66 FR 65901, December 21, 2001 C-427-819 Investigation 1999 Public Document DAS II/Office VI December 13, 2001 MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Bernard T. Carreau Deputy Assistant Secretary for AD/CVD Enforcement II SUBJECT: Issues and Decision Memorandum: Final Affirmative Countervailing Duty Determination: Low Enriched Uranium from France - Calendar Year 1999 Summary We have analyzed the comment and rebuttal briefs of interested parties in the final affirmative countervailing duty determination on low enriched uranium from France for January 1, 1999, through December 31, 1999, the period of investigation (POI). As a result of our analysis, we have made certain modifications to the Preliminary Affirmative Countervailing Duty Determination and Alignment with Final Antidumping Duty Determination: Low Enriched Uranium from France, 66 FR 24325 (May 14, 2001) (Preliminary Determination). Below are the "Methodology and Background Information" and "Analysis of Programs" sections of this memorandum that describe the decisions made in this investigation with respect to Eurodif, S.A. and Compagnie Generale des Matieres Nucleaires (COGEMA), the producers/exporters of subject merchandise covered by this proceeding. Also below is the "Analysis of Comments" section in which we discuss the issues raised by interested parties. We recommend that you approve the positions we have developed below in this memorandum. Corporate History: Eurodif, S.A. Eurodif was formed in 1973 by French and foreign government agencies to provide a secure source of low enriched uranium (LEU), in order to facilitate the development of nuclear energy programs in participating countries. During the POI, Eurodif was 44.65 percent-owned by Compagnie Generale des Matieres Nucleaires (COGEMA), which itself is principally owned by a subsidiary of the Commissariat d'Energie Atomique (CEA), an agency of the GOF. Further, Eurodif was 25 percent-owned by Sofidif, a French company 60 percent-owned by COGEMA, thereby effectively placing COGEMA's ownership of Eurodif (direct and indirect) during the POI at approximately 59.65 percent. COGEMA acts as a sales agent for Eurodif's exports to the United States. The remaining major shareholders of Eurodif during the POI were Enusa, an entity of the Spanish government; Synatom, a former entity of the Belgian government (now privately owned); and Enea, an entity of the Italian government. Eurodif has two subsidiaries, both of which are wholly-owned. Eurodif Production operates Eurodif's Georges-Besse plant complex in Tricastin, France, and Societe Auxiliaire de Tricastin (Socatri) is responsible for the nickel and chrome plating of the plant's components and maintaining part of the plant's equipment. Petitioners' Additional Subsidy Allegation On April 27, 2001, petitioners made an allegation with respect to certain electricity discounts provided to Eurodif by Electricite de France (EdF). Petitioners' allegation stems from information contained in the sales contract between Eurodif and EdF. Petitioners alleged that such special provisions provided to Eurodif by EdF confer countervailable benefits upon Eurodif. We did not address this allegation in the Preliminary Determination due to the lateness of the allegation. See 66 FR at 24326. We explained that if we decided to initiate an investigation of the allegation, then prior to making our final determination we would issue a preliminary analysis memorandum regarding this allegation and allow parties to comment. Upon our subsequent review of petitioners' allegation, we declined to initiate an investigation of the alleged program. Our decision not to investigate this allegation was based upon the fact that petitioners' allegation failed to support that the pricing of electricity between EdF and Eurodif was not in accordance with prevailing market conditions as required by section 771(5)(E)(iv) of the Act. We also note that the Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Low Enriched Uranium From France, 66 FR 36743, 36747 (July 13, 2001) (Preliminary Antidumping Determination) states that, with regard to electricity prices, while "the rate charged by EdF to Eurodif/COGEMA is below that charged to other large industrial users...the record indicates that Eurodif/COGEMA is by far the largest consumer of electricity in France. The rate charged by EdF to Eurodif/COGEMA appears to be commensurate with the respondent's massive consumption of electricity. Moreover, there is evidence on the record that at least one unaffiliated European electricity provider offered electricity to Eurodif/COGEMA at rates even lower than that charged by EdF." We further note that because we have determined not to initiate on this allegation, it was not necessary for the Department to issue a separate decision memorandum and solicit comments from interested parties on this matter prior to the issuance of this final determination. Methodology and Background Information I. Subsidies Valuation Information Treatment of the Ad Valorem Rate Calculation and the Denominator In the Preliminary Determination, lacking specific data from respondents regarding the value for the natural uranium component of certain LEU sales, we estimated a value for this component in order to determine more accurately the level of subsidy applicable to the subject merchandise. See 66 FR at 24327. In the Preliminary Determination, we increased the reported sales value to include an estimated value for the natural uranium component using petitioners' estimation that the enrichment component accounts for 60 percent of the value of LEU. Id. We further explained that we would seek additional information from respondents regarding this ratio. Id. We have determined to continue to make an adjustment to the ad valorem net subsidy rate calculated in the final determination. We find that an adjustment is necessary in order to ensure that we are only collecting duties equal to the amount of the countervailable subsidies. However, we are revising the method used to make this adjustment. During verification, we reviewed how the value of Eurodif's LEU is reported to the Unites States Customs Service (Customs). See page 6 of the Verification of the Questionnaire Responses of the Eurodif/COGEMA in the Countervailing Duty Investigation of Low Enriched Uranium from France, (Eurodif/COGEMA Verification Report) October 26, 2001, the public version of which is on file in the Central Records Unit, Room B-099, of the Main Commerce Building. During this review of Eurodif sales that entered through Customs, we collected a sales summary for sales from France to the United States. For purposes of calculating the ad valorem net subsidy rate in this final determination, we have chosen to rely on the sales data collected at verification rather than on the ratio utilized in the Preliminary Determination on the grounds that it is more appropriate to use company-specific sales data rather than an estimated industry-wide standard. Thus, we have calculated the ad valorem rate for each program using the following formula: B*(C/D) A= ------ E Where; A = Ad Valorem Rate B = Subsidy Benefit C = Sales of Subject Merchandise to the United States During the POI D = Total Sales During the POI (including COGEMA sales on behalf of Eurodif) E = Sales That Entered U.S. Customs During the POI Analysis of Programs I. Purchase at Prices that Constitute "More Than Adequate Remuneration" Eurodif sells low enriched uranium to EdF and other utilities worldwide pursuant to contract. EdF is a wholly-owned agency of the French government that supplies, imports and exports electricity. EdF is regulated by the Gas, Electricity and Coal Department of the Ministry of Industry (DIGEC) and the Budget and Treasury Departments of the Ministry of France. EdF is the predominant supplier of electricity in France, having provided 94 percent of the total electricity generated in France in 1998. EdF's nuclear facilities, consisting of 58 reactors, account for approximately 75 percent of the power supplied by EdF. To date, EdF has entered into three long-term contracts with Eurodif to secure LEU. The first contract was negotiated in 1975; Eurodif began enrichment at its Georges-Besse gaseous diffusion facility in 1979. The current contract between Eurodif and EdF covers sales from 1995 through 2005. Petitioners have alleged that the GOF, through its wholly-owned subsidiary EdF, purchased LEU from Eurodif between 1986 through 1999 at prices that constitute "more than adequate remuneration" under section 771(5)(E)(iv) of the Act. Petitioners have alleged that the differences in prices between what EdF paid Eurodif during the years 1986 through 1999 and comparison prices used for benchmark purposes in those years is the benefit amount conferred upon Eurodif. In the Preliminary Determination, we stated that any benefit resulting from purchases of goods by EdF, a wholly-owned subsidiary of the Government of France, for more than adequate remuneration is a financial contribution provided by the GOF under section 771(5)(D)(iv) of the Act. This treatment of EdF is consistent with our policy with respect to the treatment of government-owned utility companies. See, e.g., the Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From the Republic of Korea (CTL Plate from Korea), 64 FR 73176, 73182 (December 29, 1999), in which the Korea Electric Power Company (KEPCO), a company wholly-owned by the Government of Korea, was found to have provided countervailable discounts to Pohang Iron and Steel Co., Ltd. (POSCO), and the Final Affirmative Countervailing Duty Determination: Steel Wire Rod from Venezuela, 62 FR 55014 (October 22, 1997), in which the electricity prices of EDELCA, a government-owned utility company, were examined in relation to the pricing policies of private utility companies in Venezuela (no benefit was found to have been conferred). In the Preliminary Determination of the instant investigation, we stated that because this program is conferred only upon Eurodif, this program is specific under section 771(5A)(D)(i) of the Act. No new information, evidence of changed circumstances, or comments from interested parties was presented in this investigation to warrant reconsideration of these findings. Next, we must determine whether a benefit is provided to Eurodif under this program. Under section 771(5)(E)(iv) of the Act, a countervailable benefit may be provided by a government's purchase of a good for "more than adequate remuneration." Under section 771(5)(E)(iv) of the Act, the adequacy of remuneration will be determined in relation to the prevailing market conditions for the goods being purchased in the country which is subject to investigation. Unlike most other customers, EdF provides its own energy for Eurodif to use when producing LEU for EdF. Eurodif pays EdF for the energy it uses and re-bills EdF an identical amount. Respondents argue that the energy price ("part energie") is a "fiction" and that the actual prices paid by EdF for LEU cover the costs of operation ("part usine") only, not energy costs. Other customers that do not provide their own electricity simply pay one price, which takes into account all costs, including operational and energy costs. In the Preliminary Determination, we included reported operational and energy prices paid by EdF in order to determine the actual prices paid by EdF. Based on further review of record evidence, including the contracts between EdF and Eurodif, we continue to find that the actual price charged to EdF by Eurodif consists of both "part usine" and "part energie." Therefore, for comparison purposes, we have totaled the separately reported "part usine" and "part energie" to determine the actual price paid to Eurodif by EdF. For further discussion of "part energie," see Comment 4, below. As part of the arrangement for obtaining LEU, customers often provide an amount of natural uranium equal to that which went into the LEU they are purchasing. The record does not contain information on the value of the natural uranium provided by EdF to Eurodif or EdF to its other suppliers. Therefore, for purposes of this comparison, we have assumed that the value of all natural uranium is the same, regardless of the supplier. Thus, in making the comparison we have not included a value for the natural uranium component of the LEU purchased by EdF. In the Preliminary Determination, we compared the prices paid by EdF to Eurodif to the prices paid to Eurodif by its other unaffiliated customers. Based on further evaluation of the record information and our regulations, we have changed our approach for this final determination. While we have not codified a regulation for the purchase of goods for more than adequate remuneration, the preamble to our regulations states that "our intended approach toward the measurement of the adequacy of remuneration is outlined in detail in Sec. 351.511 (government provision of goods or services)." It also states that "we expect that any analysis of the adequacy of remuneration will follow the same basic principle, i.e., will focus on what a market-determined price for the good in question would be." See 63 FR 65348, 65379. Section 351.511(a)(2)(i) states that the Department "will normally seek to measure the adequacy of remuneration by comparing the government price to a market-determined price for the good or service resulting from actual transactions in the country in question. Such a price could include prices stemming from actual transactions between private parties, actual imports, or, in certain circumstances, actual sales from competitively run government auctions." Only if there is no usable market-determined price consistent with what is outlined in section 351.511(a)(2)(i) will the Department seek to measure the adequacy of remuneration by making a comparison to a "world market price," as defined under section 351.511(a)(2)(ii). While Eurodif is the only supplier of LEU in France, the record does contain information on "import prices" which reflect actual transactions within France. Such import prices are the prices paid for LEU by EdF to other suppliers of LEU. The LEU purchased by EdF from these other suppliers is imported into France. We find that this is a more appropriate benchmark to compare to prices that Eurodif received from EdF during the POI because EdF's import prices represent actual transactions in France and, thus, are more preferred in accordance with the adequate remuneration hierarchy outlined in section 351.511. As a result, in order to determine whether a benefit was provided to Eurodif during the POI, we compared the average price paid to Eurodif by EdF during the POI with the weighted-average price paid by EdF to suppliers other than Eurodif during the POI. In making this comparison, consistent with section 351.511(a)(2)(iv), we first adjust the benchmark price to reflect a delivered price in the country in question. However, there is no information on the record regarding the delivery charges paid by EdF for its imports. Therefore, as facts available, we have used delivery charges reported by Eurodif on sales to the United States in order to derive a delivered market price benchmark. See page 6 of Eurodif/COGEMA Verification Report and verification exhibit E/C-5. Based on our analysis, we determine that prices paid by EdF to Eurodif were higher than prices paid by EdF to suppliers other than Eurodif. Therefore, in accordance with section 771(5)(E)(iv) of the Act, we determine that this program conferred a countervailable benefit to Eurodif during the POI. Petitioners have alleged that a portion of the prices paid by EdF were established to cover Eurodif's depreciation and debt amortization charges on the Georges-Besse plant, and to provide Eurodif with a stable cash flow to help meet its financial obligations. Based on this, petitioners allege that a portion of the subsidy confers non-recurring benefits upon Eurodif because, consistent with section 351.524(c)(2)(iii), the subsidy was provided for, or is tied to, the capital structure or capital assets of Eurodif. Petitioners further allege that the remainder of the overall price differential confers recurring benefits upon Eurodif during 1999, the POI. As discussed in detail in Comments 2 and 3, below, we have determined, consistent with our Preliminary Determination, that the benefit resulting from EdF's purchase of subject merchandise at prices that constitute more than adequate remuneration is a recurring benefit only. Therefore, we have expensed benefits conferred upon Eurodif in 1999 only. To calculate the benefit conferred upon Eurodif, we multiplied the calculated price differential by the quantity of separative work units (SWUs) component of the LEU purchased from Eurodif by EdF during the POI. Although the cash component of EdF's LEU purchases was paid on a "per-SWU" basis, the contracts also contained provisions for the natural uranium component of the LEU as well as the electricity used by Eurodif in the production of EdF's LEU. Because we have determined that the value of the natural uranium component of the LEU is equal for EdF, as stated above, we did not need to calculate a price differential for the natural uranium component of the LEU. Rather, the natural uranium component of the LEU purchased by EdF from Eurodif and its other suppliers cancelled each other out. Next, as explained in the "Treatment of the Ad Valorem Rate Calculation and the Denominator" section, above, we multiplied the benefit amount by the sales of subject merchandise to the United States, divided by total sales (which has changed since the Preliminary Determination based on information gathered during verification), and divided the result by sales that entered U.S. Customs during the POI. On this basis, we determine a net countervailable subsidy to Eurodif from this program of 12.34 percent ad valorem. II. Exoneration/Reimbursement of Corporate Income Taxes Under a specific governmental agreement entered into upon Eurodif's creation, Eurodif is only liable for income taxes on the portion of its income relating to the percentage of its private ownership, approximately 11.11 percent during the POI. Eurodif is fully exonerated from payment of corporate income taxes corresponding to the percentage of its foreign government ownership, approximately 29.24 percent during the POI, and is eligible for a reimbursement of the amount of corporate income taxes corresponding to its percentage of French government ownership, approximately 59.65 percent during the POI. In the Preliminary Determination, we determined that Eurodif's exoneration from the portion of its corporate income