Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination: Stainless Steel Sheet and Strip in Coils from Italy

[Federal Register Volume 63, Number 221 (Tuesday, November 17, 1998)]
[Notices]
[Pages 63900-63909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30738]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-825]


Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination with Final 
Antidumping Duty Determination: Stainless Steel Sheet and Strip in 
Coils from Italy

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

EFFECTIVE DATE: November 17, 1998.

FOR FURTHER INFORMATION CONTACT: Craig W. Matney, Gregory W. Campbell, 
or Alysia Wilson, AD/CVD Enforcement, Group I, Office 1, Import 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-1778, 482-2239, or 482-0108, respectively.
    Preliminary Determination: The Department of Commerce (the 
Department) preliminarily determines that countervailable subsidies are 
being provided to producers and exporters of stainless steel sheet and 
strip in coils from Italy.

Petitioners

    The petition in this investigation was filed by the Allegheny 
Ludlum Corporation, Armco Inc., J&L Specialty Steel, Inc., Washington 
Steel Division of Bethlehem Steel Corporation, United Steel Workers of 
America, AFL-CIO/CLC, Butler Armco Independent Union, and Zanesville 
Armco Independent Organization, Inc. (collectively referred to 
hereinafter as the ``petitioners'').

Case History

    Since the publication of the notice of initiation in the Federal 
Register (see Notice of Initiation of Countervailing Duty 
Investigations: Certain Stainless Steel Sheet and Strip in Coils from 
France, Italy, and the Republic of Korea, 63 FR 37539 (July 13, 1998) 
(Initiation Notice)), the following events have occurred. On July 13, 
1998, we issued questionnaires to the Government of Italy (GOI), the 
European Commission (EC), Acciai Speciali Terni S.p.A. (AST), and 
Arinox S.r.l. (Arinox). On August 6, 1998, we postponed the preliminary 
determination of this investigation until November 9, 1998 (see Notice 
of Postponement of Time Limit for Countervailing Duty Investigations: 
Stainless Steel Sheet and Strip in Coils from France, Italy, and the 
Republic of Korea, 63 FR 43140 (August 12, 1998)).
    We received responses to our initial questionnaires from the GOI, 
the EC, AST, and Arinox between July 29 and September 14. Between 
September 21 and October 16, 1998, we issued supplemental 
questionnaires to the GOI, the EC, AST, and Arinox. We received 
responses to these supplemental questionnaires between October 9 and 
October 22, 1998.

Scope of Investigation

    For purposes of these investigations, the products covered are 
certain stainless steel sheet and strip in coils. Stainless steel is an 
alloy steel containing, by weight, 1.2 percent or less of carbon and 
10.5 percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (``HTSUS'') at 
subheadings: 7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 
7219.13.00.80, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 
7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 
7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 
7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 
7219.33.00.36, 7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 
7219.34.00.05, 7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 
7219.34.00.35, 7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 
7219.35.00.35, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 
7219.90.00.60, 7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 
7220.20.10.10, 7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 
7220.20.60.05, 7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 
7220.20.60.80, 7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 
7220.20.70.60, 7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 
7220.20.90.60, 7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 
7220.90.00.80. Although the HTS subheadings are provided for 
convenience and Customs purposes, the written description of the 
merchandise under investigation is dispositive.
    Excluded from the scope of this petition are the following: 
(1)Sheet and strip that is not annealed or otherwise heat treated and 
pickled or otherwise descaled, (2) sheet and strip that is cut to 
length, (3) plate (i.e., flat-rolled stainless steel products of a 
thickness of 4.75 mm or more), (4)flat wire (i.e., cold-rolled 
sections, rectangular in shape, of a width of not more than 9.5 mm, and 
a thickness of not more than 6.35 mm), and (5)razor blade steel. Razor 
blade steel is a flat rolled product of stainless steel, not further 
worked than cold-rolled (cold-reduced), in coils, of a width of not 
more than 23mm and a thickness of 0.266 mm or less, containing, by 
weight, 12.5 to 14.5 percent chromium, and certified at the time of 
entry to be used in the manufacture of razor blades. See Chapter 72 of 
the HTSUS, ``Additional U.S. Note'' 1(d).
    The Department has determined that certain specialty stainless 
steel products are also excluded from the scope of these 
investigations. These excluded products are described below: Flapper 
valve steel is defined as stainless steel strip in coils with a 
chemical composition similar to that of AISI 420F grade steel and 
containing, by weight, between 0.37 and 0.43 percent carbon, between 
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent 
manganese. This steel also contains, by weight, phosphorus of 0.025 
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur 
of 0.020 percent or less. The product is manufactured by means of 
vacuum arc remelting, with inclusion controls for sulphide of no more 
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper 
valve steel has a tensile strength of 185 kgf/mm2, plus or minus 10, 
yield strength of 150 kgf/mm2, plus or minus 8, and hardness (Hv) of 
540, plus or minus 30.
    Also excluded is suspension foil, a specialty steel product used, 
e.g., in the manufacture of suspension assemblies for computer disk 
drives. Suspension foil is described as 302/304 grade or 202

[[Page 63901]]

grade stainless steel of a thickness between 14 and 127 m, 
with a thickness tolerance of plus-or-minus 2.01 m, and 
surface glossiness of 200 to 700 percent Gs. Suspension foil must be 
supplied in coil widths of not more than 407 mm, and with a mass of 225 
kg or less. Roll marks may only be visible on one side, with no 
scratches of measurable depth, and must exhibit residual stresses of 2 
mm maximum deflection, and flatness of 1.6 mm over 685 mm length.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of these investigations. This ductile stainless 
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths of 1.016 to 228.6 
mm, and a thickness between 0.0127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This product is most commonly used in electronic 
sensors and is currently available, e.g., under the trade name 
``Arnokrome III,'' 1
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    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Electrical resistance alloy steel is also not included in the scope 
of these investigations. This product is defined as a non-magnetic 
stainless steel manufactured to American Society of Testing and 
Materials (ASTM) specification B344 and containing, by weight, 36 
percent nickel, 18 percent chromium, and 46 percent iron, and is most 
notable for its resistance to high temperature corrosion. It has a 
melting point of 1390 degrees Celsius and displays a creep rupture 
limit of 4 kilograms per square millimeter at 1000 degrees Celsius. 
This steel is most commonly used in the production of heating ribbons 
for circuit breakers and industrial furnaces, and in rheostats for 
railway locomotives. The product is currently available, e.g., under 
the trade name ``Gilphy 36.'' 2
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    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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    Finally, certain stainless steel strip in coils used in the 
production of textile cutting tools (e.g., carpet knives) is also 
excluded. This steel is similar to ASTM grade 440F, but containing 
higher levels of molybdenum. This steel contains, by weight, carbon of 
between 1.0 and 1.1 percent, sulphur of 0.020 percent or less, and 
includes between 0.20 and 0.30 percent copper and cobalt. This steel is 
sold under, e.g. the proprietary name GIN4Mo.3
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    \3\ ``Gin4Mo'' is the proprietary grade of Hitachi Metals 
America, Ltd.
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    All interested parties are advised that additional issues 
pertaining to the scope of these investigations are still pending. 
Furthermore, the exclusions outlined above are subject to further 
revision and refinement. The Department plans on notifying interested 
parties of its determinations on all scope issues in sufficient time 
for parties to comment before the final determination.

