[Federal Register Volume 75, Number 202 (Wednesday, October 20, 2010)]
[Notices]
[Pages 64700-64707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26403]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-351-829]


Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From 
Brazil: Preliminary Results of Countervailing Duty Administrative 
Review

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

SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty (CVD) order on certain 
hot-rolled flat-rolled carbon-quality steel products (HRS) from Brazil 
for the period January 1, 2008 through December 31, 2008. For 
information on the net subsidy for the company reviewed, see the 
``Preliminary Results of Administrative Review'' section of this 
notice. Interested parties are invited to comment on the preliminary 
results of this administrative review. See the ``Disclosure and Public 
Comment'' section of this notice, below.

DATES: Effective Date: October 20, 2010.

FOR FURTHER INFORMATION CONTACT: Myrna Lobo, Justin Neuman or Milton 
Koch, AD/CVD Operations, Office 6, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
2371, (202) 482-0486 and (202) 482-2584, respectively.

SUPPLEMENTARY INFORMATION: 

[[Page 64701]]

Background

    On September 17, 2004, the Department published in the Federal 
Register the CVD order on HRS from Brazil. See Agreement Suspending the 
Countervailing Duty Investigation on Hot-Rolled Flat-Rolled Carbon-
Quality Steel From Brazil; Termination of Suspension Agreement and 
Notice of Countervailing Duty Order, 69 FR 56040 (September 17, 2004) 
(HRS Order). The order was issued five years after the completion of 
the countervailing duty investigation, and after the termination of the 
agreement that suspended the investigation. See Suspension of 
Countervailing Duty Investigation: Certain Hot-Rolled Flat-Rolled 
Carbon-Quality Steel Products from Brazil, 64 FR 38797 (July 19, 1999); 
see also Final Affirmative Countervailing Duty Determination: Certain 
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64 FR 
38742 (July 19, 1999) (HRS Final Determination).
    On September 1, 2009, the Department published in the Federal 
Register a notice of opportunity to request an administrative review of 
this order. See Antidumping or Countervailing Duty Order, Finding, or 
Suspended Investigation; Opportunity to Request Administrative Review, 
74 FR 45179 (September 1, 2009). On September 30, 2009, the Department 
received a timely request from Usinas Siderurgicas de Minas Gerais 
(USIMINAS) and its subsidiary, Companhia Siderurgica Paulista (COSIPA), 
to conduct an administrative review of the countervailing duty order 
applicable to its exports to the United States for the period of 
January 1 through December 31, 2008. USIMINAS and COSIPA (collectively, 
USIMINAS/COSIPA) are related companies that produce and export subject 
merchandise. On October 26, 2009, the Department initiated an 
administrative review of the CVD order on HRS from Brazil covering 
USIMINAS/COSIPA for the period January 1, 2008 through December 1, 
2008. See Initiation of Antidumping and Countervailing Duty 
Administrative Reviews and Request for Revocation in Part, 74 FR 54956 
(October 26, 2009).
    The Department issued questionnaires to the Government of Brazil 
(GOB) and USIMINAS/COSIPA on December 10, 2009. USIMINAS/COSIPA 
submitted their joint questionnaire response on February 1, 2010. On 
February 4, 2010, the GOB submitted its questionnaire response. 
Subsequently, at the Department's request, USIMINAS/COSIPA submitted a 
revised copy of their original questionnaire response removing 
unrelated materials inadvertently included in the original response.
    On February 3, 2010, United States Steel Corporation (petitioner) 
submitted a timely request for the Department to conduct on-site 
verifications of the questionnaire responses submitted by USIMINAS/
COSIPA and the GOB. On March 5, 2010, in response to a request from the 
petitioner, the Department extended the deadline for the submission of 
new factual information to April 1, 2010. On April 1, 2010, petitioner 
submitted factual information for consideration in this administrative 
review. On June 7, 2010, the Department extended the time limit for the 
preliminary results of the countervailing duty administrative review 
until October 7, 2010. See Certain Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products from Brazil: Extension of Time Limit for 
Preliminary Results of Countervailing Duty Administrative Review, 75 FR 
32160 (June 7, 2010). Included in this extension was the Department's 
decision to toll all deadlines related to this proceeding by seven days 
due to the closure of the Federal Government from February 5 through 
February 12, 2010. See Memorandum to the Record from Ronald K. 
Lorentzen, Deputy Assistant Secretary for Import Administration, 
regarding ``Tolling of Administrative Deadlines As a Result of the 
Government Closure During the Recent Snowstorm'' (February 12, 2010).
    The Department issued supplemental questionnaires to the GOB and 
USIMINAS/COSIPA on June 25, 2010. On July 26 and 27, respectively, the 
GOB and USIMINAS/COSIPA submitted their supplemental responses. The 
Department issued supplemental questionnaires to the GOB and USIMINAS/
COSIPA on September 14, 2010. On September 24 and 27, respectively, the 
GOB and USIMINAS/COSIPA submitted their supplemental responses. On 
September 28, USIMINAS/COSIPA submitted additional supplemental 
information requested by the Department.

