[Federal Register Volume 61, Number 193 (Thursday, October 3, 1996)] [Notices] [Pages 51683-51687] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-25411] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE [C-401-804] Certain Cut-to-Length Carbon Steel Plate From Sweden; Preliminary Results of Countervailing Duty Administrative Review AGENCY: Import Administration, International Trade Administration, Department of Commerce. ACTION: Notice of Preliminary Results of Countervailing Duty Administrative Review. ----------------------------------------------------------------------- SUMMARY: The Department of Commerce (the Department) is conducting an administrative review of the countervailing duty order on certain cut- to-length carbon steel plate from Sweden. For information on the net subsidy for the reviewed company, as well as for any non-reviewed companies, please see the Preliminary Results of Review section of this notice. If the final results remain the same as these preliminary results of administrative review, we will instruct the U.S. Customs Service to assess countervailing duties as detailed in the Preliminary Results of Review section of this notice. Interested parties are invited to comment on these preliminary results. EFFECTIVE DATE: October 3, 1996. FOR FURTHER INFORMATION CONTACT: Gayle Longest or Lorenza Olivas, Office of CVD/AD Enforcement, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone: Gayle Longest (202) 482-3338 or (202) 482-2786. SUPPLEMENTARY INFORMATION: Background On August 17, 1993, the Department published in the Federal Register (58 FR 43758) the countervailing duty order on certain cut-to- length carbon steel plate from Sweden. On August 1, 1995, the Department published a notice of ``Opportunity to Request an Administrative Review'' (60 FR 39150) of this countervailing duty order. We received timely requests for review, and we initiated the review, covering the period January 1, 1994 through December 31, 1994, on September 15, 1995 (60 FR 47930). In accordance with section 355.22(a) of the Department's Interim Regulations, this review covers only those producers or exporters for which a review was specifically requested (see Antidumping and Countervailing Duties: Interim Regulations; Request for Comments, (60 FR 25130 ; May 11, 1995) (Interim Regulations)). Accordingly, this review covers SSAB, the sole known producer/exporter of the subject merchandise during the period of review (POR). This review also covers 10 programs. On May 29, 1996, we extended the period for completion of the preliminary and final results pursuant to section 751(a)(3) of the Tariff Act of 1930, as amended (see Certain Cut-to-Length Carbon Steel Plate From Sweden; Extension of Time Limit for Countervailing Duty Administrative Review (61 FR 26879). As explained in the memoranda from the Assistant Secretary for Import Administration to the File dated November 22, 1995, and January 11, 1996 (both on file in the public file of the Central Records Unit, Room B-099 of the Department of Commerce), all deadlines were extended to take into account the partial shutdowns of the Federal Government from November 15 through November 21, 1995, and December 15, 1995, through January 6, 1996. Therefore, the deadline for these preliminary results is no later than September 27, 1996, and the deadline for the final results of this review is no later than 180 days from the date on which these preliminary results are published in the Federal Register. Applicable Statute and Regulations Unless otherwise indicated, all citations to the statute are references to the provisions of the Tariff Act of 1930, as amended by the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the Act). The Department is conducting this administrative review in accordance with section 751(a) of the Act. References to the Department's Countervailing Duties; Notice of Proposed Rulemaking and Request for Public Comments (54 FR 23366; May 31, 1989) (1989 Proposed Regulations) are provided solely for further explanation of the Department's countervailing duty practice. Although the Department has withdrawn the particular rulemaking proceeding pursuant to which the 1989 Proposed Regulations were issued, the subject matter of these regulations is being considered in connection with an ongoing rulemaking proceeding which, among other things, is intended to conform the Department's regulations to the URAA. See Advance Notice of [[Page 51684]] Proposed Rulemaking and Request for Public Comments, (60 FR 80; Jan. 3, 1995); Antidumping Duties; Countervailing Duties: Notice of Proposed Rulemaking and Request for Public Comments, (61 FR 7308; February 27, 1996). Scope of the Review Imports covered by this review are shipments of certain cut-to- length carbon steel plate from Sweden. These products include hot- rolled carbon steel universal mill plates (i.e., flat-rolled products rolled on four faces or in a closed box pass, of a width exceeding 150 millimeters but not exceeding 