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 the current regulations codified at 19 
CFR Part 351 (1998).

Injury Test

    Because Italy is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from Italy materially injure, or threaten material 
injury to, a U.S. industry. On August 9, 1998, the ITC published its 
preliminary determination 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 Italy of the 
subject merchandise (see Certain Stainless Steel Sheet and Strip From 
France, Germany, Italy, Japan, the Republic of Korea, Mexico, Taiwan, 
and the United Kingdom, 63 FR 41864 (August 9, 1998)).

Alignment With Final Antidumping Determination

    On July 22, 1998, the petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determination in the companion antidumping duty investigation. 
See Initiation of Antidumping Investigations: Stainless Steel Sheet and 
Strip in Coils From France, Germany, Italy, Japan, Mexico, South Korea, 
Taiwan, and the United Kingdom, 63 FR 37521 (July 13, 1998). Therefore, 
in accordance with section 705(a)(1) of the Act, we are aligning the 
final determination in this investigation with the final determinations 
in the antidumping investigations of stainless steel sheet and strip in 
coils.

Period of Investigation

    The period of investigation for which we are measuring subsidies 
(the POI) is calendar year 1997.

Company History of AST

    Prior to 1987, Terni, S.p.A, (Terni), a main operating company of 
Finsider, was the sole producer of stainless steel sheet and strip in 
coils (sheet and strip) in Italy. Finsider was a holding company that 
controlled all state-owned steel companies in Italy. Finsider, in turn, 
was wholly-owned by a government holding company, Istituto per la 
Ricostruzione Industriale (IRI). As part of a restructuring in 1987, 
Terni transferred its assets to a new company, Terni Acciai Speciali 
(TAS).
    In 1988, another restructuring took place in which Finsider and its 
main operating companies (TAS, Italsider, and Nuova Deltasider) entered 
into liquidation and a new company, ILVA S.p.A. was formed. ILVA S.p.A. 
took over some of the assets and liabilities of the liquidating 
companies. With respect to TAS, part of its liabilities and the 
majority of its viable assets, including all the assets associated with 
the production of sheet and strip, were transferred to ILVA S.p.A. on 
January 1, 1989. ILVA S.p.A. became operational on the same day. Part 
of TAS's remaining assets and liabilities were transferred to ILVA 
S.p.A. on April 1, 1990. After that date, TAS no longer had any 
manufacturing activities. Only certain non-operating assets remained in 
TAS.
    From 1989 to 1994, ILVA S.p.A. consisted of several operating 
divisions. The Specialty Steels Division, located in Terni, produced 
subject merchandise. ILVA S.p.A. was also the majority owner of a large 
number of separately incorporated subsidiaries. The subsidiaries 
produced various types of steel products and also included service 
centers, trading companies, and an electric power company, among 
others. ILVA S.p.A. together with its subsidiaries constituted the ILVA 
Group (ILVA). ILVA was wholly-owned by IRI. All subsidies received 
prior to 1994 were received by ILVA or its predecessors.
    In October 1993, ILVA entered into liquidation and became known as 
ILVA Residua. On December 31, 1993, two of ILVA's divisions were 
removed and separately incorporated: AST and ILVA Laminati Piani (ILP). 
ILVA's Specialty Steels Division was transferred to AST while its 
carbon steel flat products operations were placed in ILP. The remainder 
of ILVA's assets and liabilities, along with much of the

[[Page 63902]]

redundant workforce, were left in ILVA Residua.
    In December 1994, AST was sold to KAI Italia S.r.L. (KAI), a 
privately-held holding company jointly owned by German steelmaker 
Hoesch-Krupp (50 percent) and a consortium of private Italian companies 
called FAR Acciai (50 percent). Between 1995 and the POI, there were 
several restructurings/changes in ownership of AST and its parent 
companies. As a result, at the end of the POI, AST was owned 75 percent 
by Krupp Thyssen Stainless GmbH and 25 percent by Fintad Securities 
S.A.

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 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. For further discussion of our 
privatization methodology, see, e.g., Preliminary Affirmative 
Countervailing Duty Determination and Alignment of Final Countervailing 
Duty Determination with Final Antidumping Duty Determination: Stainless 
Steel Plate in Coils from Italy, 63 FR 47246 (September 4, 1998) 
(Italian Plate).
    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 the repayment of 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 repayment of prior subsidies in accordance with the 
privatization methodology outlined above.
    AST, the GOI and the EC have all expressed the opinion that the 
sale of AST to a private consortium in an arm's length transaction 
extinguished all prior subsidies. An analogous argument was rejected in 
the GIA. There is no basis for distinguishing the sale of AST from 
other sales that we have analyzed under the GIA methodology. See, e.g., 
Final Affirmative Countervailing Duty Determination: Steel Wire Rod 
From Trinidad and Tobago, 62 FR 55003 (October 22, 1997) (Wire Rod from 
Trinidad and Tobago); Final Affirmative Countervailing Duty 
Determination: Steel Wire Rod from Canada, 62 FR 54972 (October 22, 
1997); and Final Affirmative Countervailing Duty Determination: 
Stainless Steel Wire Rod from Italy, 63 FR 40474 (July 29, 1998) (Wire 
Rod from Italy). Therefore, we have applied the methodology set forth 
in the GIA for the 1994 privatization. After the 1994 privatization of 
AST, there were numerous changes in the ownership structure of the 
parent companies of AST. AST provided information for only one of these 
changes. We have preliminarily applied the methodology to that 
transaction, and we are evaluating whether it is appropriate to apply 
the change in ownership methodology to the other post-privatization 
transactions. We request interested parties to comment on this issue.

