64 FR 73277 December 29, 1999 (Volume 64, Number 249)

DEPARTMENT OF COMMERCE

International Trade Administration
[C-427-817]

 
Final Affirmative Countervailing Duty Determination: Certain Cut-
to-Length Carbon-Quality Steel Plate From France

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai and Gregory 
Campbell, Office of Antidumping/Countervailing Duty Enforcement, Group 
I, Import Administration, U.S. Department of Commerce, Room 3099, 14th 
Street and Constitution Avenue, NW., Washington, D.C. 20230; telephone: 
(202) 482-4087 or 482-2239, respectively.

Final Determination

    The Department of Commerce (the Department) determines that 
countervailable subsidies are being provided to producers or exporters 
of certain cut-to-length carbon-quality plate (carbon plate) from 
France. For information on the estimated countervailing duty rates, 
please see the ``Suspension of Liquidation'' section of this notice.

Petitioners

    The petition in this investigation was filed by the Bethlehem Steel 
Corporation, U.S. Steel Group, Gulf States Steel, Inc., IPSCO Steel 
Inc., and the United Steel Workers of America (collectively referred to 
hereinafter as the ``petitioners'').

Case History

    Since the publication of our preliminary determination in the 
Federal Register (see Preliminary Affirmative Countervailing Duty 
Determination and Alignment of Final Countervailing Duty Determination 
With Final Antidumping Duty Determination: Certain Cut-to-Length 
Carbon-Quality Steel Plate from France, 64 FR 40430 (July 26, 1999) 
(Preliminary Determination)), the following events have occurred:
    On September 21, 1999, we initiated an investigation of whether 
advances by the Government of France (GOF) to the Societe pour le 
Developpement de l'Industrie et de l'Emploi (SODIE) through Usinor 
since 1991 provided countervailable benefits to Usinor (see Memorandum 
on Inclusion of Previously Investigated Programs in the Countervailing 
Duty Investigation of French Steel Plate, September 21, 1999). We 
issued questionnaires on SODIE advances to the GOF and Usinor on 
October 18, 1999. The GOF and Usinor responded to the SODIE 
questionnaires on November 3, 1999.
    On October 7-15, 1999, we verified the responses of Usinor, Sollac 
S.A. (Sollac), Creusot Loire Industrie S.A.(CLI), GTS Industries S.A. 
(GTS) and the GOF (collectively known as ``the respondents''). 
Verification took place at: Usinor and the GOF in Paris, France; GTS in 
Dunkirk, France; and AG

[[Page 73278]]

der Dillinger Huttenwerke (Dillinger), the parent company of GTS, in 
Dillingen, Germany.
    The petitioners and the respondents submitted case briefs on 
November 12 , 1999. On November 18, 1999, the petitioners, the 
respondents and Dillinger submitted rebuttal briefs. A public hearing 
was held November 22, 1999.

Scope of Investigation

    The products covered by this scope are certain hot-rolled carbon-
quality steel: (1) Universal mill plates (i.e., flat-rolled products 
rolled on four faces or in a closed box pass, of a width exceeding 150 
mm but not exceeding 1250 mm, and of a nominal or actual thickness of 
not less than 4 mm, which are cut-to-length (not in coils) and without 
patterns in relief), of iron or non-alloy-quality steel; and (2) flat-
rolled products, hot-rolled, of a nominal or actual thickness of 4.75 
mm or more and of a width which exceeds 150 mm and measures at least 
twice the thickness, and which are cut-to-length (not in coils).
    Steel products to be included in this scope are of rectangular, 
square, circular or other shape and of rectangular or non-rectangular 
cross-section where such non-rectangular cross-section is achieved 
subsequent to the rolling process (i.e., products which have been 
``worked after rolling'')--for example, products which have been 
beveled or rounded at the edges. Steel products that meet the noted 
physical characteristics that are painted, varnished or coated with 
plastic or other non-metallic substances are included within this 
scope. Also, specifically included in this scope are high strength, low 
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum.
    Steel products to be included in this scope, regardless of 
Harmonized Tariff Schedule of the United States (HTSUS) definitions, 
are products in which: (1) iron predominates, by weight, over each of 
the other contained elements, (2) the carbon content is two percent or 
less, by weight, and (3) none of the elements listed below is equal to 
or exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.

    All products that meet the written physical description, and in 
which the chemistry quantities do not equal or exceed any one of the 
levels listed above, are within the scope of this investigation unless 
otherwise specifically excluded. The following products are 
specifically excluded from this investigation: (1) products clad, 
plated, or coated with metal, whether or not painted, varnished or 
coated with plastic or other non-metallic substances; (2) SAE grades 
(formerly AISI grades) of series 2300 and above; (3) products made to 
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to 
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary 
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon 
manganese steel or silicon electric steel.
    The merchandise subject to this investigation is classified in the 
HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030, 
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000, 
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050, 
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000, 
7226.91.8000, 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
customs purposes, the written description of the merchandise under 
investigation is dispositive.

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the 
Act). In addition, unless otherwise indicated, all citations to the 
Department's regulations are to our regulations as codified at 19 CFR 
Part 351 (1998) and Countervailing Duties; Final Rule, 63 FR 65348 
(November 25, 1998) (CVD Regulations).

Injury Test

    Because France is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the U.S. International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from France materially injure, or threaten material 
injury to, a U.S. industry. On April 8, 1999, the ITC published its 
preliminary finding that there is a reasonable indication that an 
industry in the United States is being materially injured or threatened 
with material injury by reason of imports from France of the subject 
merchandise. See Certain Cut-to-Length Steel Plate from the Czech 
Republic, France, India, Indonesia, Italy, Japan, Korea, and Macedonia; 
Determinations, 64 FR 17198 (April 8, 1999). The ITC will make its 
final injury determination within 45 days of this final determination 
by the Department.

Period of Investigation

    The period for which we are measuring subsidies (the POI) is 
calendar year 1998.

Company History

    The GOF identified Usinor, Sollac, CLI, and GTS as the only 
producers of the subject merchandise that exported to the United States 
during the POI. Sollac and CLI are wholly-owned subsidiaries of Usinor 
(a holding company), and GTS is partially owned by Usinor.

Usinor

    In 1984, the GOF was a majority shareholder of Usinor. In 1986, 
Usinor was merged with another state-owned company, Sacilor, into a 
single company called Usinor Sacilor. Usinor Sacilor was 100 percent 
owned by the GOF.
    In 1995, Usinor Sacilor was privatized, principally through the 
public sale of shares. In October 1997, the GOF reduced its direct 
shareholdings to 1 percent. As of August 1998, the GOF has no direct 
ownership interest in Usinor but retains a minority indirect interest 
in the company.

GTS

    Prior to 1992, GTS was 89.73 percent owned by Sollac, a subsidiary 
of Usinor. In 1992, Sollac transferred its shares in GTS to Dillinger. 
In return, Dillinger transferred to Sollac shares it held in Sollac of 
an equivalent value. At that time, Dillinger was majority owned by DHS-
Dillinger Hutte Saarstahl AG (DHS), a German holding company, which, in 
turn, was 70 percent owned by Usinor.
    In 1996, Usinor reduced its interest in DHS from 70 to 48.75 
percent. At that time, DHS owned 95.3 percent of Dillinger, which in 
turn, owned 99 percent of GTS.

[[Page 73279]]

Attribution of Subsidies

    The GOF has identified three producers of subject merchandise in 
this investigation: Sollac, CLI and GTS. During the POI, both Sollac 
and CLI were wholly-owned by and consolidated subsidiaries of Usinor. 
With respect to GTS, prior to 1996, it was majority owned by Usinor 
since Usinor held 70 percent of DHS, which in turn, held approximately 
95 percent of Dillinger, GTS' direct parent company. However, since 
1996 and during the entire POI, Usinor's interest in DHS has been 48.75 
percent, i.e., slightly less than a majority.
    The issue before the Department is whether the subsidies granted to 
Usinor are attributable to GTS given that GTS is no longer majority-
owned by Usinor. Section 351.525 of the CVD Regulations states that the 
Department will attribute subsidies received by two or more 
corporations to the products produced by those corporations where 
cross-ownership exists. According to section 351.525(b)(6)(vi) of the 
CVD Regulations, cross-ownership exists between two or more 
corporations where one corporation can use or direct the individual 
assets of the other corporation in essentially the same ways it can use 
its own assets. The regulations state that this standard will normally 
be met where there is a majority voting ownership interest between two 
corporations. The Preamble to the CVD Regulations identifies situations 
where cross-ownership may exist even though there is less than a 
majority voting interest between two corporations: ``in certain 
circumstances, a large minority interest (for example, 40 percent) or a 
`golden share' may also result in cross-ownership'' (63 FR at 65401).
    In the Preliminary Determination, we found that there was no cross-
ownership between Usinor and GTS. Interested parties commented on 
cross-ownership and attribution (see Comment 1 below). Based on our 
analysis of information on the record of this proceeding and comments 
by interested parties, we continue to find that Usinor's ownership 
interest in DHS, the holding company of GTS' parent, Dillinger, is 
insufficient to establish cross-ownership between Usinor and GTS during 
the POI. We base this determination on the following: (1) Usinor has 
less than a majority voting ownership in DHS; (2) Usinor does not 
control GTS directly or indirectly; and (3) although GTS uses Usinor 
affiliates to transport and sell some of its merchandise, there is no 
evidence that Usinor controls the sales that its affiliates make for 
GTS. For more details, see the Department's position on Comment 1 
below.
    Therefore, for this final determination, we have calculated a 
separate net subsidy rate for GTS. However, since GTS was part of the 
Usinor Group for much of the allocation period, we have attributed a 
portion of subsidies received by Usinor through 1996 to GTS (see the 
``Change in Ownership'' section below).

Change in Ownership

    In the General Issues Appendix (GIA) attached to the Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Austria, 58 FR 37217, 37226 (July 9, 1993), we applied a new 
methodology with respect to the treatment of subsidies received prior 
to the sale of the company (privatization) or the spinning-off of a 
productive unit. Under this methodology, we estimate the portion of the 
purchase price attributable to prior subsidies. We compute this by 
first dividing the privatized company's subsidies by the company's net 
worth for each year during the period beginning with the earliest point 
at which nonrecurring subsidies would be attributable to the POI (i.e., 
in this case, 1985 for Usinor) and ending one year prior to the 
privatization. We then take the simple average of the ratios. The 
simple average of these ratios of subsidies to net worth serves as a 
reasonable surrogate for the percent that subsidies constitute of the 
overall value of the company. Next, we multiply the average ratio by 
the purchase price to derive the portion of the purchase price 
attributable to repayment of prior subsidies. Finally, we reduce the 
benefit streams of the prior subsidies by the ratio of the repayment 
amount to the net present value of all remaining benefits at the time 
of privatization.
    With respect to spin-offs, consistent with the Department's 
position regarding privatization, we analyze the spin-off of productive 
units to assess what portion of the sale price of the productive units 
can be attributable to payment for prior subsidies. To perform this 
calculation, we first determine the amount of the seller's subsidies 
that the spun-off productive unit could potentially take with it. To 
calculate this amount, we divide the value of the assets of the spun-
off unit by the value of the assets of the company selling the unit. We 
then apply this ratio to the net present value of the seller's 
remaining subsidies. We next estimate the portion of the purchase price 
going towards payment for prior subsidies in accordance with the 
privatization methodology outlined above.
    As discussed above in the ``Case History'' section of this notice, 
two important changes of ownership have occurred with respect to the 
producers of the subject merchandise. First, Usinor's ownership of GTS 
has declined over time so that Usinor is no longer a majority owner of 
GTS. Second, Usinor has been privatized. In addition, Usinor sold (in 
whole or in part) various productive units: Ugine (1994); Centrale 
Siderurgique de Richemont (CSR) (1994); Entreprise Jean LeFebvre 
(1994); and various productive units to FOS-OXY (1993).
    To determine the amount of subsidies that potentially transfers 
with a spun off productive unit, we have measured that productive 
unit's assets in relation to the subsidized assets of the seller (see 
Comment 8 below). In particular, because we normally attribute 
subsidies to production occurring in the jurisdiction of the 
subsidizing government (see section 351.525(b)(7)), we believe we 
should calculate the share of subsidies that can potentially transfer 
with the sale of Usinor's French productive units in relation to 
Usinor's total French assets (as opposed to Usinor's total worldwide 
assets). As explained below, we lack the information to make this 
calculation in this determination, but for the spin-off of GTS, we have 
developed a substitute measure for that amount based on sales.
    Using this information, we have applied the spin-off and 
privatization methodologies described in the GIA. Regarding spin offs, 
we first determined the portion of subsidies that potentially transfers 
with the spun-off unit based on that unit's share of assets (or French 
sales). For the latter three transactions described above (involving 
CSR, Entreprise Jean LeFebvre, and FOS-OXY), the entire productive unit 
was transferred. Consequently, the entire amount of subsidies 
attributable to these productive units were potentially transferred 
and, also, potentially reallocated to Usinor through the payment for 
these companies. Similarly, the privatization of Usinor involved 
virtually all of Usinor's shares and, hence, the entire amount of 
Usinor's remaining subsidies potentially transferred with Usinor and, 
also, were potentially repaid to the seller.
    The sales of Ugine and GTS present variations from the sales 
discussed above. While the sales of Ugine and GTS are spin offs of 
productive units, these units have been only partially spun off. 
Moreover, the sale of Ugine must be distinguished from the sale of GTS 
because after Usinor's sale of Ugine's

[[Page 73280]]

shares in 1994, Usinor continued to be the majority owner of Ugine. 
While it would be possible to apply the change-in-ownership methodology 
to this transaction (and we did so in French Stainless), there is no 
impact on the subsidy to Usinor. This is because even after the partial 
spin off, Ugine continued to be part of the consolidated Usinor Group. 
Thus, the total amount of subsidies within the Usinor Group would not 
diminish as a result of the partial spin off of Ugine, nor would 
Usinor's denominator change. Since Usinor's ownership in Ugine did not 
diminish further after 1994 (indeed, Usinor subsequently repurchased 
the Ugine shares it had sold) and we have not applied the change-in-
ownership methodology to Usinor's repurchase of Ugine's shares (see 
French Stainless), there is no need to perform the change-in-ownership 
calculation for the partial spin off of Ugine.
    GTS' situation by the POI was very different from that of Ugine. As 
discussed above, after 1996, GTS was no longer part of the consolidated 
Usinor Group. Therefore, any subsidies properly attributed to GTS would 
no longer be counted among Usinor's subsidies, nor would GTS' sales be 
included in Usinor's sales. To reflect this change in GTS' status, we 
have applied the spin off methodology twice. First, we have applied the 
methodology to the 1992 transfer of GTS shares from Sollac to DHS. We 
have done this by determining the subsidies potentially allocable to 
GTS in 1992. We have then reduced this total by the percentage of 
ownership in GTS that transferred outside the Usinor Group in 1992 to 
arrive at the amount of subsidies subjected this amount to the 
repayment methodology. We note that Usinor continued to be a majority 
owner of GTS after the 1992 transaction and, hence, that Usinor and GTS 
would continue to be treated as a single company. However, unlike the 
situation with Ugine, it is necessary for us to apply the change-in-
ownership methodology to this 1992 transaction. This is because we have 
to calculate a subsidy rate for 1998, a point in time when Usinor and 
GTS are being treated as separate companies. If we failed to apply the 
change-in-ownership methodology to the 1992 transaction, and only 
applied it to the 1996 transaction, the amount paid for GTS in 1996 
(assuming we had that information) would not be commensurate with the 
total amount of ownership that had transferred over time.
    The second application of the change-in-ownership methodology to 
Usinor/GTS is also a partial spin off. In recognition of the fact that 
this transaction reduces Usinor's ownership of GTS below 50 percent and 
our finding that Usinor does not direct or control the use of GTS' 
assets (see Comment 1 below), with the result that GTS's sales will no 
longer be treated as Usinor's sales, we believe the spin off 
methodology requires us first to assign to GTS its full share of Usinor 
subsidies (reduced in proportion to the amount of GTS sold in 1992). 
The amount of these subsidies that are then reallocated to Usinor is 
calculated taking into account the percentage change in Usinor's 
ownership of GTS and the price paid by the new owner of the GTS shares.

