54972 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

Dated: October 14, 1997.

Alejandro J. Perera,

DCM & Charge D’Affairs of Venezuelan

Embassy.

For U.S. Department of Commerce.

Dated: October 14, 1997.

Robert S. LaRussa,

Assistant Secretary for Import

Administration.

Appendix

In accordance with the established format,

the Government of Venezuela shall collect

and provide to the Department all

information necessary to ensure compliance

with this Agreement. This information will

be provided to the Department on a semiannual basis, or upon request.

The Government of Venezuela will collect

and maintain sales data to the United States,

in the home market, and to countries other

than the United States, on a continuous basis

and provide the prescribed information to the

Department.

The Government of Venezuela will provide

a narrative explanation to substantiate all

data collected in accordance with the

following formats.

Report of Inventories

Report, by location, the inventories held by

Venezuela producers/exporters in the United

States and imported into the United States

between the period beginning May 6, 1997,

through the effective date of the Agreement.

1. Quantity: Indicate original units of

measure and in pounds.

2. Location: Identify where the inventory is

currently being held. Provide the name and

address for the location.

3. Titled Party: Name and address of party

who legally has title to the merchandise.

4. Export License Number: Indicate the

number(s) relating to each entry now being

held in inventory.

5. Certificate of Origin Number(s): Indicate

the number(s) relating to each sale or entry.

6. Date of Original Export: Date the Export

License/certificate of origin is issued.

7. Date of Entry: Date the merchandise

entered the United States or the date book

transfer took place.

8. Original Importer: Name and address.

9. Original Exporter: Name and address.

10. Complete Description of Merchandise:

Include heat numbers, HTS number, physical

description, ASTM specification, and other

available information.

United States Sales

The Government of Venezuela will provide

all Export Licenses, which shall contain the

following information with the exception of

item #9, date of entry, and item #16, final

destination.

1. Export License/Certificate of Origin

Number(s): Indicate the number(s) relating to

each sale and/or entry.

2. Complete Description of Merchandise:

Include heat numbers, HTS number, physical

description, ASTM specification, and other

available information.

3. Quantity: Indicate in original units of

measure and in pounds.

4. F.O.B. Sales Value: Indicate currency

used.

5. Unit Price: Indicate currency used/per

original unit of measure.

6. Date of Sale: The date all terms of order

are confirmed.

7. Sales Order Number(s): Indicate the

specification number/order number relating

to each sale and/or shipment.

8. Date of Export: Date the Export License

is issued.

9. Date of Entry: Date the merchandise

entered the United States or the date book

transfer took place.

10. Importer of Record: Name and address.

11. Trading Company/Broker: Name and

address of any trading company involved in

the sale.

12. Customer: Name and address of the

first unaffiliated party purchasing from the

Venezuela producer/exporter.

13. Customer Affiliation: Indicate whether

the customer is affiliated or unaffiliated to

the Venezuela exporter.

14. Quota Allocated to Exporter: Indicate

the total amount of quota allocated to the

individual exporter during the Relevant

Period.

15. Quota Remaining: Indicate the

remaining quota available to the individual

exporter during the Relevant Period.

16. Final Destination: Name and address of

the end-user for consumption in the United

States.

17. Other: The identity of any party(ies) in

the transaction chain between the customer

and the final destination/end-user.

Mill Certification

The Government of Venezuela shall

ensure that all shipments of subject

merchandise exported to the United

States pursuant to this Agreement shall

be accompanied by a copy of the

original mill certification.

Sales Other Than United States

Pursuant to Section VIII, paragraph C,

the Government of Venezuela will

provide country-specific sales volume

and value information for all sales of

steel wire rod products, as described in

Section II, in the home market and to

third countries.

1. Quantity: Indicate in original units of

measure sold and/or entered and in metric

tons.

2. F.O.B. Sales Value: Indicate currency

used.

3. Date of Sale: The date all terms of order

are confirmed.

4. Complete Description of Merchandise:

Include heat numbers, HTS number, physical

description, specification/grade under which

sold, and other available information.

5. Sales Order Number(s): Indicate the

specification number/order number relating

to each sale and/or shipment.

6. Date of Export (if third country): Date of

shipment from Venezuela.

7. Date of Entry (if third country): Date the

merchandise entered the third country or the

date a book transfer took place.

8. Importer of Record (if third country):

Name and address.

9. Customer: Name and address of the first

party purchasing from the Venezuela

producer/exporter.

10. Customer Affiliation: Indicate whether

the customer is affiliated or unaffiliated.

11. Final Destination: Name and address of

the end-user for consumption.

12. Other: The identity of any party(ies) in

the transaction chain between the customer

and the final destination/end-user.

[FR Doc. 97–27988 Filed 10–21–97; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[C–122–827]

Final Affirmative Countervailing Duty

Determination: Steel Wire Rod From

Canada

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: October 22, 1997.

FOR FURTHER INFORMATION CONTACT:

Robert Bolling or Rick Johnson, Office of

Antidumping/Countervailing Duty

Enforcement, Group III, Office IX,

Import Administration, U.S. Department

of Commerce, Room 1874, 14th Street

and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone

(202) 482–3434, or 482–0165,

respectively.

Final Determination

The Department of Commerce (the

‘‘Department’’) determines that

countervailable subsidies were provided

to Sidbec-Dosco (Ispat) Inc., a producer

and exporter of steel wire rod from

Canada. For information on the

estimated countervailing duty rates,

please see the Suspension of

Liquidation section of this notice.

Case History

Since our preliminary determination

on July 28, 1997 (62 FR 41933–39,

August 4, 1997) (‘‘Preliminary

Determination’’), the following events

have occurred:

Verification: In accordance with

section 782(i) of the Act, we verified the

information used in making our final

determination. We followed standard

verification procedures, including

meeting with government and company

officials, and examination of relevant

accounting records and original source

documents. Our verification results are

outlined in detail in the public versions

of the verification reports, which are on

file in the Central Records Unit (Room

B–099 of the Main Commerce Building).

We conducted verification in Canada

of the questionnaire responses of the

Government of Canada (‘‘GOC’’), the

Government of Quebec (‘‘GOQ’’), the
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54973

Government of Ontario (‘‘GOO’’),

Sidbec-Dosco (Ispat) Inc. (‘‘SDI’’),

Sidbec (Sidbec was incorrectly referred

to as ‘‘Sidbec, Inc.’’ in the preliminary

determination), Ivaco, Inc. (Ivaco),

Stelco, Inc. (Stelco), Bank of Canada,

The Bank of Nova Scotia, and the

Canadian Steel Trades and Employment

Congress (CSTEC) from September 2

through September 11, 1997.

Argument: Petitioners and

respondents filed case and rebuttal

briefs on September 22 and September

25, 1997, respectively. A public hearing

was held on September 29, 1997.

Scope of Investigation

The products covered by this

investigation are certain hot-rolled

carbon steel and alloy steel products, in

coils, of approximately round cross

section, between 5.00 mm (0.20 inch)

and 19.0 mm (0.75 inch), inclusive, in

solid cross-sectional diameter.

Specifically excluded are steel products

possessing the above-noted physical

characteristics and meeting the

Harmonized Tariff Schedule of the

United States (HTSUS) definitions for

(a) stainless steel; (b) tool steel; (c) high

nickel steel; (d) ball bearing steel; (e)

free machining steel that contains by

weight 0.03 percent or more of lead,

0.05 percent or more of bismuth, 0.08

percent or more of sulfur, more than 0.4

percent of phosphorus, more than 0.05

percent of selenium, and/or more than

0.01 percent of tellurium; or (f) concrete

reinforcing bars and rods.

The following products are also

excluded from the scope of this

investigation:

Coiled products 5.50 mm or less in

true diameter with an average partial

decarburization per coil of no more than

70 microns in depth, no inclusions

greater than 20 microns, containing by

weight the following: carbon greater

than or equal to 0.68 percent; aluminum

less than or equal to 0.005 percent;

phosphorous plus sulfur less than or

equal to 0.040 percent; maximum

combined copper, nickel and chromium

content of 0.13 percent; and nitrogen

less than or equal to 0.006 percent.

These products are commonly referred

to as ‘‘Tire Cord Wire Rod.’’

Coiled products 7.9 to 18 mm in

diameter, with a partial decarburization

of 75 microns or less in depth and

seams no more than 75 microns in

depth; containing 0.48 to 0.73 percent

carbon by weight. These products are

commonly referred to as ‘‘Valve Spring

Quality Wire Rod.’’

The products under investigation are

currently classifiable under subheadings

7213.91.3000, 7213.91.4500,

7213.91.6000, 7213.99.0030,

7213.99.0090, 7227.20.0000, and

7227.90.6050 of the HTSUS. Although

the HTSUS subheadings are provided

for convenience and customs purposes,

our written description of the scope of

this investigation is dispositive.

The Applicable Statute and Regulations

Unless otherwise indicated, all

citations to the statute are references to

the provisions of the Tariff Act of 1930,

as amended by the Uruguay Round

Agreements Act effective January 1,

1995 (the ‘‘Act’’).

Injury Test

Because Canada 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 wire rod from Canada materially

injure, or threaten material injury to, a

U.S. industry. On April 30, 1997, the

ITC published its preliminary

determination finding 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 Canada

of the subject merchandise (62 FR

23485).

Petitioners

The petition in this investigation was

filed by Connecticut Steel Corp., CoSteel Raritan, GS Industries, Inc.,

Keystone Steel & Wire Co., North Star

Steel Texas, Inc. and Northwestern Steel

and Wire (the ‘‘petitioners’’), six U.S.

producers of wire rod.

Corporate History

Sidbec was established by the GOQ in

1964. In 1968, Sidbec acquired

Dominion Steel and Coal Corporation

Limited, a steel producer, and later

changed the name to Sidbec-Dosco, Inc.

The GOQ owned 100 percent of Sidbec’s

stock, and Sidbec owned 100 percent of

Sidbec-Dosco, Inc.’s stock, until

privatization in 1994.

In 1976, Sidbec, British Steel

Corporation (International), and Quebec

Cartier Mining Company entered into a

joint venture to mine and produce iron

ore concentrates and iron oxide pellets.

The company they formed was SidbecNormines Inc. (Sidbec-Normines), of

which Sidbec owned 50.1%. These

mining activities were shut down in

1984.

Before its privatization, Sidbec-Dosco,

Inc. operated steel making facilities in

Contrecoeur, Montreal and Longueuil,

Quebec. Until 1987, all of the facilities

at Longueuil and a good portion of the

facilities in Contrecoeur were owned by

Sidbec and leased to Sidbec-Dosco, Inc.

In 1987, Sidbec reorganized in order to

consolidate all steel-related assets under

its wholly-owned subsidiary, SidbecDosco, Inc. Sidbec itself became a

holding company.

On August 17, 1994, Sidbec-Dosco,

Inc. was sold to Beheer-en

Beleggingsmaatschappij Brohenco B.V.

(Brohenco), which is wholly-owned by

Ispat-Mexicana, S.A. de C.V. (Ispat

Mexicana). It became known as SidbecDosco (Ispat) Inc.

Sidbec, the holding company,

continues to be 100% owned by the

GOQ.

Subsidies Valuation Information

Period of Investigation: The period for

which we are measuring subsidies (the

‘‘POI’’) is calendar year 1996.

Allocation Period: In the past, the

Department has relied upon information

from the U.S. Internal Revenue Service

on the industry-specific average useful

life of assets, in determining the

allocation period for nonrecurring

subsidies. See General Issues Appendix

(‘‘GIA’’) appended to Final

Countervailing Duty Determination;

Certain Steel Products from Austria (58

FR 37217, 37226; July 9, 1993).

However, in British Steel plc. v. United

States, 879 F. Supp. 1254 (CIT 1995)

(British Steel), the U.S. Court of

International Trade (the ‘‘Court’’) ruled

against the allocation methodology. In

accordance with the Court’s remand

order, the Department calculated a

company-specific allocation period for

nonrecurring subsidies based on the

average useful life (‘‘AUL’’) of nonrenewable physical assets. This remand

determination was affirmed by the Court

on June 4, 1996. See British Steel plc. v.

United States, 929 F. Supp. 426, 439

(CIT 1996).

In this investigation, the Department

has followed the Court’s decision in

British Steel. Therefore, for the purposes

of this final determination, the

Department has calculated a companyspecific AUL.

Based on information provided by

Sidbec and SDI regarding depreciable

assets, the Department has determined

the appropriate company-specific

allocation period. Due to the proprietary

nature of data from SDI, we are unable

to provide the specific AUL for Sidbec/

SDI for the public file. The calculation

of this AUL is on the official file in the

Central Records Unit, Room B–099 of

the Department of Commerce (see

Memorandum to the File: Calculation of

AUL Period, dated October 14, 1997).

Because we have determined that

Ivaco and Stelco did not receive any

non-recurring subsidies during the POI,
54974 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

we have not calculated an AUL for

either company.

Equityworthiness: In analyzing

whether a company is equityworthy, the

Department considers whether that

company could have attracted

investment capital from a reasonable,

private investor in the year of the

government equity infusion based on

information available at that time. In

this regard, the Department has

consistently stated that a key factor for

a company in attracting investment

capital is its ability to generate a

reasonable return on investment within

a reasonable period of time.

In making an equityworthiness

determination, the Department

examines the following factors, among

others:

1. Current and past indicators of a

firm’s financial condition calculated

from that firm’s financial statements and

accounts;

2. Future financial prospects of the

firm including market studies, economic

forecasts, and project or loan appraisals;

3. Rates of return on equity in the

three years prior to the government

equity infusion;

4. Equity investment in the firm by

private investors; and

5. Prospects in the world for the

product under consideration.

For a more detailed discussion of the

Department’s equityworthiness

methodology, see GIA (58 FR at 37239

and 37244).

Petitioners alleged that Sidbec and

Sidbec-Dosco, Inc. (SDI’s predecessor)

were unequityworthy for the period

1982 through 1992. Petitioners alleged

that any equity infusions received

during those years would have been

inconsistent with the usual investment

practices of private investors and

therefore conferred a countervailable

benefit within the meaning of section

771(5)(E)(i) of the Act. In the

preliminary determination, we

determined Sidbec to be

unequityworthy from 1982 to 1992 (see

Preliminary Determination at 62 FR

41933).

In this investigation, both the GOQ

and SDI have submitted arguments

regarding Sidbec’s equityworthyness at

the time of the 1988 debt-to-equity

conversion, and whether the

Department considered the appropriate

company (Sidbec versus Sidbec-Dosco,

Inc.) when it made its preliminary

equityworthiness determination.

Throughout the period 1982 to 1985,

Sidbec reported substantial losses.

Although Sidbec reported a profit in

1986 and 1987, the profits were not of

such a magnitude to offset the

substantial losses suffered from 1982

through 1985. Additionally, return on

equity was either negative or not

meaningful (due to a negative equity

balance) in every year from 1984

through 1987. Moreover, for the years

1984 through 1987 Sidbec had a

negative debt-to-equity ratio, which

indicated that the company’s liabilities

exceeded the company’s assets.

Therefore, based on an analysis of

Sidbec’s data, we have determined that

Sidbec was unequityworthy at the time

of the 1988 debt-to-equity conversion

(see Comments 8–10 below). The

Department has not rendered a final

determination on other years in the AUL

period, because for this final

determination we find only one

potentially countervailable equity event,

the 1988 debt-to-equity conversion.

