82-714

NOTICES

DEPARTMENT OF COMMERCE

Carbon Steel Wire Rod From Belgium; Preliminary Affirmative
Countervailing Duty Determination

Wednesday, July 14, 1982

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AGENCY: International Trade Administration, Commerce.

ACTION: Preliminary Affirmative Countervailing Duty Determination.

SUMMARY: We preliminarily determine certain benefits which constitute subsidies
within the meaning of the countervailing duty law are being provided to
manufacturers, producers, or exporters in Belgium of carbon steel wire rod, as
described in the "Scope of the Investigation" section of this notice. The estimated net
subsidy is indicated under the "Summary of Preliminary Subsidies" section of this notice.
Therefore, we are directing the U.S. Customs Service to suspend liquidation of all entries
of the product subject to this determination which are entered, or withdrawn from
warehouse, for consumption, and to require a cash deposit or bond on this product in the
amount equal to the estimated net subsidy. We will make our final determination by
September 21, 1982.

EFFECTIVE DATE: July 14, 1982.

FOR FURTHER INFORMATION CONTACT:

Michael J. Altier, Office of Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue,
NW., Washington, D.C. 20230, telephone: (202) 377- 1785.

SUPPLEMENTARY INFORMATION:

Preliminary Determination

Based upon our investigation, we preliminarily determine that there is reason to believe
or suspect certain benefits which constitute subsidies within the meaning of section 701
of the Tariff Act of 1930, as amended ("the Act"), are being provided to manufacturers,
producers, or exporters in Belgium of carbon steel wire rod, and described in the "Scope
of the Investigation" section of this notice. For purposes of this investigation, the
following programs are preliminarily found to be subsidies: "interest rebates," capital
grants, loan guarantees, exemptions from real property tax, exemptions from capital
registration tax, loans to uncreditworthy companies, equity participation by the
government of Belgiun ("GOB"), assumption of financing costs, labor assistance,
preferential loans, industrial investment loans from the European Coal and Steel
community ("ECSC"), and research and development aid. We estimate the net subsidy to
be the amount indicated in

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the " Suspension of Liquidation" section of this notice.
Case History. On February 8, 1982, we received petition from counsel for Atlantic Steel
Corp., Georgetown Steel Corp., Georgetown Texas Steel Corp., Keystone Consolidated,
Inc., Korf Industries, Inc., Penn-Dixie Steel Corp., and Raritan River Steel Co. filed on
behalf of the U.S. industry producing carbon steel wire rod. The petition alleged that
certain benefits which constitute subsidies within the meaning of section 701 of the Act
are being provided, directly or indirectly, to the manufacturers, producers, or exporters
in Belgium of carbon steel wire rod. The petition also alleged that "critical
circumstances" exist, as defined in section 703(e) of the Act.
We found the petition to contain sufficient grounds upon which to initiate a
countervailing duty investigation, and on March 1, 1982, we initiated such an
investigation (47 FR 9261). We stated that we expected to issue a preliminary
determination by May 1, 1982. We subsequently determined that the investigation was
"extraordinarily complicated," as defined in section 703(c) of the Act, and postponed our
preliminary determination for 65 days until July 8, 1982 (47 FR 17319).
Since Belgium is a "country under the Agreement" within the meaning of section 701(b)
of the Act, an injury determination is required for this investigation. Therefore, we
notified the U.S. International Trade Commission ("ITC") of our initiation. On March 25,
1982, the ITC preliminarily determined that there is a reasonable indication that these
imports are materially injuring a U.S. industry.
We presented questionnaires concerning the allegations to the Delegation of the
Commission of the European Communities and to the government of Belgium at its
embassy in Washington, DC. On May 7, 1982 we received responses to the questionnaires.
Scope of the Investigation. The product covered by this investigation is carbon steel wire
rod. The product is fully described in Appendix A, which follows this notice.
Cockerill Sambre ("Cockerill") is the only known producer and exporter in Belgium of the
subject product which was exported to the United States in 1981.
Cockerill was formed by them erger in June 1981 of the former Cockerill company, which
itself is a merger of several steel mills, and Hainaut-Sambre. Hainaut-Sambre was
composed of three major components: Carlam, a flat products mill built in 1976;
Thy-Marcinelle et Providence ("TMP"), which resulted from a merger of a Providence mill
of the former Cockerill company with Thy- Marcinelle et Monceau in 1979; and the old
Hainaut-Sambre Company. TMP merged with Hainaut-Sambre in 1980.

The period for which we are measuring subsidization for Cockerill is the calendar year
1981.

