page 40427]]

program is specific under section 771(5A)(D)(iii)(II) of the Act.
    Once a loan is approved for exchange rate guarantees, access to
foreign exchange at the established rate is automatic and occurs at
regular intervals throughout the life of the loan. Therefore, we are
treating the benefits under this program as recurring grants. ILVA/ILT
and its predecessor companies from which these loans were transferred,
paid a foreign exchange commission fee to the UIC for each payment
made. We determine that this fee qualifies as an ``* * * application
fee, deposit, or similar payment paid in order to qualify for, or to
receive, the benefit of the countervailable subsidy.'' See section
771(6)(A) of the Act. Thus, for the purposes of calculating the
countervailable benefit, we have added the foreign exchange commission
to the total amount ILVA/ILT paid under this program during the POI.
See Wire Rod from Italy, 63 FR at 40479.
    Under this program, we have calculated the total countervailable
benefit as the difference between the total loan payment due in foreign
currency, converted at the current exchange rate, less the sum of the
total loan payment due in foreign currency converted at the guaranteed
rate and the exchange rate commission. We divided this amount by ILVA/
ILT's total consolidated sales during the POI. On this basis, we
preliminarily determine the net countervailable subsidy to be 0.07
percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this
program.
European Commission Programs
A. ECSC Loans Under Article 54
    Article 54 of the 1951 ECSC Treaty established a program to provide
industrial investment loans directly to the member iron and steel
industries to finance modernization and purchase new equipment.
Eligible companies apply directly to the EC (which administers the
ECSC) for up to 50 percent of the cost of an industrial investment
project. The Article 54 loans are generally financed on a ``back-to-
back'' basis. In other words, upon granting loan approval, the ECSC
borrows funds (through loans or bond issues) at commercial rates in
financial markets which it then immediately lends to steel companies at
a slightly higher interest rate. The mark-up is to cover the costs of
administering the Article 54 program.
    We preliminarily determine that these loans constitute a
countervailable subsidy within the meaning of section 771(5)(B)(i) of
the Act. This program provides a financial contribution, as described
in section 771(5)(D)(i) of the Act, which confers a benefit to the
extent the interest rate is less than the benchmark interest rate. The
Department has found Article 54 loans to be specific in several
proceedings, including Electrical Steel from Italy, 59 FR at 18362,
Certain Steel from Italy, 58 FR at 37335, and Plate in Coils from
Italy, 64 FR at 15515, because loans under this program are provided
only to iron and steel companies. The EC has also indicated on the
record of this investigation that Article 54 loans are only available
to steel and coal companies which fall within the scope of the ECSC
Treaty. Therefore, we preliminarily determine that this program is
specific pursuant to section 771(5A)(D)(i) of the Act.
    ILVA/ILT had two long-term, fixed-rate loans outstanding during the
POI, each denominated in U.S. dollars. These loans were contracted by
Italsider, one in 1978 and one in 1979. Consistent with Wire Rod from
Italy, 63 FR at 40486, we have used as our benchmark the average yield
to maturity on selected long-term corporate bonds as reported by the
U.S. Federal Reserve, since both of these loans were denominated in
U.S. dollars. We used these rates since we were unable to find a long-
term borrowing rate for loans denominated in U.S. dollars in Italy. The
interest rate charged on both of ILVA/ILT's two Article 54 loans was
lowered part way through the life of the loan. The interest rate on the
loan contracted in 1978 was lowered in 1987, and the rate on the loan
contracted in 1979 was lowered in 1992. Therefore, for the purpose of
calculating the benefit, we have treated these loans as if they were
contracted on the date of this rate adjustment. Because ILVA was
uncreditworthy in the year these loans were contracted, 1987 and 1992
(based on the interest rate adjustments mentioned above), we calculated
the uncreditworthy benchmark rate as per section 351.505 (a)(3)(iii) of
the CVD Regulations. See ``Benchmark for Long-Term Loans and Discount
Rates'' section, above.
    To calculate the benefit under this program, pursuant to section
351.505(c)(2) of the CVD Regulations, we employed the Department's
long-term fixed-rate loan methodology. We compared ILVA/ILT's interest
rates on the two loans to our benchmark interest rate for
uncreditworthy companies on interest paid by ILVA/ILT during the POI.
We then divided the benefit by ILVA/ILT's total consolidated sales
during the POI. On this basis, we preliminarily determine the net
countervailable subsidy to be 0.02 percent ad valorem for ILVA/ILT.
Palini & Bertoli did not use this program.
    ILVA/ILT was also repaying four ECSC loans under Article 54 during
the POI that were taken by ILP for the construction of housing for coal
and steel industry workers. Funding for these loans came entirely from
the ECSC operational budget, which is composed of levies imposed on
coal and steel producers, investment income on those levies, guarantee
fees and fines paid to the ECSC, and interest received from companies
that have obtained loans from the ECSC. Consistent with previous
determinations, because ECSC funding is based on producer levies, we
find these loans to be not countervailable. See Electrical Steel from
Italy, 59 FR at 18364 and Certain Steel from Italy, 58 FR at 37336.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Law 308/82
    Law 308/82 was initiated on May 29, 1982, and repealed on January
15, 1991. The GOI and ILVA/ILT reported that Italsider was approved for
a grant for investments that reduced energy consumption at the Taranto
facilities in 1983. ILP received payment of the grant in 1996. In
Certain Steel from Italy, we learned that Law 308/82 provided grants to
encourage lower energy consumption and the use of renewable energy
sources. In that prior investigation, we verified that Law 308 grants
were provided to a wide range of industries and confirmed the amount of
grants provided to each industrial sector. We found that benefits under
Law 308/82 were widely and fairly evenly distributed throughout the
sectors with no sector receiving a disproportionate amount. Therefore,
because Law 308/82 grants were not limited to a specific enterprise or
industry, or group of enterprises or industries, we determined them to
be not countervailable. See Certain Steel from Italy, 58 FR at 37336.
No new factual information or evidence of changed circumstances has
been provided to the Department in this instant investigation to
warrant the Department to revisit its earlier determination that grants
provided under Law 308/82 are not countervailable.
B. Unpaid Portion of Payment Price for ILP
    In the February 16, 1999 petition, petitioners alleged that the GOI
effectively gave RIVA a zero-interest loan on a portion of the contract
price agreed to by RIVA for ILP, because RIVA has not paid the full
contract price for

