65 FR 18066, April 6, 2000 C-423-806 Sunset Review Public Document MEMORANDUM TO: Robert S. LaRussa Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Review of the Countervailing Duty Order on Certain Cut-to-Length Carbon Steel Plate from Belgium; Final Results of Expedited Review Summary We have analyzed the substantive responses and rebuttals of interested parties in the expedited sunset review of the countervailing duty order covering certain cut-to-length carbon steel plate ("CTL plate") from Belgium. We recommend that for our final results you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in this expedited sunset review for which we received substantive responses by parties: 1. Likelihood of continuation or recurrence of a countervailable subsidy A. Continuation of subsidy programs B. Elimination of subsidy programs C. New subsidy allegations 2. Net countervailable subsidy likely to prevail A. Rates from investigation B. Use of a more recent rate 3. Nature of the subsidy A. Article 3 or 6.1 Subsidy B. Program descriptions History of the Order On July 9, 1993, the Department published its final affirmative countervailing duty determination with respect to certain steel products, including CTL plate, from Belgium (58 FR 37273 (July 9, 1993)). In this investigation, the Department investigated 30 programs, one of which it determined was not countervailable, and nine of which it determined were not used. The Department calculated, with respect to CTL plate, an estimated country-wide net subsidy rate of 6.52 percent ad valorem, and two company-specific net subsidy rates: 24.17 percent ad valorem for Cockerill Sambre ("Cockerill") and 0.96 percent ad valorem for Fabrique de Fer de Charleroi ("Fafer"). On August 17, 1993, the Department issued the countervailing duty order and amendment to the final affirmative countervailing duty determination (58 FR 43749 (August 17, 1993)). At that time, the Department amended the country-wide rate to 5.85 percent ad valorem, the rate for Cockerill to 25.97 percent, and the rate for Fafer to 1.05 percent. The final countervailing duty determination was amended once again, changing the country-wide rate to 5.92 percent ad valorem and the rate for Cockerill to 23.15 percent ad valorem.(1) In the original investigation, the Department determined that the following programs conferred countervailable subsidies: 1. Cash Grants and Interest Subsidies under the Economic Expansion Law of 1970 2. Government Funding of Early Retirement Pensions 3. Ecological Incentives 4. Assumption of Debt a. Assumption of Debt Related to Closing of Valfil Plant b. Assumption of Financing Costs c. Forgiveness of Societe Nationale de Credite a l'Industrie ("SNCI")Loans 5. Debt Conversions a. 1984 Conversion of Sidmar Debt (not countervailable) b. Conversion of Clabecq Debt into Ordinary and Non-Voting Shares c. Conversion of Clabecq Debt into Parts and Beneficiaries d. Conversion of Cockerill Sambre Debt to Equity under the Claes Plan e. Conversion of Cockerill Sambre Debt Held by the Fund pour la Restructuration des Secteurs Nationaux en Region Walloon ("FSNW") into Equity f. Conversion of Cockerill Debt to Equity under the Gandois Plan 6. Equity Infusions a. Equity Infusions for Hainaut-Sambre b. The Societe Nationale pour des Reconstruction des Secteurs Nationaux ("SNSN") Capital for Cockerill Sambre's Liege Cold- Rolling Mill c. 1981 Equity Infusion into Cockerill Sambre d. Clabecq Infusion from SOCOCLABECQ 7. SNCI Loans 8. Belgian Industrial Finance Company ("Belfin") Loans 9. The "Invests" a. SidInvest b. BoelInvest c. Clabecqlease 10. SNSN Loans 11. FSNW Loans 12. Government Guaranteed Loans 13. Exemption of Corporate Taxes for Grants Received under the 1970 Law 14. Accelerated Depreciation 15. Exemption from Real Estate Taxes 16. Exemption from the Capital Registration Tax 17. European Coal and Steel Community ("ECSC") Article 54 Loans and Loan Guarantees 18. ECSC Redeployment Aid 19. European Social Fund 20. Water Purification Subsidies The Department has conducted one administrative review with respect to the order on CTL plate from Belgium.(2) In this (1996) administrative review, the Department published a net subsidy rate of 0.35 percent for Fafer. This rate was later amended to 0.69 percent when the Department corrected certain ministerial errors.(3) In the 1996 administrative review, the Department determined that three programs confer subsidies, only one of which was previously determined to confer subsidies. The Cash Grants and Interest Subsidies under the Economic Expansion Law of 1970 was determined in the original investigation to confer a countervailable subsidy and also determined in this administrative review to confer subsidies. The net subsidy rate for this program was calculated to be 0.35 percent ad valorem for Fafer. In addition, the Department determined that two new programs, Promotion Brochure and Audio-Visual Calling Card, confer subsidies. However, the Department calculated the net subsidies for both of these programs to be less than 0.005 percent ad valorem, which is de minimis. All of the other programs determined in the original investigation to confer countervailable subsidies were found in this review to not confer subsidies or were found not to be used. However, we note that none of the programs found countervailable in the original investigation were found to be terminated in this review. The order remains in effect for all known producers/exporters of the subject merchandise from Belgium. Background On September 1, 1999, the Department initiated a sunset