65 FR 16176, March 27, 2000 C-428-817 Sunset Reviews Public Document MEMORANDUM TO: Richard W. Moreland Acting Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Reviews of the Countervailing Duty Orders on Certain Corrosion-Resistant Carbon Steel Flat Products; Cold-Rolled Carbon Steel Flat Products; and Cut-to-Length Carbon Steel Plate Products from Germany; Preliminary Results Summary We have analyzed the substantive responses and rebuttals of interested parties in the full sunset reviews of the countervailing duty orders on certain corrosion-resistant carbon steel flat products ("corrosion-resistant steel"), cold-rolled carbon steel flat products ("cold-rolled steel"), and cut-to-length carbon steel plate ("cut-to- length steel") (hereinafter collectively referred to as the "steel products") from Germany. We recommend that, for our preliminary results, you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in these full sunset reviews for which we received substantive responses and rebuttals by parties: 1. Likelihood of continuation or recurrence of countervailable subsidy Net countervailable subsidy Changes in programs Other factors 2. Net countervailable subsidy likely to prevail Net countervailable subsidy from investigation Adjustments to the subsidy 3. Nature of Subsidy History of Orders: On August 17, 1993, the Department published its countervailing duty orders on steel products from Germany determining, inter alia, net countervailable subsidies for manufacturers/exporters of the steel products as follows: (1) Corrosion-resistant steel; country-wide rate of 0.60 percent, (2) Cold-rolled steel; country-wide rate of 0.85 percent, and (3) Cut-to-length steel; Ilsenburg: 0.80 percent, Preussag: 1.72 percent, Thyssen Stahl AG ("Thyssen"): 0.51 percent, and country-wide rate: 14.84 percent ad valorem.(1) In the original investigations, the Department determined that the German manufacturers, producers, and exporters of the steel products were benefitting from thirteen subsidy programs:(2) (1) Capital Investment Grants (2) Structural Improvement Aids (3) Investment Premium Act (4) Joint Scheme: Improvement of Regional Economic Structure-GA Investment and Other GA Subsidies ("Joint Scheme") (5) Special Subsidies for Companies in the Zonal Border Area ("Zonal Area") (6) Ruhr District Action Program (7) Aid for Closure of Steel Operations (8) Joint Program: Upswing East ("Upswing East") (9) Treuhandanstalt Subsidies ("TRA/BvS") (10) Subsidies Related to the Creation of Dillinger Hu4tte Saarstahl AG (DHS) ("SVK grant") (11) ECSC Redeployment Aid Under Article 56(2)(b) ("ECSC 56") (12) ECSC Article 54 Long-Term Loans ("ECSC 54") (13) Interest Rebate on ECSC Article 54 Loans ("ECSC 54 Interest")(3) The Department has not conducted any administrative review of these countervailing duty orders. On September 22, 1999 and August 5, 1999, the Department issued the final results of changed circumstances reviews and revoked the orders, in part, with respect to certain corrosion-resistant steel(4) and certain cut-to-length steel,(5) respectively. The orders remain in effect for all manufacturers and exporters of the steel products. Background: On September 1, 1999, the Department initiated sunset reviews of the countervailing duty orders on the steel products from Germany (64 FR 47767), pursuant to section 751(c) of the Tariff Act of 1930, as amended ("the Act"). The Department received joint Notices of Intent to Participate on behalf of Bethlehem Steel Corp. ("Bethlehem"), Ispat Inland Inc., LTV Steel Inc., National Steel Corp., and U.S. Steel Group, a unit of USX Corp. ("USX") (all five are participating in the review of the corrosion-resistant and cold-rolled steel proceedings (this group is collectively referred to as the "domestic interested parties (I)") while only Bethlehem and USX are participating in the review of the cut-to-length proceedings (this group is collectively referred to as the "domestic interested parties (II)"), and both groups are collectively referred to as the "domestic interested parties") on September 10, 1999, within the deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. The domestic interested parties note that none of them is an importer of the subject merchandise. While the domestic interested parties (II) note that they are neither importers of cut-to-length steel nor are they affiliated with a foreign producer or exporter of cut-to-length steel, the domestic interested parties (I) indicate that several of them are affiliated with foreign manufacturers/exporters of corrosion- resistant and/or cold-rolled steel products.(6) Within the deadline specified in the Sunset Regulations under section 351.218(d)(3)(i), we received complete substantive responses from the domestic interested parties and respondent interested parties: on September 30, 1999, the European Union, Delegation of the European Commission ("EC") and the Government of Germany ("GOG") submitted their substantive responses with respect to all the subject merchandise; on October 4, 1999, the domestic interested parties submitted their substantive responses with respect to all the subject merchandise; on October 4, 1999, Thyssen Krupp Stahl AG ("TKS"),(7) Stahlwerke Bremen GmbH ("Bremen"), EKO Stahl GmbH ("EKO"), and Salzgitter AG ("SZAG")(8) (hereinafter referred to as "German Group") jointly submitted their substantive response for the corrosion- resistant and cold-rolled steel countervailing duty orders; and, on the same day, Salzgitter AG Stahl und Technologie ("Salzgitter"), AG der Dillinger Hüttenwerke ("Dillinger"), and Thyssen Krupp Stahl AG ("TKS") individually submitted substantive responses for the order on cut-to-length steel. Each member of the German Group, TKS, and Dillinger claim that they are manufacturers of the foreign like product and that, therefore, they qualify as interested parties, as defined in section 771(9)(A) of the Act. The domestic interested parties indicate that one or more of them have been involved in various proceedings of the orders since the original investigations and that they, as a group, remain committed to a full participation in the instant proceedings.(9) (See October 4, 1999, domestic interested parties' substantive response at 3-5.) The German Group states that TKS and SZAG participated in the original investigation by the virtue of being successors-in-interest to companies which were parties to the investigation.(10) The German Group further notes that its members are willing to participate fully in these sunset reviews by providing information requested by the Department. (See October 4, 1999, the German Group's substantive responses at 2 and 3, respectively.) Both TKS and Salzgitter note that their respective predecessors in interest, Thyssen for TKS, Preussag and Ilsenburg for Salzgitter, participated fully in the Department's original investigation and that they are willing to participate fully in the sunset review of the order pertaining to cut-to-length steel by providing information requested by the Department.(11) (See October 4, 1999, TKS and Salzgitter's substantive responses at 2 and 3, respectively.) Likewise, Dillinger states that it participated in the investigation and expresses that it is willing to participate in the sunset review of the order (cut-to-length steel). (See Dillinger's October 4, 1999, substantive response at 3.) Similarly, both the EU and the GOG indicate that they were parties to the original investigations and that they are willing to participate in the instant reviews. (See September 30, 1999, substantive responses of EU and GOG at 2 and 5, respectively.) On October 15, 1999, the domestic interested parties, the German Group, TKS, Dillinger, and the GOG submitted their respective rebuttal comments.(12) Because, for each order, the Department received complete substantive responses from the domestic interested parties, from foreign respondent companies, and from the German government (and the EU), in accordance with section 351.218(e)(2)(i) of the Sunset Regulations, the Department is conducting full (240-day) sunset reviews. In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). These reviews concern transition orders within the meaning of section 751(c)(6)(C)(i) of the Act. Therefore, on December 22, 1999, the Department determined that the sunset reviews of the countervailing duty orders on the steel products from Germany are extraordinarily complicated and extended the time limit for completion of the preliminary results of these reviews until not later than March 20, 2000, in accordance with section 751(c)(5)(B) of the Act.(13) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department is conducting these reviews to determine whether revocation of the countervailing duty orders would be likely to lead to continuation or recurrence of a countervailable subsidy. Section 752(b) of the Act provides that, in making this determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the program which gave rise to the net countervailable subsidy has occurred that is likely to affect that net countervailable subsidy. Pursuant to section 752(b)(3) of the Act, the Department shall provide to the International Trade Commission ("the Commission") the net countervailable subsidy likely to prevail if the orders are revoked. In addition, consistent with section 752(a)(6) of the Act, the Department shall provide to the Commission information concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the 1994 WTO Agreement on Subsidies and Countervailing Measures ("Subsidies Agreement"). Below we address the substantive responses and rebuttals of interested parties. 