[Federal Register Volume 64, Number 154 (Wednesday, August 11, 1999)] [Notices] [Pages 43673-43677] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 99-20736] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [C-412-811] Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom; Final Results of Countervailing Duty Administrative Review AGENCY: Import Administration, International Trade Administration, Department of Commerce. ACTION: Notice of final results of countervailing duty administrative review. ----------------------------------------------------------------------- SUMMARY: On April 7, 1999, the Department of Commerce (``the Department'') published in the Federal Register its preliminary results of administrative review of the countervailing duty order on certain hot-rolled lead and bismuth carbon steel products (``lead bar'') from the United Kingdom for the period January 1, 1997 through December 31, 1997. The Department has now completed this administrative review in accordance with section 751(a) of the Tariff Act of 1930, as amended. For information on the net subsidy for each reviewed company, and for all non-reviewed companies, please see the Final Results of Review section of this notice. We will instruct the Customs Service to assess countervailing duties as detailed in the Final Results of Review section of this notice. EFFECTIVE DATE: August 11, 1999. FOR FURTHER INFORMATION CONTACT: Gayle Longest or Stephanie Moore, Group II, Office of CVD/AD Enforcement VI, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 482-2786. SUPPLEMENTARY INFORMATION: Background Pursuant to 19 C.F.R. 351.213(b), this review covers only those producers or exporters of the subject merchandise for which a review was specifically requested. Accordingly, this review covers British Steel plc./British Steel Engineering Steels Limited (formerly United Engineering Steels Limited). This review also covers the period January 1, 1997 through December 31, 1997 and nine programs. Since the publication of the preliminary results on April 7, 1999 (64 FR 16920), the following events have occurred. We invited interested parties to comment on the preliminary results. On May 7, 1999 case briefs were submitted by British Steel Engineering Steels Limited (``BSES''), which exported to the United States during the review period (``respondent''), and Inland Steel Bar Co. (``petitioner''). On May 12, 1999 rebuttal briefs were submitted by BSES and Inland Steel Bar Co. 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''). The Department is conducting this administrative review in accordance with section 751(a) of the Act. All citations to the Department's regulations reference 19 C.F.R. Part 351, (1998) unless otherwise indicated. Scope of the Review Imports covered by this review are hot-rolled bars and rods of non- alloy or other alloy steel, whether or not descaled, containing by weight 0.03 percent or more of lead or 0.05 percent or more of bismuth, in coils or cut lengths, and in numerous shapes and sizes. Excluded from the scope of this review are other alloy steels (as defined by the Harmonized Tariff Schedule of the United States (``HTSUS'') Chapter 72, note 1 (f)), except steels classified as other alloy steels by reason of containing by weight 0.4 percent or more of lead or 0.1 percent or more of bismuth, tellarium, or selenium. Also excluded are semi- finished steels and flat-rolled products. Most of the products covered in this review are provided for under subheadings 7213.20.00.00 and 7214.30.00.00 of the HTSUS. Small quantities of these products may also enter the United States under the following HTSUS subheadings: 7213.31.30.00, 60.00; 7213.39.00.30, 00.60, 00.90; 7213.91.30.00, 45.00. 60.00; 7213.99.00; 7214.40.00.10, 00.30, 00.50; 7214.50.00.10, 00.30, 00.50; 7214.60.00.10, 00.30, 00.50; 7214.91.00; 7214.99.00 and 7228.30.80.00, 80.50. Although the HTSUS subheadings are provided for convenience and for Customs purposes, our written description of the scope of this proceeding is dispositive. Subsidies Value Information Change in Ownership (I) Background On March 21, 1995, British Steel plc (``BS plc'') acquired all of Guest, Keen & Nettlefolds' (``GKN'') shares in United Engineering Steels (``UES''), the company which produced and exported the subject merchandise to the United States during the original investigation. Thus, UES became a wholly-owned subsidiary of BS plc and was renamed British Steel Engineering Steels (``BSES''). Prior to this change in ownership, UES was a joint venture company formed in 1986 by British Steel Corporation (``BSC''), a government- owned company, and GKN. In return for shares in UES, BSC contributed a major portion of its Special Steels Business, the productive unit which produced the subject merchandise. GKN contributed its Brymbo Steel Works and its forging business to the joint venture. BSC was privatized in 1988 and now bears the name BS plc. In the investigation of this case, the Department found that BSC had received a number of nonrecurring subsidies prior to the 1986 transfer of its Special Steels Business to UES. See Final Affirmative Countervailing Duty [[Page 43674]] Determination: Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom, 58 FR 6237, 6243 (January 27, 1993) (``Lead Bar''). Further, the Department determined that the sale to UES did not alter these