Equity Methodology: In measuring the

benefit from a government equity

infusion to an unequityworthy

company, the Department compares the

price paid by the government for the

equity to a market benchmark, if such a

benchmark exists, i.e., the price of

publicly traded shares of the company’s

stock or an infusion by a private

investor at the time of the government’s

infusion (the latter may not always

constitute a proper benchmark based on

the specific circumstances in a

particular case).

Where a market benchmark does not

exist, the Department has determined in

this investigation to continue to follow

the methodology described in the GIA

58 FR 37239–44. Following this

methodology, equity infusions made

into an unequityworthy firm are treated

as grants. Using 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. If a company

receives comparable long-term financing

from commercial sources, that company

will normally be considered

creditworthy. In the absence of

comparable commercial borrowings, the

Department normally evaluates

financial data for three years prior to

each year at issue to determine whether

or not a firm is creditworthy. The

Department considers the following

factors, among others:

1. Current and past indicators of a

firm’s financial health calculated from

that firm’s financial statements and

accounts;

2. The firm’s recent past and present

ability to meet its costs and fixed

financial obligations with its cash flow;

and

3. Future financial prospects of the

firm including market studies, economic

forecasts, and project or loan appraisals.

For a more detailed discussion of the

Department’s creditworhiness criteria,

see, e.g., Final Affirmative

Countervailing Duty Determinations:

Certain Steel Products from France, 58

FR 37304 (July 9, 1993) (‘‘Certain Steel

Products from France’’), and Final

Affirmative Countervailing Duty

Determination: Certain Steel Products

from the United Kingdom, 58 FR 37393

(July 9, 1993).

Petitioners alleged that Sidbec and

Sidbec-Dosco, Inc. were uncreditworthy

from 1977 through 1993. We first

initiated an investigation of SidbecDosco, Inc.’s creditworthiness for the

years 1982 and 1984 through 1988.

Then, on July 1, 1997, we initiated an

investigation of Sidbec’s

creditworthiness for the period 1984

through 1993. In the preliminary

determination, we determined Sidbec to

be uncreditworthy from 1982 to 1992

(see Preliminary Determination, 62 FR

at 41935).

In its case brief, SDI submitted

arguments regarding Sidbec’s

creditworthiness from 1982 to 1992, and

whether the Department considered the

appropriate company (Sidbec versus

Sidbec-Dosco, Inc.) when it made its

preliminary creditworthiness

determination (see Comment 14 below).

To determine the creditworthiness of

Sidbec during the years 1983 (the year

of the first countervailable subsidy in

the AUL period) through 1992 (the year

of the last alleged subsidy in the AUL

period), we have evaluated certain

liquidity and debt ratios, i.e., quick,

current, times interest earned, and debtto-equity, on a consolidated basis. For

the period 1980 through 1985, the

company consistently incurred

substantial losses. Despite the fact that

Sidbec reported a profit from 1986

through 1990, the company was still

thinly capitalized and had a high debtto-equity ratio during this time.

Additionally, the interest coverage ratio

was negative for the years 1991 and

1992 and the liquidity ratios (i.e., quick

and current ratio) indicated that the

company may have had difficulty in

meeting its short-term obligations.

Consequently, based on our analysis of

Sidbec’s data, we have determined that
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54975

Sidbec was uncreditworthy for the years

1983 through 1992.

Discount Rates: Respondents did not

provide company-specific information

relevant to the appropriate discount

rates to be used in calculating the

countervailable benefit for nonrecurring grants and equity infusions in

this investigation. For the preliminary

determination, we used the long-term

government bond rate in Canada

published in the International Monetary

Fund (IMF) International Financial

Statistics Yearbook as the discount rate,

plus a risk premium (because we had

determined Sidbec to be

uncreditworthy), for each year in which

there was a non-recurring

countervailable subsidy. For the final

determination, because we now have

verified long-term corporate rates for the

AUL period (i.e., loans or bonds) from

the Bank of Canada, we have used these

rates as the discount rate, plus a risk

premium (because we have continued to

determine Sidbec to be uncreditworthy),

for each year in which there was a nonrecurring countervailable subsidy, i.e.,

1983 through 1992.

Privatization/Restructuring

Methodology: In the GIA, we applied a

new methodology with respect to the

treatment of subsidies received prior to

the sale of a government-owned

company. Under this methodology, we

calculate the amount of prior subsidies

that passed through to the purchaser.

In the specific context of a

restructuring, as here, where Sidbec

sold Sidbec-Dosco, Inc. to Ispat

Mexicana’s subsidiary Brohenco, we

performed the calculation for

restructuring as set forth in the GIA, 58

FR at 37269, to derive the amount of

prior subsidies that passed through to

SDI.

In the current investigation, we have

analyzed the privatization of SidbecDosco, Inc. in the year 1994. We have

followed the methodology in the GIA,

described above, to calculate the

amount of prior subsidies that passed

through to SDI.

Based upon our analysis of the

petition, the responses to our

questionnaires, and verification, we

determine the following:

I. Programs Determined To Be

Countervailable

A. 1988 Debt-to-Equity Conversion

Petitioners alleged that Sidbec-Dosco,

Inc. received a debt-to-equity

conversion from either the GOC or the

GOQ in 1988 based on Sidbec-Dosco,

Inc.’’s 1988 Annual Report. SDI reported

that a portion of Sidbec’s debt (owed to

the GOQ) was converted into Sidbec

capital stock in 1988. According to SDI,

the debt consisted of four loans

provided to Sidbec by the GOQ during

the period 1982–1985, plus accrued

interest. SDI explained that, every two

years, the GOQ extended the maturity

date for these loans for another two

years. According to the GOQ, it

converted four of Sidbec’s debt

instruments into equity in Sidbec in

1988 in order to improve Sidbec-Dosco,

Inc.’’s economic profile, for the purpose

of making it more attractive for

privatization, partnership, or

investment. In the GOQ Act which

authorized this debt conversion, Sidbec

was authorized to acquire, as it later

did, an equivalent amount in shares of

Sidbec-Dosco, Inc.

We have concluded that, consistent

with our equity methodology, benefits

to Sidbec occurred at the point when

the debt instruments (i.e., loans) were

converted to capital stock given that, as

discussed above, we have determined

that Sidbec was unequityworthy in

1988. See, e.g., Certain Steel Products

from France, 58 FR at 37306–7, 37312.

We consider the conversion of debt to

capital stock in 1988 to constitute an

equity infusion inconsistent with the

usual investment practice of private

investors within the meaning of section

771(5)(E)(i) of the Act.

When receipt of benefits under a

program is not contingent upon

exportation, the Department must

determine whether the program is

specific to an enterprise or industry, or

group of enterprises or industries.

Under the specificity analysis, the

Department examines both whether a

government program is limited by law

to a specific enterprise or industry, or

group thereof (i.e., de jure specificity),

and whether the government program is

in fact limited to a specific enterprise or

industry, or group thereof (i.e., de facto

specificity) (see Section 771(5A)(D) of

the Act). We determine the 1988 debtto-equity conversion to be specific,

because it was provided only to one

enterprise, Sidbec, and was not part of

a broader program.

For these reasons, we determine that

the 1988 debt-to-equity conversion

constitutes a countervailable subsidy

within the meaning of section 771(5) of

the Act.

Consistent with the equity

methodology, we followed our standard

declining balance grant methodology for

allocating the benefits from the equity

infusion represented by the debt-toequity conversion. We then reduced the

benefit stream by applying the

privatization calculation described in

the Restructuring section of the GIA (58

FR at 37269). We divided the benefit by

SDI total sales. On this basis, we

calculated an estimated net subsidy for

this program of 0.92 percent ad valorem

for SDI.

B. 1983–1992 Grants

Sidbec received grants from the GOQ

from 1983 to 1992 to compensate for

expenses it incurred to finance SidbecNormines and its discontinued

operations. Certain of these grants were

provided by the GOQ to Sidbec with

regard to the payment of interest on six

different loans, the first of which was

taken out in 1983. The GOQ was the

guarantor of these loans. These grants

were made in each year from 1983 to

1992. In addition, other grants were

provided by the GOQ to Sidbec with

regard to the payment of the principal

on the same six loans during each year

from 1984 to 1992. In the preliminary

determination, the Department noted

that these payments appeared in

Sidbec’s Consolidated Contributed

Surplus and treated them as equity

infusions from the GOQ. However, at

verification the Department discovered

that these payments were not equity but

grants. The receipt of these grants

occurred as follows: (1) Sidbec paid the

interest and principal, as it came due,

on loans that were taken out to finance

Sidbec-Normines and its discontinued

mining operations; (2) Sidbec then

issued statements to the GOQ for these

amounts; and (3) the GOQ, after

obtaining the necessary budgetary

authority, issued checks to Sidbec to

cover these expenses. According to the

GOQ, to process a request for these

funds, approval was needed from four

agencies (i.e., the Quebec Ministry of

Industry and Commerce, the Treasury

Board, the National Assembly and the

Executive Counsel). Once the approval

process was completed, the GOQ issued

a decree providing funding to Sidbec.

See July 3, 1997 GOQ response, Exhibit

H. In some years, the GOQ-approved

grants did not cover all of the principal

and interest due and paid by Sidbec

(because of differing fiscal years for

Sidbec and the GOQ), and Sidbec’s

financial statements recorded ‘‘grants

receivable’’, based on management’s

‘‘estimate’’ that the GOQ would

reimburse Sidbec; the financial

statements also explained how it would

be handled ‘‘[i]f the Government was to

decide to pay a smaller amount’’ than

recorded in the ‘‘grants receivable’’

account. Nevertheless, over time, the

GOQ did provide grants to Sidbec

covering, in full, all principal and

interest payments due on the six loans.

We have determined that the GOQ

funds provided to Sidbec to finance

Sidbec-Normines and its discontinued
54976 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

mining operations were in the form of

grants (see Comment 6). Based on our

analysis of the record and the comments

received from interested parties (in

Comments 3, 4, 5, and 7), we determine

that these grants constitute

countervailable subsidies within the

meaning of section 771(5) of the Act and

are non-recurring in nature. We also

have determined that they are specific

within the meaning of section

771(5A)(D) of the Act because they were

provided only to one enterprise, Sidbec,

and were not part of a broader program.

To calculate the countervailable

subsidy, we followed our standard

declining balance grant methodology, as

discussed above. We reduced the benefit

stream by applying the privatization

calculation described in the

Restructuring section of the GIA (58 FR

at 37269).

We divided the benefit attributable to

the POI by SDI total sales during the

same period. On this basis, we

determine the countervailable subsidy

for this program to be 8.03 percent ad

valorem for SDI.

II. Programs Determined To Be Not

Countervailable

A. Canadian Steel Trade Employment

Congress Skill Training Program

The GOC, through the Human

Resources Development Canada

(HRDC), and provincial regional

governments provide financial support

to private sector-led human resource

projects through the Sectoral

Partnerships Initiative (SPI). The GOC

stated that SPI has been active in over

eighty Canadian industrial sectors,

including steel through the Canada Steel

Trades and Employment Congress

(CSTEC). CSTEC’s activities are divided

into two types of assistance: 1) worker

adjustment assistance, for unemployed

steel workers; and 2) skills training

assistance, for currently employed

workers.

With regard to the worker adjustment

assistance, funds flowing from HRDC do

not go to the companies, but rather to

unemployed workers in the form of

assistance for retraining costs or income

support. We have determined that these

funds are not countervailable because

the companies are not relieved of any

obligations.

As discussed below (see Comment

16), based on the record, we have

determined that funds received by SDI,

Stelco and Ivaco from CSTEC for

training purposes did not provide

countervailable benefits during the POI,

because these SPI benefits, which

constitute a domestic subsidy, were not

specific to the Canadian steel industry.

B. 1987 Grant to Sidbec-Dosco, Inc.

Petitioners alleged that in 1987,

Sidbec-Dosco, Inc. received a grant from

the GOQ. SDI stated that the GOQ did

not provide a contribution to SidbecDosco, Inc. in 1987. At verification, we

found no evidence that the GOQ

provided a grant to Sidbec-Dosco, Inc.

in 1987. In 1987, Sidbec underwent a

reorganization in order to consolidate

all steel-related assets under SidbecDosco, Inc. The Department discovered

that this transaction involved an

intracompany reorganization, and that

this arrangement was exclusively

between Sidbec and Sidbec-Dosco, Inc.

Therefore, we have determined that no

countervailable benefits were conferred.

C. 1987 Debt-to-Equity Conversion

Petitioners alleged that, in 1987,

Sidbec-Dosco, Inc. received an equity

infusion from either the GOC or GOQ.

Specifically, petitioners stated that

Sidbec (which was wholly-owned by

the GOQ) converted loans to SidbecDosco, Inc. into Sidbec-Dosco, Inc.

shares. Both the GOC and the GOQ

stated that they did not participate in a

debt-to-equity conversion involving

either Sidbec or Sidbec-Dosco, Inc. in

1987. We found no evidence at

verification that the GOQ provided an

infusion of equity, either through a debtto-equity conversion or otherwise, to

Sidbec-Dosco, Inc. in 1987.

Furthermore, as with the alleged 1987

grant, we found that the basis for

petitioners’ allegation in fact involved a

transfer of assets associated with the

intracompany reorganization. Therefore,

we have determined that no

countervailable benefits were conferred.

D. Contributed Surplus

On July 1, 1997, we initiated an

investigation on petitioners’ allegation

that C$51.7 million in contributed

surplus constituted a countervailable

subsidy. SDI reported that this

contributed surplus was related to a

capital expenditure program for fixed

assets, and all of the assistance was

received prior to 1980, which is outside

the AUL period being used for Sidbec in

this investigation. Additionally, the

GOQ stated that Sidbec received these

funds (which originated from both from

the GOQ and the GOC) prior to the AUL

period. At verification, we reviewed

documentation which indicated that

Sidbec received this C$51.7 million

contributed surplus prior to the AUL

period. Therefore, based on record

information, we have determined that

these funds did not provide

countervailable benefits during the POI.

E. Payments Against Accumulated

Grants Receivable

On July 1, 1997, we initiated an

investigation on petitioners’ allegation

that C$43.8 million in payments against

accumulated grants receivable in 1988

constituted a countervailable subsidy.

SDI reported that these grants receivable

are included in the amounts of the

1983–1992 grants discussed above that

went to the discontinued mining

operations of Sidbec-Normines. At

verification of the GOQ, we confirmed

that all GOQ payments made to Sidbec

between 1983 and 1993 are accounted

for by the 1983–1992 grants discussed

above (see Comment 11 below).

Therefore, based on record information,

we have determined that no additional

countervailable benefits were provided.

F. 1982 Assistance to Sidbec-Dosco, Inc.

Petitioners alleged that in 1982,

Sidbec-Dosco, Inc. received an infusion

of emergency funds, either in the form

of a grant or an equity infusion, from the

GOQ. At verification, we gathered

additional information on the alleged

1982 assistance to Sidbec-Dosco, Inc.

Record evidence indicates that the GOQ

did not provide any governmental

assistance to either Sidbec or SidbecDosco, Inc. in 1982 (see, e.g.,

Government of Quebec Verification

report).

G. 1980 and 1981 Grants

On July 25, 1997, petitioners’ alleged

that through a review of Sidbec’s 1980

through 1982 financial statements

indicated that the GOQ provided grants

to Sidbec in 1980 and 1981. At

verification, we gathered information on

the alleged grants to Sidbec. Record

evidence indicates that the GOQ did not

provide any grants to Sidbec in 1980 or

1981 (see, e.g., Government of Quebec

Verification report).