1. Likelihood of Continuation or Recurrence of Countervailing Duty Interested Parties' Comments: The domestic interested parties state that were the orders revoked, countervailable subsidies to the German manufacturers/exporters of steel products would continue or recur. The domestic interested parties claim that inasmuch as nonrecurring subsidies(14) conferred benefits to German manufacturers/exporters of the subject merchandise after 1985, the Department should find that the benefit streams from those programs continue beyond the end of the sunset review and that, therefore, countervailable subsidies from those programs continue to exist. Specifically, with respect to Capital Investment Grant, the domestic interested parties note that, in the original investigation, Preussag (which produced all three types of subject merchandise) reported receiving Capital Investment Grants as late as 1990. As for Aid for Closure of Steel Operations, the domestic interested parties indicate that, since the benefit from this program was put into effect by two measures taken in 1988,(15) it is reasonable to assume that the German manufacturers/exporters of the subject merchandise received the grants under this program after 1985. Moreover, the domestic interested parties state that Preussag reported receiving grants under Aid for Closure of Steel Operations in 1989 and in 1991. Similarly, the domestic interested parties (II) argue that since the benefits from the SVK grant was effectuated by a 1989 agreement,(16) German manufacturers/exporters of cut-to-length steel must have received the benefit from the program after 1985. Also, the domestic interested parties (II) claim that Ilsenburg, which produces cut-to- length steel, received grants under the Joint Scheme and Upswing East in 1991. Finally, the domestic interested parties (I) also claim that Preussag received grants under the Investment Premium Act during the period 1977 through 1997 with respect to cold-rolled and cut-to- length steel. Consequently, the domestic interested parties assert that either because some of the German manufacturers/exporters of the steel products reported receiving benefits from these non-recurring subsidies after 1985 and/or because some programs were put into place after 1985, the Department should conclude that the benefit streams from these grants continue beyond the end of this sunset review and that, therefore, subsidies from those programs continue to exist. The domestic interested parties further claim that various subsidy programs the Department determined countervailable in the original investigation that continue to exist for manufacturers/exporters of one or more of German steel products. (1) Joint Scheme: the domestic interested parties claim that the GOG, in its report in the World Trade Organization ("WTO") Subsidies Notification (December 3, 1998), indicated that the Joint Scheme is available to provide regional assistance in the form of grants to commerce and industry. (2) TRA/BvS: the domestic interested parties claim that, as late as 1996 and 1997, this loan guarantee was made available to assist privatization of the state-owned assets of former East Germany and that there is no indication that this program has been terminated.(17) (3) ECSC 56: the domestic interested parties allege that two employee-assistance programs may have been instituted under the auspices of ECSC 56.(18) (4) ECSC 54: by referring to ECSC 1997 Financial Report,(19) which lists the German steel and coal industries as recipients of loans under the program, the domestic interested parties claim that the program still exists. The domestic interested parties argue that the continued availability of these programs, which were found counteravailable by the Department in the original investigation, should lead the Department to conclude that continuation or recurrence of the countervailable subsidies is likely were the orders revoked. Finally, the domestic interested parties note that the Department has not conducted any administrative review since the orders were imposed. To the extent that there has not been any recent administrative review, the domestic interested parties contend that the Department may consider newly alleged subsidies in the context of a sunset review. To wit, the domestic interested parties claim that, if the Department fails to find the likelihood based on the continuation of subsidies previously countervailed or based on the continued benefit streams of the non-recurring grants beyond the end of the sunset review, the Department should consider the programs which are newly alleged by the domestic interested parties and should find likelihood therefrom. Each of the respondent interested parties contends that revocation of the orders is not likely to lead to continuation or recurrence of a countervailable subsidy to the German manufacturers/exporters of the subject merchandise. The GOG claims that all the countervailable subsidies that were relevant to the orders are currently not used by German companies of steel products, have been de minimis, or have been terminated since the issuance of the orders. Specifically, the GOG contends that Ruhr District Action Program, Capital Investment Grants, Zonal Area, Structural Improvement Aids, and TRA/BvS were either terminated or dissolved in 1984, 1985, 1986, 1994, and 1995, respectively.(20) The GOG further notes that cut-to-length steel manufacturers/exporters did not use Structural Improvement Aids, Investment premium Act, Zonal Area, ECSC 54, and ECSC 54 Interest; cold-rolled steel manufacturers/exporters did not use Investment Premium Act, Joint Scheme, Upswing East, TRA/BvS, SVK grants; and corrosion-resistant steel manufacturers/exporters did not use Investment Premium Act, Joint Scheme, Zonal Area, TRA/BvS, Upswing East, SVK grants, ECSC 54, and ECSC 54 Interest. For ECSC 56 and Aid for Closure of Steel Operation, the GOG claims that the benefits from those programs are de minimis and that the programs will be terminated in 2002 when the ECSC Treaty expires. The GOG further contends that Investment Premium Act, Joint Scheme, Zonal Area, TRA/BvS, and Upswing East should not be deemed countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act. Finally, with respect to the SVK grant, the GOG contends that the Department's application of the pass- through principle in the case of a privatization, in which a private company is purchasing a state-owned enterprise, contravenes the Subsidies Agreement.(21) The EU avers that the subsidies which were found countervailable in the original investigation have provided only negligible benefits, have been terminated, or have been rendered obsolete because the Commission Decision 2496/96 of 18 December 1996 ("Commission Decision"), which entered into force on January 1, 1997, prohibits the granting of aid to the steel industry.(22) The EU further notes that, in any case, regional aid programs are not actionable pursuant to Article 8 of the Subsidies Agreement. Specifically, the EU notes that the Steel Investment Allowance Act (Capital Investment Grants) and Structural Improvement Aids no longer exist, that Investment Premium Act, Joint Scheme, Zonal Area, Ruhr District Action Program, and Upswing East either do not exist or can no longer provide benefits to the steel sector due to the Community's Steel Aid Code ("CSAC"), and that ECSC 56 only provides negligible benefits. Arguing for German manufacturers/exporters of corrosion-resistant and cold-rolled steel, the German Group asserts that the Department should revoke the orders if we find that any subsidies which will continue to exist beyond the end of the sunset review are de minimis. The German Group urges that we consider the subsidies, found not used by the German manufacturers/exporters of corrosion-resistant and cold- rolled steel in the investigation, to be non-countervailable subsidies. The German Group further urges that the Department consider the German reunification as an unique event and, as such, any assistance provided by the GOG associated with the reunification should not result in a determination that subsidization is likely to continue or recur upon revocation of the orders. Finally, the German Group contends that, within the context of a sunset review, the programs intended to provide assistance for regions with economic disadvantages, for research and development, and for adaptation of existing facilities to environmental requirements, should be found non-countervailable pursuant to section 771(5B)(C) of the Act. With respect to Capital Investment Grants, the German Group states that the German manufacturers/exporters of the subject merchandise received benefits under this program in 1984-1985 but that the program was terminated in 1985. The German Group further notes that the benefit stream associated with a 1985 grant under this program would end in 1999 and, therefore, in the year 2000, the net countervailable subsidy applicable to the Capital Investment Grants will revert to zero. The German Group's contention pertaining to other countervailable subsidy programs are as follows: Structural Improvement Aids was terminated in 1986 and the benefit streams thereof either will have ended by the end of the sunset review or will have been reduced considerably from 1991 levels;(23) Zonal Area, which provided a benefit of only 0.01 percent in 1991, expired in 1996, and should be nonactionable as per section 771(5B)(C) of the Act; the benefit from Aid for Closure of Steel Operation in 1991 was 0.06, and this benefit will have ended or will have been reduced considerably from the 1991 level in the year 2000; and ECSC 56 provides only de minimis benefits through 1999 and will automatically expire upon the termination of ECSC in 2002. In regard to cut-to-length steel, TKS indicates that the Department found in its final determination that Thyssen received only small benefits under three programs, totaling 0.50 percent ad valorem:(24) Capital Investment Grants - 0.36 percent, ECSC 56 - 0.07 percent, and Aid for Closure of Steel Operations - 0.07 percent. TKS argues that the net countervailable duty rate of 0.50 percent would have been de minimis under the Subsidies Agreement. With respect to Capital Investment Grants, although TKS acknowledges that the program was applicable to investment made prior to January 1, 1986, and that the Department uses a 15-year average-useful-life standard for German steel-industry assets, TKS asserts that the benefit stream of this program would not continue after the end of the instant sunset review. As for ECSC 56, TKS contends that the program is not countervailable, that its benefits are de minimis, and that the program will automatically expire upon the termination of the ECSC in 2002. With respect to Aid for Closure of Steel Operation, TKS suggests that the benefit streams of this program would either end or be reduced considerably from the 1991-level upon revocation of the orders.