taxes corresponding to its percentage of foreign government ownership, during the POI, is a financial contribution within the meaning of section 771(5)(D)(ii) of the Act. Further, because the tax exemption is limited to Eurodif, the benefit is specific in accordance with section 771(5A)(D)(i) of the Act. No new information, evidence of changed circumstances, or comments from interested parties was presented in this investigation to warrant reconsideration of this finding. As noted above, Eurodif was also eligible for a reimbursement of the amount of income taxes corresponding to its percentage of French government ownership. In the Preliminary Determination, we determined that because Eurodif received a reimbursement of its taxes after the POI, Eurodif did not receive a benefit during the POI. Based on information discovered during the verification of Eurodif, we now determine that Eurodif did receive a countervailable benefit in accordance with section 351.509(b), which states that "{i}n the case of a full or partial exemption or remission of a direct tax, the Secretary normally will consider the benefit as having been received on the date on which the recipient firm would otherwise have had to pay the taxes associated with the exemption or remission. Normally, this date will be the date on which the firm filed its tax return." The record shows that on April 14, 1999, Eurodif deposited the amount of tax that would have otherwise been due into a three month certificate of deposit that is rolled over if Eurodif has not yet received reimbursement by the end of the term of the certificate. Because Eurodif did not pay the tax during the POI, but rather deposited the amount of the tax into an interest-bearing account knowing it would receive the full amount of the deposit at a future date, and because the GOF had no discretion regarding whether to reimburse the funds deposited or to decide on the amount to be reimbursed, Eurodif received a countervailable benefit under section 351.509(b) at the time the tax would otherwise have been paid. We determine that this reimbursement confers a recurring benefit upon Eurodif during the POI, in accordance with section 351.509(c). Eurodif's reimbursement from income taxes is a financial contribution within the meaning of section 771(5)(D)(ii) of the Act. Further, because the tax exemption is limited to Eurodif, the benefit is specific in accordance with section 771(5A)(D)(i) of the Act. For a further discussion of this reimbursement, see Comment 6, below. The total benefit conferred upon Eurodif from this program is the amount of exonerated and reimbursable taxes otherwise due. To calculate the ad valorem rate for this program, as explained in "Treatment of the Ad Valorem Rate Calculation and the Denominator" section, above, we multiplied the benefit amount by the sales of subject merchandise to the United States, divided by total sales (which has changed since the Preliminary Determination based on information gathered during verification), and divided the result by sales that entered U.S. Customs during the POI. On this basis, we determine a net countervailable subsidy to Eurodif from this program of 0.87 percent ad valorem. Total Ad Valorem Rate ----------------------------------------------------------------------- Producer/Exporter Net Subsidy Rate ----------------------------------------------------------------------- Eurodif, S.A. & COGEMA 13.21 % ad valorem All Others 13.21 % ad valorem ----------------------------------------------------------------------- Analysis of Comments Comment 1: Scope Clarification On August 17, 2001, petitioners(1) filed a request that the Department clarify the scope of these investigations to exclude low enriched uranium imported solely for further processing and consumption outside the United States. Petitioners argue that USEC never intended to subject sales of LEU outside of the United States to U.S. trade law disciplines simply because foreign purchasers elect to have their LEU converted or fabricated in the United States prior to use in a foreign reactor. Additionally, they state that discussions with Customs have led parties to believe that in order to address Customs' concerns over the use of temporary import bonds (TIBs) for such imports, parties would be required to make adjustments to normal business practices that will increase the cost of U.S. conversion/fabrication for foreign utilities - an unintended result. In order to resolve this issue, petitioners requested that the following paragraph be added to the scope of these investigations: Also excluded from these investigations is LEU owned by a foreign utility end-user and imported into the United States by or for such end-user solely for purposes of conversion by a U.S. fabricator into uranium dioxide (UO2) and/or fabrication into fuel assemblies so long as the uranium dioxide and/or fuel assemblies deemed to incorporate such imported LEU (i) remain in the possession and control of the U.S. fabricator, the foreign end-user, or their designed transporter(s) while in U.S. customs territory, and (ii) are re-exported within eighteen (18) months of entry of the LEU for consumption by the end-user in a nuclear reactor outside the United States. In addition, petitioners assert that the proposed scope clarification can be easily administered by the Department and Customs through the use of certifications submitted with each entry of LEU for conversion/fabrication and re-export. Petitioners submitted proposed certification forms that they indicate would be appropriate for importers, and end users, to use to comply with this exclusion which include, among other terms, that the fabricated material be exported within 18 months. Respondents agree that implementing an exclusion for imports that are entering the U.S. market only for fabrication prior to being shipped to third countries is proper and appropriate. Respondents note that subjecting such imports to AD and countervailing duties ("CVD") would only serve to shift fabrication offshore, thus causing harm to both fabricators and customers of both respondents and petitioners. However, respondents do not agree with the petitioners' proposed certifications. According to respondents, the proposed certificates are both unnecessary and burdensome. Respondents argued that the Court of International Trade has emphatically rejected the notion that TIB procedures cannot be used in this industry (citing to USEC, Inc. and the United States Enrichment Corp. v. United States, LEXIS 62 at * 18, Slip Op., 2001-58 (Ct. Int'l Trade May 17, 2001). Respondents assert that because TIB procedures are applicable to imports of uranium, petitioners, by requesting this scope clarification and certification requirements, are inventing a problem that does not exist in a bid to have the Department adopt extreme and burdensome certification requirements. Respondents assert that the certifications proposed by petitioners impose restrictions that would not only apply to the subject LEU even long after the LEU is not within the United States (i.e., that they require use in nuclear reactors outside the United States) but would also reduce the flexibility of foreign entities to use book transfers and swaps that are commonly employed within the industry to minimize transportation costs. In the alternative, respondents propose certifications that do not place what they consider to be unnecessary and burdensome requirements on the importer and end user. Two importers affected by this exclusion request, General Electric Company and Framatome ANP, Inc., submitted letters supporting the proposed exclusion. In addition, petitioners cited to the Department's experience with administering the suspension agreement in the antidumping investigation of uranium from the Russian Federation in support of their assertion that the language of the certificates needs to be as proposed. Department's Position: We agree with both petitioners and respondents that LEU imported solely for further processing and consumption outside the United States is not within the scope of these investigations. The difficult question involves the appropriate method to implement such exclusion in light of the fact that all LEU entering the United States has the physical characteristics of the subject merchandise. We agree with respondents that the fungible nature of the product does not preclude the application of TIB procedures; nor does it alter the fact that the Department does not have the authority to apply duties to TIB entries or include such entries within the scope of an AD or CVD investigation. However, having heard from the industry that such procedures will have the unintended effect of requiring adjustments to normal business practices that will increase the cost of U.S. conversion/fabrication for foreign utilities, we determine that it is appropriate to develop an alternative procedure for effectuating the exclusion. We have carefully considered the comments of petitioners and respondents with respect to the need for and the extent of importer and end user certifications. We agree with petitioners that because of the fungibility of the subject merchandise, such certifications need to be explicit in their language. We find that because the scope exclusion is only intended to apply to LEU imports for further