64 FR 73244 December 29, 1999 

DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-827]

 
Final Affirmative Countervailing Duty Determination: Certain Cut-
to-Length Carbon-Quality Steel Plate From Italy

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Norbert Gannon, Kristen Johnson, or 
Michael Grossman, Office of CVD/AD Enforcement II, Import 
Administration, U.S. Department of Commerce, Room 4012, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
2786.
    Final Determination. The Department of Commerce (the Department) 
determines that countervailable subsidies are being provided to certain 
producers and exporters of certain cut-to-length carbon-quality steel 
plate from Italy. For information on the countervailing duty rates, 
please see the ``Suspension of Liquidation'' section of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

    The petition in this investigation was filed by Bethlehem Steel 
Corporation, U.S. Steel Group, a Unit of USX Corporation, Gulf States, 
Inc., IPSCO Steel Inc., and the United Steelworkers of America (the 
petitioners).

Case History

    Since the publication of our preliminary determination in this 
investigation (Preliminary Affirmative Countervailing Duty 
Determination and Alignment of Final Countervailing Duty Determination 
with Final Antidumping Duty Determination: Certain Cut-to-Length 
Carbon-Quality Steel Plate from Italy, 64 FR 40416 (July 26, 1999) 
(Preliminary Determination)), the following events have occurred:
    We issued supplemental questionnaires on July 23, 26, and 27, 1999, 
to ILVA S.p.A. (ILVA) and ILVA Lamiere e Tubi S.p.A. (ILT) 
(collectively referred to as ILVA/ILT), Palini & Bertoli S.p.A. (Palini 
& Bertoli), and the Government of Italy (GOI), respectively. We 
received the respondents' questionnaire responses on September 3, 1999. 
We conducted verification of the countervailing duty questionnaire 
responses from September 13 through September 24, 1999. Because the 
final determination of this countervailing duty investigation was 
aligned with the final antidumping duty determination (see 64 FR at 
40416), and the final antidumping duty determination was postponed (see 
64 FR at 46341), the Department on August 25, 1999, extended the final 
determination of this countervailing duty investigation until no later 
than December 13, 1999 (see 64 FR at 46341). On November 8, 1999, we 
issued to all parties the verification reports for ILVA/ILT, Palini & 
Bertoli, and the regional government of Friuli Venezia Giulia. On 
November 12, 1999, we issued the verification report for the GOI. 
Petitioners, the GOI, and ILVA/ILT filed case briefs on November 18, 
1999. Rebuttal briefs were submitted to the Department by the 
petitioners and ILVA/ILT on November 23, 1999. The case hearing was 
held on November 30, 1999.

Scope of Investigation

    The products covered by this scope are certain hot-rolled carbon-
quality steel: (1) universal mill plates (i.e., flat-rolled products 
rolled on four faces or in a closed box pass, of a width exceeding 150 
mm but not exceeding 1250 mm, and of a nominal or actual thickness of 
not less than 4 mm, which are cut-to-length (not in coils) and without 
patterns in relief), of iron or non-alloy-quality steel; and (2) flat-
rolled products, hot-rolled, of a nominal or actual thickness of 4.75 
mm or more and of a width which exceeds 150 mm and measures at least 
twice the thickness, and which are cut-to-length (not in coils).
    Steel products to be included in this scope are of rectangular, 
square, circular or other shape and of rectangular or non-rectangular 
cross-section where such non-rectangular cross-section is achieved 
subsequent to the rolling process (i.e., products which have been 
``worked after rolling'')--for example, products which have been 
beveled or rounded at the edges. Steel products that meet the noted 
physical characteristics that are painted, varnished or coated with 
plastic or other non-metallic substances are included within this 
scope. Also, specifically included in this scope are high strength, low 
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum.
    Steel products to be included in this scope, regardless of 
Harmonized Tariff Schedule of the United States (HTSUS) definitions, 
are products in which: (1) iron predominates, by weight, over each of 
the other contained elements, (2) the carbon content is two percent or 
less, by weight, and (3) none of the elements listed below is equal to 
or exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.

    All products that meet the written physical description, and in 
which the chemistry quantities do not equal or exceed any one of the 
levels listed above, are within the scope of these investigations 
unless otherwise specifically excluded. The following products are 
specifically excluded from these investigations: (1) products clad, 
plated, or coated with metal, whether or not painted, varnished or 
coated with plastic or other non-metallic substances; (2) SAE grades 
(formerly AISI grades) of series 2300 and above; (3) products made to 
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to 
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary 
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon 
manganese steel or silicon electric steel.
    The merchandise subject to these investigations is classified in 
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030, 
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000, 
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050, 
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000, 
7226.91.8000, 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
Customs purposes, the written description of the merchandise under 
investigation is dispositive.

[[Page 73245]]

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
regulations codified at 19 CFR Part 351 (1998) and to the substantive 
countervailing duty regulations published in the Federal Register on 
November 25, 1998 (63 FR 65348) (CVD Regulations).

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 April 8, 1999, 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 Cut-to-Length Steel Plate From the 
Czech Republic, France, India, Indonesia, Italy, Japan, Korea, and 
Macedonia; Determinations, 64 FR 17198 (April 8, 1999)).

Period of Investigation

    The period of investigation for which we are measuring subsidies 
(the POI) is calendar year 1998.

Corporate History of ILVA/ ILT <SUP>1</SUP>
---------------------------------------------------------------------------

    \1\ As discussed in this section, ILVA/ILT's carbon steel 
predecessor companies are: Nuova Italsider (1981-1987), Italsider 
(1987-1988), ILVA S.p.A. (1989-1993), and ILP (1994-1996).
---------------------------------------------------------------------------

    Prior to 1981, the Italian government holding company Istituto per 
la Ricostruzione Industriale (IRI), controlled Italy's nationalized 
steel industry through its wholly-owned subsidiary, Finsider S.p.A 
(Finsider). The steel operations of Finsider were subdivided into three 
main companies: Italsider (carbon steel); Terni (stainless and special 
steel); and Dalmine (pipe and tube). Italsider was the sector leader 
and the primary producer of the subject merchandise. In 1981, the GOI 
implemented a restructuring plan, restructuring Finsider into several 
operating companies including: Nuova Italsider (carbon steel flat 
products); Terni (speciality flat steels); Nuova Sias (special long 
products); and other steel product divisions. In the course of the 1981 
Restructuring Plan, Italsider transferred all of its assets, with the 
exception of certain plants, to Nuova Italsider. Italsider became a 
one-company holding company with Nuova Italsider's stock as its primary 
asset.
    During 1987, Finsider restructured three of its main operating 
companies: Nuova Italsider, Deltasider, and Terni. Nuova Italsider 
spun-off its assets to Italsider and transferred its shares in 
Italsider to Finsider. Nuova Italsider ceased operations after this 
divestment and Finsider had direct ownership of Italsider. Upon 
completion of the 1987 restructuring, Italsider re-emerged as the steel 
sector's carbon steel products producer.
    Later in 1987, Finsider and its main operating companies 
(Italsider, TAS, and Nuova Deltasider) were placed in liquidation, and 
the GOI subsequently implemented the 1988 Restructuring Plan. The goal 
of the 1988 Restructuring Plan was to restructure Finsider and its 
operating companies, assembling the group's most productive assets into 
a new operating company, ILVA S.p.A. (ILVA S.p.A. or (old) ILVA), which 
was created on January 1, 1989. The 1988 Restructuring Plan, like the 
1981 plan, was submitted to and approved by the European Commission 
(EC). In accordance with the plan, ILVA S.p.A. took over some of the 
assets and liabilities of the liquidating companies, and Finsider 
closed certain facilities to comply with the EC's requirements. With 
respect to Italsider, part of the company's liabilities and the 
majority of its viable assets, including assets associated with the 
production of carbon steel flat-rolled products, were transferred to 
ILVA S.p.A., which commenced production on January 1, 1989. Non-
productive assets and a substantial amount of liabilities were left 
behind with Finsider and the liquidating operating companies.
    The facilities retained by ILVA S.p.A were organized into four 
primary operating groups: carbon steel flat products, stainless steel 
flat products, stainless steel long products, and seamless pipe and 
tube. In 1992, ILVA Lamiere e Tubi (ILT), a carbon steel flat products 
operation, was created as a wholly-owned subsidiary of ILVA S.p.A. ILVA 
S.p.A. was also the majority owner of a large number of separately 
incorporated subsidiaries. Some of these subsidiaries produced various 
types of steel products. The other subsidiaries were service centers, 
trading companies, and an electric power company, among others. ILVA 
S.p.A., together with its subsidiaries, constituted the ILVA Group. The 
ILVA Group was wholly-owned by IRI.
    Although ILVA S.p.A. was profitable in 1989 and 1990, the company 
encountered financial difficulties in 1991, and became insolvent by 
1993. On October 31, 1993, ILVA S.p.A. entered into liquidation. On 
December 31, 1993, IRI demerged ILVA S.p.A.''s main productive assets 
and a share of its liabilities into two new companies: ILVA Laminati 
Piani (ILP) (carbon steel flat products) and Acciai Speciali Terni 
(AST) (speciality and stainless steel flat products). On January 1, 
1994, ILP and AST were formally established as separately incorporated 
firms in advance of privatization. See Memorandum to David Mueller: 
Verification Report for ILVA S.p.A. and ILVA Lamiere e Tubi, dated 
November 8, 1999 (public version on file in the Central Records Unit 
(CRU) (Room B-099 of the Main Commerce Building) (ILVA/ILT Verification 
Report), at Exhibit 1993/94-1 and Memorandum to David Mueller: 
Verification Report for the Government of Italy, dated November 12, 
1999 (public version on file in the CRU) (GOI Verification Report) at 
11. ILT, the carbon flat steel products operation, was transferred to 
ILP as its wholly-owned subsidiary. The remainder of ILVA S.p.A.''s 
assets and existing liabilities, along with much of the redundant 
workforce, was placed in ILVA Residua (a.k.a., ILVA in Liquidation).
    In 1995, 100 percent of ILP was sold through a competitive public 
tender managed by IRI with the assistance of Istituto Mobiliare 
Italiano (IMI). The sale of ILP was executed through a share purchase 
agreement between IRI and a consortium of investors led by Riva Acciaio 
S.p.A. (RIVA) and investment companies. The contract of sale was signed 
on March 16, 1995, and all shares of ILP were transferred to the 
consortium on April 28, 1995. As of that date, the GOI no longer 
maintained any ownership interest in ILP or had any ownership interest 
in any of ILP's new owners.
    On January 1, 1997, RIVA changed the name of ILP to ILVA S.p.A 
(creating the ``new'' ILVA, referred to hereafter as ILVA or (new) 
ILVA). ILVA continues to wholly-own ILT. Within RIVA's corporate 
structure, ILT, at its Taranto Works facility, produces the subject 
merchandise, which is exported to the United States. ILVA, with the 
assistance of ILVA Commerciale S.p.A. (ICO), a sales company wholly-
owned by ILVA, is responsible for selling and exporting the subject 
merchandise to the United States and other markets.

[[Page 73246]]

    As of 1998, RIVA owns and/or controls 82.0 percent of ILVA and two 
foreign-incorporated investment companies own the remaining 18.0 
percent.
    According to ILVA/ILT, Sidercomit Taranto C.S. Lamiere S.r.l. 
(Sidercomit) was created in 1992, as an indirect subsidiary of (old) 
ILVA. Sidercomit became an operating unit within (new) ILVA in 1997, 
and currently operates service centers for the distribution of 
merchandise, including the subject merchandise for ILVA/ILT. Any 
benefits to Sidercomit under programs that have been found 
countervailable have been mentioned separately within those program 
sections below.

Corporate History of Palini & Bertoli

    Palini & Bertoli, a 100 percent privately-owned corporation, was 
incorporated in December 1963. Palini & Bertoli has never been part of 
the Italian state-owned steel industry.

Change in Ownership

    In the General Issues Appendix (GIA), appended to the Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Austria, 58 FR 37217, 37226 (July 9, 1993) (Certain Steel from 
Austria), we outlined our methodology for the treatment of subsidies 
received prior to the sale of a government-owned company to a private 
entity (i.e., privatization), or the spinning-off (i.e., sale) of a 
productive unit from a government-owned company to a private entity.
    Under this methodology, we estimate the portion of the purchase 
price attributable to prior subsidies. We do this by first dividing the 
sold company's subsidies by the company's net worth for each year 
during the period beginning with the earliest point at which non-
recurring subsidies would be attributable to the POI and ending one 
year prior to the sale of the company. We then take the simple average 
of these ratios. This averaged ratio serves as a reasonable estimate of 
the percent that subsidies constitute of the overall value of the 
company. Next, we multiply this ratio by the purchase price to derive 
the portion of the purchase price attributable to the payment 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 the company is sold.
    With respect to the spin-off of a productive unit, consistent with 
the Department's methodology set out above, we analyze the sale of a 
productive unit to determine what portion of the sales price of the 
productive unit 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. The result of this 
calculation yields the amount of remaining subsidies attributable to 
the spun-off productive unit. We next estimate the portion of the 
purchase price going towards repayment of prior subsidies in accordance 
with the methodology set out above, and deduct it from the maximum 
amount of subsidies that could be attributable to the spun-off 
productive unit.