III. Programs Determined To Be Not

Used

A. Industrial Development of Quebec

The Industrial Development of

Quebec (IDQ) is a law administered by

the Societe de Developpement

Industriel du Quebec (SDIQ), a GOQ

agency that funds a wide range of

industrial development projects in

many industrial sectors. Under Article

2(a) of the IDQ, SDIQ provided funding

to help companies utilize modern

technologies in order to ‘‘increase

efficiency and exploit the natural

resources of Quebec’’ (see GOQ July 3,

1997 response at page 12). In 1982, the

GOQ rescinded the applicable law

authorizing SDIQ to provide these

grants.
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54977

The Department verified that Ivaco

received grants in 1984 and 1985 which

had been authorized prior to the

program’s rescission in 1982. With

respect to these grants, we analyzed the

total amount of funding Ivaco received

in each year, and we have determined

that the benefits Ivaco received under

this program for each year constituted a

de minimis portion (i.e., less than 0.5

percent) of total sales value, and

therefore should be expensed in each

year they were received. Therefore,

because the grants provided under this

program were expensed in the year of

receipt, we have determined that no

countervailable benefits were bestowed

on Ivaco during the POI.

Interested Party Comments

Comment 1: Respondent SDI

maintains that the Department’s

determination to treat Sidbec, SidbecDosco, Inc., and Sidbec-Normines as

one entity in the preliminary

determination in part because they

prepared consolidated financial

statements is legally insufficient. First,

SDI claims that, after cessation of

Sidbec-Normines’ operations in 1984, in

accordance with GAAP, SidbecNormines’ financial results were not

consolidated with those of Sidbec or

Sidbec-Dosco, Inc. Thus, concludes SDI,

the Department’s decision to treat

Sidbec-Normines as being the same as

Sidbec was based on an incorrect

premise: for only two of the years in

which the Department found subsidies

were Sidbec-Normines’ financial results

consolidated with the other two

companies.

SDI contends that the facts in Certain

Steel Products from France, cited by the

Department in the preliminary

determination, ‘‘are clearly and sharply

distinguishable from those here.’’

Specifically, SDI asserts that, in Certain

Steel Products from France, the

collapsed parties, Usinor and Sacilor,

each produced the subject merchandise,

each received subsidies whose benefits

were still countervailable in the period

of investigation, and merged together

before the investigation was initiated.

SDI also cites Ferrosilicon from

Venezuela, 58 FR 27539, 27542 (May

10, 1993), in which the Department

treated a parent corporation and its

subsidiary as two distinct entities, as

supporting the principle of ‘‘choos(ing)

substance over form’’ in terms of

addressing the treatment of distinct

corporate entities. By relying only on

GAAP, SDI maintains that the

Department failed to examine whether

Sidbec-Dosco, Inc. in fact benefitted

from the subsidies at issue. SDI also

argues that this approach conflicts with

Department practice. Citing Prestressed

Concrete Wire from France, 47 FR

47031, 47036 (Oct. 22, 1982), SDI states

that the Department noted that: ‘‘(i)t

cannot be concluded solely from the

consolidation of financial statements

that the subsidiaries or the parent are

not operating independently.’’

Petitioners argue that respondents

misread the preliminary determination

by describing the Department’s decision

to treat Sidbec, Sidbec-Dosco, Inc., and

Sidbec-Normines as a single entity as

based on the fact that their financial

statements are consolidated. According

to petitioners, the Department collapsed

the analysis of these three entities, not

merely because of their financial

statements, but also because of the close

relationship of these entities as well as

their common goal of creating a fully

integrated steel company in Quebec.

Petitioners believe that the close

relationship between Sidbec and

Sidbec-Dosco, Inc. renders them

indistinguishable for the purposes of

weighing subsidy benefits. Petitioners

argue that Sidbec was a crown

corporation established to create an

integrated steel facility in Quebec.

Petitioners assert that, pursuant to that

mission, it acquired Sidbec-Dosco, Inc.

Petitioners also state that Sidbec

founded Sidbec-Normines, in which it

held a majority interest for the express

purpose of supplying pelletized iron to

Sidbec-Dosco, Inc. Petitioners claim that

throughout the period of subsidies,

Sidbec, Sidbec-Dosco, Inc. and SidbecNormines shared the same identity of

interest: the production of steel from

iron ore mined in Quebec. Petitioners

conclude that the Department should

not permit a result allowing SidbecDosco to circumvent the countervailing

duty law because the subsidies were

formally bestowed on Sidbec.

Petitioners also have noted that in

Certain Steel from Germany, the

Department found that subsidies from

the parent, DHS, passed through to its

newly acquired subsidiary, Dillinger,

even though the forgiven debt was

incurred with respect to sales of another

DHS subsidiary, Saarstahl. Thus,

according to petitioners, attribution of

subsidies from a parent to its

subsidiaries may be entirely appropriate

even in situations involving no

production of subject merchandise.

Finally, petitioners have argued that,

even if the Department chooses not to

treat Sidbec, Sidbec-Dosco, Inc. and

Sidbec-Normines as a single entity, it

must allocate benefits to Sidbec, and

through Sidbec to Sidbec-Dosco, Inc.

Petitioners agree with SDI that, ‘‘in

determining whether a benefit is found

for the subject merchandise, the

Department normally must examine the

recipient of the subsidy.’’ Petitioners

point to the 1997 Proposed Rules, which

state as a general rule that the

Department will normally attribute a

subsidy received by a corporation to the

products produced by that corporation

and that if the corporation is a holding

company, subsidies will normally be

attributed to the consolidated sales of

the holding company.

Department’s Position: In the

preliminary determination, the

Department stated: ‘‘Because Sidbec,

Inc.’s financial statements were

consolidated including both its mining

and steel manufacturing activities, and

because the alleged subsidies under

investigation were granted through

Sidbec, Inc., we are treating Sidbec, Inc.,

Sidbec-Dosco, Inc. and SidbecNormines as one entity for the purposes

of determining benefits to the subject

merchandise from alleged subsidies.’’

Preliminary Determination, 62 FR at

41934. This statement needs

clarification.

There are two ways in which the

Department, in applying the

countervailing duty law, treats the

parent entity and its subsidiaries as one

when determining who ultimately

benefits from a subsidy. First, the

Department ‘‘generally allocate[s]

subsidies received by parents over sales

of their entire group of companies.’’

GIA, 58 FR at 37262. One example of

this practice is Final Affirmative

Countervailing Duty Determination;

Certain Hot-rolled Lead and Bismuth

Carbon Steel Products from France, 58

FR 6221 (Jan. 27, 1993) (‘‘France

Bismuth’’), where the ‘‘Department

allocated subsidies to all French

subsidiaries of the parent company, a

French holding company, which was

the recipient of the subsidies.’’ GIA, 58

FR at 37262. Second, the Department

has found that a subsidy provided to

one company can bestow a

countervailable benefit on another

company in the same corporate family.

As we explained in Final Affirmative

Countervailing Duty Determination;

Certain Pasta from Italy, 61 FR 30288,

30290, 30308 (June 14, 1996) (‘‘Pasta

from Italy’’), in certain situations, the

Department will treat two (or more)

affiliated companies as a single entity,

so that a subsidy to either company is

deemed a subsidy to the other company

and allocated over the combined sales of

the two companies. Thus, in Pasta from

Italy, the Department treated two

affiliated companies as a single entity

because they were sufficiently related to

each other, i.e., one company owned 20

percent or more of the other company,

and both companies produced the
54978 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

subject merchandise. The Department

also treated two affiliated companies

related by 20 percent or more ownership

as a single entity where one company,

a service company, did not produce the

subject merchandise but nevertheless

was ‘‘deeply involved in the operations

of’’ the other company, which did

produce the subject merchandise. Id. at

30290. See also GIA, 58 FR at 37262

(discussing Armco, Inc. v. United States,

733 F. Supp. 1514 (CIT, 1990), where

the court ‘‘endorsed countervailing the

parent company for subsidies received

by the subsidiary because both were

part of the same business enterprise,

and the parent exercised control over its

subsidiary’’).

In this investigation, from the

beginning of the AUL period until 1984,

when Sidbec-Normines’ mining

operations were shut down, Sidbec was

the parent of both Sidbec-Dosco, Inc.

and Sidbec-Normines, owning 100

percent of Sidbec-Dosco, Inc. and 50.1

percent of Sidbec-Normines, as well as

100 percent ownership of two other

relatively less significant companies—

Sidbec-Feruni, Inc. (steel scrap) and

Sidbec International Inc. (sales of iron

ore). In addition, Sidbec’s financial

statements included both Sidbec-Dosco,

Inc. and Sidbec-Normines among the

consolidated companies. Consistent

with our past practice, therefore, we

have treated any untied subsidy

received by the parent, Sidbec, during

this period as benefitting all of the

companies in the Sidbec group,

including Sidbec-Dosco, Inc. and

Sidbec-Normines. We note that we also

would treat Sidbec and Sidbec-Dosco,

Inc. as a single entity during this period

(and, in fact, continuing until 1987, at

which time the Sidbec group was

reorganized and Sidbec became a

holding company and Sidbec-Dosco,

Inc. assumed responsibility for all steel

wire rod production), with the result

that any untied subsidies received by

either Sidbec or Sidbec-Dosco, Inc.

during this period would be allocated to

the sales of both companies. In this

regard, both Sidbec and Sidbec-Dosco,

Inc. were producers of the subject

merchandise, Sidbec owned 100 percent

of Sidbec-Dosco, Inc. and their steel

wire rod operations were intertwined.

Nevertheless, we need not reach that

issue, given that Sidbec was the only

entity that received subsidies during the

entire AUL period, and these subsidies

already are attributable to all of the

members of the Sidbec group, including

Sidbec-Dosco, Inc., under our normal

practice when dealing with subsidies to

the head of a consolidated group, as

exemplified by France Bismuth.

From 1984, when Sidbec-Normines’

mining operations were shut down,

until 1987, the relationship between

Sidbec and Sidbec-Dosco, Inc. did not

materially change. Consequently, our

practice dictates that we attribute any

untied subsidies received by Sidbec

during this period to the Sidbec group,

which continues to include Sidbec and

Sidbec-Dosco, Inc., but no longer

Sidbec-Normines, whose production

had ceased.

In 1987, the Sidbec group was

reorganized, Sidbec became a holding

company, and Sidbec-Dosco, Inc. took

over all steel wire rod production for the

Sidbec group. From 1987 until the

privatization of Sidbec-Dosco, Inc. in

1994, we still must attribute any untied

subsidies received by Sidbec—now a

holding company, like Usinor Sacilor in

France Bismuth—to the Sidbec group,

which included Sidbec-Dosco, Inc.

Finally, from the privatization of

Sidbec-Dosco, Inc. in 1994 through the

POI, our practice dictates that we treat

all of the subsidies previously received

by Sidbec during the AUL period and

attributable to Sidbec-Dosco, Inc. as

passing to SDI, subject to and in

accordance with the Department’s

privatization and, if relevant, tying

methodologies (see Comment 13). In

this regard, at the time of privatization

and, indeed, since 1987, when Sidbec

transferred all of its steel wire rod assets

to Sidbec-Dosco, Inc., all of the

subsidies previously provided to Sidbec

resided with Sidbec-Dosco, Inc., with

the exception of the small portion of

those subsidies allocable to Sidbec’s

steel scrap subsidiary.

With respect to respondents’

comments, first we note that it is not

material whether Sidbec-Normines’

financial results were included in

Sidbec’s consolidated financial

statements after the closing of SidbecNormines’ mining operations in 1984. It

is only material that Sidbec-Normines

was part of the Sidbec group until its

mining operations were shut down in

1984. The post-1984 grants provided to

Sidbec related to the closure of SidbecNormines’ mining operations and are

attributable to the remaining production

of the Sidbec group, which is the steel

wire rod production of Sidbec (until

1987) and Sidbec-Dosco, Inc.

Meanwhile, the pre-1984 grants

provided to Sidbec, even if considered

tied to Sidbec-Normines’ iron ore

production, similarly are attributable to

the remaining production of the Sidbec

group (see Comment 3).

We do not agree with respondents

that Ferrosilicon from Venezuela is

relevant to the Department’s

determination. There, the Department

was addressing the issue of whether two

companies, FESILVEN and CVG, should

be treated as a single entity, so that a

subsidy to either company would be

deemed a subsidy to the other and

allocated over the combined sales of the

two companies, as in Pasta from Italy.

The Department explained why it

refused to treat the two companies as a

single entity as follows: ‘‘While CVG

does have extensive control over

FESILVEN, FESILVEN has other

shareholders. Moreover, CVG is merely

a holding company with ownership

interest in other companies producing

other products. Therefore, we do not see

an identity of interests sufficient to

warrant treating CVG and FESILVEN as

a single company.’’ 58 FR at 27542. In

this case, the issue is what production

benefits from the subsidy to Sidbec once

Sidbec-Normines ceased production. As

explained above, the Department is

following the precedent, exemplified by

France Bismuth, pursuant to which it is

the Department’s practice to allocate

subsidies received by a parent over sales

of its entire group of companies.

Respondent SDI’s reliance on

Prestressed Concrete Wire from France

also is misplaced. There, the

Department was addressing whether

subsidies provided to an input supplier,

Usinor, had been passed on to the

producer of the finished product, CCG,

which was a wholly owned subsidiary

of Usinor. The Department held that the

mere fact that CCG was consolidated on

Usinor’s financial statement was not

enough to serve as a basis for

concluding that the price charged by

Usinor to CCG for the input was not at

arm’s length. Indeed, the Department

ultimately held that the price was at

arm’s length after reviewing both

Usinor’s and CCG’s dealings with

unrelated companies. In contrast, the

issue in this case is not whether the

government has provided a subsidized

input. Rather, the issue is whether

subsidies provided to Sidbec should be

atttributed to all of the Sidbec group’s

sales. Consequently, Prestressed

Concrete Wire from France is not

relevant here.

We also do not agree with respondent

SDI’s construction of the Department’s

final determination in Certain Steel

Products from France. SDI

misunderstands both the facts of that

case and the Department’s

determination. There, contrary to

respondent SDI’s statements, Usinor and

Sacilor were not producers of the

subject merchandise; rather, each of

them was a parent of a large group of

consolidated companies, among which

were producers of the subject

merchandise and producers of other
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54979

products. During the middle of the AUL

period, in 1986, Usinor and Sacilor were

merged and Usinor Sacilor emerged as

a parent, holding company for the

companies that previously had been

part of the Usinor group and the Sacilor

group. In addressing the subsidies

provided by the French government to

Usinor and Sacilor and, after 1986, to

Usinor Sacilor, the Department followed

its precedent in France Bismuth, where

the Department six months earlier had

faced the same consolidated groups of

companies, the same subsidies and the

same POI. Thus, the Department

attributed subsidies provided to Usinor

and Sacilor prior to the creation of

Usinor Sacilor in 1986 to their

respective groups of companies, and

these subsidies together with all

subsidies bestowed after 1986 were

attributed to the Usinor Sacilor group

(exclusive of Usinor Sacilor’s foreign

producing subsidiaries because, as in

France Bismuth, the Department had

found the subsidies at issue to be tied

to French production). Consequently,

the Department’s approach in the final

determination here—to allocate untied

subsidies received by Sidbec, the

parent, over sales of its entire group of

companies—is entirely consistent with

Certain Steel Products from France.