Scope of the Order

    For purposes of this review, the products covered are certain hot-
rolled flat-rolled carbon-quality steel products of a rectangular 
shape, of a width of 0.5 inch or greater, neither clad, plated, nor 
coated with metal and whether or not painted, varnished, or coated with 
plastics or other non-metallic substances, in coils (whether or not in 
successively superimposed layers) regardless of thickness, and in 
straight lengths, of a thickness less than 4.75 mm and of a width 
measuring at least 10 times the thickness. Universal mill plate (i.e., 
flat-rolled products rolled on four faces or in a closed box pass, of a 
width exceeding 150 mm, but not exceeding 1250 mm and of a thickness of 
not less than 4 mm, not in coils and without patterns in relief) of a 
thickness not less than 4.0 mm is not included within the scope of 
these investigations.
    Specifically included in this scope are vacuum degassed, fully 
stabilized (commonly referred to as interstitial-free (``IF'')) steels, 
high strength low alloy (``HSLA'') steels, and the substrate for motor 
lamination steels. IF steels are recognized as low carbon steels with 
micro-alloying levels of elements such as titanium and/or niobium added 
to stabilize carbon and nitrogen elements. HSLA steels are recognized 
as steels with micro-alloying levels of elements such as chromium, 
copper, niobium, titanium, vanadium, and molybdenum. The substrate for 
motor lamination steels contains micro-alloying levels of elements such 
as silicon and aluminum.
    Steel products to be included in the scope of this investigation, 
regardless of HTSUS definitions, are products in which: (1) Iron 
predominates, by weight, over each of the other contained elements; (2) 
the carbon content is 2 percent or less, by weight; and (3) none of the 
elements listed below exceeds the quantity, by weight, respectively 
indicated: 1.80 percent of manganese, or 1.50 percent of silicon, or 
1.00 percent of copper, or 0.50 percent of aluminum, or 1.25 percent of 
chromium, or 0.30 percent of cobalt, or 0.40 percent of lead, or 1.25 
percent of nickel, or 0.30 percent of tungsten, or 0.012 percent of 
boron, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or 
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent 
of zirconium.
    All products that meet the physical and chemical description 
provided above are within the scope of this order unless otherwise 
excluded. The following products, by way of example, are outside and/or 
specifically excluded from the scope of this order:
    <bullet> Alloy hot-rolled steel products in which at least one of 
the chemical elements exceeds those listed above (including e.g., ASTM 
specifications A543, A387, A514, A517, and A506).
    <bullet> SAE/AISI grades of series 2300 and higher.
    <bullet> Ball bearing steels, as defined in the HTSUS.
    <bullet> Tool steels, as defined in the HTSUS.
    <bullet> Silico-manganese (as defined in the HTSUS) or silicon 
electrical steel with a silicon level exceeding 1.50 percent.

[[Page 64702]]

    <bullet> ASTM specifications A710 and A736.
    <bullet> USS Abrasion-resistant steels (USS AR 400, USS AR 500).
    <bullet> Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
       C           Mn (max)     P (max)     S (max)         Si              Cr              Cu         Ni (max)
----------------------------------------------------------------------------------------------------------------
    0.10-0.14         0.90       0.025       0.005       0.30-0.50       0.30-0.50       0.20-0.40        0.20
----------------------------------------------------------------------------------------------------------------

Width = 44.80 inches maximum; Thickness = 0.063-0.198 inches; Yield
Strength = 50,000 ksi minimum; Tensile Strength = 70,000-88,000 psi.

    <bullet> Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
      C              Mn        P (max)    S (max)         Si             Cr        Cu (max)   Ni (max)     Mo
----------------------------------------------------------------------------------------------------------------
   0.10-0.16      0.70-0.90      0.025      0.006      0.30-0.50      0.30-0.50       0.25       0.20      0.21
----------------------------------------------------------------------------------------------------------------

Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi 
Aim.

    <bullet> Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

                                                                      [In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  V (wt.)
        C                Mn            P (max)       S (max)           Si               Cr               Cu          Ni (max)      (max)       Cb (max)
--------------------------------------------------------------------------------------------------------------------------------------------------------
    0.10-0.14         1.30-1.80         0.025         0.005         0.30-0.50        0.50-0.70        0.20-0.40         0.20         0.10         0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------

Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi 
Aim.

    <bullet> Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

                                                                      [In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
   C (max)      Mn (max)       P (max)      S (max)      Si (max)     Cr (max)     Cu (max)     Ni (max)     Nb (min)          Ca               Al
--------------------------------------------------------------------------------------------------------------------------------------------------------
     0.15          1.40         0.025         0.010         0.50         1.00         0.50         0.20        0.005          Treated        0.01-0.07
--------------------------------------------------------------------------------------------------------------------------------------------------------

Width = 39.37 inches; Thickness = 0.181 inches maximum; Yield Strength 
= 70,000 psi minimum for thicknesses <= 0.148 inches and 65,000 psi 
minimum for thicknesses > 0.148 inches; Tensile Strength = 80,000 psi 
minimum.

    <bullet> Hot-rolled dual phase steel, phase-hardened, primarily 
with a ferritic-martensitic microstructure, contains 0.9 percent up to 
and including 1.5 percent silicon by weight, further characterized by 
either (i) tensile strength between 540 N/mm2 and 640 N/mm2 and an 
elongation percentage >= 26 percent for thicknesses of 2 mm and above, 
or (ii) a tensile strength between 590 N/mm2 and 690 N/mm2 and an 
elongation percentage >= 25 percent for thicknesses of 2 mm and above.
    <bullet> Hot-rolled bearing quality steel, SAE grade 1050, in 
coils, with an inclusion rating of 1.0 maximum per ASTM E 45, Method A, 
with excellent surface quality and chemistry restrictions as follows: 
0.012 percent maximum phosphorus, 0.015 percent maximum sulfur, and 
0.20 percent maximum residuals including 0.15 percent maximum chromium.
    <bullet> Grade ASTM A570-50 hot-rolled steel sheet in coils or cut 
lengths, width of 74 inches (nominal, within ASTM tolerances), 
thickness of 11 gauge (0.119 inch nominal), mill edge and skin passed, 
with a minimum copper content of 0.20%.
    The merchandise subject to this order is classified in the 
Harmonized Tariff Schedule of the United States (HTSUS) at subheadings: 
7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 7208.25.30.00, 
7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 7208.27.00.30, 
7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 7208.37.00.30, 
7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 7208.38.00.90, 
7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 7208.40.60.30, 
7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 7208.90.00.00, 
7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 7211.14.00.90, 
7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 7211.19.45.00, 
7211.19.60.00, 7211.19.75.30, 7211.19.75.60, 7211.19.75.90, 
7212.40.10.00, 7212.40.50.00, 7212.50.00.00. Certain hot-rolled flat-
rolled carbon-quality steel covered by this order, including: vacuum 
degassed, fully stabilized; high strength low alloy; and the substrate 
for motor lamination steel may also enter under the following tariff 
numbers: 7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 
7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30,