1,250 millimeters and of a thickness of not less than 4 millimeters, not in coils and without pattern in relief), of rectangular shape, neither clad, plated nor coated with metal, whether or not painted, varnished, or coated with plastics or other nonmetallic substances, 4.75 millimeter or more in thickness and of a width which exceeds 150 millimeters and measures at least twice the thickness. During the review period, such merchandise was classifiable under the Harmonized Tariff Schedule (HTS) item numbers 7208.31.0000, 7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000 and 7212.50.5000. Included in this order are flat-rolled products of non-rectangular cross-section where 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. Excluded from this order is grade X-70 plate. The HTS item numbers are provided for convenience and customs purposes. The written description remains dispositive. Allocation Methodology In the past, the Department has relied upon information from the U.S. Internal Revenue Service on the industry-specific average useful life of assets in determining the allocation period for nonrecurring grant benefits. See General Issues Appendix appended to Final Countervailing Duty Determination; Certain Steel Products from Austria (58 FR 37063, 37226; July 9, 1993). However, in British Steel plc. v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel), the U.S. Court of International Trade (the Court) ruled against this allocation methodology. In accordance with the Court's remand order, the Department calculated a company-specific allocation period for nonrecurring subsidies based on the average useful life (AUL) of non- renewable physical assets. This remand determination was affirmed by the Court on June 4, 1996. British Steel, 929 F. Supp. 426, 439 (CIT 1996). The Department has decided to acquiesce to the Court's decision and, as such, we intend to determine the allocation period for nonrecurring subsidies using company-specific AUL data where reasonable and practicable. Specifically, the Department has preliminarily determined that it is reasonable and practicable to allocate all new nonrecurring subsidies (i.e., subsidies that have not yet been assigned an allocation period) based on a company-specific AUL. However, if a subsidy has already been countervailed based on an allocation period established in an earlier segment of the proceeding, it does not appear reasonable or practicable to reallocate that subsidy over a different period of time. In other words, since the countervailing duty rate in earlier segments of the proceeding was calculated based on a certain allocation period and resulting benefit stream, redefining the allocation period in later segments of the proceeding would entail taking the original grant amount and creating an entirely new benefit stream for that grant. Such a practice may lead to an increase or decrease in the amount countervailed and, thus, would result in the possibility of over-countervailing or under-countervailing the actual benefit. The Department has preliminarily determined that a more reasonable and accurate approach is to continue using the allocation period first assigned to the subsidy. We invite the parties to comment on the selection of this methodology and provide any other reasonable and practicable approaches for complying with the Court's ruling. In the current review, there are no new subsidies. All of the nonrecurring grants under review were provided prior to the POR; allocation periods for these grants were established during prior segments of this proceeding. Therefore, for purposes of these preliminary results, the Department is using the original allocation period assigned to each grant. Privatization and Sale of Assets to Other Companies Within the SSAB group only one subsidiary produces and exports the subject merchandise. SSAB has sold several productive units and the company was partially privatized twice, in 1987 and in 1989. During the review period, SSAB was completely privatized. In Final Affirmative Countervailing Duty Determinations: Certain Steel Products from Sweden (58 FR 37385; July 9, 1993) (Final Determination), the Department found that SSAB had received countervailable subsidies prior to the sale of the productive units and the two partial privatizations. Further, the Department found that a private party purchasing all or part of a government-owned company can repay prior subsidies on behalf of the company as part or all of the sales price (see General Issues Appendix (58 FR 37217, 37262; July 9, 1993)). Therefore, to the extent that a portion of the sales price paid for a privatized company can be reasonably attributed to prior subsidies, that portion of those subsidies will be extinguished. To calculate a rate for the subsidies that were allocated to the spin-off, i.e., a productive unit that was sold, we first determined the amount of the subsidies attributable to each productive unit by dividing the asset value of that productive unit