66 FR 45007, August 27, 2001 C-423-809 ARP 09/04/98 - 12/31/99 Public Document I/1: M. Miller x0116 MEMORANDUM TO: Joseph A. Spetrini Acting Assistant Secretary for Import Administration FROM: Susan Kuhbach Acting Deputy Assistant Secretary, Group I Import Administration SUBJECT: Issues and Decision Memorandum: Final Results of the First Countervailing Duty Administrative Review of Stainless Steel Plate in Coils from Belgium ---------------------------------------------------------------------- SUMMARY We have analyzed the comments in the case and rebuttal briefs submitted by interested parties in the first countervailing duty administrative review of stainless steel plate in coils from Belgium. The "Methodology and Background Information" and "Analysis of Programs" sections below describe the decisions made in this review. Also below is the "Analysis of Comments" section that contains the Department's response to the issues raised in the case and rebuttal briefs. We recommend that you approve the positions we have developed in this memorandum. METHODOLOGY AND BACKGROUND INFORMATION Subsidies Valuation Information Responding Producers In the Preliminary Results, (1) consistent with Plate in Coils from Belgium, (2) we found that ALZ N.V. ("ALZ"), the respondent in this proceeding, had two subsidiaries which were involved in the production of the subject merchandise, ALBUFIN N.V. ("Albufin") and AL-FIN N.V. ("Alfin"). ALZ has reported in the instant review that, as of the end of 1998, Albufin was merged into ALZ and no longer exists as a separate entity. We have included subsidies to these companies in the subsidy rate for ALZ for the period of review ("POR"). Furthermore, the SIDMAR Group ("Sidmar") owns either directly or indirectly 100 percent of ALZ's voting shares and is the overall majority shareholder of ALZ. Therefore, in accordance with section 351.525(b)(6)(iii) of the Department of Commerce's ("the Department") regulations, (3) because ALZ is a fully consolidated subsidiary of Sidmar, any untied subsidies provided to Sidmar are attributable to ALZ. No interested party has objected to this methodology or commented on this issue in the case or rebuttal briefs. Our methodology for determining the appropriate responding producers, therefore, has not changed in these final results. Benchmarks for Long-term Loans and Discount Rates Both ALZ and Sidmar obtained long-term commercial loans contemporaneously with the receipt of certain government loans or grants that are under review. Therefore, for those years in which ALZ or Sidmar obtained long- term commercial loans, we used the company-specific interest rate as the long-term loan benchmark interest rate or discount rate. See section 351.505(a)(2)(ii) of the Department's regulations. For years in which ALZ and Sidmar did not have such commercial loans, we used national average rates for long-term, fixed-rate debt as the long-term loan benchmark interest rate or discount rate. See section 351.505(a)(3)(ii) of the Department's regulations. No interested party has objected to this methodology or commented on this issue in the case or rebuttal briefs. Our benchmark interest rates, therefore, have not changed in these final results. Equity Methodology Section 771(5)(E)(i) of the Act, (4) and section 351.507(a)(1) of the Department's regulations state that, in the case of a government-provided equity infusion, a benefit is conferred if an equity investment decision is inconsistent with the usual investment practice of private investors. Consistent with the methodology discussed in section 351.507 of the Department's regulations, the first question in analyzing a benefit with respect to an equity infusion is whether, at the time of the infusion, there was a market price for similar newly-issued equity. If so, the Department will consider an equity infusion to be inconsistent with the usual investment practice of private investors if the price paid by the government for newly-issued shares is greater than the price paid by private investors for the same, or similar, newly-issued shares. If actual private investor prices are not available, then the Department will determine whether the firm funded by the government-provided infusion was equityworthy at the time of the equity infusion (see section 351.507(a)(3)(i) of the Department's regulations). Section 351.507(a)(4)(ii) of the Department's regulations further stipulates that the Department will "normally require from the respondents the information and analysis completed prior to the infusion, upon which the government based its decision to provide the equity infusion." Absent an analysis containing information typically examined by potential private investors considering an equity investment, the Department will normally determine that the equity infusion provides a countervailable benefit. This is because, before making a significant equity infusion, it is the usual investment practice of private investors to evaluate the potential risk versus the expected return, using the most objective criteria and information available. In this review, the Department is examining three government equity infusions (1984 Purchase of Sidmar's Common and Preference Shares, 1985 ALZ Share Subscriptions, and Sidmar's Debt to Equity (OCPC-to-PB) Conversion in 1985). See the individual program descriptions and the "Analysis of Comments" section, below, for discussions relating to the Government of Belgium ("GOB") equity infusions. Allocation Period In Plate in Coils from Belgium, in accordance with a Court of International Trade ("CIT") decision, we calculated company-specific allocation periods for non-recurring subsidies using company-specific average useful life ("AUL") data. See British Steel plc v. United States, 929 F. Supp. 426, 439 (CIT 1996). We determined that the AUL for ALZ was 15 years, and that the AUL for Sidmar was 19 years. Since Plate in Coils from Belgium, the Department has adopted new countervailing duty ("CVD") regulations which are applicable to this review. (5) Pursuant to section 351.524(d)(2) of these regulations, the Department will presume the allocation period for non-recurring subsidies to be the