processing and consumption outside the United States, it is appropriate for the importers and end users to make such certifications at the time of importation. Therefore, we are excluding from the investigations and orders low enriched uranium imported solely for further processing and consumption outside the United States and we have adopted the language of the certifications as proposed by petitioners. In order to ensure the effectiveness of such certification system, we intend to work closely with Customs to implement these procedures. Comment 2: Petitioners' Argument that Eurodif Received Non-Recurring Benefits in the Years 1986 through 1999 Petitioners contend that EdF's purchases of LEU from Eurodif at more than adequate remuneration provided Eurodif with non-recurring subsidies during the years 1986 through 1999. Petitioners have argued throughout the proceeding, and contend the results of verification further support, that a large amount of the subsidies provided should be deemed non-recurring because such subsidies were linked to the depreciation of the Georges- Besse plant and the amortization of the financing for the plant. In their case brief, petitioners provided an updated version of a previously submitted table that outlines what they believe are the exact amounts of the subsidies, including the non-recurring portion, in each of the years 1986 through 1999. The table compares an average per-SWU price to EdF (including both "part usine" and "part energie") to a reference price made up of average prices paid by EdF to all other suppliers for each of the years 1986 through 1998 in order to determine the subsidy amount in each of these years. For 1999, the reference price reflects the amount per SWU received by Eurodif from non-shareholder customers as confirmed in a verification exhibit. Petitioners state that this 1999 reference price is not used in all prior years under investigation because there is not sufficient information on the record. Petitioners argue that a certain portion of the price differential in each of the years 1986 through 1999 is attributable to the depreciation and amortization of the Georges-Besse plant and, therefore, that portion should be deemed to be a non-recurring subsidy in each of the years. The amounts attributable to depreciation and amortization, according to petitioners, are not, however, determined by the amounts of the price differentials, but are included in these differentials; the non-recurring amounts are determined as a certain component of the "part usine" prices paid by EdF as defined in the contract between EdF and Eurodif. Specifically, petitioners state that for the years 1986 through 1995, the per-SWU price differential attributable to depreciation and amortization, to be deemed non-recurring, is determined as the percentage of the average "part usine" price paid by EdF in each of these years, reduced by the percentage of the "part usine" price decline to EdF beginning in 2001, after the end of the Georges-Besse plant depreciation was accounted for on Eurodif's books. For the years 1996 through 1999, petitioners state that the amounts attributable to non- recurring subsidies is based on the same concept as was used for 1986 through 1995, but the formula is slightly more complex due to clauses in the 1995 contract between EdF and Eurodif. Petitioners state that the non- recurring benefit amounts in each of the years 1986 through 1999 is the derived per-SWU amount attributable to depreciation and amortization multiplied by the volume of SWU purchased by EdF from Eurodif. Respondents counter that there is no basis for equating the percentage decline in the "part usine" beginning in 2001 with the percentage of the "part usine" represented by depreciation and amortization. Respondents further state that there is no support for petitioners' assertion that the re-allocation of revenues from 1999 and 2000 to 1996 through 1998 was done to reflect the impact of the change in Eurodif's income more gradually. Respondents state that the re-allocation was done to provide better coverage of costs in earlier years. Respondents further argue that even if it were possible to isolate a portion of EdF's prices charged for depreciation or amortization and treat this portion as a subsidy, the only way it could be deemed "more than adequate remuneration" would be if it could be shown that EdF paid too much for that portion in relation to Eurodif's other customers. Respondents state that there is no evidence on the record that this is the case. Respondents also argue that while Eurodif's "part usine" price to EdF covers depreciation among other expenses, this is only normal business practice. Petitioners argue that, unlike in the situation of a private seller where prices established in arm's length negotiations do not always assure that such costs will be recovered, the prices paid by EdF to Eurodif were expressly linked to Eurodif's fixed and operating costs, a significant aspect of which was the depreciation of the Georges-Besse plant and the amortization of the debt and shareholder advances incurred in connection with the plant. Petitioners argue that the direct link between the prices EdF paid and the depreciation and amortization is revealed by certain facts. First, the "part usine" prices paid by EdF according to the 1995 contract changed dramatically beginning in 2001. Petitioners argue that, with the 1998 end of the depreciation of the plant, one would expect to see a large drop in the price beginning in 1999. However, as explained above, Eurodif re-allocated revenues from 1999 and 2000 to the years 1996 through 1998. Therefore, the price change occurred after the period affected by re-allocation of revenues ended. Second, petitioners assert that a high-ranking EdF official further highlighted the linkage between EdF's "part usine" payments and the depreciation and amortization in connection with the plant. Petitioners point to a Nuclear Fuel article of January, 2001, in which the official stated that full amortization of the plant cuts more than 25 percent off the price of enriched uranium fuel. Petitioners contend that EdF was contractually committed to pay the "part usine" charge each month, regardless of the actual amount of SWU deliveries made. Petitioners argue that Eurodif's contractual arrangements with EdF benefitted Eurodif in that the contracts ensured that Eurodif would have the cash flows from "part usine" to meet the debt obligations it incurred in the construction of the plant. Petitioners argue that this exemplifies that the government was willing to do whatever was necessary to ensure Eurodif's success. Petitioners contend that absent the commitment made by EdF to pay prices that covered Eurodif's depreciation and amortization, Eurodif's ability to finance the plant's construction, and the terms on which the financing would have had to be undertaken, would have been different. Petitioners argue that the Department's regulations make clear that a large portion of the subsidies provided through EdF's payment at prices that constitute more than adequate remuneration should be deemed non- recurring and allocated over the average useful life of Eurodif's assets. Because purchase of goods for more than adequate remuneration is not included on the Department's illustrative list of the types of subsidies normally considered recurring or non-recurring, petitioners state that the Department will look at section 351.524(c)(2) in such an instance to determine whether to allocate a subsidy over time. Petitioners argue that an examination of all three criteria listed in the regulation make clear that the Department should find the subsidies provided to be deemed non- recurring. First, section 351.524(c)(2)(i) looks at "{w}hether the subsidy is exceptional in the sense that the recipient cannot expect to receive additional subsidies under the same program on an ongoing basis from year to year." Petitioners argue that the benefits to Eurodif were exceptional for two reasons. The prices paid by Eurodif were determined by three separate contracts that covered all years under investigation. Hence, Eurodif could not expect to receive such benefits on an ongoing basis, as they were limited to the terms of the contracts. Additionally, petitioners claim that a portion of the subsidies were linked to the depreciation and amortization of the plant and, therefore, were linked to a definitive time period. Petitioners state that typical recurring subsidies have no expiration and can be expected to be received on an ongoing basis from year to year. Second, section 351.524(c)(2)(ii) examines "{w}hether the subsidy required or received the government's express authorization or approval." Petitioners argue that EdF's acquisition of LEU from Eurodif at prices for more than adequate remuneration received the express approval of EdF, a government-owned entity. Also, given the fact that several EdF Board members are GOF representatives, the decisions by EdF to enter into new contracts with Eurodif in 1989 and 1995 must be deemed to have received the express approval of the GOF. Petitioners also note that the GOF verification report notes GOF officials' statement that "EdF is an agency of the Government of France." Third, section 351.524(c)(2)(iii) looks at "{w}hether the subsidy was provided