review of the countervailing duty order on CTL plate from Belgium (64 FR 47767), pursuant to section 751(c) of the Act. The Department received a notice of intent to participate on behalf of Bethlehem Steel Corporation and U.S. Steel Group, a unit of USX Corporation (collectively, "domestic interested parties") in this review on September 10, 1999, within the deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. Pursuant to 19 U.S.C. § 1677(9)(C), the domestic interested parties claimed interested party status as a domestic producer of a like product. Moreover, the domestic interested parties stated that one or more of them were petitioners in the original countervailing duty investigation and have participated in all of the administrative reviews conducted by the Department and other segments of the proceeding. The Department received a complete substantive response from the domestic interested parties on October 1, 1999, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). In addition, the Department received a substantive response on behalf of the Government of Belgium ("GOB") on September 30, 1999, within the deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). The GOB claimed interested party status under 19 U.S.C. § 1677(9)(B) as a government of the country in which the subject merchandise is produced and from which it is exported. The GOB stated that it had participated in the proceeding in the past. The Department also received a substantive response from the Delegation of the European Commission (the "EC") on September 29, 1999, within the deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). The EC stated that it had also previously participated in this countervailing duty proceeding. Furthermore, the Department received, on October 1, 1999, also within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i), a submission from Fafer, a Belgium producer of CTL plate. However, we determined this submission to be deficient and incomplete.(4) As a result, pursuant to 19 CFR 351.218(e)(1)(ii)(C), the Department determined to conduct an expedited, 120-day review of the order. On October 15, 1999, we received rebuttal comments from the domestic interested parties.(5) In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a sunset review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). This review covers a transition order within the meaning of section 751(c)(6)(C)(i) of the Act. On December 22, 1999, the Department determined that the sunset review of the countervailing duty order on CTL plate from Belgium is extraordinarily complicated pursuant to section 751(c)(5)(C)(v) of the Act and extended the time limit for completion of the final results of this review until not later than March 29, 2000, in accordance with section 751(c)(5)(B) of the Act.(6) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department is conducting this review to determine whether revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy. Section 752(b) of the Act provides that, in making this determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the program which gave rise to the net countervailable subsidy has occurred that is likely to affect that net countervailable subsidy. Pursuant to section 752(b)(3) of the Act, the Department shall provide to the International Trade Commission ("the Commission") the net countervailable subsidy likely to prevail if the order is revoked. In addition, consistent with section 752(a)(6), the Department shall provide the Commission information concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the 1994 WTO Agreement on Subsidies and Countervailing Measures ("Subsidies Agreement"). Below we address the comments of interested parties. Likelihood of Continuation or Recurrence of a Countervailable Subsidy Interested Party Comments In their substantive response, the domestic interested parties argue that revocation of the countervailing duty order on CTL plate from Belgium would likely result in the continuation or recurrence of a countervailable subsidy. Specifically, the domestic interested parties argue that because previously countervailed subsidy programs were amortized and those benefit streams continue past the sunset review period and because the GOB continues to provide subsidies to Belgian steel producers through many of the programs previously countervailed, the Department should determine that revocation of the order would likely result in the continuation or recurrence of a countervailable subsidy (see October 1, 1999, substantive response of the domestic interested parties at 4). Quoting the Statement of Administrative Action ("SAA"), the domestic interested parties point out that the Department must consider whether the fully allocated benefit stream is likely to continue after the end of the review, without regard to whether the program that gave rise to the long-term benefit continues to exist. Moreover, the domestic interested parties argue that, to the best of their knowledge, none of the programs found countervailable in the original investigation has been terminated; moreover, they argue, a number of these programs, as well as several new subsidies, were identified in Belgium's most recent Article 25 submission to the WTO on subsidy programs currently in force (see id. at 9). Specifically, the domestic interested parties argue that subsidies countervailed in the original investigation under the Economic Expansion Law of 1970 ("1970 Law") continue to provide benefits and that the benefit stream of grants and interest subsidies received by