AUL of renewable physical assets of the relevant industry as listed in the Internal Revenue Service's 1977 Class Life Asset Depreciation Range System, as updated by the Department of Treasury ("IRS tables") unless a party claims and establishes that the IRS tables do not reasonably reflect the company-specific AUL or the country-wide AUL for the industry. In this case, the AUL in the IRS tables is 15 years. With respect to non-recurring subsidies received prior to the POR which had already been countervailed and allocated based on an allocation period established in Plate in Coils from Belgium, in the Preliminary Results, we determined that it was neither reasonable nor practicable to reallocate those subsidies over a different time period. Therefore, we allocated non- recurring subsidies countervailed in Plate in Coils from Belgium over 15 years for ALZ and over 19 years for Sidmar. As noted in the Preliminary Results, this methodology is consistent with our approach in Certain Carbon Steel Products from Sweden; Final Results of Countervailing Duty Administrative Review, 62 FR 16549 (April 7, 1997) and Certain Pasta from Italy: Final Results of Third Countervailing Duty Administrative Review, 66 FR 11269 (February 23, 2001). For non-recurring subsidies received by ALZ which are being allocated for the first time in this review, we are using a 15-year allocation period. We are using this period because no party rebutted the presumption in favor of the 15-year period from the IRS tables. For Sidmar's subsidies which are being allocated for the first time in this review, we used a 19- year AUL for the purposes of the preliminary results. However, we invited parties to comment on this issue. As discussed in detail in Comment 2 in the "Analysis of Comments" section, below, the parties to this proceeding presented several arguments in response to our request. We have determined, as explained below, that the 15-year AUL set forth in the IRS tables is the most appropriate AUL to use for subsidies received by Sidmar. Therefore, we are using the 15-year AUL from the IRS tables to allocate non-recurring subsidies received by Sidmar which have not been previously allocated. ANALYSIS OF PROGRAMS I. Programs Determined to Confer Subsidies A. 1985 ALZ Share Subscriptions In 1985, the GOB made three share subscriptions (one subscription for ordinary shares and two for preference shares) in ALZ. These purchases followed Royal Decree No. 245 of December 31, 1983, which authorized the GOB to make preference share subscriptions in the steel industry as long as the subscriptions did not exceed one-half of the social capital of the company. In the Preliminary Results, we found that these share purchases conferred a countervailable subsidy on the subject merchandise during the POR. As noted below in the "Analysis of Comments" section, for these final results, we continue to find that this equity infusion confers a countervailable subsidy. ALZ's net subsidies for this program have not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.69 percent ad valorem, and the countervailable subsidy for 1999 is 0.62 percent ad valorem. B. 1987 ALZ Common Share Transaction Between the GOB and Sidmar In 1987, the GOB sold the common shares it had purchased in 1985 to Kempense Investeringsvennootschap, a company controlled by Sidmar. ALZ benefitted from the GOB's 1987 sale of ALZ's common shares to Sidmar during the POR. In the Preliminary Results, we found that this transaction conferred a countervailable subsidy on the subject merchandise during the POR. We received no comments on this, and our calculations of ALZ's net subsidies for this program have not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.07 percent ad valorem, and the countervailable subsidy for 1999 is 0.07 percent ad valorem. C. Industrial Reconversion Zones 1. Alfin Alfin was established as a "proper" reconversion company in 1985 under the reconversion program "Herstelwet 1984." Alfin was financed by a government agency, Nationale Investeringsmaatschappij ("NIM"), and ALZ. In exchange for its investment, NIM received non-voting preferred shares in Alfin and a two percent annual return on its investment. ALZ was obligated to repurchase all of the shares purchased by NIM at the issued price over a ten-year period. In the Preliminary Results, we found that this program conferred a countervailable subsidy on the subject merchandise during the POR. We received no comments on this, and our calculation of ALZ's net subsidy for this program has not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.17 percent ad valorem. Because the allocation period for this subsidy ended in 1998, this program did not confer a countervailable subsidy in 1999. 2. Albufin Albufin (which merged into ALZ on November 1, 1998) was established as an "improper" reconversion company in 1989, also under the reconversion program "Herstelwet 1984." Albufin received its initial capital from the government (NIM), the Sidmar Group (FININDUS), a private company (Klockner Stahl), and ALZ. In Plate in Coils from Belgium, we found that, as an "improper" reconversion company, Albufin/ALZ benefitted from a tax exemption on dividend payments and was exempt from the capital registration tax. Albufin/ALZ received these tax benefits during the POR. In the Preliminary Results, we found this program conferred a countervailable subsidy on the subject merchandise. We received no comments on this, and our calculations of ALZ's net subsidies for this program have not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.05 percent ad valorem, and the countervailable subsidy for 1999 is 0.03 percent ad valorem. D. Regional Subsidies under the Economic Expansion Law of 1970 1. Expansion Real Estate Tax Exemption Pursuant to Article 16 of the 1970 Law, assets acquired using benefits received under the 1970 Law may be exempted from real estate taxes for up to five years, depending on the extent to which objectives of the 1970 Law are achieved. Albufin/ALZ utilized this tax exemption during part of the POR. In the Preliminary Results, we found that this program conferred a countervailable subsidy on the subject merchandise. We