The Use of Facts Available

    Certain information requested of respondents was not provided in 
this investigation. Specifically, Usinor failed to respond to the 
Department's questions concerning creditworthiness for the years 1992 
though 1995. The GOF failed to provide information on the distribution 
of investment and operating subsidies (other than those from the water 
boards) received by Usinor. Nor did it demonstrate at verification that 
it had provided information on use of ESF funding by all Usinor group 
members. Finally, the EC did not provide information with respect to 
the distribution of European Social Fund (ESF) funding.
    Section 776(a)(2) of the Act requires the use of facts available 
when an interested party withholds information that has been requested 
by the Department, or when an interested party fails to provide the 
information requested in a timely manner and in the form required. In 
such cases, the Department must use the facts otherwise available in 
reaching the applicable determination. Because the EC, the GOF and 
Usinor failed to submit the information that was specifically requested 
by the Department, we have based our determination for these programs 
on the facts available.
    In accordance with section 776(b) of the Act, the Department may 
use an inference that is adverse to the interests of that party in 
selecting from among the facts otherwise available when the party has 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information. Such adverse inference may include 
reliance on information derived from (1) the petition; (2) a final 
determination in a countervailing duty or an antidumping investigation; 
(3) any previous administrative review, new shipper review, expedited 
antidumping review, section 753 review, or section 762 review; or (4) 
any other information placed on the record. See 19 C.F.R. 351.308(c). 
In the absence of information from the EC, the GOF and Usinor, we 
consider the February 16, 1999 petition, as well as our findings in 
French Stainless and other information gathered during the course of 
this investigation to be appropriate bases for a facts available 
countervailing duty rate calculation.
    The Statement of Administrative Action accompanying the URAA 
clarifies that information from the petition and prior segments of the 
proceeding is ``secondary information.'' See Statement of 
Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316) 
(1994) (SAA), at 870. If the Department relies on secondary information 
as facts available, section 776(c) of the Act provides that the 
Department shall, to the extent practicable, corroborate such 
information using independent sources reasonably at its disposal. The 
SAA further provides that to corroborate secondary information means 
simply that the Department will satisfy itself that the secondary 
information to be used has probative value. However, where 
corroboration is not practicable, the Department may use uncorroborated 
information.
    We relied upon French Stainless regarding Usinor's creditworthiness 
during the period 1992 through 1995. With respect to ESF funding and 
investment and operating subsidies (other than those provided by the 
water boards) for which we did not receive complete information from 
the respondents, we relied upon findings in French Stainless and 
information in the petition indicating that these programs are 
specific. Based on our review of the findings in French Stainless and 
the information in the petition, we find that this secondary 
information has probative value and, therefore, the information has 
been corroborated.

Subsidies Valuation Information

Allocation Period

    The current investigation includes untied, non-recurring subsidies 
to Usinor that were found to be countervailable in Final Affirmative 
Countervailing Duty Determinations: Certain Steel Products From France, 
58 FR 37304 (July 9, 1993) (French Certain Steel): PACS, FIS, and 
Shareholders' Advances. For the Preliminary Determination, we allocated 
those subsidies over 14 years because we have already assigned this 
company-specific allocation period to those subsidies in other 
proceedings. See French Stainless. See also Final Results of

[[Page 73281]]

Redetermination Pursuant to Court Remand on General Issue of 
Allocation, British Steel plc, v. United States, Consol. Ct. No. 93-09-
00550-CVD. After considering interested parties comments on this issue, 
we have continued to apply a 14-year allocation period to these 
subsidies for this final determination. For further details, see 
Comment 13 below.
    We have found no other allocable non-recurring subsidies received 
by Usinor and GTS in the instant proceeding.

Creditworthiness

    When the Department examines whether a company is creditworthy, it 
is essentially attempting to determine if the company in question could 
obtain commercial financing at commonly available interest rates. See 
section 351.595 of the CVD Regulations.
    Usinor was found to be uncreditworthy from 1982 through 1988 in 
French Certain Steel, 58 FR at 37306. No new information has been 
presented in this investigation that would lead us to reconsider these 
findings. Therefore, we continue to find Usinor uncreditworthy from 
1985 through 1988.
    In Notice of Initiation of Countervailing Duty Investigations: 
Certain Cut-To-Length Carbon-Quality Steel Plate from France, India, 
Indonesia, Italy, and the Republic of Korea, 64 FR 12996 (March 16, 
1999), we stated that the petitioners provided sufficient information 
to lead us to believe or suspect that Usinor was uncreditworthy from 
1992 through 1995. Therefore, we requested Usinor to provide data that 
would allow us to analyze its creditworthiness during this period.
    Usinor did not provide the information requested by the Department 
citing the ``formidable burdens which would be involved in responding 
to the Department's Creditworthiness questions.'' Consequently, the 
Department has decided to use facts available in accordance with 
section 776 (a)(2)(A) of the Act. Section 776(b) of the Act permits the 
Department to draw an inference that is adverse to the interests of an 
interested party if that party has ``failed to cooperate by not acting 
to the best of its ability to comply with a request for information.'' 
In this investigation, Usinor refused to answer on more than one 
occasion, the creditworthiness questions in the Department's original 
and supplemental questionnaires. Therefore, the Department determines 
it appropriate to use an adverse inference in selecting the discount 
rate to be applied in these years.

Benchmarks for Loans and Discount Rates

    In accordance with sections 351.505 (a) and 351.524 (c)(3)(i) of 
the CVD Regulations, we used Usinor's company-specific cost of long-
term, fixed-rate loans, where available, for loan benchmarks and 
discount rates for years in which Usinor was creditworthy. In the 
Preliminary Determination for years where Usinor was creditworthy and a 
company-specific rate was not available, we used the average yields on 
long-term private-sector bonds in France as published by the OECD. 
Interested parties commented on the calculation of the non-company-
specific benchmark rate. In response to these comments, we have revised 
our benchmark for this final determination. Specifically, we are using 
an average of the following long-term interest rates: medium-term 
credit to enterprises (MTCE), and equipment loan rates as published by 
the OECD, cost of credit rates published in the Bulletin of Banque de 
France, and private sector bond rates as published by the International 
Monetary Fund. (See Comment 18 below for further discussion of this 
issue.)
    For the years in which Usinor was uncreditworthy (see 
``Creditworthiness'' section above), we calculated the discount rates 
in accordance with section 351.524(c)(3)(ii) of the CVD Regulations. To 
construct these benchmark rates, we used the formula described in 
section 351.505(a)(3)(iii) of the CVD Regulations. This formula 
requires values for the probability of default by uncreditworthy and 
creditworthy companies. For the probability of default by an 
uncreditworthy company, we relied on the average cumulative default 
rate reported for Caa to C-rated category of companies as published in 
Moody's Investors Service, ``Historical Default Rates of Corporate Bond 
Issuers, 1920-1997,'' (February 1998). For the probability of default 
by a creditworthy company we used the average cumulative default rates 
reported for the Aaa to Baa-rated categories of companies as reported 
in this study.<SUP>1</SUP> See Memorandum to Case File; Clarification 
of Moody's Default Data (December 13, 1999).
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    \1\ We note that since publication of the CVD Regulations, 
Moody's Investors Service no longer reports default rates for Caa to 
C-rated category of companies. Therefore for the calculation of 
uncreditworthy interest rates, we will continue to rely on the 
default rates as reported in Moody Investor Service's publication, 
February 1998.
---------------------------------------------------------------------------

    Based upon our verification and our analysis of the comments 
received from interested parties, we determine the following:

I. Programs Determined To Be Countervailable

GOF Programs

A. Loans With Special Characteristics (PACS)
    A plan was agreed upon in 1978 to help the principal steel 
companies, Usinor, Sacilor, Chatillon-Neuves-Maisons, and their 
subsidiaries, restructure their massive debt. This plan entailed the 
creation of a steel amortization fund, called the Caisse 
d'Amortissement pour l'Acier (CAPA), for the purpose of ensuring 
repayment of funds borrowed by these companies prior to June 1, 1978. 
In accordance with the restructuring plan of 1978, bonds previously 
issued on behalf of the steel companies and pre-1978 loans from Credit 
National and Fonds de Developpement Economique et Social (FDES) were 
converted into ``loans with special characteristics,'' or PACS. As a 
result of this process, the steel companies were no longer liable for 
the loans and bonds, but did take on PACS obligations.
    In 1978, Usinor and Sacilor converted 21.1 billion French francs 
(FF) of debt into PACS. From 1980 to 1981, Usinor and Sacilor issued 
FF8.1 billion of new PACS. PACS in the amount of FF13.8 billion, FF12.6 
billion and FF2.8 billion were converted into common stock in 1981, 
1986, and 1991, respectively.
    In French Stainless, French Certain Steel, and Final Affirmative 
Countervailing Duty Determinations: Certain Hot Rolled Lead and Bismuth 
Carbon Steel Products from France, 58 FR 6221 (January 27, 1993) 
(French Bismuth), the Department determined that the conversion of PACS 
to common stock in 1986 constituted a countervailable equity infusion. 
This equity infusion was limited to Usinor Sacilor and was, therefore, 
specific within the meaning of section 771(5A)(D)(i) of the Act. Also, 
this equity infusion provided a financial contribution to Usinor 
Sacilor within the meaning of section 771(5)(D)(i) of the Act. No new 
information or evidence of changed circumstances has been submitted in 
this proceeding to warrant a reconsideration of our earlier finding. 
Therefore, we determine that a countervailable benefit exists in the 
amount of the 1986 equity infusion in accordance with section 77(5)(A) 
of the Act.
    We have treated the 1986 equity infusion as a non-recurring grant

[[Page 73282]]

received in the year the PACS were converted to common stock. Using the 
allocation period of 14 years, the 1986 conversion of PACS continues to 
yield a countervailable benefit during the POI. We used an 
uncreditworthy discount rate to allocate the benefit of the equity 
infusion over time. Additionally, we followed the methodology described 
in the ``Change in Ownership'' section above to determine the amounts 
of the equity infusion appropriately allocated to Usinor and GTS. We 
divided these amounts by Usinor's and GTS' total sales of French-
produced merchandise during the POI. Accordingly, we determine the net 
subsidy rate to be 1.35 percent ad valorem for Usinor and 1.70 percent 
ad valorem for GTS.
B. Shareholders' Advances
    The GOF provided Usinor and Sacilor grants in the form of 
shareholders' advances in 1985 and 1986. The purpose of these advances 
was to finance the revenue shortfall needs of Usinor and Sacilor while 
the GOF planned for the next major restructuring of the French steel 
industry. These shareholders' advances carried no interest and there 
was no precondition for receipt of these funds. These advances were 
converted to common stock in 1986.
    In French Stainless, French Certain Steel, and French Bismuth, the 
Department determined that the shareholders' advances constituted 
countervailable grants because no shares were received for them. These 
grants were limited to Usinor and Sacilor and were, therefore, specific 
within the meaning of section 771(5A)(D)(i) of the Act. Also, these 
grants provided a financial contribution to Usinor and Sacilor within 
the meaning of section 771(5)(D)(i) of the Act. No new information or 
evidence of changed circumstances has been submitted in this proceeding 
to warrant a reconsideration of our earlier finding. Therefore, we 
determine these grants provide a countervailable benefit in accordance 
with section 77(5)(A) of the Act.
    Because the 1986 shareholders' advance was less than 0.5 percent of 
Usinor's sales of French-produced merchandise during the year of 
approval, this grant was expensed in the year of receipt. See CVD 
Regulations, 64 FR at 65415.
    We have treated the 1985 shareholders' advance as a non-recurring 
subsidy. Using the allocation period of 14 years, this shareholders' 
advance continues to provide a countervailable benefit during the POI. 
We used an uncreditworthy discount rate to allocate the benefits of the 
1985 shareholders' advance over time. Additionally, we followed the 
methodology described in the ``Change in Ownership'' section above to 
determine the amount of the grant appropriately allocated to Usinor and 
GTS. We divided these amounts by Usinor's and GTS'' total sales of 
French-produced merchandise during the POI. Accordingly, we determine 
the net subsidy rate to be 0.54 percent ad valorem for Usinor and 0.68 
percent ad valorem for GTS.
C. Steel Intervention Fund (FIS)
    The 1981 Corrected Finance Law granted Usinor and Sacilor the 
authority to issue convertible bonds. In 1983, the Fonds d'Intervention 
Siderurgique (FIS), or steel intervention fund, was created to 
implement that authority. In 1983, 1984, and 1985, Usinor and Sacilor 
issued convertible bonds to the FIS, which in turn, with the GOF's 
guarantee, floated the bonds to the public and to institutional 
investors. These bonds were converted to common stock in 1986 and 1988.
    In French Stainless, French Certain Steel and French Bismuth, the 
Department determined that the conversions of FIS bonds to common stock 
in 1986 and 1988 were countervailable equity infusions. These equity 
infusions were limited to Usinor Sacilor and were, therefore, specific 
within the meaning of section 771(5A)(D)(i) of the Act. Also, these 
equity infusions provided a financial contribution to Usinor Sacilor 
within the meaning of section 771(5)(D)(i) of the Act. No new 
information or evidence of changed circumstances has been submitted in 
this proceeding to warrant a reconsideration of our earlier finding. 
Therefore, we determine that a countervailable benefit exists in the 
amount of the 1986 and 1988 equity infusions in accordance with section 
77(5)(A) of the Act.
    We have treated the 1986 and 1988 equity infusions as non-recurring 
subsidies received in the years the FIS bonds were converted to common 
stock. Using the allocation period of 14 years, the 1986 and 1988 FIS 
bond conversions continue to yield a countervailable benefit during the 
POI. We used an uncreditworthy discount rate to allocate the benefits 
of the equity infusions over time. Additionally, we followed the 
methodology described in the ``Change in Ownership'' section above to 
determine the amount of the equity infusion appropriately allocated to 
Usinor and GTS. Dividing these amounts by Usinor's and GTS' total sales 
of French-produced merchandise during the POI, we determine the net 
subsidy rate to be 3.56 percent ad valorem for Usinor and 4.48 percent 
ad valorem for GTS.
D. Investment/Operating Subsidies
    During the period 1987 through 1998, Usinor received a variety of 
small investment and operating subsidies from various GOF agencies as 
well as from the European Coal and Steel Community (ECSC). The 
subsidies were provided for research and development, projects to 
reduce work-related illnesses and accidents, projects to combat water 
pollution, etc. The subsidies are classified as investment, equipment, 
or operating subsidies in the company's accounts, depending on how the 
funds are used.
    In French Stainless, the Department determined that the funding 
provided to Usinor by the water boards (les agences de l'eau) and 
certain work/training grants were not countervailable. Therefore, we 
are not investigating those programs in this proceeding.
    For the remaining amounts in these accounts, including certain 
work/training grants that differed from those found not countervailable 
in French Stainless, the GOF did not provide any information regarding 
the distribution of funds, stating that, in the GOF's view, the total 
amount of investment and operating subsidies received by Usinor was 
``insignificant and would * * * be expensed.'' Given the GOF's failure 
to provide the requested information, we are using ``facts available'' 
in accordance with section 776(a)(2)(A) of the Act. Further, section 
776(b) of the Act permits the Department to draw an inference that is 
adverse to the interests of an interested party if that party has 
``failed to cooperate by not acting to the best of its ability to 
comply with a request for information.'' In this investigation, the GOF 
has refused to answer the Department's repeated requests for data 
regarding the distribution of grant funds. Therefore, the Department 
determines it appropriate to use an adverse inference in concluding 
that the investment and operating subsidies (except those provided by 
the water boards and certain work/training contracts) are specific 
within the meaning of section 771(5A)(D) of the Act.
    We also determine that the investment and operating subsidies 
provide a financial contribution, as described in section 771(5)(D)(i) 
of the Act, in the form of a direct transfer of funds from the GOF and 
the ECSC to Usinor, providing a benefit in the amount of the grants.