Use of Facts Available

    Both the GOI and ILVA/ILT failed to fully respond to the 
Department's questionnaires concerning the program ``Debt Forgiveness: 
1981 Restructuring Plan.'' Section 776(a)(2) of the Act requires the 
use of facts available when an interested party withholds information 
that has been requested by the Department, or when an interested party 
fails to provide the information requested in a timely manner and in 
the form required. In such cases, the Department must use the facts 
otherwise available in reaching the applicable determination. Because 
the GOI and ILVA/ILT failed to submit the information that was 
specifically requested by the Department, we find that the respondents 
have failed to cooperate to the best of their abilities. Therefore, we 
have based our determination for this program on the facts available.
    In accordance with section 776(b) of the Act, the Department may 
use an inference that is adverse to the interests of that party in 
selecting from among the facts otherwise available when the party has 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information. Such adverse inference may include 
reliance on information derived from (1) the petition; (2) a final 
determination in a countervailing duty or an antidumping investigation; 
(3) any previous administrative review, new shipper review, expedited 
antidumping review, section 753 review, or section 762 review; or (4) 
any other information placed on the record. See 19 CFR 351.308(c). In 
the absence of information from the GOI and ILVA/ILT, we consider the 
February 16, 1999 petition, as well as our findings from the final 
determination of Certain Steel from Italy to be appropriate bases for a 
facts available countervailing duty rate calculation. See Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Italy, 58 FR 37327, 37329-30 (July 9, 1993) (Certain Steel from 
Italy).
    The Statement of Administrative Action accompanying the URAA 
clarifies that information from the petition and prior segments of the 
proceeding is ``secondary information.'' See Statement of 
Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316) 
(1994) (SAA), at 870. If the Department relies on secondary information 
as facts available, section 776(c) of the Act provides that the 
Department shall, to the extent practicable, corroborate such 
information using independent sources reasonably at its disposal. The 
SAA further provides that to corroborate secondary information means 
simply that the Department will satisfy itself that the secondary 
information to be used has probative value. However, where 
corroboration is not practicable, the Department may use uncorroborated 
information. With respect to the program for which we did not receive 
complete information from the respondents, the secondary information 
was corroborated through exhibits (i.e., financial statements) attached 
to the petition. The financial transactions discussed within Finsider's 
1984 and 1985 financial statements confirm that the GOI engaged in 
transactions which are tantamount to the assumption of debt and debt 
forgiveness. Based on such review of the transactions discussed in the 
financial statements, we find that the secondary information (i.e., the 
petition and Certain Steel from Italy) has probative value and, 
therefore, the information regarding the debt forgiveness provided 
under the 1981 Restructuring Plan has been corroborated.

Subsidies Valuation Information

Allocation

    Section 351.524(d)(2) of the CVD Regulations states that we will 
presume the allocation period for non-recurring subsidies to be the 
average useful life (AUL) of renewable physical assets for the industry 
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class 
Life Asset Depreciation Range System and updated by the Department of 
Treasury. The presumption will apply unless a party claims, and 
establishes that, these tables do not reasonably reflect the AUL of the 
renewable physical assets for the

[[Page 73247]]

company or industry under investigation, and the party can establish 
that the difference between the company-specific or country-wide AUL 
for the industry under investigation is significant.
    On June 21, 1999, ILVA/ILT submitted to the Department four tables 
illustrating company-specific AUL calculations for (old) ILVA, ILP, 
ILT, and (new) ILVA, both separately and in combination. In addition, 
the GOI provided estimates of the country-wide AUL for the Italian 
steel industry. Based upon our analysis of the data submitted by ILVA/
ILT regarding the AUL of their assets, we preliminarily determined that 
the calculation which takes into consideration all producers of the 
subject merchandise over the past 10 years is the most appropriate AUL 
calculation. However, because this calculation did not yield a company-
specific AUL which is significantly different from the AUL listed in 
the IRS tables, in the Preliminary Determination, we used the 15 year 
AUL as reported in the IRS tables to allocate non-recurring subsidies 
under investigation for ILVA/ILT in the preliminary calculations.
    After considering the parties' comments and verifying the data 
submitted by ILVA/ILT regarding the AUL of their assets, we continue to 
use a 15 year AUL for ILVA/ILT. We have rejected respondents company-
specific AUL calculation and the country-wide depreciation information 
provided by the GOI and are using the IRS tables pursuant to 19 CFR 
351.524(d)(2)(i). For an explanation of why we are rejecting ILVA/ILT's 
company-specific AUL and the country-wide depreciation information, see 
Comment 2.
    In its questionnaire response of July 6, 1999, Palini & Bertoli 
stated that it ``does not have sufficient resources to respond'' to the 
Department's inquiry of whether the company wished to rebut the 15 year 
AUL as reported in the IRS tables. Therefore, we are using a 15 year 
AUL for Palini & Bertoli.

Equityworthiness

    In measuring the benefit from a government equity infusion, in 
accordance with section 351.507(a)(2) of the Department's CVD 
Regulations, the Department compares the price paid by the government 
for the equity to actual private investor prices, if such prices exist. 
According to section 351.507(a)(3) of the Department's CVD Regulations, 
where actual private investor prices are unavailable, the Department 
will determine whether the firm was unequityworthy at the time of the 
equity infusion.
    In this case, private investor prices are unavailable; therefore, 
it is necessary to determine whether ILVA/ILT's predecessor companies 
were unequityworthy in the years in which equity infusions were made. 
Our review of the record has not led us to change our findings from 
prior investigations, in which we found ILVA/ILT's predecessor 
companies, Nuova Italsider and (old) ILVA, unequityworthy from 1984 
through 1988, and from 1991 through 1992. See, e.g.,Certain Steel from 
Italy, 58 FR 37328; Final Affirmative Countervailing Duty 
Determination: Certain Stainless Steel Wire Rod from Italy, 63 FR 
40474, 40477 (July 29, 1998) (Wire Rod from Italy); Final Affirmative 
Countervailing Duty Determination: Stainless Steel Plate in Coils from 
Italy, 64 FR 15508, 15511 (March 31, 1999) (Plate in Coils from Italy) 
and Final Affirmative Countervailing Duty Determination: Stainless 
Steel Sheet and Strip in Coils from Italy, 64 FR 30624, 30627 (June 8, 
1999) (Sheet and Strip from Italy). We have not examined whether (old) 
ILVA was equityworthy in 1989 and 1990, because the company did not 
receive an equity infusion from the GOI in either of those years.
    Section 351.507(a)(3) of the Department's CVD Regulations views an 
infusion of equity into an unequityworthy company as inconsistent with 
the usual investment practices of private investors. In such cases, the 
Department will apply the methodology described in section 
351.507(a)(6) of the regulations, treating the equity infusion as a 
grant. Use of the grant methodology for equity infusions into an 
unequityworthy company 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 year in which the infusion was received 
based on the available information.

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), and Final 
Affirmative Countervailing Duty Determination: Steel Wire Rod from 
Venezuela, 62 FR 55014 (October 21, 1997). The Department will consider 
a firm to be uncreditworthy if it is determined that, based on 
information available at the time of the government-provided loan, the 
firm could not have obtained a long-term loan from conventional 
sources. See section 351.505(a)(4)(i) of the CVD Regulations.
    Italsider, Nuova Italsider, and (old) ILVA were found to be 
uncreditworthy from 1977 through 1993. See Certain Steel from Italy, 58 
FR at 37328-29, Wire Rod from Italy, 63 FR at 40477, and Sheet and 
Strip from Italy, 64 FR at 30627. In its September 3, 1999 response, 
ILVA/ILT stated that the Department has incorrectly determined that 
Finsider and (old) ILVA were uncreditworthy, since these companies were 
able to borrow money from commercial lenders at prevailing market rates 
of interest. ILVA/ILT discussed the existence of IRI guarantees as the 
reason why both Finsider and (old) ILVA were able to obtain loans at 
commercial interest rates. See ILVA/ILT's September 3, 1999 
Questionnaire Response (QR), at 12-13.
    We disagree with respondents. The existence of commercial loans to 
a government-owned company is not dispositive for purposes of 
determining the company's creditworthiness. In the preamble to the CVD 
Regulations, we state that for government-owned firms, the Department 
will make its creditworthiness determination by examining those factors 
listed in paragraph (a)(4)(i) of section 351.505. See Preamble to the 
CVD Regulations, 63 FR at 65367. Those factors outlined in paragraph 
(a)(4)(i) include, among other things: (1) the receipt by the firm of 
comparable, commercial financing, (2) the present and past financial 
health of the firm as indicated by various financial indicators, (3) 
the firm's past and present ability to meet its costs and fixed 
financial obligations with its cash flow, and (4) evidence of the 
firm's future financial position.
    No information with respect to the above factors has been presented 
in this investigation that would lead us to reconsider our earlier 
findings that Italsider, Nuova Italsider, and (old) ILVA were 
uncreditworthy from 1977 through 1993. Therefore, consistent with our 
past practice, we continue to find Italsider, Nuova Italsider, and 
(old) ILVA uncreditworthy from 1977 through 1993.
    We have not analyzed ILP's, (new) ILVA's, or ILT's creditworthiness 
in the years 1994 through 1998, because the companies did not negotiate 
new loans with the GOI or EC during these years.

Benchmarks for Long-Term Loans and Discount Rates

    In the Preliminary Determination, we based our discount rates on 
the Italian

[[Page 73248]]

Bankers' Association (ABI) rates, which was consistent with the 
Department's finding in Wire Rod from Italy, 63 FR at 40477 and Sheet 
and Strip from Italy, 64 FR at 30626-30627. However, at verification, 
we learned that the ABI rate does not represent a long-term interest 
rate, but is rather an average of the short-term interest rates 
commercial banks charge to their most favored customers. A Bank of 
Italy (BOI) official explained at verification that an overdraft loan 
is the most wide-spread short-term instrument of financing available in 
Italy for companies and individuals. There is no set maturity on an 
overdraft loan and a company or individual repays the principal when 
the banks call in the loans. The Italian Bankers Association averages 
the banks' short-term interest rates to arrive at the ABI rate which 
the BOI publishes in its economic bulletins and annual reports. See GOI 
Verification Report, at 3-4.
    At verification, we inquired whether the BOI collects data on long-
term interest rates charged by commercial banks. We learned that only 
recently (i.e., beginning with financial year 1995) has the BOI started 
to compile statistics on long-term interest rates charged by banks. The 
only long-term interest rate for which the BOI has historical yearly 
information is the rate charged on treasury bonds issued by the GOI. 
See Id.
    Because we were unable to gather information on commercial long-
term interest rates from either the BOI or independent research for the 
period 1984 through 1998, and the government bond rate does not 
represent a commercial rate, for purposes of this final determination, 
we have continued to use the ABI rates to construct discount rates. We 
note that, in Wire Rod from Italy, the ABI rate was said to be ``the 
most suitable benchmark for long-term financing to Italian companies.'' 
See Memorandum to Barbara Tillman re: Countervailing Duty Investigation 
of Certain Stainless Steel Wire Rod from Italy: Discussions with 
Company Officials from Gabetti per L'impresa, Banca Di Roma, and 
Reconta Ernst & Young, dated June 3, 1998 (public document on file in 
CRU).
    In calculating the interest rate applicable to a borrower, 
commercial banks typically add a spread ranging from 0.55 percent to 
4.0 percent, which is determined by the company's financial health. See 
Wire Rod from Italy, 63 FR at 40477. Additionally, information on the 
record indicates that the published ABI rates do not include amounts 
for fees, commissions, and other borrowing expenses. While we do not 
have information on the expenses that would be applied to long-term 
commercial loans, the GOI supplied information on the borrowing 
expenses for overdraft loans in 1997, as an approximation of the 
expenses on long-term commercial loans. This information shows that 
expenses on overdraft loans range from 6.0 to 11.0 percent of interest 
charged. Such expenses, along with the applied spread, raise the 
effective interest rate that a company would pay. Because 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. See section 351.505(a)(1) of the CVD 
Regulations. Therefore, we have added the average of the spread (i.e., 
2.28 percent) and borrowing expenses (i.e., 8.5 percent of the interest 
charged) to the yearly ABI rates to calculate the effective discount 
rates.
    For the years in which ILVA/ILT or their predecessor companies were 
uncreditworthy (see ``Creditworthiness'' section above), we calculated 
discount rates in accordance with the formula for constructing a long-
term benchmark interest rate for uncreditworthy companies as stated in 
section 351.505 (a)(3)(iii) of the CVD Regulations. This formula 
requires values for the probability of default by uncreditworthy and 
creditworthy companies. For the probability of default by an 
uncreditworthy company, we relied on the weighted-average cumulative 
default rates reported for the Caa to C-rated category of companies as 
published in Moody's Investors Service, ``Historical Default Rates of 
Corporate Bond Issuers, 1920-1997'' (February 1998).<SUP>2</SUP> For 
the probability of default by a creditworthy company, we used the 
weighted-average cumulative default rates reported for the Aaa to Baa-
rated categories of companies in the study. The weighted-average 
cumulative default rates for the Aaa to Baa-rated categories is 
indicated as the ``Investment Grade'' default rates. See Memorandum to 
the File: Moody's Investment Grade Default Rates, dated November 9, 
1999 (public document on file in the CRU). For non-recurring subsidies, 
the average cumulative default rates for both uncreditworthy and 
creditworthy companies were based on a 15 year term, since all of ILVA/
ILT's allocable subsidies were based on this allocation period.
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    \2\ We note that since publication of the CVD Regulations, 
Moody's Investors Service no longer reports default rates for Caa to 
C-rated category of companies. Therefore, for the calculation of 
uncreditworthy interest rates, we will continue to rely on the 
default rates as reported in Moody's Investors Service's publication 
dated February 1998 (at Exhibit 28).
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    In addition, ILVA/ILT had two long-term, fixed-rate loans under 
ECSC Article 54 outstanding during the POI. Therefore, we have selected 
a U.S. dollar-based interest rate as our benchmark. See section 
351.505(a)(2)(i) of the CVD Regulations. Consistent with the 
Preliminary Determination, we have used as our benchmark the average 
yield to maturity on selected long-term corporate bonds as reported by 
the U.S. Federal Reserve, since both of these loans were denominated in 
U.S. dollars. We have used these rates since we were unable to obtain 
at verification or through independent research, a long-term borrowing 
rate for loans denominated in U.S. dollars in Italy. Because ILVA was 
uncreditworthy in the years in which the loans were contracted, we 
calculated the uncreditworthy benchmark rates in accordance with 
section 351.505 (a)(3)(iii) of the CVD Regulations.