received no comments on this, and our calculation of ALZ's net subsidy for this program has not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.10 percent ad valorem. This tax benefit expired for Albufin/ALZ in 1998. Therefore, this program did not confer a countervailable subsidy in 1999 upon ALZ. 2. Accelerated Depreciation Article 15 of the 1970 Law allows certain companies to declare twice the standard depreciation for assets acquired using grants bestowed under the law. In the Preliminary Results, we found that this tax benefit conferred a countervailable subsidy on the subject merchandise during the POR. We received no comments on this, and our calculation of ALZ's net subsidy for this program has not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.06 percent ad valorem. We did not find ALZ's use of accelerated depreciation to confer a countervailable benefit in 1999 as ALZ was in a tax loss position. E. Belgian Industrial Finance Company ("Belfin") Loans Belfin was established by Royal Decree on June 29, 1981, as a mixed corporation with 50 percent GOB participation and 50 percent private industry participation. 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. ALZ had Belfin loans outstanding during 1998. In the Preliminary Results, we found that this program conferred a countervailable subsidy on the subject merchandise. We received no comments on this, and our calculation of ALZ's net subsidy for this program has not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.00 percent ad valorem. The Belfin loan to ALZ was repaid in 1998. Therefore, this loan did not confer a countervailable subsidy on ALZ in 1999. F. Societe Nationale de Credite a l'Industrie ("SNCI") Loans SNCI was a public credit institution, which, through medium-term and long- term financing, encouraged the development and growth of industrial and commercial enterprises in Belgium. SNCI was organized as a limited liability company and, until 1997, was 50 percent owned by the Belgian government. ALZ received investment loans from SNCI which were outstanding during the POR. In the Preliminary Results, we found that this program conferred a countervailable subsidy on the subject merchandise during the POR. We received no comments on this, and our calculations of ALZ's net subsidies for this program have not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.04 percent ad valorem, and the countervailable subsidy for 1999 is 0.01 percent ad valorem. G. Subsidies Provided to Sidmar that are Attributable to ALZ 1. 1984 Purchase of Sidmar's Common and Preference Shares In 1984, the GOB made two share subscriptions (one for preference shares and the other for common shares) in Sidmar. The purchase of preference shares was authorized by Royal Decree 245 of December 31, 1983. This Royal Decree allowed the GOB to make preference share subscriptions in the steel industry as long as the subscriptions did not exceed one-half of the social capital of the company. In the Preliminary Results, we found that this program conferred a countervailable subsidy on the subject merchandise. ALZ, as part of the Sidmar Group, benefitted from this program during the POR. As discussed in the "Analysis of Comments" section, we continue to determine that these 1984 share subscriptions confer a countervailable benefit. However, the amount of the subsidy has changed due to the revised AUL we are using to allocate the benefits of this subsidy. Therefore, for the final results, the countervailable subsidy for 1998 is 1.00 percent ad valorem. Because the allocation period for this subsidy ended in 1998, there is no benefit to ALZ from this equity infusion in 1999. 2. Conversion of Sidmar's Debt to Equity (OCPC-to-PB) in 1985 Between 1979 and 1983, the GOB assumed the interest costs associated with medium- and long-term loans for certain steel producers, including Sidmar. In exchange for the GOB's assumption of financing costs, Sidmar agreed to the conditional issuance of convertible profit sharing bonds ("OCPCs") to the GOB. In 1985, Sidmar and the GOB agreed to substitute parts beneficiaires ("PBs") for the OCPCs. In Plate in Coils from Belgium, we found a portion of this equity infusion to be countervailable. In the Preliminary Results, after a re-examination of this program in light of the equity methodology effected by our new regulations, we found the remaining amount of the equity infusion to also be countervailable. As discussed below in the "Analysis of Comments" section, we continue to determine that this transaction confers a countervailable benefit. However, the amount of the subsidies has changed due to the revised AUL we are using to allocate the benefits of this subsidy. Therefore, for the final results, the countervailable subsidy for 1998 is 0.67 percent ad valorem, and the countervailable subsidy for 1999 is 0.65 percent ad valorem. 3. SidInvest SidInvest was incorporated on August 31, 1982, as a holding company jointly owned by Sidmar and the Societe Nationale d'Investissement, S.A. ("SNI") (a government financing agency). SidInvest was given drawing rights on SNI to finance specific projects. The drawing rights took the form of conditional refundable advances ("CRAs"), which were interest- free, but repayable to SNI based on a company's profitability. SidInvest made periodic repayments of the CRAs it had drawn from SNI. However, in 1987, the GOB moved to accelerate the repayment of the CRAs. Later, in July 1988, an agreement was reached for Nationale Maatschappig voor de Herstructurering van de Nationale Sectoren ("NMNS") (another government agency) to become a shareholder in SidInvest by contributing the CRAs owed to the government by SidInvest in exchange for SidInvest stock. The Sidmar Group then repurchased the SidInvest shares obtained by NMNS. ALZ, through Sidmar, benefitted from these transactions during the POR. In the Preliminary Results, we found that this transaction conferred a countervailable subsidy on the subject merchandise during the POR. We received no comments on this and our calculations of ALZ's net subsidies for this program have not changed from the Preliminary Results. The countervailable subsidy