Fafer, Clabecq, and Cockerill extend beyond the period of this sunset review (see id. at 9). The domestic interested parties maintain that the 1970 Law authorizes the disbursement of federal funds to achieve certain economic development objectives, such as to encourage economic growth in specific disadvantaged regions. Moreover, the domestic interested parties assert that this subsidy program is in fact expanding. They point out that according to Belgium's most recent subsidy submission to the WTO, the country had budgeted BF 3,791.6 million for programs under the 1970 Law in 1997, which constituted an increase of more than BF 1,000 million over the previous year (see id. at 10). Additionally, the domestic interested parties maintain that new subsidy benefits under the 1970 Law were identified in the Department's countervailing duty determination in the case of stainless steel plate in coils from Belgium ("Stainless Steel," 64 FR 15567 (March 31, 1999), as amended, 64 FR 25288 (May 11, 1999)). Specifically, the domestic interested parties argue that four separate regional subsidy programs authorized under the 1970 Law were determined to confer benefits to Belgian stainless steel producers: cash expansion grants, investment and interest subsidies, accelerated depreciation, and real estate tax exemptions (see id. at 11). The domestic interested parties conclude that since the 1970 Law has been found in a recent proceeding to continue to confer benefits to Belgian steel producers, including at least one producer of the subject merchandise, the Department must find that subsidization under this program is likely to continue or recur (see id. at 12). In addition, the domestic interested parties also maintain that the Government Funding of Early Retirement Pensions, determined to be countervailable in the original investigation, continued to confer benefits to Cockerill after the investigation (see id. at 14). Moreover, the domestic interested parties argue that Belgian producers continue to receive benefits under SNCI loans; in fact, they maintain that in Stainless Steel, ALZ N.V. (a subsidiary of Sidmar) was determined to have received SNCI loans which were still outstanding in 1997 (see id. at 17). The domestic interested parties also maintain that in Stainless Steel, the Department determined that a steel producer had received Belfin loans which remained outstanding during the period of investigation (see id. at 17). Furthermore, the domestic interested parties argue that a number of other subsidy programs countervailed in the original investigation continue in place today. The domestic interested parties also maintain that two new subsidy programs, administered by the Walloon Export Agency ("AWEX"), were found to confer benefits to Fafer during the 1996 administrative review. Both of these programs provide contingent liability loans to companies located in the Walloon region of Belgium for the creation of promotional brochures and audio-visual "calling cards" targeted for use at trade exhibitions, according to the domestic interested parties. Moreover, the domestic interested parties point out that Faber, Clabecq, and Cockerill all have production facilities within Walloon and are thus eligible for these programs (see id. at 20). In addition, the domestic interested parties urge the Department to consider new subsidy allegations, pointing out that, as stated in the SAA and the Sunset Policy Bulletin, where good cause is shown, the Department will consider newly alleged subsidy programs where there have been no recent administrative reviews or where the alleged countervailable subsidy program came into existence after the most recently completed administrative review. Specifically, the domestic interested parties maintain that the Government of Walloon ("GOW"), under the Decree of 5 July 1990 and its execution order, the Walloon Government Decree of 29 September 1994, provides financial assistance to enterprises that promote technology. This program, allege the domestic interested parties, provides both grants and interest free loans. In fact, the domestic interested parties point out that in the 1996 administrative review, the Department determined that research and development subsidies provided under the 1970 Law pursuant to the 5 July 1990 Decree were not de jure specific. However, the domestic interested parties request that the Department again analyze whether subsidy benefits provided under this program confer a de facto specific benefit. Furthermore, the domestic interested parties allege that Cockerill appears to have benefitted from at least three distinct subsidies provided by the GOW for research and development: Operation Wide Angle, Surface Treatment Aid, and Alternative Coating Techniques (see October 1, 1999, substantive response of the domestic interested parties at 25). Moreover, the domestic interested parties maintain that Cockerill has benefitted from research benefits provided by the Centre de Recherche Metallurgie ("CRM"). The domestic interested parties assert that since only those projects related to iron and steel manufacturers are eligible to benefit from research projects with CRM, the program is de jure specific (see id. at 26). Additionally, the domestic interested parties argue that a 1997-98 grant from the GOW to Cockerill to reduce working hours constitutes a de jure specific subsidy. Also, the domestic interested parties argue that special incentives granted to new enterprises in zones located in areas of high structural unemployment ("employment zones"), which includes certain areas