I. Programs Determined To Be Countervailable

Government of Italy Programs

A. Equity Infusions to Nuova Italsider and (Old) ILVA <SUP>3</SUP>
    The GOI, through IRI, provided new equity capital to Nuova 
Italsider or (old) ILVA, two predecessor companies of ILVA/ILT that 
produced carbon steel plate, in every year from 1984 through 1992, 
except in 1987, 1989, and 1990. We determine that these equity 
infusions constitute countervailable subsidies within the meaning of 
section 771(5)(B)(i) of the Act. These equity infusions constitute 
financial contributions, as described in section 771(5)(D)(i) of the 
Act. Because they were not consistent with the usual investment 
practices of private investors (see ``Equityworthiness'' section 
above), the equity infusions confer a benefit within the meaning of 
section 771(5)(E)(i) of the Act. Because these equity infusions were 
limited to Finsider and its operating companies, Nuova Italsider and 
(old) ILVA, we determine that they are specific within the meaning of 
section 771(5A)(D)(iii) of the Act.
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    \3\ In the Initiation Notice, these equity infusions were 
separately listed as ``Equity Infusions into Italsider/Nuova 
Italsider'' and ``Equity Infusions into ILVA.''
---------------------------------------------------------------------------

    We have treated these equity infusions as non-recurring subsidies 
given in the year each infusion was received because each required a 
separate authorization. We allocated the equity infusions over a 15 
year AUL.

[[Page 73249]]

Because Nuova Italsider and (old) ILVA were uncreditworthy in the years 
the equity infusions were received, we constructed uncreditworthy 
discount rates to allocate the benefits over time. See ``Subsidies 
Valuation Information'' section, above. We noted, and petitioners 
discussed in their November 18, 1999 case brief, that a ministerial 
error was made in the Preliminary Determination with respect to the 
1986 equity infusion Nuova Italsider received from IRI. See 
Petitioners' November 18, 1999 Case Brief, at 48. The error was 
numerical and was insufficient to require a ministerial error 
correction of the preliminary calculations. For this final 
determination, we have corrected the error.
    For equity infusions originally provided to Nuova Italsider, a 
predecessor company that produced carbon steel plate, we consider these 
equity infusions to be attributable to (old) ILVA and subsequently to 
ILP, because they are simply restructured entities of the government-
owned steel company. Accordingly, we did not apportion to the other 
operations of (old) ILVA any part of the equity infusions originally 
provided directly to Nuova Italsider. While we acknowledge that it 
would be our preference to look at equity infusions into (old) ILVA as 
a whole and then apportion an amount to ILP when it was spun-off from 
(old) ILVA, we find our approach in this case to be the most feasible 
since information on equity infusions provided to the non-carbon steel 
operations of (old) ILVA is not available. For the equity infusions to 
(old) ILVA, however, we did apportion these by asset value to all (old) 
ILVA operations in determining the amount applicable to ILP.
    We applied the repayment portion of our change in ownership 
methodology to all of the equity infusions described above to determine 
the subsidy allocable to ILP after its privatization. We divided this 
amount by ILVA's total sales <SUP>4</SUP> during the POI. On this 
basis, we determine the net countervailable subsidy to be 3.07 percent 
ad valorem for ILVA/ILT. Palini & Bertoli did not receive any equity 
infusions from the GOI.
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    \4\ Since February 1997, ILVA and ILT have had an exclusive 
sales arrangement, by which, all of ILT products are sold to ILVA, 
which, in turn, sells them to outside customers. When ILVA purchases 
goods from ILT, ILVA considers the purchase as an increase of 
inventory and the transaction is recorded as an ``acquisition cost'' 
in its accounting books. See ILVA/ILT Verification Report, at 2. 
Because of this sales arrangement, we are using as our denominator, 
ILVA's 1998 sales sourced from the company's unconsolidated 
financial statement.
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B. Debt Forgiveness: 1981 Restructuring Plan
    The GOI reported that the objective of the 1981 Restructuring Plan 
was to redress the economic and financial difficulties the iron and 
steel industry was realizing in the early 1980's. The GOI stated that 
this plan, which extended to 1985, due to the prolonged crisis within 
the sector, envisaged financial interventions to aid in the recovery of 
the Finsider group. As discussed above in the ``Use of Facts 
Available'' section, the GOI and ILVA/ILT failed to submit complete 
information in regard to the assistance provided under the 1981 
Restructuring Plan. Therefore, based on the facts available, we 
determine that certain financial transactions conducted in association 
with the 1981 Restructuring Plan are countervailable subsidies.
    Following Italsider's transfer of all its company facilities to 
Nuova Italsider in September 1981, Italsider held 99.99 percent of 
Nuova Italsider's shares. In 1983, Italsider was placed in liquidation. 
While in liquidation, Italsider sold its shares of Nuova Italsider to 
Finsider in December 1984. The sales price was 714.6 billion lire. As 
part of this payment, Finsider assumed Italsider's debts owed to IRI of 
696.4 billion lire. The difference between the 714.6 billion lire and 
696.4 billion lire was paid directly by Finsider to Italsider.
    On December 31, 1984, Finsider also granted to Italsider a non-
interest bearing loan of 563.5 billion lire to cover losses realized 
from the liquidation. A matching provision was also made to Finsider's 
``Reserve for Losses on Investments and Securities,'' to cover the 
losses of the liquidation of Italsider. Following a shareholders' 
meeting of Finsider on December 30, 1985, the amount of 563.5 billion 
lire was disbursed to cover the losses of Italsider and Italsider's 
state of liquidation was revoked.
    In Certain Steel from Italy, the Department determined that the 
1981 Restructuring Plan merely shifted assets and debts within a family 
of companies, all of which were owned by Finsider, and ultimately, by 
the GOI. Therefore, we determined that both the 696.4 billion lire 
assumption of debt and the 563.5 billion lire debt forgiveness were 
specifically limited to the steel companies and constitute 
countervailable subsidies. See Certain Steel from Italy, 58 FR at 
37330. No new factual information or evidence of changed circumstances 
has been provided to the Department in this instant investigation to 
warrant a reconsideration of the earlier finding that the debt 
assumption and debt forgiveness are countervailable subsidies. 
Therefore, consistent with our treatment of these transactions in 
Certain Steel from Italy, we determine that the 1984 assumption of debt 
and 1985 debt forgiveness constitute countervailable subsidies within 
the meaning of section 771(5)(B)(i) of the Act. In accordance with 
Certain Steel from Italy, debt assumption and debt forgiveness are 
treated as grants which constitute financial contributions under 
section 771(5)(D)(i) of the Act. The transactions also confer benefits 
to the recipient within the meaning of section 771(5)(E)(i) of the Act, 
in the amount of the debt coverage. Because the debt assumption and 
debt forgiveness were limited to Italsider, one of ILVA/ILT's 
predecessor companies, we determine that these transactions are 
specific within the meaning of section 771(5A)(D)(iii) of the Act.
    To calculate the benefit, we have treated the assumption of debt 
and debt forgiveness to Italsider as non-recurring subsidies because 
each transaction was a one-time, extraordinary event. We allocated the 
1984 debt assumption and 1985 debt forgiveness over a 15 year AUL. See 
the ``Allocation Period'' section, above. In our grant formula, we used 
constructed uncreditworthy discount rates based on our determination 
that Italsider was uncreditworthy in 1984 and 1985. See ``Benchmark for 
Long-Term Loans and Discount Rates'' and ``Creditworthiness'' sections, 
above.
    As with the equity infusions originally provided to Nuova 
Italsider, we consider the assumption of debt and debt forgiveness to 
be attributable to (old) ILVA and subsequently to ILP, because they are 
simply restructured entities of the government-owned steel company. To 
determine the amount appropriately allocated to ILP after its 
privatization, we followed the methodology described in the ``Change in 
Ownership'' section above. We divided this amount by ILVA's sales 
during the POI. On this basis, we determine the net countervailable 
subsidy to be 1.09 percent ad valorem for ILVA/ILT. Palini & Bertoli 
did not receive any benefit under this program.
C. Debt Forgiveness: 1988 Restructuring Plan
    As discussed above in the ``Corporate History of ILVA/ILT'' 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. (i.e., (old) ILVA).

[[Page 73250]]

The Finsider restructuring plan was developed at the end of 1987, and 
was approved by the GOI on June 14, 1988, and by the EC on December 23, 
1988. The objective of the plan was to restore the industrial, 
financial, and economic balance to the public iron and steel-making 
sector in Italy. The restructuring plan included the voluntary 
liquidation of Finsider, and IRI's assumption of the debts not covered 
by the sale of assets of the companies being liquidated. IRI was the 
majority owner of Finsider, and therefore, the party responsible for 
payment of Finsider's debts.
    A transfer of assets and liabilities from Finsider to (old) ILVA 
was to be accomplished at the latest by March 31, 1990. Upon completion 
of the 1988 Restructuring Plan, (old) ILVA owned Finsider's productive 
assets and a small portion of the group's liabilities. Included in the 
transfer were the productive portions of the flat-rolled facilities 
located at Taranto, Genoa, and Novi Ligure.<SUP>5</SUP> The liquidating 
companies retained the non-productive assets and the vast majority of 
the liabilities, which had to be repaid, assumed, or forgiven. Thus, 
while (old) ILVA emerged from the process with a positive net worth, 
the other companies were left with capital structures in which their 
liabilities greatly exceeded the liquidation value of their assets.
---------------------------------------------------------------------------

    \5\ The subject merchandise which ILT produced and (new) ILVA 
exported to the United States in 1998, was produced at the Taranto 
facilities.
---------------------------------------------------------------------------

    We determine that certain financial transactions associated with 
the 1988 Restructuring Plan constitute countervailable subsidies. In 
1988, IRI established a fund of 2,943 billion lire to cover losses 
which Finsider would realize while in liquidation. As of December 31, 
1988, Finsider had accumulated losses in excess of its equity. In order 
to prevent Finsider from becoming insolvent during 1989, IRI utilized 
1,364 billion lire of the fund to forgive debts it was owed by Finsider 
to cover the losses. We determine that IRI's action of forgiving 
Finsider's debts in 1989, constitutes a countervailable subsidy.
    Later in 1990, IRI forgave debts it was owed by Finsider when it 
purchased (old) ILVA's stock from Finsider (and Terni) for 2,983 
billion lire. The 2,983 billion lire was used to pay the liquidated 
companies' debts which existed at the time of the sale. Prior to the 
preliminary determination, ILVA/ILT disagreed with our characterization 
in Certain Steel from Italy that the share purchase was an act of debt 
forgiveness. They stated that the price paid by IRI for (old) ILVA's 
shares reflected the market value of the shares and, therefore, the 
purchase was not an act of debt forgiveness. We preliminarily disagreed 
with ILVA/ILT's argument and determined that IRI's purchase of (old) 
ILVA's stock was tantamount to debt forgiveness; however, we stated 
that we would seek further clarification of the stock purchase 
transaction for the final determination. See Preliminary Determination, 
64 FR at 40422.
    In the July 23, 1999 questionnaire and at verification, we asked 
the GOI and ILVA/ILT to provide all feasibility studies, market 
reports, economic forecasts, or similar documents completed prior to 
(old) ILVA's share purchase, which related to the future expected 
financial performance of the company. We examined the McKinsey & 
Company (McKinsey) report of August 1988, which respondents claim 
provides a comprehensive analysis of the expected future financial 
performance of (old) ILVA. For reasons discussed in Comment 7, we find 
that the McKinsey report did not assess the expected future financial 
health of (old) ILVA. Rather, we find that the report examined the 
viability of the government's 1988 Restructuring Plan for the period 
1988 to 1990, and assessed whether the creation of (old) ILVA would 
conform with the EC's trade and competition rules. See GOI Verification 
Report, at 5. Therefore, on January 1, 1989, the day on which IRI 
committed to purchasing (old) ILVA's shares, IRI did not have 
sufficient financial data and analysis which would have allowed it to 
evaluate the potential risk versus the expected return in (old) ILVA. 
See Id., at 9-10. Because IRI did not undertake the financial analysis 
that a private investor would have prior to purchasing shares, we 
determine that ILVA's share purchase was not in accordance with the 
normal investment practice of a private investor.
    Consistent with our preliminary determination, we find that IRI's 
purchase of (old) ILVA's shares from Finsider merely shifted assets 
(i.e., ownership of company stock) within a family of companies which 
were all owned by the government. The purpose of IRI's decision to 
purchase (old) ILVA's stock on January 1, 1989, was to provide to 
Finsider in liquidation cash to repay debts. As such, IRI's purchase of 
(old) ILVA's stock was tantamount to debt forgiveness. Thus, we 
determine that IRI's purchase of (old) ILVA's stock is a 
countervailable subsidy because it effectively forgave Finsider's 
debts.
    At the Preliminary Determination, we noted that Finsider's 1989 
Annual Report at page 12 states that: ``During the fiscal year, your 
company [Finsider] recorded losses totaling 1,568 billion lire; 
therefore, the circumstances reoccur for which the shareholder IRI 
later renounced its own credits necessary to cover the difference.'' 
Thus, Finsider realized a net loss of 1,568 billion lire for fiscal 
year 1989. In order to avoid insolvency of the company, IRI should 
have, but did not, forgive the 1,568 billion lire it was due to cover 
Finsider's losses in excess of equity during 1990. At the Preliminary 
Determination, we stated that we would seek additional information 
regarding Finsider's 1,568 billion lire of losses.
    For this final determination, we have examined whether IRI expected 
to receive payment of the 1,568 billion lire debt which Finsider owed 
it in 1990. Based on the record evidence, we determine that IRI did not 
expect Finsider to pay the 1,568 billion lire debt. First, in 1988, IRI 
created a fund with the sole purpose to cover the losses which Finsider 
would realize while in liquidation. Second, IRI utilized 1,364 billion 
lire of the fund to cover losses in 1989, by forgiving debt of an 
equivalent amount. In addition, respondents did not submit information 
on the record regarding the value of the assets which remained in 
Finsider as of December 31, 1989, to demonstrate that Finsider had 
viable assets which it could sell for cash to pay the debt owed to IRI. 
On the basis of these facts, we determine that IRI had no expectation 
that Finsider would pay the 1,568 billion lire debt. Therefore, we 
determine that IRI provided to Finsider debt forgiveness of 1,568 
billion lire in 1990. For a further discussion see Comment 6.
    On the basis of the record evidence, we determine that the debt 
forgiveness which IRI provided in 1989 and 1990, constitute 
countervailable subsidies within the meaning of section 771(5)(B)(i) of 
the Act. In accordance with our practice, debt forgiveness is treated 
as a grant which constitutes a financial contribution under section 
771(5)(D)(i) of the Act, and provides a benefit in the amount of the 
debt coverage. Because the debt forgiveness was received by only (old) 
ILVA, a predecessor company of ILVA/ILT, we determine that the debt 
coverage is specific under section 771(5A)(D)(iii)(I) of the Act.
    The record of this investigation demonstrates that (old) ILVA did 
not obtain all of Finsider's assets. Based on the information submitted 
to the Department, we have calculated the percentage of Finsider's 
assets which were transferred to (old) ILVA. We calculated that, on 
December 31, 1988, 71.31 percent of Finsider's assets were transferred 
to (old) ILVA. We also