for 1998 is 0.40 percent ad valorem, and the countervailable subsidy for 1999 is 0.40 percent ad valorem. II. Programs Determined to Be Not Used During the POR We examined the following programs and determine that ALZ did not apply for or receive benefits under these programs during the POR: A. Government of Belgium Programs 1. Subsidies Provided to Sidmar that are Potentially Attributable to ALZ Water Purification Grants 2. Societe Nationale pour la Reconstruction des Secteurs Nationaux 3. Regional subsidies under the 1970 Law Investment and Interest Subsidies 4. Reduced Social Security Contributions Pursuant to the Maribel Scheme (Article 35 of the Law of June 29, 1981) B. Government of Flanders Programs 1. Regional subsidies under the 1970 Law a. Corporate Income Tax Exemption b. Capital Registration Tax Exemption c. Government Loan Guarantees d. 1993 Expansion Grant 2. Special Depreciation Allowance 3. Preferential Short-Term Export Credit 4. Interest Rate Rebates C. Programs of the European Commission 1. ECSC Article 54 Loans and Interest Rebates 2. ECSC Article 56 Conversion Loans, Interest Rebates and Redeployment Aid 3. European Social Fund Grants 4. European Regional Development Fund Grants 5. Resider II Program ANALYSIS OF COMMENTS Comment 1: GOB Equity Infusions ALZ and the GOB first argue that the Department did not properly address the issue of whether a benefit was conferred on the recipients of the GOB equity infusions (i.e. the 1984 Purchase of Sidmar's Common and Preference Shares, 1985 ALZ Share Subscriptions, and Sidmar's Debt to Equity (OCPC-to- PB) Conversion in 1985). Specifically, ALZ and the GOB argue that, according to section 771(5)(E)(i) of the Act, a benefit exists in the case of an equity infusion if the investment decision is inconsistent with the usual investment practice of private investors. ALZ and the GOB contend that, according to U.S. law and the WTO Agreement on Subsidies and Countervailing Measures ("ASCM"), a benefit exists when a recipient is better off than it would have been in the commercial marketplace. (See also, section 351.503(b) of the Department's regulations.) Thus, ALZ and the GOB argue that in order to determine whether a benefit exists, a comparison must be made to the marketplace to determine if the recipient is better off financially than it would have been absent the government financial contribution. ALZ and the GOB contend that the Department did not conduct such a comparison in its analysis. Additionally, ALZ and the GOB argue that, in making its preliminary determination with respect to these equity infusions, the Department did not consider all of the information on the record of this proceeding. Specifically, ALZ and the GOB argue that, in making its determinations, the Department relied only on analyses performed in conjunction with the government's decisions to invest. ALZ and the GOB contend that the Department did not consider the financial health of either Sidmar or ALZ, and did not consider whether ALZ or Sidmar showed an ability to generate a reasonable rate of return within a reasonable time as required by section 351.507(a)(4)(i) of the Department's regulations. ALZ contends that the Department ignored the fact that both Sidmar and ALZ were in sound financial health at the time the equity infusions were made, and that both showed an ability to generate a reasonable rate of return within a reasonable time. The GOB further argues that, by focusing only on the analyses performed in connection with these investments, the Department is making an irrebuttable presumption that all private investors conduct such objective studies prior to making an investment. The GOB contends that the Department is also making a presumption about what should be included in these studies which is not identified anywhere in the Department's regulations, but mentioned only in the preamble to the Department's regulations. The GOB concludes that there is no evidence that private investors actually even conduct these types of studies. Finally, ALZ and the GOB argue that for both Sidmar and ALZ, objective analyses of the investments were prepared prior to the government's decision to invest. With respect to the 1984 Purchase of Sidmar's Common and Preference Shares, ALZ and the GOB argue that the clear commitment to invest in Sidmar was not made until the shares were actually subscribed, and that the decision to invest was subject to the outcome of the negotiations. As for the 1985 ALZ Share Subscriptions and Sidmar's Debt to Equity (OCPC-to-PB) Conversion in 1985, ALZ and the GOB note that the Department has before it the same information that it examined in Stainless Steel Plate in Coils. ALZ and the GOB argue that, with respect to these two infusions, the Department arbitrarily reversed its decision in Stainless Steel Plate in Coils without any new information or evidence on the record which would contradict the Department's previous findings. Moreover, with respect to the ALZ study, ALZ notes that, in Stainless Steel Plate in Coils, the Department stated that the methodology used in those studies was consistent with the actions of a private investor. The petitioners disagree with ALZ and the GOB. The petitioners first argue that ALZ and the GOB mischaracterize the standard for measuring a benefit for an equity infusion. The petitioners state that the methodology for measuring a benefit from an equity infusion is clearly spelled out in the Department's regulations at section 351.507. The methods that ALZ and the GOB argue should be used apply only to subsidies for which no specific rule has been laid out for measuring the benefit of a subsidy, according to the petitioners. The petitioners then argue that the Department considered all relevant information on the record of this proceeding in making its equity benefit determinations. The petitioners point out that, according to section 351.507(a)(4)(ii) of the Department's regulations, absent the existence or provision of an objective analysis performed prior to an equity infusion that contains information typically considered by potential private investors considering an equity investment, the Department will