[[Page 64703]]

7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 
7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. Although the HTSUS 
subheadings are provided for convenience and Customs purposes, the 
written description of the merchandise covered by this order is 
dispositive.

Period of Review

    The period for which we are measuring subsidies, i.e., the period 
of review (POR), is January 1, 2008 through December 31, 2008.

Subsidies Valuation Information

Cross-Ownership

    The Department's regulations state that cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. See 19 CFR 351.525(b)(6)(vi). 
The regulation specifies that this standard will normally be met where 
there is a majority voting ownership interest between two corporations 
or through common ownership of two (or more) corporations. Id. The 
preamble to the Department's regulations further clarifies the 
Department's cross-ownership standard. See Countervailing Duties; Final 
Rule, 63 FR 65347, 65401 (November 25, 1998) (CVD Preamble). According 
to the CVD Preamble, relationships captured by the cross-ownership 
definition include those where the interests of two corporations have 
merged to such a degree that one corporation can use or direct the 
individual assets (including subsidy benefits) of the other corporation 
in essentially the same way it can use its own assets (including 
subsidy benefits). Id. The cross-ownership standard does not require 
one corporation to own 100 percent of the other corporation. In certain 
circumstances, a large minority voting interest (for example, 40 
percent) or a ``golden share'' may also result in cross-ownership. Id. 
at 65401.
    As such, the Department's regulations make it clear that we must 
examine the facts presented in each case in order to determine whether 
cross-ownership exists. If we find that cross-ownership exists and if 
one or more of the relationships identified in 19 CFR 351.525(b)(6) 
exists, we treat all cross-owned companies, to which at least one of 
those relationships applies, as one company, and calculate a single 
rate for any countervailable subsidies that we identify and measure, in 
accordance with 19 CFR 351.525(b)(6).
    Further, in accordance with 19 CFR 351.525(b)(6)(iv), if the 
Department determines that the suppliers of inputs primarily dedicated 
to the production of the downstream product are cross-owned with the 
producers/exporters under investigation, then the Department will treat 
subsidies provided to the input producers as subsidies attributable to 
the production of the downstream product.
    In the original HRS investigation in 1999, the Department 
determined that USIMINAS and COSIPA should be treated as a single 
company because of USIMINAS' 49.79 percent ownership stake in COSIPA 
and the fact that both companies produced subject merchandise. See HRS 
Final Determination at 38744. This finding on the relationship between 
USIMINAS and COSIPA was reaffirmed in the Department's countervailing 
duty investigation in 2002 of certain cold-rolled carbon steel flat 
products (CRS) from Brazil, in which both USIMINAS and COSIPA were 
respondents. See Final Affirmative Countervailing Duty Determination: 
Certain Cold-Rolled Carbon Steel Flat Products From Brazil, 67 FR 62128 
(October 3, 2002) (CRS Final Determination) and the accompanying Issues 
and Decision Memorandum (CRS I&D Memorandum) at 4-5. Since the CRS 
investigation, COSIPA has become a wholly-owned subsidiary of USIMINAS, 
and remained so throughout the current POR. COSIPA produced the same 
steel products as its parent company; USIMINAS produced audited 
consolidated financial statements for 2008 that included COSIPA's 
financial information; and COSIPA's own audited financial statement for 
2008 indicates that the majority of its Board of Directors also hold 
positions on USIMINAS' Executive Board. Based on this information, the 
Department has determined that USIMINAS and COSIPA were cross-owned 
during the POR in accordance with 19 CFR 351.525(b)(6)(vi). Further, 
since they both produce and export subject merchandise, we are treating 
them as a single entity, USIMINAS/COSIPA.
    USIMINAS/COSIPA reported affiliations during the POR with three 
warehousing/processing/distributing companies involved in the 
production and sale of HRS, Fasal, S.A. (Fasal), Dufer, S.A. (Dufer), 
and Rio Negro Comercio e Industrial (Rio Negro), and two of its 
suppliers of iron ore consumed in the production of HRS, 
Minera[ccedil][atilde]o J. Mendes Ltda. (J. Mendes) and Companhia do 
Vale do Rio Doce (Vale). To the extent that the subsidies we are 
investigating are conferred on these companies, we must examine whether 
cross-ownership exists among and across producers, the inventory/
processing/distributor companies, and the iron ore producers/suppliers.
    USIMINAS/COSIPA submitted information indicating that at the 
beginning of 2008, COSIPA owned 51 percent of Dufer. In October 2008, 
COSIPA purchased the remaining shares of Dufer, making the company a 
wholly-owned subsidiary of COSIPA. USIMINAS/COSIPA also reported in its 
July 27, 2010 supplemental questionnaire response that ``some members 
of Usiminas' (Cospa's) {sic{time}  top management also sat on Dufer's 
board of directors.'' USIMINAS/COSIPA indicates that it was the sole 
supplier of all the steel products that Dufer sells or further 
processes. Based on this information, we preliminarily determine that 
Dufer and USIMINAS/COSIPA were cross-owned during the POR in accordance 
with 19 CFR 351.525(b)(6)(vi).
    During the POR, USIMINAS owned 65.69 percent of Rio Negro's shares. 
Respondents also indicate in their July 27, 2010 response that ``(s)ome 
members of Usiminas' top management also sit on Rio Negro's board of 
directors.'' USIMINAS/COSIPA indicates that it was the sole supplier of 
all steel that Rio Negro sells or processes. Based on this information, 
we preliminarily determine that Rio Negro and USIMINAS/COSIPA were 
cross-owned during the POR in accordance with 19 CFR 351.525(b)(6)(vi).
    On February 1, 2008, USIMINAS/COSIPA acquired all the shares of J. 
Mendes and its wholly-owned subsidiaries, Somisa Siderurgica Oeste de 
Minas Ltda. (Somisa) and Global Minera[ccedil][atilde]o Ltda. On July 
1, 2008, the stockholders of USIMINAS/COSIPA approved the merger of J. 
Mendes and its two wholly-owned subsidiaries into USIMINAS; those 
companies were then extinguished. Based on information on the record, 
we preliminarily determine that J. Mendes was cross-owned with 
USIMINAS/COSIPA, from February 1, 2008 through July 1, 2008, the date 
on which it was extinguished and absorbed by USIMINAS/COSIPA, in 
accordance with 19 CFR 351.525(b)(6)(vi). Because USIMINAS/COSIPA also 
absorbed the subsidiaries Somisa and Global Minera[ccedil][atilde]o 
Ltda. when it merged with J. Mendes, and because Somisa had outstanding 
loans under the FINAME program under review (see ``Analysis of 
Programs'' section, below), any countervailable benefit that Somisa 
received from these loans during the POR will be attributed to 
USIMINAS/COSIPA.