Analysis of Programs. In their responses, the GOB and the Delegation of the Commission
of the European Communities provided data for the applicable periods. Additionally, we
received information from Cockerill.
Throughout this notice, general principles applied by the Department of Commerce to the
facts of the current investigation concerning carbon steel wire rod are described in detail
in Appendix B, which follows this notice. Appendix C, which also follows this notice, is a
description of programs administered by organizations of the European Communities.
Appendices B and C are identical to Appendices B and C published on June 17, 1982, with
our notice of "Preliminary Affirmative Countervailing Duty Determinations, Certain
Steel Products from Belgium" (47 FR 26300). Based upon our analysis to date of the
petition and responses to our questionnaires, we preliminarily determine the following.

I. Programs Preliminarily Determined To Be Subsidies

We preliminarily determine subsidies are being provided to manufacturers, producers, or
exporters in Belgium of carbon steel wire rod and under the programs listed below.

A. Programs Administered Under the Law of December 30, 1970 on Economic Expansion

The Law of December 30, 1970 on economic expansion (the "1970 law") provided for
regional assistance to companies located in certain development areas to promote
activities which contribute to the establishment, expansion, conversion or modernization
of industrial enterprises. We preliminarily determine that the benefits provided under
this law are countervailable because they are targeted to companies in specific areas.

1. "Interest Rebates". "Interest rebate" programs are administered by the Ministry of
Economic Affairs. The rebates may be given on investment loans for tangible and
intangible assets. The law also provides for "interest rebates" on interest payable by the
companies to holders of bonds and convertible debentures. Rebates are variable
depending upon the degree to which the investment projects meet the objectives of the
1970 law.
Cockerill responded that "interest rebates" received under this program benefited a
division not involved in the production of steel. We will seek additional information.

2. Capital Grants. Where investments are financed by "at least" 50 percent of a company's
own funds, a grant may be given which totally or partially replaces the "interest rebate"
for which the investment is otherwise eligible. The methodology for calculating the
subsidy value of grants is described in Appendix B. The benefits are allocated over the
average useful life of capital assets in the steel industry, 15 years, and are applied to the
value of total steel production of the company.
Cockerill received several grants for less than $50 million. The grants received amounted
to a subsidy rate of 0.127 percent ad valorem.

3. Loan Guarantees. The Belgian government may guarantee total or partial repayment of
loans and debentures. When the loan or debenture is not granted by a public institution,
the guarantee may not exceed 75 percent of the difference between the amount of the
loan outstanding and the value of any collateral offered by the borrower. Companies must
pay fees of 0.75 percent of the principal for guarantees of capital investment loans and
1.5 percent for guarantees of working capital loans. The fees are paid into a fund managed
by the Ministry of Finance. Government loan guarantees benefit the loan recipients when
they enable them to obtain loans at lower rates, including fees, than might otherwise be
available for comparable commercial loans.
Cockerill received loan guarantees under this program. Since these guaranteed loans were
subject to payment holidays (moratoria) and in some cases were provided to the
company after it was determined to be uncreditworthy, our calculations of the subsidies
from this program are subsumed in the sections entitled "Loans to Uncreditworthy
Companies" and "Assumption of Financing Costs."

4. Exemptions from Real Property Tax. Qualifying investments may be granted an
exemption from the real property tax levied by the state, province, or local community
on the estimated rental income from fixed assets. The exemption may be granted for a
period of up to five years, depending on the degree to which the investment program
achieves the objectives of the 1970 law. The tax is levied at an average rate of 1.25
percent by the state, 4.46 percent by the

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province and 17.38 percent by the
local community. Exemptions received by companies were treated as grants. We
allocated the benefits solely to the year of grant receipt and applied the benefits to the
value of total steel production of the company.
The subsidy rate for Cockerill under this program amounts to 0.074 percent ad valorem.

5. Exemptions from Capital Registration Tax. Assets transferred to a company through
investments assisted by the 1970 law may be exempted from the one percent capital
registration tax. Exemptions under this program were treated as grants. We allocated the
benefits solely to the year of grant receipt and applied the benefits to the value of total
steel production of the company.
Cockerill received exemptions amounting to a subsidy rate of 0.474 percent ad valorem.

B. Restructuring Plan Programs

The GOB has mandated a reorganization of the steel industry in Belgium under the
following enactments and agreements:
The Reorganization Plan of 1978 (Hanzinelle agreement)

Council of Ministers decision of November 23, 1978

Royal Decree of December 15, 1978

Council of Ministers decision of May 15, 1981
Related agreements between the government and individual steel companies
These are intended to assist the modernization of the steel industry. Specific programs
include loans to uncreditworthy companies, equity participation by the GOB, assumption
of financing costs and labor assistance. We find these programs to provide
counteravailable benefits.