normally find that an investment was inconsistent with the usual investment practice of private investors and, thus, provides a countervailable benefit. Thus, the petitioners point out, because the Department properly determined that there were no appropriate objective studies conducted prior to the government's investments into ALZ and Sidmar, no further analysis of any of the other factors or information is needed. Even if the Department were to consider other information on the record, the petitioners argue, ALZ has not proven that ALZ and Sidmar were financially sound at the time these investments or that either of these companies would have been profitable options when compared to alternative investment opportunities. The petitioners finally argue that the Department was correct in determining that the GOB decided to invest in Sidmar and ALZ without the benefit of objective studies completed prior to the equity infusions into these companies. Moreover, the petitioners contend, even if the studies had been prepared before the decisions to invest were made, there is no information on the record showing that these studies contained information typically considered by private investors. The petitioners contend that the arguments put forth by ALZ and the GOB that the Department arbitrarily changed determinations it made in Stainless Steel Plate in Coils fail to recognize that the instant proceeding is being conducted according to the Department's new CVD regulations, which contain a more exacting standard for examining equity infusions. The petitioners contend that the Department has clearly explained its change in position with respect to the countervailability of these equity infusions. Department's Position: We disagree with the GOB and ALZ that we did not apply the correct benefit analysis to these equity infusions. Pursuant to section 351.503(a) of our regulations, we are directed to apply the specific rule for calculating benefit when a specific rule exists. In the case of equity purchases by a government, a specific rule exists in section 351.507(a)(1) of our regulations. The rule states that "in the case of a government-provided equity infusion, a benefit exists to the extent that the investment decision is inconsistent with the usual investment practice of private investors, including the practice regarding the provision of risk capital, in the country in which the equity infusion is made." The regulation continues by describing those situations where the Department will find that the government's provision of equity is "inconsistent with the usual investment practice of private investors. . ." One of the situations is identified in section 351.507(a)(4)(ii): "Absent the existence. . .of an objective analysis, containing information typically examined by potential private investors considering an equity investment, the Secretary will normally determine that the equity infusion received provides a countervailable benefit within the meaning of paragraph (a)(1) of this section." Therefore, in the absence of such an objective analysis, the Department will determine that the company receiving the government's equity infusion is receiving a benefit in the amount of the infusion. While we believe that this regulation is consistent with the notion that a benefit exists when the recipient is better off than it would have been in the commercial market place, the regulation (and section 771(5)(E)(1) of the Act) point us towards considering what a reasonable private investor would do. Where a reasonable private investor is purchasing equity, we believe that investor would seek information about expected returns and evaluate that information before making the decision to invest. That is the premise of section 351.503(a)(4)(ii) of our regulations. Consequently, where there is no evidence that a government has sought this type of information prior to deciding to invest, we will normally find that the government is not acting in accordance with "the usual investment practice of private investors." This is not, as the GOB claims, an irrebuttable presumption. Section 351.307(a)(4)(ii) of the Department's regulations makes clear that "(t)he Secretary will not necessarily make such a determination (i.e., that a benefit exists) if the absence of an objective analysis is consistent with the actions of reasonable private investors in the country in question." Neither the GOB nor ALZ has provided any evidence that private investors in Belgium would not seek information and analysis of potential investments. Regarding the GOB's claim that the Department presumes the types of information that would be included in a private investor's analysis, we do, in the preamble to the regulation, identify the elements that we believe a private investor would consider. These include the expected return on the investment and risk or likelihood of achieving that return. This discussion in the preamble to the regulation is meant to elaborate on the types of information and analysis we would expect to see in an objective analysis of an investment offer. However, we would also consider arguments that other types of information and analysis might also be relevant in such objective analyses. We agree with the GOB and ALZ that we did not analyze the financial health of Sidmar or ALZ at the time of the infusions. As noted above, where there is no evidence that the investing government has relied on an objective analysis in deciding to make its investment, then we normally will conclude on that basis alone that the government is not following the usual investment practice of private investors. However, where timely information and objective analysis have been obtained by the government, then we will examine the information and analysis along with other indicia of the recipient company's financial health. (See section 351.507(a)(4)(i) of the Department's regulations.) Finally, we disagree with ALZ and the GOB that a pre-decisional objective analyses containing sufficient relevant information was prepared prior to the government's decision to invest in Sidmar in the 1984 Purchase of Sidmar's Common and Preference Shares. As discussed in detail in the