[[Page 40428]]

ILP. RIVA reported that the company entered into arbitration after the
transfer of ownership of ILP in April 1995. RIVA stated that it did not
invoke arbitration to challenge the purchase price of ILP, but invoked
arbitration to obtain an indemnity from pre-existing and unreported
liabilities in accordance with the indemnification provision of the
contract of sale. The dispute concerns whether IRI owes RIVA a sum of
money as indemnification for liabilities, which RIVA has potentially
incurred as a result of the acquisition of ILP. To preserve its
leverage in the dispute and ensure that the company will obtain relief
in the event that it is awarded indemnification by the arbitration
panel, RIVA has withheld payment of amounts due to IRI under the
contract of sale.
    We inquired about the arbitration procedure and whether any Italian
company which purchases either a government-owned or private entity can
enter into arbitration to remedy a dispute. RIVA reported that Article
25 of the contract of sale provides for arbitration under the rules of
the International Chamber of Commerce (ICC). Any company in Italy that
purchases another company from either the government or a private
seller can include such an arbitration provision in the contract of
sale. Article 806 of the Italian Civil Code authorizes the use of
arbitration to settle litigation. Because the arbitration which RIVA
invoked to obtain an indemnity from liabilities was provided under the
rules of the ICC and the Italian Civil Code, we preliminarily determine
that the monetary amount, which RIVA has withheld from IRI for the
purchase of ILP, is not tantamount to a zero-interest loan provided by
the government.