Comment 2: Respondents GOQ and

SDI contend that the Department’s

treatment of Sidbec-Normines as being

at one with Sidbec and Sidbec-Dosco,

Inc. is in error because Sidbec-Normines

was a joint venture, distinct from both

Sidbec and Sidbec-Dosco, Inc.

According to respondent SDI, even

though Sidbec-Normines was included

in Sidbec’s consolidated financial

statements up until 1984 the results of

Sidbec-Normines were treated

separately from those of Sidbec-Dosco,

Inc. or other Sidbec-related companies.

Additionally, the GOQ notes (citing

Ferrosilicon From Venezuela, 58 FR

27539, 27541 (May 10, 1993), which

was sustained in Aimcor v. United

States, 871 F. Supp. 447, 450 (CIT

1994)) that, where the Department has

found the presence of other

shareholders (as in the case of SidbecNormines), it has declined to treat

related companies as a single entity.

Respondent SDI adds that the

Department’s determination to treat

Sidbec, Sidbec-Dosco, Inc. and SidbecNormines as one entity in the

preliminary determination in part

because subsidies were granted to a

parent corporation provides insufficient

grounds for countervailing the product

of a subsidiary. Citing Aimcor v. United

States, 871 F. Supp. 447, 452 (CIT

1994), construing Armco Inc. v. United

States, 733 F. Supp. 1514, 1516 (CIT

1990), SDI notes that the Court stated

that the Department must ‘‘examine

simply more than the corporate

structure in deciding whether a

countervailable benefit has been

bestowed.’’

Petitioners argue that the existence of

Sidbec-Normines as a joint venture does

not alter the Department’s approach, in

applying the countervailing duty law, of

treating the parent entity and its

subsidiaries as one when determining

who ultimately benefits from a subsidy.

Petitioners cite to Certain Hot-Rolled

Lead and Bismuth Carbon Steel

Products from the United Kingdom, 58

FR 6237, 6240 (Jan. 27, 1993), as a case

in which the Department noted that

‘‘the subsidies provided to a company

presumably are utilized to finance

operations and investments in the entire

company, including productive units

that are subsequently sold or spun off

into joint ventures.’’

While petitioners acknowledge that

there are decisions where the

Department has treated parent and

subsidiary corporations as distinct

entities for purposes of subsidy analysis

(e.g., Ferrosilicon from Venezuela and

Brass Sheet and Strip from France),

petitioners believe that there are more

important precedents for this case. For

example, petitioners assert that Certain

Steel Products from Belgium holds that

corporate formalities or maneuvering

will not be permitted to subvert the

purposes of the statute. Additionally,

petitioners maintain that this approach

was specifically endorsed by the court

in Armco, Inc. v. United States, 733 F.

Supp. 1514, 1524 (CIT 1990), which

held that the Department ‘‘must beware

of permitting statutorily proscribed

bounties that are avowedly of a

countervailable nature to escape

countervailing duties merely because of

intra-corporate machinations.’’

Department’s Position: The parties’

arguments address the propriety of the

Department treating Sidbec, SidbecDosco, Inc., and Sidbec-Normines as a

single entity, as in the Pasta from Italy

line of precedent. Moreover, the

Department is following its past practice

of attributing untied subsidies received

by a parent company to all of the

companies in the parent’s consolidated

group. See also response to Comment 5.

Comment 3: Addressing the 1983–

1992 grants, respondent SDI argues that,

in order for the Department to find a

countervailable benefit within the

meaning of the statute (section 701(a)(1)

of the Act), two conditions must be met:

(1) a countervailable subsidy has been

bestowed, directly or indirectly; and (2)

the countervailable subsidy has been

bestowed upon the manufacture,

production or export of subject

merchandise. SDI claims that, in the

instant case, the Department failed to

make this examination, and instead

assumed without inquiry that the

manufacturer of the subject

merchandise received a benefit from

subsidies given to its parent. Further,

SDI claims that the Department has

made this examination in other cases,

such as Carbon Steel Structural Shapes

from Luxembourg, 47 FR 39364, 39365

(Sept. 7, 1982) and Brass Sheet and

Strip from France, 52 FR 1218 (Jan. 12,

1987).

Petitioners argue that Sidbec and

Sidbec-Dosco, Inc. were closely

intertwined, and thus the Department

was correct to consider subsidies

provided to the parent as benefitting the

subsidiary. Petitioners argue that Sidbec

was not just a holding company, noting

that, until 1987, Sidbec itself owned all

of the steel making facilities at

Longueuil, Quebec, and a significant

portion of the facilities in Contrecoeur.

Sidbec, in turn, leased these facilities to

Sidbec-Dosco Inc., which operated them

together with its own plants as a single

unit. Petitioners claim that this is

evidence that there was a closely

aligned identity of interests which

existed between Sidbec and its

subsidiary. Therefore, according to

petitioners, any payments to Sidbec

must have benefitted those productive

facilities, the only ones Sidbec owned.

Moreover, petitioners assert that,

because Sidbec-Normines was formed to

supply pelletized iron ore for SidbecDosco’s steelmaking facilities, and

because the only use of pelletized iron

ore is to make steel, the establishment

of Sidbec-Normines was part of the

overall mission to give Sidbec

‘‘integrated production from mining

through semi-fabricated product stages.’’

Department’s Position: We disagree

with respondent SDI. We concluded in

the preliminary determination that (1) a

countervailable subsidy has been

bestowed, directly or indirectly, and (2)

the countervailable subsidy had been

bestowed upon the manufacture,

production or export of subject

merchandise. We make the same

conclusions here in the final

determination, with the clarification

made above in Comment 1 regarding the

attribution of subsidies within the

Sidbec group.

With respect to whether a

countervailable subsidy had been

bestowed, directly or indirectly, we

have concluded that the 1983–92 grants

were provided directly to Sidbec and

that they were specific and nonrecurring in nature.
54980 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

With respect to whether the

countervailable subsidy had been

bestowed upon the manufacture,

production, or export of subject

merchandise, we have followed our past

practice, as described in the GIA, and

treated the 1983–92 grants, which were

designed to offset Sidbec’s losses

relating to Sidbec-Normines and its

discontinued mining operations, as

benefitting the steel wire rod production

of Sidbec and Sidbec-Dosco, Inc. and,

ultimately, SDI.

Specifically, while the grants

provided in 1983 and 1984 before

Sidbec-Normines’ mining operations

were tied to Sidbec-Normines’ iron ore

production (see response to Comment

5), these subsidies became attributable

to the remaining production of the

Sidbec group once the shutdown of

Sidbec-Normines’ mining operations

occurred. The Department explained

this approach in the GIA as follows:

The Department maintains its position that

subsidies are not extinguished either in

whole or in part when a company closes

facilities. Rather, the subsidies continue to

benefit the merchandise being produced by

the company. The rationale underlying this

position is that once inefficient facilities are

closed, the company can dedicate its

resources to production at its remaining

facilities. Thus, subsidies do not diminish or

disappear upon the closure of certain

facilities but rather are spread throughout,

and benefit, the remainder of the company’s

operations.

GIA, 58 FR at 37269. Thus, for

example, in Final Affirmative

Countervailing Duty Determinations;

Certain Steel Products from Spain, 58

FR 37374 (July 9, 1993) (‘‘Certain Steel

Products from Spain’’), the Department

faced a situation where AHM had

received subsidies benefitting both its

hot-rolled steel and cold-rolled steel

operations and subsequently closed

down its hot-rolled steel operations. The

Department allocated the portion of the

subsidies previously attributed to the

hot-rolled steel operations to AHM’s

cold-rolled steel subsidiary, SIDMED.

See GIA, 58 FR at 37269; Certain Steel

Products from Spain, 58 FR at 37374–

5, 37379.

Meanwhile, the grants provided in the

years subsequent to the shutdown of

Sidbec-Normines’ mining operations in

1984 plainly reflect payments to effect

that shutdown and, therefore, benefit

the remaining production of the Sidbec

group. According to the GIA, which

describes the Department’s practice in

this area:

The closing of plants result[s] in the

increased efficiency of the company as a

whole. In turn, the increased efficiency

makes the company more competitive. It

necessarily follows that closure subsidies

benefit a company’s remaining production

beyond the year of receipt. The basis for

finding funds for government-directed plant

closure countervailable is that these funds

relieve the company of the costs it would

have incurred in closing down the plant.

Therefore, because the company has been

relieved of a cost, the funds benefit the

company as a whole, and the appropriate

denominator for calculating the benefit of

such funds would be total sales of all

products.

GIA, 58 FR at 37270 (citing British

Steel Corp. v. United States, 605 F.

Supp. 286 (CIT 1985)). The Department

applied this approach in Final

Affirmative Countervailing Duty

Determinations; Certain Steel Products

from Italy, 58 FR 37327 (July 9, 1993)

(‘‘Certain Steel Products from Italy’’),

where the head of the Falck group

received subsidies to close down certain

steel facilities. See GIA, 58 FR at 37270.

Thus, consistent with its past

practice, the Department finds that

grants provided both before and after

the closure of Sidbec-Normines’ mining

operations in 1984 benefit the Sidbec

group’s remaining production as of 1985

onward, including the production of the

subject merchandise, steel wire rod.

Comment 4: SDI contends that the

Department’s reliance on certain

language from the GIA, 58 FR at 37269,

pertaining to spreading benefits

throughout the remainder of the

company’s operations, is misplaced.

Specifically, SDI argues that the GIA

language applies to closed facilities

within the same corporation. The GOQ

adds that, in British Steel Corp. v.

United States, 605 F. Supp. 286 (CIT

1985) (which the Department

incorporated into its remarks involving

plant closure in the GIA in order to

indicate judicial support for the

Department’s position), unlike the

situation with Sidbec, the discontinued

facilities had produced the subject

merchandise, not some other

merchandise, and were part of the

respondent company, not a distinct

corporation.

SDI also asserts that the rationale

expressed in the language quoted by the

Department from the GIA also applies to

subsidies ‘‘previously received.’’ With

regard to funds received following

closure of Sidbec-Normines, SDI

concludes that the language is

inapposite. Instead, SDI believes that

the relevant language from the GIA

would be that language dealing with

payments for the actual closure of a

facility within a company. And, in this

respect, because the entire operation of

Sidbec-Normines was shut down, there

was no remaining enterprise to benefit

from the restructuring. Moreover, there

is nothing on the record to support a

conclusion that the closure increased

the competitiveness or efficiency of

Sidbec-Dosco.

Department’s Position: We disagree

with respondent SDI that the GIA’s

rationale for countervailing subsidies

received prior to a plant closure and the

GIA’s rationale for countervailing

subsidies to effect the closing down of

a plant apply only to situations where

the closed plant was part of the same

individual company as the remaining

production which is deemed to be

benefitted. Although the language to

which respondent SDI cites in the GIA

only references ‘‘a company,’’ the GIA’s

statements are equally applicable under

the circumstances here, where the

Department is dealing with a

consolidated group of companies (the

Sidbec group). Specifically, it is

appropriate to allocate the subsidies at

issue to the remaining production of the

consolidated group in this case given

that the closed plant (the SidbecNormines mining operations) had been

operated by a subsidiary (SidbecNormines) whose only production of

any type came from the closed plant,

and the parent of the consolidated group

(Sidbec) is the group’s shareholder in

the subsidiary and has financed and is

obligated to pay the debts of the

subsidiary. Plainly, the subsidies at

issue allow Sidbec ‘‘to dedicate its

resources to production at its remaining

facilities.’’ GIA, 58 FR at 37269. As the

Department explained in the GIA,

‘‘subsidies do not diminish or disappear

upon the closure of certain facilities.’’

Id. Moreover, in the scenario here, it is

plain that Sidbec, the parent, is being

relieved of ‘‘the costs it would have

incurred in closing down the plant,’’ id.,

so that its remaining production

(including steel wire rod) undeniably

benefitted from the subsidies which it

received.

We note, as well, that in one of the

Certain Steel Products cases, the

Department dealt with subsidy funds

provided to a parent company for the

closing of one of its subsidiaries’

facilities. In that case, Certain Steel

Products from the United Kingdom, the

Department, on remand from the Court

of International Trade, had to determine

how to treat, inter alia, 1984/85 equity

infusions provided to British Steel

Corporation (‘‘BSC’’) for the purpose of

paying for the closure of facilities

which, as here, were dedicated to the

production of non-subject merchandise.

Indeed, the facilities were the very same

facilities at issue in this case, the

Sidbec-Normines mining operations, as

BSC’s subsidiary, British Steel

Corporation (International) (‘‘BSCI’’),
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54981

held an ownership interest in SidbecNormines. The Department treated the

equity infusions as benefitting the

worldwide consolidated sales of the

BSC (actually, its successor, British

Steel plc) group, see Final Results of

Redetermination Pursuant to Court

Remand on General Issue of Sales

Denominator, in British Steel plc v.

United States, Consol. Ct. No. 93–09–

00550–CVD (CIT), dated June 23, 1995,

and the court upheld this treatment, see

British Steel plc v. United States, 929 F.

Supp. 426, 457–58 (CIT 1996).

Similarly, we disagree with

respondent GOQ’s argument that the

rationales in the GIA are limited to the

situation where the closed plant

produced the subject merchandise.

Indeed, the GIA addresses situations

where the closed plant produced nonsubject merchandise, both in the context

of subsidies received prior to a plant

closure (Certain Steel Products from

Spain) and in the context of subsidies to

effect the closing down of a plant

(Certain Steel Products from Italy). See

GIA, 58 FR at 37269, 37270.

Comment 5: Respondents GOQ and

SDI assert that evidence on the record

shows that the countervailed funds were

all (with the exception of the 1988 debtto-equity conversion) specifically tied to

Sidbec’s mining operations. SDI argues

that the Department fully verified that

Sidbec repaid loans provided to

refinance part of the debt of Sidbec’s

mining operations using funds provided

by the GOQ.

Respondents SDI, the GOQ, and the

GOC contend that the Department has

departed from past practice, precedent,

its Proposed Rules, and the Agreement

on Subsidies and Countervailing

Measures of the World Trade

Organization (SCM Agreement) by

countervailing subsidies tied to the

mining operations. First, SDI and the

GOQ argue that it is the Department’s

longstanding practice (as reflected in

both the 1989 Proposed Rules and the

1997 Proposed Rules) that, if the

Department determines that a

countervailable benefit is tied to a

product other than the merchandise, it

will not find a countervailable subsidy

on the merchandise. SDI and the GOQ

cite, inter alia, Certain Iron-Metal

Castings From India, 62 FR 32297,

32302 (June 13, 1997), Certain

Laminated Hardwood Trailer Flooring

from Canada, 62 FR 5201, 5211 (Feb. 4,

1997), and Pasta From Italy, 61 FR

30288, 30303 (June 14, 1996), as

examples of the Department’s ‘‘tied

benefits’’ practice. Thus, argues SDI and

the GOQ, to find a countervailable

subsidy to Sidbec-Dosco (through which

Quebec’s obligations to SidbecNormines, as a separately incorporated

joint venture, could not possibly flow)

from subsidies given by the GOQ for

purposes related to Sidbec-Normines

would be in contravention of the

Department’s past practice relating to

tied subsidies. The GOQ and the GOC

add that the SCM Agreement does not

permit the attribution to output by one

company of countervailable benefits

directed to, and received by, a separate

corporate entity engaged in the

production of a completely different

product. SDI further argues that this is

true where the subsidy is channeled

through a parent company acting

‘‘merely as a conduit’’ for subsidies to

a subsidiary corporation.