Final Results Equity Infusion Memorandum, (6) we have determined that the analyses submitted by ALZ in support of the 1984 Purchase of Sidmar's Common and Preference Shares did not provide the type of information that would be used by a private investor. Thus, we continue to determine that no sufficient pre-decisional objective analyses was prepared prior to the GOB's decision to invest in Sidmar in the 1984 Purchase of Sidmar's Common and Preference Shares. We also disagree with ALZ and the GOB that the Department arbitrarily changed its position from its determination in Stainless Steel Plate in Coils with respect to the 1985 ALZ Share Subscriptions and Sidmar's Debt to Equity (OCPC-to-PB) Conversion in 1985. In Stainless Steel Plate in Coils, we analyzed whether the GOB's 1985 share purchases conferred a benefit on ALZ and Sidmar according to the equity methodology that was in place prior to the issuance of the Department's current subsidy regulations. However, as noted in the Preliminary Results and the Final Results Equity Infusion Memorandum, in the instant review, we re-examined these equity infusions using the methodology required by our new CVD regulations as explained in the "Equity Methodology" section, above. Under the new CVD regulations, the Department places a greater emphasis on the objective analysis relied upon in making its decision to invest then we did in our prior practice. (See the General Issues Appendix to the Final Affirmative Countervailing Duty Determination: Certain Steel Products from Austria, 58 FR 37217, 37244 (July 9, 1993), in which we state that "we tend to place greater emphasis on past indicators as they are known with certainty and provide a clear track record of the company's performance, unlike studies of future expected performance which necessarily involve assumptions and speculation.") In the case of the 1985 ALZ Share Subscriptions, the Department found that no objective study was prepared prior to the government's decision to invest in ALZ. See Final Results Equity Infusion Memorandum. Therefore, unlike Stainless Steel Plate in Coils, we did not consider the ALZ study on the record because it was completed after the GOB's decision to invest in ALZ was made. As for Sidmar's Debt to Equity (OCPC-to-PB) Conversion in 1985, we found the entire amount of the infusion to be countervailable because no study containing information that would be examined by a potential private investor was examined by the GOB prior to participating in this 1985 conversion. See Preliminary Results Equity Infusions Memorandum. (7) Comment 2: Average Useful Life for Non-recurring Subsidies Benefitting Sidmar Which Have Not Been Previously Allocated ALZ argues that, for non-recurring subsidies provided to Sidmar which have not been previously allocated, the Department should use the AUL listed in the IRS tables. ALZ points out that the Department's regulations contain a rebuttable presumption that, unless a party can prove that a country-wide or a company-specific AUL is more appropriate, then the AUL from the IRS tables (15 years in this case) should be used. ALZ contends that, because the petitioners in this case have not established that the 15-year AUL period set forth in the IRS tables does not reasonably reflect the Sidmar Group AUL, the presumptive period in the IRS tables should apply. ALZ further argues that, although the Department relied on a company- specific AUL for Sidmar N.V. in Plate in Coils from Belgium as the AUL for the Sidmar Group, the Department practice that was in effect at that time was to use company-specific data. ALZ argues that, in the instant review, the Department is operating under new regulations which specify a preference for the use of IRS AUL data. Moreover, in this review, as in Plate in Coils from Belgium, ALZ states that no data is available to calculate a Sidmar Group-specific AUL, and that a Sidmar Group AUL cannot be calculated. Instead, the only available data is for Sidmar N.V., which is only one part of the overall Sidmar Group. ALZ argues that it is inappropriate to use the Sidmar N.V. AUL data because it is not based on the complete data for the Sidmar Group. ALZ further argues that, even if the Sidmar N.V. data were to be used, it yields different AULs for different periods and is, thus, distortive. Moreover, there is no evidence that the Sidmar N.V. AUL data is any more reflective of the appropriate Sidmar Group AUL than is the AUL of any other Sidmar Group company, such as ALZ. The petitioners disagree with ALZ, arguing that Sidmar N.V.'s company- specific AUL should be utilized as the AUL for non-recurring subsidies which have not been previously allocated. The petitioners argue that, although the Department's regulations state that the IRS AUL should be used unless it is rebutted, the use of the IRS tables in this situation has been rebutted. The petitioners point out that the 19-year AUL used for Sidmar in the Preliminary Results, which was verified and used by the Department in Plate in Coils from Belgium, differs by significantly more than one year from the 15-year IRS AUL. Moreover, the petitioners argue that the revised 21-year Sidmar N.V. AUL that was reported by ALZ on the record of this proceeding further rebuts the presumption that the IRS AUL should be used in this review. The petitioners also disagree that the Sidmar N.V. AUL information itself is inappropriate. The petitioners point out that the Department found the Sidmar N.V. AUL information to be an appropriate alternative to utilize in Plate in Coils from Belgium. Additionally, the petitioners argue that there is no evidence on the record indicating that the Sidmar N.V. data is not representative of the other entities in the Sidmar Group, and, moreover, that it is the only Sidmar-specific information on the record. Moreover, the petitioners note that ALZ itself argued that the Sidmar N.V. information should be used in Plate in Coils from Belgium, even if that had been conducted under the Department's new countervailing duty regulations. Finally, the petitioners argue that any inconsistencies with Sidmar N.V.'s data over different periods is merely reflective of likely