[[Page 73283]]

    The investment and operating subsidies provided in the years prior 
to the POI were less than 0.5 percent of Usinor's sales of French-
produced merchandise in those years. Therefore, we have expensed these 
grants in the years of receipt, in accordance with section 351.524 
(b)(2) of the CVD Regulations. To calculate the benefit received during 
the POI, we divided the subsidies received by Usinor in the POI by 
Usinor's total sales of French-produced merchandise during the POI. 
Accordingly, we determine Usinor's net subsidy rate to be 0.11 percent 
ad valorem. GTS did not receive any of these investment and operating 
subsidies during the POI.
E. Subsidies Provided Directly to GTS
    GTS' 1996 condensed financial statements include a ``capital 
subsidy'' in the amount of FF 2.1 million. GTS claims that this amount 
reflects the unamortized balance of a grant that was provided to GTS 
pursuant to an agreement dated December 29, 1987, between the GOF and 
Usinor. The grant was given to support the development of a machine for 
the accelerated cooling of heavy plate during the hot-rolling process. 
The grant was provided in two disbursements made in 1988 and 1990.
    The GOF responded to the Department's questions on this capital 
subsidy stating that because of its size, the amounts would be expensed 
in a period outside the POI. Therefore, the GOF did not provide 
information on the distribution of other grants that might have been 
given under the same program.
    The total amount approved in 1987 was less than 0.5 percent of 
Usinor's sales of French-produced heavy plate in 1987. Therefore, we 
determine that these grants did not confer a countervailable subsidy 
during the POI.
F. Myosotis Project
    Since 1988, Usinor has been developing a continuous thin-strip 
casting process, called ``Myosotis,'' in a joint venture with the 
German steelmaker, Thyssen. The Myosotis project is intended to 
eliminate the separate hot-rolling stage of Usinor's steelmaking 
process by transforming liquid metal directly into a coil between two 
to five millimeters thick.
    To assist this project, the GOF, through the Ministry of Industry 
and Regional Planning and L'Agence pour la Maitrise de L'Energie 
(AFME), entered into three agreements with Usinor Sacilor (in 1989) and 
Ugine (in 1991 and 1995). The first agreement, dated December 27, 1989, 
provided three payments in 1989, 1991, and 1993. The second agreement, 
between Ugine and the AFME, covered the cost of some equipment for the 
project. This agreement resulted in two disbursements to Ugine from the 
AFME in 1991 and 1992. The third agreement, with Ugine, dated July 3, 
1995, provided interest-free reimbursable advances for the final two-
year stage of the project, with the goal of casting molten steel from 
ladles to produce thin strips. The first reimbursable advance under 
this agreement was made in 1997. Repayment of one-third of the 
reimbursable advance is due July 31, 1999. The remaining two-thirds are 
due for repayment on July 31, 2001.
    In French Stainless, the Department determined that funding 
associated with the 1989 and 1991 contracts constituted countervailable 
subsidies within the meaning of section 771(5) of the Act. Since the 
GOF did not provide any information indicating that the grants were 
provided to other companies in France, the Department determined that 
the grants were specific within the meaning of section 771(5A)(D) of 
the Act. Also, the Department found that these grants provided a 
financial contribution within the meaning of section 771(5)(D)(i) of 
the Act. No new information has been submitted to warrant a 
reconsideration of our earlier finding. Therefore, we continue to find 
that the grants associated with the 1989 and 1991 Myosotis contracts 
constitute countervailable subsidies within the meaning of section 
771(5) of the Act. Because the amounts received under the 1989 and 1991 
contracts were less than 0.5 percent of Usinor's sales of French-
produced merchandise during their respective year of approval, these 
grants were expensed in the years of receipt. See CVD Regulations, 64 
FR at 65415.
    With respect to the reimbursable advance received in 1997, the GOF 
has requested that we find this subsidy non-countervailable under 
section 771(5B)(B)(ii)(II) of the Act, i.e., that this is a green-light 
subsidy. We have determined that we do not need to address the issue 
whether this subsidy is countervailable because the benefit of the 
reimbursable advance during the POI is less than 0.5 percent. As stated 
in the Preamble to the CVD Regulations:

    [W]e will not consider claims for green light status if the 
subject merchandise did not benefit from the subsidy during the 
period of investigation or review. Instead, consistent with the 
Department's existing practice, the green light status of a subsidy 
will be considered only in an investigation or review of a time 
period where the subject merchandise did benefit from the subsidy.

See CVD Regulations, 63 FR at 65388.
    In accordance with section 351.505(d)(1) of the CVD Regulations, we 
are treating this reimbursable advance as a contingent liability loan 
because the GOF has indicated that repayment of the loan is contingent 
on the success of the project. We used as our benchmark a long-term 
fixed-rate loan consistent with section 351.505(a)(2)(iii) of the 
Department's regulations. Since Usinor would have been required to make 
an interest payment on a comparable commercial loan during the POI (see 
French Stainless), we calculated the benefit from the reimbursable 
advance as the amount that would have been due during the POI. Dividing 
these interest savings by Usinor's sales of French-produced merchandise 
during the POI, we find the net subsidy rate to be 0.00 percent ad 
valorem for Usinor. GTS did not receive subsidies under this program.

EC Programs

European Social Fund
    The European Social Fund (ESF), one of the Structural Funds 
operated by the EC, was established in 1957 to improve workers' 
employment opportunities and to raise their living standards. The main 
purpose of the ESF is to make employing workers easier and to increase 
the geographical and occupational mobility of workers within the 
European Union. It accomplishes this by providing support for 
vocational training, employment, and self-employment.
    Like the other EC Structural Funds, the ESF seeks to achieve six 
different objectives explicitly identified in the EC's framework 
regulations for Structural Funds: Objective 1 is to promote development 
and structural adjustment in underdeveloped regions; Objective 2 is to 
assist areas in industrial decline; Objective 3 is to combat long-term 
unemployment and to create jobs for young people and people excluded 
from the labor market; Objective 4 is to assist workers adapting to 
industrial changes and changes in production systems; Objective 5 is to 
promote rural development; and Objective 6 is to aid sparsely populated 
areas in northern Europe.
    The member states are responsible for identifying and implementing 
the individual projects that receive ESF financing. The member states 
also must contribute to the financing of the projects. In general, the 
maximum benefit provided by the ESF is 50 percent of the project's 
total cost for projects geared toward Objectives 2, 3, 4, and 5b (see 
below), and 75 percent of

[[Page 73284]]

the project's total cost for Objective 1 projects. For all programs 
implemented under Objective 4 in France, 35 percent of the funding 
comes from the EC, 25 percent from the GOF, and the remaining 40 
percent from the company.
    According to the questionnaire responses, CLI received an ESF grant 
for an Objective 4 project. The amount received during the POI was a 
portion of a larger ESF grant authorized for CLI in 1996.
    The Department considers worker assistance programs to provide a 
countervailable benefit to a company when the company is relieved of a 
contractual or legal obligation it would otherwise have incurred. See 
section 357.513(a) of the CVD Regulations. Only limited information was 
provided in the questionnaire responses about the purpose of this 
grant; therefore, we are unable to determine whether it relieved CLI of 
any legal or contractual obligations. With regard to specificity, the 
EC has not provided complete information about the distribution of ESF 
grants. In addition, the GOF was unable to show at verification that it 
had reported all ESF grants to Usinor Group companies during the POI.
    Consequently, the Department has decided to use facts available in 
accordance with section 776(a)(2)(A) of the Act. Section 776(b) of the 
Act permits the Department to draw an inference that is adverse to the 
interests of an interested party if that party has ``failed to 
cooperate by not acting to the best of its ability to comply with a 
request for information.'' Since Usinor, the GOF and the EC failed to 
provide complete information to the Department, we determine it 
appropriate to use an adverse inference in concluding that: CLI was 
relieved of an obligation in receiving the ESF grant; the ESF grant is 
specific within the meaning of section 771(5A)(D) of the Act and that 
the benefit was tied to goods produced by CLI. Also, we find the grant 
to be a financial contribution within the meaning of section 
771(5)(D)(i) of the Act. Based on the foregoing, we determine that the 
1998 ESF grant is countervailable within the meaning of section 771(5) 
of the Act.
    The Department normally expenses the benefits from worker-related 
subsidies in the year in which the recipient is relieved of a payment 
it would normally incur. See CVD Regulations, 63 FR at 65412. Dividing 
the amount received by CLI in 1998 by CLI's 1998 sales of French-
produced merchandise yields a net subsidy rate of 0.00 percent ad 
valorem for Usinor. GTS did not benefit from ESF funding during the 
POI.

II. Programs Determined Not To Be Countervailable

GOF Programs

A. 1994 Purchase of Power Plant for Excessive Remuneration
    The Department initiated an investigation of this program prior to 
the issuance of the final determination of French Stainless. This 
program was subsequently found to be not countervailable in French 
Stainless.
B. GOF Conditional Advance on New Steel Development
    Usinor received an interest-free conditional advance from the GOF. 
This advance was provided through the Ministry of Industry to support a 
project aimed at developing a new type of steel for use in the 
production of catalytic converters. Since the GOF conditional advance 
is for a project aimed at developing a new type of steel which does 
fall within the scope of this proceeding, we find that this program is 
tied to non-subject merchandise and not countervailable with respect to 
this investigation only.

III. Other Programs

A. Electric Arc Furnaces

    In 1996, the GOF agreed to provide assistance in the form of 
reimbursable advances to support Usinor's research and development 
efforts regarding electric arc furnaces. The first disbursal of funds 
occurred on July 17, 1998. Repayment of the reimbursable advances will 
begin on July 31, 2002.
    Since these advances may someday be repaid, we are treating them as 
contingent liability loans. Section 351.505(d)(1) of the CVD 
Regulations. Under the methodology specified in the Department's new 
regulations, the benefit occurs when payment would have been made on a 
comparable commercial loan. Section 351.505(b) of the CVD Regulations. 
As stated in French Stainless, Usinor would make interest payments on 
its long-term loans on an annual basis and such a payment schedule 
would not be considered atypical of general French banking practices. 
See French Stainless, 64 FR at 30780. Accordingly, we have assumed that 
a payment on a comparable commercial loan taken out by Usinor at the 
time of this reimbursable advance would not be due until the year 1999.
    Given that no payment would be due during the POI, we determine 
that there is no benefit to Usinor from these reimbursable advances 
during the POI. Consequently, we have not addressed whether this 
reimbursable advance is countervailable.

B. Post-1991 SODIE Advances

    As discussed in the ``Case History'' section of this notice, the 
decision to investigate post-1991 SODIE advances was made at a late 
date in this investigation. Because of this, we were not able to seek 
clarification of the information supplied in the GOF and Usinor 
responses. Therefore, we are not making a determination on the 
countervailability of the post-1991 SODIE advances in this 
investigation. If this proceeding results in a countervailing duty 
order, we will examine the post-1991 SODIE advances in an 
administrative review, if requested. See Comment 16 below.

IV. Programs Determined To Be Not Used

    Based on the information provided in the responses and our findings 
at verification, we determine that the responding companies did not 
apply for or receive benefits under the following programs during the 
POI:

GOF Programs

A. Shareholders Guarantees
B. Long-Term Loans From CFDI

EC Programs

A. Resider and Resider II Program
B. ECSC Article 54 Loans
C. ECSC Article 56(2)(b) Redeployment/Readaptation Aid
D. Grants From the European Regional Development Fund (ERDF)

Interested Party Comments

Comment 1: Treatment of GTS

    The petitioners argue that the Department's preliminary decision to 
treat GTS as separate from Usinor was unreasonable, inconsistent with 
past Department practice and contrary to law. The petitioners maintain 
that GTS should continue to be treated as part of the Usinor group, 
along with the other two producers of subject merchandise (i.e., CLI 
and Sollac), with all receiving a single subsidy rate for the Usinor 
group.
    The petitioners base this on their claim that the Usinor group was 
and remains fully vertically integrated, with ownership of raw 
materials, basic production facilities, steel processing operations, 
service centers, marketing arms and distribution services fully 
consolidated. Furthermore, the petitioners argue that calculating a 
single subsidy rate for the group is

[[Page 73285]]

consistent with past practice. The petitioners state that in French 
Certain Steel, French Bismuth, and French Stainless, the Department 
treated the Usinor group, not the individual group producers, as the 
relevant respondent; consequently, GTS' subsidies were included in the 
Usinor numerator and its sales were included in the Usinor denominator.
    The petitioners argue that despite Usinor's reduction of its 
indirect ownership interest in GTS below the 50 percent level in 1996, 
the reasons for approaching Usinor as a group have not changed; namely: 
(1) GTS and Usinor share common marketing and transportation services 
which provide a vehicle for the transmittal of subsidies and the 
potential for export shifting should the Department assign different 
rates, and (2) GTS does not have audited financial statements for all 
of the years that the Department would require in order to conduct an 
analysis leading to a separate subsidy rate.
    The petitioners dispute the Department's application of its cross-
ownership regulation in the Preliminary Determination. The petitioners 
maintain that the relevant regulation is 19 CFR. 351.525(b)(6)(iii) 
which states that if a subsidy is received by a holding company ``the 
Secretary will attribute subsidies to the consolidated sales of the 
holding company and its subsidiaries.'' Additionally, the petitioners 
maintain that Usinor and GTS do not cross-own each other. Instead, 
Usinor has one-way partial ownership of GTS.
    Finally, even if the cross-ownership regulation does apply, the 
Department should still treat GTS as part of the Usinor group, in the 
petitioners' view. The petitioners point to Certain Cold-Rolled Flat-
Rolled Carbon-Quality Steel Products from Brazil, 64 FR 53332 (July 26, 
1999) (Brazil Carbon Plate) in which the Department found cross-
ownership between two companies when one company owned only 49.8 
percent of the other.
    Moreover, the petitioners argue that Usinor effectively controls 
GTS because: (1) Usinor's 48.31 percent ownership interest in GTS far 
exceeds any other owner, (2) the next largest shareholder, Saarstahl 
with 32.14 percent indirect ownership interest in GTS, is in bankruptcy 
and its shares can only be voted on by the bankruptcy trustees, and (3) 
Usinor, with three of the eight GTS Board members, controls GTS' Board 
of Directors. Additionally, the petitioners point out that the 
Department learned at verification that Dillinger controls GTS. The 
petitioners argue that this control by Dillinger is not inconsistent 
with Usinor's control of GTS since Usinor is the largest shareholder of 
Dillinger's parent company, DHS. Furthermore, the petitioners argue 
that the Chairman of both DHS and Dillinger Supervisory Boards is a 
representative of Usinor and that Usinor's presence on DHS's and 
Dillinger's Supervisory Board gives Usinor considerable power.
    The respondents disagree with the petitioners that the Department 
should treat GTS as if it were still part of the Usinor group. The 
respondents maintain that under section 351.525(b)(6)(iii) of the CVD 
Regulations (relating to holding companies), Usinor's subsidies should 
not be attributed to GTS because it is not included in Usinor's 
consolidated holdings. Instead, the Department properly looked to 
section 351.525(b)(6)(ii) of the CVD Regulations, (relating to cross-
ownership) to determine whether any subsidies should be attributed to 
GTS as a result of cross-ownership between GTS and Usinor. The 
respondents argue that the Department correctly concluded that there is 
no cross-ownership between GTS and Usinor since Usinor cannot control 
or direct GTS' assets in essentially the same manner it could its own.
    The respondents argue that the record is clear that Usinor does not 
have any direct interest in GTS or Dillinger (GTS' parent company), and 
only a minority interest in DHS (Dillinger's parent company). The 
respondents argue that verification confirmed that Usinor cannot use or 
direct the assets of DHS given its minority shareholding, the power 
accorded to labor on DHS' Supervisory Boards, and that all the seats on 
DHS' Management Board are held by employees. The respondents explain 
that Usinor's role in GTS is further attenuated and that Dillinger 
directs the individual assets of GTS. Therefore, the respondents 
maintain that cross-ownership does not exist, and the Department cannot 
attribute Usinor's subsidies to GTS.
    Dillinger rejects petitioners' argument that the Department should 
continue to treat GTS as part of the Usinor group based on the fact 
that GTS was part of the Usinor group during the French Certain Steel 
investigation. Dillinger points out that in the POI of the instant 
proceeding, GTS is no longer consolidated in the Usinor group's 
financial statements. Additionally, Dillinger points out that the 
Department has promulgated new regulations which mandate that the 
Department treat GTS as a separate company.
    Dillinger also rejects petitioners' argument that internal 
transfers and shared marketing services within the Usinor group provide 
a vehicle for the transmittal of subsidies. Dillinger states that GTS 
is no longer a consolidated member of the Usinor group so this argument 
is not relevant. Furthermore, Dillinger argues that petitioners' 
argument was not accepted by the Department in French Certain Steel nor 
has it been adopted in subsequent cases. Dillinger also rejects the 
petitioners' argument that the Department does not have audited 
financial statements for GTS for all of the years that the Department 
would require in order to conduct an analysis leading to a separate 
subsidy rate. Dillinger argues that this is not true and that the 
petitioners have not identified a single piece of missing information 
that the Department would need to calculate a separate rate.
    Dillinger argues that the Department should continue to calculate a 
separate rate for GTS since the Department's new regulations at 19 CFR 
351.525(b)(6)(iv) require a finding of cross-ownership in order to 
attribute subsidies. Dillinger maintains that there is no cross-
ownership between the two companies because: (1) Usinor only has a 
minority ownership interest in DHS, (2) Usinor does not have ``golden 
share'' in DHS, and (3) Usinor's indirect ownership interest is matched 
by the combined ownership of Saarstahl and the Government of Saarland. 
Furthermore, Dillinger argues that Usinor's large minority ownership 
interest in DHS is irrelevant because the DHS General Assembly requires 
at least a 70 percent majority for approval. Therefore, Dillinger 
points out that Usinor's ownership interest does not come close to the 
level that would enable it control DHS, Dillinger, or GTS.
    Lastly, Dillinger argues that petitioners' argument that Usinor has 
a dominant presence on the GTS Board of Directors is irrelevant. 
Dillinger points out that all shareholder representatives on GTS' Board 
of Directors are elected by Dillinger. Dillinger points out that the 
fact that three of the eight directors elected by Dillinger happen to 
be representatives of Usinor is merely a business decision made by 
Dillinger based on its prior affiliation with that company.
    Department Position: Although the petitioners have raised several 
valid concerns about treating GTS as separate from Usinor, we have 
examined this matter closely and concluded that, on balance, the facts 
of this case support calculating separate subsidy rates for Usinor and 
GTS.
    At the outset, we note that we do not share the petitioners' view 
that Section