previously bestowed subsidies, and thus the portion of BSC's pre-1986 subsidies attributable to its Special Steels Business transferred to UES. Lead Bar, 58 FR at 6240. In the 1993 certain steel products investigations, the Department modified the allocation methodology developed for Lead Bar. Specifically, the Department stated that it would no longer assume that all subsidies allocated to a productive unit follow it when it is sold. Rather, when a productive unit is spun-off or acquired, a portion of the sales price of the productive unit represents the reallocation of prior subsidies. See the General Issues Appendix (``GIA''), appended to the Final Countervailing Duty Determination; Certain Steel Products From Austria, 58 FR 37217, 37269 (July 9, 1993) (``Certain Steel''). In a subsequent Remand Determination, the Department aligned Lead Bar with the methodology set forth in the ``Privatization'' and ``Restructuring'' sections of the GIA. Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the United Kingdom: Remand Determination (October 12, 1993) (``Remand''). On March 21, 1995, BS plc acquired 100 percent of UES. In determining how this change in ownership affects our attribution of subsidies to the subject merchandise, we relied on section 771(5)(F) of the Act, which states that a change in ownership does not require a determination that past subsidies received by an enterprise are no longer countervailable, even if the transaction is accomplished at arm's length. The Statement of Administrative Action, H.R. Doc. No. 316, Vol. 1, 103d Cong., 2d Sess. (1994) (``SAA''), explains that the aim of this provision is to prevent the extreme interpretation that the arm's length sale of a firm automatically, and in all cases, extinguishes any prior subsidies conferred. While the SAA indicates that the Department retains the discretion to determine whether and to what extent a change in ownership eliminates past subsidies, it also indicates that this discretion must be exercised carefully by considering the facts of each case. SAA at 928. In accordance with the Act and the SAA, we examined the facts of BS plc's acquisition of GKN's 50 percent ownership stake in UES, and we determined that the change in ownership does not render previously bestowed subsidies attributable to UES no longer countervailable. However, we also determined that a portion of the purchase price paid for UES is attributable to its prior subsidies. Therefore, we reduced the amount of the subsidies that ``traveled'' with UES to BS plc, taking into account the allocation of subsidies to GKN, the former joint-owner of UES. See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom; Final Results of Countervailing Duty Administrative Review, 62 FR 53306 (October 14, 1997) (``Lead Bar 95 Final Results'') and Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom; Preliminary Results of Countervailing Duty Administrative Review, 62 FR 16555 (April 7, 1997) (``Lead Bar 95 Preliminary Results''). To calculate the amount of UES's subsidies that passed through to BS plc as a result of the acquisition, we applied the methodology described in the ``Restructuring'' section of the GIA. See GIA, 58 FR at 37268-37269. This determination is in accordance with our changes in ownership finding in Final Affirmative Countervailing Duty Determination; Pasta From Italy, 61 FR 30288, 30289-30290 (June 14, 1996), and our finding in the 1994 administrative review of this case, in which we determined that ``[t]he URAA is not inconsistent with and does not overturn the Department's General Issues Appendix methodology or its findings in the Lead Bar Remand Determination.'' Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom; Final Results of Countervailing Duty Administrative Review, 61 FR 58377, 58379 (November 14, 1996). With the acquisition of UES, we also determined that BS plc's remaining subsidies are attributable to the subject merchandise, now produced by BS plc's wholly-owned subsidiary, BSES. Where the Department finds that a company has received untied countervailable subsidies, to determine the countervailing duty rate, the Department attributes those subsidies to that company's total sales of domestically produced merchandise, including the sales of 100-percent- owned domestic subsidiaries. If the subject merchandise is produced by a subsidiary company, and the only subsidies in question are the untied subsidies received by the parent company, the countervailing duty rate calculation for the subject merchandise is the same as described above. Similarly, if such a company purchases another company, as was the case with BS plc's purchase of UES, then the current benefit from the parent company's allocable untied subsidies is attributed to total sales, including the sales of the newly acquired company. See, e.g., GIA, 58 FR at 3762 (``the Department often treats the parent entity and its subsidiaries as one when determining who ultimately benefits from a subsidy''). Accordingly, in the Lead Bar 95 Final Results, we determined that it is appropriate to collapse BSES with BS plc for purposes of calculating the countervailing duty for the subject merchandise. BSES, as a wholly-owned subsidiary of BS plc, continues to benefit from the remaining benefit stream of BS plc's untied subsidies. In collapsing UES with BS plc, we also determined that UES's untied