Subsidies Valuation Information

    Benchmarks for Long-term Loans and Discount Rates: Consistent with 
the Department's finding in Wire Rod from Italy, 63 FR at 40476-77, we 
have based our long-term benchmarks and discount rates on the Italian 
Bankers' Association (ABI) rate. Because the ABI rate represents a 
long-term interest rate provided to a bank's most preferred customers 
with established low-risk credit histories, commercial banks typically 
add a spread ranging from 0.55 percent to 4 percent onto the rate for 
other customers depending on their financial health.
    In years in which AST or its predecessor companies were 
creditworthy, we added the average of that spread onto the ABI rate to 
calculate a nominal benchmark rate. In years in which AST or its 
predecessor companies were uncreditworthy (see Creditworthiness section 
below), we calculated the discount rates in accordance with our 
methodology for constructing a long-term interest rate benchmark for 
uncreditworthy companies. Specifically, we added to the ABI rate a 
spread of 4 percent in order to reflect the highest commercial interest 
rate available to companies in Italy. We added to this rate a risk 
premium equal to 12 percent of the ABI, as described in section 
355.44(b)(6)(iv) of the Department's 1989 Proposed Regulations, which 
remain a statement of the Department's practice (see Countervailing 
Duties; Notice of Proposed Rulemaking and Request for Public Comment, 
54 FR 23366, 23374 (May 31, 1989) (1989 Proposed Regulations).
    Additionally, information on the record of this case indicates that 
published ABI rates do not include amounts for fees, commissions and 
other borrowing expenses. Since such expenses raise the effective 
interest rate that a company would experience and it is the 
Department's practice to use effective interest rates, where possible, 
we are including an amount for these expenses in the calculation of our 
effective benchmark rates. While we do not have information on the 
expenses that would be applied to long-term commercial loans, 
information on the record shows that borrowing expenses on overdraft 
loans range from 6 to 11 percent of interest charged. For purposes of 
this preliminary determination, we are assuming that the level of 
borrowing expenses on overdraft loans approximates the level on long-
term commercial loans. Accordingly, we are increasing the nominal 
benchmark rate by 8.5 percent, representing the average reported level 
of borrowing expenses, to arrive at an effective benchmark rate.
    Allocation Period: In the past, the Department has relied upon 
information from the U.S. Internal Revenue Service (IRS) for the 
industry-specific average useful life of assets in determining the 
allocation period for non-recurring subsidies. See the GIA. In British 
Steel plc v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel 
I), the U.S. Court of International Trade (the Court) held that the IRS 
information did not necessarily reflect a reasonable period based on 
the actual commercial and competitive benefit of the subsidies to

[[Page 63903]]

the recipients. In accordance with the Court's remand order, the 
Department calculated a company-specific allocation period for non-
recurring 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. See British Steel plc v. United States, 929 
F. Supp. 426, 439 (CIT 1996) (British Steel II).
    In recent countervailing duty investigations, it has been our 
practice to follow the Court's decision in British Steel II, and to 
calculate a company-specific allocation period for all countervailable 
non-recurring subsidies. In this investigation, we examined the 
company-specific AUL for both AST and Arinox because both received non-
recurring subsidies. In the case of Arinox, we preliminarily determine 
a company specific AUL of their non-renewable physical assets of 12 
years.
    However, our analysis of the data submitted by AST regarding the 
AUL of its assets has revealed several problems. It appears that the 
methodology used to value AST's assets during and subsequent to AST's 
privatization may be distorting the company-specific AUL calculation. 
Moreover, it appears that AST has not included all of its non-renewable 
physical assets in the AUL figure it reported. Furthermore, the 
methodology used to value ILVA's assets is unclear and may be 
distortional.
    Based on the concerns outlined above, we preliminarily determine 
that AST's calculation of its company-specific AUL should not be used 
to determine the appropriate allocation period for non-recurring 
subsidies. Rather, for purposes of this preliminary determination we 
are using the 15 years as set out in the IRS Tables. We intend to 
request clarification and additional information concerning AST's AUL 
data in the course of this investigation.
    While we have not used AST's company-specific AUL because of the 
concerns outlined above, even if we were to use the company-specific 
data submitted by AST, the facts of this case pose additional concerns 
and possible inconsistencies. In particular, this investigation covers 
countervailable non-recurring subsidies benefitting AST that were found 
to be countervailable in Final Affirmative Countervailing Duty 
Determination: Grain-Oriented Electrical Steel from Italy, 59 FR 18357 
(April 18, 1994), (Electrical Steel from Italy), i.e., equity 
infusions, equity infusions to Terni and ILVA, benefits from the 1988-
90 restructuring (called debt forgiveness: Finsider-to-ILVA 
restructuring in Initiation Notice), debt forgiveness: ILVA-to-AST 
(included under this debt forgiveness are the following programs from 
the Initiation Notice: working capital grants to ILVA, 1994 debt 
payment assistance by IRI, and ILVA restructuring and liquidation 
grant), Law 675/77, and ECSC Article 54 Loans. See 63 FR at 37543. In 
Electrical Steel From Italy, the Department allocated these subsidies 
over 15 years based on information from the U.S. Internal Revenue 
Service (IRS) for the industry-specific average useful life of assets. 
Under current Department practice, previously allocated subsidies 
within the same proceeding are not given a new allocation period. 
Rather, it is our policy to retain the allocation period originally 
established for the subsidies in subsequent administrative reviews of 
the same preceding.
    We note here that in the concurrent investigation of stainless 
steel sheet and strip in coils from France, the Department 
preliminarily determined that it is more appropriate to continue 
allocating non-recurring subsidies over the company-specific AUL of 14 
years, which was calculated as a result of British Steel II. Although 
this was a company-specific AUL, it was the AUL applied in a prior 
investigation of the same subsidies to the same company that are 
currently being examined in the investigation of stainless steel sheet 
and strip in coils from France. The issue we are presented with is 
whether the allocation period, once established for a subsidy to a 
company, should change in different proceedings. If the allocation 
period did not change across proceedings, the same subsidies described 
above would be allocated over 15 years in both the current 
investigation and under the countervailing duty order on Electrical 
Steel From Italy. However, if we were to adopt different allocation 
periods for different proceedings, the same subsidy to the same company 
would be allocated over different periods, since AST has calculated an 
AUL of 9 years, assuming the calculation presented by and based on 
company-specific data was accepted by the Department. Thus, the same 
subsidy to the same company would have different allocation periods 
across separate proceedings: 15 years in Electrical Steel From Italy 
and 9 years in this investigation.
    We encourage parties to comment on this issue and whether an 
alternative approach may be more appropriate. One option may be to 
retain the allocation period of a subsidy previously investigated in a 
prior investigation, rather than assign a new company-specific 
allocation period based on company-specific AUL data. As described 
above, this would conform with our practice in administrative reviews 
of the same countervailing duty order. Alternatively, an additional 
option would be to determine an individual AUL for each year in which a 
non-recurring subsidy is provided to a company, rather than to 
determine a company-specific AUL for non-recurring subsidies that could 
change with each investigation and result in different allocation 
periods for the same subsidy, as detailed above. We also welcome any 
additional comments on this issue not raised above.