(25) Also, with respect to the order regarding cut-to-length steel, Salzgitter claims that it did not receive any countervailable benefits which were attributed to Preussag and Ilsenburg in the countervailing duty investigation. Salzgitter argues that among four programs, which were found to afford countervailiable benefits to Preussag in the original investigation (1.72 percent ad valorem), Capital Investment Grants does not provide benefit streams beyond the end of this review; Investment Allowance Act is not countervailable as per Article 8.2(b) of the Subsidies Agreement, or, alternatively, the benefit streams thereof would not continue after the end of the sunset review in any meaningful amount; Zonal Area provided a recurring benefit and was subsequently terminated by a legislative action and, thus, no countervailable benefit is associated with this program (Salzgitter contends that, besides, this program should be non-countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act); and ECSC 56 conferred only a minuscule benefit, was modified by German administrative regulation to significantly reduce the level of benefit, and will automatically expire upon the termination of the ECSC in 2002. (See Salzgitter's substantive response at 3-6.) Next, Salzgitter contends that the three programs, Joint Scheme, Upswing East, and TRA/BvS, which the Department determined to confer countervailable subsidies to Ilsenburg in the original investigation at the rate of 0.80 percent ad valorem, should have been found de minimis according to Article 11.9 of the Subsidies Agreement. Salzgitter further claims that Joint Scheme and Upswing East are non- countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act or, alternatively, that the benefit streams thereof would not continue beyond the end of the instant review in any meaningful amount. As for TRA/BvS, Salzgitter claims that the program was dissolved by operation of law in 1995, was a recurring-benefits program providing only a minimal benefit, and should be noncountervailable within the meaning of Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act. Dillinger, which is participating only cut-to-length steel portion of the orders, insists that it did not directly receive any significant amount of subsidies.(26) Dillinger claims that the Department's application of the pass-through principle with respect to the SVK grant in the original investigation was contrary to the Subsidies Agreement. In addition, Dillinger argues that the Department incorrectly treated the SVK grant as a lump-sum payment in 1989 when, in reality, the benefits from the program were installments for the period from 1978 through 1989. Dillinger further contends that, in any case, the Department improperly deemed the SVK grant as a contingent, long-term, and interest-free loan without further elaborating whether the contingency, on which repayment of the SVK grant was based, was viable in accordance with commercial considerations. Moreover, Dillinger asserts that, in light of the fact that the Department adopted the current Department Regulations in 1998, which significantly amended its practice with respect to contingent liability interest-free loans, the Department must reexamine whether the event upon which the repayment of the loan depends is a viable contingency. Had the Department done so, Dillinger contends that the Department would have found the manifestation of the non-viability of the contingency long before 1989 and, consequently, would have determined the vast majority of the SVK grant was effectuated no later than 1985. Dillinger further suggests that, therefore, the Department should determine that the benefit streams from the SVK grant would not continue beyond the end of this sunset review. Continuing its argument with respect to the SVK grant, Dillinger notes that the Department erred in determining the private banks' debt forgiveness constitutes a countervailable subsidy. According to Dillinger, the private banks acted on their own and for their own self-interest and were not influenced or directed by the Government of Saarland or Germany. Without the necessary action by a government authority, Dillinger further claims that the private banks' debt forgiveness cannot be treated as a countervailable subsidy. In addition, Dillinger contends that the portion of the SVK grant that was attributed to Dillinger in the original investigation was too high and that the Department's fifteen-year average-useful-life standard does not properly reflect the actual useful life of productive assets in the German steel industry; viz., the Department's fifteen-year useful life standard is too long. Had the Department adopted a shorter average-useful-life standard,(27) Dillinger notes that the benefit streams of the SVK grant would end before the end of this sunset review. In their rebuttal comments, the domestic interested parties contend that (1) the debt forgiveness pertaining to SVK took place in 1989 and, therefore, the benefit streams of the program would last beyond the end of the instant review; (2) benefit streams from Capital Investment Grants continue beyond the end of the sunset review because the program is a non-recurring grant and because Preussag reported receiving grants under Capital Investment Grants as late as in 1990 (two in 1986, one in 1987, one in 1989, and one in 1990); and (3) Joint Scheme, Aid for Closure of Steel Operation, Upswing East, ECSC 56, ECSC 54 Interest, and ECSC 54 continue to exist. Finally, according to the domestic interested parties, the Department should determine Structural Improvement Aids also continue to exist because the respondent interested parties failed to prove otherwise. With respect to the German Group and the GOGs contention that, pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act, Zonal Area, Investment Premium Act, Joint Scheme, Upswing East, and TRA/BvS should qualify as non- countervailable subsidies, the domestic interested parties argue that a sunset review is not the proper forum to revisit the issues pertaining to the countervailability of a program (the domestic interested parties suggest that, instead, respondent interested parties should discuss the issues in an administrative review segment of the proceedings). Also, the domestic interested parties argue that, in any case, the Department should not afford green light (per se non-countervailable) treatment to the above programs because respondent interested parties failed to demonstrate that the programs were created based on the statutes or regulations which incorporate clearly stated, objective, and neutral criteria, or appropriate and development-based ceilings. In addition, the domestic interested parties claim that the language of the EC Regional Subsidy Rules,(28) on which the European Union ("EU") determines whether a region of its member country is disadvantaged, poses a vague, subjective, and unverifiable standard. Finally, the domestic interested parties suggest that each of the above programs failed to meet the requirements set forth in section 771(5B)(C) of the Act. With respect to respondent interested partiess argument that the subsidization of the steel sector in the EU is strictly prohibited as per the Commission Decision, the domestic interested parties claim that the argument is untenable because historically, although it may have some limiting effects upon subsidies, the Commission Decision failed to stop further countervailable subsidization in the EU for various reasons. As for respondent interested parties' contention that the Department should apply an 11-year average-useful-life standard instead of the 15-year standard, the domestic interested parties argue that the respondent interested parties failed to appeal the Department's finding and that even if the Department is to redetermine the average- useful-life standard, it must determine a company-specific standard. In other words, the Department cannot use the 11-year standard which was determined for a different company and for a different product. In its rebuttal, the German Group argues that the Department should reject all allegations of new subsidies advanced by the domestic interested parties because those subsidies are applicable to producers of non-subject merchandise and because the Department historically has not been inclined to entertain the idea of examining new subsidies in the context of a sunset reviews. The German Group further indicates that benefit streams associated with coutervailable programs will either end or will be reduced to even lesser amounts at the end of the sunset review than existed in 1991, that the EU prohibits the GOG from granting subsidies to the steel industry, and that the benefit from ECSC 56 is de minimis and the program will expire in 2002. Similarly, the GOG contends that none of the newly alleged subsidies advanced by the domestic interested parties is relevant to the subject merchandise. The GOG also notes that the Commission Decision places stringent limits on any grant to the steel industry in Germany and, thus, no aid in contravention of the Subsidies Agreement will be granted to German manufacturers/exporters of steel products in the future. The GOG further argues that the vast majority of the programs found countervailable by the Department in the investigation either have been terminated or would qualify as non-countervailable assistance under Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act. Finally, the GOG claims that the 15- year average-useful-life standard employed by the Department in the original investigation is unreasonable. Instead, the GOG suggests that the Department adopt an 11-year average-useful-life standard. In addition to concurring with the German Group's rebuttal, SZAG notes the following in its rebuttal comments: after merging with Walzewerk Ilsenburg GmbH ("Ilsenburg") in 1995, Preussag changed its name to SZAG in 1998;(29) Preussag