1. Loans to Uncreditworthy Companies. Petitioners allege that Cockerill and
Hainaut-Sambre (now merged with Cockerill) were uncreditworthy at the time loans were
made to them.
We preliminarily determine Cockerill to be uncreditworthy from 1978 on. First, the
company sustained net losses ranging from 2.4 to 7.0 billion Belgian francs ("BF") in each
of the last four years prior to its merger with Hainaut- Sambre in 1981. Second, certain
financial ratios for this company indicate an uncreditworthy situation. Third, Cockerill
apparently lost access to loans from independent commercial sources. Fourth, the
government-directed moratorium on Cockerill's debt service is a further indication of
uncreditworthiness, as is the amount, timing and nature of some of the government
equity participation.
Since Cockerill received a private loan in 1977, we will, for purposes of these preliminary
determinations, consider the company as creditworthy in that year. We will seek
additional information concerning this loan to see if it was made without government
direction and on commercial terms.
We preliminarily determine Hainaut-Sambre to be uncreditworthy from 1977 on. First,
the company sustained net losses ranging from 2.7 to 5.5 billion BF in three out of the last
five years (and smaller losses in the other two), preceding its merger with Cockerill in
1981. Second, certain financial ratios for this company indicate an uncreditworthy
situation. Third, the government- directed moratorium on Hainaut-Sambre's debt service
is a further indication of uncreditworthiness, as is the timing amounts, and nature of some
of the government equity participation.
Because we consider Cockerill (and before its acquisition, Hainaut-Sambre) to have been
uncreditworthy, loans and loan guarantees issued by the GOB during the period of
uncreditworthiness are treated essentially as equity investments. Under the equity
methodology for loans to uncreditworthy companies in Appendix B, we compared the
national rate of return on equity in Belgium to the rate realized by the GOB in Cockerill
for 1981. To prevent countervailing a higher subsidy amount than if the loan had been an
outright grant to the company, we limited the 1981 benefit under this methodology to the
result that would be found if the loans were treted as grants under the grant methodology
in Appendix B. The countervailable benefit from each loan was allocated over the value of
total steel production of the company. Loans actually converted to equity or convertible
debentures are treated separately under the section entitled "Equity Participation by the
GOB."
The benefit to Cockerill under this program amounted to a subsidy rate of 7.405 percent
ad valorem.

2. Equity Participation by the GOB. The GOB has purchased equity in Cockerill and has
converted "medium" and long-term debt to equity. Equity infusions by the GOB took place
as follows:

Cockerill
1979--Conversion of debt to equity and convertible debentures
1981--Conversion of debt to equity and convertible debentures; purchases of equity to
cover "cash drains"

Hainaut-Sambre
1979--Conversion of debt to equity and convertible debentures

TMP
1979--Conversion of debt to equity and convertible debentures
As indicated in Appendix B, equity participation by the government is not a subsidy per
se. Petitioners allege, however, that government infusions of equity in Belgian steel
companies were made at times when these infusions did not represent sound commercial
investments. Under the methodology described in Appendix B, the treatment of
government equity in a company hinges essentially on analysis of the soundness of the
investment. If such an investment was not reasonably sound at the time made, we will
consider it as potentially giving rise to a subsidy.
The companies listed above recorded substantial and persistent losses over the last
several years. Cockerill sustained losses for the last five years. Hainaut-Sambre sustained
losses in each of the five years prior to its merger with Cockerill, and TMP incurred losses
in each of the three years prior to its merger with Hainaut-Sambre.
Under normal business or financial criteria, companies exhibiting a pattern of deep or
significant continuing losses would not be regarded as sound investments. In view of
these histories of losses and other factors already considered in the preceding section
entitled "Loans to Uncreditworthy Companies," we do not regard these Belgian steel
companies as representing sound commercial investments at the time the GOB acquired
equity positions in them. Therefore, we preliminarily determine that the equity infusions
are inconsistent with commercial considerations.
Since the stocks of Cockerill, Hainaut-Sambre and TMP were traded on Belgian markets
during the time span covering the government's equity infusions (see equity section in
Appendix B), we looked to the market to determine the value of the benefit by comparing
the market value of these stocks at the beginning of the month in which the equity
infusions took place to the actual value of the equity infusions paid by the government. If
the value paid by the GOB was greater than the market value, we found the difference to
be a grant and allocated it over the average useful life of capital assets, 15 years (see
grants methodology in Appendix B).
In 1979 and 1981, the GOB entered into arrangements with Cockerill whereby it
converted the company's debt into convertible debentures. Because these debentures are
repayable

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only at such time as the company makes sufficient profits to
overcome its present heavy debt burden, we treated these conversions as tantamount to
purchases of equity in amounts equal to the value of the debentures. Convertible
debentures obtained through this arrangement in 1979, and apparently converted to
equity in 1981 were treated as equity purchases in the latter year.
In addition, Cockerill received an advance payment on a pending equity purchase by the
GOB to cover 1981 "cash drains." This payment was also treated as an equity purchase.
Since the terms of this transaction did not permit identification of a per-share price, we
used the per-share price for the previous 1981 GOB purchase of Cockerill's equity as the
best information available for comparison in our calculations.
Allocated over the value of Cockerill's total steel production, the benefit for equity
purchases amounted to a subsidy rate of 8.651 percent ad valorem.