by the total asset value of SSAB in the year of the spin-off. We then applied this ratio to the net present value (NPV), in the year of the spin-off, of the future benefit streams from all of SSAB's prior subsidies allocable to the POR. The future benefit streams at the time of the sale of each productive unit reflect the Department's allocation over time of prior subsidies to SSAB in accordance with the declining balance methodology (see section 355.49 of the Department's Proposed Regulations), and reflect also the effect of prior spin-offs of SSAB productive units. We next estimated the portion of the purchase price which represents repayment of prior subsidies by determining the portion of SSAB's net worth that was accounted for by subsidies. To do that, we divided the face value of the allocable subsidies received by SSAB in each year from fiscal year 1979 through fiscal year 1993 by SSAB's net worth in the same year. We calculated a simple average of these ratios, which was then multiplied by the purchase price of the productive unit. Thus, we determined the amount of the purchase price which represents repayment of prior subsidies. This amount was subtracted from the subsidies attributed to the productive unit at the time of sale to arrive at the amount of subsidies allocated to the productive unit being spun-off. To calculate the subsidies remaining with SSAB after privatization, we performed the following calculations. We first calculated the NPV of the future benefit stream of the subsidies at the [[Page 51685]] time of the sale of the shares. Next, we estimated the portion of the purchase price which represents repayment of prior subsidies in accordance with the methodology described in the ``Privatization'' section of the General Issues Appendix (58 FR 37217, 37259). This amount was then subtracted from the amount of the NPV eligible for repayment, and the result was divided by the NPV to calculate the ratio representing the amount of subsidies remaining with SSAB. To calculate the benefit provided to SSAB in the POR, where appropriate, we multiplied the benefit calculated for 1994, adjusted for sales of productive units, by the ratio representing the amount of subsidies remaining with SSAB after privatization. We then divided the results by the company's total sales in 1994. Analysis of Programs I. Programs Conferring Subsidies Programs Previously Determined to Confer Subsidies (1) Equity Infusions In 1981, the Government of Sweden (GOS) provided equity capital to SSAB totaling 1,125 million Swedish kronor (MSEK). Simultaneously, Granges, a private company and the only other shareholder at the time, contributed 375 MSEK. To persuade Granges to contribute this equity capital, the GOS guaranteed a specified sum to be paid to Granges in 1991. Because of this arrangement, we determined that the 375 MSEK paid by Granges was an equity infusion provided indirectly by the GOS, through Granges, specifically to SSAB. See Final Determination (58 FR 37385, 37387). In the Final Determination and in the final determination in a previous investigation of Swedish steel, Final Affirmative Countervailing Duty Determinations; Certain Carbon Steel Products from Sweden (50 FR 33377; August 19, 1985) (Final Certain Carbon Steel Products), we determined that SSAB was unequityworthy in 1981 when it received the equity infusions, and that the two equity infusions are therefore countervailable. There has been no new information or evidence of changed circumstances in this review to warrant reconsideration of this determination. In accordance with the ``Equity'' section of the General Issues Appendix, we treated the equity infusions as grants. To calculate the benefit from these equity infusions for the POR, we used the grant methodology as described in the ``Allocation Methodology'' section above. Because the Department determined in the Final Determination that the infusions are non-recurring subsidies, we have allocated the subsidies over 15 years, as discussed in the ``Allocation Methodology'' section above. As the discount rate, we have used SSAB's company- specific interest rate on fixed-rate long-term loans (see Sec. 355.49(b)(2) of the Proposed Regulations). We reduced the benefit from these equity infusions attributable to the POR according to the methodology outlined in the ``Privatization'' section above. We then divided the result by SSAB's total sales for 1994. On this basis, we preliminarily determine the net subsidy for equity infusions to be 0.53 percent ad valorem. (2) Structural Loans Under three separate pieces of legislation, SSAB received structural loans for investment in plant and equipment. The loans were disbursed in installments between 1978 and 1983. All three loans were outstanding during the POR. According to the terms of the loans, all three structural loans were interest-free for three years from the date of disbursement. After that time, one loan incurred interest at a fixed rate of five percent per annum while the other