subsidies ``rejoined'' BS plc's pool of subsidies with the company's 1995 acquisition. All of these subsidies were untied subsidies originally bestowed upon BSC (BS plc). After the formation of UES in 1986, the subsidies that ``traveled'' with the Special Steels Business were also untied, and were found to benefit UES as a whole. See Lead Bar 95 Final Results; Lead Bar 95 Preliminary Results. (II) Calculation of Benefit To calculate the countervailing duty rate for the subject merchandise in 1997, we first determined BS plc's benefits in 1997, taking into account all spin-offs of productive units (including the Special Steel Business) and BSC's full privatization in 1988. See Final Affirmative Countervailing Duty Determination; Certain Steel Products from the United Kingdom, 58 FR 37393 (July 9, 1993) (``UK Certain Steel''). We then calculated the amount of UES's subsidies that ``rejoined'' BS plc after the 1995 acquisition, taking into account the reallocation of subsidies to GKN. See Lead Bar 95 Final Results; Lead Bar 95 Preliminary Results. As indicated above, in determining both these amounts, we followed the methodology outlined in the GIA. After adding BS plc's and UES's benefits for each program, we then divided that amount by BS plc's total sales of merchandise produced in the United Kingdom in 1997. Allocation Methodology In British Steel plc v. United States, 879 F. Supp. 1254 (CIT 1995) (``British Steel''), the U.S. Court of International Trade (``the Court'') ruled against the allocation period methodology for non- recurring subsidies that the Department has employed for the past decade, a [[Page 43675]] methodology that was articulated in the General Issues Appendix (58 FR at 37226). In accordance with the Court's decision on remand, the Department determined that the most reasonable method of deriving the allocation period for nonrecurring subsidies is a company-specific average useful life (``AUL'') of non-renewable physical assets. For British Steel, we determined this allocation period to be 18 years. This remand determination was affirmed by the Court on June 4, 1996. British Steel, 929 F. Supp. 426, 439 (CIT 1996). The Department's acquiescence to the CIT's decision in the Certain Steel cases resulted in different allocation periods between the UK Certain Steel and Lead Bar proceedings (18 years vs. 15 years). Moreover, UES became a wholly-owned subsidiary of BS plc in 1995. In the 1995 review of Lead Bar, in order to maintain a consistent allocation period across the UK Certain Steel and Lead Bar proceedings, as well as in the different segments of Lead Bar, we altered the allocation methodology previously used to determine the allocation period for non-recurring subsidies previously bestowed on BSC and attributed to UES. In the 1995 review, we applied the company-specific 18-year allocation period to all non-recurring subsidies. See Lead Bar 95 Final Results. Based on our decision in the 1995 administrative review of this order, we determine that it is appropriate in this review to continue to allocate all of BSC's non-recurring subsidies over BS plc's company-specific average useful life of renewable physical assets (i.e., 18 years). Analysis of Programs Based upon the responses to our questionnaire and written comments from the interested parties we determine the following: I. Programs Conferring Subsidies A. Programs Previously Determined to Confer Subsidies 1. Equity Infusions In the preliminary results we found that this program conferred countervailable subsidies on the subject merchandise. Our review of the record shows that no new information has been placed on it which shows that this program does not continue to confer countervailable subsidies. This and our analysis of the comments submitted by the interested parties, summarized below, has not led us to change our findings from the preliminary results. Accordingly, the net subsidies for this program, which is 4.07 percent ad valorem, remains unchanged from the preliminary results. 2. Regional Development Grant Program In the preliminary results we found that this program conferred countervailable subsidies on the subject merchandise. Our review of the record shows that no new information has been placed on it which shows that this program does not continue to confer countervailable subsidies. This and our analysis of the comments submitted by the interested parties, summarized below, has not led us to change our findings from the preliminary results. Accordingly, the net subsidies for this program, which is 0.14 percent ad valorem, remains unchanged from the preliminary results. 