SDI also maintains that, because the

subsidies benefitted the mining

operations (regardless of whether they

were provided before or after closure of

the mining facility) then they cannot be

held to benefit the downstream product

except through an upstream subsidy

analysis.

Petitioners assert that both the

intended use and the likely effect of

these subsidies was to benefit Sidbec,

not Sidbec-Normines. Petitioners point

to Industrial Nitrocellulose From France

as illustrating that the Department’s

inquiry attempts to determine the

ultimate destination or likely

beneficiary of the subsidy, in large part

by considering the government’s intent

in bestowing the subsidy. Petitioners

claim that, applying these principles,

the GOQ’s subsidies are clearly not tied

to Sidbec-Normines. Petitioners note

that the ultimate destination and likely

beneficiary of these subsidies was

Sidbec, since the nature of these

benefits was to provide loan forgiveness

to Sidbec. Furthermore, petitioners

argue that if Sidbec did pay the loan

principal directly to Sidbec-Normines,

the ultimate beneficiary of such

forgiveness was not Sidbec-Normines,

which had received the loans and was

shutting down its operations, but

Sidbec, which would remain in

existence and was otherwise liable for

repayment of the loans.

Petitioners add that an analysis

focusing on the intended use of the

subsidies yields the same result:

namely, that Sidbec was the intended

user, since the GOQ’s specific intent in

bestowing the subsidy was to relieve

Sidbec of its loan guarantee obligations.

Finally, petitioners stress that the

Department’s approach to tied

subsidies, like its approach to the

relationship of the various Sidbec

corporate entities, must be reasonable.

Petitioners cite Industrial Nitrocellulose

from France, noting that the Department

analyzed the legislative history of the

tied subsidies provision and concluded

that ‘‘the single most important

principle that both committees stressed

here was that the Department should

reasonably allocate subsidies to the

products that they benefit * * * The

main issue * * * is not whether we

have considered the intent or the effect,

but whether we have appropriately and

reasonably allocated the benefits.’’

Department’s Position: We disagree

with respondents. While SidbecNormines’ mining operations were still

in existence, it is true that the 1983 and

1984 grants would affect only iron ore.

However, these grants could only be

considered to be tied to iron ore up to

1984—the year Sidbec-Normines ceased

production. Once the company no

longer produced iron ore, the remaining

benefits from these grants—we allocate

grants over a period of time equal to a

company’s AUL—could only be

attributed to the remaining production

of the Sidbec group, which consists of

steel products, including wire rod.

Grants made to Sidbec after the closure

of Sidbec-Normines’ mining operations

cannot be tied to non-existent

production, i.e., iron ore. Rather, the

Department’s practice, as described in

the GIA, is to treat these ‘‘closure

subsidies {as} benefit{ting} a company’s

remaining production.’’ GIA, 58 FR at

37270.

We also disagree with respondent

SDI’s argument that the 1983–92 grants

cannot be attributed to Sidbec’s steel

wire rod production without an

upstream subsidy analysis under section

701(e) of the Act, 19 U.S.C. § 1671(e).

Given that Sidbec-Normines’ mining

operations were shut down in the 1984

during Sidbec’s AUL period, the

upstream subsidy provision is no longer

germane. As the Department made clear

in the GIA, closure payments for plants

producing subject and non-subject

merchandise alike are countervailable.

GIA, 58 FR at 37270.

Comment 6: The GOQ argues that the

financial assistance referred to by the

Department as ‘‘1982–92 Equity

Infusions’’ in fact were grants

representing principal payments made

by the GOQ on certain loans taken out

by Sidbec in connection with its

investment in Sidbec-Normines.

According to the GOQ, this financial

assistance was no different from the

interest payments that the GOQ made

on these same loans which the

Department correctly treated as grants.

Specifically, the GOQ argues that

nothing was given in return for the

funds, nor was anything expected or

intended. The GOQ contends that,

according to Departmental practice, all

of the monies should be characterized as
54982 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

grants. The GOQ further asserts that the

Department verified that all the

financial assistance given by the GOQ to

Sidbec were grants.

SDI argues that the Department’s

conclusion that, because certain funds

received by Sidbec were included in its

financial statements under ‘‘contributed

surplus’’ they were equity infusions, is

not supported by precedent or

accounting principles. SDI states that

the funds referred to by the Department

as ‘‘1982–92 Equity Infusions’’ were

contributed for the express purpose of

paying Sidbec obligations incurred in

connection with its investment in

Sidbec-Normines, and did not result in

the receipt of shares by the investor.

Petitioners argue that the GOQ’s

payments of contributed surplus are

equity infusions because they are

additions to shareholder’s equity and

increase the value of total shareholders’

equity in the company. Petitioners

contend that the intent to increase the

company’s equity value is indeed

significant. Petitioners argue that by

infusing funds into Sidbec’s equity

account, the GOQ increased the

likelihood that equity would reach

positive levels, thus allowing the GOQ

to recover previously granted funds.

Department’s Position: We agree with

the GOQ and SDI. The line item

‘‘Contribution by the gouvernement de

la province de Quebec for Discontinued

Mining Operation’’ appearing in

Sidbec’s Consolidated Contributed

Surplus refers not to equity payments,

but to grants, and these payments by the

GOQ in fact took the form of grants (see

GOQ Verification Exhibits G–14 through

G–16).

The Department distinguishes grants

from equity and debt by following its

stated methodology as outlined in the

GIA (see GIA, 58 FR at 37254). The

Department defines grants as funds

provided without expectation of a: (1)

repayment of the grant amount; (2)

payment of any kind stemming directly

from the receipt of the grant (including

interest or claims on profits of the firm

(i.e., dividends) with the exception of

offsets as defined in the 1989 Proposed

Regulations Section 355.46); or (3) claim

on any funds in case of company

liquidation.

At verification, the Department

discovered that the GOQ funds provided

to Sidbec related to principal payments

due under loans that Sidbec had taken

out, and which were guaranteed by

Sidbec’s shareholder, the GOQ (see

Verification Exhibit G–8), relating to

Sidbec-Normines and its discontinued

mining operations. Although the GOQ

as a guarantor had the right to seek

reimbursement from Sidbec for the

funds which it advanced, the

Department has found that the GOQ

provided these funds to Sidbec without

a repayment obligation, and without

compensation in the form of shares. In

this regard, the Decrees authorizing the

GOQ to provide these funds indicate

that these funds were provided as direct

subsidies to service the debt on loans

taken out to finance Sidbec’s mining

obligations, and that the GOQ did not

receive anything from Sidbec in return.

Additionally, we confirmed at

verification that the GOQ neither

received new shares nor had its existing

shares in Sidbec revalued as a result of

its payments (see, e.g., Decree 374–91,

Exhibit 15 of the GOQ Verification

Report). Thus, the Department

concludes that these funds were

provided to Sidbec in the form of grants,

and that the investor did not expect a

reasonable return on the investment

(i.e., the funds were a simple gift).

Comment 7: The GOQ argues that all

of the money countervailed in the

Department’s preliminary determination

originated from the GOQ’s decision to

enter a joint mining venture (i.e.,

Sidbec-Normines) with Quebec Cartier

Mining Company (QCMC) and the

British Steel Corporation (International).

The GOQ notes that it chose to assume

the joint venture’s obligations to private

investors, and opted to fulfill these

obligations by directing funds through

Sidbec. The GOQ maintains that it

financed these obligations to SidbecNormines through a series of loans,

which it obligated itself to pay through

guarantees, and that the loans (to which

the GOQ was a party) were made

through private banks. Furthermore, the

GOQ and SDI argue that the GOQ

assumed responsibility for repayment of

these loans (i.e., principal and interest).

On this basis, the GOQ argues that the

grants provided to Sidbec for payment

of the mining debts, i.e., 1983–1992

grants, were recurring because they

were automatically provided (as they

were guaranteed) on a yearly (principal)

or monthly (interest) basis. As recurring

grants, the GOQ and GOC assert that it

is the Department’s practice to allocate

(expense) a recurring grant to the year

in which the subsidy is received.

According to the GOQ, all funds at issue

were provided in the form of recurring

grants, and none of those funds was

received in the POI. Thus, the GOQ

concludes that none of the money

provided to Sidbec should be allocated

to the POI, and none of the infusions

can be considered countervailable.

SDI asserts that the provision of funds

pursuant to the mining operations was

a commitment made by the GOQ to

make full and prompt payment of all

Sidbec obligations under the mining

venture. Therefore, when the GOQ

undertook the obligation, it made a

commitment to pay, on a recurring

basis, the principal and interest on loans

incurred by Sidbec pursuant to its

mining venture. SDI argues that these

were not ‘‘exceptional’’ grants because

the recipient (Sidbec) could expect to

receive them each year.

SDI states that Sidbec’s financial

statements show the recurring nature of

these payments. Additionally, SDI

argues that the loan agreements

pertaining to the countervailed monies

had fixed and predetermined dates

upon which the interest payments were

due. Moreover, since the GOQ was a

party to the loans, the government could

anticipate when the interest was

payable. Therefore, the funding Sidbec

received to pay the accumulated interest

was regular and predictable,

establishing the recurring nature of

these payments.

Petitioners argue that if the

Department decides that the GOQ’s

coverage of Sidbec’s payments of

principal are not equity but grants, then

the Department should follow its

practice and determine these payments

as nonrecurring (see GIA 58 FR at

37226). Petitioners argue that all

government subsidies to Sidbec were

non-recurring because they required

government approval and authorization

on each individual expenditure prior to

the distribution of the funds.

Petitioners state that the approval

process was extensive and exacting

because each year, prior to issuing the

grant, the GOQ had to seek budgetary

authority. Additionally, the grant had to

be approved at several stages of review,

approval and regulation. Further,

petitioners argue that the grant process

was filled with inconsistencies

concerning the use of discretion, since

the GOQ sometimes failed to pay the

full amount of interest incurred by

Sidbec which lead to the entry of

‘‘grants receivable’’ in Sidbec’s financial

statements. Therefore, petitioners

contend that this variability is

inconsistent with the regularity and

predictability necessary for a nonrecurring grant. Petitioners also

maintain that a consideration in

deciding whether a program is recurring

or non-recurring is ‘‘whether there is

reason to believe that the program will

not continue into the future.’’ In

applying this criterion, according to

petitioners, the Department in Final

Countervailing Duty Determination

Certain Hot Rolled Lead and Bismuth

Carbon Steel Products from the United

Kingdom, 58 FR 6237, 6242 (January 27,

1993) (U.K. Bismuth), deemed equity
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54983

infusions to be non-recurring even

though the equity capital was received

every fiscal year for eight years. The

Department stated in U.K. Bismuth that

the recipient ‘‘had reason to believe that

the program would not continue once

the company reached viability.’’

Petitioners similarly contend that, in

this case, Sidbec had reason to believe

that the equity infusions would not

continue indefinitely.

Lastly, petitioners assert that,

although Sidbec made a profit in 1989,

the GOQ continued to pay the company

principal and interest costs, and did not

seek to require Sidbec’s repayment of

these funds. According to petitioners,

this indicates that these payments were

discretionary, and therefore were nonrecurring.

Department’s Position: We disagree

with respondents GOC, GOQ and SDI.

The 1983–92 grants were non-recurring

in nature.

The Department’s policy with respect

to grants is (1) to expense recurring

grants in the year of receipt, and (2) to

allocate non-recurring grants over the

average useful life of assets in the

industry, unless the sum of grants

provided under a particular program is

less than 0.50 percent of a firm’s total

or export sales (depending on whether

the program is a domestic or export

subsidy) in the year in which the grants

were received (see GIA, 58 FR at 37226).

We consider grants to be non-recurring

when ‘‘the benefits are exceptional, the

recipient cannot expect to receive

benefits on an ongoing basis from

review period to review period, and/or

the provision of funds by the

government must be approved every

year.’’ Id. (quoting France Bismuth, 58

FR at 6722). If any of these questions are

answered in the affirmative, the

Departments considers the benefits to be

non-recurring.Id. Examples of types of

grants which the Department normally

has considered non-recurring are: equity

infusions, research and development

grants, grants for loss coverage, grants

for the purchase of fixed assets, debt

forgiveness, and assumption of debt

(including payments of principal and

interest). See id. The grants at issue fall

into this category, although that fact

alone is not determinative of the

recurring/non-recurring question.

The Department has stated that ‘‘the

element of ‘government approval’

relates to the issue of whether the

program provides benefits

automatically, essentially as an

entitlement, or whether it requires a

formal application and/or specific

government approval prior to the

provision of each yearly benefit. The

approval of benefits under the latter

type of program cannot be assumed and

is not automatic’’ (see id.) At

verification, the Department discovered

that for each year of grants issued to

cover Sidbec-Normines debt, the GOQ

had to engage in a multi-layered process

seeking budgetary authority (in the form

of Decrees) prior to issuance of the

funds in the form of Decrees (see

verification Exhibits G–13 through G–

16). Therefore, the Department

concludes that government approval

was necessary prior to the receipt of

each individual grant.

The Department also concludes that

the record evidence does not indicate

that Sidbec could expect to receive

benefits on an ongoing basis. Although

Sidbec may have had expected that

payment from the GOQ would continue

so long as Sidbec was unprofitable,

given that the GOQ was the guarantor

on the underlying loans, Sidbec could

not expect that payments from the GOQ

in the years when Sidbec was

unprofitable would be outright grants

rather than payments for which the

GOQ would later exercise its right as

guarantor to seek reimbursement from

Sidbec, the guarantee. Moreover, Sidbec

could not expect that the GOQ would

make payments, whether or not outright

grants, in years when Sidbec was

profitable (even though the GOQ in fact

did do so).

Other facts in the record also support

this conclusion. For example, in its

financial statements for certain years,

Sidbec recorded ‘‘grants receivable,’’

based on management’s ‘‘estimate’’ that

the GOQ would reimburse Sidbec;

however, the financial statements also

explained how reimbursement would be

handled ‘‘[i]f the GOQ was to decide to

pay a smaller amount’’ than recorded in

the ‘‘grants receivable’’ account (see,

e.g., Note 3 of Exhibit 14 of SDI’s May

27, 1997 questionnaire response). Again,

this indicates the uncertainty associated

with the GOQ’s payments.

Two similar cases include U.K.

Bismuth, which petitioners have cited

and discussed, and the Certain Steel

Products from Mexico final

determination addressed in the GIA. In

Certain Steel Products from Mexico, the

respondent had argued that the

subsidies at issue—equity infusions—

were recurring because they ‘‘were

regularly and routinely approved by the

legislature’’ and the ‘‘infusions were

provided for nine consecutive years.’’

GIA, 58 FR at 37228. The petitioners,

meanwhile, pointed out the requirement

for ‘‘specific government authorization’’

and that the ‘‘infusions were made on a

case-by-case basis depending on the

financial need of the company.’’ Id. The

Department found the subsidies to be

non-recurring because the benefits were

exceptional, had to be ‘‘separately

approved or authorized by’’ the Mexican

government and the respondent could

not expect to receive the benefits on an

ongoing basis. Id.

Lastly, we note that the Department

cannot determine that these payments

were unexceptional simply because the

payments spanned several years. Such a

broad approach, of course, would lead

to the illogical conclusion that any

multi-year distribution of payments

makes a subsidy program ‘‘recurring’’.