two loans incurred interest at a variable rate subject to change every five years. The variable interest rate on these two loans is set at the rate of the long-term government bonds plus a 0.25 percent margin. After a five-year grace period, the principal is repaid in 20 equal installments at the end of each calendar year. In Final Determination and in Final Certain Carbon Steel Products, we determined that these loans are countervailable because they were provided specifically to SSAB on terms inconsistent with commercial considerations. There has been no new information or evidence of changed circumstances in this review to warrant reconsideration of this determination. To calculate the benefit from the fixed-rate structural loan, we employed the long-term loan methodology described in section 355.49(c)(1) of the 1989 Proposed Regulations. To calculate the benefits from the two variable-rate loans, we used the variable-rate long-term loan methodology described in section 355.49(d)(1) of the 1989 Proposed Regulations. As the discount rate, we used SSAB's company-specific long-term benchmark interest rates, previously established in the Final Determination. We reduced the benefit attributable to the POR from the fixed-rate structural loan according to the methodology outlined in the ``Privatization'' section above. We then aggregated the benefits for the three loans (fixed interest rate and variable interest rate) and divided the results by SSAB's total sales for 1994. On this basis, we preliminarily determine the net subsidy from the three structural loans to be 0.27 percent ad valorem. (3) Forgiven Reconstruction Loans The GOS provided reconstruction loans to SSAB between 1979 and 1985 to cover operating losses, investment in certain plants and equipment, and for employment promotion purposes. The loans were interest free for three years, after which a fixed interest rate was charged. According to the terms of the loans, up to half of the outstanding amount of the loan can be written off after the second calendar year following the disbursement. The remainder of the loan can be written off entirely at the end of the ninth calendar year after disbursement. Pursuant to the terms of the reconstruction loans, the GOS wrote off large portions of principal and accrued interest on these loans between 1980 and 1990. In the Final Determination and in Final Certain Carbon Steel Products, we determined that forgiveness of these loans is countervailable. There has been no new information or evidence of changed circumstances in this review to warrant reconsideration of this determination. To calculate the benefit, we treated the written-off portions of the reconstruction loans as countervailable grants received in the years the loans were forgiven and calculated the benefit using the grant methodology as described in the ``Allocation Methodology'' section above. We reduced the benefits from these grants attributable to the POR according to the methodology outlined in the ``Privatization'' section above. We then divided the results by SSAB's total sales for 1994. On this basis, we preliminarily determine the net subsidy from the three forgiven reconstruction loans to be 1.18 percent ad valorem. II. Programs Preliminarily Determined Not to Confer Subsidies (1) Research & Development (R&D) Loans and Grants The Swedish National Board for Industrial and Technical Development (NUTEK) provides research and development loans and grants to Swedish industries for R&D purposes. [[Page 51686]] One type of R&D loan (industrial development loans) is mostly aimed at ``new'' industries such as the biotechnical, electronic, and medical industries. Another type of R&D loan (energy efficiency loans) is directed towards big energy consumers. The loans accrue interest equal to the official ``discount'' rate plus a premium of 3.75 percent. However, no interest or principal payments are due until the R&D project is completed. If, upon completion of a project, the company wishes to use the research results for commercial purposes, the loan must be repaid. On the other hand, if the company decides not to utilize the results and, therefore, does not claim proprietary treatment for the results, NUTEK will forgive the loan and the results of the research become publicly available. SSAB had several R&D loans outstanding during the POR on which it did not make either principal or interest payments. However, under our current pratice, we cannot determine whether SSAB has received a countervailable benefit until the research is completed, and they will be able to submit information demonstrating that the research results are publicly available. It is only upon completion that it will be known (1) whether the loans are forgiven and (2) if the loans are not forgiven, whether the accrued interest is less than what would accrue if the loans are provided at commercial rates. See Final Determination (58 FR 37385, 37390). Therefore, we will continue to examine these R&D loans in future