received only a small fraction (0.6 percent) of benefits under the Capital Investment Grants after the end of the 1985/86 fiscal year, and in light of the small net countervailable subsidy attributed to the program (0.39 percent), the current effect of this program is nonexistent; and contrary to the domestic interested parties' allegation that Preussag and Ilsenburg received new countervailable benefits between 1986 and 1997, those benefits are from programs which, although found countervailable by the Department in the investigation, qualify as non-countervailable assistance to disadvantaged regions as per the GOG's substantive response. SZAG argues that, besides, even if these programs are found countervailable, the benefits that would continue after the end of this review are not substantial and that the 1994 tax concession Ilsenburg received should have been expensed in the year of receipt. In their rebuttal, Dillinger and Salzgitter(30) contend that none of the benefit streams from the programs found countervailable in the investigation, will continue beyond the end of the instant sunset review. Dillinger and Salzgitter argue that the domestic interested parties did not sufficiently refute Dillinger and Salzgitter's claim that no benefit would continue after the end of this review. Dillinger and Salzgitter claim that the Department's use of a front- loading or decreasing allocation method for non-recurring subsidy would substantially decrease the net countervailable subsidy applicable to the latter part of the average-useful-life period.(31) Also, Dillinger and Salzgitter argue that any benefit received before 1987 would expire, at the latest, in 2000 and, therefore, would not continue beyond the end of this review. If the Department properly considers all the above arguments, Dillinger and Salzgitter conclude that the Department would determine that the benefit streams of non- recurring countervailable subsidies will not continue beyond the end of the sunset review. In addition, Dillinger and Salzgitter argue that the Department should reject all allegations of new subsidies advanced by the domestic interested parties because those subsidies were already reviewed by the Department in the investigation, qualify as non- actionable pursuant to section 771(5B)(C) of the Act, or relate exclusively to producers of non-subject merchandise. Finally, Dillinger and Salzgitter reiterate the arguments from their substantive responses: the Department's pass-through application in an arm's length and fair market-value privatization transaction violates the Subsidies Agreement; and the Department should apply an 11-year average-useful-life standard instead of its 15-year standard. In its rebuttal, TKS argues that the Department should reject all allegations of new subsidies advanced by the domestic interested parties because a more appropriate forum for the consideration of new subsidies is an administrative review of the orders and because it did not receive new subsidies from the GOG. TKS further indicates that benefit streams associated with coutervailable programs will either end or will be reduced to even lesser amounts than existed in 1991, that the EC prohibits the GOG from granting subsidies to the steel industry, and that the benefit from ECSC 56 is de minimis and the program will expire in 2002. Department's Position: Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the SAA, H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103- 412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order-wide basis (see section III.A.2 of the Sunset Policy Bulletin). Additionally, the Department normally will determine that revocation of a countervailing duty order is likely to lead to continuation or recurrence of a countervailable subsidy where (a) a subsidy program continues, (b) a subsidy program has been only temporarily suspended, or (c) a subsidy program has been only partially terminated (see section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this policy are provided where a company has a long record of not using a program (see id. at section III.A.3.b). Also, if the Department determines that the fully allocated benefit stream of a countervailable subsidy is likely to continue after the end of a sunset review, it will normally determine that the subsidy continues to exist regardless whether the program that gave rise to such benefit continues to exist. (See Id. at section III.A.4.) In its final affirmative countervailing duty determination, as amended, the Department determined that the combined net countervailable subsidies with respect to the steel products from Germany are as follows: (1) Corrosion-resistant steel; country-wide rate of 0.60 percent, (2) Cold-rolled steel; country-wide rate of 0.85 percent, and (3) Cut-to-length steel; Ilsenburg: 0.80 percent, Preussag: 1.72 percent, Thyssen Stahl AG ("Thyssen"): 0.51 percent, and country-wide rate: 14.84 percent ad valorem.(32) We note that the Department has not conducted an administrative review of these orders. As an initial matter, we note that the Department determined in the investigation that the average useful life of renewable assets in the German steel-industry is 15 years because such allocation period reflects the average useful life of assets in the steel industry as a whole.(33) As a result, any non-recurring grants received by a respondent steel company after 1985 continue to provide benefits beyond the end of this sunset review.(34) Second, in the context of a sunset review, we normally do not determine whether any change to the program which gave rise to the net countervailable subsidy has occurred without the knowledge that such change was found and verified in the original investigation and/or subsequent administrative review(s) of the orders. (1) Capital Investment Grants. The domestic interested parties came forth with evidence in which Preussag admitted receiving benefits under Capital Investment Grants as late as in 1990. Because the Department determined that Capital Investment Grants is a non-recurring program and that Preussag received the grant as late as in 1990, regardless of the GOG's claim that Capital Investment Grants was terminated in 1985, or the EC's claim that the program no longer exists, based on the 15-year allocation period used by the Department in its investigations,(35) we preliminarily determine that benefit streams from this program continue beyond the end of this sunset review and that, therefore, a countervailable subsidy from Capital Investment Grants to manufacturers/exporters of subject merchandise will continue to exist.(36) (2) Structural Improvement Aids. The Department indicated in its original investigations that this recurring program provided funds to German manufacturers/exporters of corrosion-resistant and cold-rolled steel through 1986. At the same time, the GOG contends that Structural Improvement Aids was terminated in 1986 and that the program was not used by German cut-to- length steel manufacturers/exporters. In addition, the EC claims that this program no longer exists. Absent any evidence to the contrary, we agree with respondent interested parties that this program is terminated. (3) Investment Premium Act. In its original investigations, the Department noted that German manufacturers/exporters of cut-to-length and cold-rolled steel received grants under this non-recurring program through 1989. Furthermore, the domestic interested parties claim that Preussag received grants under the Investment Premium Act during the period 1977 through 1991. Although the EC contends that the program can no longer provide benefits and the GOG argues that this program should be deemed not countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act, without any further tangible evidence, we preliminarily determine that the benefit stream from this program continues beyond the end of this sunset review with respect to German manufacturers/exporters of cut- to-length and cold-rolled steel. (4) Joint Scheme. According to the Department's finding in the investigations, this non-recurring program would be nullified as per the Commission Decision, effective 1989 (however, exceptions were made for new states of the former East Germany). Also, the domestic interested parties (I) claim that, in 1991, Ilsenburg received grants under the Joint Scheme in association with the production of cut-to-length steel. In addition, the domestic interested parties (I) claim that the GOG, in its World Trade Organization ("WTO") Subsidies Notification (December 3, 1998), indicated that the Joint Scheme is available to provide regional assistance in the form of grants to commerce and industry. Therefore, despite the EC's contention that the program can no longer provide benefits, and the GOG's claim that this program should be deemed not countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act, without any further tangible evidence, we preliminarily determine that the benefit stream from Joint Scheme continues beyond the end of this sunset review as far as German manufacturers/exporters of cut-to- length steel are concerned. (5) Zonal Area. The Department found in its original investigations that the need for this recurring program disappeared with the unification of Germany and that this program would expire by 1996. The EC asserts that this program can no longer provide benefits, and the GOG claims that this program was terminated 1994 and that the program should be deemed not countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act. Absent any tangible evidence indicating otherwise, we preliminarily determine that the program was terminated with respect to the subject merchandise. (6) Ruhr District Action Program. The Department determined in its original investigations that this non-recurring program provided grants from 1980 through 1984. The GOG contends that Ruhr District Action Program was terminated in 1984 and that the program was not used by cut-to-length and corrosion- resistant steel manufacturers/exporters in Germany. Also, the EC claims that this program can no longer provide benefits to German steel manufacturers. Hence, without any evidence to the contrary, we preliminarily determine that this program was terminated. (7) Upswing East. While the EC claims this program can no longer provide benefits, the GOG argues that the program should be deemed not countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act and that the program was not used by cold- rolled and corrosion resistant steel manufacturers/exporters in Germany. However, in its investigations, the Department found that this non-recurring program was created by the Investment Act of 1991. Also, the domestic interested parties (I) claim that Ilsenburg received grants under the Upswing East in 1991 in association with manufacturing/exporting of cut-to-length steel. Because the Department determined that Upswing East is a non-recurring program, based on the 15-year allocation period used by the Department in its investigations, we preliminarily determine that the benefit stream of the program continues beyond the end of the instant sunset review. (8) TRA/BvS. The Department noted in its original investigations that the purpose of this recurring program is to accomplish a comprehensive privatization of former East German companies by 1995. The EC contends the program can no longer provide benefits, and the GOG argues that the program was dissolved in 1995.