Comment 8: Respondent SDI argues

that the Department applied its

equityworthiness test to the wrong

company. Specifically, SDI contends

that the Department should examine the

financial status of Sidbec-Dosco, Inc.,

not Sidbec. Respondent SDI argues that

the GOQ’s 1988 debt-to-equity

conversion in Sidbec was authorized for

the purpose of investing in SidbecDosco, Inc. SDI stated that the

legislation explains that the object of the

law is to ‘‘acquire shares of the capital

stock of Sidbec-Dosco, Inc.’’ Therefore,

SDI maintains that while the conduit of

these funds was Sidbec, the actual

beneficiary of the equity infusion was

Sidbec-Dosco, Inc. and, accordingly, the

equityworthiness of Sidbec-Dosco, Inc.

alone should be at issue in this

determination. SDI asserts that, in Final

Affirmative Countervailing Duty

Determination; Brass Sheet and Strip

from France, 52 FR 1218, (Jan. 12, 1987)

(‘‘Brass Sheet and Strip from France’’),

the Department properly examined a

corporate structure similar to the one in

this investigation. SDI states that in

Brass Sheet and Strip from France, the

parent company, Pechiney, was a

holding company 85 percent-owned by

the Government of France, and

Pechiney in turn owned virtually all the

stock of the subject manufacturer. SDI

points and that the Department

examined the equityworthiness of

Pechiney’s subsidiary, not Pechiney, the

parent. According to SDI, as in

Pechiney’s case, in the instant

investigation a reasonable private

investor would have examined the

financial indicators of the subsidiary,

Sidbec-Dosco, Inc., not its parent,

Sidbec.

SDI also argues that Preliminary

Affirmative Countervailing Duty

Determination Oil Country Tubular

Goods from Austria, 60 FR 4600, 4601

(Jan. 24, 1995) (‘‘OCTG from Austria’’)

stands for the proposition that, only

where the Department cannot use or is

not provided with the relevant

information, will it resort to use of the

parent’s financial indicators, rather than

those of the subsidiary, the equity
54984 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

recipient. SDI concludes that in this

case, the Department had the relevant

information (i.e., Sidbec-Dosco, Inc’s

financial statements).

SDI argues, moreover, that the

financial statements of Sidbec-Dosco,

Inc. demonstrate a reasonably healthy

company, and that market studies

forecast a healthy steel industry into

which a reasonable private investor

could have expected a reasonable

return.

Petitioners argue that the Department

should reject SDI’s claim that the

Department should evaluate financial

indicators for Sidbec-Dosco, Inc. rather

than Sidbec because it is inconsistent

with both the corporate structure of

Sidbec and the normal behavior of a

reasonable investor. Petitioners contend

that, until the reorganization, Sidbec

directly owned steel facilities whose

operations functioned as one unit with

those of Sidbec-Dosco, Inc. Thus,

petitioners conclude that any financial

problems of Sidbec would limit its

ability to fund Sidbec-Dosco, Inc.

Petitioners assert that the case on which

SDI principally relies (Brass Sheet and

Strip from France) is not on point

because the parent’s consolidated

financial data contained information on

‘‘numerous’’ other subsidiaries

producing non-subject merchandise.

Petitioners also argue that, even if the

Department relied on Sidbec-Dosco

Inc.’s financial indicators rather than

the consolidated financial statements of

Sidbec, Sidbec-Dosco, Inc. would still

be unequityworthy in 1988. Petitioners

contended that Sidbec-Dosco Inc.’s

financial indicators do not support a

conclusion that a reasonable private

investor would have expected a

reasonable rate of return from an

investment in Sidbec-Dosco, Inc. in the

years 1985, 1986, 1987, and 1988

because these financial indicators do

not point to a healthy company.

Therefore, petitioners state that using

Sidbec-Dosco, Inc.’s financial indicators

would not change the results of the

analysis.

Department’s Position: We disagree

with SDI’s claim that the Department

should evaluate financial indicators for

Sidbec-Dosco, Inc. rather than Sidbec

for the three-year period dictated by our

equityworthiness methodology, i.e.,

1985–1987. As stated in Comment 1, the

Department would have treated Sidbec

and Sidbec-Dosco, Inc. as a single entity

up through 1987. During that time

period, the steel operations of Sidbec

and Sidbec-Dosco, Inc. were intertwined

and any reasonable investor would have

looked to the financial indicators of the

parent, Sidbec, as a gauge for how

Sidbec (up until at least the end of 1987,

when it transferred its steel assets to

Sidbec-Dosco, Inc. and became a

holding company) and Sidbec-Dosco,

Inc. would perform. It was the steel

assets of both companies which had just

begun to reside in Sidbec-Dosco, Inc. in

1988, when the debt-to-equity

conversion at issue took place. A private

investor would not have confined its

evaluation to Sidbec-Dosco, Inc.’s

performance in 1985–1987, as that

would only provide a partial picture of

the steel operations of Sidbec-Dosco,

Inc. in 1988. These circumstances are

quite distinct from these addressed in

Brass Sheet and Strip from France and

OCTG from Austria. Thus, for the final

determination, the Department has

evaluated the financial indicators of

Sidbec, rather than Sidbec-Dosco, Inc.,

to make its equityworthiness

determination regarding the 1988 debtto-equity conversion.

Comment 9: With respect to the

GOQ’s 1988 debt-to-equity conversion,

the GOQ asserts that the Department

must measure the GOQ’s action against

the standard of a reasonable private

investor faced with the same choices as

the GOQ under the same circumstances,

in determining whether this transaction

constituted a countervailable event. The

GOQ argues that its decision to convert

this debt-to-equity in 1988 satisfies this

standard and therefore cannot constitute

a countervailable event.

Moreover, the GOQ notes that the

Department’s standard equityworthiness

methodology was formulated for equity

infusions, and is not designed to

analyze debt-to-equity conversions.

According to the GOQ, no money

changed hands.

In any event, respondent GOQ also

argues that the record shows that Sidbec

was equityworthy at the time of the

debt-to-equity conversion. The GOQ

suggests that Final Affirmative

Countervailing Duty Determination;

Steel Wire Rod From Trinidad and

Tobago, 49 FR 480, 483 (Jan. 4, 1984),

supports the argument that it is

commercially reasonable to rely on

contemporaneous studies. For this case,

the GOQ claims that it acted as a private

investor, relying on three internal

studies that all concluded that a debt-toequity conversion was the best option

for the GOQ in order to maximize its

long-term return on its investment in

Sidbec. The GOQ asserts that the

Department’s practice in determining

the reasonableness of a government

action is to examine the information

available to that government at the time

of a debt-to-equity conversion. The GOQ

maintains that the trends for both

Sidbec’s financial performance and that

of the steel industry had been very

positive for more than three years by the

end of 1988, when the GOQ made its

final decision to convert some of

Sidbec’s existing debt into equity.

Petitioners argue that the Department

does not differentiate between equity

infusions and conversions when making

an equityworthiness determination.

Petitioners also argue that any

improvements registered in SidbecDosco, Inc.’s financial statements or

forecasts for the overall Canadian steel

market for 1987 to 1988 could not offset

the magnitude of Sidbec’s previous

losses. Petitioners contend that, even if

Sidbec’s financial performance

improved, the Department generally

does not consider ‘‘a couple of years’’ of

improved performance as warranting a

finding of equityworthiness when a firm

has been found unequityworthy for a

number of years. Additionally,

petitioners assert that information on

future prospects is only one factor to

consider, and the Department generally

places ‘‘greater reliance on past

indicators as they are known with

certainty and provide a clear track

record of the company’s performance,

unlike studies of future expected

performance which necessarily involve

assumptions and speculation.’’ (GIA, 58

FR at 37244).

Department’s Position: We disagree

with the GOQ that the Department

should employ an analysis different

from its standard equityworthiness

methodology in determining the

countervailability of the debt-to-equity

conversion. What the GOQ proposes is

essentially an inside investor standard.

In past practice, however, the

Department has rejected the insider

investor arguments which have been

forwarded by the GOQ in this case. The

Department has stated that ‘‘it is

essential to recognize that the

Department must render its

equityworthiness determination on the

basis of objective and verifiable

evidence. The argument that an inside

investor may have a greater appreciation

of the workings of the firm does not

provide the Department with a reliable

means of distinguishing between those

inside investor motivations that may be

commercially based and those that are

not’’ (see GIA, 58 FR 37250). Further,

the Department has stated that ‘‘a

determination of equityworthiness

cannot be measured by, nor equated

with, the decision of a creditor

exchanging its debt for an equity

position in a company in order to

improve its chances for recouping

money already loaned to that enterprise.

Nor can it be based on whether an

optimal debt to equity ratio can be

achieved through the conversion of
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54985

debt. These may both be important

commercial considerations, but they are

considerations that relate to interests

distinct from the viability of any given

investment. The Department is

fundamentally concerned with whether

it would have been reasonable for a

private investor to invest money in the

company in question. Such an

examination must take place each time

an investment occurs, whether it is an

investment with ‘new’ money or a

conversion of previous debt to equity.

However, the proper focus of the

Department’s analysis is whether the

individual investment, taken alone,

made sound commercial sense’’ (see

GIA, 58 FR 37250). Therefore, the

Department determines that its

equityworthiness analysis is

appropriate.

We also disagree with the GOQ’s

argument that a debt-to-equity

conversion should not be treated as an

equity infusion because no new money

was provided by the GOQ. We reject

this argument because of the principle

laid down in the GIA, quoted

immediately above, and our past

practice, as evidenced by cases such as

France Bismuth, 58 FR at 6227–28, and

Certain Steel Products from France, 58

FR at 37312, 37313, where we treated

debt-to-equity conversions as equity

infusions.

Finally, we disagree with the GOQ

that Sidbec was equityworthy at the

time of the 1988 debt-to-equity

conversion. As we have discussed above

(see Equityworthiness Section of this

Notice), the factors which the

Department examines when making an

equityworthiness determination showed

Sidbec to be unequityworthy.

We also note that at verification, GOQ

officials stated that in the mid-1980s,

Sidbec was not attractive to investors,

because even though it showed some

‘‘minor’’ profits, the profits were not

sufficient to attract a private investor.

See Government of Quebec Verification

Report. Therefore, by the GOQ’s own

admission, it performed this conversion

because no private investor would

provide the capital.

Further, the ultimate aim of the

studies commissioned by the GOQ was

the privatization of Sidbec-Dosco, Inc.

The GOQ stated in its July 3, 1997

questionnaire response that a GOQ

memorandum noted that ‘‘a debt-toequity conversion offered the greatest

potential return to the GOQ.’’

Specifically, the report concluded that,

‘‘as a result of the contemplated debt-toequity conversion, Sidbec would have a

capital structure comparable to other

integrated steel companies. Therefore,

the report concluded that the debt-toequity conversion would make the

company much more marketable should

the government wish to sell it, or shares

in it, in the future.’’ These statements

lead the Department to the conclusion

that this debt-to-equity conversion was

undertaken for the purpose of relieving

Sidbec of debt to make the company

attractive to private investors. It also

leads us to the conclusion that normal

commercial considerations would not

have led a private investor to make an

equity infusion when the GOQ did.

The Department is not aware of any

record information suggesting that the

marginally improved health of the

Canadian steel market and the

worldwide steel industry generally in

the mid-1980s could offset the poor

financial condition of Sidbec. As we

explained in our preliminary

determination, ‘‘throughout the period

1982 to 1985, Sidbec reported

substantial losses. Although Sidbec

reported a profit in 1986 and 1987, this

profit trend was not of such a magnitude

to offset the substantial losses suffered

from 1982 through 1985.’’ Similarly, the

marginally improved health of the steel

market in recent years was not

significant enough to change the prior

assessment of Sidbec’s health.

Comment 10: SDI argues that the

Department erred in its preliminary

determination of Sidbec’s

equityworthiness because the

Department allegedly analyzed the

entire 1982–92 period in determining

whether the 1988 debt-to-equity

conversion was a countervailable action.

Instead, SDI argues, the Department

should have limited its

equityworthiness analysis to 1988 (the

time the equity infusion was made) and

the three years preceding the

investment, as well as the future

prospects of the company and the

industry as a whole. Respondent SDI

indicated that both the Department’s

practice and Proposed Rules dictate that

equityworthiness can only be

established by examining financial

performance prior to and at the time of

the equity infusion occurs; later

performance is irrelevant in determining

whether a ‘‘reasonable private investor’’

would have invested at the time.

Petitioners argue that the Department

properly applied its standard

equityworthiness methodology in its

preliminary determination. Petitioners

point out that the Department analyzed

Sidbec’s financial performance

indicators for the entire period from

1982 through 1992 because the

allegations concerning equity infusions

and the debt-to-equity conversion

covered this entire period.

Department’s Position: Petitioners are

correct in interpreting the results of the

Department’s equityworthiness analysis.

We did not use later performance in

evaluating the 1988 debt-to-equity

conversion or any of the equity

infusions (which we have decided in

this final determination actually are

grants) made in the years 1983 through

1992. Rather, for each equity

transaction, we followed our standard

equityworthiness methodology, as set

forth above in our equityworthiness

section of this notice, and analyzed

current and past financial indicators

reaching back three years and future

prospects as of the time of the equity

transaction.

Comment 11: Petitioners argue that

the Department failed to countervail

benefits from payments to Sidbec,

authorized by the GOQ, against

accumulated grants receivable.

Specifically, petitioners assert that

while some of the grants receivable

covered by a 1988 payment were

countervailed in previous years, the

Department must countervail that

portion of the grants receivable which

was not covered by the payment.

Petitioners speculate that the

Department did not countervail these

payments in the preliminary

determination in order to avoid double

counting. However, petitioners argue

that, because Sidbec’s financial

statements ‘‘clearly distinguish’’

government grants from grants

receivable, countervailing grants

receivable would not result in double

counting. Petitioners recommend that

the Department countervail the total

payment against grants receivable in

1988, while subtracting the value of

grants receivable in 1987 and 1988 from

the 1987 and 1988 grant amounts

countervailed in the preliminary

determination. Petitioners state that the

Department should follow this

methodology because the grants

receivable can only have conveyed a

countervailable benefit in the year when

they were received.

Respondents GOQ and SDI claim that

the payments against accumulated

grants receivable cannot be

countervailed because the funds are tied

to interest due on an instrument taken

by Sidbec to pay for costs of Normines’

mining operations and therefore has no

relationship to the subject merchandise

(see Comment 5 for a discussion of

funds granted pertaining to mining

operations). The respondents also argue

that the Department already accounted

for this sum in the preliminary

determination. According to the

respondents the Department verified the

source of the money in question, and
54986 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

traced it back to monies already

accounted for in the preliminary

determination. Additionally, respondent

SDI argues that, by definition, ‘‘grants

receivable’’ have not yet been received,

and therefore cannot be countervailed in

the years in which they are recorded as

‘‘grants receivable.’’ Finally, the GOQ

suggests that, in the alternative, the

Department could do what petitioners

have asked. The GOQ argues that,

should the Department decide to accept

petitioners’ argument, the end result,

using petitioners’ suggested method to

avoid double counting, would be a net

reduction in the margin.

Department’s Position: We believe

that the focus of our effort to calculate

the countervailable subsidy should be

twofold. First, we need to ensure that

grants receivable (which eventually may

become grants received) are not

improperly included in the

countervailing duty margin. A grant

receivable is not a subsidy; only a grant

is. Second, we need to ensure that all

countervailable subsidies have been

captured by our methodology. In order

to achieve these goals with respect to

GOQ grants to Sidbec, the Department

reconciled payments to Sidbec as

recorded in the GOQ’s public accounts

to amounts received per Sidbec’s

accounting records. In doing so, the

Department confirmed that all GOQ

payments made between 1983 and

March 31, 1993 (the end of the GOQ’s

1992 fiscal year) were accounted for in

the Department’s preliminary

determination. See Sidbec Verification

Report, Exhibit 7. Therefore, the

Department finds that no adjustments

are necessary in the final determination.