for, or tied to, the capital structure or capital assets of the firm." Petitioners note that the preamble to the Department's regulations makes clear that subsidies provided for, or tied to, the capital structure or capital assets of a firm are non-recurring because they "generally benefit the creation, expansion, and/or continued existence of a firm." As stated above, petitioners argue that the subsidies are linked to the depreciation and amortization of the Georges-Besse plant. Petitioners note that the Department does not focus on the form of the subsidy, but on the linkage between the subsidy and the capital assets or capital structure of the recipient. Therefore, even if the purchase of goods at more than adequate remuneration was on the Department's illustrative list as generally considered to be a recurring subsidy, the linkage to the capital assets or capital structure would necessitate treatment as a non-recurring subsidy. In this case, there can not even be an initial presumption that the subsidy at hand would be recurring because such a subsidy is not on the illustrative list. On the contrary, respondents assert that, first, EdF's purchases are made on an ongoing basis from year to year, and the purchases are not exceptional. Respondents cite to Certain Steel Products from Austria, 58 FR 37217, 37226 (July 9, 1993) (General Issues Appendix (GIA)), which defines "exceptional" as benefits not received on a predictable basis, from review period to review period. Respondents argue that the fact that petitioners do not allege one benefit amount or even one benefit per contract, and that EdF made 168 predictable consecutive monthly purchases from Eurodif pursuant to contract during the 14 years under investigation, provides further proof that any benefits are not exceptional. The total benefits for each year could not be determined at the beginning of the contract, but only periodically, based on the SWUs purchased over a period of time. Second, respondents contend that EdF/Eurodif contracts did not require or receive approval of any agency or official of the GOF. Respondents again point to the GIA (58 FR at 37226) in which the "express government approval" criterion "relates to the issue of whether the program provides benefits automatically, essentially as an entitlement, or whether it requires a formal application and/or specific government approval prior to the provision of each yearly benefit." Respondents also cite Certain Hot Rolled Carbon Steel Flat Products from Thailand, 66 FR 50410 (October 3, 2001) in which a benefit was found to be non-recurring because approval was given by a government agency for a discrete benefit. Further, respondents argue that EdF acted as a commercial entity, and that petitioners admit that the GOF was not involved in expressly approving government grants to Eurodif. Further, respondents state that petitioners' argument that express government approval exists by definition because EdF is owned by the government would mean that every commercial transaction involving a government-owned entity that resulted in a purchase subsidy would result in a non-recurring subsidy and, clearly, this was not the Department's intent. Respondents argue that, had it been the Department's intent for "express governmental approval" to include commercial transactions by a government-owned entity, it would not have included the government's provision of goods and services for less than adequate remuneration on the illustrative list of recurring subsidies under section 351.524(c) of the regulations. Third, Eurodif counters that the single operational, or "usine," component of its price to EdF has no link to depreciation or any other specific cost of Eurodif. The "usine" price covers all aspects of Eurodif's costs - labor, material and overhead including depreciation - except electricity. Respondents also argue that the Department has found subsidies tied to a capital asset where the subsidy was provided at the time the asset is purchased and the full value of the subsidy was known at that time, and that the facts in this case are completely different. The plant's construction began shortly before the 1975 contract with EdF and the 1995 contract extends beyond the end of depreciation. Respondents point to petitioners' comment in its case brief that "{a}t the end of the term of each of the contracts, the parties had to reach a new agreement which might or might not continue to provide more than adequate remuneration" as further underscoring the absence of any tie to the plant or its depreciation. Also, respondents state that the value of the alleged subsidy could not be known or even estimated when the contracts were entered into; the subsidy amount would be a result of prices paid by EdF and other customers, and quantities purchased, among other factors. Respondents further argue that even if petitioner could find some linkage between EdF's purchases and depreciation, it would not assist their argument because depreciation is an annual expense that cannot be treated as non-recurring. Respondents also contend that, while the government purchase of goods or services for more than adequate remuneration is not on the illustrative list of recurring or non-recurring subsidies, the provision of goods and services for less than adequate remuneration is included on the list of recurring subsidies under section 351.524(c)(1). Respondents argue that the Department has indicated in the preamble, at 63 FR at 65379, that it expects to treat these the same in determining countervailability. Respondents state, therefore, that there is no basis for distinguishing between countervailable purchases and sales for allocation purposes. In both cases, a benefit is conferred by means of commercial transactions with the government or a government-owned entity. Respondents cite the affirmative preliminary determinations of Certain Softwood Lumber Products from Canada, 66 FR 43186, 43191 (August 17, 2001), in which the Department treated the timber management systems of the provinces as the provision of a good or service for less than adequate remuneration and, therefore, as a recurring subsidy, and Stainless Steel Bar from Italy, 66 FR 30414, 30424 (June 6, 2001), in which payment in lieu of services to be provided by a regional government were treated as recurring subsidies. Respondents further counter petitioners' contentions by stating that breaking the prices paid by EdF into separate pieces and assigning allocation periods to those pieces depending on how each was used or intended to be used would violate the Department's intent to not trace effects or uses, as discussed in the preamble at 63 FR at 65393: The addition of this criterion to the GIA test in no way envisions or requires an examination of the effects or uses of the subsidy. Rather, we will examine whether, at the point of bestowal, the subsidy was provided to, or tied to, the company's capital structure or capital assets. Lastly, petitioners argue that the GOF's objective of ensuring that Eurodif had sufficient resources to be able to repay its debts could have been met through various forms of financial contributions. For example, if EdF paid Eurodif prices that reflected only adequate remuneration, the GOF would have had to make up the shortfall in the form of periodic grants to Eurodif, which undoubtedly would have been viewed as non-recurring benefits. Petitioners state that the GOF was able to achieve its objective in a more subtle way, where the payment of subsidies could be "socialized" by EdF among all of its electricity customers (essentially all French taxpayers). Department's Position: As noted above, purchase of goods for more than adequate remuneration is not included on the Department's illustrative list of the types of subsidies normally considered recurring or non- recurring. However, it is important to note that the illustrative list does specify that the provision of goods for less than adequate remuneration is generally treated as a recurring subsidy. The preamble to the CVD regulations notes that we plan to treat these types of subsidies in the same manner. Both the provision of goods for less than adequate remuneration and the purchase of goods for more than adequate remuneration involve sales transactions between the government and the respondent producer. As such, the benefit from both of these types of subsidies is provided to the respondent in an identical manner. Therefore, consistent with our regulatory practice, whereby the benefit from goods provided for less than adequate remuneration is considered a recurring subsidy, we consider the benefit provided by the purchase for more than adequate remuneration to also be a recurring subsidy. We do note, however, that even if the purchase of goods for more than adequate remuneration were included on the illustrative list, the regulations allow for an examination of the criteria listed under section 351.524(c)(2) to determine whether the subsidy can be considered recurring or non-recurring when a party presents a claim as to how the subsidy should be treated. First, the subsidy conferred upon Eurodif is not exceptional in accordance with section 351.524(c)(2)(i), in the sense that the recipient can expect to receive additional subsidies under this same program on an ongoing basis from year to