[[Page 64704]]

    The Department also finds that Fasal is cross-owned with USIMINAS/
COSIPA, and that Vale is not cross-owned with the companies under 
review. Since much of the analysis supporting our findings on cross-
ownership regarding Fasal and Vale involves business proprietary 
information, this analysis is fully set forth in the Memorandum to 
Barbara E. Tillman, Director, AD/CVD Operations, Office 6, from Justin 
M. Neuman, International Trade Compliance Analyst; Countervailing Duty 
Administrative Review: Certain Hot-Rolled Flat-Rolled Carbon-Quality 
Steel from Brazil, dated concurrently with this notice (Cross-Ownership 
Memorandum), a public version of which is on file in the Department's 
Central Records Unit (CRU) in Room 7046 of the main Department 
building.
    Based on information on the record, for purposes of these 
preliminarily results, we determine that cross-ownership exists, as 
defined by 19 CFR 351.525(b)(6), among and across the following 
companies involved in the production and sale of the subject 
merchandise: respondent HRS producers/exporters, USIMINAS and COSIPA; 
the inventory/processing/distribution companies involved in the 
production and distribution of HRS, Fasal, Dufer, and Rio Negro; and 
the iron-ore supply company, J. Mendes.

Allocation Period

    Under 19 CFR 351.524(d)(2)(i), we will presume the allocation 
period for non-recurring subsidies to be the average useful life (AUL) 
prescribed by the Internal Revenue Service (IRS) for renewable physical 
assets of the industry under consideration (as listed in the IRS's 1977 
Class Life Asset Depreciation Range System, and as updated by the 
Department of the Treasury). This presumption will apply unless a party 
claims and establishes that these tables do not reasonably reflect the 
AUL of the renewable physical assets of the company or industry under 
investigation. Specifically, the party must establish that the 
difference between the AUL from the tables and the company-specific AUL 
or country-wide AUL for the industry under investigation is 
significant, pursuant to 19 CFR 351.524(d)(2)(i) and (ii). For assets 
used to manufacture steel products such as HRS, the IRS tables 
prescribe an AUL of 15 years.
    USIMINAS/COSIPA did not rebut the presumption that the IRS tables 
should be used. Therefore, we are using the 15-year AUL as reported in 
the IRS tables to allocate any non-recurring subsidies under 
investigation which were provided directly to the producers and 
exporters of the subject merchandise.

Benchmark Rate Information

    For programs requiring the application of a benchmark interest 
rate, 19 CFR 351.505(a)(1) states a preference for using an interest 
rate that the company would have paid on a comparable commercial loan 
\1\ on the market. Also, 19 CFR 351.505(a)(3)(i) stipulates that when 
selecting a comparable commercial loan that the recipient ``could 
actually obtain on the market'' the Department will normally rely on 
actual short-term and long-term loans obtained by the firm. However, 
when there are no comparable commercial loans, the Department ``may use 
a national average interest rate for comparable commercial loans,'' 
pursuant to 19 CFR 351.505(a)(3)(ii).
---------------------------------------------------------------------------

    \1\ A comparable commercial loan is a loan in the same currency, 
with a similar maturity, and interest rate structure (i.e., fixed 
vs. variable interest rate). See Countervailing Duties; Final Rule, 
63 FR 65348, 65362.
---------------------------------------------------------------------------