administrative reviews. As explained above, NUTEK may forgive R&D loans if the companies receiving them disseminate publicly the results of the research financed by the loans. The Department's current practice is to treat forgiven R&D loans as non-countervailable if the research results are publicly available. See Final Determination (58 FR 37385, 37390). During the POR, three such loans to SSAB were forgiven. Official documentation from NUTEK, provided in the questionnaire response, indicates that the results of these research projects for which these three loans were made to SSAB were made publicly available. On this basis, we preliminarily determine that these three forgiven R&D loans did not confer countervailable benefits on the subject merchandise during the POR. (2) Fund for Industry and New Business R&D SSAB reported in its questionnaire response that SSAB Oxelosund, a subsidiary, received a conditional repayment R&D loan from the Fund for Industry and New Business (the Fund). The Fund provides project financing to firms with a budget of at least two million Swedish kroner (MSEK), and start-up loans to new ``limited'' companies. Projects are financed through (1) conditional repayment loans, (2) capital in return for royalty, (3) project guarantees, and (4) credit guarantees for developing new products, processes and systems, and marketing. The terms and conditions of the financing depend on the type of financing provided. In October 1992, the Fund approved a 6-MSEK conditional repayment loan for SSAB Oxelosund. Only 3 MSEK of the loan amount were disbursed. Under the terms of the loan, 50 percent of the principal was to be paid at the end of 1994, with the remaining 50 percent to be paid at the end of 1995. The loan accrued interest from the date of disbursement at a rate equal to the Central Bank's ``discount'' rate, plus a 4 percent premium, paid quarterly, for the prior quarter. Because the base rate changes quarterly, we have analyzed this loan under our variable rate loan methodology. In Certain-Cut-to-Length Carbon Steel Plate from Sweden; Preliminary Results of Countervailing Duty Administrative Review (60 FR 44017; August 24, 1995) (92/93 Preliminary Results) and Certain-Cut-to-Length Carbon Steel Plate from Sweden; Final Results of Countervailing Duty Administrative Review (61 FR 5381; February 12, 1996) (92/93 Final Results), the previous administrative review of this order, we found that SSAB paid a higher interest rate for this loan than it would have paid at the commercial benchmark rates. Accordingly, we determined that the program did not confer a countervailable benefit on the subject merchandise during the POR. In this review period, the entire outstanding principal and the accrued interest was paid. During the POR, SSAB made two interest payments on the loan. The first payment was in arrears and covered the last quarter of 1993; the second payment was for interest accrued in 1994. Therefore, we selected benchmarks for both 1993 and 1994, using the same source for benchmarks established previously. See 92/93 Preliminary Results and 92/93 Final Results. We compared the interest paid by the company with the amount of interest that the company would have paid on a similar loan provided at the benchmark rates, and we factored into the calculation the period of time in which the interest payment was in arrears. We found that the amount paid by the company was slightly lower than the amount that would have been paid at the commercial benchmark rate. However, the subsidy rate that would be attributable to this loan is 0.00002 percent ad valorem. A rate this small would not change the overall subsidy rate for SSAB. Moreover, since the principal of the loan was entirely repaid during the POR, the issue of the countervailability of the loan will not arise in subsequent administrative reviews. Since any benefit we would calculate for the loan would not affect the overall subsidy rate during the POR, and, since there is no possibility of future benefits from this loan, we do not consider it necessary to make a determination on the specificity of this loan program and are not including it in the calculation of these preliminary results. III. Programs Preliminarily Found To Be Not Used We also examined the following programs and preliminarily determine that SSAB did not apply for or receive benefits under them during the POR: A. Regional Development Grants B. Transportation Grants C. Location-of-Industry Loans IV. Programs Preliminarily Found To Be Terminated Mining Exploration Grants Between 1983 and 1985, SSAB received grants for exploration of new mineral deposits in its Grangesberg mines. In Final Determination, the Department found that these grants were countervailable, because they were provided specifically to a group of enterprises or industries (mining companies). The amounts received under this program were less than 0.5 percent of the value of SSAB's total sales for that year and were expensed in the year of receipt