additions or retirements of assets on a regular basis and should not be sufficient to render Sidmar N.V.'s AUL data aberrational. Department's Position: We agree with ALZ. As noted above in the "Allocation Period" section, the Department's new CVD regulations at 351.524(d)(2) state that the Department will presume the allocation period for non-recurring subsidies to be the AUL listed in the IRS tables unless a party claims and establishes that the IRS tables do not reasonably reflect the company- specific AUL. The petitioners claim that they have rebutted the presumption of the use of the IRS tables because Sidmar N.V.'s AUL of 19 years (or 21 years, as recalculated by ALZ on the record of this review) differs from the IRS table AUL by more than one year as required by the Department's regulations at 351.524(d)(2)(ii). Although the Department used the AUL of Sidmar N.V. as the most appropriate company-specific AUL in Stainless Steel Plate in Coils pursuant to the Department's old methodology, which called for the use of a company-specific AUL, under the Department's new CVD regulations, we presume that the IRS tables' AUL will be used to allocate non-recurring subsidies unless a party establishes that the IRS tables do not reasonably reflect the company-specific AUL. In this instance, as the Department verified in Stainless Steel Plate in Coils, ALZ was unable to calculate a company-specific AUL for the Sidmar Group, the entity that received and, as a whole, benefitted from the applicable financial contributions. Thus, there is no company-specific AUL for the Sidmar Group which can be used to rebut the presumption to use the IRS tables. Although the petitioners argue that the Sidmar N.V. AUL should be considered as being representative of the Sidmar Group AUL and should be used to rebut the presumption of the use of the IRS tables, the Department's regulations contain no provision for using a proxy company- specific AUL when rebutting the presumptive IRS tables' AUL. Moreover, the petitioners' argument does not take into account that, although Sidmar N.V. is one subsidiary of the Sidmar Group, ALZ is also a subsidiary of the Sidmar Group. In Stainless Steel Plate in Coils, we calculated a company-specific AUL for ALZ of 15 years, identical to the AUL from the IRS tables. There is no information on record indicating that Sidmar N.V.'s AUL is any more representative of the Sidmar Group's AUL than is ALZ's company-specific AUL. For the reasons above, we determine that the petitioners have not sufficiently rebutted the presumption to use the IRS tables. Thus, we are using the 15-year AUL from the IRS tables to allocate non-recurring subsidies that benefitted the Sidmar Group which have not been previously allocated. Comment 3: Reduced Social Security Contributions Pursuant to the Maribel Scheme The petitioners argue that the Department should countervail benefits received under the Maribel scheme because record evidence does not sufficiently establish these programs as terminated or fully repaid. Specifically, the petitioners allege that the GOB has failed to provide any documentation establishing the claimed July 1, 1997 termination of the Maribel program. Furthermore, the petitioners assert that, from information on the record, it is unclear whether all of the benefits provided to ALZ and Sidmar under Maribel have been repaid and, in fact, record evidence indicates that employers were only required to repay a portion of the benefits received under the program. Finally, the petitioners argue that the Department's regulations do not specifically list reduced social security contributions as a type of recurring benefit and any finding that Maribel provided recurring benefits is not adequately supported by record evidence. ALZ counters that record evidence supports its claim that the Maribel scheme was terminated and the funds were repaid. First, ALZ contends that the Maribel scheme meets the definition of a recurring benefit inasmuch as it is a "direct tax exemption and deduction" under section 351.524(c)(1) of the Department's regulations and otherwise meets the definition of a recurring benefit under section 351.524(c)(2) of the Department's regulations. Furthermore, ALZ notes that, in response to an EU judicial decision finding that Maribel Bis and Ter violated the E.C. Treaty, the GOB issued the Royal Decree of December 24, 1999, which ordered companies to pay the GOB the difference between what the companies received under Maribel Bis and Ter and what they would have otherwise received under the basic Maribel program. ALZ notes that ALZ's and Sidmar's annual statements reflect the repayment of Maribel Bis and Ter liabilities, and that, on Mary 2, 2001, ALZ provided proof of repayment. Thus, ALZ contends that it did not receive benefits under the Maribel scheme during the POR. Department's Position: We agree with ALZ and, for these final results, continue to find that ALZ did not benefit from the Maribel scheme during the POR. Under Article 35 of the Law of June 29, 1981 (called the "Maribel scheme"), companies in Belgium that employed manual workers were granted a reduction in social security contributions for each manual worker. This law was amended several times to allow even smaller contributions for companies employing manual laborers in certain industries. A 1993 Royal Decree introduced the "Maribel Bis" scheme, which reduced contributions for companies employing manual workers in processing industries most exposed to internal competition. The 1994 Royal Decrees, which introduced the "Maribel Ter" scheme, reduced contributions for companies employing manual workers in sectors most exposed to international competition, as well as the international transportation, horticulture, forestry, and the exploitation of forestry sectors. In the Preliminary Results, we preliminarily found that ALZ did not apply for or receive benefits during the POR under the Maribel scheme. See Preliminary Results, 66 FR at 20433. However, we stated that, prior to reaching our final results, we would seek further information from the GOB and ALZ regarding the termination of the Maribel Bis and Ter schemes, or repayment of any