[[Page 73286]]

351.525 (b)(6)(iii) (regarding holding companies) is the relevant 
provision for deciding how to attribute subsidies in this case. 
Although Usinor was a holding/parent company during the POI, GTS was no 
longer a consolidated member of the Usinor group and GTS' sales were 
not reported in Usinor's consolidated sales. Thus, subparagraph 
(b)(6)(iii) does not lead us to attribute Usinor's subsidies to GTS. 
Instead, we believe that the applicable regulation is Section 
351.525(b)(6)(ii), which addresses situations involving cross 
ownership.
    In applying this subparagraph, the petitioners have asked that we 
take into account two types of concerns. First, because Usinor is a 
vertically integrated company and because certain services are shared 
among Usinor companies, including GTS, they should be viewed as a 
single company. Second, although Usinor is not the majority owner of 
GTS, it should be viewed as controlling GTS. We address these points in 
turn.
    The petitioners are correct that both GTS and Usinor, as producers 
of subject merchandise, share service centers, marketing arms, and 
channels of distribution. GTS makes a certain number of its French 
sales through a subsidiary of Sollac and some of its U.S. sales to an 
importer which is also owned by Sollac. However, we reviewed these 
transactions carefully at verification and found no indication that 
they were not at arm's length. Therefore, we found no basis to conclude 
that subsidies were transmitted from Usinor to GTS (or vice versa) as a 
result of GTS using Usinor affiliates for these services.
    To the extent that the petitioners rely on the Department's 
decision ``to collapse'' respondents in the Affirmative Countervailing 
Duty Determination and Final Determination of Sales at Less Than Fair 
Value: Certain Pasta From Italy and Turkey, 61 FR 30288, 30308 (June 
14, 1996) (Italy Pasta) as the basis for treating Usinor and GTS as a 
single company, we note that Italy Pasta predates the current 
regulations. We also are not persuaded by the precedents involving the 
Usinor group. Until 1996, GTS' results were consolidated in the Usinor 
Group. Therefore, even under our current regulations, Usinor's 
subsidies would be attributed to GTS and a single CVD rate would be 
calculated. With respect to French Stainless, which had a 1997 POI, 
GTS' sales were not included in Usinor's sales because GTS was no 
longer included in Usinor's consolidated results.
    Regarding Usinor's alleged control of GTS, as noted above, Usinor 
indirectly owned 48.75 percent of GTS during the POI. Because this 
level of ownership is close to the majority ownership required to find 
cross ownership, we have examined closely whether Usinor controls GTS 
directly, or indirectly through its ownership position in DHS. In 
analyzing whether two companies should be treated as one for purposes 
of calculating a countervailing duty rate, we believe that the control 
analysis undertaken in connection with subparagraph (b)(6)(ii) should 
identify situations where the ``interests of these two corporations 
have merged to such a degree that one corporation can use or direct the 
individual assets (or subsidy benefits) of the corporations in 
essentially the same ways it can use its own assets (or subsidy 
benefits).'' See the Preamble to the CVD Regulations (63 FR at 65401).
    In this connection, the petitioners have pointed to Brazil Carbon 
Plate, where the Department found cross ownership although the major 
shareholder held less than a majority ownership position. We note that 
the facts in this case differ from those in the Brazil case. In Brazil 
Carbon Plate, one shareholder directly held 49.8 percent while the 
remaining shareholders were numerous (i.e., more than 10) and each held 
a small ownership interest percentage with no one shareholder coming 
close to controlling one-quarter of the shares that the main 
shareholder controlled (64 FR at 53334). In the instant proceeding, 
Usinor's ownership interest is indirect (via DHS) and there are only 
three other shareholders in DHS, two of which are affiliated and 
together match Usinor's ownership interest. Specifically, while 
Usinor's ownership interest in DHS is unquestionably large, it is 
matched by two affiliated shareholders, SAG Saarstahl AG at 33.75 
percent and Government of Saarland at 15 percent.
    We have also considered whether Usinor controls GTS via control 
over its Board of Directors and its parent companies, Dillinger and 
DHS. First, we do not believe that Usinor controls GTS Board of 
Directors, notwithstanding the fact that Usinor has three of the eight 
representatives on GTS' current Board. According to the information we 
received, Usinor cannot control the GTS Board because all Board members 
are selected by Dillinger, and there is no indication that Usinor has 
guaranteed ownership of these three seats. Dillinger has stated that 
its decision to have Usinor representatives on GTS' Board was a 
business decision based on their knowledge of the industry.
    Second, we find that Usinor does not control Dillinger, 
notwithstanding the fact that Usinor is the largest shareholder of 
Dillinger's parent company, DHS. We recognize, in certain situations 
and in certain countries, that a large minority interest such as 
Usinor's interest in DHS could lead a finding of control by that 
shareholder. However, because DHS and Dillinger are German companies in 
the coal, iron and steel sector, they are governed by laws which limit 
the shareholders' ability to control a company. In the case of DHS and 
Dillinger, information on the record shows that the day-to-day 
operational decisions and long-term business decisions concerning DHS 
and Dillinger are made by DHS's and Dillinger's Supervisory and 
Management Boards, and Usinor did not and could not control these 
decision-making bodies given its ownership interest during the 
POI.<SUP>2</SUP>
---------------------------------------------------------------------------

    \2\ Because more specific information concerning the types of 
decisions made by both Dillinger and DHS's Supervisory and 
Management Boards is business proprietary, the Department cannot 
discuss them here.
---------------------------------------------------------------------------

    During the POI, Dillinger's Supervisory Board consisted of 15 
members, three of which were Usinor company representatives. Given that 
Supervisory Board decisions require a 50 percent majority and Usinor 
had only three representatives on this Board, it was impossible for 
Usinor to control Dillinger's Supervisory Board. Additionally, the 
Department notes that laws governing the membership of Dillinger's 
Supervisory Board require an equal number of labor and shareholders' 
representatives. Given this legal requirement, Usinor's minority 
indirect ownership interest could not enable it to gain a significant 
presence on the Supervisory Board to control decision making. With 
respect to Dillinger's Management Board, we note that it consists of 
employees from DHS and Dillinger. Therefore, Usinor does not control 
the Dillinger's Management Board.
    Similarly with respect to DHS, resolutions requiring approval of 
DHS' General Assembly of Shareholders (which includes the election of 
the Supervisory Board members) require 70 and 90 percent majorities. 
DHS' Supervisory Board requires a 50 percent majority for the approval 
of decisions, and Usinor holds only three out of 21 seats on this 
Board. Like Dillinger's Management Board, DHS' Management Board is made 
up of employees.
    Based on all the information regarding Usinor and its ability to 
direct or control GTS, we have concluded, on balance, that such control 
does not exist. Therefore, we have determined that

[[Page 73287]]

cross ownership does not exist between Usinor and GTS.

Comment 2: 1996 Transfer of Usinor's Ownership Interest in DHS Should 
Not Be Treated as a Spin-Off of GTS

    The respondents argue that the Department erroneously applied its 
change-in-ownership methodology to the 1996 partial reduction of 
Usinor's ownership interest in DHS. The respondents maintain that this 
transaction was not a sale or transfer of GTS because no GTS shares 
changed hands and, therefore, it should not be treated as a spin-off of 
GTS. The respondents explain that the fact that the transaction had the 
effect of reducing Usinor's indirect beneficial interest in GTS was an 
incidental result of the transaction, not the focus.
    The respondents point out that the Department has made clear that 
it will not apply its change-in-ownership methodology to every 
transaction that affects the ownership of a productive unit. The 
respondents state that in Final Affirmative Countervailing Duty 
Determination: Stainless Steel Plate in Coils from Italy, 64 FR 15508, 
(March 31, 1999) (Italian Plate), the Department declined to perform 
its change-in-ownership methodology to a transaction involving the 
sale/transfer of indirect beneficial interests of the Italian 
respondent, AST, because the ownership interest was relatively small 
and so remote from the company upon which the subsidies were conferred. 
The respondents argue that Usinor's 1996 transaction is similar to the 
Italian one in that in both cases, the productive units (GTS and AST) 
were not involved in the transaction and the exchange occurred two 
levels up the corporate chain from the productive unit.
    Additionally, the respondents argue that the Department's practice 
and regulations preclude attributing subsidies to GTS as a consequence 
of the 1996 transaction because the transfer of shares involved DHS, a 
German company upon which no alleged subsidies involved in this 
investigation were conferred. The respondents argue that the 
Department's regulations at 19 CFR 351.525(b)(7) do not permit the 
attribution of subsidies across borders. Therefore, they maintain it is 
impossible for Usinor's subsidies to be attributed to GTS through 
Usinor's transfer of shares in DHS, a German company.
    The petitioners take issue with the respondents' claim that German 
ownership of GTS' stock somehow relieves GTS' production of 
countervailable French subsidies. The petitioners argue that the 
subsidies in question were provided to French steel production which 
included GTS. The petitioners argue that the real issue is whether 
Usinor's reduction of its ownership interest in DHS in 1996 leads to 
reallocation of the subsidies received by GTS. The petitioners believe 
that there should be no reallocation of subsidies as a result of this 
transaction since the respondents have contended that nothing 
substantive really happened as a result of this transaction.
    The petitioners object to the respondents' application of the 
transnational rule because the petitioners believe that it is not 
applicable here as it only deals with initial bestowal of subsidies not 
attribution. The petitioners point out that even if the transnational 
rule applies, it does not apply to subsidies tied to French production 
which are the only subsidies at issue in this case. Finally, the 
petitioners note that if the respondents' application of the 
transnational rule is correct, then companies could insulate their 
subsidiaries from all countervailing duty liability by setting up their 
ownership in foreign holding companies.
    Department Position: We disagree with the respondents that we 
erroneously applied our change-in-ownership methodology to the 1996 
reduction of Usinor's indirect interest in GTS. For this final 
determination, the Department has revised its treatment of the 
subsidies received by GTS when it was part of the Usinor Group by 
assigning to GTS its pro rata share of Usinor's subsidies (based on 
GTS' sales/assets as a percentage of Usinor's sales/assets). Since 
those subsidies have been attributed to GTS and a portion of GTS has 
been sold, it is appropriate to apply our change-in-ownership 
methodology to the 1996 transaction in the instant proceeding.
    We believe that the situation can be distinguished from that in 
Italian Plate. First, the net result of this transaction resulted in 
the termination of GTS' consolidation in Usinor's financial results. 
Second, the seller (Usinor) was owned, in part, by the Government of 
France. Therefore, Usinor's sale of its DHS shares resulted in the 
disposition of a portion of GTS to private parties. This is in contrast 
to Italian Plate where minority private owners were selling their 
interests in AST's parent companies to other private companies.
    We further disagree with the respondents that the Department's 
regulations preclude the attribution of subsidies to GTS as a 
consequence of the 1996 transaction because Usinor's sale of its DHS 
shares was to a foreign company. While the Department's regulations 
require it to attribute subsidies to products produced within the 
territory of the subsidizing government, GTS is located in France (see 
19 CFR 351.525(b)(7)). Therefore, even if those subsidies flowed from 
Usinor to the German company which purchased Usinor's DHS shares, our 
attribution rules require that the subsidies be attributed to DHS' 
French production, i.e., GTS.

Comment 3: The Department Must Correct the Misapplication of its 
Change-in-Ownership Methodology to the 1996 Transaction

    The respondents suggest that if the Department were to continue to 
treat the 1996 DHS transaction as a spin-off of GTS, then it must 
correct the misapplication of its change-in-ownership methodology in 
the Preliminary Determination. The respondents argue that in the 
Preliminary Determination the Department treated the transaction as 
involving 100 percent of GTS' assets rather than a partial spin-off of 
a small portion of Usinor's indirect beneficial interest in GTS, as 
stipulated in the GIA (58 FR at 37273). In the GIA, the respondents 
point out that the Department stated that pass-through of subsidies 
must correspond to the extent of the interest being transferred. The 
respondents do not agree with the Department's analysis that Usinor's 
reduction of its interest in DHS was ``akin to a total sale since 
Usinor no longer had the ability to control or direct GTS' assets as 
its own'' (see Memorandum from the Team to Susan Kuhbach regarding the 
Ministerial Error Allegation for Preliminary Determination (September 
22, 1999)). The respondents believe that the methodological rationale 
advanced in the Preliminary Determination is not consistent with the 
Department's decision not to require change in control before applying 
its change-in-ownership methodology.
    The respondents argue that it is impossible for the Department to 
treat the 1996 DHS transaction as a 100 percent transfer of GTS when 
the Department treated the 1992 sale of Sollac's ownership interest in 
GTS as a partial spin-off. Additionally, the respondents argue that 
methodology applied to the 1996 transaction in the Preliminary 
Determination is inconsistent with the Department's repayment 
methodology since the calculation provided for 100 percent of GTS' 
assets as transferred but repayment could have been only been based on 
the price paid for the assets actually

[[Page 73288]]

transferred which was 21.25 percent of DHS' shares. Therefore, the 
respondents argue that if the Department continues to treat the 1996 
transaction as a spin-off involving GTS, it should revise the assets to 
reflect the percentage that was actually transferred.
    The petitioners take issue with the respondents' suggestion that 
because only 21 percent of DHS was transferred, a maximum of 21 percent 
of the subsidies provided to GTS' production can be countervailed. The 
petitioners point out that the respondents' argument is based on the 
incorrect assumption that no subsidies are attributable to GTS' 
production prior to the 1996 transaction. The petitioners contend that 
the real question is to what extent, if any, is the 21 percent of the 
subsidies repaid or reallocated. The petitioners further argue that the 
1996 transaction does not change the fact that 79 percent of the 
previously allocated subsidies inhere in GTS' assets and, therefore, 
are attributable to GTS.
    The petitioners do not believe that the methodology used in the 
Preliminary Determination to attribute subsidies to GTS as a result of 
the 1996 transfer is inconsistent with its past practice. The 
petitioners argue that once the Department decided that the result of 
the 1996 transaction required it to calculate a separate rate for GTS, 
it first correctly determined the total amount of the subsidies 
potentially allocable to GTS' production.
    The petitioners point out that the second step of the change-in-
ownership calculation requires it to determine the amount of subsidies 
repaid or reallocated by the partial sale. The petitioners believe that 
the Department correctly applied its methodology by determining that 
this transaction could have only resulted in the repayment/reallocation 
of a maximum of 21 percent of the subsidies since only 21 percent of 
the assets were transferred. The petitioners reject the respondents' 
claim that there is inconsistency or unfairness in the Department's 
application of its change-in-ownership methodology in this transaction.
    Department Position: We have revised the calculation used in the 
Preliminary Determination. Beginning with the 1992 transaction and 
continuing with the 1996 transaction, we have determined the subsidies 
allocable to GTS (in accordance with the spin-off methodology described 
in the GIA). Then, as ownership of GTS transferred out of Usinor, we 
applied our change-in-ownership methodology to measure the amount of 
subsidies that were reallocated to Usinor. This approach was 
necessitated by our decision that GTS should be treated as separate 
from Usinor during the POI. In short, because GTS' sales were no longer 
included in the Usinor Group's sales, it was incorrect to include 
subsidies attributable to GTS (because it was part of the Usinor Group 
when these subsidies were received) as Usinor's subsidies.
    We disagree that this revision from the Preliminary Determination 
conflicts with the position taken by the Department in Italian Plate 
regarding changes in control. Specifically, there does not have to be a 
change in control of a company for the Department to apply the change-
in-ownership methodology. However, when a company moves from being part 
of a consolidated group to outside the consolidated group because of a 
change in ownership, it is appropriate to ensure that the proper share 
of subsidies is assigned to the company.