year. Beginning in 1979, Eurodif and EdF have been engaged in long-term contracts with clearly defined pricing arrangements. There is a predictable monthly payment made each month by EdF to Eurodif; there is no doubt that Eurodif can expect to receive this monthly payment and, therefore, the benefit conferred as a result of these payments, from year to year. Second, we disagree with petitioners that the mere fact that EdF is an agency of the Government of France, or that the role of GOF officials on EdF's Board of Directors, necessarily determines that the GOF provided its express approval for the subsidy. The benefit was automatic and did not require or receive a formal application and/or specific government approval prior to the provision of each yearly benefit. As mentioned above, EdF and Eurodif entered into long-term contractual arrangements resulting in automatic benefits for the life of the contracts. No approval was expressly provided, let alone for each yearly benefit. Third, we see no conclusive evidence on the record of the investigation that the subsidy was "provided for, or tied to, the capital structure or capital assets" of Eurodif. Petitioners have alleged the total subsidy (including both recurring and non-recurring portions) is the price differential resulting from a comparison of EdF's prices to Eurodif to the benchmark prices used. Petitioners then go on to say that the non- recurring portion is equal to the "part usine" multiplied by the percentage decline in EdF's prices to Eurodif after the end of depreciation of the Georges-Besse plant. Petitioners, however, make no direct connection between the calculation of the price differential and the calculation of the non-recurring portion of the subsidy. Therefore, based on petitioners' reasoning, had the benchmark (the prices EdF paid for LEU to its suppliers other than Eurodif) been sufficiently high as to make the resulting overall price differential lower than the "part usine" multiplied by the percentage decline in EdF's price, the result could be a higher non-recurring subsidy than even the total subsidy (the overall price differential). Clearly, petitioners' logic is flawed, as this is an impossible result. Even if there had been sufficient evidence of a link between the provision of the subsidy and the capital structure or capital assets of Eurodif, we see no evidence to support petitioners' contention that the amount tied to the depreciation and amortization can be calculated by simply taking the percentage decline in Eurodif's price after the end of depreciation of the Georges-Besse plant. The actual drop in price can be a result of many factors, only one of which may be the change in the cost of depreciation and amortization. The preamble to the CVD regulations provides examples as to when the Department may consider a subsidy tied to the capital structure or capital assets of a company. See 63 FR at 65393. These examples include debt forgiveness, coverage of a company's losses, and import duties tied to major capital equipment purchases. The purchase of goods for more than adequate remuneration does not fit into any of these categories. The price of a good should cover a number of costs in order to ensure the long-term viability of the firm. These costs, of course, would include such items as depreciation, labor and raw materials. The fact that the price of a good would include these items does not mean that the price is tied to any one of these items, such as capital assets. Additionally, regarding petitioners' cite to an EdF official's comments that the full amortization of the plant cuts more than 25 percent off the price of enriched uranium fuel, we are unconvinced that this provides specific evidence that the subsidy was provided for, or tied to, the capital structure or capital assets of Eurodif. As explained by respondents, depreciation and amortization were significant expenses for Eurodif prior to 1999. If a link existed between the provision of subsidies and the depreciation and amortization of the Georges-Besse plant, one would assume the drop in price to EdF would occur immediately following the 1998 end of depreciation of the Georges-Besse plant. The price change, however, occurred beginning in 2001. While petitioners cite to the re-allocation of revenues from 1999 and 2000 to the period 1996 through 1998 as an agreement between Eurodif and EdF to reflect the impact of the change in income more gradually, there is no evidence on the record to support their allegation. Finally, with regard to petitioners' argument that had EdF not made purchases from Eurodif at prices that constitute more than adequate remuneration, the GOF would have had to make up Eurodif's financial shortfall in other ways by providing non-recurring subsidies, including the provision of grants, it is impossible for the Department to determine what would have been in alternative scenarios. We do not necessarily subscribe to the view that, had the GOF determined that it would provide alternative subsidies to Eurodif, such subsidies would have been allocable over time. The GOF could have provided recurring subsidies in any number of fashions, including providing excessive rebates of indirect taxes or providing electricity for less than adequate remuneration. Based on the above factors, we find that there is insufficient evidence to find EdF's purchases at prices that constitute more than adequate remuneration were provided for, or tied to, the capital structure or capital assets of Eurodif. Therefore, taking into consideration that none of the three criteria have been met to find a non-recurring subsidy, we have treated all benefits conferred upon Eurodif from EdF's purchase of LEU at prices that constitute more than adequate remuneration as recurring, and have expensed 1999 benefits in the POI. Comment 3: Petitioners' Argument that a Portion of the Subsidies Related to EdF's 1999 Purchases at Prices that Constitute More than Adequate Remuneration Should be Treated as a Recurring Subsidy Petitioners argue that while a large portion of the subsidies resulting from EdF's purchases from Eurodif should be deemed non-recurring, the remaining portion of the subsidy resulting from EdF purchases made during 1999 that are not tied to the depreciation and amortization of the plant should be treated as having provided recurring benefits to Eurodif during the POI. Petitioners added their calculation of the "part usine" price for 1999 to the uncontested "part energie" price during the POI and compared the total to their calculation of the reference price of Eurodif's deliveries to non-shareholder customers. Petitioners based their calculation of this figure on information contained in verification exhibits. The resulting price differential is the 1999 subsidy, and when the non-recurring portion (according to petitioners as defined in Comment 2, above) is deducted, the resulting per-SWU price differential multiplied by the total number of SWUs purchased by EdF during the POI represents the recurring benefit amount to Eurodif from EdF's purchases at prices that constitute more than adequate remuneration. Department's Position: As explained above, we have determined that the entire benefit conferred upon Eurodif through EdF's purchases of subject merchandise at prices that constitute more than adequate remuneration is a recurring subsidy. We do note that petitioners are incorrect in their calculation of the per-SWU "part usine" price paid by EdF to Eurodif during 1999. Petitioners argued that the figure used by the Department in the Preliminary Determination is incorrect, and was "one of three different, and incorrect, figures" provided by respondents in their questionnaire responses. In fact, the actual "part usine" figure is not what was calculated by petitioners in their case brief, but is what was calculated according to data received during verification. The calculation to determine the actual "part usine" price paid by EdF is explained at page 8 of the Eurodif/COGEMA Verification Report. Of the three disparate figures cited by petitioners, one is a reference price that is plugged into a formula (outlined in the 1995 EdF/Eurodif contract) to determine EdF's actual "part usine" payment price, the second is the "part usine" price used by the Department in the Preliminary Determination, and the final figure is an average of EdF's prices outlined in its contract from 1999 through 2005, as discovered during verification. See Eurodif/COGEMA Verification Report at page 7. Comment 4: Treatment of "Part Energie" Component of EdF's Price Respondents argue that, unlike the case with all other customers except Synatom, which simply pay one price that covers all of Eurodif's costs, EdF's true price is only the "part usine" price since EdF provides its own electricity for the enrichment of EdF's uranium. Respondents argue that, under the "part energie," EdF bills Eurodif for the energy it uses and Eurodif simply bills EdF back and that, at the end of the year, the amounts charged for electricity net out to zero. Therefore, respondents say that EdF incurs only the marginal cost of producing the electricity supplied to Eurodif for EdF's enrichment. Respondents further argue that the "part energie" charge is a "fiction" that was never actually incurred by EdF and never actually retained by