in Liege, where Cockerill has production facilities, confer a specific benefit (see id. at 28). Moreover, the domestic interested parties allege that in 1994 Cockerill received a 15 percent subsidy to support a BF 3 billion environmental investment program and the program subsidy was to be spread over several years (see id. at 28). In addition, the domestic interested parties also argue that in 1996, the GOB and the GOW, under the aegis of a new program the GOW created to preserve the steel industry in Walloon, offered debt forgiveness, loans and loan guarantees on terms inconsistent with commercial considerations, equity infusions, grants, restructuring aid, and the GOW-arranged sale of Clabecq's products to another steel producer (see id. at 29-30). All of these subsidies, state the domestic interested parties, were deemed to be illegal state aid by the European Commission ("EC"). In their substantive response, the domestic interested parties describe these three programs as follows. They allege that in June 1996, the GOB and the GOW provided aid, such as bridging loans, loan forgiveness, and debt rescheduling, to Clabecq, and in December 1996, the EC rejected many of the measures, holding them as illegal state aid (see id. at 31). In addition, the domestic interested parties maintain that Clabecq has received other subsidies through the Societe Wallone de Siderurgie ("SWS") in the form of a takeover and financial assistance from the GOW during insolvency (see id. at 32-33). Furthermore, the domestic interested parties argue that the GOB has repeatedly provided subsidies related to various company's social security contributions through a program known as "Maribel," which allowed companies employing manual workers to reduce their social security charges by 6.71 percent of the earnings of manual workers (see id. at 34-35). According to the domestic interested parties, the EC found that the benefits conferred under Maribel constituted illegal state aid. In addition, the domestic interested parties allege that the EC has provided, through various organizations, a significant volume of loans and other financial assistance to the Belgian steel industry since the late 1970s. The domestic interested parties assert that to the extent that these programs continue to exist and have been found to be countervailable in past determinations, the Department should determine that subsidization is likely to continue or recur. The domestic interested parties maintain that these new subsidy allegations pertain to companies that did not participate in the most recent administrative review (e.g., Cockerill and Clabecq) or programs which have come into existence since the 1996 review of Fafer (see id. at 21). In their substantive response, the GOB argues that it does not foresee any negative impact from the revocation of the countervailing duty order. Specifically, the GOB asserts that subsidization is unlikely to continue or recur following the revocation of the order for the following reasons. One, the GOB argues that in the 1996 administrative review, Fafer's countervailing duty rate of 0.69 percent was entirely due to the fact that a particular benefit was totally expensed during the period of review rather than allocated over the exporter's average useful life ("AUL") (see September 30, 1999, substantive response of the GOB at 2). Furthermore, the GOB argues that, due to the coming expiry of the ECSC Treaty in 2002, the ECSC Article 54 Loans and Loan Guarantees program would cease to provide benefits, while benefits under the ECSC Redeployment program, if still available, would be negligible (see id. at 3). In addition, the GOB maintains that the programs countervailed in the original investigation have either been terminated or were aid programs which cannot provide benefits under the Commission's Steel Aid Code. In fact, the GOB argues that the subsidization of the steel sector in the EU is strictly prohibited following the adoption of a series of EC decisions (the Community Steel Aid Codes) which entered into force on January 1, 1997, and which only allow aid to be granted to the steel industry under three circumstances: for the closing of facilities, for environmental reasons, and for research and development. The GOB points out that the last two types of aid are not actionable under article 8 of the WTO Agreement on Subsidies and Countervailing Measures ("SCM Agreement") since the aid is non- specific (see September 30, 1999, substantive response of the GOB at 3). The EC, in its substantive response, also argues that revocation of the countervailing duty order would not likely lead to continuation or recurrence of a countervailing subsidy. The EC's arguments are the same as the GOB's. Fafer, in its October 1, 1999, submission (which, as discussed above, the Department determined to be incomplete and deficient), agrees with the submission of the GOB and states that Fafer incorporates the information contained in the GOB's substantive response into its submission, adding no new information to the record. In their rebuttal, the domestic interested parties refute the GOB's, EC's, and Fafer's (collectively, "respondent interested parties") argument that subsidization is unlikely to continue or recur based upon a net subsidy rate of 0.69 percent calculated for Fafer during the 1996 review. The domestic interested parties argue that sunset reviews are conducted on an order-wide basis, and, as such, an individual rate calculated for a single company is largely irrelevant (see October 15, 1999, rebuttal of the domestic