Comment 4: Privatization Should Extinguish Any Previously Bestowed 
Subsidies

    The respondents argue that the circumstances of Usinor's 
privatization compel the Department to find that any previously 
conferred subsidies were eliminated and did not pass through to the 
privatized company. The respondents point out that the URAA directs the 
Department to examine all the circumstances of a privatization to 
determine whether and to what extent subsidies have been extinguished 
or passed through to the private buyer. Similarly, the SAA at 928 
directs the Department to devise an appropriate methodology to 
determine whether and to what extent, the privatization of a 
government-owned firm eliminates any previously conferred 
countervailable subsidies. The respondents argue that the 
countervailing duty law states that a subsidy can only be found where a 
benefit is conferred as the result of a government financial 
contribution. The respondents maintain that the payment of a market 
price for all or part of a previously subsidized entity should 
extinguish previously bestowed countervailable subsidies because the 
purchased entity is acquired at full value and, thus, there is no 
benefit. See 19 CFR 351.503(b)(1). Since Usinor's privatization 
consisted mainly of the sale of shares to the public for fair market 
value by means of international and French public offerings, the full 
value of any previously conferred subsidies was embodied in the 
purchase price and those subsidies were eliminated upon Usinor's 
privatization.
    Additionally, the respondents note that a WTO Dispute Settlement 
Panel recently found in a case involving hot-rolled lead and bismuth 
carbon steel products from the United Kingdom that the Department had 
violated its WTO obligations in determining that the sale of a company 
to private bidders did not automatically extinguish subsidies that the 
company received when it was government owned.
    The petitioners dispute the respondents' claim that Usinor's 
privatization eliminates benefits from pre-privatization subsidies. 
According to the petitioners, this same argument has been repeatedly 
rejected by the Department, the CIT, and Congress. Specifically, the 
respondents argument that there is no benefit after Usinor's 
privatization because the shares were purchased at fair market value is 
misplaced since the Department's obligation with respect to a benefit 
analysis refers to the initial bestowal of the subsides not to a 
competitive benefit received after privatization.
    The petitioners further believe that the respondents have wrongly 
accused the Department of failing to examine all factual circumstances 
as directed by the statute. The petitioners argue that the requirement 
to ``examine all circumstances'' relates to determining whether any 
repayment of subsidies has taken place, not, as respondents 
characterize, whether a competitive advantage has been received. 
Petitioners claim that the respondents' argument would be tantamount to 
a presumption that subsidies do not survive privatization, a 
presumption which the petitioners argue the URAA's change-in-ownership 
provision was enacted to preclude.
    The petitioners argue that the record in the instant proceeding 
fully supports the Department's decision to countervail Usinor's sales 
post-privatization. In support of this, the petitioners point out that 
Usinor is wholly unchanged by the privatization as the privatization 
was merely a stock sale and Usinor has made clear that its management 
did not change in any way after the privatization.
    Lastly, with respect to the WTO report, the petitioners point out 
that this interim report cannot change the clear Congressional mandate 
which expressly overturns Usinor's argument with respect to this issue.
    Department Position: Under our existing methodology we presume 
neither automatic extinguishment nor automatic pass-through of prior 
subsidies in an arm's-length transaction. Instead, our methodology 
recognizes that a change in ownership has some impact on the allocation 
of previously bestowed subsidies and, through an

[[Page 73289]]

analysis based on the facts of each transaction, determines the extent 
to which the subsidies pass through to the privatized company. In the 
instant proceeding, we have relied upon the pertinent facts of the case 
in determining whether the countervailable benefits received by Usinor 
Sacilor pass through to the privatized Usinor and to the productive 
units that have been spun off by Usinor.
    Following the GIA methodology, the Department subjected the level 
of previously bestowed subsidies and Usinor's purchase price to a 
specific, detailed analysis. This analysis resulted in a particular 
``pass-through ratio'' and a determination as to the extent of 
repayment of prior subsidies. On this basis, the Department determined 
that when Usinor was privatized a portion of the benefits received by 
Usinor Sacilor passed through to Usinor and a portion was repaid to the 
government. This is consistent with our past practice and has been 
upheld in Saarstahl AG v. United States, 78 F.3d 1539 (Fed. Cir. 1996), 
British Steel plc v. United States, 127 F.3d 1471 (Fed. Cir. 1997) 
(British Steel), and Delverde, SrL. v. United States, 24 F. Supp. 2d 
314 (CIT 1998).
    Furthermore, Usinor's contention that the sale of Usinor was an 
arms-length, market-valued transaction does not demonstrate that 
previous subsidies were extinguished. Section 771(5)(F) of the Act 
states that the change in ownership of the productive assets of a 
foreign enterprise does not require an automatic finding of no pass 
through even if accomplished through an arms-length transaction. 
Section 771(5)(F) of the Act instead leaves the choice of methodology 
to the Department's discretion. Additionally, the SAA directs the 
Department to exercise its discretion in determining whether a 
privatization eliminates prior subsidies by considering the particular 
facts of each case. See SAA at 928.
    Lastly, with respect to the respondents' and the petitioners' 
comments concerning the recent finding by a WTO Dispute Settlement 
Panel that an arm's-length privatization automatically extinguishes 
prior subsidies received by government-owned firms, the Department 
notes that this was an interim (i.e., preliminary) confidential report. 
As such, it is inappropriate for the parties or the Department to 
comment on it.

Comment 5: Repayment Portion of Change-in-Ownership Analysis

    According to the petitioners, Congress intended that countervailing 
duties be imposed to offset subsidies to production. Since changes in 
ownership do not affect production, the petitioners conclude that they 
should also not affect countervailing duty liability.
    The petitioners distinguish between the subsidies themselves and 
countervailing duty liabilities arising from those subsidies. Citing 
the GIA (58 FR at 37260) where it quotes British Steel Corp. v. United 
States, 605 F. Supp. 286, 294 (CIT 1985), the petitioners state that 
the Department is obligated, when injury exists, to impose duties when 
subsidies have been provided ``with respect to the manufacture, 
production or export . . . of a class or kind of merchandise'' imported 
into the United States. To show that the liability for such subsidies 
is attached to production, the petitioners cite to the same where it 
states, ``if a benefit or advantage is received in connection with the 
production of merchandise,'' that benefit or advantage is a ``bounty or 
grant on production.'' To further demonstrate the linking of 
countervailing duty liabilities to production in a post-URAA case, the 
petitioners cite the Final Results of Redetermination Pursuant to Court 
Remand, Delverde, SrL v. United States, Consol. Ct. No. 96-08-01997, 
aff'd, Delverde, SrL v. United States, 24 F. Supp.2d 314 (CIT 1998) 
where it states:

    Once the Department determines that a ``subsidy'' has been 
provided, it measures the amount of the subsidy, attributes the 
subsidy to the appropriate production . . . Generally speaking, the 
practical results of this system is to link liability for, as an 
example, pasta subsidies to pasta production.''
    The petitioners maintain that after a change in ownership, a 
company will produce at the same cost, in the same volume and with the 
same artificial advantages born of subsidies. This happens, state the 
petitioners, because the profit-maximizing level of price and output 
are unchanged. According to the petitioners, regardless of whether a 
buyer or seller captures the benefit of a subsidy after a change in 
ownership, the buyer still acquires the subsidy-augmented production 
facilities and uses them at the same profit-maximizing level, thus 
leaving the misallocation of resources arising from the subsidies and 
the threat to the companies' competitors unchanged.
    To show that the seller actually captures the benefit of previously 
bestowed subsidies, the petitioners cite a publication by the U.S. 
Department of Agriculture which states that subsidies to farmers have 
created inequities between existing and entering farmers by increasing 
the cost of acquiring land for entering farmers. <SUP>3</SUP> The 
petitioners maintain that even though sellers gain the windfalls from 
subsidies during a change in ownership, the reallocation of 
countervailing duty liabilities back to the sellers is inappropriate. 
First of all, the price paid by a buyer is discounted for the risk 
associated with the countervailing duty liabilities, according to the 
petitioners. In addition, since the seller no longer has control over 
production, the petitioners state that imposing duties on the seller 
would not have the effect of offsetting the artificial advantages on 
production arising from the subsidies.
---------------------------------------------------------------------------

    \3\  U.S. Farm Programs and Agricultural Resources, USDA 
Economic Research Service, Agricultural Information Bulletin No. 614 
(Sept. 1990).
---------------------------------------------------------------------------

    The petitioners further argue that the reallocation/repayment 
aspects of the Department's change-in-ownership methodology amount to 
measuring the effects of subsidies and taking account of events 
subsequent to the bestowal of the same. According to 19 CFR 351.504-
511, the Department should not take into account the effects of 
subsidies and, instead, should measure benefits at the time of 
bestowal.
    Finally, the petitioners take issue with the Department's practice 
of automatically conducting a repayment/reallocation analysis as part 
of its change-in-ownership methodology. According to the petitioners, 
the URAA legislative history makes it clear that such automaticity was 
not intended by Congress where it says that the Department must 
continue to countervail subsidies following a normal (i.e., fairly 
priced) ownership change without lessening or reallocating unamortized 
subsidy benefits unless something else occurs during the transaction 
that ``actually serve[s] to eliminate . . . subsidies.'' See S. Rep. 
No. 103-412 at 92 (1994).
    The respondents emphasize that the petitioners' argument that there 
must be specific evidence of repayment has been considered and rejected 
by the Department in the GIA (58 FR at 37264). In addition, the 
respondents state that there is nothing about the Ugine transactions or 
Usinor's 1995 privatization that would disqualify these transactions 
from being analyzed under the Department's change-in-ownership 
methodology.
    Department Position: The petitioners' main argument is that subsidy 
liabilities are attached to production; therefore, subsidy amounts 
cannot change when production remains unchanged. While we agree that 
subsidies benefit production, that does not require the

[[Page 73290]]

conclusion that subsidies cannot change without changes in production. 
Our rationale for applying repayment calculations as part of our 
change-in-ownership methodology does not pre-suppose that production 
has changed. Rather, our methodology is based on the idea that a 
portion of the purchase price for ownership rights may remunerate the 
seller for prior subsidies.
    To the extent we countervail the portion of the subsidy existing 
after repayment or reallocation, we are executing our mandate ``to 
impose duties with respect to the manufacture, production or export of 
a class or kind of merchandise.'' Our repayment/reallocation 
methodology, as part of our change-in-ownership methodology, has been 
litigated and upheld by the Courts (see Saarstahl AG v. United States, 
78 F.3d 1539 (Fed. Cir. 1996), British Steel plc v. United States, 127 
F.3d 1471 (Fed. Cir. Oct. 24, 1997) British Steel plc v. United States, 
929 F. Supp. 426 439 (CIT 1996) and Delverde, SrL. v. United States, 24 
F. Supp. 2d 314 (CIT 1998).
    We disagree with the petitioners' assertion that the ``automatic'' 
nature of the repayment/reallocation analysis is contrary to the URAA 
legislative history. The legislative history simply says that a change 
in ownership ``does not by itself require the Commerce Department to 
determine that a countervailable subsidy . . . continues to be 
countervailable, even if the change in ownership occurs through an 
`arm's length transaction' '' and that ``the sale of a firm at `arm's 
length' does not automatically extinguish any previously-conferred 
(sic) subsidies.'' See S. Rep No. 103-412 at 92 (1994). To the extent 
our repayment/reallocation methodology does not make any presumptions 
as to whether there will be any repayment/reallocation as a result of a 
change in ownership, there is nothing inherently automatic in its 
nature. Nowhere does the legislative history require that ``something 
else'' must happen, as was argued by the petitioners, before subsidies 
can be extinguished.
    Finally, regarding the petitioners' argument that the repayment/
reallocation calculation amounts to measuring to the effects of 
subsidies, we disagree. Our methodology does not examine the effects of 
a subsidy.

Comment 6: Spin-Offs of Productive Assets

    The petitioners maintain that in the event the Department decides 
to continue applying the repayment portion of its change-in-ownership 
analysis, it should only conduct such analyses for sales of enterprises 
that Usinor has demonstrated to be productive units. In particular, the 
petitioners question whether Usinor has demonstrated that the 
enterprises sold to FOS-OXY and Enterprise Jean Lefebvre in 1994 were, 
at the time of sale, ``productive'' within the meaning articulated in 
the GIA, i.e., capable of generating sales and operating independently. 
See GIA 58 FR at 37268.
    In French Stainless, state the respondents, the Department found 
that Entreprise Jean LeFebvre was a lime production facility and FOS-
OXY an oxygen-generating one. According to the respondents, the 
production of oxygen and lime both constitute production; therefore, 
the treatment of these two companies as ``productive units'' in the 
Preliminary Determination was proper. In any event, the respondents 
point out that the issue is moot in that no subsidies were spun-off 
from Usinor as a result of either of these two transactions because all 
benefits were found to be reallocated to Usinor.
    Department Position: As stated above in Comment 5, we are 
continuing to apply our repayment analysis. However, the application of 
this analysis in this case results in all subsidies potentially spun-
off to Entreprise Jean LeFebvre and FOS-OXY remaining with Usinor. 
Therefore, the respondents are correct that the issue is moot.

Comment 7: Assets v. Sales in Apportioning Subsidies

    The petitioners point out that the Department's practice of using 
relative asset value to apportion subsidies between units in a spin-off 
analysis was born from administrative convenience in the Certain Steel 
investigations to cover situations where a unit does not have 
identifiable sales. See GIA 58 FR at 37268. Prior to Certain Steel, the 
petitioners note that the Department acknowledged the reasonableness of 
apportioning subsidies via relative sales by stating:

    [B]ecause it is the Department's long-standing practice to 
allocate subsidies over the sales of subject merchandise, it is 
reasonable to use the ratio between the sales of [the spun-off unit] 
and the sales of the [parent] . . . as the basis on which we would 
apportion the subsidies.