Eurodif. They say that the billing and re-billing arrangement was done simply for VAT purposes. Respondents argue that, in the Preliminary Determination, the Department could have adjusted comparison prices to back out Eurodif's actual electricity costs for enrichment for customers whose prices were being compared to EdF's prices, or the Department could have compared EdF's 1999 price to Eurodif's price to Synatom, which had a contractual relationship similar to that of EdF, whereby it also supplied electricity to Eurodif for enrichment on its behalf. Another option, according to respondents, would have been to make a comparison using Eurodif's "true" price to EdF, with no electricity component. Respondents point to an EdF official's statement at verification that EdF's cost for enrichment from Eurodif is Eurodif's price plus the marginal cost to EdF of supplying electricity to Eurodif for enrichment on EdF's behalf. Further, respondents point to statements made by a Eurodif official during verification that the marginal electricity cost is less than five centimes per kilowatt hour. Respondents also submitted documents regarding the marginal cost of electricity on October 22, 2001. Petitioners counter by stating first that the fact Eurodif and EdF swap invoices rather than send checks for the electricity amounts billed should not mask the fact that real costs have been incurred. Second, petitioners argue that the energy component is very much a part of the total price that EdF pays to Eurodif and that the billing and re-billing of the "part energie" is the functional equivalent of EdF's having paid cash for the electricity used in the production of EdF's LEU, as is conclusively demonstrated in the Eurodif/EdF contracts. Third, petitioners point out that every internal and public financial statement generated by Eurodif other than for the purpose of responding to Department questionnaires has included "part energie" as part of the price paid by EdF. Petitioners point to a submitted document which shows the complete price to include both "part usine" and "part energie" and to a verification exhibit in which a financial report lists an amount for "prix energie," or energy price. Finally, petitioners state that the inclusion of the value of the "part energie" as a cost to EdF and an element of revenue to Eurodif is consistent with - indeed, required by - Generally Accepted Accounting Principles, which specify that parties to a transaction in which non- monetary assets or other things of value are provided in connection with the acquisition of an asset must recognize the fair value of the thing provided as part of the cost of acquiring the asset or selling the asset. Similarly, French tax authorities likewise require that VAT be paid on the electricity supplied by EdF to Eurodif because the VAT is a "tax on the consumption of goods and services...paid by the consumer." Petitioners argue that French tax authorities recognize that Eurodif is "consuming" a good in the production of LEU when it uses electricity supplied by EdF and, therefore, VAT must be paid by Eurodif even if Eurodif doesn't pay cash for the good (electricity) and EdF doesn't pay cash for the "part energie" when it acquires the LEU. Additionally, petitioners argue that, especially in light of the fact that EdF refused to provide the Department with any information regarding its costs of production, the argument made by respondents - that the true cost to EdF is its "usine" price plus EdF's marginal cost of producing electricity used in production of EdF's LEU - must be disregarded. Petitioners also state that the cost information submitted on October 22, 2001, as a result of comments made by a Eurodif official during verification, is inaccurate. The per-KwH cost figure arrived at by respondents appears to reflect only the fuel costs and not the other cash operating and maintenance costs that are necessary to determine the costs incurred in produced electricity. Further, petitioners argue that the document, which is untranslated from French, must be rejected by the Department since respondents have neither obtained a waiver on the translation requirement nor have they provided a translation of relevant sections, as is required under section 351.303(e). In any event, petitioners argue that, even if specific EdF cost information were on the record, it would be irrelevant. This is because EdF and Eurodif based their transactions on the value of the electricity under the Green Tariff, not on marginal cost, and because EdF built a power plant adjacent to Eurodif's enrichment facility to provide electricity to that facility, which would therefore necessitate the assessment of costs of the EdF plant in considering EdF's costs of supplying electricity to Eurodif. Petitioners counter respondents' argument that Synatom prices provide an appropriate benchmark with several points. First, as a shareholder in Eurodif, petitioners argue that the factors that might have affected prices paid by Synatom are unknown, including whether similar factors that motivated EdF to subsidize Eurodif may also have been at play in determining Synatom's prices. Second, respondents argue that, as is the case with EdF, Synatom does, in fact, pay for energy. Third, Synatom's price information on the record is sketchy, and it is not clear whether Synatom's contractual arrangements with Eurodif confirm whether prices are higher or lower than EdF's prices. Department's Position: We agree with petitioners that the actual price to EdF includes the "part energie" component and see no evidence that has arisen to lead us to alter our Preliminary Determination decision. Respondents' argument that the electricity price charged to EdF is a "fiction" is untrue. Just as the cost of electricity is included in Eurodif's charges to its customers other than EdF, the cost of electricity must be considered in the case of Eurodif's charges to EdF. In fact, as petitioners have pointed out, the "part energie" price is listed in various submissions. The price of electricity is clearly outlined in the contracts and the invoices examined during verification. Eurodif's accounting records and audited financial statements, prepared in accordance with French generally accepted accounting principles, include a cost for all electricity supplied by EdF and consumed in the production process. Further, language in the contracts between EdF and Eurodif makes clear that the cost of electricity is real. The cost of electricity necessary for the production of LEU for EdF is not eliminated simply because EdF is in a position to furnish electricity for production of its LEU while other customers are not in the position to do so. Further, the cost is not zero simply because the billing arrangements makes it so the charges between Eurodif and EdF net out to zero. Further, the cost of electricity for the production of LEU for EdF is not a calculation of the marginal cost of electricity to EdF. As petitioners have stated, too many factors go into EdF's cost with regard to its provision of electricity to Eurodif to attempt to calculate a figure for EdF's cost of electricity, notwithstanding the fact that EdF refused to place cost information on the record, despite our requests during verification to obtain such data. We also agree with petitioners that French tax authorities recognize that Eurodif is "consuming" a good in the production of LEU when it uses electricity supplied by EdF and, therefore, VAT is paid by Eurodif on the "part energie" price when it acquires the LEU. Lastly, with regard to respondents' argument that the prices paid by Synatom, in which it provides electricity for the enrichment of its own uranium, is the most appropriate benchmark to compare to the prices paid by EdF to Eurodif, we disagree. For reasons explained above, we have determined that the most appropriate benchmark for comparison purposes is the weighted-average price EdF paid to suppliers other than Eurodif. Comment 5: Respondents' Argument that the Department's Price Comparison in the Preliminary Determination was Flawed in Other Respects First, respondents argue that the Department excluded from its Preliminary Determination analysis prices paid by Eurodif's shareholder customers to ensure the benchmark was representative of market conditions, but did not provide any basis for deeming shareholder transactions to be unrepresentative of market conditions. Respondents contend there is no statutory provision allowing the Department to ignore these transactions. Second, respondents state that the Department erred in using as a benchmark a weighted average of the prices paid by Eurodif's non- shareholder customers, as demonstrated by the vast differences in the prices. Third, respondents contend that in considering the "prevailing market conditions" (under 19 U.S.C. 1677(5)(E)(iv)) bearing upon EdF's purchases from Eurodif, the Department failed to consider whether EdF could have reliably secured enrichment services sufficient to meet its SWU needs other than from Eurodif. Respondents claim that EdF had no better alternative; Eurodif was the only supplier in the world able to reliably meet EdF's long-term needs for its 58 reactors. Eurodif posed no currency, political, transportation, or other risk. Respondents state that in 1995, Urenco and the Russians had