(37) The GOG further argues that TRA/BvS should be deemed not countervailable pursuant to Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act, that the program was not used by cold-rolled and corrosion- resistant steel manufacturers/exporters in Germany, and that the program only provides minimal benefits. However, the domestic interested parties (I) claim that, as late as 1996 and 1997, this loan guarantee was made available to assist privatization of the state-owned assets of former East Germany and that there is no indication that this program has been terminated.(38) Because the domestic interested parties came forth with argument and evidence which indicate that this program may still exist, we preliminarily determine that the program continues to exist with respect to cut-to- length steel. (9) SVK grant. The Department indicated in its investigations that this non- recurring grant was effectuated by 1989 agreement affecting only one respondent interested party, Dillinger, which manufactures cut-to- length steel.(39) Although the GOG contends that the Department's various methodologies in deriving the original determination contravene the Subsidies Agreement, it does not present any persuasive evidence or argument that the benefit stream of the program would not continue beyond this sunset review. Consequently, we preliminarily determine that the benefit stream will continue beyond this review and that, therefore, the countervailable subsidy from the program continues to exist with respect to cut-to-length steel. (10 - 13) Aid for Closure of Steel Operations; ECSC 56; ECSC 54; and ECSC 54 Interests. Insofar as the GOG and EC acknowledge that these program will last until the year 2002, it is unnecessary for us to discuss any other arguments from either domestic or respondent interested parties. Thus, we preliminarily determine that these programs continue to exist. We disagree with the German Group's argument that the Department should revoke the orders if we find that a particular subsidy would be likely to continue but only at a de minimis level. Section III.A.6 of the Sunset Policy Bulletin enunciates that zero or de minimis rates alone shall not, by themselves, require the Department to determine that continuation or recurrence of the countervailable subsidy is not likely if the order is revoked. Moreover, even if the combined benefit of all programs is de minimis, unless such combined rate was never above de minimis at any time the order was in effect, and there is no likelihood the combined benefit will exceed the de minimis level in the event the order is revoked, with continuing countervailable subsidy programs, we will normally determine that continuation or recurrence of the countervailable subsidies is likely if the order is revoked. By the same token, we do not entirely agree with the German Group's contention that the programs which were found not used by the German manufacturers/exporters of the subject merchandise in the original investigation should be considered non-countervailable for that reason alone. However, section III.A.2.b of the Sunset Policy Bulletin explains that the mere availability of the program does not, by itself, indicate likelihood of continuation or recurrence of a countervailable subsidy if a company has a long record of not using a program. Therefore, we preliminarily determine that the manufacturers/exporters of corrosion-resistant and cold-rolled steel have a consistent record of not using SVK grant, including during the investigation, because the Department determined that none of German manufacturers/exporters of corrosion-resistant and cold-rolled steel used this program during the investigation period, because the GOG contends that the manufacturers/exporters of the subject merchandise did not use the program, and because the domestic interested parties (I) do argue any German manufacturer/exporter of corrosion-resistant and cold-rolled steel used the program. As a result, we did not consider the SVK grants in making our likelihood determination with respect to corrosion-resistant and cold-rolled steel in this sunset review. During the investigation, the Department found that Investment Premium Act, Upswing East, Ruhr District Action Program, ECSC 54, ECSC 54 Intrerest, and Joint Scheme provided a zero-benefit to German manufacturers/exporters of corrosion-resistant steel; Joint Scheme and Upswing East provided a zero-benefit to cold-rolled; and Structural Improvement Aids, Ruhr District Action Program, ECSC 54, and ECSC 54 Interest provided a zero-benefit to cut-to-length steel products. However, at the same time, the Department found that those programs were used by the respective German steel companies. As a result, we cannot determine that the German steel companies have a long record of not using those programs, despite the fact that the GOG claims the above programs were not used by the respective German companies of the subject merchandise. As a result, we preliminarily determine that manufacturers/exporters of the respective subject merchandise do not have a record of not using these corresponding programs and that, therefore, those programs continue to exist with respect to subject merchandise for corresponding German manufacturers/exporters. We agree with the German Group and acknowledge that the German reunification was an extraordinary and unique event. However, we disagree with the German Group's statement that the Department should disregard any GOG assistance provided in conjunction with the German reunification processes from our likelihood consideration. First, this transnational subsidy issue is moot with respect to the orders regarding corrosion-resistant and cold-rolled steel because we already have determined that manufacturers/exporters of corrosion- resistant and cold-rolled steel have a consistent record of not using TRA/BvS. Second, regarding cut-to-length steel, insofar as TRA/BvS is a recurring program, any loan guarantees provided by the GOG to East German companies prior to the reunification are irrelevant to determining the likelihood in this sunset review. Third, if the GOG is currently providing loan guarantees under TRA/BvS, such subsidy would not qualify as transnational subsidies because the GOG would not be considered as a government of a country other than the country in which the recipient firm is located or as an international lending or development institution. (See section 351.527 of the Department's Regulations.) We agree with the German Group's contention that in the context of a sunset review, if we find a subsidy program falls within the purview of section 771(5B)(C) of the Act, we should determine that program non-actionable. (See section III.B.3(e) of the Sunset Policy Bulletin.) In the instant case, however, we do not have record evidence which would indicate that any of the programs found countervailable in the original investigation, are non-actionable because there have not been any administrative reviews of the relevant orders. The Sunset Policy Bulletin explains that when the Department has not conducted an administrative review of the order, we limit our scope of a sunset review by permitting adjustments to the net countervailable subsidy only to instances in which an interested party presents other factors with good cause arguments. (See section III.B.3.(g) and III.C of the Sunset Policy Bulletin.) In the instant review, respondent interested parties did not present the Department with other factors accompanied by good cause arguments. Furthermore, while claiming that Zonal Area, Investment Premium Act, Joint Scheme, Upswing East, and TRA/BvS grants fall within section 771(5B)(C) of the Act, the German Group does not substantiate the claim. In other words, the German Group does not supply the Department with information regarding whether the programs are non- specific, whether the region is clearly, neutrally, objectively identified based on statute, regulation, or official document, and whether a measurement of economic development (per capita income and/or unemployment analysis) was incorporated in determining the disadvantaged region.(40) As a result, we cannot agree with the German Group that the above programs fall within the purview of section 771(5B)(C) of the Act. As for SVK grant, we disagree with the GOG and Dillinger's arguments that the Department's usage of pass-through principle, based solely upon subsidies granted to the state-owned enterprise prior to the privatization in an arm's-length and fair-market-value privatization transaction, contravenes the Subsidies Agreement. Following a court ruling from the Court of International Trade (the "CIT),(41) the Department submitted its remand, which was later affirmed by the CIT.