Equityworthiness

    In analyzing whether a company is equityworthy, the Department 
considers whether that company could have attracted investment capital 
from a reasonable private investor in the year of the government equity 
infusion, based on information available at that time. See GIA, 58 FR 
at 37244. Our review of the record has not led us to change our finding 
in Final Affirmative Countervailing Duty Determination: Grain-Oriented 
Electrical Steel from Italy, 59 FR 18357 (April 18, 1994), (Electrical 
Steel from Italy), in which we found AST's predecessors unequityworthy 
from 1984 through 1988, and from 1991 through 1992.
    In measuring the benefit from a government equity infusion into an 
unequityworthy company, the Department compares the price paid by the 
government for the equity to a market benchmark, if such a benchmark 
exists. In this case, a market benchmark does not exist, so we used the 
methodology described in the GIA, 58 FR at 37239. See, also, Wire Rod 
from Trinidad and Tobago, 62 FR at 55004. Following this methodology, 
equity infusions made on terms inconsistent with the usual practice of 
a private investor are treated as grants. Use of this methodology is 
based on the premise that an unequityworthiness finding by the 
Department is tantamount to saying that the company could not have 
attracted investment capital from a reasonable investor in the infusion 
year. This determination is based on the information available in that 
year.

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, 
e.g., Final Affirmative Countervailing Duty Determinations: Certain 
Steel Products from France, 58 FR 37304 (July 9, 1993) (Certain Steel 
from France); Final

[[Page 63904]]

Affirmative Countervailing Duty Determination: Steel Wire Rod from 
Venezuela, 62 FR 55014 (Oct. 21, 1997).
    Terni, TAS and ILVA were found to be uncreditworthy from 1983 
through 1993 in Electrical Steel from Italy at 18358 and Wire Rod from 
Italy at 40477. No new information has been presented in this 
investigation that would lead us to reconsider these findings. 
Therefore, consistent with our past practice, we continue to find 
Terni, TAS and ILVA uncreditworthy from 1985 through 1993. See, e.g., 
Final Affirmative Countervailing Duty Determinations: Certain Steel 
Products from Brazil, 58 FR 37295, 37297 (July 9, 1993). There was no 
allegation by petitioners that Arinox was uncreditworthy. Therefore, we 
did not analyze its creditworthiness. In accordance with section 
355.44(b)(6)(i) of the Department's 1989 Proposed Regulations, 54 FR at 
23380, we did not analyze AST's creditworthiness in 1994 through 1997 
because AST did not negotiate the terms of loans with the GOI or EC 
during these years.

I. Programs Preliminarily Determined To Be Countervailable

GOI Programs

A. Equity Infusions to Terni and ILVA

    The GOI, through IRI, provided new equity capital to Terni or ILVA 
in every year from 1984 through 1992, except in 1989 and 1990. We 
preliminarily determine that these equity infusions constitute 
countervailable subsidies within the meaning of section 771(5) of the 
Act. These equity infusions provided a financial contribution, as 
described in section 771(5)(D)(i) of the Act, and were not consistent 
with the usual investment practices of private investors (see 
Equityworthiness section above). Because these equity infusions were 
limited to Finsider and its operating companies and ILVA, we 
preliminarily determine that they are specific within the meaning of 
section 771(5A)(D) of the Act.
    AST did not report, in its response to our questionnaires, the 1988 
equity infusion provided to ILVA. We have public information from 
Electrical Steel from Italy on the existence and amount of this 
infusion and are including it in our calculations for the preliminary 
determination.
    We have treated these equity infusions as non-recurring grants 
given in the year the infusion was received because each required a 
separate authorization. Because Terni and ILVA were uncreditworthy in 
the years of receipt, we used discount rates that include a risk 
premium to allocate the benefits over time. Additionally, we followed 
the methodology described in the Change in Ownership section above to 
determine the amount of each equity infusion appropriately allocated to 
AST after its privatization. We divided this amount by AST's total 
sales during the POI. Accordingly, we preliminarily determine the 
countervailable subsidy to be 0.12 percent ad valorem for AST.

B. Benefits from the 1988-90 Restructuring of Finsider (called Debt 
Forgiveness: Finsider-to-ILVA Restructuring in Initiation Notice)

    As discussed above in the Company History of AST section of this 
notice, the GOI liquidated Finsider and its main operating companies in 
1988 and assembled the group's most productive assets into a new 
operating company, ILVA S.p.A. In 1990, additional assets and 
liabilities of TAS, Italsider and Finsider went to ILVA.
    Not all of TAS's liabilities were transferred to ILVA S.p.A.; 
rather, many remained with TAS and had to be repaid, assumed or 
forgiven. In 1989, Finsider forgave 99,886 million lire of debt owed to 
it by TAS. Even with this debt forgiveness, a substantial amount of 
liabilities left over from the 1990 transfer of assets and liabilities 
to ILVA S.p.A. remained with TAS. In addition, losses associated with 
the transfer of assets to ILVA S.p.A. were left behind in TAS. These 
losses occurred because the value of the transferred assets had to be 
written down. As TAS gave up assets whose book value was higher than 
their appraised value, it was forced to absorb the losses. These losses 
were generated during two transfers as reflected in: (1) an 
extraordinary loss in TAS's 1988 Annual Report and (2) a reserve 
against anticipated losses posted in 1989 with respect to the 1990 
transfer.
    Consistent with our treatment of the 1988-90 restructuring in 
Electrical Steel from Italy, 59 FR at 18359, we preliminarily determine 
that the debt and loss coverage provided to ILVA constitutes a 
countervailable subsidy within the meaning of section 771(5) of the 
Act. The debt and loss coverage provided a financial contribution as 
described in section 771(5)(D)(i) of the Act. Because this debt and 
loss coverage was limited to TAS, AST's predecessor, we preliminarily 
determine that it is specific within the meaning of section 771(5A)(D) 
of the Act.
    In calculating the benefit from this program, we followed our 
methodology in Electrical Steel from Italy, except for the correction 
of a calculation error which had the effect of double-counting the 
write-down from the first transfer of assets in 1988 by including it in 
the calculations of losses generated upon the second transfer of assets 
in 1990. We have treated Finsider's 1989 forgiveness of TAS' debt and 
the loss resulting from the 1989 write-down as grants received in 1989. 
The second asset write down and the debt outstanding after the 1990 
transfer were treated as grants received in 1990. We treated these as 
non-recurring grants because they were a one-time, extraordinary event. 
Because ILVA was uncreditworthy in these years, we used discount rates 
that include a risk premium to allocate the benefits over time. 
Finally, we followed the methodology described in the Change in 
Ownership section above to determine the amount of each benefit 
appropriately allocated to AST after its privatization and subsequent 
changes in ownership. We divided this amount by AST's total sales 
during the POI. Accordingly, we preliminarily determine the 
countervailable subsidy to be 1.52 percent ad valorem for AST.