in accordance with the Allocation section of the General Issues Appendix. In June 1993, the mining exploration grant program was terminated by the Government of Sweden under law SFS 1993:693 which eliminated Namnden for Statens Gruvegendom, the agency that administered the program. No grants were given to SSAB under this program after 1985 and there were no residual benefits during the POR from grants previously bestowed. Preliminary Results of Review In accordance with section 355.22(c)(4)(ii) of the Department's Interim Regulations, we calculated an individual subsidy rate for each [[Page 51687]] producer/exporter subject to this administrative review. For the period January 1, 1994 through December 31, 1994, we preliminarily determine the net subsidy for SSAB to be 1.98 percent ad valorem for SSAB. If the final results of this review remain the same as these preliminary results, the Department intends to instruct the U.S. Customs Service to assess countervailing duties for SSAB at 1.98 percent ad valorem. The Department also intends to instruct the U.S. Customs Service to collect a cash deposit of 1.98 percent of the f.o.b. invoice price on all shipments of the subject merchandise from SSAB, entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this review. Because the URAA replaced the general rule in favor of a country- wide rate with a general rule in favor of individual rates for investigated and reviewed companies, the procedures for establishing countervailing duty rates, including those for non-reviewed companies, are now essentially the same as those in antidumping cases, except as provided for in section 777A(e)(2)(B) of the Act. The requested review will normally cover only those companies specifically named. Pursuant to 19 CFR 355.22(g), for all companies for which a review was not requested, duties must be assessed at the cash deposit rate, and cash deposits must continue to be collected, at the rate previously ordered. As such, the countervailing duty cash deposit rate applicable to a company can no longer change, except pursuant to a request for a review of that company. See Federal-Mogul Corporation and The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993) (interpreting 19 CFR 353.22(e), the antidumping regulation on automatic assessment, which is the analogue to 19 CFR 355.22(g), the countervailing duty regulation on automatic assessment). Therefore, the cash deposit rates for all companies except those covered by this review will be unchanged by the results of this review. We will instruct Customs to continue to collect cash deposits for non-reviewed companies at the most recent company-specific or country- wide rate applicable to the company. Accordingly, the cash deposit rate that will be applied to all non-reviewed companies covered by this order is that established in the most recently completed administrative proceeding. See Certain Cut-to-Length Carbon Steel Plate From Sweden; Final Results of Countervailing Duty Administrative Review, 61 FR at 5381. This rate shall apply to all non-reviewed companies until a review of a company assigned this rate is requested. In addition, for the period January 1, 1994 through December 31, 1994, the assessment rates applicable to all non-reviewed companies covered by this order are the cash deposit rates in effect at the time of entry. Public Comment Parties to the proceeding may request disclosure of the calculation methodology and interested parties may request a hearing not later than 10 days after the date of publication of this notice. Interested parties may submit written arguments in case briefs on these preliminary results within 30 days of the date of publication. Rebuttal briefs, limited to arguments raised in case briefs, may be submitted seven days after the time limit for filing the case brief. Parties who submit written arguments in this proceeding are requested to submit with the argument (1) a statement of the issue and (2) a brief summary of the argument. Any hearing, if requested, will be held seven days after the scheduled date for submission of rebuttal briefs. Copies of case briefs and rebuttal briefs must be served on interested parties in accordance with 19 CFR 355.38. Representatives of parties to the proceeding may request disclosure of proprietary information under administrative protective order no later than 10 days after the representative's client or employer becomes a party to the proceeding, but in no event later than the date the case briefs, under 19 CFR 355.38, are due. The Department will publish the final results of this administrative review, including the results of its analysis of issues raised in any case or rebuttal brief or at a hearing. This administrative review and notice are in accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1) and 19 CFR 355.22(c)(5)). Dated: September 25, 1996. Robert S. LaRussa, Acting Assistant Secretary for Import Administration. [FR Doc. 96-25411 Filed 10-2-96; 8:45 am] BILLING CODE 3510-DS-P