Comment 12: Respondent SDI argues

that the purchase price for SidbecDosco, Inc. used by the Department in

the preliminary determination did not

reflect the true purchase price. SDI

states that the purchase price used by

the Department represented the cash

payment by the buyer; however, it

grossly understated the actual purchase

price because it failed to take into

account the additional consideration

paid by the buyer for the shares of

Sidbec-Dosco, Inc. The specific nature

of the additional consideration is

proprietary.

The petitioners did not comment on

respondent SDI’s argument.

Department’s Position: We disagree

with SDI. SDI does not cite any past

Departmental practice where the

Department has included in its purchase

price calculation the additional

consideration to which SDI refers, nor

does any sound financial analysis

support SDI’s approach (see

Memorandum to the File, Final Analysis

Memorandum for the Investigation of

Steel Wire Rod from Canada).

We note that although Article 6.1 of

the Stock Purchase Agreement provided

for the buyer to assume other

obligations in the purchase of SidbecDosco, Inc., Articles 3.1 and 3.2 of the

Stock Purchase Agreement specifically

outline the actual purchase price that

Ispat Mexicana , through its subsidiary,

Brohenco, paid for Sidbec-Dosco, Inc.

Nowhere in Articles 3.1 and 3.2 is

reference made to other obligations

being included in the purchase price of

Sidbec-Dosco, Inc. Additionally, the

record includes clear statements from

both SDI and the GOQ in their

questionnaire responses indicating the

amount of money that Ispat Mexicana

paid for outstanding shares of SidbecDosco, Inc. (see SDI May 27, 1997

questionnaire response and GOQ July 3,

1997 questionnaire response). This

amount does not include the additional

consideration to which SDI now refers.

Furthermore, at verification, SDI

officials specifically stated that the

official price at which Ispat Mexicana

purchased Sidbec-Dosco, Inc. from

Sidbec was the price that agreed with

the amount in the questionnaire

responses (see SDI verification report,

Sept. 17, 1997). We also reviewed

documents at verification showing the

Department this same purchase price.

Moreover, at Sidbec, we verified the

price that Ispat Mexicana paid for

Sidbec-Dosco, Inc. and that this price

agreed with the questionnaire responses

(see Sidbec verification report, Sept. 17,

1997). Furthermore, at Sidbec, we

examined sale documentation and

found that the purchase price in this

documentation agreed with the

purchase price in the responses (see

Exhibit S–1).

Therefore, for the final determination,

the Department will continue to use the

purchase price from the preliminary

determination.

Comment 13: SDI asserts that any

possible countervailable subsidies were

extinguished by privatization. SDI

argues that the privatization

methodology used in the preliminary

determination is incorrect for the

following reasons: (1) The accepted

practice in virtually every part of the

world for valuing a company for

purposes of acquisition is to look at the

discounted stream, or present value, of

future earnings; (2) the forecasted

earnings are calculated by excluding

any interest payments, and any income

or expenses which do not impact on

cash flow, such as depreciation; and (3)

the forecasted tax burden is also

calculated and subtracted from the pretax earnings. SDI contends that after

calculating the future earnings, the

earnings are discounted using the

relevant cost of capital (to the

purchaser) and then summed, and that

this sum represents the value of the

company as if all the financing were

share capital. Also, if there are loans or

other debts outstanding, these liabilities

are subtracted from the sum of

discounted future values in order to

arrive at the net (unleveraged) value of

the company. SDI points out that grants

taken by the company effectively

decrease the amount of the loans that

the company would otherwise have to

take to finance the given level of

investment, and the value of the

company increases by the amount of the

grants and this, in turn, increases the

amount that the purchaser is willing to

pay for the company. Moreover, SDI

points out that if the operations are not

financed completely by loans, but are

financed in part by grants and equity

infusions, the value of the company is

reduced only by the amount of the

loans, not the grants and equity

infusions, when calculating the present

value of future earnings. SDI argues that

Ispat Mexicana’s purchase of SidbecDosco, Inc. paid back the grants dollar

for dollar. Therefore, SDI argued that the

subsidies that Sidbec-Dosco, Inc.

received prior to privatization are

extinguished at the point of

privatization.

The GOC asserts that it has concerns

with the Department’s privatization

methodology. The GOC contends that it

was advised that the sale of SidbecDosco, Inc. was an arm’s length

transaction and fully reflected the

market value of the company’s assets.

Therefore, the Department should

conclude that any alleged subsidies

were extinguished at privatization.

Department’s Position: We disagree

with both the GOC and SDI.

In deciding how to treat non-recurring

subsidies after a privatization, the

Department has followed the

methodology which was discussed in

the ‘‘Restructuring’’ section of the GIA,

58 FR at 37266–69. There we stated that

‘‘subsidies were not extinguished when

a productive unit was sold. Instead,

some portion of prior subsidies received

‘by the seller ‘‘travel (with the

productive unit) to its new home’’:

The Department determines that a

company’s sales of a ‘‘business’’ or

‘‘productive unit’’ does not alter the effect of

previously bestowed subsidies. The

Department does not examine the impact of

subsidies on particular assets or tie the

benefit level of subsidies to changes in the

company under investigation. Therefore, it

follows that when a company sells a

productive unit, the sale does nothing to alter
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54987

the subsidies enjoyed by that productive

unit.

Id. At 37268 (quoting U.K. Bismuth). We

then described the calculation that we

would use to measure the portion of the

subsidies which passed through. This

calculation takes into account the sale

price for the productive unit and calls

for an allocation of previously bestowed

subsidies between the buyer and seller.

See id. at 37269.

Consistent with this approach, we

treated a portion of the subsidies

received by Sidbec as passing through to

SDI. We calculated the allocated

amounts pursuant to the formula

developed in the Restructuring section

of the GIA, 58 FR at 37269.

As to the argument that an arm’s

length transaction, at fair market value,

extinguishes prior subsidies, the

decision of the United States Court of

Appeals for the Federal Circuit in

Saarstahl AG v. United States, 78 F.3d

1539 (Fed. Cir. 1996) (‘‘Saarstahl’’), is

controlling. There, the Federal Circuit

found that an arm’s length transaction,

at fair market value, does not

automatically extinguish subsidies

previously bestowed on a governmentowned company, given that the

countervailing duty statute does not

require the Department to find that the

buyer—here, Ispat Mexicana—has a

competitive benefit resulting from those

subsidies. The Federal Circuit indicated

that the Department can impose

countervailing duties upon the buyer

once it finds (1) a subsidy with regard

to the production of the subject

merchandise, and (2) injury to the

domestic industry by reason of imports

of that merchandise. See id. at 1542–43.

These prerequisites have been met in

this final determination.

The Department continues to believe

that its approach with regard to

privatization is reasonable, and this

approach has received support from the

Federal Circuit, as indicated above.

Therefore, for the final determination,

the Department has continued to follow

that approach in addressing the

restructuring at issue.

Comment 14: SDI argues that the

Department’s finding that Sidbec was

uncreditworthy in its preliminary

determination is not supported by

evidence on the record. SDI contends

that the Department did not consider

evidence of comparable long-term

commercial financing received by

Sidbec when making its funding. SDI

argues that it provided the Department

with evidence of commercial debt

obtained contemporaneously with the

receipt of government grants. SDI

maintains that Sidbec entered into a

long-term capital lease obligation and

the terms of the lease stated that Sidbec

would pay the rent. SDI argues that the

lease was not guaranteed by the

government; hence, the lease

constituted comparable long-term

financing obtained through private

commercial sources.

SDI further argues that the

Department should have considered the

creditworthiness of Sidbec-Dosco, Inc.,

the producer of the subject

merchandise, and not Sidbec. SDI stated

that in (LHF from Canada), the

Department examined the

creditworthiness of two related

companies ‘‘directly engaged in the

production of LHF,’’ and not the

creditworthiness of the entire

consolidated group. SDI noted that the

Department should have made a similar

determination in this case. Additionally,

SDI states that Sidbec-Dosco Inc.’s

financial ratios indicates that it was

creditworthy during in the years prior to

the 1988 debt-to-equity conversion, and

that the Department erred in using

Sidbec’s financial ratios when

determining creditworthiness. Finally,

SDI asserts that the Department failed to

consider record evidence showing that

Sidbec-Dosco, Inc. received comparable

long-term financing from commercial

sources during the AUL from 1985–

1988.

SDI asserts that the above errors

resulted in the Department adding a risk

premium to the discount rate. Citing the

1997 Proposed Rules, 62 FR at 8829–30,

SDI argues that the risk premium is

greater than the benchmark of 4.3

percent that the Department proposes as

‘‘a more accurate measure of risk

involved in lending to firms with little

or no access to commercial bank loans’’

that captures ‘‘more precisely the

speculative nature of loans to

uncreditworthy companies and the

premium they would have to pay the

lender to assume that risk.’’ Therefore,

the Department’s use of a risk premium

is not legally correct.

Petitioners argue that the Department

should reject SDI’s argument that the

Department should base its

creditworthiness analysis on SidbecDosco, Inc., and not Sidbec, financial

ratios because of the nature of Sidbec’s

corporate relationship with SidbecDosco, Inc. Petitioners state that this

analysis is accurate because no

reasonable creditor would lend to

Sidbec-Dosco, Inc. without evaluating

the financial condition of Sidbec.

However, petitioners assert that if the

Department does consider Sidbec-Dosco

Inc.’s financial ratios, Sidbec-Dosco, Inc.

still had a high debt-to-equity ratio and

ultra-low quick ratio and thus would

not be attractive to a commercial lender.

Petitioners contend that Sidbec’s lease

obligation is not proof of

creditworthiness. Petitioners note that

in the preliminary determination for

Steel Wire Rod From Germany, the

Department found that respondent Ispat

Hamburger Stahlwerke was

uncreditworthy in 1994 even though it

had long-term lease agreements.

Therefore, the Department should

disregard the evidence of Sidbec’s longterm lease.

Petitioners state that they agree with

SDI in its suggestion that the

Department use the new

uncreditworthiness calculation from the

proposed countervailing duty

regulations in this review. However,

petitioners contend that the Department

should use the entire methodology,

including the formula in Section

351.504(a)(3)(iii). Petitioners note that

while it may not be appropriate to apply

the new regulations to all of these

investigations, it believes it is entirely

correct when petitioners and the

respondent agree that it would yield to

a more accurate measure.

Department’s Position: The

creditworthiness analysis that the

Department performed in its

preliminary determination (and

subsequently in this final

determination) is consistent with our

decision (see Comment 1) to analyze the

subsidies at issue as benefitting the

consolidated group of the parent/

holding company, Sidbec. Therefore, for

the final determination, we have limited

our analysis to Sidbec. See, e.g., Final

Affirmative Countervailing Duty

Determination: Small Diameter Circular

Seamless Carbon and Alloy Steel

Standard, Line and Pressure Pipe from

Italy, 60 FR 3199 (June 19, 1995).

Since the Department has limited its

analysis of creditworthiness to Sidbec,

we feel that it is not appropriate to

address the Sidbec-Dosco, Inc.’s longterm commercial loans in this final

determination. We also note that, in any

event, SDI did not provide complete

data regarding these borrowings.

Additionally, we disagree with SDI

that Sidbec’s long-term capital lease is

comparable long-term commercial

financing. The lease that SDI points to

is a capital lease, which is secured by

a first-rank specific charge (see Exhibit

13, Note 8 of SDI’s May 27, 1997

questionnaire response), which is not

unlike a typical mortgage. In this case,

the lessor has first lien rights on the

capital equipment should the lessee,

Sidbec, be in default. On this basis, the

Department distinguishes this capital

lease from a typical long-term
54988 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

commercial loan, which is not secured

in this way. The Department therefore

does not consider Sidbec’s lease to be

comparable long-term commercial

financing. Lastly, the Department has

determined that the use of a risk

premium is appropriate and legally

correct in this case because the

Department continues to operate under

its existing practice rather than the 1997

Proposed Rules.

Comment 15: Respondent SDI

contends that the Department erred in

calculating the ad valorem

countervailing duty rate by using an

FOB sales value as the denominator in

its formula. SDI cites the GIA (58 FR at

37237) as supporting the concept of

using respondents’ sales value as

recorded in their financial statements

and accounts as the denominator when

calculating the ad valorem subsidy rate.

SDI notes that, in contrast, Commerce in

this case has used an estimated FOB

factory sales value for domestic sales,

and an estimated FOB port sales value

for export sales, even though SidbecDosco (Ispat) maintains its sales records

and reports sales figures in its financial

statements on a delivered price basis.

Petitioners did not comment on this

argument.

Department’s Position: The

Department acknowledges that, in the

GIA, it stated that it would be ‘‘more

appropriate to use respondents’ sales

value as recorded in their financial

statement and accounts in the

denominator when calculating the ad

valorem subsidy rate.’’ GIA, 58 FR at

37237. However, an adjustment (a ratio

of invoice value of exports to the United

States to the FOB value of exports to the

United States) was still necessary under

the GIA methodology to ensure that

Customs would collect the correct

amount of subsidy based on an FOB

invoice price of the imported

merchandise. In the 1997 Proposed

Rules, the Department noted that the

methodology discussed in the GIA had

not proven useful, because so few

companies had the data in the form

necessary to calculate the ratio. While

SDI maintains that it does possess the

necessary information, it is also true

that, so long as the estimates used to

calculate the FOB value are reasonable,

there should be no net effect on the

calculated margin. The Department

verified SDI’s estimated freight

calculations, and found them to be

reasonable. See SDI Verification Report.

Therefore, for the purposes of

calculating a final margin, we have

made no adjustments.

Comment 16: The GOQ supports the

Department’s preliminary determination

not to countervail benefits received

through the Canadian Steel Trades and

Employment Congress (CSTEC), but

argues that the Department should

acknowledge that benefits under the

Sectoral Partnerships Initiative (of

which CSTEC is a part) are generally

available to Canadian industry, and that

only ‘‘additional training’’ qualifies for

government funding through CSTEC.

The GOQ also notes that petitioners

made no claim in their subsidy

submission that CSTEC programs

constituted a subsidy to Canadian

employers, nor did they request that

CSTEC be included in the calculation of

a Canadian countervailing duty margin.

Petitioners did not comment on this

argument.

Department’s Position: At verification

of the response of the Government of

Canada and CSTEC, the Department

reviewed documentation supporting

record evidence that benefits under the

Sectoral Partnerships Initiative, of

which CSTEC is a part, are not de jure

specific to the Canadian steel industry,

as is discussed above in Part II. See

Government of Canada Verification

Report, page 4; Canada Steel Trades

and Employment Congress Verification

Report, page 1. See also GOC July 2,

1997 Supplemental Questionnaire

response, exhibit 4 (Sectoral Activities

Update Report; Spring 1996, which

shows that over 50 separately classified

industrial sectors were included in SPI).

Additionally, there is no record

evidence suggesting that the

administration of SPI vis-a-vis the steel

industry would lead the Department to

determine that SPI is de facto specific

with respect to the steel industry.

Therefore, benefits received under this

program are not countervailable.