C. Debt Forgiveness: ILVA-to-AST (Included Are The Following Programs 
From the Initiation Notice: Working Capital Grants to ILVA, 1994 Debt 
Payment Assistance by IRI, and ILVA Restructuring and Liquidation 
Grant)

    As of December 31, 1993, the majority of ILVA's viable 
manufacturing activities had been separately incorporated into either 
AST or ILP; ILVA Residua was primarily a shell company with liabilities 
far exceeding assets. In contrast, AST and ILP, now ready for 
privatization, had operating assets and relatively modest debt loads.
    The liabilities remaining with ILVA Residua after the privatization 
of AST and ILP had to be repaid, assumed, or forgiven. AST has stated 
that IRI, in accordance with Italian Civil Code, bears responsibility 
for all liabilities remaining in ILVA Residua. Furthermore, information 
submitted by AST indicates that the EC has approved IRI's plan to cover 
ILVA Residua's remaining liabilities when its final liquidation occurs.
    Although this debt has yet to be eliminated completely by any 
specific act of the GOI or its holding company IRI, we preliminarily 
determine that AST (and consequently the subject merchandise) received 
a countervailable subsidy in 1993 when the bulk of ILVA's debt was 
placed in ILVA Residua, rather than being placed also with AST and ILP.
    The placing of this debt with ILVA Residua was equivalent to debt 
forgiveness for AST. In accordance with our past practice, debt 
forgiveness is treated as a grant which constitutes a financial 
contribution under section

[[Page 63905]]

771(5)(D)(ii) and provides a benefit in the amount of the debt 
forgiveness. Because the debt forgiveness was received only by 
privatized ILVA operations, we preliminarily determine that it is 
specific under section 771(5A)(D) of the Act.
    As noted above, certain operating assets (e.g., pipe and tube 
operations) and non-operating assets (e.g., cash, bank deposits) 
remained in ILVA Residua. Some of these assets have been privatized or 
otherwise used to fund repayment of the liabilities remaining in ILVA 
Residua. The EC, in its monitoring of the ILVA liquidation, has 
accounted for the fact that certain assets have been privatized or 
otherwise used to fund repayment of ILVA Residua's liabilities. The 
Department has followed similar methodology. We have also subtracted 
the amount of debt (i.e., 253 billion lire) that was tied to Cogne 
Acciai Speciali (CAS), an ILVA subsidiary privatized in 1994, which was 
left behind in ILVA Residua. This amount was countervailed in Wire Rod 
from Italy (see 63 FR at 40478). We have attributed ILVA Residua's 
remaining residual indebtedness as of the end of 1997 to AST based on 
the proportion of assets assigned to AST to the total viable assets 
assigned to AST, ILP, and other ILVA operations which were privatized, 
as appropriate, and considered this amount as debt forgiveness. For the 
final determination, we intend to examine further the liquidation of 
ILVA Residua's assets as well as any liquidation costs that might not 
have been accounted for in the EC monitoring process.
    We treated the debt forgiveness to AST as a non-recurring grant 
because it was a one-time, extraordinary event. The discount rate we 
used in our grant formula included a risk premium based on our 
determination that ILVA was uncreditworthy in 1993. (For purposes of 
the final determination we will examine the issue of whether it is more 
appropriate to analyze the creditworthiness of AST rather than ILVA in 
1993.) We followed the methodology described in the Change in Ownership 
section above to determine the amount appropriately allocated to AST 
after its privatization and subsequent changes in ownership. We divided 
this amount by AST's total sales during the POI. Accordingly, we 
determine the estimated net subsidy to be 3.47 percent ad valorem for 
AST.

D. Law 796/76: Exchange Rate Guarantees

    Law 796/76 established a program to minimize the risk of exchange 
rate fluctuations on foreign currency loans. All firms that had 
contracted foreign currency loans from the European Coal and Steel 
Community (ECSC) or the Council of Europe Resettlement Fund (CER) could 
apply to the Ministry of the Treasury (MOT) to obtain an exchange rate 
guarantee. The MOT, through the Ufficio Italiano di Cambi (UIC), 
calculated loan payments based on the lira-foreign currency exchange 
rate in effect at the time the loan was approved. The program 
established a floor and ceiling for exchange rate fluctuations, 
limiting the maximum fluctuation a borrower would face to two percent. 
If the lira depreciated against the foreign currency, AST was still 
able to purchase foreign currency at the established ceiling rate, and 
the UIC would absorb a loss in the amount of the difference between the 
ceiling rate and the actual rate. If the lira appreciated against the 
foreign currency, the UIC would realize a gain in the amount of the 
difference between the floor rate and the actual rate.
    This program was terminated effective July 10, 1992, by Decree Law 
333/92. However, the exchange rate guarantees continue on any loans 
outstanding after that date. AST had two outstanding ECSC loans during 
the POI that benefitted from these guarantees. Arinox did not receive 
foreign exchange rate guarantees under this program.
    We preliminarily determine that this program constitutes a 
countervailable subsidy within the meaning of section 771(5) of the 
Act. This program provides a financial contribution, as described in 
section 771(5)(D)(i) of the Act, to the extent that the lira 
depreciates against the foreign currency beyond the two percent band. 
When this occurs, the borrower receives a benefit in the amount of the 
difference between the two percent floor and the actual exchange rate.
    The GOI did not provide information regarding the types of the 
enterprises that have used this program. However, we have previously 
found the steel industry to be a dominant user of the exchange rate 
guarantees provided under Law 796/76. Therefore, we preliminarily 
determine that the program is specific under section 771(5A)(D) of the 
Act. See Final Affirmative Countervailing Duty Determination: Small 
Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and 
Pressure Pipe From Italy, 60 FR 31996 (June 19, 1995).
    Once a loan is approved for exchange rate guarantees, access to 
foreign exchange at the established rate is automatic and occurs at 
regular intervals throughout the life of the loan. Therefore, we have 
treated benefits under this program as recurring grants. The benefit 
was calculated as the difference between the total payment due (i.e., 
the sum of interest, principal, and any guarantee fees paid by AST) in 
foreign currency converted at the current exchange rate minus the total 
payment due in foreign currency at the established (ceiling) rate. We 
divided this amount by AST's total sales during the POI. Accordingly, 
we determine the countervailable subsidy to AST for this program to be 
0.86 percent ad valorem.