[[Page 73251]]

calculated the value of the additional assets which were transferred to 
(old) ILVA during the course of 1990. We then summed the assets 
transferred to (old) ILVA in 1989 and 1990, and divided that amount by 
Finsider's total asset value as of December 31, 1988, to derive the 
percentage of Finsider's assets which were obtained by (old) ILVA. On 
this basis, we calculated that 84.94 percent of Finsider's assets were 
transferred to (old) ILVA. For a further discussion see the 
Department's Position to Comment 5.
    To determine the benefit from these countervailable subsidies, we 
have treated the amounts of debt forgiveness provided under the 1988 
Restructuring Plan as non-recurring grants because they were one-time, 
extraordinary events. For the debt forgiveness provided in 1989, we 
applied 71.31 percent to the amount of debt forgiveness to determine 
the amount attributable to (old) ILVA. With respect to the debt 
forgiveness provided in 1990, we applied 84.94 percent to the total 
amount of debt forgiveness to determine the amount attributable to 
(old) ILVA. Because (old) ILVA was uncreditworthy in 1989 and 1990, the 
years in which the assistance was provided, we used constructed 
uncreditworthy discount rates to allocate the benefits over time. We 
allocated the debt forgiveness provided in 1989 and 1990, over a 15 
year AUL. See the ``Subsidies Valuation Information'' section, above.
    We also apportioned the debt coverage by asset value to all (old) 
ILVA operations in determining the amount applicable to ILP. We next 
applied the repayment portion of our change in ownership methodology to 
the debt forgiveness to determine the amount of the subsidy allocable 
to ILP after its privatization. We divided this amount by ILVA's total 
sales during the POI. On this basis, we determine the net 
countervailable subsidy to be 5.12 percent ad valorem for ILVA/ILT. 
Palini & Bertoli did not receive any benefit under this program.
    In addition, at the time of the Preliminary Determination, there 
was ambiguity as to whether the GOI provided additional financial 
assistance to Finsider in liquidation, and if so, the amount of 
assistance actually disbursed (see 64 FR at 40423). For purposes of the 
preliminary determination, we found, based on the information provided 
to the Department by ILVA/ILT, that IRI provided 738 billion lire to 
Finsider to cover costs and losses in 1989. See Id. However, we stated 
that we would seek further clarification from the GOI and ILVA/ILT of 
the assistance provided under the 1988 Restructuring Plan.
    At verification, we discussed with GOI and company officials the 
aid disbursed to Finsider for the closure of steel plants and other 
losses realized in the liquidation process. In particular, we asked the 
officials to account for the financial assistance the EC authorized for 
plant closure costs and liquidation losses in the 89/218/ECSC Decision 
of December 23, 1988. We learned that the EC authorized the 
disbursement of a maximum of 738 billion lire in additional financial 
aid to Finsider to cover costs and losses realized in the liquidation 
process. However, the GOI and ILVA/ILT officials stated that, although 
the EC authorized the additional financial assistance, this aid was not 
needed. They stated that no additional assistance was required because 
the cash received from the sale of Finsider's assets was greater than 
expected. See GOI Verification Report, at 10 and ILVA/ILT Verification 
Report, at 11. To confirm whether this additional 738 billion lire of 
assistance was provided, we examined Finsider's and IRI's 1989 
financial statements and found no evidence that IRI provided additional 
aid to Finsider based upon the 89/218/ECSC Decision. Therefore, we 
determine that IRI did not provide to Finsider an additional 738 
billion lire to cover closure costs and losses in 1989.
D. Debt Forgiveness: 1993-1994 Restructuring Plan, ILVA-to-ILP 
<SUP>6</SUP>
    During 1992 and 1993, (old) ILVA incurred heavy financial losses, 
which compelled IRI to place the company into liquidation. In December 
1993, the Italian government proposed to the EC a plan to restructure 
and privatize (old) ILVA by the end of 1994. The reorganization 
provided for splitting (old) ILVA's main productive assets into two new 
companies, ILP and AST. ILP would consist of the carbon steel flat 
production of (old) ILVA, receiving the Taranto facilities. AST would 
consist of the speciality and stainless steel production. The rest of 
(old) ILVA's productive assets (i.e., tubes, electricity generation, 
specialty steel long products, and sea transport), together with the 
bulk of (old) ILVA's existing debt and redundant work force were placed 
in a third entity known as ILVA Residua. Under the restructuring plan, 
ILVA Residua would sell those productive units it could for cash to pay 
debts and then would be liquidated, with IRI (i.e., the Italian 
government) absorbing the remaining debt.
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    \6\ This program was referred to as ``Debt Forgiveness Given in 
the Course of Privatization in Connection with the 1993-1994 
Restructuring Plan'' in the Initiation Notice (see 64 FR at 13000).
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    The demerger of the majority of (old) ILVA's viable manufacturing 
activities and a portion of its liabilities occurred on December 31, 
1993. On January 1, 1994, ILP and AST were formally established as 
separate corporations which, respectively, had operating assets and 
relatively modest debt loads. See ILVA/ILT Verification Report, at 
Exhibit 1993/94-1. (Old) ILVA in liquidation became a shell company, 
known as ILVA Residua, with liabilities far exceeding its assets, 
although it did contain some operating assets that were later sold. The 
liabilities which remained with ILVA Residua had to be repaid, assumed, 
or forgiven. On April 12, 1994, the EC, through the 94/259/ECSC 
decision, approved the GOI's restructuring and privatization plan for 
(old) ILVA and IRI's intention to cover ILVA Residua's remaining 
liabilities.
    We determine that ILP received a countervailable subsidy on January 
1, 1994, within the meaning of section 771(5)(B)(i) of the Act, when 
the bulk of (old) ILVA's liabilities were placed in ILVA Residua, 
rather than being proportionately allocated to ILP and AST when they 
were formally established as separate corporations. The retention of 
liabilities by (old) ILVA that should have been transferred to ILP when 
the company was created constitutes a financial contribution to ILP in 
accordance with section 771(5)(D)(i) of the Act in the form of debt 
forgiveness. Prior to the separate incorporation of ILP and AST, (old) 
ILVA significantly wrote down the value of its assets, thereby 
increasing the net liabilities that it retained when ILP and AST were 
created. These write-downs can be tied to specific assets that were 
either transferred to ILP and AST, or retained by (old) ILVA. In order 
to more accurately calculate the value of the benefit to ILP from the 
debt forgiveness, we have factored in the value of each company's asset 
write-downs, to determine the total benefit from debt forgiveness to 
ILP and AST, rather than apportioning the total benefit by using a 
ratio calculated from the asset values each company took at the point 
of demerger. This is further discussed below and in Comment 11.
    We determine that the amount of liabilities which resulted from the 
1993-94 Restructuring Plan which should have been attributable to ILP, 
but were instead retained by ILVA Residua, was equivalent to debt 
forgiveness for ILP at the time of its separate incorporation. In 
accordance with our practice, debt forgiveness is treated as a

[[Page 73252]]

grant which constitutes a financial contribution under section 
771(5)(D)(i) of the Act, and provides a benefit in the amount of the 
debt forgiveness.
    We also determine, based on record evidence, that the liquidation 
process of (old) ILVA did not occur under the normal application of a 
provision of Italian law, and therefore, the debt forgiveness is de 
facto specific under section 771(5A)(D)(iii)(II) of the Act. As stated 
above, the liquidation of (old) ILVA was done in the context of a 
massive restructuring/privatization plan of the Italian steel industry 
undertaken by the GOI and approved and monitored by the EC. Because 
(old) ILVA's liquidation was part of an extensive state-aid package to 
privatize the Italian state-owned steel industry, and the debt 
forgiveness was received by only privatized (old) ILVA operations, we 
find that the assistance provided under the 1993-1994 Restructuring 
Plan is de facto specific. In support of this finding, we note the EC's 
94/259/ECSC decision, in which the Commission identified the 
restructuring of (old) ILVA as a single program, the basic objective of 
which was the privatization of the ILVA steel group by the end of 1994. 
As set forth in the EC's decision, the 1993-1994 Restructuring Plan was 
limited by its terms to (old) ILVA and the benefits of the plan were 
received by only (old) ILVA's successor companies. For a further 
discussion see Comment 13.
    To determine the benefit attributable to ILP, it is first necessary 
to determine the total amount of liabilities which the government 
forgave. We would prefer to base our calculation on information at the 
time a portion of (old) ILVA's assets and liabilities were demerged to 
ILP and the company was separately incorporated. However, the 
information contained in (old) ILVA's 1993 financial statement 
regarding the assets and liabilities of the company was found to be 
unreliable by the company's auditor. We note the following statement 
within the ``Report on the Management'' section of ILVA Residua's 1994 
annual report: ``In the financial statement for 1993, we pointed out 
how the opening of liquidation would require drawing up a balance sheet 
formulated not with values of normal operation but with values of 
estimated cost. The brevity of time available then and the complexity 
of the valuations to be executed in that meeting allowed putting 
together only a few limited adjustments of values for which sure 
elements of judgement were available.'' See ILVA Residua's 1994 Annual 
Report in the February 16, 1999 Petition, at Volume 8, Tab 11. Because 
this information has been determined to be unreliable, we have resorted 
to facts otherwise available. As such, we have used information 
contained in the EC's 10th Monitoring Report which provides the most 
reliable data that is on the record for determining the benefit 
conferred by this program. We intend, however, to seek additional 
information to establish the value of the debt forgiveness at the time 
of the separate incorporation of ILP, in a subsequent administrative 
review should this investigation result in a countervailing duty order.
    Therefore, based upon the methodology that we employed in the final 
determination of Sheet and Strip from Italy, the amount of liabilities 
that we attributed to ILP is based on the gross liabilities left behind 
in ILVA Residua, as reported in the EC's 10th Monitoring Report (see 64 
FR at 30628). In calculating the amount of unattributable liabilities 
remaining after the separate incorporation of ILP, we started with the 
most recent ``total comparable indebtedness'' amount from the 10th 
Monitoring Report, which represents the indebtedness, net of debts 
transferred in the privatization of ILVA Residua's operations and 
residual asset sales, of a theoretically reconstituted, pre-liquidation 
(old) ILVA. In order to calculate the total amount of unattributed 
liabilities which amounted to countervailable debt forgiveness, we made 
the following adjustments to this figure: for the residual assets that 
had not actually been liquidated as of the 10th and final Monitoring 
Report; for assets that comprised SOFINPAR, a real estate company 
(because these assets were sold prior to the demergers of AST and ILP); 
for the liabilities transferred to AST and ILP; for income received 
from the sale of ILVA Residua's productive assets; and for the amount 
of debts transferred to Cogne Acciai Speciali (CAS), an ILVA subsidiary 
that was left behind in ILVA Residua and later spun off, as well as the 
amount of (old) ILVA debt attributed to CAS and countervailed in Wire 
Rod from Italy (see 63 FR at 40478). As discussed above, we subtracted 
the value of the asset write-downs taken by ILVA.
    The amount of liabilities remaining represents the pool of 
liabilities that were not individually attributable to specific (old) 
ILVA assets. We apportioned this debt to ILP, AST, and viable assets of 
ILVA Residua based on their relative asset values. We used the total 
consolidated asset values reported for ILP and AST for the year ending 
December 31, 1993.<SUP>7</SUP> The asset values recorded for ILP and 
AST as of December 31, 1993, were the opening asset values for each 
company when they were separately incorporated on January 1, 1994. See 
ILVA/ILT Verification Report, at 12 and Exhibit 1993/94-2, for ILP's 
asset value. For ILVA Residua, we used the sum of the purchase price 
plus debts transferred as a surrogate for the viable asset value of the 
operations sold from ILVA Residua. Because we subtracted a specific 
amount of ILVA's gross liabilities attributed to CAS in Wire Rod from 
Italy, we did not include its assets in the amount of ILVA Residua's 
privatized assets. Also, we did not include in ILVA Residua's viable 
assets those assets sold to IRI, because the sales do not represent 
sales to a non-governmental entity. To ensure that liabilities retained 
by ILVA Residua were properly apportioned across the three companies, 
we added the amount of the write-downs that were tied to the asset pool 
which ILP took when it was separately incorporated from (old) ILVA. The 
total amount of write-downs were previously subtracted from the pool of 
liabilities.
---------------------------------------------------------------------------