interested parties at 6). In other words, the domestic interested parties maintain that the fact that some of the current company-specific net subsidy rates are small does not indicate that subsidization is unlikely to continue or recur if the order were to be revoked. Moreover, the domestic interested parties maintain that the respondents' arguments that benefits under ECSC Article 54 Loans will no longer be available due to the forthcoming expiry of the ECSC Treaty in 2002 are not persuasive. The domestic interested parties argue that future expiration of a subsidy provision cannot be deemed a terminated subsidy program since the Department does not recognize prospective terminations. In addition, they maintain that publicly available data show that subsidy benefits continue to flow under Article 54 and that ECU 315.4 million worth of new Article 54 loans were originated in 1997 (see id. at 8). Furthermore, the domestic interested parties rebut the respondent interested parties' arguments regarding the EC's Steel Aid Code. The domestic interested parties argue that the Steel Aid Code permits numerous kinds and amounts of subsidies which are actionable under the SCM Agreement and countervailable under U.S. law, and, therefore, even perfect enforcement of the Steel Aid Code would not preclude continuation or recurrence of countervailable subsidies (see id. at 9). Additionally, the domestic interested parties argue that there is no basis for confidence that the Steel Aid Code will prevent even the kinds of subsidies which it normally bans. Specifically, the domestic interested parties observe that a predecessor 1985 Steel Aid Code banned, in theory, all aid to the steel industry save for research and development, environmental protection, and closure aid. However, argue the domestic interested parties, the EC gave billions of Belgian francs away after this time (see id. at 10). Also, the domestic interested parties rebut the respondent interested parties' argument that two of the three remaining types of subsidies are not specific, arguing that the fact that a subsidy is deemed to be used for environmental purposes or for research does not excuse it from countervailability. In sum, the domestic interested parties maintain that the existence of the Steel Aid Code does not demonstrate that subsidization is unlikely to continue or recur were the order revoked (see id. at 12). Department's Determination Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the SAA, the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order-wide basis (see section II.A.2 of the Sunset Policy Bulletin). Additionally, the Department normally will determine that revocation of a countervailing duty order is likely to lead to continuation or recurrence of a countervailable subsidy where (a) a subsidy program continues, (b) a subsidy program has been only temporarily suspended, or (c) a subsidy program has been only partially terminated (see section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this policy are provided where a company has a long record of not using a program (see section III.A.3.b of the Sunset Policy Bulletin). Section 752(b) of the Act provides that, in making its determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the program which gave rise to the net countervailable subsidy has occurred that is likely to affect that net countervailable subsidy. As noted above, the Department has conducted one administrative review of this order. All of the programs determined in the original investigation to confer countervailable subsidies remain in place. Although the SNCI Loans program was determined in the 1996 administrative review to not confer subsidies, the program has not been terminated, nor has there been a change in the program that would warrant the Department to consider it to no longer confer a countervailable subsidy. Therefore, based on the continued existence of programs found to provide countervailable subsidies, we determine that revocation of the countervailing duty order would lead to the continuation or recurrence of a countervailable subsidy. Net Countervailable Subsidy Interested Party Comments In their substantive response, the domestic interested parties argue that the Department must view the original net countervailable subsidy as a starting point from whence to derive a more appropriate rate. Arguing that Belgian producers of the subject merchandise have received new countervailable subsidies since the imposition of the order in 1993, the domestic interested parties maintain that modification of the net subsidy rate is required in order to accurately capture the magnitude of subsidization of Belgian producers (see October 1, 1999, substantive response of the domestic interested parties at 39). However, the domestic interested parties argue that the lowest rate the Department should report to the Commission is the rate from the original investigation, as amended: 23.15 percent ad valorem for Cockerill and 5.92 percent for "all others." Neither the GOB nor the EC discuss in their respective submissions the net countervailable subsidy likely to prevail were the order revoked. Department's Determination As discussed in the Sunset Policy Bulletin, the Department normally will report to the Commission an original subsidy rate as adjusted to take into account program-wide changes. As noted above, all of the programs determined in the original investigation to confer countervailable subsidies remain in place, although they may not currently be in use. In addition, while two new programs administered