E. Law 675/77

    Law 675/77 was designed to provide GOI assistance in the 
restructuring and reconversion of Italian industries. There are six 
types of assistance available under this law: (1) grants to pay 
interest on bank loans; (2) mortgage loans provided by the Ministry of 
Industry (MOI) at subsidized interest rates; (3) grants to pay interest 
on loans financed by IRI bond issues; (4) capital grants for the South; 
(5) VAT reductions on capital good purchases for companies in the 
South; and (6) personnel retraining grants. During the POI, AST had two 
outstanding loans financed by IRI bond issues for which it received 
interest contributions from the GOI. Arinox did not receive assistance 
under this program.
    Under Law 675/77, IRI issued bonds to finance restructuring 
measures of companies within the IRI group. The proceeds from the sale 
of the bonds were then re-lent to IRI companies. During the POI, AST 
had two outstanding loans financed by IRI bond issues for which the 
effective interest rate was reduced by interest contributions made by 
the GOI. In addition to interest contributions on these variable rate 
long-term loans, the GOI also made other financial contributions 
relating to ``expenses'' associated with the loans.
    We preliminarily determine that these loans constitute a 
countervailable subsidy within the meaning of section 771(5) of the 
Act. These loans provided a financial contribution as described in 
section 771(5)(D)(i) of the Act.
    With regard to specificity, a number of different industrial 
sectors have received benefits under Law 675/77. However, in Electrical 
Steel from Italy, the Department determined that assistance under this 
law was specific because the steel industry was a dominant user of the 
program (the steel industry received 34 percent of the benefits). See 
Electrical Steel from Italy, 59 FR at 18361. In the instant proceeding, 
the GOI submitted additional information regarding the distribution of 
benefits under this

[[Page 63906]]

program. While it is unclear whether this information reflects the 
distribution of benefits at the time the subsidies in question were 
given, the new information is nevertheless consistent with our previous 
finding of specificity. Therefore, we preliminarily find the program to 
be specific.
    To measure the benefit from these loans, we compared the benchmark 
interest rate to the amounts paid by AST on these loans during the POI. 
We divided the resulting difference by AST's total sales during the 
POI. Accordingly, we determine the estimated net subsidy from this 
program to be 0.04 percent ad valorem for AST.

F. Law 488/92

    Law 488/92 provides grants for industrial projects in depressed 
regions of Italy. The subsidy amount is based on the location of the 
investment and the size of the enterprise. The funds used to pay 
benefits under this program are derived in part from the GOI and in 
part from the Structural Funds of the EU. To be eligible for benefits 
under this program, the enterprise must be located in one of the 
regions in Italy identified in EU Objectives 1, 2 or 5b. Arinox 
received assistance under this program because it is located in an 
economically depressed region, AST did not.
    We preliminarly determine that this program constitutes a 
countervailable subsidy within the meaning of section 771(5) of the 
Act. This program provides a financial contribution, as described in 
section 771(5)(D)(i) of the Act. Because assistance is limited to 
enterprises located in certain regions, we preliminarily determine that 
the program is specific under section 771(5A)(D) of the Act.
    Under this program Arinox received one grant, disbursed in two 
tranches during the POI. We have treated benefits under this program as 
non-recurring because each grant requires separate government approval. 
The benefit to Arinox was calculated as the sum of the two tranches 
provided. Because this sum is greater than 0.5 percent of Arinox's 
sales, we allocated the benefit over Arinox's AUL. We divided the 
benefit allocated to the POI by Arinox's total sales during the POI. 
Accordingly, we determine the countervailable subsidy to Arinox for 
this program to be 0.12 percent ad valorem.

EC Programs

A. ECSC Article 54 Loans

    Article 54 of the 1951 ECSC Treaty established a program to provide 
industrial investment loans directly to the iron and steel industries 
to finance modernization and the purchase of new equipment. Eligible 
companies apply directly to the EU for up to 50 percent of the cost of 
an industrial investment project. The Article 54 loan program is 
financed by loans taken out by the European Union, which are then 
refinanced at slightly higher interest rates than those at which the EU 
obtained them. AST had two long-term, fixed-rate loans outstanding 
during the POI under this program. Arinox did not receive loans under 
this program.
    We preliminarily determine that these loans constitute a 
countervailable subsidy within the meaning of section 771(5) of the 
Act. This program provides a financial contribution, as described in 
section 771(5)(D)(i) of the Act. The Department has found Article 54 
loans to be specific in several proceedings, including Electrical Steel 
from Italy, 59 FR at 18362, and Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from Italy, 58 FR 37327, 37335 
(July 9, 1993), because loans under this program are provided only to 
iron and steel companies. The EU has also indicated on the record of 
this investigation that Article 54 loans are for steel undertakings. 
Therefore, we preliminarily determine that this program is specific.
    AST had two long-term, fixed-rate loans outstanding during the POI, 
each one denominated in a foreign currency. Consistent with Electrical 
Steel from Italy, 59 FR at 18362, we have used the lira-denominated 
interest rate discussed in the Subsidies Valuation Information section 
of this notice as our benchmark interest rate. The interest rate 
charged on one of AST's two ECSC loans was lowered part way through the 
life of the loan. Therefore, for the purpose of calculating the 
benefit, we have treated this loan as if it were contracted on the date 
of this rate adjustment. We used the outstanding principal as of that 
date as the new principal amount, to which the new, lower interest rate 
applied. As our interest rate benchmark, we used the long-term, lira-
based rate in effect on the date of the downward rate adjustment.
    To calculate the benefit under this program, we employed the 
Department's standard long-term loan methodology. We calculated the 
grant equivalent and allocated it over the life of each loan. We 
followed the methodology described in the Change in Ownership section 
above to determine the amount appropriately allocated to AST after its 
privatization and subsequent changes in ownership. We divided this 
benefit by AST's total sales during the POI. Accordingly, we determine 
the countervailable subsidy to AST for these two loans together to be 
0.06 percent ad valorem.