    Pursuant to 19 CFR 351.505(a)(2)(iii) and (a)(2)(iv), if a program 
under review is a government-provided loan program, the preference 
would be to use a company-specific annual average of interest rates of 
comparable commercial loans during the year in which the government-
provided loan was approved. For this review, the Department required 
benchmark rates to determine benefits received from FINAME loans 
provided by Banco Nacional de Desenvolvimento Economico e Social 
(BNDES), the Brazilian National Development Bank. USIMINAS/COSIPA did 
not report having any comparable commercial loans meeting the above 
criteria outstanding during the POR. Therefore, to calculate the 
benefit to USIMINAS/COSIPA from FINAME loans, for these preliminary 
results, in accordance with 19 CFR 351.505(a)(3)(ii), the Department 
has used national average interest rates.
    In response to our initial questionnaire, the GOB provided 
information regarding national average interest rates in the form of 
the CDI rate and the SELIC rate; the CDI rate is the Interbank Deposit 
Rate and the SELIC rate is the rate at which the central bank provides 
overnight funds to banks. Neither represents an interest rate at which 
a commercial borrower could obtain financing on the market. Therefore 
for the purposes of these preliminary results, we will rely on 
information available from the Banco Central do Brasil, Brazil's 
central bank. Specifically, for the fixed-rate loans in Brazilian 
reais, we have used use an annual average of the monthly rates 
identified as interest rates for working capital, for corporate 
entities for fixed operations. For the loans denominated in reais with 
the application of an indexation factor, we are using an annual average 
of the monthly rates identified as the consolidated rate for corporate 
entities. For these loans, because there are inconsistencies in the 
reported information about how the loan program operates and the loan 
information provided by USIMINAS/COSIPA, and there are multiple 
components of the loans, including indexation, we believe it is 
appropriate to use the consolidated rates which represent a composite 
of the fixed, indexed, and floating interest rates available to 
corporate entities. For a more detailed discussion of our selection and 
use of the benchmark interest rates, see Memorandum to the File from 
The Team; Calculations for the Preliminary Results: Usinas Siderurgicas 
de Minas Gerais S.A. and Companhia Siderugica Paulista (USIMINAS/
COSIPA), dated concurrently with this notice (HRS Calculation 
Memorandum).

Analysis of Programs

A. Program Preliminarily Determined To Be Countervailable

National Bank for Economic and Social Development Loans (BNDES) Loan 
Program: FINAME
    In the CRS Final Determination, we determined that the FINAME loan 
program was countervailable as an import substitution program in 
accordance with section 771(5A)(C) of the Tariff Act of 1930, as 
Amended (the Act). In a prior administrative review of the instant 
order, the Department decided that it was appropriate to examine 
programs discovered in that investigation that reasonably appeared to 
provide countervailable subsidies to USIMINAS/COSIPA, such as FINAME 
loans. See Memorandum to the File, from The Team; Additional Subsidy 
Programs to be Included in the Questionnaire for the Countervailing 
Duty Administrative Review of Certain Hot-Rolled Carbon Steel Flat 
Products from Brazil (December 19, 2005), a public document available 
in the CRU. Although the prior administrative review was subsequently 
rescinded (see Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Flat 
Products from Brazil: Notice of Rescission of Countervailing Duty 
Administrative Review, 71 FR 8278 (February 16, 2006)), the decision to 
examine FINAME loans to producers of HRS stands. Therefore, we 
requested

[[Page 64705]]

complete information on all FINAME loans outstanding during the POR.
    The FINAME program was established by BNDES in the 1990s to finance 
purchases of Brazilian-produced equipment. Essentially, financing was 
only provided by BNDES for the purchase of Brazilian-made equipment and 
financing for imported equipment could only be provided if that 
equipment could not be obtained in Brazil. Financing was not provided 
for foreign-made equipment if the same equipment was produced in 
Brazil. FINAME loans are primarily made on an indirect basis through 
agent banks.
    The terms of FINAME loans vary depending on whether the financing 
is for imported or domestically-produced equipment. For domestically-
produced equipment, FINAME finances up to 90 percent of the purchase 
for a small business and up to 80 percent of the purchase for a large 
company. If the equipment is imported, or less than 60 percent 
Brazilian content, the financing must be made from a basket of foreign 
currencies. For imported equipment, a maximum financing term of five 
years is applied, and financing is available for 85 percent of the 
value of the equipment for small businesses and for 80 percent of the 
value for large businesses. During the POR, USIMINAS/COSIPA had 
outstanding FINAME loans granted for the purchase of Brazilian-made 
equipment. See ``Benchmark Rate Information,'' above.
    We are examining the specificity of the FINAME financing that 
USIMINAS/COSIPA received. In the absence of new information or evidence 
of changed circumstances that would warrant a reconsideration of the 
countervailability of this program, we continue to find this program to 
be de jure specific as an import substitution program because it is 
only available to finance the purchase of domestically-produced 
equipment. See section 771(5A)(C) of the Act. We further find that 
there is a financial contribution, through the provision of loans, 
under section 771(5)(D)(i) of the Act.
    To the extent that the interest rates on these loans are lower than 
the benchmark rate, a benefit exists in accordance with 19 CFR 
351.505(a). We calculated the benefit in accordance with sections 
351.505(a)(5)(i) and 351.505(a)(5)(ii) of the Department's regulations, 
by comparing the actual interest paid on the outstanding FINAME loans 
during the POR, to the amount of interest that would have been paid on 
these loans using the comparable commercial benchmark rates noted in 
the ``Benchmark Rate Information'' section above. The FINAME loans 
received by USIMINAS/COSIPA have unique interest rates and structures 
including monetary correction (indexation) of the loan principal. 
Because the structure of these loans is complex, and much of the 
information is business proprietary, the calculation methodology for 
these loans is discussed in more detail in the preliminary calculation 
memorandum. See HRS Calculation Memorandum. We preliminarily determine 
that USIMINAS/COSIPA received benefits under the FINAME financing 
program during the POR. We summed the benefits from all loans to the 
cross-owned companies, and divided this total by the combined total 
sales of USIMINAS/COSIPA during the POR. We thus determine the 
countervailable subsidy from FINAME loans to USIMINAS/COSIPA to be 0.02 
percent ad valorem.