3. Assumption of Financing Costs. For the years 1979-83, the GOB has assumed all of
Cockerill's financing costs for "medium" and long-term borrowing. This assumption took
the form of issuance of convertible debentures in the amount of interest payable and the
postponement of principal repayments. We calculated the benefit from those deferred
principal and assumed interest payments as loan holidays (moratoria) in accordance with
the methodology described in Appendix B. Where the original loans or guaranteed loans
were provided at preferential rates, these benefits were included in our calculation of
benefits stemming from the moratoria.
To determine whether respondent's loans were preferential, we compared the interest
rates for loans and guaranteed loans with "benchmark" rates. For benchmark rates, we
used the lending rates of the Societe Nationale de Credit a l'Industrie ("SNCI") for capital
investment loans exceeding five years in maturity which is a generally available
commercial rate. We added 0.25 percent to our benchmark rate. This represents the fee
that is often charged by lending banks to borrowers.
The information provided by Cockerill on certain loans subject to moratoria was
incomplete. This necessitated our making the following assumptions based on the best
information available. Where the term of the loan was missing, we assumed a 20-year life,
the average life of those loans for which complete information was provided. We
increased the estimated loan life to 25 years for loans that should have expired before the
moratoria, but which in fact were still outstanding when the moratoria occurred. Where
the original loan amount was missing, we calculated an estimated amount based on the
1981 balance and assumed constant repayment of principal. The benefit to Cockerill
under this program, allocated over the value of its total steel production, amounted to a
subsidy rate of 2.523 percent ad valorem.

4. Labor Assistance. In order to avoid a massive lay-off of surplus workers because of the
government-mandated restructuring of the steel industry, companies entered into
agreements with their unions for the early retirement of certain workers. The government
has assumed portions of the costs for this program. We preliminarily determine that this
government assumption of an obligation of the companies is a counteravailable benefit.
The assistance given to the companies is in the form of government-guaranteed loans with
deferred interest and principal payments for the first five years. The loans to Cockerill
were treated essentially as equity because they were provided at a time after the
company had become uncreditworthy. We applied the equity methodology for loans and
loan guarantees to uncreditworthy companies as described above and in Appendix B and
allocated the benefits over the value of total steel production of the company.
The subsidy rate to Cockerill for this program was 0.493 percent ad valorem.

C. Preferential Loans

These loans were given by the SNCI at interest rates which apparently were lower than
those commercially available. Therefore, we preliminarily determine a subsidy was
provided to the loan recipient. To calculate the subsidy rate, we applied the methodology
outlined in Appendix B, using the national commercial rate as our benchmark.
Cockerill failed to provide complete information on certain loans. Where the year of loan
receipt was missing, we considered it to be a loan received in 1980 because the response
indicated that the loans had been received by the beginning of 1981. Where the term of
the loan was missing, we assumed it to be 20 years, as explained in the section entitled
"Assumption of Financing Costs." Where no interest rate was provided, we assumed it to
be equal to the lowest preferential interest rate of any loan in the response.
The benefits of this program to Cockerill were allocated over the value of total steel
production and amounted to a subsidy rate of 0.082 percent ad valorem.

D. Industrial Investment Loans From the ECSC (Article 54)

For the reasons described in Appendix C, we preliminarily determine that ECSC industrial
investment loans (under Article 54 of the Treaty of Paris) provide countervaliable
benefits. Using the appropriate methodoligy described in Appendix B, we calculated the
benefits from these loans made to Cockerill and included the amounts in the sections
entitled "Assumptions of Financing Costs" to "Loans to Uncreditworthy Companies."

E. Research and Development ("R&D") Aid From the Institute for Scientific Research in
Industry and Agriculture ("IRSIA") and the Center for Metallurgical Research ("CRM")

The GOB provides funds for applied research conducted by IRSIA and the CRM. Both
organizations perform research that benefits the iron and steel industry. The results
apparently remain property of these organizations and are not generally available.
Under these circumstances, we preliminarily determine government assistance for R&D is
counteravailable. We treated assistance received by Cockerill as a grant in the year
received. We used the methodology described in Appendix B and allocated the benefit
over the value of total steel production of the company.
Cockerill reported funding for certain research projects from IRSIA but provided no
detail on the terms or use. We countervailed these funds in their full amount as grants
allocated in the year received. We will seek additional information as to whether
additional research projects that benefited Cockerill but were not included in the
response were conducted by the CRM and IRSIA. The subsidy rate to Cockerill from this
program is 0.076 percent qd valorem.

II. Programs Preliminarily Determined Not To Be Subsidies

We preliminarily determine subsidies are not being provided to manufacturers,
producers, or exporters in Belgium of carbon steel wire rod under the following
programs.