    \7\ Because the ultimate objective of the 1993-94 Restructuring 
Plan was the privatization of ILP and AST, which were separately 
incorporated from (old) ILVA on January 1, 1994, we have no reason 
not to believe that the value of the assets which were transferred 
to ILP and AST were accurately assessed during the liquidation 
process.
---------------------------------------------------------------------------

    We have treated the debt forgiveness provided to ILP as a non-
recurring subsidy because it was a one-time, extraordinary event. The 
discount rate we used in our grant formula was a constructed 
uncreditworthy benchmark rate based on our determination that (old) 
ILVA was uncreditworthy in 1993, the year in which the 1993-94 
Restructuring Plan was approved by the GOI. See ``Benchmarks for Long-
Term Loans and Discount Rates'' and ``Creditworthiness'' sections, 
above. We followed the methodology described in the ``Change in 
Ownership'' section above to determine the amount of benefit 
appropriately allocated to ILP after its privatization. We divided this 
amount by ILVA's total sales during the POI. On this basis, we 
determine the net countervailable subsidy to be 13.27 percent ad 
valorem for ILVA/ILT. Palini & Bertoli did not receive any benefits 
under this program.
E. Capital Grants to Nuova Italsider Under Law 675/77
    In 1977, the Italian Parliament passed Law 675 to establish an 
industrial plan for Italy which was experiencing an economic downturn. 
The objective of the law was to identify those industries vital to the 
economic health and development of Italy and provide to them financial 
assistance to modernize

[[Page 73253]]

and restructure production facilities. See GOI Verification Report, at 
16. In total, eleven sectors were identified as eligible for 
assistance. See Certain Steel from Italy, 58 FR at 37330-31. The types 
of funding provided under Law 675/77 included: (1) interest payments on 
bank loans and bond issues; (2) low interest loans granted by the 
Ministry of Industry; (3) grants for companies located in the South; 
(4) grants for personnel retraining; and (5) increased VAT reductions 
for firms located in the Mezzogiorno area.
    In Certain Steel from Italy, we verified that of the sectors which 
received Law 675/77 funding, steel accounted for 36.4 percent of the 
total funding provided under Law 675/77 (see 58 FR 37331). On this 
basis, we determined that assistance provided to steel companies under 
Law 675/77 is limited to a specific enterprise or industry, or group of 
enterprises or industries, and therefore is countervailable.
    In regard to the record of the instant investigation, the GOI 
stated that the objective of the capital grants program was to support 
the development of regions in the south of Italy. See GOI's May 28, 
1999 QR. The only eligibility criterion for receipt of this ``one-
time'' assistance was the location of factories in the south of Italy.
    Consistent with our preliminary finding, we determine that this 
program constitutes a countervailable subsidy within the meaning of 
section 771(5)(B)(i) of the Act. The capital grants constitute a 
financial contribution under section 771(5)(D)(i) of the Act providing 
a benefit in the amount of the grants. Because the steel sector was 
found to be the dominant user of Law 675/77 and the capital grants were 
limited to enterprises located in the south of Italy, we determine that 
the program is specific under section 771(5A)(D)(iii) and (iv) of the 
Act.
    At the verification of this investigation, we examined the 
application which Italsider submitted on February 20, 1980, for 
assistance under Law 675/77, and the corresponding approval 
notification of November 19, 1982. We noted that Nuova Italsider, the 
successor company to Italsider, was awarded a grant of 125,040 million 
lire. We examined Nuova Italsider's financial statements and learned 
that the grant was disbursed in several tranches during the years 1985, 
1986, and 1987.
    To determine the benefit, we have treated the capital grant as a 
non-recurring subsidy because the receipt of the grant was a one-time, 
extraordinary event. Because the benefit to Nuova Italsider is greater 
than 0.5 percent of the company's sales for 1982 (the year in which the 
grant was approved), we allocated the benefit over a 15 year AUL. See 
section 351.524(b)(2) of the CVD Regulations. We applied the change in 
ownership methodology to the capital grant to determine the subsidy 
allocable to ILP after its privatization. We divided this amount by 
ILVA's total sales during the POI. On this basis, we determine the net 
countervailable subsidy to be 0.13 percent ad valorem for ILVA/ILT. 
Palini & Bertoli did not use this program.
F. Early Retirement Benefits
    Law 451/94 was created to conform with EC requirements of 
restructuring and capacity reduction of the Italian steel industry. Law 
451/94 was passed in 1994, and enabled the Italian steel industry to 
implement workforce reductions by allowing steel workers to retire 
early. During the 1994-1996 period, and into January 1997, Law 451/94 
provided for the early retirement of up to 17,100 Italian steel 
workers. Benefits applied for during this period continue until the 
employee reaches his/her natural retirement age, up to a maximum of ten 
years.
    In the final determinations of Plate in Coils from Italy and Sheet 
and Strip from Italy, 64 FR at 15514-15 and 64 FR at 30629-30, 
respectively, as well as in the Preliminary Determination of the 
instant investigation, 64 FR at 40425-26, the Department determined 
that early retirement benefits provided under Law 451/94 are 
countervailable subsidies under section 771(5)(B)(i) of the Act. Law 
451/94 provides a financial contribution, as described in section 
771(5)(D)(i) of the Act, because Law 451/94 relieves the company of 
costs it would have normally incurred by having to employ individuals 
until the normal age of retirement. Also, because Law 451/94 was 
developed for, and exclusively used by, the steel industry, we 
determined that Law 451/94 is specific within the meaning of section 
771(5A)(D)(iii) of the Act. No new factual information or evidence has 
led us to change our prior findings that early retirements under Law 
451/94 are countervailable.
    As in the Preliminary Determination, we have treated one-half of 
the amount paid by the GOI as benefitting the company. Recognizing 
that, under Law 223/91, ILP would have been required to enter into 
negotiations with the unions before laying off workers, it is 
impossible for the Department to determine the outcome of those 
negotiations absent Law 451/94. At one extreme, the unions might have 
succeeded in preventing lay offs. If so, the benefit to ILP would be 
the difference between what it would have cost to keep those workers on 
the payroll and what the company actually paid under Law 451/94. At the 
other extreme, the negotiations might have failed and ILP would have 
incurred only the minimal costs described under the so-called 
``Mobility'' provision of Law 223/91, which identifies the minimum 
payment the company would incur when laying off workers. The benefit to 
ILP would have been the difference between what it would have paid 
under Mobility and what it actually paid under Law 451/94.
    We have no basis for believing either of these extreme outcomes 
would have occurred. It is clear, given the EC regulations that called 
for restructuring within the steel industry, that ILP would have laid 
off workers. However, we do not believe that ILP would have simply 
fired the workers without reaching accommodation with the unions. GOI 
officials have indicated that failure to negotiate a separation package 
with the unions would likely have led to social strife. Therefore, we 
have proceeded on the assumption that ILP's early retirees would have 
received some support from ILP.
    In attempting to determine the level of post-employment support 
that ILP would have negotiated with its unions, we examined the 
situation facing (old) ILVA before ILP and AST were separately 
incorporated. By the end of 1993, (old) ILVA had established an overall 
plan for terminating redundant workers--a plan that would ultimately 
affect both ILP and AST. Under this plan, early retirees would first be 
placed on a temporary worker assistance measure under Law 223/91, Cassa 
Integrazione Guadagni--Extraordinario (CIG-E), while awaiting the 
passage of Law 451/94, and then would receive benefits under Law 451/
94, once implemented. This indicates that, at the time an agreement was 
being negotiated with the unions and the Ministry of Labor on the terms 
of the layoffs, (old) ILVA and its workers were aware that government 
contributions would ultimately be made to workers' benefits. In such 
situations, i.e., where the company and its workers are aware at the 
time of their negotiations that the government will be making 
contributions to the workers' benefits, the Department's prior practice 
has been to treat half of the amount paid by the government as 
benefitting the company. We have stated that when the government's 
willingness to provide assistance is known at the time the contract is 
being negotiated, this

[[Page 73254]]

assistance is likely to have an effect on the outcome of the 
negotiations. While we continue to adhere to this logic in the preamble 
to the CVD Regulations, we stated that we would examine the facts of 
each case to determine the appropriate portion of the funds to be 
considered countervailable. See CVD Regulations, 63 FR at 65380.
    With respect to ILP and its workers, we determine that, under 
Italian Law 223, ILP would be required to negotiate with its unions 
about the level of benefits that would be made to workers permanently 
separated from the company. Since (old) ILVA and its unions were aware 
at the time of their negotiations that the GOI would be making payments 
to those workers under Law 451/94, some portion of the payment is 
countervailable. However, we have no basis for apportioning the 
benefit. Therefore, we consider the benefit to ILVA/ILT to be one-half 
of the amount paid to the workers by the GOI under Law 451/94.
    Consistent with the Department's practice with regard to allocation 
of worker-related subsidies, we have treated benefits to ILVA/ILT under 
Law 451/94 as recurring grants expensed in the year of receipt. To 
calculate the benefit received by ILVA/ILT during the POI, we 
multiplied the number of employees by employee type (blue collar, white 
collar, and senior executive) who retired early by the average salary 
by employee type. Since the GOI was making payments to these workers 
equaling 80 percent of their salary, we attributed one-half of that 
amount to ILVA/ILT. Therefore, we multiplied the total wages of the 
early retirees by 40 percent. We then divided this total amount by 
ILVA's total sales during the POI. On this basis, we determine a net 
countervailable subsidy to be 1.39 percent ad valorem for ILVA/ILT.
    As mentioned in the ``Corporate History of ILVA/ILT'' section of 
this notice, in October 1993, (old) ILVA entered into liquidation and 
became known as ILVA Residua. In December 1993, IRI initiated the 
demerger of (old) ILVA's main productive assets into two new companies, 
ILP and AST. On January 1, 1994, ILP and AST became separately 
incorporated firms. The remainder of (old) ILVA's productive assets and 
existing liabilities, along with much of the redundant workforce, was 
placed in ILVA Residua. By placing much of this redundant workforce in 
ILVA Residua, ILP and AST were able to begin their respective 
operations with a relatively ``clean slate'' in advance of their 
privatizations. ILP and AST were relieved of having to assume their 
respective obligations to those redundant workers who were placed in 
ILVA Residua and received early retirement benefits under Law 451/94. 
Therefore, we have determined that ILVA/ILT has received a 
countervailable benefit during the POI, because it was relieved of a 
financial obligation that would otherwise have been due.
    In order to calculate the subsidy received by ILVA/ILT during the 
POI, we first needed to determine the appropriate number of early 
retirees in ILVA Residua that originally should have been apportioned 
to ILP. Consistent with our findings for the 1993-94 Restructuring 
Plan, we used the asset value we apportioned to ILP as a percentage of 
total viable assets of (old) ILVA immediately prior to ILP's separate 
incorporation. We then multiplied this percentage by the total number 
of ILVA Residua early retirees. It was then necessary to estimate the 
numbers and salaries of early retirees by employee type since the GOI 
did not provide this information. To do this, we applied the same 
ratios of workers by employee type as ILP retired, and applied this to 
ILVA Residua. We also used the same salaries of ILVA/ILT employees by 
worker type. As we did with ILP early retirees, we then multiplied the 
number of employees, by employee type, by the average salary by 
employee type. Since the GOI was making payments to these workers 
equaling 80 percent of their salary, we attributed one-half of that 
amount to ILVA/ILT. Therefore, we multiplied the total wages of the 
early retirees by 40 percent. We then divided this total amount by 
ILVA's total sales during the POI. On this basis, we determine a net 
countervailable subsidy to be 0.66 percent ad valorem for ILVA/ILT.
    The Sidercomit unit of ILVA/ILT also received early retirement 
benefits under Law 451/94 separately from ILVA/ILT. As we did with 
ILVA/ILT, we multiplied the total wages of the early retirees by 40 
percent and then divided this amount by the total sales of ILVA during 
the POI. On this basis, we preliminarily determine the net 
countervailable subsidy to be less than 0.005 percent ad valorem for 
ILVA/ILT.
    Upon consolidation of the above determined rates, we determine a 
total net countervailable subsidy of 2.06 percent ad valorem for ILVA/
ILT under Law 451/94 for the POI. Palini & Bertoli did not use this 
program.
G. Exemptions From Taxes
    Presidential Decree 218/1978 exempted firms operating in the 
Mezzogiorno from both the ILOR and IRPEG profit taxes. Companies are 
eligible for full exemption from the 16.2 percent ILOR tax on profits 
arising from eligible projects in the Mezzogiorno and less developed 
regions of the center-north of Italy for ten consecutive years after 
profits first arise. New companies undertaking productive activities in 
the Mezzogiorno are entitled to a full exemption from the IRPEG tax (37 
percent of a majority of profits and 19 percent of certain profits) for 
ten consecutive years after the project is completed. While the ILOR 
tax was repealed beginning with tax year 1998, a successor tax, IRAP, 
has been introduced beginning with tax year 1998.
    We determine that exemptions from ILOR and IRPEG taxes are 
countervailable subsidies in accordance with section 771(5)(B)(i) of 
the Act. These tax exemptions constitute financial contributions under 
section 771(5)(D)(ii) of the Act, since revenue that is otherwise due 
is being foregone. Because these exemptions are limited to a group of 
enterprises or industries within a designated geographical region, they 
are specific in accordance with section 771(5A)(D)(iv). Benefits 
resulting from ILOR and IRPEG tax exemptions were found to be 
countervailable in Certain Steel from Italy (see 58 FR at 37334-35).
    ILT received an exemption from the IRPEG tax and a partial 
exemption from the ILOR tax on its 1997 tax return, filed during the 
POI. In order to calculate the benefit stemming from the exemption from 
IRPEG, we multiplied ILT's total profits that would otherwise have been 
subject to IRPEG by the IRPEG tax rate. We then divided the result by 
ILVA's total sales during the POI to determine the ad valorem subsidy. 
On this basis, we determine the subsidy to be 1.05 percent ad valorem 
for ILVA/ILT.
    To compute ILT's partial exemption from ILOR, we took the amount of 
profits exempted from the ILOR tax, as shown in ILVA/ILT Verification 
Exhibits Tax-2 and Tax-3, and multiplied that amount by the ILOR tax 
rate of 16.2 percent to determine the benefit. We then divided the 
result by ILVA's total sales during the POI to determine the ad valorem 
subsidy. On this basis, we determine the subsidy to be 0.24 percent ad 
valorem for ILVA/ILT. Upon consolidation of the IRPEG and ILOR 
exemptions, we determine the net consolidated subsidy for ILVA/ILT to 
be 1.29 percent ad valorem. Palini & Bertoli did not use this program.
H. Exchange Rate Guarantees Under Law 796/76
    Law 796/76 established a program to minimize the risk of exchange 
rate