Comment 17: Respondent GOQ states

that in the Department’s preliminary

determination it concluded that funding

by the Societe de Developpement

Industriel du Quebec (SDIQ) did not

confer a countervailable subsidy during

the POI. Respondent notes that

verification confirmed that no SDIQ

benefits were received by steel wire rod

producers or sellers during the POI, and

that SDIQ monies received by a steel

company prior to the POI constituted a

de minimis portion of total sales value

in those years. Moreover, the GOQ

argues that the verified record

demonstrates that SDIQ monies received

by the respondent companies could not

possibly be countervailed in that the

monies were not specific to the steel

wire rod industry because SDIQ

provided benefits to over 1,100

companies. The GOQ contends that

while there were many users, from a

wide variety of industries, no steel

producer was a dominant user, and steel

did not receive a disproportionate share.

Therefore, SDIQ was not specific.

The petitioners did not comment on

this argument.

Department’s Position: We agree with

the GOQ that respondent Ivaco was the

only steel wire rod producer to receive

any benefits from SDIQ during the AUL

period. As we explained above (see Part

III), Ivaco received de minimis benefits

in two years prior to the POI, and we

therefore expensed them in the years of

receipt. As a result, we did not

countervail any benefits under this

program.

Comment 18: Respondent SDI states

the Department did not correctly sum its

depreciation expense that it used to

calculate its AUL. SDI notes that the

Department’s AUL calculation only

summed nine years of depreciation

expense as opposed to ten years, and

therefore, the Department should correct

the summing of its depreciation expense

in its final determination.

The petitioners did not comment on

this argument.

Department’s Position: We agree with

respondent SDI. In the preliminary

determination, the Department

incorrectly calculated SDI’s

depreciation expense that it used to

calculate SDI’s AUL. The Department

has recalculated SDI’s depreciation

expense by summing the appropriate

number of years (i.e., ten). This

recalculation has changed the length of

the AUL period (see Memorandum to

the File, Final Analysis Memorandum

in the Investigation of Steel Wire Rod

from Canada).

Comment 19: Respondent GOQ states

that petitioner alleged that Sidbec’s

1982 financial statements indicated that

Sidbec received C$51.7 million

contributed surplus from the GOQ and

the GOC. The GOQ notes that the

Department verified that this

contributed surplus represents funds

provided to Sidbec before the AUL

period. Therefore, the GOQ maintains

that these funds are not relevant to the

investigation.

Petitioners did not comment on this

argument.

Department’s Position: We agree with

respondent GOQ. Although Sidbec’s

1980 consolidated financial statement

indicated that Sidbec did receive a

C$51.7 million contributed surplus, the

Department verified that Sidbec

received this C$51.7 million contributed

surplus from 1977 to 1979 (See Sidbec

Verification Exhibit S–4). Consequently,

these funds were provided outside of

the Department’s calculated AUL period

for SDI.

Comment 20: Petitioners state that a

review of Sidbec’s 1980 through 1982
Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices 54989

financial statements indicates that the

GOQ provided grants to Sidbec in 1980

and 1981. Petitioners state that the 1980

financial statement described these

grants as ‘‘an amount that the

government has consented to pay to the

company to finance specific investment

projects’’ and Sidbec officials stated at

verification that Sidbec had received

these amounts (see Sidbec’s Verification

report). Therefore, petitioners argue that

Sidbec received grants from the GOQ.

Lastly, petitioners state although the

regulatory time limit for alleging new

subsidies has passed, if the Department

does not include these subsidies it will

reward Sidbec’s refusal to provide the

Department with requested information.

The GOQ states that the amounts of

funding are not grants, but are payments

for equity purchased in 1979. The GOQ

argues that the Department verified the

funding to be grants provided in 1980

and 1981, and were the last of two

installment payments on equity that the

GOQ purchased from Sidbec in 1979.

The GOQ notes that it passed legislation

which allowed it to purchase shares of

Sidbec stock in 1979, that legislation

permitted the GOQ to pay for those

shares in installments over three years,

and Sidbec’s 1980 balance sheet

confirms that the shares were issued

prior to 1979. Furthermore, the GOQ

argues that the date of issuance of the

shares, not the dates on which the

purchase price was fully paid,

establishes as a matter of law the date

on which an equity infusion is made.

The GOQ asserts that the shares were

issued in 1979.

Additionally, respondent SDI notes

that Sidbec’s financial statements for

1980 and 1981 do not provide a basis for

countervailing these amounts.

According to SDI, states that there is no

evidence on the record to indicate that

Sidbec-Dosco, Inc. received any funding

in either 1980 or 1981.

Lastly, both the GOQ and SDI state

that these equity infusions were outside

of the Department’s calculated AUL

period.

Department’s Position: We disagree

with petitioners. At verification of

Sidbec, officials informed the

Department that Sidbec did receive

equity infusions from the GOQ from

1979 through 1981. See Sidbec

Verification Report, dated September

17, 1997. Therefore, we determine that

no countervailable benefits were

conferred through this program.

Comment 21: Respondent GOQ notes

that petitioners alleged that in 1987

Sidbec-Dosco received a grant from the

GOQ. The GOQ states that the

Department verified that no such

program existed and that Sidbec-Dosco

never received any money from the

GOQ during 1987 or any other year

during the AUL.

The petitioners did not comment on

this argument.

Department’s Position: We agree with

respondent GOQ. At verification, we

found no evidence that the GOQ

provided a grant to Sidbec-Dosco, Inc.

in 1987. Sidbec underwent a

reorganization in 1987 in order to

consolidate all steel-related assets under

Sidbec-Dosco, Inc., and all assets

previously belonging to Sidbec had been

leased to Sidbec-Dosco, Inc. We

discovered that this transaction

reflected an intracomapany

reorganization, and that this

arrangement was exclusively between

Sidbec and Sidbec-Dosco, Inc. and was

designed to effect the reorganization.

See GOQ and Sidbec-Dosco (Ispat)

Verification Reports, dated Sept. 17,

1997. Therefore, we determine that no

countervailable benefits were conferred

through this program.

Comment 22: Respondent GOQ states

that petitioners alleged that in 1987

Sidbec-Dosco, Inc. received an equity

infusion (i.e., a debt-to-equity

conversion) from either the GOQ or the

GOC. Respondent argues that the

Department concluded in its

preliminary determination that no

countervailable benefits were provided

under this program. The GOQ notes that

the Department verified that the GOQ

made no equity infusions into SidbecDosco, Inc. or Sidbec in 1987.

The petitioners did not comment on

this argument.

Department’s Position: We agree with

respondent GOQ. At verification, we

found no evidence that the GOQ

provided an equity infusion (i.e., a debtto-equity conversion) to Sidbec-Dosco,

Inc. in 1987. We discovered that this

transaction reflected an intracompany

reorganization. See GOQ and SidbecDosco (Ispat) Verification Reports, dated

Sept. 17, 1997. Therefore, we determine

that no countervailable benefits were

conferred through this program.

Comment 23: Respondent GOQ

asserts that the Department concluded

in its preliminary determination that

neither Sidbec nor Sidbec-Dosco, Inc.

received any equity infusions in 1982.

However, the Department noted that it

was uncertain as to whether any grants

were provided to either of these

companies in 1982. The GOQ states that

the record now shows that neither

Sidbec nor Sidbec-Dosco, Inc. received

any countervailable assistance in 1982,

whether in the form of grants or equity.

The petitioners did not comment on

this argument.

Department’s Position: We agree with

the GOQ. At verification, we found no

evidence that the GOQ provided any

form of governmental assistance to

either Sidbec or Sidbec-Dosco, Inc. in

1982. See the GOQ and Sidbec-Dosco

(Ispat) Verification Reports, dated Sept.

17, 1997. Therefore, we determine that

no countervailable benefits were

conferred through this program.

Suspension of Liquidation

In accordance with section

705(c)(1)(B)(i) of the Act, we have

calculated individual rates for each of

the companies under investigation.

To calculate the all others rate, we

weight-average all individual company

rates which are positive by each

company’s exports of the subject

merchandise to the United States. In

this case, because Stelco and Ivaco’s

rates are zero, we are using SDI’s rate as

the All Others rate.

In accordance with section 703(d) of

the Act, we are directing the U.S.

Customs Service to suspend liquidation

of all entries of steel wire rod from

Canada, except those of Ivaco and

Stelco, which are entered, or withdrawn

from warehouse, for consumption on or

after the date of the publication of this

notice in the Federal Register, and to

require a cash deposit or bond for such

entries of the merchandise in the

amounts indicated below. Because there

is no estimated net subsidy for Ivaco

and Stelco, they are exempt from the

suspension of liquidation. This

suspension will remain in effect until

further notice.

Manufacturers/exporters Ad valorem

rate (percent)

Sidbec-Dosco (Ispat) Inc. ....... 8.95

Ivaco, Inc. ............................... 0

Stelco, Inc. .............................. 0

All Others ................................ 8.95

ITC Notification

In accordance with section 705(d) 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 Deputy Assistant

Secretary for AD/CVD Enforcement,

Group III, Import Administration.

If the ITC determines that material

injury, or threat of material injury, does
54990 Federal Register / Vol. 62, No. 204 / Wednesday, October 22, 1997 / Notices

not exist, these proceedings will be

terminated and all estimated duties

deposited or securities posted as a result

of the suspension of liquidation will be

refunded or canceled. If, however, the

ITC determines that such injury does

exist, we will issue a countervailing

duty order directing Customs officers to

assess countervailing duties on steel

wire rod from Canada.

Return or Destruction of Proprietary

Information

This notice serves as the only

reminder to parties subject to

Administrative Protective Order (APO)

of their responsibility concerning the

return or destruction of proprietary

information disclosed under APO in

accordance with 19 CFR 355.34(d).

Failure to comply is a violation of the

APO.

This determination is published

pursuant to section 705(d) of the Act.

Dated: October 14, 1997.

Robert LaRussa,

Assistant Secretary for Import

Administration.

[FR Doc. 97–27986 Filed 10–21–97; 8:45 am]

BILLING CODE 3510–05–P

DEPARTMENT OF COMMERCE

International Trade Administration

[C–428–823]

Final Affirmative Countervailing Duty

Determination: Steel Wire Rod From

Germany

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: October 22, 1997.

FOR FURTHER INFORMATION CONTACT:

Cynthia Thirumalai or Daniel Lessard,

Office of Antidumping/Countervailing

Duty Enforcement, Group 1, Office 1,

Import Administration, U.S. Department

of Commerce, Room 1874, 14th Street

and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone

(202) 482–4087 or 482–1778,

respectively.

Final Determination

The Department determines that

countervailable subsidies are being

provided to Saarstahl AG (‘‘Saarstahl’’)

and Ispat Hamburger Stahlwerke GmbH

(‘‘IHSW’’), producers and exporters of

steel wire rod from Germany. We also

determine that Walzdraht Hochfeld

GmbH (‘‘WHG’’) and Brandenburger

Elektrostahlwerke GmbH (‘‘BES’’)

received de minimis subsidies.

Case History

Since the publication of the

preliminary affirmative determination

(‘‘Preliminary Determination’’) in the

Federal Register, 62 FR 41945 (August

4, 1997), the following events have

occurred.

Verification of the responses of the

Government of the Federal Republic of

Germany (‘‘GOG’’), the Government of

the Free and Hanseatic City of Hamburg

(‘‘GOH’’), the Government of Saarland

(‘‘GOS’’), the European Union (‘‘EU’’),

Saarstahl, IHSW, WHG, and BES was

conducted between August 20 and

September 5, 1997.

Petitioners and respondents filed case

and rebuttal briefs on September 19,

1997, and September 23, 1997,

respectively. The hearing was held on

September 24, 1997. Per the

Department’s request, post-hearing

submissions were received from parties.

Scope of Investigation

The products covered by this

investigation are certain hot-rolled

carbon steel and alloy steel products, in

coils, of approximately round cross

section, between 5.00 mm (0.20 inch)

and 19.00 mm (0.75 inch), inclusive, in

solid cross-sectional diameter.

Specifically excluded are steel products

possessing the above noted physical

characteristics and meeting the

Harmonized Tariff Schedule of the

United States (‘‘HTSUS’’) definitions for

(a) stainless steel; (b) tool steel; (c) high

nickel steel; (d) ball bearing steel; (e)

free machining steel that contains by

weight 0.03 percent or more of lead,

0.05 percent or more of bismuth, 0.08

percent or more of sulfur, more than 0.4

percent of phosphorus, more than 0.05

percent of selenium, and/or more than

0.01 percent of tellurium; or (f) concrete

reinforcing bars and rods.

The following products are also

excluded from the scope of this

investigation:

Coiled products 5.50 mm or less in

true diameter with an average partial

decarburization per coil of no more than

70 microns in depth, no inclusions

greater than 20 microns, containing by

weight the following: carbon greater

than or equal to 0.68 percent; aluminum

less than or equal to 0.005 percent;

phosphorous plus sulfur less than or

equal to 0.040 percent; maximum

combined copper, nickel and chromium

content of 0.13 percent; and nitrogen

less than or equal to 0.006 percent. This

product is commonly referred to as

‘‘Tire Cord Wire Rod.’’

Coiled products 7.9 to 18 mm in

diameter, with a partial decarburization

of 75 microns or less in depth and

seams no more than 75 microns in

depth; containing 0.48 to 0.73 percent

carbon by weight. This product is

commonly referred to as ‘‘Valve Spring

Quality Wire Rod.’’

The products under investigation are

currently classifiable under subheadings

7213.91.3000, 7213.91.4500,

7213.91.6000, 7213.99.0030,

7213.99.0090, 7227.20.0000, and

7227.90.6050 of the HTSUS. Although

the HTSUS subheadings are provided

for convenience and customs purposes,

our written description of the scope of

this investigation is dispositive.

The Applicable Statute

Unless otherwise indicated, all

citations to the statute are references to

the provisions of the Tariff Act of 1930,

as amended by the Uruguay Round

Agreements Act effective January 1,

1995 (the ‘‘Act’’).

Petitioners

The petition in this investigation was

filed by Connecticut Steel Corp., CoSteel Raritan, GS Industries, Inc.,

Keystone Steel & Wire Co., North Star

Steel Texas, Inc. and Northwestern Steel

and Wire (‘‘petitioners’’), six U.S.

producers of wire rod.

Subsidies Valuation Information

Period of Investigation: The period for

which we are measuring subsidies (the

‘‘POI’’) is calendar year 1996.

Allocation Period: Since benefits from

nonrecurring subsidies are not confined

to a single period of time, the

Department must determine a

reasonable period over which to allocate

such benefits. In the past, the

Department has relied upon information

from the U.S. Internal Revenue Service

on the industry-specific average useful

life of assets to determine the allocation

period for nonrecurring subsidies (see

General Issues Appendix appended to

Final Affirmative Countervailing Duty

Determination; Certain Steel Products

from Austria, 58 FR 37217, 37226 (July

9, 1993) (‘‘GIA’’)). However, in British

Steel plc. v. United States, 879 F. Supp.

1254 (CIT 1995) (‘‘British Steel’’), the

U.S. Court of International Trade (the

‘‘Court’’) ruled against this allocation

methodology. In accordance with the

Court’s remand order, the Department

calculated a company-specific

allocation period for nonrecurring

subsidies based on the average useful

life (‘‘AUL’’) of renewable physical

assets. This remand determination was

affirmed by the Court on June 4, 1996.

British Steel, 929 F. Supp. 426, 439 (CIT

1996).

In this investigation, the Department

has followed the Court’s decision in