A. Environmental Incentives

The GOB provides funding for environmental projects. Once a company's request for an
environmental grant is approved, the company arranges for a loan in the amount of the
grant. The grant is not paid directly to the company but is used to pay the interest and
principal payments on behalf of the company. Cockerill received relatively

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small
grants under this program. The GOB responded that benefits under this program are
available to all industries on equal terms. Therefore, we preliminarily determine that this
program does not provide subsidies to the steel industry. We will seek additional
information to determine whether or not the program provides benefits to "a specific
enterprise or industry or group of enterprises or industries" (section 771(5)(B) of the
Act).

B. Employment Premiums for New Workers and Trainees

The "De Wulf Plan" (Royal Decree of October 15, 1979) grants employment premiums of
62,500 BF for each new permanent worker hired under certain conditions. Under a
separate government plan, 30,000 BF may be paid for each trainee in excess of a number
equaling one percent of the workforce of a company. We preliminarily determine that
these programs are not counteravailable since they do not benefit "a specific enterprise or
industry, or group of enterprises or industries."

C. Reimbursement of Worker Training Costs

The National Employment Office in Belgium reimburses firms for various in- plant and
outside professional training costs.
Cockerill, a recipient of these grants, claims that these benefits are available to all Belgian
industries on equal terms. We preliminarily determine that this program is not
countervailable since it does not benefit "a specific enterprise or industry, or group of
enterprises or industries."

D. Assistance to the Coal Industry

We requested information from the GOB and the steel companies in order to determine
whether or not aid given to the coal industry could be considered an indirect subsidy to
the steel industry.
Most of the aid serves to bring the cost of Belgian coal down to but not lower than
competitive prices. Belgium does not restrict the importation of coal, and the steel
industry purchases more than half of its coal from sources outside Belgium, including
the United States. The assistance to the coal industry at most only equalizes the prices of
domestic and foreign coal, putting them both on the same commercial level.
The Belgian government provides assistance to producers of all types of coal, not just that
used by the steel industry, and thus does not, through assistance to coal producers,
provide to the Belgian steel producers a subsidy "provided * * * to a specific enterprise or
industry, or group of enterprises or industries."
Regarding the allegation that the Belgian steel industry benefits from government
assistance provided to the coal industry in the Federal Republic of Germany, we
preliminarily do not consider such assistance to confer a countervailable benefit on the
Belgian steel industry for the reasons outlined in Appendix B.
The ECSC provides various production and marketing grants to EC coal and coke
producers; however, we preliminarily do not consider this assistance to confer a
countervailable benefit on the Belgian steel industry for the reasons described in
Appendix C.

E. Reduction of Capital Gains Tax

Capital gains on the sales of tangible property may be exempt from corporate taxes for a
minimum of five years, if receipts are reinvested in Belgium within three years. The
provision is contained in the Belgian Income Tax Code, and we believe that it is generally
available on equal terms to all companies in Belgium.
We therefore preliminarily determine that this program does not provide a subsidy to the
steel industry. We will seek additional information concerning the applicability of this
program.

F. Programs Contained in the Law of July 17, 1959 for Economic Expansion

The Law of July 17, 1959 (the "1959 law") for economic expansion contains programs
which are designed to promote economic expansion and modernization. The 1959 law
provides for interest rebates, grants for capital investments, government loan
guarantees, exemptions from property taxes on investments approved under the law and
grants for R&D. We preliminarily determine that the programs contained in the 1959 law
are not countervailable, since they are generally available and do not benefit "a specific
enterprise or industry, or group of enterprises or industries." We will seek additional
information concerning the application of the 1959 law.

G. ECSC Interest Rebates and R&D Grants

We preliminarily determine that ECSC interest rebates and R&D grants to the Belgian steel
industry are not countervailable benefits. For our treatment of these programs in general,
see Appendix C.

III. Programs Preliminarily Determined Not To Be Utilized

We preliminarily determine that the following programs alleged by petitioners to provide
countervailable benefits are not used by the manufacturers, producers, or exporters in
Belgium of carbon steel wire rod.

A. Accelerated Depreciation

Companies that receive investment benefits provided for by the 1970 law may take twice
the normal annual straight-line depreciation for assets acquired as the result of the
investment. The benefit of such a program is reduced taxable income. Cockerill stated
that it did not participate in the program.

B. Employment Premiums

Article 14 of the 1970 law provides for employment premiums for investments that
create new jobs. The assistance may be given for new enterprises or for the expansion of
existing enterprises. Nonrepayable premiums may be paid for as long as five years,
depending on the rate at which new jobs are created and filled. Cockerill stated that it did
not participate in this program.

C. Exemption From Income Tax on Capital Grants

Grants provided under the 1970 law are exempted from income taxes. In calculating
depreciation, the amount of such grants is deducted from the cost of value of the financed
investments. Cockerill stated that it did not participate in this program.