B. European Social Fund

    The European Social Fund (ESF), one of the Structural Funds 
operated by the EU, was established to improve workers' opportunities 
through training and to raise their standards of living throughout the 
Community by increasing their employability. Like other EU Structural 
Funds, there are five different Objectives (sub-programs) identified 
under ESF: Objective 1 covers projects located in underdeveloped 
regions, Objective 2 addresses areas in industrial decline, Objective 3 
relates to the employment of persons under 25, Objective 4 funds 
training for employees in companies undergoing restructuring, and 
Objective 5 pertains to agricultural areas.
    During the POI, AST received ESF assistance under Objectives 2 and 
4, and Arinox received assistance under Objective 2. In the case of 
AST, the Objective 2 funding was to retrain production, mechanical, 
electrical maintenance, and technical workers, and the Objective 4 
funding was to train AST's workers to increase their productivity. 
Arinox stated that the grants it received were for worker training.
    The Department considers worker training programs to provide a 
countervailable benefit to a company when the company is relieved of an 
obligation it would have otherwise incurred. See Final Affirmative 
Countervailing Duty Determination: Certain Pasta (``Pasta'') From 
Italy, 61 FR 30287, 30294 (June 14, 1996) (Pasta From Italy). Since 
companies normally incur the costs of training to enhance the job-
related skills of their own employees, we preliminarily determine that 
this ESF funding relieves AST and Arinox of obligations they would have 
otherwise incurred.
    Therefore, we preliminarily determine that the ESF grants received 
by AST and Arinox are countervailable within the meaning of section 
771(5) of the Act. The ESF grants are a financial contribution as 
described in section 771(5)(D)(i) of the Act which provide a benefit to 
the recipient in the amount of the grant.
    Consistent with prior cases, we have examined the specificity of 
the funding under each Objective separately. See Wire Rod from Italy, 
63 FR at 40487. In this case, the Objective 2 grants received by AST 
and Arinox were funded by the EU, the GOI, and the regional government 
of Umbria acting through the provincial government of Terni for AST and 
the regional government of

[[Page 63907]]

Liguria for Arinox. In Pasta From Italy, 61 FR at 30291, the Department 
determined that Objective 2 funds provided by the EU and the GOI were 
regionally specific because they were limited to areas within Italy 
which are in industrial decline. No new information or evidence of 
changed circumstances has been submitted in this proceeding to warrant 
reconsideration of this finding. Regarding funding provided by the 
regional governments, neither government provided information on the 
distribution of its grants under Objective 2. Therefore, since these 
governments failed to cooperate to the best of their ability by not 
supplying the requested information on the distribution of grants under 
Objective 2, we are assuming for purposes of this preliminary 
determination, as adverse facts available under section 776(b) of the 
Act, that the funds provided by the provincial governments of Terni and 
Liguria are also specific.
    In the case of Objective 4 funding, the Department has determined 
in past cases that the EU portion is de jure specific because its 
availability is limited on a regional basis within the EU. The GOI 
funding was also determined to be de jure specific because eligibility 
is limited to the center and north of Italy (non-Objective 1 regions). 
See Wire Rod from Italy, 63 FR at 40487. No new information or evidence 
of changed circumstances has been submitted in this proceeding to 
warrant reconsideration of this finding.
    The Department normally considers the benefits from worker training 
programs to be recurring. See GIA, 58 FR at 37255. However, consistent 
with the Department's determination in Wire Rod from Italy, 63 FR at 
40488, that these grants relate to specific, individual projects, we 
have treated these grants as non-recurring grants because each required 
separate government approval. Because the amount of funding for each of 
AST's projects was less than 0.5 percent of AST's sales in the year of 
receipt, we have expensed these grants received in the year of receipt. 
Two of AST's grants were received during the POI. For these grants, we 
divided this benefit by AST's total sales during the POI and calculated 
a benefit of 0.01 percent ad valorem for ESF Objective 2 funds and 0.03 
percent ad valorem for ESF Objective 4 funds.
    Arinox received ESF Objective 2 grants in 1991 and 1992. Because 
the amount of funding for each of Arinox's projects project was more 
than 0.5 percent of Arinox's sales in the year of receipt, we have 
allocated these grants over its AUL. In allocating Arinox's benefits, 
we used the appropriate discount rate which corresponded to the year in 
which the funds were approved by the GOI. Accordingly, we determine the 
countervailable subsidy under the ESF Objective 2 program for Arinox to 
be 0.34 percent ad valorem.

II. Programs Preliminarily Determined to be Not Countervailable

A. AST Participation in the THERMIE Program

    The EU provided funds to AST for the development of a demonstration 
project (pilot plant) through an EU program promoting research and 
development in the field of non-nuclear energy (THERMIE). The objective 
of the THERMIE program is to encourage the development of efficient, 
cleaner, and safer technologies for energy production and use. The 
THERMIE program is part of a larger program categorized under the EU's 
Fourth Framework Programme which covers activities in research and 
technological development from 1994-1998. Arinox did not receive funds 
from this program.
    The objective of AST's demonstration plant is to reduce energy 
consumption in the production of stainless steel by eliminating some of 
the traditional production steps through the adoption of ``strip 
casting'' technology. In Italian Plate, as well as in the instant 
proceeding, the EU has requested noncountervailable (green light) 
treatment for this project as a research and development subsidy under 
section 771(5B)(B)(ii)(II) of the Act.
    In Italian Plate, 63 FR at 47252, the Department preliminarily 
determined that the THERMIE program did not merit green light treatment 
because it did not meet the statutory requirement that ``the 
instruments, equipment, land or buildings be used exclusively and 
permanently (except when disposed on a commercial basis) for the 
research activity'' (see section 771(5B)(B)(i) of the Act). No new 
information has been submitted on the record in the instant proceeding 
to warrant a reconsideration of this finding.
    However, in Italian Plate, we did not have sufficient information 
to determine if the technology and the demonstration plant provided a 
benefit to subject merchandise. Furthermore, we did not have 
information on the distribution of project funds by industry or by 
company for the year in which AST's project was approved.
    In the instant proceeding, it is clear that the project does have 
applications to the subject merchandise. Also, in this proceeding, the 
EU has submitted information on the distribution of assistance under 
the THERMIE program for 1995 and 1996. Based on the information on the 
record, there is no indication that this program is de jure specific. 
Additionally, based on an examination of the distribution information, 
it appears that the program benefitted a large number of users in 
different industries, and that neither AST nor the steel industry 
received a disproportionate share of the benefits (see Memorandum to 
Susan Kuhbach from Case Analysts, dated November 9, 1998.) Therefore, 
we preliminarily determine that the THERMIE program is not specific 
within the meaning of section 771(5A)(D) of the Act and, consequently, 
not countervailable.

III. Programs for Which We Need More Information

GOI Programs

A. Law 10/91

    In its October 9 response, AST stated that it received a grant 
under Law 10/91 in a year prior to the POI.
    Law 10/91 is designed to provide grants to fund energy conservation 
projects. Companies seeking assistance under this program can apply 
under Article 8, 10, 11, 12, 13, or 14 of the Law. According to the 
GOI, aid under articles 8, 10, and 13 is limited to the autonomous 
regions and the provinces of Trento and Bolzano, while aid under 
articles 11, 12, and 14 is available throughout Italy. AST received its 
grant under article 12.
    In its October 23 response, the GOI provided a description and 
certain usage information regarding this program. Because we did not 
seek additional clarifying information on specificity prior to our 
preliminary determination, we intend to do so prior to our final 
determination. After we collect additional information and conduct 
verification, we will prepare an analysis memorandum addressing the 
countervailability of this program, and provide all parties an 
opportunity to comment on our analysis. However, we note that even if 
this program were found to be specific, the grant received by AST was 
less than 0.5 percent of AST's sales in the year of receipt. Therefore, 
the benefit would be expensed in the year of receipt and no benefit 
would be allocated to the POI.