See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the 
United Kingdom, 58 FR 6237 (July 9, 1993) (UK Bismuth). In situations 
where sales are disproportionate compared to assets, the use of assets 
to apportion subsidies can be distortive in light of the statute's goal 
of offsetting subsidized U.S. sales, state the petitioners. 
Accordingly, the petitioners argue that subsidies should be apportioned 
based on relative sales in situations where both the parent and the 
spun-off unit have sales.
    Acknowledging that the Department expressed a preference for asset 
values over sales values in UK Bismuth, the respondents argue that the 
Department later expressed its clear intention in the GIA to adopt a 
practice of using assets where it stated, ``asset values are the more 
appropriate basis upon which to measure the portion of the subsidy 
which potentially passes through'' (58 FR at 37268). According to the 
respondents, adopting an approach that could be applied consistently 
was a reasonable step by the Department as opposed to using different 
measures from one case to another depending upon the information 
available. In addition, the respondents state that the Department has 
consistently used asset values in other proceedings, see, e.g., French 
Stainless 64 FR at 30776-77.
    Department Position: We agree with the respondents that it is the 
Department's practice and preference to apportion subsidies based on 
assets. In many instances, such as in spin-offs of units that were not 
previously considered to be profit centers, sales values may not be 
available. In using assets to apportion subsidies, we have a measure 
that can be applied in all cases which adds to predictability. 
Moreover, it avoids the situation where the spin off of one productive 
unit in a company which happens to have a sales value would be treated 
differently than the spin off of another productive unit in the same 
company which does not have a sales value. However, we recognize that 
there may be situations where an exception to this rule is necessary. 
As stated in our response to Comment 8 below, information on the record 
does not allow us to calculate a French-only asset value for Usinor for 
any of the years in which spin offs occurred. For details on how we are 
addressing this situation for purposes of this final determination, see 
Comment 8:

Comment 8: French v. Total Usinor Assets

    Should the Department continue to use assets as the basis for 
allocating subsidies between GTS and the Usinor Group, argue the 
petitioners, then it should base the calculation of Usinor's assets 
only on the relevant pool of assets over which the subsidy benefits 
would be applicable, i.e., French assets in this case. The petitioners 
note that this information was requested at verification but not 
provided. Lacking information on Usinor's French assets, the 
petitioners suggest that the Department use sales to allocate the

[[Page 73291]]

subsidies between Usinor and GTS, in particular, Usinor's sales of 
French-produced merchandise net of intra-company transactions.
    The respondents argue that the use of total assets has been the 
Department's practice since the Certain Steel cases where it said in 
the GIA that the potential pass-through of subsidies would be 
calculated by comparing the book value of ``the productive unit sold to 
the book value of the assets of the entire company'' (58 FR at 37273). 
The respondents add that this same methodology of allocating subsidies 
based total assets was used in the French Stainless case.
    Department Position: This is the first time that the question of 
what group of assets to use in allocating subsidies between units under 
our change-in-ownership methodology has arisen as an issue of 
contention. While our prior general statements on the use of assets may 
have referred to ``total assets,'' this is because our basic assumption 
was that for a typical respondent, subsidy benefits would apply equally 
to all assets. However, we acknowledge that the asset values used for 
purposes of apportioning benefits between units as part of our change-
in-ownership methodology should correspond to those assets to which 
subsidies would properly be attributed (i.e., assets in facilities 
located in France). Such an approach is entirely consistent with our 
view that governments subsidize domestic production and not foreign 
production, which has been upheld by the Courts. See Preamble to the 
CVD Regulations (63 FR at 65403); see also Inland Steel Industries v. 
United States, 188 F. 3d 1349, 1360-61 (Fed. Cir. 1999) (where the 
Court held that the Department's presumption that subsidies are tied to 
domestic production on the premise that a foreign government normally 
intends to principally benefit its domestic production ``is eminently 
reasonable'').
    Information on the record of this case, however, does not allow us 
to calculate a French-only asset value for Usinor for any of the years 
in which spin-offs occurred. This information was requested of Usinor 
too late in the proceeding for it to provide. Therefore, for those 
transactions for which French sales values are available for both 
Usinor and the units being spun off, we are using sales to allocate 
subsidies in this case. For those transactions for which French sales 
values are not available, we will continue to use total assets to 
allocate subsidies for purposes of this final determination. Should a 
countervailing duty order be put in place in this case, we will, 
however, pursue French asset values during the course of any 
administrative review that may occur.

Comment 9: Sale of and Buyback of Ugine Shares

    Should the Department continue to calculate repayment as part of 
its change-in-ownership analysis, the petitioners take issue with its 
application to the partial spin-off of Ugine shares that were 
eventually repurchased by Usinor a short time later. If the Department 
allows for the reduction in subsidy benefits in this case via 
repayment, the petitioners argue that an incentive would be created for 
foreign producers to buy and repurchase their productive units in order 
to dissipate their countervailable subsidy benefits. The petitioners 
note that while the amount of repayment with respect to the Ugine 
transactions was small, the concept is important in principle.
    The respondents counter by saying that both the initial sale of 
Ugine shares and their later repurchase by Usinor were legitimate, 
arm's-length transactions. According to the respondents, these were not 
sham or churning transactions, as supposed by the petitioners. Since 
these were legitimate transactions, the respondents maintain that 
application of the Department's change-in-ownership methodology is 
warranted.
    Department Position: We agree with the respondents that there is 
nothing on the record of this case indicating that there is anything 
illegitimate about these transactions. However, because Ugine would 
continue to be consolidated in the Usinor Group, and we did not apply 
our change-in-ownership methodology to the repurchase of Ugine's shares 
by Usinor, application of the change-in-ownership methodology would not 
affect subsidies to the Usinor Group. This is because in any 
reallocation of subsidies from the sale of Ugine's shares, the 
reallocated portion would go to Usinor. However, Usinor's subsidy 
benefits, including the amount reallocated would be attributed to all 
members of the consolidated Usinor Group, including Ugine. Likewise, 
any amount allocable to Ugine would have been attributed to the Usinor 
Group.

Comment 10: The 1995 Privatization of Usinor

    Should the Department continue to apply its repayment methodology 
to privatizations, the petitioners argue that no repayment should be 
found in the 1995 privatization of Usinor. According to the 
petitioners, the ``repayment'' of subsidy benefits to the government 
was not possible in this case since the purchase price for Usinor was 
retained by Usinor, itself, and not passed on to the GOF.
    According to the respondents, the 1995 privatization of Usinor 
involved the sale of shares for cash and no part of the purchase price 
inured to Usinor. The respondents add that Usinor's capital increase, 
to which the petitioners allude, was properly not included among the 
programs to be examined during this investigation because the purchase 
of shares by private investors did not provide countervailable benefits 
to Usinor.
    Department Position: We agree with the respondents that the 1995 
privatization of Usinor was a legitimate transaction for which a 
change-in-ownership calculation is appropriate. All monies paid for 
existing Usinor shares during the privatization process were received 
by the parties holding those shares prior to the transaction, i.e., 
proceeds from the sale of shares held by the GOF were paid to the GOF, 
those from shares held by Clindus (the subsidiary of Credit Lyonnais 
holding Usinor shares) were paid to it. The only monies received by 
Usinor during the privatization process were those it received for the 
sale of new shares in a public offering. The sale by Usinor of new 
shares was like any other private company offering shares as a means of 
raising capital. In such cases, it is proper for the seller (i.e., the 
company itself) to hold on to the proceeds of the sale.

Comment 11: Disposition of Benefits Spun-Off in 1992 GTS Transaction

    Since the 1992 transaction was a share swap that did not push GTS 
outside of the Usinor Group, state the petitioners, this transaction 
should not be viewed as a spin off. Should the Department continue to 
apply a spin-off calculation to this transaction, the petitioners state 
that the distinct benefit stream for the spun-off portion of GTS should 
be properly applied as was not done in the calculations for the 
Preliminary Determination.
    While the 1992 transaction did not result in the loss of control of 
GTS by Usinor, the respondents argue that it was, nonetheless, a 
partial spin-off to third parties. As such, the respondents conclude 
that the Department's treatment of this transaction in the Preliminary 
Determination as a partial spin-off was in accord with its practice 
with respect to partial changes in ownership.
    Department Position: As discussed in the ``Change in Ownership'' 
section of the notice, we have applied our change-

[[Page 73292]]

in-ownership methodology to the 1992 transaction. It is necessary to do 
this because a portion of GTS moved from Usinor to non-Usinor ownership 
and Usinor received payment for that portion of subsidies attributable 
to GTS. Although GTS is not treated as a separate company until 1996, 
we need to account for the 1992 transaction so that the amount of 
subsidies potentially reallocated to Usinor 1996 is commensurate with 
the amount of ownership that has transferred up to time.

Comment 12: Calculation of the Portion of Benefits Spun-Off in 1992 GTS 
Transaction

    Should the Department continue to do a partial spin-off calculation 
with respect to the 1992 GTS transaction, the petitioners argue that it 
must correct its calculation of the portion of Usinor benefits 
potentially being spun-off by virtue of the partial sale of GTS. 
According to the petitioners, the Department should first determine the 
benefit attributable to GTS as a whole, and then multiply that amount 
by the percentage of GTS being sold to determine what, if any, 
reallocation occurs.
    The respondents take issue with the petitioners' proposition that 
subsidies should be attributed to all of GTS' assets, including those 
not spun-off, with respect to the 1992 partial spin-off. According to 
the respondents, under the Department's change-in-ownership methodology 
with respect to partial changes in ownership, the subsidy benefits 
attributable to the portion of GTS that was not sold and remained with 
Usinor do not travel with the sold portion. Rather, the respondents 
claim that those benefits should remain with Usinor and be attributed 
across the consolidated French sales of Usinor.
    Department Response: Given the circumstances of this case, in 
particular the facts that GTS goes through two partial changes in 
ownership prior to the POI and is being treated as a separate company, 
we have performed our calculations as suggested by the petitioners. 
That is, beginning in 1992, we have calculated subsidies attributable 
to GTS based on GTS' share of Usinor's assets in that year. The level 
of the ownership change in 1992 (and also 1996) serves to cap the 
amount of subsidies reallocated to Usinor as a result of the payments 
for GTS. Although only a portion of GTS is sold in each instance (i.e., 
these are partial privatizations) it is necessary to move the full 
amount of subsidies out of Usinor and into GTS because after 1996, GTS 
is separate from Usinor. To follow the respondent's suggestion would 
understate the benefit to GTS.

Comment 13: Allocation Period

    Should the Department continue to find that the 1995 privatization 
of Usinor did not extinguish previously bestowed benefits, the 
respondents argue that Usinor's company-specific calculation of its 
average useful life of assets (AUL) for the POI should be used to 
determine its allocation period. The respondents take issue with the 
decision in French Stainless where the Department for the first time 
rejected a verified, company-specific AUL in favor of one from another 
previous investigation. Following the French Stainless precedent is not 
justified in this case, argue the respondents, because the Preamble to 
the regulations governing this investigation (which differ from those 
governing French Stainless) require the Department to use a company's 
own AUL when it varies from that in the IRS tables by one year or more. 
See 19 CFR 351.524(d)(2)(iii).
    The respondents also point out that the French Stainless decision 
is inconsistent with prior court rulings mandating the use of company-
specific allocation periods based on record evidence which the 
Department has followed consistently until French Stainless (see e.g., 
Italian Plate (64 FR at 15511); Certain Pasta From Italy: Final Results 
of the Second Countervailing Duty Administrative Review, 64 FR 44489, 
44490 (August 16, 1999)). According to the respondents, there is no 
basis for using information that is decades old. Not only has the 
current data been verified as being accurate, the respondents claim 
that its privatization did not change Usinor's AUL nor has Usinor and 
it has not suffered a bankruptcy, instances that petitioners state may 
affect a company's AUL. As for the concern that changing the allocation 
period from one case to another may result in under- or over-
countervailing a subsidy, the respondents state that this is simply not 
the case.
    Finally, the respondents note that the Department has not hesitated 
to apply other parts of 19 CFR 351.524(d) (the section of the CVD 
Regulations specifying the AUL methodology) when they work to the 
detriment of the respondents, such as the use of a new policy for 
calculating discount rates. For example, the use of the new discount 
rates created entirely new benefit streams for Usinor's old subsides, 
state the respondents. The respondents point out that this stands in 
contrast to the rationale in French Stainless of applying an AUL from a 
prior case to previously countervailed subsidies in order to maintain 
consistency. According to the respondents, the Department cannot pick 
and choose which parts of the applicable regulations it will apply.
    The petitioners cite to French Stainless as precedent for 
maintaining the allocation period for a particular subsidy benefit once 
it has been countervailed. To change the allocation period in a future 
segment or proceeding, argue the petitioners, would risk either over-
countervailing or under-countervailing the subsidy. Such a practice, 
point out the petitioners, would also be at odds with the fact that the 
subsidies themselves have not changed.
    The petitioners also point out that the 14-year period used in the 
Preliminary Determination was based on Usinor's own information and 
approved by the CIT during the Certain Steel litigation. See British 
Steel plc. versus United States, 929 F. Supp. 426 439 (CIT 1996). The 
petitioners note that while the regulations require a company-specific 
AUL, they do not mandate the period over which that AUL should be 
calculated. The petitioners' take issue with the information submitted 
by Usinor for the calculation of the allocation period noting that it 
covers only post-bestowal years--a period not ``appropriate'' within 
the meaning of section of the Preamble to the CVD Regulations 
pertaining to company-specific AULs (63 FR at 65397).
    With respect to the respondents' complaint about the change in the 
discount rates affecting the benefit streams, the petitioners state 
that changing a discount rate differs from changing an allocation 
period in that the principal amount allocable to any particular year is 
not affected by a change in the discount rate, but would be when the 
allocation period changes.
    Finally, should the Department contemplate using an allocation 
period other than 14 years, the petitioners maintain that, pursuant to 
19 CFR 351.524(d)(2), it should look to the IRS tables as they are the 
default source for information on the useful life of assets when a 
respondent has not demonstrated a significantly different and non-
aberrational average useful life of assets of its own.
    Department Position: For this final determination, we are 
continuing to allocate subsidies countervailed in prior cases over the 
AUL established in those prior cases consistent with French Stainless. 
See, e.g., French Certain Steel. In so doing, we maintain consistency 
across cases and predictability, and we attach the most relevant period 
possible to allocable subsidies.

[[Page 73293]]

    Since the purpose of calculating an AUL is to determine the 
relevant period over which an allocable subsidy would provide benefits 
to a company, the year of most relevance is the year of receipt. In an 
ideal setting, we would calculate a company's AUL, in accordance with 
our methodology in the CVD Regulations, in each year that an allocable 
subsidy is provided and then allocate each subsidy based on the AUL of 
that year. This is what we do in administrative reviews when new 
allocable subsidies are received during a review period. See, e.g., 
Industrial Phosphoric Acid from Israel: Final Results of Countervailing 
Duty Administrative Review, 64 FR 2879, 2880 (January 19, 1999) (Israel 
IPA).
    The question of what AUL to use becomes particularly acute in 
investigations where allocable subsidies have been received prior to 
the POI because AULs have not been calculated on an on-going basis. As 
a matter of convenience, we have elected as our practice to compute an 
AUL for the POI to determine how far back in time to capture allocable 
subsidies in our analysis. The alternative would be to have respondents 
calculate all of the AULs for years in which allocable subsidies were 
received in the past in the event the AUL for any of those prior years 
would happen to call for the allocation of the subsidies received in 
that year into the POI. This could be extremely burdensome for both 
respondents and the Department, and involve the use of very old 
information. Therefore, we find that calculating an AUL for the POI to 
be reasonable in that it uses information as close in time to the year 
of receipt of prior subsidies without posing a great burden on any 
party.
    An exception occurs for allocable subsidies that have been 
countervailed in prior cases. Since the time period examined in any 
prior case will always be the same as, or earlier than, the POI for an 
on-going investigation, the information on the AUL for a company from a 
prior proceeding will always be as close or closer to the year of 
receipt for allocable subsidies being examined. Therefore, an AUL used 
to allocate a previously countervailed subsidy will be as accurate, or 
even more accurate, than an AUL calculated in an on-going 
investigation. If we were to attach different AULs to the same subsidy 
across proceedings, the possibility would arise of countervailing the 
same subsidy across different products by different amounts in any 
given period. Since a given subsidy intuitively should supply the same 
benefit to a company across all the relevant products during the same 
period of time, we find the method in French Stainless to be 
reasonable.
    Based on the foregoing, we find that the use of an AUL from a prior 
investigation to allocate a previously countervailed subsidy to be 
reasonable and as accurate as possible without being burdensome. With 
respect to the respondents' argument regarding the application of the 
new discount policy described in 19 CFR 351.524, we disagree. The 
changes in the benefit stream brought about by application of a more 
realistic discount rate result in a better measure of the subsidy. For 
the reasons discussed above, using a more current AUL would not 
increase the accuracy of our benefit calculation.

Comment 14: 1991 Equity Infusion

    The petitioners argue that the ``voluminous new evidence'' they 
submitted regarding the nature of and circumstances surrounding the 
GOF's infusion of equity into Usinor in 1991, which has not previously 
been considered by the Department, provides sufficient cause to believe 
that Usinor was unequityworthy and, therefore, that a countervailable 
subsidy had been conferred. The Department, the petitioners contend, 
has violated the statute by refusing to reinvestigate this equity 
infusion.
    Department Position: The Department examined this program closely 
in French Certain Steel and found it to be non-countervailable. Faced 
with largely the same record evidence in French Stainless, the 
Department declined to reinvestigate this program in that proceeding. 
Likewise, we are not investigating this program in this proceeding. See 
Memorandum to Richard W. Moreland from Susan Kuhbach; Petitioners' 
Request for Initiation of 1991 Equity Infusion (July 16, 1999).