B. Program Preliminarily Determined To Be Not Countervailable

Presumed Tax Credit for the Program of Social Integration and the 
Social Contributions of Billings on Inputs Used in Exports (PIS/COFINS)
    In 1970, through Supplementary Law No. 7, the GOB established PIS. 
Under the law, companies make PIS contributions to a fund which is ``a 
means of creating wealth for * * * employees.'' In 1991, through 
Supplementary Law No. 70, the GOB established COFINS as a contribution 
for the financing of social insurance ``intended solely to defray the 
cost of health care and social security and assistance work.'' At the 
time of the CRS investigation, the Department determined that PIS and 
COFINS taxes were assessed on all products purchased domestically but 
did not apply to the sale of products that are exported. See CRS I&D 
Memorandum at 15. Each company was responsible for making monthly 
payments of PIS and COFINS based on the total value of its domestic 
sales of goods and services.
    In 1996, through Law No. 9363, the GOB established the PIS/COFINS 
tax credit program to provide a rebate of PIS/COFINS contributions 
assessed on the purchase of raw materials, intermediate products, and 
packing materials used in the production of exports. The PIS and COFINS 
``presumed'' tax credit was established to prevent the cascading effect 
of these taxes which accrue at each point in the chain of production. 
Companies calculated PIS/COFINS credits on a monthly basis, and used 
the credit by making deductions from the Industrial Products Tax (IPI) 
due.
    The ``presumed'' tax credit rate for PIS and COFINS was 5.37 
percent and applied to exporters in all industries. The Department 
determined in the CRS investigation that the GOB did not determine the 
value, quantity or type of inputs consumed in the production, by any 
particular producer, of subject merchandise, nor did the GOB take into 
account any yield factors; this tax credit rate was arbitrarily chosen 
for administrative convenience. To calculate its credit, a company 
divided its export revenues, accumulated through the prior month, by 
its total sales revenues for the same period. This export revenue ratio 
was then multiplied by the company's total value of purchases as 
reflected in the supplier's sale invoices for raw materials, semi-
finished products, and packaging materials used in the production 
process. This amount was then multiplied by the tax credit rate of 5.37 
percent to yield the year-to-date accumulated tax credit. In order to 
calculate the credit for the current month, the credit used through the 
prior month was deducted from this accumulated tax credit.
    Consistent with the definition provided in 19 CFR 351.102(b), we 
treated PIS/COFINS taxes as indirect taxes. (See CRS I&D Memorandum at 
Comment 2). Further, because PIS/COFINS was charged on inputs used to 
make cold-rolled steel, it was charged on goods at one stage of 
production that were used in a succeeding stage of production, thus 
falling within the definitions provided in 19 CFR 351.102(b) of 
``cumulative indirect tax'' and ``prior-stage indirect tax.'' See CRS 
I&D Memorandum at 16.
    In the CRS investigation, based on our determination that PIS and 
COFINS were prior-stage cumulative indirect taxes, we examined whether 
the GOB had a system or procedure in place, within the meaning of 19 
CFR 351.518(a)(4)(i), to confirm which inputs and in what amounts were 
used in the production of subject merchandise. We determined that this 
system was established as a simplified and streamlined methodology to 
implement and administer the tax rebate for all companies in Brazil. 
The only limitation imposed on companies making rebate claims was that 
the claims be limited to those inputs defined under the PIS/COFINS 
rebate law, which was broader than the ``consumed in production'' 
standard provided for in 19 CFR 351.518(a)(1). Companies reported their 
purchases of inputs based on the assumption that all goods purchased 
were consumed equally in exported and domestically

[[Page 64706]]