(42) In its remand determination,(43) the Department found that, after the privatization, DHS and Dillinger remained, for all intents and purposes, the same entities as the pre-privatization Saarstahl/DHS and that the debt forgiveness conferred to Saarstahl/DHS was not tied to any specific products. As a result, the Department allocated the benefits from relevant portion of SVK grant over all DHS sales including that of Dillinger.(44) Furthermore, we do not consider that a recent WTO interim panel finding(45) requires the Department to alter its approach to privatization in the instant case. Because the final panel report has not been adopted by the Dispute Settlement Body, the United States has no obligation with respect to the report. As the report has not been adopted, it is premature to consider what obligations, if any, the panel report may impose on the United States. Even if it were not premature for us to reconsider our approach to privatization in light of the panel report, and it were otherwise appropriate to do so, 19 U.S.C.§ 3533(g)(1) provides that a regulation or practice may not be amended, rescinded, or otherwise modified in the implementation of such report unless and until very specific statutorily mandated actions have been fulfilled and the appropriate congressional committees have been consulted. Thus, we preliminarily determine that a portion of subsidies bestowed on a government-owned company prior to privatization continues to benefit the production of the privatized company. Similarly, Dillinger's assertions that the Department should change the formula for amortizing benefits over time, should pro-rate the SVK grant rather than considering it as a lump-sum grant, and should reassess Dillinger's portion of the SVK grant because its portion was assessed too high were all denied by the Department in the original determination.(46) For the same reason, we disagree with Dillinger's contention that the Department's 15-year allocation methodology is arbitrary and that such methodology fails to reflect the actual useful life of productive assets in the German steel industry.(47) Although the U.S. Court of International Trade ("Court") in British Steel Plc. v. United States, 879 F. Supp. 1254 (CIT 1995) rejected the Department's previous methodology of relying on the U.S. IRS based industry- specific average useful life of assets, the Court's remand order was order- and country-specific: the Court ordered the Department to reconsider the average-useful-life methodology which the Department applied to the British and French steel industries but not to the German steel industry. Therefore, in the instant review of the orders, the Department's application of the 15-year average useful life for assets in the German steel industry remains valid. As for Dillinger's contention that, with respect to contingent liability interest-free loans, the Department should reexamine the viability of a contingency based on the Department's 1998 Regulations, we disagree. We consider that it is inappropriate, in the context of a sunset review, to apply 1998 rules (post-WTO rules) retroactively to a 1993 countervailing duty case (pre-WTO case). Furthermore, we determine that there is no basis to reject the Department's findings in an investigation due to subsequent changes in methodology because such changes do not invalidate the Department's findings under the prior methodology. As for Salzgitter's contention that it did not receive any benefits attributed to Preussag and Ilsenburg, we disagree. Since Salzgitter in its substantive response explicitly stipulates that Preussag and Ilsenburg are its predecessors-in-interest and that we have no basis, in this sunset review, to determine the level of any countervailable benefits received by Salzgitte, we preliminarily determine that it is appropriate for us to rely on the information related to Preussag and Ilsenburg. Finally, with respect to the GOG and the EU's contention that a particular subsidy would not have been found countervailable had the Department applied WTO provisions or post-WTO U.S. statutes, we note that these countervailing duty orders are pre-WTO orders and that we do not apply rules, regulations, or laws retroactively in a sunset review of an antidumping or countervailing duty order. 2. Net Countervailable Subsidy Likely to Prevail Interested Parties' Comments: The domestic interested parties contend that, since the Department has not conducted any administrative review of the orders and the production of German steel products are still heavily subsidized, the appropriate country-wide net countervailable subsidies likely to prevail if the orders are revoked are the ones from the original investigation. The GOG states that the likely-to-prevail net countervailable duty rate for respective subject merchandise, were the orders revoked, is de minimis. Neither the domestic interested parties nor respondent interested parties submitted rebuttal comments with respect to other parties likely-to-prevail net coutervailable subsidy arguments. Department's Position: In the Sunset Policy Bulletin, the Department stated that, consistent with the SAA and House Report, the Department normally will select a rate from the investigation, because that is the only calculated rate that reflects the behavior of exporters and foreign governments without the discipline of an order or suspension agreement in place. The Department noted that this rate may not be the most appropriate rate if, for example, the rate was derived from subsidy programs which were found in subsequent reviews to be terminated, there has been a program-wide change, or the rate ignores a program found to be countervailable in a subsequent administrative review. (See Section III.B.3 of the Sunset Policy Bulletin.) Since the issuance of the orders, the Department has not conducted any administrative review. As a result, we do not have any verified, updated information with respect to whether a particular countervailable subsidy has been terminated, whether any program-wide changes thereof have been effectuated, or whether additional programs provide countervailable subsidies to the manufacturers and/or exporters of the subject merchandise. Nor do we have any updated information regarding the current level of benefits. Therefore, the only net countervailable subsidies available to us in these reviews are from the original investigation. As stated above, we preliminarily determined that some programs were terminated without any of its benefit streams continuing beyond the end of this sunset review. Therefore, in deriving the final net countervailable subsidies that are likely-to-prevail if the orders are revoked, we subtracted the subsidy rates pertaining to such terminated programs.(48) (See Memorandum to File Regarding Calculation of the Net Countervailable Subsidy, March 20, 2000.) However, although a program is terminated, where the benefit stream from such program continues beyond the end of this sunset review, we did not subtract net countervailable subsidy from such program. Nature of the Subsidy In the Sunset Policy Bulletin, the Department stated that, consistent with section 752(a)(6) of the Act, the Department will provide information to the Commission concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the Subsidies Agreement. We agree with the German Group that none of the thirteen programs that the Department determined to confer positive countervailable benefits to German manufacturers/exporters of the subject merchandise in its original investigation is contingent, either solely or as one of several other conditions, upon export performance. Namely, none of these programs falls within the definition of an export subsidy under Article 3.1(a) of the Subsidies Agreement. All ten subsidies that we found continue to exist, individually and/or as a group may fall within Article 6 if the total net countervailable subsidy for the subject merchandise exceeds 5 percent, as measured in accordance with Annex IV of the Subsidies Agreement, if the subsidies cover operating losses sustained by an industry, or if the subsidies directly forgive debts. Nonetheless, the Department does not have enough information to preliminarily determine, other than to note that all ten subsidies were provided to a specific enterprise/industry or group of enterprises/industries, whether the subsidies were to cover operating losses or for direct forgiveness of debt, or whether the net countervailable subsidy exceeds 5 percent. Nor does the Department believe such calculation or determination would be appropriate in the course of a sunset review. Instead, we are providing the Commission with the following program descriptions. Capital Investment Grants: This non-recurring program provided grants to reimburse a certain percentage of the acquisition-cost of assets purchased or produced after July 1981 but prior to January 1986. Because this program was available only to iron and steel industries, the Department determined that this program was countervailable. Aid for Closure of Steel Operations: Based on two laws, this non- recurring program was created to reduce the economic and social costs of plant closings in the steel industry between 1987 and 1990. Because this program was available only to a specific enterprise or industry, the Department determined that this program was countervailable. ECSC 56: This program was created to provide assistance to persons who lost their jobs in the iron, steel, and coal industries. Because the GOG's funding has relieved the steel companies of an obligation they would otherwise have, the Department determined the program to be countervailable. Investment Premium Act: Under this non-recurring program, which was supposedly in effect from 1969 through 1989, grants were provided to companies investing in specific regions of Germany as long as the project would be implemented by the company within three years of the certification. Because this program was limited to enterprises or industries located in specific geographical areas within Germany, the Department determined the program to be specific and, thus, countervailable. SVK Grants: the Government of Saarland and Dillinger's parent company, Usinor Sacilor, created a new holding company, DHS-Dillinger Hutte Saarstahl AG ("DHS"), making Dillinger and Saarstahl Volklingen GmbH ("Saarstahl") wholly-owned subsidiaries of DHS. In the process of this privatization, the governments of Germany and Saarland forgave debts owed to them by Saarstahl. Also, in conjunction with this privatization process, private creditors forgave Saarstahl's debts as a part of restructuring two companies. The total amount involved in this debt forgiveness was DM 4.153 Billion. Because this program was limited to enterprises or industries located in specific geographical areas within Germany, the Department determined the program to be specific and, thus, countervailable. Joint Scheme: This non-recurring program, which was signed in October 1969 and came into force in January 1970, was designed to assist companies in depressed areas. Because this program was limited to enterprises or industries located in specific geographical areas within Germany, the Department determined the program to be specific and, thus, countervailable. Upswing East: This non-recurring program was established to provide a special investment allowance in five new states in Berlin. Because this program was limited to enterprises or industries located in specific geographical areas within Germany, the Department determined the federal government portion of the program to be specific and, thus, countervailable. TRA/BvS: The purpose of this non-recurring program is to take over the government-held assets in the former GDR and place them within the competition-directed market economy of the unified Germany. Because this program was limited to enterprises or industries located in specific geographical areas within Germany, the Department determined the program to be specific and, thus, countervailable. ECSC 54: This program was available only to the iron, steel, and coal industries to purchase new equipment or finance modernization. Because this program was de jure specific to an enterprise or industry or a group of enterprises or industries, the Department determined the program to be countervailable to the extent that loans from this program were provided on terms inconsistent with commercial considerations. ECSC 54 Interest: This program was available only to the iron, steel, and coal industries providing rebates during the restructuring and modernization of the industry beginning in the 1980s. Because this program was de jure specific to an enterprise or industry or a group of enterprises or industries, the Department determined the program to be countervailable to the extent that the portion of the rebates from this program were provided on terms inconsistent with commercial considerations. Preliminary Results of Review As a result of these reviews, the Department preliminarily finds that revocation of the countervailing duty orders would be likely to lead to continuation or recurrence of a countervailable subsidy at the rates listed below: --------------------------------------------------------------------- Manufacturer/Exporters Margin (percent) --------------------------------------------------------------------- Corrosion-resistant carbon steel flat products: Country-wide rate 0.54 Cold-rolled carbon steel flat products: Country-wide rate 0.55 Cut-to-length steel plate products: Salzgitter 1.62 TKS 0.51 Country-wide (Dillinger) 14.84 --------------------------------------------------------------------- Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the preliminary results of review in the Federal Register. AGREE____ DISAGREE____ _________________________ Richard W. Moreland Acting Assistant Secretary for Import Administration __________________________ (Date) ____________________________________________________________________ footnotes 1. See Countervailing Duty Orders and Amendment to Final Affirmative Countervailing Duty Determinations: Certain Steel Products From Germany, 58 FR 43756 (August 17, 1993). Finding that AG der Dillinger Hüttenwerke's ("Dillinger") rate was not significantly different from the country-wide rate, the Department assigned Dillinger the country- wide rate. 2. See Final Affirmative Countervailing Duty Determinations: Certain Steel Products from Germany, 58 FR 37315(July 9, 1993); also see Final Affirmative Countervailing Duty Determination: Certain Steel Products From Austria, 58 FR 37217 (July 9, 1993), GENERAL ISSUES APPENDIX ("General Issues"). 3. See id. Also, the Department determined that some programs fall outside the purview of the countervailing duty law: such as, Wage Subsidies (Kurzarbeitergeld), Nordrhein-Westfalen's Technology Program Materials and Substances Development, and Loan Guarantees from Nordrhein-Westfalen. Also, the Department found that some other programs are either not countervailable or not used by German manufacturers/exporters of the subject merchandise: such as, Loans with Reduced Interest Rates under the Steel Restructuring Plan, Federal and State Government, Loan Guarantees under the Steel Restructuring Plan, Special Ruhr Plan, Zukunftsinitiative Montanregionen (ZIM) Initiative, Kreditanstalt fu4r Wiederaufbau (KfW) Investment Loans for Eastern Germany, European Recovery Program Loans for Eastern Germany, Loan Guarantee Program for Eastern Germany Peine-Salzgitter Profit Transfer Agreement and Other Operating Loss Subsidies, Elimination of Duisburg Harbor Tolls, Export Credits at Preferential Rates, Miscellaneous Tax Subsidies, Loans from the Government of Nordrhein -Westfalen, Tax Subsidies for Eastern Germany, ECSC Article 54 Loan Guarantees, ECSC Article 56 Conversion Loans, Interest Rebates on ECSC Conversion Loans under Article 56, European Investment Bank Loans and Loan Guarantees, New Community Instrument Loans, European Regional Development Fund Aid, Nordrhein- Westfalen's Air Pollution Control Program. 4. See Notice of Final Results of Changed Circumstances Antidumping Duty and Countervailing Duty Reviews and Revocation of Orders in Part: Certain Corrosion-Resistant Carbon Steel Flat Products From Germany, 64 FR 51292 (September 22, 1999). The Department noted that the affirmative statement of no interest by petitioners, combined with the lack of comments from interested parties, is sufficient to warrant partial revocation. This partial revocation applies to certain corrosion-resistant deep-drawing carbon steel strip, roll- clad on both sides with aluminum (AlSi) foils in accordance with St3 LG as to EN 10139/10140. The merchandise's chemical composition encompasses a core material of U St 23 (continuous casting) in which carbon is less than 0.08; manganese is less than 0.30; phosphorous is less than 0.20; sulfur is less than 0.015; aluminum is less than 0.01; and the cladding material is a minimum of 99% aluminum with silicon/copper/iron of less than 1%. The products are in strips with thicknesses of 0.07mm to 4.0mm (inclusive) and widths of 5mm to 800mm (inclusive). The thickness ratio of aluminum on either side of steel may range from 3%/94%/3% to 10%/80%/10%. 5. See Certain Cut-to-Length Carbon Steel Plate from Finland, Germany, and United Kingdom: Final Results of Changed Circumstances Antidumping Duty and Countervailing Duty Reviews, and Revocation of Orders in Part, 64 FR 46343 (August 25, 1999). This partial revocation applies to cut-to-length steel with a maximum thickness of 80 mm in steel grades BS 7191, 355 EM and 355 EMZ, as amended by Sable Offshore Energy Project Specification XB MOO Y 15 0001, types 1 and 2. 6. Ispat Inland Inc. is a wholly owned subsidiary of Ispat International N. V. of the Netherlands; L-SE is 60% owned by a subsidiary of LTV Steel Company, Inc. and 40% owned by Sumitomo of Japan; NKK of Japan owns 68.8% of National Steel's voting stock; USS- Posoc is owned 50% by USX and 50% by Pohang Iron and Steel of Korea; and PRO-TEC Coating Company is owned 50% by USX and 50% by Kobe Steel of Japan. (See the domestic interested parties (I)' September 10, 1999, intent to participate, ATTACHMENT 2.) 7. In 1993, Krupp Stahl AG and Hoesch Stahl AG merged to form Krupp Hoesch Stahl AG, and in 1997, Thyssen Stahl AG and Krupp Hoesch Stahl AG merged to form TKS. (See the German Group's substantive response at 5.) 8. Salzgitter AG - Stahl and Technologic ("Salzgitter") and SZAG are the same company. SZAG (Salzgitter) is the successor to Preussag. (See id.) Also, SZAG (Salzgitter) elaborates, in its October 15, 1999, rebuttal comments, that after merging with Walzewerk Ilsenburg GmbH ("Ilsenburg") in 1995, Preussag changed its name to SZAG in 1998. In this review, we will use both Salzgitter when we refer to cut-to-length steel and SZAG when we refer to corrosion-resistant steel/cold-rolled steel portions of the orders. 9. The domestic interested parties note that they filed the original petition and that they participated in all facets of subsequent litigation of the orders as well as in scope and changed circumstance reviews. 10. The German Group indicates that EKO was not party to the original investigation. In addition, although the German Group notes that Bremen is a successor to Klockner, since Klockner was not party to the original investigation regarding the corrosion-resistant and cold-rolled steel, Bremen was not deemed a party to the original investigation. 11. Salzgitter and TKS also state that they did not export cut-to- length steel to the United State during the five years (1994-1998) preceding the year of publication of the notice of initiation for these sunset reviews. (See October 4, 1999, Salzgitter and TKS's substantive responses at 7 and 4, respectively.) 12. On the same day SZAG (Salzgitter), which is a member of the German Group, also individually submitted rebuttal comments with respect to all three orders. 13. See Extension of Time Limit for Preliminary Results of Full Five- Year Reviews, 64 FR 71726 (December 22, 1999). 