D. Contractual Aid

The 1970 law provides for aid in realizing specific objectives related to certain long-term,
large scale investments. The government and an enterprise negotiate the specific terms of
the program and enter into a "progress contract." Under "management contracts" the
government may grant interest-free aid, to be repaid within three years, for up to 75
percent of management advisory fees. The response states that Cockerill did not receive
any aid under this program. We will seek additional information.

E. Export Assistance

Certain export assistance programs, such as export financing and commercial risk
guarantees, are provided by the Office National du Ducroire. Cockerill stated that it
received no assistance under this program.

F. The European Regional Development Fund ("ERDF")

We preliminarily determine that Cockerill did not receive ERDF funds (see Appendix C).

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G. European Investment Bank ("EIB")

Cockerill stated that it had no loans outstanding from the EIB in 1981 (see Appendix C).

H. Loan Guarantees From the ECSC

Cockerill has indicated that it has not used this program (see Appendix C).

IV. Programs for Which Additional Information Is Needed

The following programs were alleged by the petitioners to be subsidies: readaptation and
retraining assistance and GOB advances for R. & D. At this time, we do not have sufficient
information upon which to determine whether these programs are providing
manufacturers, producers, or exporters in Belgium of carbon steel wire rod with
benefits which constitute subsidies within the meaning of the countervailing duty law.
We will seek additional information regarding these programs before reaching a final
determination.

A. Readaptation and Retraining Assistance

The GOB finances a portion of readaptation and retraining assistance to laid- off
employees under Article 56 of the ECSC Treaty. It is unclear at this time whether or not
this program provides countervailable benefits to the steel industry. We will seek
additional information concerning the obligations of the steel companies to laid-off
workers. If the government assumes a portion of the obligation of the steel companies,
the assistance may constitute a subsidy. In addition, we are seeking information
concerning the types of training and readaptation being performed. If laid-off workers or
potentially laid-off workers are being retrained to assume jobs in the steel industry (to
take the place of early retirees, for instance), then the assistance may well be a subsidy to
steel companies. If, however, the government is assuming the cost of training a laid-off
worker for a non-steel industry job (and the government was not assuming a portion of
the steel company's mandated obligations to workers), then the assistance may not be a
subsidy to the steel industry.

B. GOB Advances for R&D

Interest-free advances can be provided under the 1970 law up to a maximum of 80
percent of the expense incurred for the R&D of prototypes. The advances are repayable if
the research leads to a profitable industrial or commercial activity. The results of the
research become the property of the recipient companies. Under such circumstances, the
assistance may convey a subsidy. The GOB responded that during 1980-81 it has provided
aid to steel companies under this program. We are unable to determine from the company
response if Cockerill received such aid. We are seeking additional information concerning
this program to resolve this discrepancy and to determine the type of research, the
recipients and the amount of aid in order to determine whether such aid constitutes a
subsidy.
Negative Determination of Critical Circumstances. The petition alleged that imports of
carbon steel wire rod from Belgium present "critical circumstances." Under section
703(e)(1) of the Act, critical circumstances exist when the alleged subsidy is inconsistent
with the Subsidies Code of the General Agreement on Tariffs and Trade and "there have
been massive imports of the class or kind of merchandise which is the subject of the
investigation over a relatively short period."
Since these investigations were initiated, U.S. imports of carbon steel wire rod from
Belgium/Luxembourg totaled 543 net tons in March, 331 net tons in April and 968 net
tons in May (import statistics available to the Department of Commerce are combined for
Belgium/Luxembourg). In the context of this industry, this product has not recently
been massively imported from Belgium/Luxembourg over a relatively short period of
time. Therefore, critical circumstances do not exist for carbon steel wire rod from
Belgium.
Verification. In accordance with section 776(a) of the Act, we will verify data used in
making our final determination.
Suspension of Liquidation. In accordance with section 703 of the Act, we are directing
the U.S. Customs Service to suspend the liquidation of all entries of carbon steel wire rod
which are entered, or withdrawn from warehouse, for consumption, on or after July 14,
1982 and to require a cash deposit or bond for each such entry of the merchandise in the
amounts indicated below:

Summary of Preliminary Subsidies
-------------------------------------------------------------------------------
Manufacturer/producer/exporter Ad valorem rate
(percent)
-------------------------------------------------------------------------------
Name: Cockerill Sambre, carbon steel wire rod .......................... 19.905
All other manufacturers/producers/exporters: Carbon
steel wire rod ....................................................... 19.905
-------------------------------------------------------------------------------

This suspension will remain in effect until further notice.

ITC Notifications

In accordance with section 703(f) of the Act, we will notify the ITC of our determination.
In addition, we are making available to the ITC all nonprivileged and nonconfidential
information relating to this investigation. We will allow the ITC access to all privileged
and confidential information in our files, provided the ITC confirms that it will not
disclose such information, either publicly or under an administrative protective order
without the written consent of the Deputy Assistant Secretary for Import Administration.