III. Programs Preliminarily Determined To Be Not Used

Government of Italy Programs
1. Lending From the Ministry of Industry Under Law 675/77
    ILVA/ILT reported that at the time of its privatization the company
became responsible for certain loan obligations of its predecessor
companies. ILVA/ILT were responsible for repaying the loans under Law
675/77, which were applicable to those facilities that produce the
subject merchandise. Repayment obligations on these loans ended in
December 1997. The GOI and ILVA/ILT both reported that no new loans
have been provided under Law 675/77 since 1987. Because there were no
loans provided under Law 675/77 outstanding in 1998, we preliminarily
determine that the program was not used during the POI by ILVA/ILT.
2. Interest Contributions Under Law 675/77
    ILVA/ILT reported that an interest contribution was received in
1998, against a loan provided under Law 675/77. Because the loan
against which the interest contribution was received was repaid in full
in December 1997, we preliminarily determine that this program was not
used during the POI. It is the Department's policy to treat interest
contributions as countervailable on the date the company made the
corresponding interest payments, despite any delay in the receipt of
the interest contributions. This is so because the company's
entitlement to the interest contributions was automatic when it made
the interest payments. Therefore, we find, for purposes of the benefit
calculation, that the interest contributions were received at the time
the interest payments were made. See e.g., Stainless Steel Sheet &
Strip, and Final Affirmative Countervailing Duty Determination: Oil
Country Tubular Goods from Italy, 60 FR 33577, 33579 (June 28, 1995)
(Oil Country Tubular Goods from Italy).
3. Law 305/89
    ILVA/ILT reported that (old) ILVA, its predecessor company, applied
for a grant under Law 305/89 in 1990. The GOI approved (old) ILVA's
application in 1991, and awarded the company a grant of 2.2 billion
lire. Because payment of the grant was delayed, ILP received a portion
of the grant in 1994, and ILVA/ILT received payment of the remaining
portion of the grant in 1996. We applied the 0.5 percent allocation
test against the full grant amount approved in 1991. See section
351.524(b)(2) of the CVD Regulations. We calculated the benefit under
Law 305/82 as less than 0.5 percent ad valorem of (old) ILVA's sales in
1991. Therefore, even if we preliminarily determined that Law 305/89 is
countervailable, the grant would be expensed in the years of receipt,
1994 and 1996. Because the grant would be expensed and not provide any
benefit to ILVA/ILT during the POI, we preliminarily determine that Law
305/89 was not used by ILVA/ILT.
4. Interest Grants for ``Indirect Debts'' Under Law 750/81
    In 1984, Nuova Italsider received a residual payment of 25.3
billion lire against interest grants provided in the fiscal years 1982
and 1983. Because we do not know what portion of the 1984 payment was
approved in 1982, and what portion was approved in 1983, to determine
whether the 1984 grant payment should be allocated or expensed, we
assumed, for purposes of the 0.5 percent allocation test, that the
residual amount was approved in 1984. See Sec. 351.524(b)(2) of the CVD
Regulations. On this basis, we calculated the benefit of the 1984
interest grant to be less than 0.5 percent ad valorem of Nuova
Italsider's sales in 1984. Therefore, because the interest grant is
expensed in the year of receipt, we preliminarily determine that this
program was not used during the POI by ILVA/ILT.
5. Capital Grants Under Law 218/78
    The GOI reported that (old) ILVA received a grant in 1988, under
Law 218/78. The original grant amount was approved in 1978. We applied
the 0.5 percent test against the full grant amount approved in 1978.
See Sec. 351.524(b)(2) of the CVD Regulations. We calculated the
benefit as less than 0.5 percent ad valorem of Italsider's sales in
1978. Additionally, Sidercomit received a grant in 1996, that was
approved in 1995. We applied the 0.5 percent test against the full
grant amount approved in 1995. We calculated the benefit as less than
0.5 percent ad valorem of ILP's sales in 1995. Therefore, even if we
determined that this program is countervailable, the above-mentioned
grants would be expensed in the respective years of receipt. Because
the grants would be expensed and would not provide any benefit to ILVA/
ILT during the POI, we preliminarily determine that capital grants were
not used.
6. Urban Redevelopment Packages Under Law 181/89
    ILVA/ILT and its predecessor companies, ILP and (old) ILVA,
received grants under Law 181/89 between 1991 and 1997. No grants were
received during the POI. Because the approved amount of each grant,
separately, was less than 0.5 percent of total sales of ILVA/ILT (or
predecessor company) in the corresponding year, we would expense the
benefit of each approved grant in that year. See Sec. 351.524(b)(2) of
the CVD Regulations. Therefore, since the grants would be expensed in
the years of receipt, and ILVA/ILT would not realize any benefit during
the POI, we preliminarily determine that Urban Redevelopment Packages
under Law 181/89 was not used.

[[Page 40429]]

7. Closure Payments Under Law 481/94 and Predecessor Law
8. Closure Grants Under Laws 46 and 706
9. Decree Law 120/89
10. Law 488/92
11. Law 341/95 Tax Concessions
12. Interest Rate Reductions Under Law 902
13. Interest Contributions Under the Sabatini Law
14. Export Marketing Grants Under Law 394/81
15. Law 549/95: Tax Exemptions on Reinvested Profits for Steel
Producers in Objective 1, 2, and 5(B) Areas
European Commission Programs
1. European Social Fund (ESF)
    The GOI has reported ESF grants were provided to Nuova Italsider,
Italsider and (old) ILVA from 1985 through 1993. Because the amount of
each grant, separately, was less than 0.5 percent of total sales of
Nuova Italsider, Italsider or (old) ILVA (depending on the year of
receipt) in the corresponding year, we would expense the benefit of
each grant payment received in that year. See Sec. 351.524(b)(2) of the
CVD Regulations.
    ILVA/ILT has reported that ESF payments were also made to ILP in
1994 and 1995, and to ILVA/ILT in 1998, for projects having taken place
in 1994 and 1995. ILVA/ILT has reported that ESF funding was not used
for training of ILVA/ILT employees, but for other initiatives in the
Mezzogiorno region. ILVA/ILT has provided documentation that payments
received by the company were solely for goods and services to IRI that
were provided by ILP and ILVA/ILT.
    With regard to ESF grants and payments received, because the
amounts would either be expensed in the corresponding years of receipt,
or were simply payments received for invoiced goods and services, ILVA/
ILT would not see any benefit during the POI. Therefore, we
preliminarily determine that the European Social Fund was not used.
2. Interest Rebates on ECSC Article 54 Loans
3. ECSC Conversion Loans, Interest Rebates, Restructuring Grants and
Traditional and Social Aid Under Article 56
4. ERDF Aid
5. Resider and Resider II (Commission Decision 88/588)