little or no excess capacity, and the U.S. enrichment enterprise continued to be mired with troubling issues from a customer's perspective. For example, prior to EdF committing to extend its contract with Eurodif, a large group of petitioners' customers filed overcharge claims against USEC, and there was also concern USEC's 1994 agreement with Russia would adversely affect the company. Petitioners counter that the exclusion from the benchmark of prices paid by other Eurodif shareholders was appropriate in view of the fact that unique factors and considerations may be at work in the prices paid by shareholders that do not apply in arm's-length transactions with non- shareholders. Further, petitioners state that calculating the proper prices deemed to have been paid by shareholders can be complex. Petitioners next argue that, in any average, there will always be data points above and below the average. Indeed, that is the nature of a weighted average and does not undermine the validity or usefulness of a weighted-average approach. Additionally, the fact that prices certain non- shareholder customers paid to Eurodif may be higher than others is a reflection of a number of market and timing factors. Moreover, petitioners state that EdF's prices exceed any reasonable benchmark, as can be seen if EdF's prices are compared to the prices of Eurodif's next three largest non-shareholder customers. Finally, with regard to respondents' contention that EdF had no viable alternative source of enrichment other than Eurodif, petitioners counter by arguing that other suppliers, specifically USEC and its predecessor, the U.S. Department of Energy, were not unreliable and were obtaining significant business from unaffiliated customers during the periods when respondents suggest that no rational utility would have looked to those entities. Also, petitioners state that capacity constraints would not have inhibited providers of LEU other than Eurodif from competing for EdF's business had EdF been willing to consider other sources. Department's Position: First, with regard to respondents' argument that there is no statutory authority for excluding prices paid by Eurodif's shareholder customers in the benchmark, we note that because we have changed our approach from the Preliminary Determination and are now using as our benchmark the weighted-average price EdF paid to suppliers other than Eurodif for LEU, there is no need to further consider this issue. Second, as petitioners have stated, the use of weighted averages will always include data points above and below the calculated mean. Further, as petitioners have pointed out, the Department often uses such averages in making appropriate comparisons for purposes of evaluating adequate remuneration. See, e.g., CTL Plate from Korea, 64 FR at 73184-5. Thus, there is no merit to respondents' contention that the Department's use of weighted average prices for benchmark purposes is an invalid means of assessing the adequacy of remuneration to Eurodif. Finally, with regard to respondents' argument concerning availability, while Eurodif may have been the most attractive supplier to EdF in terms of reliability and risk, record evidence makes clear that Eurodif was not EdF's only viable option for the supply of LEU. As petitioners have pointed out, the fact is that EdF could have turned elsewhere to meet at least some of its LEU needs. USEC, for example, was obtaining business from unaffiliated customers while EdF was negotiating its contracts with Eurodif. Comment 6: Tax Exemption from the GOF Petitioners argue that, along with the benefit Eurodif received through an exoneration of income taxes corresponding to its percentage of foreign ownership, Eurodif also received a countervailable benefit from the GOF during the POI from its exemption of taxes relating to Eurodif's 59.65 percent French government ownership. Petitioners contend that the Eurodif/COGEMA Verification Report makes clear the tax exemption process. While Eurodif pays taxes corresponding to the amount of its private ownership and its French government ownership, Eurodif is reimbursed the amount it pays corresponding to its French government ownership at a later date. On April 14, 1999, Eurodif requested a reimbursement relating to tax year 1998 payments corresponding to its share of French government ownership. Eurodif received the reimbursement on January 25, 2000. Petitioners argue that, under section 351.509(b) and (c), the benefit of the exemption from payment of corporate income taxes is normally deemed to be received "on the date on which the recipient firm would otherwise have had to pay the taxes associated with the exemption or remission. Normally, this date will be the date on which the firm filed its tax return." Eurodif made a deposit with the government-owned bank of the French Treasury equal to the amount of tax to be reimbursed, and earned interest on the deposited amount while the GOF processed the reimbursement. Petitioners argue that Eurodif benefits from the amount deposited with the French Treasury during the period in which the reimbursement paperwork is pending, and that the fact the reimbursement came shortly after the end of the POI was happenstance. Therefore, the Department should treat the reimbursement as received in 1999, the year the tax return was filed. Respondents argue that the Department properly decided in the Preliminary Determination that Eurodif did not receive a benefit during the POI from the reimbursement of taxes proportional to its French ownership because the tax was not reimbursed until January, 2000, which is after the POI. Respondents cite to Stainless Steel Sheet and Strip in Coils from France, 64 FR 30774, 30780 (June 8, 1999) which states that benefits are deemed as received "at the time that there is an effect on the recipient's cash flow." Respondents assert that April 14, 1999 is not "the date on which the recipient firm would otherwise have had to pay the taxes associated with the exemption or remission" because Eurodif actually paid money out in 1999 when it filed its income tax return and no cash flow effect occurred until Eurodif received the reimbursement on January 25, 2000, even if Eurodif deposited the money into an interest-bearing account with the French Treasury. Eurodif was deprived of use of funds until it received the reimbursement. Department's Position: We agree with petitioners that the benefit to Eurodif is received at the time Eurodif was to pay the taxes corresponding to its percentage of French government ownership. Contrary to respondents' argument, Eurodif did not "pay" this tax, or any monies, on April 14, 1999. The amount of the income tax corresponding to Eurodif's French government ownership was deposited in an interest-bearing account that was to be reimbursed to Eurodif in full. The timing of the reimbursement is not fixed; Eurodif officials stated during verification that notification of the reimbursement is somewhat unpredictable. Additionally, there was no discretion on the part of the GOF as to whether to reimburse Eurodif, or in what amount. Eurodif knew at the time it filed its tax return and deposited the monies that it would receive a full reimbursement of the amount deposited with the government-owned bank of the French Treasury. During verification, we also examined the account in which Eurodif records and tracks the deposit, which is made in the form a three-month certificate of deposit that can be rolled over until the reimbursement notification is given. Additionally, respondents' cite to Stainless Steel Sheet and Strip in Coils from France, in which a reimbursable advance received during the POI was not found to provide a benefit during the POI because it was treated as an interest-free loan. In that case, the Department determined that payments on a comparable commercial loan would not be due until after the POI, because the company makes all payments of interest on its long- term loans on an annual basis, not atypical of general banking practices in France. Hence, there would be no effect on the company's cash flow during the POI. In our case, the benchmark (Eurodif's full payment of income taxes during the POI, corresponding to its French government ownership) undoubtedly would have provided a cash flow effect on Eurodif during the POI. Based on these factors, we determine that the income tax amount to have been paid based on Eurodif's French government ownership, in which Eurodif was to be reimbursed, is fully countervailable. Recommendation: Based on our analysis of the comments received, we recommend adopting all of the above positions and adjusting all related subsidy calculations accordingly. If these recommendations are accepted, we will publish the final determination of the investigation. _________ _________ Agree Disagree ___________________________ Faryar Shirzad Assistant Secretary for Import Administration ___________________________ Date ______________________________________________________________________ footnote: 1. The petitioners in this investigation are USEC, Inc. and its wholly- owned subsidiary, United States Enrichment Corporation (collectively "USEC"), and the Paper, Allied-Industrial, Chemical and Energy Workers International Union, AFL-CIO, CLC, Local 5-550 and Local 5-689 (collectively "PACE") ("the petitioners").