by AWEX, Promotion Brochure and Audio-Visual Calling Card, were found to confer countervailable subsidies in the 1996 administrative review, the net subsidy rate for both programs was found to be less than 0.005 percent ad valorem. Moreover, we note that the Department determined in the 1996 administrative review that the Research and Development Loan Provided under the 1970 Law was not specific, and, therefore, did not confer a countervailable subsidy. Referring to section 752(b)(2) of the Act, the Sunset Policy Bulletin provides that if the Department determines that good cause is shown, the Department will consider other factors in sunset reviews. Specifically, the Department will consider programs determined to provide countervailable subsidies in other investigations or reviews, but only to the extent that such programs (a) can potentially be used by the exporters or producers subject to the sunset review and (b) did not exist at the time that the countervailing duty order was issued (see section III.C.1). Additionally, the Sunset Policy Bulletin provides that if the Department determines that good cause is shown, the Department will also consider programs newly alleged to provide countervailable subsidies, but only to the extent that the Department makes an affirmative countervailing duty determination with respect to such programs and with respect to the exporters or producers subject to the sunset review (see section III.C.2). Both sections specify that the burden is on interested parties to provide information or evidence that would warrant consideration of the subsidy program in question. In their substantive response, the domestic interested parties urge the Department to consider a number of alleged new programs. As noted above, the Department will only consider other factors under section 752(b)(2) of the Act where it determines good cause for such consideration has been shown. Additionally, the Sunset Regulations specify that the Department normally will consider such other factors only where it conducts a full sunset review. Here, although the domestic interested parties allege that a number of new programs have been created to benefit Belgian steel producers, the domestic interested parties concede that they have no way of calculating the benefits conferred by these alleged new programs. As stated in the SAA at 889, the more appropriate vehicle for consideration of new subsidies is an administrative review pursuant to section 751(a) of the Act. Therefore, we are not considering these alleged new subsidy programs for the purpose of this review. As noted above, all of the programs determined in the original investigation to confer countervailable subsidies remain in place, although some of the programs may not be in use currently. In addition, two new programs found to confer countervailable subsidies in the only administrative review conducted by the Department were de minimis. Therefore, because we have not determined that any of the countervailable programs from the original investigation were terminated and there have been no changes to the programs which remain in place, we will report to the Commission the net subsidy rate from the original investigation, as amended, as contained in the Final Results of Review section of this Decision Memo. Nature of the Subsidy In the Sunset Policy Bulletin, the Department stated that, consistent with section 752(a)(6) of the Act, the Department will provide information to the Commission concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the SCM Agreement.(7) Although the programs included in our calculation of the net countervailable subsidy likely to prevail if the order were revoked do not fall within the definition of an export subsidy under Article 3.1(a) of the Subsidies Agreement, they may be subsidies described in Article 6, if the net countervailable subsidy exceeds 5 percent, as measured in accordance with Annex IV of the Subsidies Agreement. The Department, however, has no information with which to make such a calculation, nor do we believe it appropriate to attempt such a calculation in the course of a sunset review. Rather, we are providing the Commission the following program descriptions. 1. Cash Grants and Interest Subsidies under the Economic Expansion Law of 1970. The Economic Expansion Law of December 30, 1970 (the 1970 law), offers incentives to promote the establishment of new enterprises or the expansion of existing ones which contribute directly to the creation of new activities and new employment within designated development zones. 2. Government Funding of Early Retirement Pensions. The early retirement system was established as a result of the lengthy economic recession triggered by the first oil crisis. To alleviate the social hardships stemming from the recession, Collective Labor Convention ("CLC") Number 17 of the National Labor Council provided for additional allowances over and above unemployment benefits for certain laid-off workers over 60 years of age for all industries. 3. Ecological Incentives. Under the Royal Decree of April 9, 1975, firms unable to meet the requirements of the Clean Water Act of 1971 could apply for grants from the GOB to cover a portion of the investment needed to meet the requirements. 