Public Comment

In accordance with � 355.35 of the Commerce Department Regulations, if requested, we
will hold a public hearing to afford interested parties an opportunity to comment on this
preliminary determination at 10:00 a.m. on August 11, 1982 at the U.S. Department of
Commerce, Room 6802, 14th Street and Constitution Avenue, NW., Washington, D.C.
20230. Individuals who wish to participate in the hearing must submit a request to the
Deputy Assistant Secretary for Import Administration, Room 3099B, at the above
address within ten days of this notice's publication. Requests should contain: (1) The
party's name, address, and telephone number; (2) the number of participants; (3) the
reason for attending; and (4) a list of the issues to be discussed. In addition, prehearing
briefs must be submitted to the Deputy Assistant Secretary by August 4, 1982. Oral
presentations will be limited to issues raised in the briefs. All written views should be filed
in accordance with 19 CFR 355.34, on or before August 13, 1982, at the above address
and in at least ten copies.

Gary N. Horlick,

Deputy Assistant Secretary for Import Administration.

July 8, 1982.

Appendix A.--Description of Product

For the purpose of this investigation in the term "carbon steel wire rod" covers a coiled,
semi-finished, hot-rolled carbon steel product of approximately round solid cross
section, not under 0.20 inch nor over 0.74 inch in diameter, not tempered, not treated,
not partly manufactured; and valued over 4 cents per pound, as currently provided for in
item 607.17 of the Tariff Schedules of the United States.

Appendix B

Several basic issues are common to many of the countervailing duty investigations of
carbon steel wire rod, initiated by the Department of Commerce (the "Department") on
March 1, 1982; e.g., government assistance through grants, loans, equity infusions, and
research and development projects. This Appendix describes in some detail the

*30547

general principles applied by the Department when dealing with these issues as they arise
within the factual contexts of these cases.

Grants

Petitioners allege that respondent foreign steel companies have received numerous
grants for various purposes. Under section 771(5)(B) of the Tariff Act of 1930, as
amended ("the Act") (19 U.S.C. 1677(5)(B)), domestic subsidies are countervailable where
they are "provided or required by government action to a specific enterprise or industry,
or group of enterprises or industries" (emphasis added).
The legislative history of Title VII of the Act states that where a grant is "tied" to--that is,
bestowed expressly to purchase--costly pieces of capital equipment, the benefit flowing
from the grant should be allocated over the useful life of that equipment. A subsidy for
capital equipment should also be "front loaded" in these circumstances; that is, allocated
more heavily to the earlier years of the equipment's useful life, reflecting its greater
commercial impact and benefit in those years.
In the past we have allocated the face value of the grant, in equal increments, over the
appropriate time period. For large capital equipment, we used a period of half the useful
life of the equipment purchased with the grant. In each year we conutervailed only that
year's allocated portion of the total grant. For example, a hypothertical grant of $100
million used to purchase a machine with a 20-year life would have been countervailed at
a rate of $10 million per year (allocated over the appropriate product group) for 10
years, beginning in the year of receipt.
This allocation technique has often been criticized for not capturing the entire subsidy by
ignoring the time value of money. It has been argued that $100 million today is much
more valuable to a grant recipient than $10 million per year for the next 10 years, since
the present value of the latter is considerably less than $100 million. We agree, and are
now changing our methodology of grant subsidy calculation to reflect this agreement. So
long as the present value (in the year of grant receipt) of the amounts allocated over time
does not exceed the face value of the grant, we are consistent with both our domestic law
and international obligations because the amount conutervailed will not exceed the total
net subsidy.
Present value is calculated using a discount rate. We considered using each company's
weighted cost of capital at the time of the grant receipt as the appropriate measure of the
time value of its funds. However, we lacked sufficent information to do so for these
preliminary determinations. Instead we used the national cost of long-term corporate
debt as a substitute measure of a company's discount rate. We welcome additional
information or comments on this estimate between the preliminary and final
determinations.
For costly pieces of capital equipment, we believe that the appropriate time period over
which to allocate the subsidy is its entire useful life. In the past, we allocated the subsidy
over only half the useful life in order to front load the countervailing duties in order
to comply with the legislative intent of the Act. However, so long as we allocate the
subsidy in equal nominal increments over the entire useful life, it will still be effectively
front loaded in real terms since money tomorrow is less valuable than money today.
For these steel investigations we have allocated a grant over the useful life of equipment
purchased with it when the value of that grant was large (in these investigations, greater
than $50 million), and specifically ''tied" to pieces of capital equipment.
Where the grant was small (less than one percent of the company's gross revenues or,
where we do not know gross revenues, less than one percent of the company's total value
of 1981 steel production) and "tied" to items generally expensed in the year purchased
(e.g. wages, purchases of materials), we have allocated the subsidy solely to the year of
the grant receipt.
All other grants--the vast majority of those involved in these investigations--will be
allocated over 15 years, a period of time reflecting the average life of capital assets in
integrated steel mills in the U.S. The 15-year figure is based on Internal Revenue Service
studies of actual experience in integrated mills in the U.S. Furthermore, we understand
that a 15-year period is also used in some of the countries involved in these
investigations. We are using this time period as the best available estimate of the average
steel asset life worldwide. We could not calculate the average life of capital assets on a
company-by-company basis, since different accounting principles, extraordinary
write-offs, and corporate reorganizations yielded extremely inconsistent results. For
example, the average life of one steel company's assets, as indicated on its books,
increased from 3 years to 22 years within 3 years.
We do not distinguish grants bestowed expressly to cover operating losses from other
"untied" grants. Since grants used to cover operating losses often keep the company in
business and are frequently quite large, their real effects extend for a considerable period
of time. It is appropriate to allocate them over a number of years.