3. National Loan Funds Loan Cancellation In the preliminary results we found that this program conferred countervailable subsidies on the subject merchandise. Our review of the record shows that no new information has been placed on it which shows that this program does not continue to confer countervailable subsidies. This and our analysis of the comments submitted by the interested parties, summarized below, has not led us to change our findings from the preliminary results. Accordingly, the net subsidies for this program, which is 0.43 percent ad valorem, remains unchanged from the preliminary results. II. Programs Found To Be Not Used In the preliminary results we found that the producers and/or exporters of the subject merchandise did not apply for or receive benefits under the following programs: A. New Community Instrument Loans B. NLF Loans C. Regional Selective Loans D. ECSC Article 56(b)(2) Redeployment Aid E. Inner Urban Areas Act of 1978 F. LINK Initiative We did not receive any comments on these programs from the interested parties, and our review of the record has not led us to change our findings from the preliminary results. III. Other Programs Examined BRITE/EuRAM and Standards Measurement and Testing Program BS plc received assistance under these two European Union programs to fund research and development. The European Union claimed that assistance provided under both of these programs is non-countervailable in accordance with Article 8.2(a) of the WTO Agreement on Subsidies and Countervailing Measures and section 771(5B)(B) of the Act (which provide that certain research and development subsidies are not countervailable). We determine that it is not necessary to address whether BRITE/EuRAM and the Standards Measurement and Testing Program qualify for non-countervailable treatment because combined, the assistance provided under both of these programs would result in a rate of less than 0.005 percent ad valorem, and thus would have no impact on the overall countervailing duty rate calculated for this POR. For the same reason we have not conducted a specificity analysis of these programs. See, e.g., Final Affirmative Countervailing Duty Determination: Steel Wire Rod from Germany, 62 FR 54990, 54995-54996 (October 22, 1997). Analysis of Comments Comment 1: Application of the Repayment Methodology According to the petitioner, the Department's subsidy repayment methodology is inconsistent with the countervailing duty statute, basic economic principles, and evidence produced in this proceeding. The petitioner contends that the Department's subsidy credit methodology is invalid, that there is no evidence of repayment, and that BS plc's acquisition of GKN's shares does not differ from sales of shares traded daily on the stock market. Because BSES is in the same position as BSC's special steels business in 1985, all of UES's subsidies should travel back to BS plc, subsequent to GKN's sale of UES shares to BS plc. Furthermore, the petitioner asserts that the GIA and Certain Pasta from Italy are distinguishable from the current case. In rebuttal, the respondent points out that the petitioner's arguments with respect to the attribution of a portion of UES's subsidies to GKN have been examined by the Department in the 1995 and 1996 administrative reviews and rejected by the Department. The respondent argues that petitioner's contention that the Department's repayment methodology should not be applied to the1986 privatization of the assets of British Steel Corporation's Special Steel Division and BS plc's 1995 acquisition of GKN is not correct. The respondent asserts that these two transactions were authentic and substantive undertakings enacted for separate and important commercial reasons. The respondent further argues that these transactions were not carried [[Page 43676]] out for purposes of evading U.S. countervailing duties. Therefore, the respondent asserts that the Department has no basis to disregard the validity or substance of these transactions and there is no basis to not apply the repayment methodology. Department's Position Our position with respect to the petitioner's comments was outlined in detail in the 1995 review of this case. See Lead Bar 95 Final Results, 62 FR at 53309-10. The petitioner has not presented any new arguments or facts that would lead the Department to depart from its original conclusion with respect to this issue. Further, the Department's position was strengthened with the CAFC's holding in British Steel, affirming the Department's discretion to apply the repayment methodology. For these reasons, we continue to apply the repayment methodology in these final results. Comment 2: The ``Change in Ownership'' Issue BSES argues that the Department should revisit its determinations on the change-in-ownership issues in this case because the effect of the URAA amendments on change in ownership transactions is currently under consideration by the United States Court of Appeals for the Federal Circuit (``CAFC'') in Delverde, SRL v. United States, 24 F.Supp.2d 314 (CIT 1998), appeal docketed, No. 99-1186 (Federal Circuit Jan. 13, 1999). The respondent states that pursuant to consent motions, the CIT has stayed the appeals of the Department's final results in both the 1995 and 1996 administrative reviews of this case pending the CAFC's decision in Delverde. According to the respondent, by raising this issue again in this review, BSES preserves the possibility that the final decision in Delverde may be applied to entries covered by this administrative review. The respondent claims that the Department countervailed BS plc's 1997 production without any analysis of its 1988 privatization. The respondent also contends that to comply with the Change in Ownership provision of the URAA, the Department is required to conduct an analysis of the privatization transaction in order to determine whether subsidies pass through. Moreover, the respondent argues that 19 U.S.C. section 1677(5)(B) requires the Department to conduct an analysis to determine whether the privatized company has received a financial benefit from the past