4. Assumption of Debt. a. Assumption of Debt Related to Closing of Valfil Plant. In 1984, pursuant to the Gandois Plan the Societe Nationale de Credite a l'Industrie (SNCI) provided BF1,616 million in credits to Cockerill to finance the closing of the company's Valfil plant. The Gandois Plan was a plan commissioned and adopted by the GOB in 1983 specifically to assist the Belgian steel industry. b. Assumption of Financing Costs. The GOB assumed the interest costs of Sidmar, Cockerill and Clabecq for the five-year period from 1979 through 1983. c. Forgiveness of SNCI Loans to Cockerill Sambre. According to petitioners, loans granted by the SNCI in the amount of BF14,947 million were contributed to Cockerill's capital in 1981. Because shares were apparently not issued to SNCI or any government entity for its contribution, this transaction represents debt forgiveness. 5. Debt Conversions. a. Conversion of Clabecq Debt into Ordinary and Non-Voting Shares. Pursuant to the approval of the Belgian Council of Ministers on December 30, 1983, the SNSN and Clabecq agreed to convert Clabecq debt held by SNSN to ordinary and non-voting preference shares. b. Conversion of Clabecq's Debt into Parts Beneficiaries. The Department treated these conversions of debt to parts beneficiaries as debt to equity conversions which are limited to a specific enterprise or industry or group of enterprises or industries. c. Conversion of Cockerill Sambre Debt to Equity Under the Claes Plan. Petitioners state that in June 1979, pursuant to the Claes Plan, the GOB converted BF2.051 billion in outstanding SNCI claims against Cockerill into 1,578,150 shares, for approximately BF1,300 per share. The debt conversions made to acquire the equity were on terms inconsistent with commercial considerations and were countervailable. d. Conversion of Cockerill Sambre Debt Held by FSNW into Equity. Petitioners allege that because the Gandois Plan was limited to the steel industry, the benefits of these debt-to-equity conversions are limited to a specific enterprise or industry. e. Conversion of Cockerill Debt to Equity under the Gandois Plan. According to petitioners, in 1983 the GOB forgave BF15.785 billion of SNCI debt in exchange for common shares in the company priced at BF160 per share, the average market price of Cockerill's shares traded between July and November 1983. The Department found that the GOB paid a premium for these shares and treated the premium as a non- recurring grant. 6. Equity Infusions. a. Equity Infusions for Hainaut-Sambre. Hainaut-Sambre has merged entirely with Cockerill. In Belgian Steel, this equity infusion was determined to be countervailable because the GOB paid more per share than the market price of the stock at that time and, hence, its investment was inconsistent with commercial considerations. Lacking any information on the nature of the merger between Hainaut-Sambre and Cockerill, we presume that the benefits to Hainaut-Sambre are now conferred on Cockerill as well. b. SNSN Capital for Cockerill Sambre's Liege Cold-Rolling Mill. Petitioners note that, pursuant to the Gandois Plan, SNSN purchased 26,666,666 common shares of Cockerill's stock in 1985 for BF 6 billion in order to finance an investment in Cockerill's cold-rolling facilities at Liege. SNSN purchased Cockerill's common shares at a price of BF 225 per share. The market price of the stock at that time was BF 197 per share. c. 1981 Equity Infusion into Cockerill Sambre. Petitioners claim that in 1981, the GOB decided to increase the capital of Cockerill by infusing BF11 billion in cash in exchange for equity. d. Clabecq Infusion from SOCOCLABECQ. Under the statute, a subsidy can be provided directly or indirectly by that government, or it can be required by government action. In SOCOCLABECQ's report to its general shareholders, it stated that its purchase of additional Clabecq common shares was required by the GOB as a precondition to the government's further intervention on Clabecq's behalf and was, therefore, necessary to preserve the value of SOCOCLABECQ's ownership interest in Clabecq. Therefore, we have concluded that the equity infusion made by SOCOCLABECQ was required by government action and was, in effect, provided by a government. Because this transaction was limited to a specific enterprise, we have determined it be countervailable. 7. Belgian Industrial Finance Company (Belfin) Loans. Belfin borrows money in Belgium and on international markets, with the benefit of government guarantees, in order to obtain the funds needed to make loans to Belgian companies. The government's guarantee makes it possible for Belfin to borrow at favorable interest rates and to pass the savings along when it lends the funds to Belgian companies. 8. The "Invests." Pursuant to the Belgian government's 20-point plan adopted in 1981 to restructure the steel industry, the GOB created holding companies ("INVESTS") that were financed jointly by Societe Nationale d'Investissement (SNI) and private companies. a. SidInvest On August 31, 1982, SidInvest N.V. was incorporated as a holding company jointly capitalized by SNI and Sidarfin, a subsidiary of Sidmar. b. BoelInvest In June 1983, BoelInvest was established as a holding company jointly owned by SNSN, Fabfer, and Boel. c. Clabecqlease. On March 5, 1987, Clabecqlease was incorporated as a joint holding company owned by Clabecq and SNSN. 9. SNSN Loans. These advances were provided to companies, beginning in 1981, as temporary measures in anticipation of later, more comprehensive aid. We found that, upon receipt of the later aid, the SNSN advances were "rolled" into that aid. 10. FSNW Loans. In 1989, according to petitioners, after the conversion of large amounts of FSNW loans to equity, FSNW made a new loan to Cockerill in the amount of BF158 million to finance investments in accordance with the Gandois Plan. 11. Government-Guaranteed Loans. Government loan guarantees issued pursuant to the Economic Expansion Laws of either 1959 and 1970 were received by Fabfer, Clabecq, and Sidmar on SNCI loans and, in the case of Clabecq, also on Belfin loans which were outstanding during the POI. The Department included the guarantee fee in the cost of the government loan. 12. Exemption of Corporate Income Tax for Grants Received under the 1970 Law. Under the 1970 Law, companies located in development zones are exempt from income tax on cash grants in the year in which the grant is received. Because this program is limited to specific zones, we have found the exemption to be countervailable. 