Comment 15: Shareholder Advances

    The petitioners argue that the Department correctly found the 1982-
86 shareholder advances to be countervailable subsidies. However, in 
the petitioners' view, the Department wrongly determined that these 
advances were grants in the years of bestowal (1982-86) rather than 
debts whose 1986 conversion to equity conferred a new subsidy in the 
year of conversion. While conceding that the Department's treatment of 
these advances in the Preliminary Determination is consistent with 
French Certain Steel, the petitioners contend that this approach 
results in an undervaluation of the benefit because the benefit stream 
has been pushed back farther in time. The correct approach, according 
to the petitioners, would be to treat the advances as loans in the year 
of bestowal, and then treat the conversion of these loans as a 
distinct, countervailable subsidy in the form of an equity infusion in 
1986. The petitioners make the following points in support of their 
argument:
    First, in French Certain Steel the Department characterized these 
advances as grants in part because there was no written agreement 
between the shareholders and Usinor at the time of the advances 
stipulating the terms of repayment. However, Usinor included these 
advances in the ``liabilities'' section of its audited financial 
statement, the same section in which PACs--which the Department found 
to be loans--where included. There is no such thing as a grant giving 
rise to a liability, and ``it is simply inconceivable that Usinor would 
have chosen to record (or that auditors would have permitted it to 
record) as liabilities funds for which it was not liable.''
    Second, by reporting these advances as liabilities, Usinor clearly 
expected to have to make a repayment of some sort. In fact, in its 
questionnaire responses in French Bismuth, Usinor explicitly referred 
to these advances as ``loans'' which are ``. . . repayable on demand.'' 
Furthermore, in a Usinor-Sacilor condensed balance sheet submitted by 
the respondents in the French Certain Steel investigation, the 
shareholder advances are reported in the category ``long term debt.'' 
Also, Usinor issued the new stock to the GOF in 1986 to avoid taxation 
that would otherwise accompany the direct forgiveness of the 
shareholder advances.
    Third, the Department cannot assume that because no formal 
repayment terms were written, no repayment was expected or required. 
Expert opinions from PriceWaterhouse and others indicate French 
accounting standards and French law clearly establish that where there 
is no written agreement regarding the terms of the repayment of a 
shareholder advance, the ``funds put at the disposal of a company by a 
shareholder cannot be recorded otherwise (sic) than as a liability of 
the company.'' The expert opinion further states that a French company 
may not ``register funds put at the disposal of a company as a grant 
without the written evidence of such intention from the provider.''
    The respondents counter, first, by noting that the petitioners' 
arguments are largely the same as those which the CAFC considered and 
rejected in the petitioners' appeal of French Certain Steel. See Inland 
Steel Indus., Inc.

[[Page 73294]]

versus United States, 188 F.3d 1349 (Fed. Cir. 1999). According to the 
respondents, these arguments include: (1) shareholder advances were 
accounted for by Usinor and Sacilor as loans; (2) the conversion of the 
advances into common stock to avoid taxation demonstrates that they 
were loans; and (3) French law and accounting practice required 
treating them as loans. The ``new evidence'' submitted in this 
proceeding by the petitioners, the respondents contend, in fact 
consists of no new information over that reviewed by the CAFC in 
upholding the Department's determination in French Certain Steel. 
Therefore, these facts cannot ``overcome the preclusive or, at a 
minimum, stare decisis effect'' of the CAFC's finding.
    The respondents further argue that the petitioners arguments in 
this regard become moot if the Department adopts--as the respondents 
argue it should--Usinor's 11-year AUL to allocate subsidies. Under this 
11-year allocation period, the benefits from the 1986 shareholder 
advances would fall outside the POI.
    Department Position: We disagree that, for purposes of calculating 
the correct benefit stream for these subsidies, the Department should 
treat the 1986 conversion of the shareholder advances to equity as a 
separate subsidy event. The respondents are correct in noting that the 
petitioners' arguments are largely the same as those which the CAFC 
considered and rejected in the petitioners' appeal of French Certain 
Steel. Although some additional information regarding this program is 
available on the record of this proceeding, this information does not 
include any substantive new facts that would merit a reevaluation of 
our findings in French Certain Steel.
    In response to the petitioners' arguments, we start by noting the 
following excerpt from the Usinor Sacilor Verification Report in the 
French Certain Steel investigation (at 18).<SUP>4</SUP>
---------------------------------------------------------------------------

    \4\ Memorandum to Susan H. Kuhbach, from Julie Anne Osgood and 
Susan Strumbel; Verification of the Responses of Usinor Sacilor in 
the Countervailing Duty Investigations of Certain Steel Products 
from France (April 9, 1993), Attached to Memorandum to Case File, 
Excerpts Regarding Shareholder advances from Certain Steel Usinor 
Verification Report (December 13, 1999).
---------------------------------------------------------------------------

    Officials stated that the French versions of the companies' 
Annual Reports show the outstanding amounts of the shareholders' 
advance in the liabilities account ``dotation d'actionnaire.'' 
Officials explained that prior to the shareholders'' advance 
designated for SODIs, shareholders' advances were called 
``dotation,'' which when translated means ``grant,'' ``capital 
advance,'' ``grant of capital,'' or ``capital injection.''
    We asked officials why the shareholders' advances received from 
1982 through 1985 were reported under liabilities in the balance 
sheet. Officials explained that when the GOF paid shareholders' 
advances to Usinor and Sacilor, they were reported under liabilities 
because as cash was debited, the corresponding entry was a liability 
account. We also asked why the receipt of shareholders' advances was 
not originally reported as capital, given that they ultimately were 
converted to common stock. Officials explained that recording 
shareholders' advances under ``dotation d'actionnaire'' suggested, 
essentially, that the shareholders' advances were designated to 
become common stock rather than income. In 1986, when shareholders' 
advances were received to fund the SODIs, officials explained that 
they were placed under the account ``avance d'acctionnaire,'' 
indicating an ``advance of funds'' or ``loan.''

    Several points are clear from the Usinor officials' above 
statements. First, at the time of receiving the shareholder advances, 
company officials expected that those funds would be converted into 
equity rather than repaid in cash or in some other more liquid form of 
reimbursement.
    Second, Usinor officials perceived these shareholder advances as 
uniquely different from other sources of funds the company received, 
including shareholder advances for the SODIEs program, and signaled as 
much by including the advances in a specially designated category 
(``dotation'') indicating they were grants of capital. It is likewise 
telling that these shareholder advances are in a category entirely 
separate from the company's ``financial debts'' and ``operating 
debts.'' Contrary to the petitioners'' assertion, the ``PAC'' loans are 
included in the ``debts'' category of both Usinor and Sacilor's 1985 
balance sheets, which is a distinctly separate category from 
shareholder advances.
    Although the petitioners are correct that shareholder advances were 
reported under the heading ``long term debt'' in the Usinor-Sacilor 
condensed balance sheets, we do not find this information conclusive. 
The condensed balance sheet is clearly meant to be a summary of Usinor-
Sacilor's combined asset and liability accounts, and its summary format 
does not supersede the more precise and specific breakout of accounts 
provided in the annual reports. We note, for example, that in the 
condensed statement, the PACs (i.e., loans with special 
characteristics) comprise part of the ``total equity'' accounts whereas 
in the detailed balance sheets these loans are categorized as 
``debts.''
    Third, as Usinor officials implied, recording these advances as 
``liabilities'' was necessitated by the basic tenets of double-entry 
bookkeeping. An infusion of cash into a company is recorded in an 
accounting system by means of two entries: one ``on the left side'' of 
the balance sheet (a debit to the cash account), and one ``on the right 
side'' of the balance sheet (in this case, a credit to shareholder 
advances). The petitioners are incorrect in their assertion that a 
grant cannot involve an entry in the ``liabilities'' category of the 
company's accounts. A cash infusion in the form of a grant to Usinor 
would increase the value of assets, which would have to be matched by a 
corresponding increase in the value of either the equityholders' or the 
debtholders' stake in the company. However, as evidenced by the very 
financial statements cited by the petitioners, both debt and equity in 
Usinor/Sacilor's financial statements are included in the ``passif'' 
(liabilities) category. A cash infusion in the form of a loan would 
have the same effect on the company's assets and ``liabilities'' 
accounts as a grant infusion. Therefore, the fact that the shareholder 
advances are recorded as a liability is irrelevant to the issue of 
whether an infusion is a grant or a loan.
    With regard to the petitioners' expert opinion from PriceWaterhouse 
on French accounting and law, we note that the Price Waterhouse opinion 
states that a shareholder advance must ``become part of the company's 
liability and must be recorded as a debt.'' The evidence on the record, 
however, flatly refutes the later portion of this statement. In neither 
the Usinor or Sacilor balance sheets are these shareholder advances 
included in the debt category. And the Auditor's Report for these 
statements makes no indication that the reporting of these advances is 
incorrect or misleading.
    Finally, our comments above notwithstanding, the meaning of 
shareholder advances according to French accounting standards is 
ultimately irrelevant to how we calculate the benefit from these 
subsidies in this instance. Under the Department's established 
methodology, this program is properly treated as a grant in the year of 
receipt because, for as long as these funds were considered to be 
shareholder advances, there was no expectation of a: (1) repayment of 
the grant amount, (2) payment of any kind stemming directly from the 
receipt of the grant, or (3) claim on any funds in case of company 
liquidation. See the GIA (58 FR at 37254).

[[Page 73295]]

Comment 16: SODIEs

    In 1983, Usinor and Sacilor established regional development 
subsidiary companies, subsequently to be known as SODIEs, to promote 
the retraining of redundant steelworkers. From 1983 through the mid-
1990s, Usinor provided funds to the subsidiary SODIEs which, in turn, 
loaned these funds to local enterprises providing the worker 
retraining. Starting in 1986, the GOF agreed to provide to the SODIEs 
(through Usinor) additional funds matching the amount of Usinor's 
contribution. In return, Usinor agreed to expand the coverage of its 
SODIEs into other depressed regions of France. In French Certain Steel, 
the Department determined that these GOF contributions were not 
countervailable because they represented the GOF's share of the SODIE 
program and were used only for GOF purposes, not to support Usinor's 
steel operations. We further found that the GOF's contributions did not 
relieve Usinor from any costs or obligations it would otherwise have 
been required to incur.
    The petitioners argue that the Department should find the post-1991 
payments from the GOF to Usinor in support of the SODIES to be 
countervailable subsidies. First, the petitioners argue, the Usinor 
Group (including the subsidiary SODIEs) was entitled to keep full 
repayment (both principal and interest) of the GOF's share of the loans 
that the SODIEs provided to the local entities. This entitlement to 
repayment of the GOF's funds constitutes a grant. Second, the 
petitioners claim that neither the GOF nor Usinor has established that 
the GOF's contributions did not relieve Usinor of certain obligations 
to retrain redundant steelworkers. Finally, with respect to the post-
1991 advances, the petitioners state that the European Commission has 
conceded that the SODIE advances are a financial contribution which 
confers a benefit, as evidenced by the EC's notification of the SODIE 
program to the World Trade Organization (WTO).
    The petitioners also object to the Department's decision not to 
reinvestigate the pre-1992 SODIE contributions by the GOF. (The pre-
1992 contributions were found to be not countervailable in French 
Certain Steel.) According to the petitioners, the Department failed to 
consider whether the GOF's SODIE contributions were ultimately grants 
to Usinor. The petitioners also object to the Department's finding that 
Usinor was not relieved of any obligations by the GOF's SODIE 
contributions.
    The respondents counter, to start, by noting that the Department 
has not reinitiated an investigation into the 1980s SODIE advances and, 
therefore, the petitioners' arguments that the Department should find 
these countervailable are not relevant. With regard to the post-1990 
SODIE payments by the GOF, the respondents state that the petitioners 
have not shown how these are materially different from the 1980s SODIEs 
payments, which the Department has previously found to be not 
countervailable.<SUP>5</SUP> Although there is additional evidence on 
the record of this proceeding, none of it supports a different 
conclusion regarding the countervailability of the program.
---------------------------------------------------------------------------

    \5\ This determination, the respondents note, was subsequently 
upheld by the CIT in Inland Steel, 967 F. Supp. at 1366-68.
---------------------------------------------------------------------------

    Specifically with regard to the petitioners' argument that a 
benefit was conferred on Usinor because it was entitled to repayment by 
the SODIEs of funds provided by the GOF, the respondents state that the 
Department has already considered this fact with regard to the 1980s 
GOF payments and, nevertheless, found that the payments made by the GOF 
do not confer a benefit on Usinor. This is because upon repayment of 
the loan, the funds were simply loaned out again. The respondents also 
state that, in addition to passing the GOF's contributions on to the 
SODIEs, Usinor made its own contributions to the SODIEs that exceeded 
substantially the GOF's contributions.
    Finally, the respondents contend, the EC notification of the SODIE 
program to the WTO does not represent a concession that the GOF's 
payments were a subsidy to Usinor. In fact, the notification states 
that the loans ``are not financed by the State funds but by the Usinor-
Sacilor iron and steel group.'' Rather, the program was notified 
because the GOF was providing assistance to particular regions--
unrelated to Usinor's assistance to steel producing regions--for which 
notification was appropriate.
    Department's Position: On September 21, 1999, just prior to 
verification, the Department formally notified the respondents that it 
was initiating an investigation of the post-1991 GOF advances to Usinor 
under the SODIE program. The decision to initiate was based on 
questions raised by factual information submitted by the petitioners 
regarding the EC's notification of the SODIE program to the WTO, and 
the reporting of the SODIE funds in Usinor's financial 
statements.<SUP>6</SUP> On October 18, 1999, the Department sent a 
questionnaire soliciting information from the respondents and the GOF 
regarding this program.
---------------------------------------------------------------------------

    \6\ See Memorandum to Richard Moreland from Susan Kuhbach; 
Inclusion of Previously Investigated Programs in the Countervailing 
Duty Investigation of French Steel Plate (September 21, 1999).
---------------------------------------------------------------------------

    The Department received questionnaire responses regarding the SODIE 
program from both the GOF and the respondents on November 3, 1999. In 
their respective questionnaire responses, both the GOF and the 
respondents stated that because the respondents did not apply, use, or 
benefit from the SODIE program during the POI, in accordance with the 
questionnaire instructions, no detailed response was required. 
Consequently, neither party provided complete details regarding the 
specificity of the program, or any financial contributions or benefits 
Usinor may have received under this program. The parties did, however, 
provide a general history of, and comments on, the SODIE program and 
the WTO's notification.
    Notwithstanding these general responses to the Department's 
questionnaire, we find that we do not have sufficient information at 
this time to determine whether this program represents a 
countervailable subsidy. In particular, Usinor has claimed that it made 
contributions to SODIE that exceed the GOF's contributions and that 
Usinor loans to SODIE are reclassified as ``risk and losses.'' Without 
further questioning, we are not able to track these amounts in Usinor's 
financial statements. We note that we initiated our investigation of 
the post-1991 SODIE contributions because the data presented in 
Usinor's financial statements did not reflect our understanding of the 
program. Without a full understanding of the amounts contributed by the 
GOF and Usinor, we are not in a position to say whether the post-1991 
advances should be viewed differently from the pre-1992.
    Because an investigation of the post-1991 SODIE advances was not 
initiated in time to solicit adequate, verified information from all of 
the necessary respondents, we have no basis upon which to use adverse 
facts available with respect to this program. Accordingly, we are not 
making a determination on the countervailability of the SODIE program 
in this investigation. Should a countervailing duty order be put in 
place, however, we will solicit information on the post-1991 SODIE 
advances in a future

[[Page 73296]]

administrative review, if one is requested. See 19 CFR 351.311(c)(2).
    We note, moreover, that based on the limited information the 
respondents have submitted, any potential benefits to Usinor during the 
POI from the SODIE program appear to be very small and, therefore, 
would likely have little or no impact on the overall ad valorem subsidy 
rate. See Memorandum to the file, Calculations for Final Determination, 
December 13, 1999.