sold goods. Further confirmation was not conducted by the government. 
As such, we found that this system did not permit the GOB to confirm 
which inputs are being consumed in the production of exported goods and 
in what amounts.
    In addition, in the CRS investigation, we found that the system did 
not account for the fact that domestic and export sales may include 
imported inputs. Further, in determining the actual amounts of inputs 
consumed in final products, the GOB did not make due allowance for 
waste, thereby raising the concern that the claim amounts were 
overstated. Because we found that the GOB had not met the requirements 
under 19 CFR 351.518(a)(4)(i), we determined that the entire amount of 
the credit granted on PIS/COFINS payments conferred a benefit to the 
respondent companies. In the CRS Final Determination, we determined 
that, according to section 771(5)(D)(ii) of the Act, the granting of 
tax credits constituted a financial contribution, and because the PIS/
COFINS rebates were calculated based on a company's export revenue, 
i.e., were available only to exporters, we found that this program was 
de jure specific as an export subsidy according to section 771(5A)(B) 
of the Act.
    In the current review of HRS, in response to the initial 
questionnaire, the GOB has reported widespread changes to the 
administration of PIS/COFINS since the CRS investigation. In order to 
eliminate the distortions caused by the cumulative regime of PIS/COFINS 
and to promote tax neutrality, the GOB introduced Law No. 10.637 of 
December 30, 2002, and Law No. 10.833 of December 29, 2003, for PIS and 
COFINS, respectively. These laws revised the PIS/COFINS programs such 
that they now operate as a value-added tax (VAT) system. For the 
reasons discussed above, as in the CRS investigation we preliminarily 
determine that the PIS/COFINS taxes meet the definitions of an 
``indirect tax'' and a ``prior-stage indirect tax'' within the meaning 
of 19 CFR 351.102(b).
    According to the revisions in the legislation, PIS and COFINS taxes 
are now collected at 1.65 percent and 7.6 percent, respectively, when 
companies sell goods in the domestic market. Companies also pay PIS and 
COFINS at the rates of 1.65 percent and 7.6 percent, respectively, when 
domestically purchasing goods for resale, goods and services used as 
inputs in the production or manufacture of goods for sale, storage of 
merchandise related to sales, freight expenses related to sales, etc. 
Goods that are exported do not generate any tax liability under the 
non-cumulative PIS/COFINS regime.
    To calculate the difference between the taxes paid by a company on 
its purchases and the taxes collected by a company on its sales under 
the non-cumulative PIS/COFINS system, the total value of the company's 
exports is subtracted from the company's overall revenue before 
applying the combined PIS/COFINS tax rate of 9.25 percent to determine 
the amount of PIS/COFINS taxes due to the government. Eligible 
purchases of inputs, goods for resale, etc., that were subject to PIS/
COFINS taxation are summed and multiplied by the same 9.25 percent rate 
to determine the total amount of PIS/COFINS taxes already paid by the 
company on its purchases. When a company has paid more in PIS/COFINS 
taxes on its purchases than it collects on its sales, the company is 
due the difference. When a company collects more in PIS/COFINS on its 
sales than it pays on its purchases, the company remits the difference 
to the government. Brazilian companies prepare monthly documents that 
reconcile the amount of PIS/COFINS taxes they paid on their purchases 
and the amount of PIS/COFINS taxes they collected on the company's 
total sales in each month. These documents are filed with the Brazilian 
Federal income tax authority.
    In the CRS investigation, we found that PIS/COFINS operated as a 
cumulative, indirect tax for which excessive remission was received by 
respondents within the meaning of 19 CFR 351.518(a)(2). However, 
because information provided by the GOB indicates widespread changes in 
the administration of PIS/COFINS since the Department last examined 
this program in the CRS investigation, we have reexamined this program. 
For the purposes of this review, we preliminarily determine that the 
PIS/COFINS program has been transformed via Laws No. 10.637 and 10.833 
and now operates like a standard VAT system. Based on the information 
on the record, the PIS/COFINS program no longer operates as a 
cumulative indirect tax within the meaning of 19 CFR 102(b). Therefore, 
an analysis of the program under 19 CFR 351.518 is no longer 
appropriate. Because of the program's transformation into a standard 
VAT program, we have reexamined whether any remittance or rebate 
received under this program is excessive within the meaning of 19 CFR 
351.517. See CVD Preamble at 65383. Under 19 CFR 351.517, which 
addresses the exemption or remission upon export of indirect taxes, a 
benefit exists to the extent that the amount remitted or exempted 
exceeds the amount levied with respect to the production and 
distribution of like products when sold for domestic consumption. The 
record demonstrates that the changes to the program have eliminated the 
tax credits granted upon export. The only credit is itself based on the 
actual amount of PIS/COFINS taxes already paid by a company on its 
purchases, and there are no credits granted upon export. Thus, there is 
no benefit as defined under the provisions of 19 CFR 351.517(a), which 
define a benefit as the amount by which the credit upon export exceeds 
the taxes levied on the production and distribution of like products 
sold for domestic consumption. Therefore, for purposes of these 
preliminary results, we find that there is no benefit within the 
meaning of 19 CFR 351.517(a). Furthermore, we find that the laws 
transforming these PIS/COFINS tax credits into a VAT-like system did 
not provide any ``grandfathering'' provisions and therefore we find 
that there are no benefits available under the old PIS/COFINS 
structure. As such, we preliminarily determine that the PIS/COFINS 
program is not countervailable within the meaning of section 771(5) of 
the Act.

C. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that USIMINAS/COSIPA did not apply for 
or receive benefits during the POR under the programs listed below:
1. Equity Infusions
    In the investigation of HRS, we found that the GOB had granted 
subsidies in the form of equity infusions to USIMINAS from 1983 through 
1988, and to COSIPA from 1983 through 1989, and in 1991. The 
countervailable benefits from those equity infusions were fully 
allocated prior to the POR. USIMINAS/COSIPA has not received any other 
equity infusions that provide countervailable benefits in the POR.
2. GOB Debt-to-Equity Conversions
    In the investigation of HRS, we found that the GOB had granted 
subsidies in the form of debt-to-equity conversions to COSIPA in 1992 
and 1993 in preparation for COSIPA's privatization. The countervailable 
benefits from those debt-to-equity conversions were fully allocated 
prior to the POR. USIMINAS/COSIPA has not received any other debt-to-
equity conversions that provide countervailable benefits in the POR.