benefits received by ALZ under these programs. We issued a questionnaire to ALZ on April 25, 2001, requesting such information. ALZ filed a response on May 3, 2001. As we stated in the Preliminary Results, the Department normally treats reduced social security contributions, such as those under the Maribel scheme, as recurring benefits under section 351.524(c) of the Department's regulations. Accordingly, we must determine whether ALZ received any benefits under the Maribel scheme during the POR. The GOB stated in its November 16, 2000 questionnaire response that it terminated the Maribel scheme as of July 1, 1997. Consequently, if the Maribel Bis and Ter schemes were terminated in 1997, there would be no benefit to ALZ during the POR. Although the GOB was not able to provide any specific documentation confirming the termination of this program, there is also no evidence on the record that disputes the GOB's claim. Moreover, ALZ has explained that the references to Maribel in its 1998 and 1999 financial statements are to the general Maribel scheme and not to Maribel Bis and Ter (the only parts of the Maribel program being reviewed). Finally, ALZ provided documentation showing that payments received were returned to the GOB. Thus, the evidence on the record of this review is consistent with ALZ's and the GOB's assertions that the program was terminated prior to the POR, neither ALZ nor Sidmar received benefits under the Maribel Bis or Maribel Ter systems during the POR, and benefits received under the Maribel Bis and Ter programs were repaid to the GOB. Inasmuch as the record supports ALZ's assertion that no benefit accrued to ALZ, Albufin, or Sidmar during the POR under the Maribel Bis and Ter programs, for purposes of these final results, we find that neither ALZ nor its affiliates benefitted from this program during the POR. Comment 4: Cash Deposit Rate for Future Entries ALZ argues that the Department should adjust the cash deposit rate for entries made subsequent to the publication of these final results. ALZ argues that the Department should make this adjustment to the cash deposit rate to take into account several programs where the benefit has expired. ALZ argues that, because these subsidies were one-time events that cannot be expected to be repeated, the cash deposit rate should be adjusted to take into account the fact that there is no possibility of future entries benefitting from these programs. The petitioners disagree, arguing that ALZ has not provided any documentation establishing that the programs at issue have been terminated. The petitioners cite to section 351.526 of the Department's regulations and the accompanying preamble, which states that "program-wide changes must be documented by the respondent beyond mere assertion." Furthermore, the petitioners contend that ALZ's argument that equity infusions are programs which cannot be repeated is incorrect, as such equity infusions have occurred on multiple occasions and may be re- instituted at any time in the future. Department's Position: We agree with the petitioners. According to sections 351.526(a) and (b) of the Department's regulations, in determining the appropriate cash deposit rate, the Department may only take into account a program-wide change that is not limited to an individual firm and that is effectuated by an official act, such as the enactment of a statute, regulation, or decree. In this instance, ALZ has not placed on the record sufficient evidence that any of the programs cited in its request to alter the cash deposit rate have, indeed, undergone program-wide changes as required by section 351.526(b), and has not provided sufficient documentation "beyond mere assertion" as required by section 351.526(b)(2) and as noted in the preamble to the Department's regulations. (8) Therefore, we are not altering the cash deposit rate for future entries of the subject merchandise. RECOMMENDATION Based on our analysis of the comments received, we recommend adopting all of the above positions and adjusting all related margin calculations accordingly. If these recommendations are accepted, we will publish the final results of review and the final net subsidy rate for ALZ in the Federal Register. AGREE ____________ DISAGREE _________ ______________________ Joseph A. Spetrini Acting Assistant Secretary for Import Administration ______________________ (Date) _______________________________________________________________________ footnotes: 1. Stainless Steel Plate in Coils from Belgium: Preliminary Results of Countervailing Duty Administrative Review, 66 FR 20425 (April 23, 2001) ("Preliminary Results"). 2. Final Affirmative Countervailing Duty Determination; Stainless Steel Plate in Coils from Belgium, 64 FR 15567 (March 31, 1999) ("Plate in Coils from Belgium"). 3. See 19 CFR Part 351 (2000), which includes the new substantive countervailing duty regulations published in the Federal Register on November 25, 1998 (Countervailing Duties; Final Rule, 63 FR 65348 (November 25, 1998)) ("the Department's regulations"). 4. Tariff Act of 1930, as amended by the Uruguay Round Agreements Act effective January 1, 1995 ("the Act"). 5. See Countervailing Duties; Final Rule, 63 FR 65348 (November 25, 1998). 6. See the Department's August 22, 2001, memorandum to Susan Kuhbach, Acting Deputy Assistant Secretary for AD/CVD Enforcement entitled "Final Results Analysis of the Government of Belgium Equity Infusions: 1984 Infusion in Sidmar, 1985 Infusion in ALZ, and the Conversion of Sidmar's Debt to Equity (OCPC-to-PB) in 1985" ("Final Results Equity Infusion Memorandum") (which is on file in the Import Administration's Central Records Unit, Room B-099 of the main Department of Commerce building ("CRU")). 7. See the Department's April 16, 2001, memorandum to Richard W. Moreland, Deputy Assistant Secretary for AD/CVD Enforcement entitled "Government of Belgium Equity Infusions: 1984 Infusion in Sidmar, 1985 Infusion in ALZ, and the Conversion of Sidmar's Debt to Equity (OCPC-to- PB) in 1985" ("Preliminary Results Equity Infusions Memorandum") (which is on file in the CRU). 8. See Countervailing Duties; Final Rule, 63 FR 65348, 65404 (November 25, 1998).