Comment 17: Foreign Ownership

    The petitioners argue that 19 CFR 351.525(b)(7) makes clear that 
subsidies are allocable to all domestic production regardless of the 
nationality of the owner of that production where it states:

    If the firm that received the subsidy has production facilities 
in two or more countries, the Secretary will attribute the subsidy 
to products produced by the firm within the country of the 
government that granted the subsidy. However, if it is demonstrated 
that the subsidy was tied to more than domestic production, the 
Secretary will attribute the subsidy to multinational production.

Therefore, state the petitioners, any subsidies allocated to DHS will 
be tied to DHS' French production only. The petitioners point out that 
if the Department were to adopt a policy of reducing the level of past 
subsidies in any way in response to a purchase of a company by a 
foreign entity, then governments could shield against countervailing 
duties by selling shares in domestic producers to foreign entities.
    Department's Position: We agree with the petitioners that it is not 
the nationality of the owner of the productive unit that matters; 
rather, it is the nationality of the productive unit, itself, that is 
of consequence. If a unit is cross-owned by a company that receives 
untied subsidies and both are in the same country, we would attribute 
the subsidy benefits to both. For a subsidy to be considered trans-
national and, therefore, not countervailable, it would have to be given 
by a government in one country to a company in a different country. The 
owners of the subsidy recipient are of no consequence in making 
transnational determinations.

Comment 18: Discount Rates

    The petitioners state that in calculating benchmark interest rates, 
the new regulations require the Department to use as a base rate a 
long-term interest rate that would be paid by a creditworthy company. 
The petitioners state that there are a number of possible creditworthy 
rates on the current record and that, of those rates, the Department 
should choose the OECD-published ``Medium Term Credit to Enterprises, 
3-7 years'' (MTCE) rates which are rates that are both long-term and 
rates which would be paid by a creditworthy company.
    The respondents take issue with the petitioners' attempt to 
increase the creditworthy interest rate used in the Department's 
uncreditworthy interest rate calculation. The respondents argue that 
the bond rates selected by the Department in the Preliminary 
Determination are the most appropriate rates to use to match to default 
rates of corporate bond issuers as contemplated by section 
351.505(a)(3)(iii) of the CVD Regulations. The respondents point out 
that the MTCE rates recommended by the petitioners are not appropriate 
because these rates apply to credit that is for a much shorter period 
of time than is typical of private sector bonds. Furthermore, 
respondents believe that the MTCE rates recommended by the petitioners 
do not match with either the bond default rates currently used or with 
the Department's AUL-determined benefit stream. With respect to the IMF 
rates, the respondents point out that they have been previously 
rejected by the Department as unrepresentative of long-term corporate 
borrowing (see French Certain Steel).
    Department's Position: We agree with the petitioners that the 
Department has a variety of creditworthy interest rates on the record 
to select from. In calculating a creditworthy benchmark rate for use in 
years in which Usinor was creditworthy, but did not have a company-
specific interest rate, and for use in constructing uncreditworthy 
benchmark rates for years in which it was not creditworthy, we applied 
the methodology as described in section 351.505(a)(3) of the CVD 
Regulations. This methodology requires the use of a long-term interest 
rate that would be paid by a creditworthy company.
    On the record of the instant proceeding, there are several interest 
rates that could serve as the long-term interest rates that would be 
paid by a creditworthy company, i.e., MTCE and equipment loan rates as 
published by the OECD, cost of credit rates published in the Bulletin 
of Banque de France, and private sector bond rates as published by the 
International Monetary Fund. With respect to the equipment loan rates, 
the cost of credit rates, and the private sector bond rates, the 
Department determined in prior cases that these rates are indicative of 
a creditworthy company's long-term cost of borrowing, see French 
Certain Steel (58 FR at 37314) and French Stainless (64 FR at 30790). 
Although the Department has not previously used the MTCE rates, there 
is no record information indicating that they would be not indicative 
of a creditworthy company's long-term cost of borrowing. In addition, 
there is no evidence on the record of this proceeding indicating that 
any of these rates is more appropriate than the others for purposes of 
constructing a creditworthy benchmark rate. Therefore, for this final 
determination, we are using an average of these creditworthy long-term 
interest rates to calculate a non-company-specific creditworthy 
benchmark rate.
    Contrary to the respondents' argument, the Department's regulations 
require the use of a long-term interest rate, not an interest rate that 
equals the term of a company's AUL or matches the term of the other 
interest rates being used. We did not include the IMF-published line 
60p ``lending rates'' because the Department has determined that these 
interest rates are unrepresentative of the cost of corporate long-term 
borrowing. See French Certain Steel (58 FR at 37315).

Comment 19: Sales Denominators

    The petitioners state that the sales values used by Department in 
its preliminary determination were inflated because they included 
substantial transfers occurring between members of the Usinor Group. 
The petitioners argue that the 1998 Usinor net sales of 9.4 billion 
euros, as reported in its annual report, is a gross amount which 
includes intersegment sales occurring within the Usinor Group and that 
this figure does not represent the sales revenue derived by the Group 
from selling French merchandise to outside parties. Instead, the 
petitioners argue, the correct sales figure is 8.3 billion euros as 
reported in the annual report as total sales (or net sales minus 
intersegment sales).
    The petitioners state that due to the manner in which GTS 
determines its sales revenues, it is impossible to judge whether the 
sales value reported by GTS is legitimate. However, the petitioners 
point out that there was an error in the company's calculations of its 
POI sales revenue as made clear by the GTS verification exhibit 
detailing this calculation.
    The respondents take issue with the petitioners' claim that Usinor 
based its 1998 sales figure of French-produced merchandise on the wrong 
line item in its 1998 Annual Report. Respondents argue that the figure 
accepted by the Department includes sales of French-produced 
merchandise to members of the Usinor Group outside France. This is in 
accordance with Financial Accounting Standard 14 which requires

[[Page 73297]]

exclusion of intercompany sales within France in order to avoid double-
counting of French production. Respondents argue that the line item 
entitled ``intersegment sales'' represents sales from one geographical 
segment to another geographical segment (e.g., from France to the 
United States) for which sales are reported.
    The respondents argue that Usinor's use of the amount in the ``net 
revenue'' column is consistent with the calculation of the French-only 
sales denominator in French Certain Steel. The respondents point out 
that this methodology was also upheld in Court, see Inland Steel 
Industries, Inc., et al, v. United States, 967 F. Supp. 1338, 1368(CIT 
1997) (Inland Steel). The respondents believe that the petitioners have 
no reason and cite no precedent for excluding intersegment sales within 
the Usinor Group. The respondents maintain that these sales are real 
sales carried out under arm's-length conditions. Lastly, the 
respondents argue that most of Usinor's U.S. sales are to affiliates 
and that the petitioners would never contend that any subsidies found 
should not be allocated to these intercompany sales.
    Department Position: We disagree with the petitioners that the 
appropriate net sales amount for Usinor should be net of intersegment 
sales. According to the Interpretation and Application of International 
Accounting Standard for 1998,<SUP>7</SUP> ``intersegment sales'' are 
defined as ``transfers or products or services, similar to those sold 
to unaffiliated customers, between industry segments or geographic 
areas of the enterprise.'' Therefore, since Usinor's intersegment sales 
are similar to those sold to unaffiliated customers, and there is no 
regulatory or statutory requirements to exclude these sales, the 
Department will continue to include them in Usinor's net sales amount 
for the POI.
---------------------------------------------------------------------------

    \7\ Excerpts are found attached to the Memorandum to the file on 
International Accounting Standards of December 1, 1999.
---------------------------------------------------------------------------

    With respect to the petitioners' argument that it is impossible to 
judge whether the sales value reported by GTS is legitimate, we 
disagree. While the manner in which GTS records its sales value is 
unusual, we do not find it to be inherently distortional. Therefore, 
the verified sales value for GTS is appropriate to use in the 
calculations for the final determination. Although GTS made a slight 
error in calculating its reported POI sales value, it is not the error 
alluded to by the petitioners. The ``error'' referred to by the 
petitioners is not an error because the adjustment they said should 
have been done was made in a later stage of the calculation. For more 
information, see the GTS verification report.

Comment 20: FOB Calculation

    The petitioners argue that Usinor's reported FOB adjustment is 
inconsistent with other publicly available data for plate imports from 
France. The petitioners maintain that Usinor understated the FOB port 
adjustment by only including ocean freight in its shipping expenses. 
The petitioners argue that there are other costs such as insurance 
which should have been deducted which Usinor failed to account for in 
its calculations. The petitioners argue that the Department only 
verified that there were no discrepancies with Usinor's reported 
shipping costs, but it did not verify that there were other expenses 
such as insurance which should also be included in the FOB adjustment. 
The petitioners urge the Department to apply a more meaningful and 
realistic FOB port adjustment to Usinor's sales for the final 
determination.
    Additionally, the petitioners argue that the same FOB adjustment 
was used to adjust GTS' French merchandise sales value with no 
indication of whether: (1) GTS was more or less export-intensive than 
the Usinor Group as a whole or (2) GTS' costs for shipping, insurance 
and other items were higher or lower than those of the Usinor Group as 
a whole. Furthermore, the petitioners point out that the Department did 
not verify GTS' FOB adjustment and whether it should be identical to 
that of the Usinor Group.
    The respondents take issue with the petitioners' complaint that 
Usinor's FOB sales adjustment is too small because it does not include 
insurance and other non-shipping costs. The respondents point out that 
the FOB adjustment made by Usinor in this investigation was verified 
and is precisely the same methodology used in French Certain Steel and 
French Stainless. The respondents assert that the petitioners also made 
this same argument on appeal from French Certain Steel, and that the 
Court rejected those challenges, see Inland Steel, 967 F. Supp. at 
1368-69.
    Department Position: We agree with the respondents. Usinor has 
indicated that it does not maintain FOB (port) value information, as 
requested in the Department's questionnaire, in the regular course of 
business. Therefore, Usinor reported an FOB adjustment based on the 
methodology that was used and verified in the French Stainless. This 
methodology derived Usinor's estimated FOB value by calculating a 
shipping expense based on the expenses of a sample of Usinor Group 
companies (including ocean freight, loading and port/terminal fees) and 
dividing the shipping expenses by the 1998 net sales of the sampled 
companies to derive the ratio of shipping costs to net sales. At 
verification we found no reason to suspect that this methodology was 
distortional, rather, we found it to be a reasonable methodology for 
deriving Usinor's sales value on an FOB (port) basis.
    With respect to the petitioners' argument that the Department 
accepted the same FOB adjustment for GTS without verifying whether or 
not it should be the same, there is no record information indicating 
that it would not be an inappropriate estimate. Furthermore, the 
Department has consistently recognized that given the vast amount of 
information provided during the course of an investigation and the 
strict time constraints imposed on the proceeding and particularly, 
verification, it is simply not possible to examine each and every piece 
of information provided by the respondents. The Department has taken 
the position that by testing the validity and integrity of a 
significant amount of relevant information, the small portion of the 
remaining information not examined cannot be considered inaccurate or 
incomplete.
    In this instance, the responding companies had reported a single 
FOB adjustment to be applied to the sales of the Usinor Group and GTS. 
As discussed in Usinor's verification report, see Memorandum to the 
File dated November 4, 1999 regarding ``Results of Verification of 
Usinor,'' this adjustment was derived by calculating the total shipping 
expenses of four companies within the Usinor Group: Sollac, Ugine, 
Unimetal and Ascometal. Although this adjustment does not include the 
shipping costs of GTS or CLI (also a producer of subject merchandise), 
we consider it to be a more reasonable estimate of shipping costs 
incurred by GTS than the use of the difference between the customs 
value and the landed value as suggested by the petitioners since the 
landed value could include other expenses which are not representative 
of the respondents' shipping costs. Nevertheless, we acknowledge that 
the respondents' calculation of the FOB adjustment did not include 
amounts for insurance. Should a countervailing duty order be put in 
place, we will examine this issue further in an administrative review, 
if one is requested.
    Therefore, for the purposes of this final determination, we have 
continued to use the FOB adjustment reported by the responding 
companies and verified

[[Page 73298]]

by the Department. We note, however, that in the event a countervailing 
duty order is put in place and an administrative review of GTS occurs, 
GTS will be required, as a separate entity, to report its own sales 
values on an FOB basis.

Comment 21: Mid-Year Grant Allocation Assumption

    The petitioners take issue with the Department's allocation 
methodology for non-recurring benefits codified as 19 CFR 
351.503(c)(4)(i). According to the petitioners, this methodology is 
biased in favor of respondents in the following respects:
    First, the methodology assumes that the benefit was received on the 
first day of the first year instead of, on average, midway through the 
year, the petitioners claim. In so doing, claim the petitioners, it 
reduces the remaining, unallocated portion of the benefit that goes 
into subsequent years. Since it is on this unallocated portion that the 
time value of money calculation is attached, the petitioners argue that 
the benefits in subsequent years are artificially reduced.
    Second, the Department's methodology provides that the yearly 
portion of the benefit that is amortized in subsequent years is also 
credited as of the first of the year, i.e., no time value of money 
calculation is made for that portion during that year, according to the 
petitioners. In reality, argue the petitioners, the yearly portion of 
the benefit would be expended over the course of the year and another 
time value of money calculation would be appropriate on that yearly 
portion. As a result of the yearly portion being credited as of the 
first of the year, state the petitioners, the remaining unallocated 
amount of the benefit that gets moved to future years is artificially 
reduced at the beginning of the year instead of across the span of the 
year. Accordingly, point out the petitioners, the calculation of the 
time value of money attached to the remaining unallocated amount is 
also artificially reduced.
    The petitioners propose adopting the assumption that benefits are 
received mid-year in order to neutralize the bias in the Department's 
methodology. To this end, the petitioners provide calculation 
methodologies.
    The respondents note that the petitioners made these same arguments 
during the Department's recent countervailing duty rulemaking 
proceedings and that the Department rejected them. According to the 
respondents, the petitioners must either challenge the particular 
regulation that embodies the Department's grant allocation formula as 
unlawful or seek a new rulemaking proceeding.
    Department Position: The petitioners' approach to allocating 
subsidies was presented to the Department during the comment period of 
the CVD Regulations. See CVD Regulations, 63 FR at 65399. In finalizing 
its CVD Regulations, the Department considered and chose not to adopt 
the methodology proposed by petitioners. We continue to follow our 
policy as explained in the Preamble to the CVD Regulations.
Verification
    In accordance with section 782(i)(1) of the Act, except as noted 
above, we verified the information submitted by the respondents prior 
to making our final determination.
Suspension of Liquidation
    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for Usinor (including CLI and Sollac) and 
GTS, the sole manufacturers of the subject merchandise. We determine 
that the total estimated net subsidy rate is 5.56 percent ad valorem 
for Usinor and 6.86 percent ad valorem for GTS. The All Others rate is 
6.80 percent, which is the weighted average of the rates for both 
companies.
    In accordance with our Preliminary Determination, we instructed the 
U.S. Customs Service to suspend liquidation of all entries of carbon-
quality plate from France, which were entered or withdrawn from 
warehouse, for consumption on or after July 26, 1999, the date of the 
publication of our Preliminary Determination in the Federal Register. 
In accordance with section 703(d) of the Act, we instructed the U.S. 
Customs Service to discontinue the suspension of liquidation for 
merchandise entered on or after November 23, 1999, but to continue the 
suspension of liquidation of entries made between July 26, 1999 and 
November 22, 1999. We will reinstate suspension of liquidation under 
section 706(a) of the Act if the ITC issues a final affirmative injury 
determination and will require a cash deposit of estimated 
countervailing duties for such entries of merchandise in the amounts 
indicated above. If the ITC determines that material injury, or threat 
of material injury, does not exist, this proceeding will be terminated 
and all estimated duties deposited or securities posted as a result of 
the suspension of liquidation will be refunded or canceled.

ITC Notification

    In accordance with section 705(d) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all non-privileged and non-proprietary information related to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    If the ITC determines that material injury, or threat of material 
injury, does not exist, these proceedings will be terminated and all 
estimated duties deposited or securities posted as a result of the 
suspension of liquidation will be refunded or canceled. If, however, 
the ITC determines that such injury does exist, we will issue a 
countervailing duty order.
Return or Destruction of Proprietary Information
    In the event that the ITC issues a final negative injury 
determination, this notice will serve as the only reminder to parties 
subject to Administrative Protective Order (APO) of their 
responsibility concerning the destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 351.305(a)(3). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to sections 705(d) and 
777(i) of the Act.

    Dated: December 13, 1999.
Robert LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33238 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-P