[[Page 64707]]

3. National Bank for Economic and Social Development Loans (BNDES) Loan 
Programs
a. BNDES EXIM
b. BNDES Participacoes S.A. (BNDESPAR)
4. Provincial Government Program: PRO-INDUSTRIA
5. Programa de Financiamento as Exportacoes (PROEX)
6. Program to Induce Industrial Modernization of the State of Minas 
Gerais (PROIM)

D. Program For Which More Information Is Required

BNDES FINEM Loan Program
    In the CRS Final Determination, we found the FINEM loan program not 
countervailable based on information provided by the GOB that showed 
that FINEM loans were not specific: there was no indication of de jure 
specificity under section 771(5A)(D)(i) of the Act. Further, the 
financing was provided to a wide variety of industries ranging from 
paper to electricity to farming products, and the breakdown of FINEM 
financing by industry indicated that the steel industry was neither a 
predominant user nor disproportionate recipient of FINEM financing, and 
the program was not de facto specific under section 771(5A)(D)(iii) of 
the Act.
    In the original questionnaire, the companies reported FINAME loans 
and other BNDES loans. See USIMINAS/COSIPA's February 1, 2010 
questionnaire response at 17. In our supplemental questionnaires, we 
sought clarification of the BNDES programs under which the loans 
reported by USIMINAS/COSIPA had been provided. The GOB identified 
certain BNDES loans as FINEM loans for the financing of investment 
projects. See the GOB's July 26, 2010 supplemental response at 1. These 
loans had been granted to USIMINAS/COSIPA after the POI. Our decision 
in the CRS Final Determination that FINEM loans were de facto not 
specific was based on our analysis of the distribution of loans granted 
contemporaneously with USIMINAS/COSIPA's FINEM loans outstanding during 
the POI. Because the FINEM loans outstanding during the POR are new 
loans granted to USIMINAS/COSIPA since the POI, it is appropriate to 
examine whether this program is de facto specific for the purposes of 
this review. In the second supplemental questionnaire, we asked the GOB 
to provide information regarding this program, in particular, the 
distribution of loans by industry for the years in which USIMINAS/
COSIPA's loans were approved and the prior three years. The GOB 
responded to this questionnaire on September 24, 2010, but did not 
provide detailed information. Given that the FINEM loan issue arose 
late in the proceeding, and the Department has not had sufficient time 
to gather and assess the information provided by the GOB, the 
Department will continue to examine the information provided by the GOB 
and will request additional information in order to complete our 
analysis of whether this program provides a countervailable subsidy to 
USIMINAS/COSIPA for the final results.
Preliminary Results of Administrative Review
    In accordance with 19 CFR 351.221(b)(4)(i), we have calculated a 
combined subsidy rate for USIMINAS/COSIPA for the POR. We preliminarily 
determine the total countervailable subsidy to be 0.02 percent ad 
valorem for USIMINAS/COSIPA, which is a de minimis rate. See 19 CFR 
351.106(c)(1).
Assessment Rates/Cash Deposits
    The Department intends to issue assessment instructions to U.S. 
Customs and Border Protection (CBP) 15 days after the date of 
publication of the final results of this review. If the final results 
remain the same as these preliminary results, the Department will 
instruct CBP to liquidate without regard to countervailing duties all 
shipments of subject merchandise produced by USIMINAS/COSIPA, entered, 
or withdrawn from warehouse, for consumption from January 1, 2008 
through December 31, 2008. The Department will also instruct CBP to 
collect cash deposits of estimated countervailing duties at a rate of 
0.00 percent on shipments of the subject merchandise produced by 
USIMINAS/COSIPA, entered, or withdrawn from warehouse, for consumption 
on or after the date of publication of the final results of this 
review.
    We will instruct CBP to continue to collect cash deposits for non-
reviewed companies at the most recent company-specific or country-wide 
rate applicable to the company. Accordingly, the cash deposit rates 
that will be applied to companies covered by this order, but not 
examined in this review, are those established in the most recently 
completed administrative proceeding for each company. These rates shall 
apply to all non-reviewed companies until a review of a company 
assigned these rates is requested.
Disclosure and Public Comment
    We will disclose the calculations used in our analysis to parties 
to this segment of the proceeding within five days of the public 
announcement of this notice. See 19 CFR 351.224(b). Pursuant to 19 CFR 
351.309, interested parties may submit written comments in response to 
these preliminary results. Unless the time period is extended by the 
Department, case briefs are to be submitted within 30 days after the 
date of publication of this notice in the Federal Register. See 19 CFR 
351.309(c). Rebuttal briefs, which must be limited to arguments raised 
in case briefs, are to be submitted no later than five days after the 
time limit for filing case briefs. See 19 CFR 351.309(d). Parties who 
submit arguments in this proceeding are requested to submit with the 
argument: (1) A statement of the issues; (2) a brief summary of the 
argument; and (3) a table of authorities cited. Further, we request 
that parties submitting written comments provide the Department with a 
diskette containing an electronic copy of the public version of such 
comments. Case and rebuttal briefs must be served on interested 
parties, in accordance with 19 CFR 351.303(f).
    Interested parties may also request a hearing pursuant to 19 CFR 
351.310(c). Interested parties who wish to request a hearing, or to 
participate if one is requested, must submit a written request to the 
Assistant Secretary for Import Administration, within 30 days of the 
date of publication of this notice. See id. Requests should contain: 
(1) The party's name, address and telephone number; (2) the number of 
participants; and (3) a list of issues to be discussed.
    Unless extended, the Department will issue the final results of 
this administrative review, including the results of its analysis of 
issues raised in any written briefs, not later than 120 days after the 
date of publication of this notice, pursuant to section 751(a)(3)(A) of 
the Act. These preliminary results are issued and published in 
accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 
351.221(b)(4).

    Dated: October 7, 2010.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2010-26403 Filed 10-19-10; 8:45 am]
BILLING CODE 3510-DS-P