IV. Programs Preliminarily Determined To Be Not Used

A. Pre-Privatization Employment Benefits (Law 451/94)
    Law 451/94 authorized early retirement packages for Italian steel 
workers from 1994-1996. The program,

[[Page 63908]]

as described by the GOI, was designed to comply with the EC's 
reorganization of the iron and steel industry, specifically in regards 
to reducing productive capacity. The law entitled men of at least 50 
years of age and women of 47 years of age with at least 15 years of 
pension contributions to retire early. AST and Arinox employees made 
use of this program during the three years of the program.
    In Wire Rod from Italy, we determined that Italian companies such 
as AST and Arinox could not simply lay off workers, but instead would 
be required to provide early retirement assistance to them. Hence, we 
reviewed other GOI programs that would be widely used by Italian 
companies in order to determine what obligations AST and Arinox would 
have to their workers who retired early in the absence of Law 451. In 
Wire Rod from Italy, we determined that the Cassa Integrazione Guadagni 
(CIG)-Extraordinary program provided the best benchmark for Law 451. 
Like Law 451, CIG-Extraordinary addresses workers whose companies are 
restructuring, reorganizing, and/or downsizing.
    New information submitted on the record in the instant proceeding 
indicates that a different program, ``CIG-Mobility,'' provides a more 
appropriate benchmark to Law 451. Like CIG-Extraordinary, CIG-Mobility 
was not developed for particular Italian industries and is used by a 
wide variety of them. However, whereas CIG-Extraordinary addresses 
temporary layoffs, CIG-Mobility is designed to address assistance to 
workers who are being permanently laid off. Because Law 451 also 
addresses an employees' permanent separation from the company, we 
preliminarily determine that CIG-Mobility is a more appropriate 
benchmark to determine what costs AST and Arinox would have incurred in 
laying off employees had they not been able to take advantage of Law 
451.
    Under CIG-Mobility, a company must make a final payment to the 
employee upon the employees' departure from the company. Since 
employees at AST and Arinox were eligible to use Law 451 from 1994-1996 
only, the companies would have incurred the payments to the employees 
under the benchmark program prior to the POI. Because it is the 
Department's practice to treat early retirement benefits as recurring 
grants which are expensed in the year of receipt, the companies did not 
incur costs under the benchmark program during the POI. See GIA, 58 FR 
at 37226. Therefore, Law 451 does not provide a financial contribution 
during the POI which relieves AST and Arinox of costs that they 
otherwise would incur if they participated in more broadly used early 
retirement programs.
B. Benefits from the 1982 Transfer of Lovere and Trieste to Terni 
(called Benefits Associated With the 1988-90 Restructuring in the 
Initiation Notice)
C. Decree Law 120/89: Recovery Plan for the Steel Industry
D. Law 181/89: Worker Adjustment and Redevelopment Assistance
E. Law 345/92: Benefits for Early Retirement
F. Law 706/85: Grants for Capacity Reduction
G. Law 46/82: Assistance for Capacity Reduction
H. Loan to KAI for Purchase of AST
I. Debt Forgiveness: 1981 Restructuring Plan
J. Law 675/77: Mortgage Loans, Personnel Retraining Aid and VAT 
Reductions
K. Law 193/84: Interest Payments, Closure Assistance and Early 
Retirement Benefits
L. Law 394/81: Export Marketing Grants and Loans
M. Law 341/95 and Circolare 50175/95
N. Law 227/77: Export Financing and Remission of Taxes

EC Programs

A. ECSC Article 56 Conversion Loans, Interest Rebates and Redeployment 
Aid
B. European Regional Development Fund
C. Resider II Program and Successors
D. 1993 EU Funds

Verification

    In accordance with section 782(i)(1) of the Act, we will verify 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 each company investigated. Because 
the rate for Arinox is de minimis, and the Department does not include 
de minimis rates in the calculation of the all-others rate, AST's rate 
also will serve as the all-others rate. We preliminarily determine that 
the total estimated net countervailable subsidy rate is 6.11 percent ad 
valorem for AST and 0.46 percent ad valorem for Arinox.
    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of stainless 
steel sheet and strip from Italy, which are entered or withdrawn from 
warehouse, for consumption on or after the date of the publication of 
this notice in the Federal Register, and to require a cash deposit or 
bond for such entries of the merchandise in the amounts listed above. 
Since the estimated preliminary net countervailing duty rate for Arinox 
is de minimis, it will be excluded from the suspension of liquidation. 
The suspension will remain in effect until further notice.

ITC Notification

    In accordance with section 703(f) 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.
    In accordance with section 705(b)(2) of the Act, if our final 
determination is affirmative, the ITC will make its final determination 
within 45 days after the Department makes its final determination.

Public Comment

    In accordance with 19 CFR 351.310, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
this preliminary determination. The hearing is tentatively scheduled to 
be held 57 days from the date of publication of this preliminary 
determination, at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue N.W., Washington, DC 20230. Individuals who wish to 
request a hearing must submit a written request within 30 days of the 
publication of this notice in the Federal Register to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230. 
Requests for a public hearing should contain: (1) the party's name, 
address, and telephone number; (2) the number of participants; (3) the 
reason for attending; and (4) a list of the issues to be discussed. An 
interested party may make an affirmative presentation only on arguments 
included in that party's case brief and may make a rebuttal 
presentation only on arguments

[[Page 63909]]

included in that party's rebuttal brief. Parties should confirm by 
telephone the time, date, and place of the hearing 48 hours before the 
scheduled time.
    In addition, six copies of the business proprietary version and six 
copies of the nonproprietary version of the case briefs must be 
submitted to the Assistant Secretary no later than 50 days from the 
publication of this notice. As part of the case brief, parties are 
encouraged to provide a summary of the arguments not to exceed five 
pages and a table of statutes, regulations, and cases cited. Six copies 
of the business proprietary version and six copies of the 
nonproprietary version of the rebuttal briefs must be submitted to the 
Assistant Secretary no later than 55 days from the publication of this 
notice. Written arguments should be submitted in accordance with 19 CFR 
351.309 and will be considered if received within the time limits 
specified above.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: November 9, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-30738 Filed 11-16-98; 8:45 am]
BILLING CODE 3510-DS-P