IV. Programs Preliminarily Determined Not To Exist

1. Additional Debt Forgiveness in the Course of Privatization
2. Grants to ILVA to Cover Closure and Liquidation Expenses as Part of
the 1993-1994 Privatization Plan
3. Working Capital Grants to ILVA in 1993
    With respect to the programs 1, 2, and 3 listed above, the GOI
reported in its May 10, 1999 questionnaire response that all monetary
assistance (old) ILVA received in the course of the 1993-1994
Restructuring Plan was effected in the EC Decision 94/259/ECSC of April
12, 1994. There were no additional debt forgiveness or grants provided
as part of the 1993-1994 Restructuring Plan. Therefore, we preliminary
determine that these programs do not exist.
4. Personnel Retraining Grants Under Law 675/77
    The GOI reported that personnel retraining grants provided under
Law 675/77 were terminated in 1987. The government stated that the
resources provided under this program were allocated over the years
1981 through 1987. The GOI reported that no other law providing
personnel retraining grants or financial allocations under Law 675/77
have been approved since 1987.
5. VAT Reductions Under Law 675/77
    The GOI reported that the tax reductions referred to in section 18
of Law 675 of August 12, 1977, were terminated effective March 29,
1991. Pursuant to section 14(3) of Law 64 of March 1, 1986, section 18
of Law 675/77, applied for a period of five years from the date of
promulgation of the law.
6. Grants to ILVA
7. Grants to RIVA/ILP

Verification

    In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by 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 subsidy rate for ILVA/ILT and Palini &
Bertoli. We preliminarily determine that the total estimated net
countervailable subsidy rate is 23.27 percent ad valorem for ILVA/ILT
and 0.0 percent ad valorem for Palini & Bertoli. The All Others rate is
23.27 percent ad valorem, which is the rate calculated for ILVA/ILT.
See section 705(c)(5)(A) of the Act.

------------------------------------------------------------------------
               Company                         Net subsidy rate
------------------------------------------------------------------------
ILVA/ILT............................  23.27% ad valorem.
Palini & Bertoli....................  0.0% ad valorem.
All Others..........................  23.27% ad valorem.
------------------------------------------------------------------------

    In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of certain
cut-to-length carbon-quality steel from Italy, which are entered or
withdrawn from warehouse, for consumption on or after the date of the
publication of this notice in the Federal Register, and to require a
cash deposit or bond for such entries of the merchandise in the amounts
listed above. Since the estimated preliminary net countervailing duty
rate for Palini & Bertoli is zero, the company will be excluded from
the suspension of liquidation. This suspension will remain in effect
until further notice.

ITC Notification

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

Public Comment

    In accordance with 19 CFR 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing is tentatively scheduled to
be held 57 days from the date of publication of the preliminary
determination at the U.S.

[[Page 40430]]

Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230. Individuals who wish to request a hearing must
submit a written request within 30 days of the publication of this
notice in the Federal Register to the Assistant Secretary for Import
Administration, U.S. Department of Commerce, Room 1870, 14th Street and
Constitution Avenue, NW., Washington, DC 20230. Parties should confirm
by telephone the time, date, and place of the hearing 48 hours before
the scheduled time.
    Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; and, (3)
to the extent practicable, an identification of the arguments to be
raised at the hearing. In addition, six copies of the business
proprietary version and six copies of the non-proprietary version of
the case briefs must be submitted to the Assistant Secretary no later
than 50 days from the date of publication of the preliminary
determination. As part of the case brief, parties are encouraged to
provide a summary of the arguments not to exceed five pages and a table
of statutes, regulations, and cases cited. Six copies of the business
proprietary version and six copies of the non-proprietary version of
the rebuttal briefs must be submitted to the Assistant Secretary no
later than 5 days from the date of filing of the case briefs. An
interested party may make an affirmative presentation only on arguments
included in that party's case or rebuttal briefs. Written arguments
should be submitted in accordance with 19 CFR 351.309 and will be
considered if received within the time limits specified above.
    This determination is published pursuant to sections 703(f) and
777(i) of the Act.

    Dated: July 16, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-18853 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P