subsidies received by BSC. The respondent argues that current production of BS plc subject to countervailing duties is no longer subsidized because, as of the 1988 privatization, the company bears its full cost of capital to its shareholders on all funds and assets in the company. Moreover, the respondent contends that BSES received no financial benefit from the past subsidies to BSC. Therefore, the respondent argues that BSES cannot be subjected to countervailing duties based on past subsidies. In rebuttal, petitioner points out that BSES raises no new arguments in its case brief and the Department has already addressed and ruled against these arguments in Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom (``Lead Bar 1994 Final Results''), 61 FR 58377 (November 14, 1996). According to petitioner, the Department decided that its subsidy allocation methodology was in agreement with the URAA and used its discretion in determining the impact the change in ownership had on the countervailability of BS plc's past subsidies. The petitioner asserts that the Department has rejected BSES's claim that countervailable subsidies must be current benefits and the CAFC has also rejected similar arguments made by British Steel in Inland Steel Bar Co. v. United States, 155 F.3d 1370 (Federal Circuit 1998). The petitioner further argues that BSES has mischaracterized the Department's analysis in the preliminary results of this review and in the investigation and previous administrative reviews of this case in claiming that the Department has refused ``to consider the effect of a privatization'' and has used an ``irrebuttable presumption.'' The petitioner contends that the Department has examined the specific facts of this case and considered arguments raised by the parties in its determination of the allocation of subsidies. The petitioner cites to Comment 5 of the Lead Bar 1994 Final Results and asserts that the Department considered interested parties arguments regarding the ``subsequent events rule'' and explained that the Department did not rely on such a rule in its findings in that review. See 61 FR at 58381. Department's Position Our position with respect to the respondent's comments on these ``change in ownership'' issues was outlined in detail in the 1994 review of this case. See Lead Bar 1994 Final Results, 61 FR at 58378- 58380. The respondent has not presented any new arguments or facts that would lead the Department to depart from its original conclusion with respect to this issue. For these reasons, our preliminary determination with respect to the changes in ownership remains unchanged in these final results. Final Results of Review In accordance with 19 C.F.R. 351.221(b)(4)(i), we calculated an individual subsidy rate for each producer/exporter subject to this administrative review. As discussed in the ``Change in Ownership'' section of the notice, above, we are treating British Steel plc and British Steel Engineering Steels as one company for purposes of this proceeding. For the period January 1, 1997 through December 31, 1997, we determine the net subsidy for British Steel plc/British Steel Engineering Steels (BS plc/BSES) to be 4.64 percent ad valorem. We will instruct the Customs Service (``Customs'') to assess countervailing duties on entries of subject merchandise from BS plc/ BSES during the POR at 4.64 percent ad valorem. The Department will also instruct Customs to collect a cash deposit of estimated countervailing duties of 4.64 percent of the f.o.b. invoice price on all shipments of the subject merchandise from BS plc/BSES 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. See 19 C.F.R. 351.213(b). Pursuant to 19 C.F.R. 351.212(c), 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 cannot 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). 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- [[Page 43677]] reviewed companies at the most recent company-specific or country-wide rate applicable to the company. Accordingly, the cash deposit rates that will be applied to non-reviewed companies covered by this order will be the rate for that company established in the most recently completed administrative proceeding conducted under the URAA. If such a review has not been conducted, the rate established in the most recently completed administrative proceeding pursuant to the statutory provisions that were in effect prior to the URAA amendments is applicable. See, Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the United Kingdom; Final Results of Countervailing Duty Administrative Review, 60 FR 54841 (October 26, 1995). These rates shall apply to all non-reviewed companies until a review of a company assigned these rates is requested. In addition, for the period January 1, 1997 through December 31, 1997, 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. This notice serves as a reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 C.F.R. Sec. 351.305(a)(3). Timely written notification of return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation. This administrative review and notice are issued and published in accordance with section 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1) and 19 U.S.C. 1677f(i)(1)). Dated: August 5, 1999. Robert S. LaRussa, Assistant Secretary for Import Administration. [FR Doc. 99-20736 Filed 8-10-99; 8:45 am] BILLING CODE 3510-DS-P