14. See footnote 2, supra. The nonrecurring countervailable subsidies the domestic interested parties refer to in their substantive responses are Capital Investment Grants, Aid for Closure of Steel Operations, Joint Scheme, Upswing East, SVK and Investment Premium Act. 15. See footnote 2, supra, at 37318. The Department found that the GOG adopted two measures: on May 3, 1988, "Rules on Providing Funds to Iron and Steel Companies to Give Social Assistance for Structural Adjustment" was adopted (this program provided grants to the iron and steel industry for expenses incurred with respect to displaced employees); and on June 27, 1988, "the Guideline for Granting Aid to the Iron and Steel Industry" was adopted (this measure increased the amount of aid provided to employees under Article 56(2)(b) of the ECSC Treaty). 16. See footnote 2, supra. In April of 1989, the Government of Saarland and Dillinger's parent company, Usinor Sacilor, created a new holding company, DHS-Dillinger Hutte Saarstahl AG ("DHS"), making Dillinger and Saarstahl Volklingen GmbH ("Saarstahl") wholly-owned subsidiaries of DHS. In the process of this privatization, the governments of Germany and Saarland forgave debts owed to them by Saarstahl. Also, in conjunction with this privatization process, private creditors forgave Saarstahl's debts as a part of restructuring the two companies. The total amount involved in this debt forgiveness was DM 4.153 Billion. 17. See domestic interested parties' substantive response, Attachment 8 (Seventh Survey of State Aid in the European Union in the Manufacturing and Certain Other Sectors. Commission of the European Communities at 25 (March 30, 1999) ("SSSA")). TRA was succeeded by the program, Bundesanstalt fur Vereinigungsbedingte Sanderaufgaben ("BvS"). 18. However, the domestic interested parties acknowledge that they are unable to establish a definite nexus between ECSC 56 and the aforementioned two employee-assistance programs; namely, the domestic interested parties stipulate that they have "no information available to tie directly" the programs to the ECSC 56. 19. See domestic interested parties' substantive response, Attachment 9 (ECSC 1997 Financial Report, Financing of Industrial Investment (Article 54 of the ECSC Treaty), and Financing of Investment in the Iron and Steel Industry (first paragraph of Article 54 of the ECSC Treaty)). 20. However, for each of these alleged terminations, the GOG does not provide the mode and/or nature of each termination. That is, the GOG does not indicate whether a particular termination was done via legislative or administrative action. Also, the GOG does not explain whether a particular termination is partial only with respect to exports to the United States, with respect to the German steel industry, or in its entirety. 21. Although no grant directly benefitted Dillinger, in its investigation, the Department attributed a portion of the grant package, which forgave DHS's debt, to Dillinger because the Department deemed the grant as being passed through. In its substantive response, the GOG indicates that the Department's application of the aforementioned pass-through practice is currently a subject before a WTO Dispute Settlement Panel. (See General Issues at Restructuring and Privatization.) 22. The EU states that the Commission Decision allows aid only in three circumstances: factory closures, environmental reasons, and research and development. In all three cases, the aid must be notified and approved by the EU according to the procedure specified in the Commission Decision. (See the EC's substantive response at II(G)(3).) 23. The German Group bases its contention of reduced rate on the allocation formula set forth in section 351.524(d) of the Department Regulations. Accordingly, the German Group claims that the Department usually allocates the non-recurring benefits at a gradually reduced rate over the years. 24. See footnote 1, supra and 58 FR 43758. The Department amended this figure to 0.51 percent. 25. However, TKS does not elaborate the reason for its suggestion that the benefit stream will either end or have been reduced considerably from the 1991 level. 26. See footnote 21, supra. Dillinger notes that without the pass- through portion of debt-forgiveness, the SVK grant benefitting DHS, the total amount of countervailing duty rate assigned to Dillinger would have been de minimis, 0.21 percent ad valorem. 27. Dillinger indicates that the Department should adopt an 11-year allocation period as it did in Final Affirmative Countervailable Duty Determination: Steel Wire Rod from Germany, 62 FR 54990 (April 15, 1997) ("Steel Wire Rod"). In this case, the Department explained that its previous methodology of relying on US IRS based industry-specific average useful life of assets (as it was used in the investigation of the subject merchandise) was rejected by the U.S. Court of International Trade (the "Court") in British Steel Plc. v. United States, 879 F. Supp. 1254 (CIT 1995). At the same time, Dillinger urges the Department to utilize the principle enunciated in Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the United Kingdom; Final Results of Countervailing Duty Administrative Review, 63 FR 18367 (October 22, 1998). In this case, finding that applying different allocation periods (15 years and 18 years) for the same subsidies in two different proceedings involving the same company generates significant inconsistencies, the Department harmonized two different allocation periods into one period, 18 years. However, in this review we are dealing with different companies and a different set of subsidies. 28. See, Commission Communication on the Method for the Application of Article 92(3)(a) and (c) to Regional Aid, Official Journal of the European Communities at 212/5 (December 8, 1988). 29. With this, SZAG is rebutting the domestic interested parties' characterization of SZAG in their substantive response: in 1998, Preussag was acquired by the government of Lower Saxony, merged with affiiliated companies and renamed SZAG. (See the domestic interested parties' substantive response at 7.) 30. Although Dillinger and Salzgitter submitted their substantive response separately, they filed their rebuttal comments jointly. 31. See section 351.524(d) of the Department's Regulations. 32. See footnote 1, supra. 33. See Final Affirmative Countervailing Duty Determination: Certain Steel Products From Austria, GENERAL ISSUES APPENDIX, Allocation, 58 FR 37217, 37227 (July 9, 1993). 34. The effective date for revocation or termination of any transition order is January 1, 2000. (See section 351.222(i)(2)(ii) of the Department's Regulation.) 35. See footnote 2, supra. 36. Thus, the domestic interested parties' acknowledgment, in their rebuttal comments, that this program has expired is immaterial. 37. However, for each of these alleged terminations, the GOG does not provide the nature of each termination. That is, the GOG does not indicate whether a particular termination was done via legislative or administrative action. Also, the GOG does not explain whether a particular termination is partial only with respect to exports to the United States, with respect to the German steel industry, or in its entirety. 38. See domestic interested parties' substantive response, Attachment 8 (Seventh Survey of State Aid in the European Union in the Manufacturing and Certain Other Sectors. Commission of the European Communities at 25 (March 30, 1999) ("SSSA")). TRA was succeeded by the program, Bundesanstalt fur Vereinigungsbedingte Sanderaufgaben ("BvS"). 39. See footnote 2 and 16 supra. 40. The GOG submitted a copy of its September 1997, Case Brief pertaining to the Countervailing Duty Investigation of Steel Wire Rod from Germany purportedly in support of its claim that some subsidies are not-countervailable pursuant to section 771(5B)(C) of the Act. However, the submitted case brief deals with a different product and pertains mostly the different interested parties. Moreover, it is not even clear whether the same aspects of a program or even whether the same programs are discussed in the case brief as in the orders. For this reason, we conclude that the information from the case brief should not affect the Department's decision in the instant review. (See the GOG's substantive response Appendix 1 and 2.) 41. See British Steel plc v. United States, 879 F. Supp. 1254 (Ct. Int'l Trade 1995). 42. See British Steel plc v. United States, Slip Op. 96-130 (CIT August 13, 1996). 43. See May 22, 1996, Final Results of Redetermination Pursuant to Court Remand on Certain Factual Issues Regarding the Privatization in Germany, British Steel Plc v. United States Consol. Ct. NO. 93-09- 00550-CVD ("Remand Determination") (affirmed, British Steel plc v. United States, Slip Op. 96-130 (CIT August 13, 1996)). 44. Also see Delverde SRL v. United States, Appeal No. Op. 99-1186 (Fed. Cir. 2000). (The Court of Appeals for the Federal Circuit ("CAFC") recently ruled that the Department may not presume that non- recurring subsidies survive a private-to-private transfer in a subsidized company's ownership. To the extent that the CAFC-ruling may be relevant to the instant orders, that decision is not final and conclusive. Specifically, under the Federal Rules of Appellate Procedure, the time for petitioning for rehearing in banc, or appealing, has not yet run. Further, the Court has not yet issued a mandate. 45. See October 8,1999, WTO Interim Panel Finds Against U.S. CVD Rules on Privatization, 17 Inside U.S. Trade No. 140 at 4. 46. See footnote 2, supra at GENERAL ISSUES APPENDIX -- Allocation and Restructuring. The Department indicated that it is inappropriate for the Department to take into account the timing of each and every receipt of benefits in calculating the allocation of non-recurring benefits. Also, in the Restructuring segment, the Department explained how it allocated the SVK grant to Dillinger in The Calculation of the Portion of the Sale Price Allocable to Previously Received Subsidies. 47. See footnotes 2 and 43, supra. Moreover, in British Steel Plc. v. United States, with respect to allocation methodology, the order pertaining to Germany was not contested (only orders of the United Kingdom and France were remanded by the Court). 48. Although the domestic interested parties raised a newly-alleged- subsidies issue within their likely effects argument, they did not attempt to incorporate the newly-alleged-subsidies rate with the likely-to-prevail margin. Furthermore, the domestic interested parties did not attempt to put forth good-cause argument.