[[Page 73255]]

fluctuations on foreign currency loans. All firms that contract foreign 
currency loans from the European Coal and Steel Community (ECSC) or the 
Council of Europe Resettlement Fund (CERF) could apply to the Ministry 
of the Treasury (MOT) to obtain an exchange rate guarantee. The MOT, 
through the Ufficio Italiano di Cambi (UIC), calculates loan payments 
based on the lire-foreign currency exchange rate in effect at the time 
the loan is contracted (i.e., the base rate). The program establishes a 
floor and ceiling for exchange rate fluctuations, limiting the maximum 
fluctuation a borrower would face to two percent above or below the 
base rate. If the lire depreciates more than two percent against the 
foreign currency, a borrower is still able to purchase foreign currency 
at the established (guaranteed) ceiling rate. The MOT absorbs the loss 
in the amount of the difference between the guaranteed rate and the 
actual rate. If the lire appreciates against the foreign currency, the 
MOT realizes 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 pre-existing exchange rate guarantees continue on 
any loans outstanding after that date. Italsider contracted two loans, 
one in 1978, and the other in 1979. Both of these loans were ultimately 
transferred to ILVA/ILT. These two foreign currency denominated loans 
were outstanding during the POI and exchange rate guarantees applied to 
both.
    We determine that this program constitutes a countervailable 
subsidy within the meaning of section 771(5)(B)(i) 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 lire depreciates 
against the foreign currency beyond the two percent limit. When this 
occurs, the borrower receives a benefit in the amount of the difference 
between the guaranteed rate and the actual exchange rate.
    During the recent verification of the GOI in the Plate in Coils 
from Italy and Sheet and Strip from Italy investigations, GOI officials 
explained that over the last decade, roughly half of all guarantees 
made under this program were given to coal and steel companies. See 
Results of Verification of the Government of Italy, Memorandum to the 
File, dated February 3, 1999 (public version of the document is 
available on the public file in the CRU). This is consistent with the 
Department's finding in a previous proceeding that the Italian steel 
industry has been a dominant user of the exchange rate guarantees 
provided under Law 796/76. 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). No new information to contradict these earlier findings of 
specificity has been received in this case. Therefore, we determine 
that the program is specific under section 771(5A)(D)(iii)(II) of the 
Act.
    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 are 
treating the benefits under this program as recurring grants. ILVA/ILT 
and its predecessor companies from which these loans were transferred, 
paid a foreign exchange commission fee to the UIC for each payment 
made. We determine that this fee qualifies as an `` . . . application 
fee, deposit, or similar payment paid in order to qualify for, or to 
receive, the benefit of the countervailable subsidy.'' See section 
771(6)(A) of the Act. Thus, for the purposes of calculating the 
countervailable benefit, we have added the foreign exchange commission 
to the total amount ILVA/ILT paid under this program during the POI. 
See Wire Rod from Italy, 63 FR at 40479.
    Under this program, we have calculated the total countervailable 
benefit as the difference between the total loan payment due in foreign 
currency, converted at the current exchange rate, less the sum of the 
total loan payment due in foreign currency converted at the guaranteed 
rate and the exchange rate commission. We divided this amount by ILVA's 
total sales during the POI. On this basis, we determine the net 
countervailable subsidy to be 0.07 percent ad valorem for ILVA/ILT. 
Palini & Bertoli did not use this program.
I. Interest Grants on Loans Under Law 64/86
    The GOI has maintained a system of ``extraordinary intervention'' 
in southern Italy since the 1950's, authorizing aid to the 
disadvantaged region. Over time, various laws were passed, including 
Decree 218/78, relating to the extraordinary intervention in the South. 
In 1986, Law 64/86 was passed in order to consolidate all laws relating 
to the extraordinary intervention in the South into one development 
policy.
    In 1992, Sidercomit was created as a subsidiary of (old) ILVA. In 
1997, Sidercomit became an operating unit within (new) ILVA. During 
verification, the Department determined that in 1996, Sidercomit 
received a loan for which it was granted interest contributions under 
Law 64. Subsequent to receiving this loan, but prior to the POI, 
Sidercomit was subsumed into ILVA as an operating unit, and was no 
longer a separate corporate entity.
    ILVA/ILT did not report these interest contributions in its 
questionnaire responses. We found at verification, through examining 
the financial statements of (new) ILVA and discussions with company 
officials, that Sidercomit had received a ``soft loan'' in 1996, which 
was ultimately recorded in (new) ILVA's financial statements once 
Sidercomit was subsumed into (new) ILVA. We further learned that, under 
this loan, the Ministry of Industry was to assume a large part of the 
interest payments, which effectively reduced the payments for 
Sidercomit. The Ministry pays the interest contributions directly to 
the bank. As such, these contributions reduce the interest rate that 
Sidercomit (and now (new) ILVA) must pay on the loan. Accordingly, 
under section 771(5)(D)(i) of the Act, we have determined that these 
interest contributions represent financial contributions.
    Under section 771(5A)(D)(iv) of the Act, we determine that these 
contributions are specific since assistance under Law 64 was only 
available to a limited geographical region within the country. This is 
consistent with our determinations in numerous Italian countervailing 
duty investigations, including the Final Affirmative Countervailing 
Duty Determination: Certain Pasta from Italy, 61 FR 30288, 30293 (June 
14, 1986). Pursuant to section 771(5)(E)(ii) of the Act, we are 
calculating the benefit conferred as the ``difference between the 
amount the recipient of the loan pays on the loan and the amount the 
recipient would pay on a comparable commercial loan that the recipient 
could actually obtain on the market.'' In this particular case, the 
benefit conferred is equal to the amount of the interest contributions 
provided by the GOI during the POI. We have divided the benefit over 
ILVA's total sales during the POI. On this basis, we determine the net 
countervailable subsidy to be less than 0.005 percent ad valorem for 
ILVA/ILT. Palini & Bertoli did not use this program.

Programs of the Regional Government of Friuli-Venezia Giulia

A. Development Grants Under Law 30 of 1984
    Law 30 of 1984 was enacted by the Regional Government of Friuli-
Venezia

[[Page 73256]]

Giulia to provide one-time development grants to companies for 
investments in industrial projects, including the construction of new 
plants and modernization or expansion of existing plants. Eligible 
companies could receive a grant amounting to 20 percent of the cost of 
the investment, with the grant not to exceed 1,000,000,000 lire. Law 30 
has not been officially terminated by Decree, but funding for grants 
outlined under the law has not been provided since 1993. Those projects 
approved for funding prior to 1993, would still receive the grant at 
the conclusion of the investment project.
    At verification, the Department learned that companies from all 
industries that planned future industrial investments were eligible to 
receive development grants under Law 30. Eligibility under the law was, 
however, confined to certain geographical areas within the Friuli-
Venezia Giulia region. Eligible firms were those operating in 
mountainous zones north of Udine, those in the provinces of Trieste and 
Gorizia, and those in the industrial areas of Aussa Corno and San Vitto 
al Tagliamento. Because these grants are available to firms within 
designated areas of the Friuli-Venezia Giulia region, they are specific 
in accordance with section 771(5A)(D)(iv) of the Act. The grants 
provided under this program represent a financial contribution under 
section 771(5)(D)(i) of the Act.
    In 1989, Palini & Bertoli submitted to the regional government an 
application for a development grant under Law 30. The company received 
approval for the grant in 1989, and received the grant in 1993. To 
determine the benefit, we have treated the grant as a non-recurring 
subsidy because receipt of the grant was a one-time, extraordinary 
event. Because the benefit to Palini & Bertoli is greater than 0.5 
percent of the company's sales for 1989 (the year in which the grant 
was approved), we allocated the benefit over a 15 year AUL. See section 
351.524(b)(2) of the CVD Regulations. To calculate the benefit, we 
determined the benefit allocable to the POI and divided it by Palini & 
Bertoli's total sales during the POI. On this basis, we determine the 
net countervailable subsidy to be 0.12 percent ad valorem for Palini & 
Bertoli. ILVA/ILT did not use this program.

European Commission Programs

A. ECSC Loans Under Article 54
    Article 54 of the 1951 ECSC Treaty established a program to provide 
industrial investment loans directly to the member iron and steel 
industries to finance modernization and purchase new equipment. 
Eligible companies apply directly to the EC (which administers the 
ECSC) for up to 50 percent of the cost of an industrial investment 
project. The Article 54 loans are generally financed on a ``back-to-
back'' basis. In other words, upon granting loan approval, the ECSC 
borrows funds (through loans or bond issues) at commercial rates in 
financial markets which it then immediately lends to steel companies at 
a slightly higher interest rate. The mark-up is to cover the costs of 
administering the Article 54 program.
    We determine that these loans constitute a countervailable subsidy 
within the meaning of section 771(5)(B)(i) of the Act. This program 
provides a financial contribution, as described in section 771(5)(D)(i) 
of the Act, which confers a benefit to the extent the interest rate is 
less than the benchmark interest rate. The Department has found Article 
54 loans to be specific in several proceedings, including Electrical 
Steel from Italy, 59 FR at 18362, Certain Steel from Italy, 58 FR at 
37335, and Plate in Coils from Italy, 64 FR at 15515, because loans 
under this program are provided only to iron and steel companies. The 
EC has also indicated on the record of this investigation that Article 
54 loans are only available to steel and coal companies which fall 
within the scope of the ECSC Treaty. Therefore, we determine that this 
program is specific pursuant to section 771(5A)(D)(i) of the Act.
    ILVA/ILT had two long-term, fixed-rate loans outstanding during the 
POI, each denominated in U.S. dollars. These loans were contracted by 
Italsider, one in 1978 and one in 1979. Consistent with Wire Rod from 
Italy, we have used as our benchmark the average yield to maturity on 
selected long-term corporate bonds as reported by the U.S. Federal 
Reserve, since both of these loans were denominated in U.S. dollars 
(see 63 FR at 40486). We used these rates since we were unable to find 
a long-term borrowing rate for loans denominated in U.S. dollars in 
Italy. The interest rate charged on both of ILVA/ILT's two Article 54 
loans was lowered part way through the life of the loan. The interest 
rate on the loan contracted in 1978 was lowered in 1987, and the rate 
on the loan contracted in 1979 was lowered in 1992. Therefore, for the 
purpose of calculating the benefit, we have treated these loans as if 
they were contracted on the date of this rate adjustment. Because ILVA 
was uncreditworthy in the year these loans were contracted, 1987 and 
1992 (based on the interest rate adjustments mentioned above), we 
calculated the uncreditworthy benchmark rate in accordance with section 
351.505 (a)(3)(iii) of the CVD Regulations. See ``Benchmark for Long-
Term Loans and Discount Rates'' section, above.
    To calculate the benefit under this program, pursuant to section 
351.505(c)(2) of the CVD Regulations, we employed the Department's 
long-term fixed-rate loan methodology. We compared ILVA/ILT's interest 
rates on the two loans to our benchmark interest rate for 
uncreditworthy companies on interest paid by ILVA/ILT during the POI. 
We then divided the benefit by ILVA's total sales during the POI. On 
this basis, we determine the net countervailable subsidy to be 0.02 
percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this 
program.
    ILVA/ILT was also repaying four ECSC loans under Article 54 during 
the POI that were taken by ILP for the construction of housing for coal 
and steel industry workers. Funding for these loans came entirely from 
the ECSC operational budget, which is composed of levies imposed on 
coal and steel producers, investment income on those levies, guarantee 
fees and fines paid to the ECSC, and interest received from companies 
that have obtained loans from the ECSC. Consistent with previous 
determinations, because ECSC funding for these types of loans is 
completely from non-government sources, we find these loans to be not 
countervailable. See Electrical Steel from Italy, 59 FR at 18364 and 
Certain Steel from Italy, 58 FR at 37336.