13. Accelerated Depreciation. Under Article 15 of the 1970 Law, companies located in development zones may take twice the normal straight-line depreciation on assets acquired in part by grants received under this law. Because this benefit is limited to companies located in development zones, we have determined it to be countervailable. 14. Exemption from Real Estate Taxes. Assets acquired through investments financed in part under the 1970 Law may be exempted from real estate tax for up to five years, depending on the extent to which objectives of the 1970 Law are achieved. The exemption is provided for under Article 16 of the 1970 Law and is restricted to firms located in development zones. 15. Exemption from the Capital Registration Tax. A capital registration tax is assessed at the time capital is formally registered with a company. Under the 1970 Law, companies located in development zones may be exempted from the one percent capital registration tax. 16. ECSC Article 54 Loans and Loan Guarantees. Article 54 industrial investment loans are provided for the purpose of purchasing new equipment or financing modernization. The Department confirmed that Article 54 loans are direct loans from the Commission and that the funds are loaned at a slightly higher rate than that at which the Commission obtained them in order to cover its costs. These loans are only available to the steel and coal industries and are, therefore, limited. Thus, these loans are countervailable to the extent that they are provided on terms inconsistent with commercial considerations. 17. ECSC Redeployment Aid. Under Article 56 (2)(b) of the ECSC Treaty, individuals employed in the coal and steel industry who lose their jobs may receive assistance for social adjustment. This assistance is provided for workers affected by restructuring measures, particularly as workers withdraw from the labor market into early retirement or are forced into unemployment. 18. European Social Fund. The ESF program is funded from the EC General Budget, the revenues for which are derived from customs duties, agricultural levies, Member State contributions, etc. The ESF is one part of the EC's Structural Funds. It is primarily responsible for two out of the five objectives of the Structural Funds. These two objectives relate to combating long-term unemployment and facilitating the occupational integration of young people. 19. Water Purification Subsidies. Since Sidmar did not provide information regarding the authority under which the company received these benefits, as best information available ("BIA") we have treated these water purification subsidies as if they were provided under the Ecological Incentives program noted above. 20. SNCI Loans The SNCI is a public credit institution which, through medium- and long-term financing, encourages the development and growth of industrial and commercial enterprises in Belgium, including the national industries. Final Results of Review We determine that revocation of the countervailing duty order on CTL plate from Belgium would be likely to lead to continuation or recurrence of a countervailable subsidy. The net countervailable subsidy likely to prevail if the order were revoked is 23.15 percent ad valorem for Cockerill, 1.05 percent ad valorem for Fafer, and 5.92 percent ad valorem for "all others." Recommendation Based on our analysis of the substantive response received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review in the Federal Register. AGREE ____ DISAGREE____ Joseph A. Spetrini Acting Assistant Secretary for Import Administration (Date) _______________________________________________________________ Footnotes: 1. See Amended Final Affirmative Countervailing Duty Determinations; Certain Carbon Steel Products from Belgium, 62 FR 37880 (July 15, 1997). 2. See Cut-to-Length Carbon Steel Plate from Belgium; Final Results of Countervailing Duty Administrative Review, 64 FR 12982 (March 16, 1999). 3. See Cut-to-Length Carbon Steel Plate from Belgium; Amended Final Results of Countervailing Duty Administrative Review, 64 FR 18001 (April 13, 1999). 4. See memo to Jeffrey A. May concerning adequacy, dated October 21, 1999 on file in the Central Records Unit, Room B-099 in the main Commerce building. 5. On September 20, 1999, the Department received a request from the domestic interested parties for a nine working-day extension of the deadline for filing rebuttal comments in this sunset review. We granted an extension of seven working days. This extension was granted for all participants eligible to file rebuttal comments in this review. The deadline for filing rebuttals to the substantive comments therefore became October 15, 1999. 6. See Extension of Time Limit for Preliminary Results of Full Five- Year Reviews, 64 FR 71726 (December 22, 1999). 7. We note that as of January 1, 2000, Article 6.1 has ceased to apply (see Article 31of the Subsidies Agreement).