II. Programs Determined To Be Not Countervailable

Government of Italy Programs

A. Law 308/82
    On March 16, 1999, the Department initiated on the program ``Grants 
to ILVA.'' In their May 13, 1999 response, ILVA/ILT report that 
Italsider was approved for a grant under Law 308/82 in 1983. In Certain 
Steel from Italy, we verified that benefits under Law 308/82 were 
widely and fairly evenly distributed with no one sector or sectors 
receiving a disproportionate amount. Because Law 308/82 grants were not 
limited to a specific enterprise or industry, or group of enterprises 
or industries, we determined them to be not countervailable. See 
Certain Steel from Italy, 58 FR at 37336. No new factual information or 
evidence of changed circumstances has been provided to the Department 
in this instant investigation to warrant the Department to revisit its 
earlier determination that grants provided

[[Page 73257]]

under Law 308/82 are not countervailable.
B. Unpaid Portion of Payment Price for ILP
    Petitioners alleged that the GOI effectively gave RIVA a zero-
interest loan on a portion of the contract price agreed to by RIVA for 
ILP, because RIVA has not paid the full contract price for ILP. RIVA 
reported that the company entered into arbitration after the transfer 
of ownership of ILP in April 1995. RIVA stated that it did not invoke 
arbitration to challenge the purchase price of ILP, but invoked 
arbitration to obtain an indemnity from pre-existing and unreported 
liabilities in accordance with the indemnification provision of the 
contract of sale. The dispute concerns whether IRI owes RIVA a sum of 
money as indemnification for liabilities, which RIVA has potentially 
incurred as a result of the acquisition of ILP. To preserve its 
leverage in the dispute and ensure that the company will obtain relief 
in the event that it is awarded indemnification by the arbitration 
panel, RIVA has withheld payment of amounts due to IRI under the 
contract of sale.
    We inquired about the arbitration procedure and whether any Italian 
company which purchases either a government-owned or private entity can 
enter into arbitration to remedy a dispute. RIVA reported that Article 
25 of the contract of sale provides for arbitration under the rules of 
the International Chamber of Commerce and that Article 806 of the 
Italian Civil Code authorizes the use of arbitration to settle 
litigation. Any company in Italy that purchases another company from 
either the government or a private seller can include such an 
arbitration provision in the contract of sale. Because the use of 
arbitration to settle disputes between two parties is a normal 
commercial practice in Italy and there is no information that this 
particular arbitration has proceeded in a non-commercial manner, we 
determine that no countervailable benefit has been provided under this 
process.

Programs of the Regional Government of Friuli-Venezia Giulia

A. Interest Contributions Under Law 25 of 1965
    Under Regional Law 25 of 1965, companies making manufacturing 
investments in the region of Friuli-Venezia Giulia were eligible to 
receive interest contributions from the region on loans taken out for 
those investments. For a firm to receive interest contributions, it had 
to construct a new industrial plant, or modernize or expand an existing 
plant. Interest contributions effectively lower the interest rate on a 
loan taken out for such an investment. While the firm pays interest on 
the loan at an agreed-upon rate, the regional government will reimburse 
the company the difference between the agreed-upon rate and a reference 
rate decided on by the region. The Department learned at verification 
that, although the program has not been officially terminated, no 
regional investments made after 1991 have been approved for interest 
contributions.
    The regional government approved Palini & Bertoli for interest 
contributions in 1991. The company began receiving payments in 1993, 
after construction of a new plant was completed. During the POI, Palini 
& Bertoli received two interest contributions under Law 25. We verified 
that assistance under Law 25 was provided to a large number of firms 
from a wide range of industries throughout the entire region of Friuli-
Venezia Giulia, and that the steel industry did not receive a 
disproportionate share of assistance under the program. Because 
interest contributions under Regional Law 25 are not specific in 
accordance with section 771(5A)(D) of the Act, we determine that this 
program is not countervailable.

III. Programs Determined To Be Not Used

Government of Italy Programs

A. Lending From the Ministry of Industry Under Law 675/77
    ILVA/ILT reported that at the time of its privatization the company 
became responsible for certain loan obligations of its predecessor 
companies. ILVA/ILT was responsible for repaying loans provided under 
Law 675/77, which were applicable to those facilities that produce the 
subject merchandise. We confirmed at verification that the repayment 
obligations on these loans ended in December 1997. We also verified 
with the GOI that no new loans have been provided under Law 675/77 
since 1987. Because ILVA/ILT did not have loans under Law 675/77 
outstanding during the POI, we determine that the program was not used.
B. Interest Contributions Under Law 675/77
    ILVA/ILT reported and we verified that the company received an 
interest contribution in 1998, against a loan provided under Law 675/
77. Because the loan against which the interest contribution was 
received was repaid in full in December 1997, we determine that this 
program was not used during the POI. It is the Department's practice to 
treat an interest contribution as countervailable on the date the 
company made the corresponding interest payment, despite any delay in 
the receipt of the interest contribution. This is because the company's 
entitlement to the interest contribution was automatic when it made the 
interest payment and the amount of any benefit from the interest 
contribution was known at the time of the interest payment. Therefore, 
we find, for purposes of the benefit calculation, that the benefit was 
received at the time the interest payment was made, and, as such, the 
program was not used during the POI. See e.g., Sheet and Strip from 
Italy, and Final Affirmative Countervailing Duty Determination: Oil 
Country Tubular Goods from Italy, 60 FR 33577, 33579 (June 28, 1995) 
(Oil Country Tubular Goods from Italy).
C. Law 305/89
    ILVA/ILT reported that (old) ILVA, its predecessor company, applied 
for a grant under Law 305/89 in 1990. The GOI approved (old) ILVA's 
application in 1991, and awarded the company a grant of 2.2 billion 
lire. However, payment of the grant was delayed. We learned at 
verification that ILP received a portion of the grant in 1996, and 
ILVA/ILT received the remaining portion of the grant in 1997. We 
applied the 0.5 percent allocation test against the full grant amount 
approved in 1991. See section 351.524(b)(2) of the CVD Regulations. We 
calculated the amount of the grant received under Law 305/89 to be less 
than 0.5 percent ad valorem of (old) ILVA's sales in 1991. Therefore, 
even if we determined that Law 305/89 is countervailable, the grant 
would have been expensed in the years of receipt, 1996 and 1997. 
Because the grant would be expensed, it would not provide any benefit 
to ILVA/ILT during the POI. Therefore, we determine that Law 305/89 was 
not used by ILVA/ILT.
D. Interest Grants for ``Indirect Debts'' Under Law 750/81
    In 1984, Italsider received a residual payment of 25.3 billion lire 
against interest grants provided in fiscal years 1981, 1982, and 1983. 
At verification, we learned that under Law 750 of 1981, the GOI 
approved funding for IRI, which was providing financial assistance to 
its sub-holdings that were incurring debts. See GOI Verification 
Report, at 19-20. In 1981, 1982, and 1983, Italsider incurred costs, 
associated with debts, at the Bagnoli plant and the Elba Island

[[Page 73258]]

mines, and the grant received in 1984, was for the plant and mines. 
However, since the grant was received in 1984, the POI (i.e., 1998) 
would be the last year of the allocation period. Therefore, even if we 
were to allocate the grant over time, rather than expense it in the 
year of receipt, any benefit during the POI would be less than 0.005 
percent ad valorem.
E. Capital Grants Under Decree 218/78 and Law 64/86
    The GOI reported that (old) ILVA received a grant in 1988, under 
Decree 218. The original grant amount was approved in 1978. We applied 
the 0.5 percent test against the full grant amount approved in 1978. 
See section 351.524(b)(2) of the CVD Regulations. We calculated the 
benefit as less than 0.5 percent ad valorem of Italsider's sales in 
1978. Additionally, Sidercomit and Centro Acciai received several 
grants under Decree 218 and Law 64 between 1984 and 1997. We summed all 
grants by year of approval and applied the 0.5 percent test against the 
total amounts for each year. We calculated the benefit as less than 0.5 
percent ad valorem of the sales of ILVA/ILT or its respective 
predecessor company corresponding to the year the grants were received. 
Therefore, even if we determined that this program is countervailable, 
the above-mentioned grants would have been expensed in the respective 
years of receipt. Because the grants would be expensed and would not 
provide any benefit to ILVA/ILT during the POI, we determine that this 
program was not used.
F. Urban Redevelopment Packages Under Law 181/89
    ILVA/ILT and its predecessor companies, ILP and (old) ILVA, 
received grants under Law 181/89 between 1991 and 1997. No grants were 
received during the POI. Because the approved amount of each grant, 
separately, was less than 0.5 percent of total sales of ILVA/ILT (or 
predecessor company) in the corresponding year, we would expense the 
benefit of each approved grant in that year. See section 351.524(b)(2) 
of the CVD Regulations. Therefore, since the grants would be expensed 
in the years of receipt, and ILVA/ILT would not realize any benefit 
during the POI, we determine that Urban Redevelopment Packges under Law 
181/89 were not used.
G. Grants to ILVA
    For a discussion, see Comment 20, below.
H. Closure Payments Under Law 481/94 and Predecessor Law
I. Closure Grants Under Laws 46 and 706
J. Decree Law 120/89
K. Law 488/92
L. Law 341/95 Tax Concessions
M. Interest Rate Reductions Under Law 902
N. Interest Contributions Under the Sabatini Law
O. Export Marketing Grants Under Law 394/81
P. Law 549/95: Tax Exemptions on Reinvested Profits for Steel Producers 
in Objective 1, 2, and 5(B) Areas

European Commission Programs

A. European Social Fund (ESF)
    The GOI has reported that ESF grants were provided to Nuova 
Italsider, Italsider and (old) ILVA from 1985 through 1993. Because the 
total of all grants provided under the program in each year was less 
than 0.5 percent of total sales of Nuova Italsider, Italsider or (old) 
ILVA (depending on the year of approval) in the corresponding year, we 
would expense the benefit of each grant payment received in that year. 
See section 351.524(b)(2) of the CVD Regulations. Therefore, there is 
no benefit to ILVA/ILT during the POI.
    ILVA/ILT has reported that ESF payments were also made to ILP in 
1994 and 1995, and to ILVA/ILT in 1998, for the DUSID, DUTEM, and DUMES 
training programs having taken place in 1994 and 1995. While some ILP 
employees took part in these training programs, there is no evidence 
that ILP benefitted from the ESF payments under these training 
programs, or that these programs provided training to ILP employees 
that ILP would otherwise have had to incur. As such, we find that these 
programs do not provide a countervailable subsidy. See Comment 19, 
below.
    Based on the fact that grants received in 1985 through 1993, would 
provide no benefit to ILVA/ILT during the POI, and that funds received 
for the DUSID, DUTEM, and DUMES training programs are not 
countervailable, we determine that the ESF was not used by ILVA/ILT.
B. Interest Rebates on ECSC Article 54 Loans
C. ECSC Conversion Loans, Interest Rebates, Restructuring Grants and 
Traditional and Social Aid Under Article 56
D. ERDF Aid
E. Resider and Resider II (Commission Decision 88/588)

IV. Programs Determined Not To Exist or To Have Been Terminated

A. Additional Debt Forgiveness in the Course of Privatization

B. Grants to ILVA To Cover Closure and Liquidation Expenses as Part of 
the 1993-1994 Privatization Plan

C. Working Capital Grants to ILVA in 1993

    With respect to the programs A, B, and C listed above, the GOI 
reported in its May 10, 1999 questionnaire response that all monetary 
assistance (old) ILVA received in the course of the 1993-1994 
Restructuring Plan was effected in the EC Decision 94/259/ECSC of April 
12, 1994. We found no evidence at verification that there was any 
further debt forgiveness or grants provided as part of the 1993-1994 
Restructuring Plan beyond the assistance outlined in the April 12, 1994 
EC decision. We therefore determine that these programs do not exist.

D. Personnel Retraining Grants Under Law 675/77

    The GOI reported, and we verified, that personnel retraining grants 
provided under Law 675/77 were terminated in 1987. The government 
stated that the resources provided under this program were allocated 
over the years 1981 through 1987. The GOI reported that no other law 
providing personnel retraining grants or financial allocations under 
Law 675/77 have been approved since 1987.

E. VAT Reductions Under Law 675/77

    The GOI reported, and we verified that, the tax reductions referred 
to in Section 18 of Law 675 of August 12, 1977, were terminated 
effective March 29, 1991. Pursuant to Section 14(3) of Law 64 of March 
1, 1986, Section 18 of Law 675/77, applied for a period of five years 
from the date of promulgation of the law.

F. Grants to RIVA/ILP

Interested Party Comments
    The case brief submitted by the GOI addresses, what they consider 
to be, errors and omissions contained the in the GOI's verification 
report issued by

[[Page 73259]]

the Department on November 12, 1999. Principally, they state the errors 
concern the liquidation of Finsider and the assistance provided by IRI 
in connection with the liquidation. The GOI also states that no 
subsidies passed through to the new owner of ILP upon its privatization 
in 1995, and that failure by the Department to recognize this fact 
would be inconsistent with U.S. obligations under the WTO Agreement. 
With regard to the GOI's statement on the privatization of ILP, we 
address the issue of privatization in Comment 14 below. Because the 
other comments made by the GOI are not substantive arguments, we have 
not addressed them separately.
    Palini & Bertoli did not submit any comments, therefore, when we 
refer to ``respondents'' below, we are referring to ILVA/ILT, except 
for Comment 14 where we refer to ILVA/ILT and the GOI.

Comment 1: Use of ILVA's Verified 1998 Sales

    Respondents argue that the Department in calculating the final CVD 
rates should use the correct and verified 1998 sales denominator. They 
state that at the time of the preliminary determination ILVA (i.e., 
(new) ILVA) had not completed its official trial balance for 1998. When 
preparing for verification, using the finalized trial balance, ILVA 
found that the sales denominator submitted earlier to the Department 
was incorrect. Respondents note that the Department confirmed the 
correct sales denominator at verification, and therefore, that sales 
denominator should be used in the final determination.
    Department's Position: We agree with the respondents that the 
Department should use ILVA's verified 1998 sales figure as the 
denominator to calculate the final CVD rates. We verified the correct 
1998 sales figure by reconciling that amount to ILVA's completed trial 
balance which was examined at verification. Therefore, we have used 
ILVA's corrected 1998 sales denominator in the final determination.

Comment 2: Average Useful Life of Assets

    Respondents provided four tables illustrating its proposed company-
specific AUL calculations for ILVA's (i.e., (new) ILVA) and ILT's 
assets, both separately and in combination. Both respondents and 
petitioners have focused their arguments on two of the four tables. The 
primary difference between the AUL calculations contained in each of 
these two tables is the treatment of the 1993 write-down of ILVA's 
assets. The first calculation presents a simple division of the annual 
average gross book values of the depreciable fixed assets by the 
aggregated annual charge to accumulated depreciation over a ten-year 
period (calculation 1). The second calculation adjusts the figures 
contained in the first calculation to reduce the gross book values by 
the amount of write-downs that occurred in connection with the 1993-94 
restructuring and demerger of ILP from the (old) ILVA (calculation 2).
    According to respondents, they provided the Department an 
inadequate explanation of ILVA's AUL worksheets prior to the 
Preliminary Determination, and, as a result, the Department relied on a 
worksheet (calculation 1) that substantially overstated the value of 
ILVA's depreciable assets. Respondents further maintain that, as 
demonstrated at verification, using the correct numbers from the 
correct worksheet yields an AUL for the renewable physical assets of 
ILVA and ILT of approximately 11 years.
    Respondents state that this 11-year AUL not only accords with 
Generally Accepted Accounting Principals (GAAP) and is consistent with 
ILVA's financial statements, but also reflects precisely the type of 
normalizing adjustment required by the Department for companies that 
have recorded asset write-downs as per the preamble to the Department's 
final CVD Regulations, (see 63 FR at 65397). Respondents maintain that 
because ILVA made the normalizing adjustment, the Department should use 
this 11-year AUL from calculation 2 in its final determination. 
According to respondents, the AUL calculation, which was provided by 
respondents and used by the Department in its preliminary determination 
does not produce an AUL using actual asset values, since it disregards 
the write-downs of 1993. In other words, this calculation does not 
include the normalizing adjustment for the asset write-down, and as a 
result seriously distorts the AUL calculation. Respondents also claim 
the Department cannot accept the calculation 1 result, because it omits 
the normalizing adjustment for the asset write-down and the only 
purpose served by calculation 1 was to illustrate the impact of the 
1993 write down on the asset values and depreciation recorded in 
calculation 2.
    Petitioners contend that calculation 1 provides the closest 
approximation to the AUL methodology established by the Department in 
19 CFR 351.524(d)(iii) and that this calculation produces an AUL of 
assets that does not differ by a year or more from the 15 year period 
provided for in the IRS tables. Therefore, petitioners request that the 
Department use the AUL established by the IRS as it did in the 
preliminary determination.
    Petitioners contend that adjusting the asset values to account for 
the extraordinary write-downs in the value of ILVA's fixed assets in 
1993 due to the liquidation of ILVA in connection with the 1993-94 
restructuring has the effect of distorting the AUL calculation in a 
manner that makes the calculation unreliable for purposes of 
determining ILVA/ILT's company-specific AUL. Petitioners cite the 
preamble to the current regulations (see 63 FR at 65396) to support 
their contention that the company-specific AUL calculation is not 
appropriate ``* * * for companies that have been sold and that it 
presents problems when a company revalues its assets, for example, as a 
result of declaring bankruptcy.''
    Petitioners cite Steel Wire Rod from Germany to support the 
contention that whether or not an asset write-down is done in 
accordance with GAAP is not necessarily the determining factor when 
examining whether these write-downs should be reflected in the average 
annual gross value of fixed assets in the AUL calculation. See Final 
Affirmative Countervailing Duty Determination: Stainless Steel Wire Rod 
from Germany, 62 FR 54990, 54999 (October 22, 1997) (Steel Wire Rod 
from Germany). Petitioners state that the asset write-down adjustment 
does not represent a reasonable estimate of the life of equipment at 
the time it was purchased, but instead ILVA/ILT 's calculation 
represents a mixture of the average useful life of the assets and the 
remaining useful life of assets after the revaluation. They further 
state that a company-specific AUL may be inappropriate when the company 
under investigation has faced recent changes in ownership or 
bankruptcy.
    Finally, both respondents and petitioners argue that the country-
wide AUL information provided by the GOI should not be used by the 
Department.
    Department's Position: Under 19 CFR 351.524(d)(2), the Department 
presumes that the AUL set out in the IRS's 1977 Class Life Asset 
Depreciation Range System is the appropriate allocation period by which 
to allocate non-recurring subsidies, and the burden is placed on the 
party contesting these AULs to establish that the IRS tables do not 
reasonably reflect the company-specific AUL. In addition, the 
contesting party must demonstrate that the company-specific AUL differs 
significantly from the AUL in the IRS tables.

[[Page 73260]]

    It is clear from the preamble to the CVD Regulations that, based on 
the Department's experience, using a company-specific AUL in situations 
where there have been major asset revaluations in connection with 
bankruptcy poses significant problems: ``We have found that the method 
[i.e., company-specific AUL calculation] may not be appropriate for 
companies that have been sold and that it presents problems when a 
company revalues its assets as a result of declaring bankruptcy (see, 
e.g., Steel Wire Rod from Germany, 62 FR at 54990 (October 22, 
1997)).'' See CVD Regulations, 63 FR at 65396. In addition, the 
preamble states: ``It may also be necessary to make normalizing 
adjustments for factors that distort the calculation of an AUL. We are 
not in a position at this time to provide additional detail in the 
regulation itself on when we will make normalizing adjustments and how 
such adjustments will be made because the types of necessary 
adjustments will likely vary based on the facts of a particular case. 
However, certain obvious normalizing adjustments that come to mind are 
situations in which a firm may have charged an extraordinary write-down 
of fixed assets to depreciation, or where the economy of the country in 
question has experienced persistently high inflation.'' See Id., at 
65397.
    With regard to this last statement from the preamble, we disagree 
with respondents that adjusting the AUL calculation for the asset 
write-downs, as was done in calculation 2, is the normalizing 
adjustment called for in the regulations. Respondents misread the 
regulations; it is precisely the existence of a massive asset write-
down that requires a ``normalizing adjustment'' in the first place. We 
also find the distinction drawn between Saarstahl's situation in Steel 
Wire Rod from Germany and ILVA/ILT by respondents to be uninformative. 
There is little substantive difference between a situation where a 
company acquires assets from another company then revalues them at 
acquisition cost and a situation where assets are revalued before the 
transfer with the new owner carrying the assets on its books at the new 
revalued amount.
    The basic point being made in the Department's regulations is that 
the basis of a company-specific AUL calculation is called into question 
when a situation exists such as the situation we are currently facing 
with ILVA/ILT, i.e., numerous changes in ownership, a massive asset 
write-down, and bankruptcy. We do not agree with respondents that the 
only issue here is one of consistency between the numerator and the 
denominator in the company-specific calculation. The larger issue is 
whether we should depart from the IRS asset depreciation schedules. We 
do not find the fact that the 1993 asset write-downs were in accordance 
with GAAP to be particularly persuasive. The AUL calculation is an 
attempt to derive the average useful life of renewable physical assets. 
Whether or not it is in accordance with GAAP, the accounting treatment 
of asset values, which is usually done for tax purposes, does not 
necessarily attempt to accurately reflect the physical life of a 
particular asset. Because there are so many different ways to calculate 
asset values for tax purposes, the IRS constructed its tables to ensure 
consistency. There is a tendency on the part of the Department to rely 
on the IRS tables because, as is stated in the preamble to the 
countervailing duty regulations: ``In our experience, we have found 
that for most industries and most types of subsidies, the IRS tables 
have provided an accurate and fair approximation of the AUL of assets 
in the industry in question. * * *'' See CVD Regulations, 63 FR at 
65396. In other words, the presumption that the IRS tables do not 
reflect the actual physical life of an asset for a particular company 
is not an easy one to overcome. In our view, respondents have failed to 
meet this threshold.
    As noted above, respondents have provided four different AUL 
calculations, all with different results. By respondents' own 
admission, very little, if any explanation of how these calculations 
were done was provided until relatively late in the case. Respondents 
have argued that the main issue in the AUL calculation for this 
investigation is a simple matter of consistency between the numerator 
and the denominator. Respondents argument that their calculation 2, 
which takes the asset write-downs into account in both the asset value 
and depreciation, is the only reliable calculation is unpersuasive. 
Calculation 1, which we relied upon in the Preliminary Determination, 
is flawed according to respondents, because the asset values do not 
reflect the write-down while depreciation does reflect the write-down. 
Since by respondents' own admission, calculation 1 is flawed, we are 
rejecting calculation 1 as a basis for the company-specific AUL.
    With regard to the Italian country-wide AUL, 19 CFR 
351.524(d)(2)(iii) states that ``A country-wide AUL for the industry 
under investigation will not be accepted by the Secretary unless the 
respondent government demonstrates that it has a system in place to 
calculate AULs for its industries, and that this system provides a 
reliable representation of AUL.'' The GOI has not met this burden, nor 
have respondents argued that they have.
    We therefore reject respondents company-specific AUL calculation 
and the country-wide depreciation information provided by the GOI, and 
have used the IRS tables for purposes of determining the period over 
which to allocate non-recurring subsidies.
    We note that in the 1993 Certain Steel cases, our practice was to 
use the IRS tables to allocate non-recurring subsidies over time. 
Subsequent to that case, the Court overturned over use of the IRS 
tables in favor of company-specific rates. See British Steel plc v. 
United States, 879 F. Supp. 1254 (CIT 1995) and British Steel plc v. 
United States, 929 F. Supp. 426, 439 (CIT 1996). Under the current 
regulations, we have decided to revert to the IRS tables as a 
rebuttable presumption. In a 1997 Italian investigation, while we did 
attempt to calculate a company-specific AUL, we were unable to do so 
and used a surrogate AUL instead. See Wire Rod from Italy, 63 FR 40477.
    While our preference is to apply the same AUL to the same subsidies 
across cases, we have not been able to do that in Italy due to the 
changes in our allocation methodology mandated by the Court and our 
subsequent decision to use the IRS table as a rebuttable presumption. 
This is the first Italy case subject to the new regulations. 
Accordingly, we are applying the regulatory standard to determine the 
AUL.

Comment 3: 1984 Debt Transfer Was Not a Countervailable Event

    Respondents disagree with the Department's classification of the 
1984 debt transfer from Italsider to Finsider as being equivalent to a 
government grant. They note that, under section 771(5)(D) of the Act, 
the Department can countervail a transfer of debt only if it involves a 
financial contribution from the government.
    In 1984, debts were transferred from Italsider's balance sheet to 
that of Finsider, which under the sole shareholder provision of the 
Italian Civil Code, had legal responsibility for all debts of 
Italsider. Respondents contend that the debts remained fully in effect, 
but that Finsider now had direct rather than indirect responsibility 
for their payment. They argue that IRI made no financial contribution 
in 1984, by allowing the transfer of debt from Italsider to Finsider. 
Respondents point out that the Department itself

[[Page 73261]]

recognized that the transfer ``merely shifted assets and debts within a 
family of companies, all of which were owned by Finsider.'' They submit 
that it would be double-counting to countervail both the 1984 debt 
transfer and the subsequent forgiveness of the same debt through the 
liquidation of the Finsider Group in 1988. Since no debt was forgiven 
in 1984, the Department has no legal or factual justification to 
countervail the 696.4 billion lire of debt which was transferred within 
the Finsider Group.
    Petitioners urge the Department to