Loans and Loan Guarantees for Companies Considered Creditworthy

In these investigations, various loan activities give rise to subsidies. The most common
practice is the extension of a loan at a preferential interest rate where the government is
either the actual lender or directs a private bank to lend at a preferential rate. The subsidy
is computed by comparing what a company would pay a normal commercial lender in
principal and interest in any given year with what the company actually pays on the
preferential loan in that year. We determine what a company would pay a normal
commercial lender by constructing a comparable commercial loan at the appropriate
market rate (the "benchmark"). If the preferential loan is part of a broad, national lending
program, we use a national average commercial interest rate as our benchmark. If the
loan program is not generally available--like most large loans to respondent steel
companies--the benchmark used instead, where available, is the company's actual
commercial credit experience (e.g., a contemporaneous loan to the company from a
private commercial lender). If there were no similar loans, the national commercial rate
is used as a second-best alternative.
For loans denominated in a currency other than the currency of the country concerned in
an investigation, the benchmark is selected from interest rates (either national or
company-specific, as appropriate) applicable to loans denominated in the same currency
as the loan under consideration.
After calculating the payment differential in each year of the loan, we then calculate the
present value of this stream of benefits in the year the loan was made, using a national
cost of long-term corporate debt in that year as the discount rate. In other words, we
determine the subsidy value of a preferential loan as if the benefits had been bestowed as
a lump-sum grant in the year the loan was given. We determine how much less valuable
money tomorrow is than money today by applying a discount rate. We are using the
national cost of long-term corporate debt for the year in which the loan was given as this
discount rate. This amount is then allocated evenly over the life of the loan, with one
exception. Where the loan was given expressly for the purchase of a costly piece of capital
equipment, the present value of the payment differentials is allocated over the useful life
of the capital equipment concerned.
For loans not tied to capital equipment with mortgage-type repayment schedules, this
methodology results in annual subsidies equivalent to those calculated under the
previous Department policy of considering the difference in total repayments in each
year of a loan's lifetime to be the subsidy in that year. For loans with constant principal
repayments (i.e., declining total repayments), loans with deferral of repayments, and
loans for costly capital equipment, the present value method results in even allocations of
the subsidy over the relevant period. This effectively front loads countervailing
duties on these loan benefits in the same manner as grants are front loaded.
A loan guarantee by the government constitutes a subsidy to the extent the guarantee
assures more favorable loan terms than for an unguaranteed loan. The subsidy amount is
guantified in the same manner as for a preferential loan.
If a borrowing company preferentially received a payment holiday from a government
lending institution or from a private lender at government direction, an additional
subsidy arises that is separate from and in addition to the preferential interest rate
benefit. The subsidy value of the payment holiday is measured in the same manner as for
preferential loans, by comparing what the company pays verus what it would pay on a
normal commerical loan in any given year. A payment holiday early in the life of a loan
can result in such large loan payments near the end of its term that during the final years
the loan recipient's annual payments on the subsidized loan may be greater than they
would have been on an unsubsidized loan. By reallocating the benefit

*30548

over the
entire life of the loan through the present value methodology described above, we avoid
imposing countervailing duties in excess of the net subsidy.

Loans and Loan Guarantees for Companies Considered Uncreditworthy

In a number of cases petitioners have alleged that certain respondent steel companies
were uncreditworthy at the time they received preferential loans or guarantees, and that
they could not have obtained any commercial loan without government intervention.
Where the company under investigation has a history of deep or significant continuing
losses, and diminishing (if any) access to private lenders, we generally agree with
petitioners. In these situations neither national nor company-specific market interest
rates provide an appropriate benchmark since, by definition, an uncreditworthy
company could not receive loans on these terms without government intervention. Nor
have we been able to find any reasonable and practical basis for selecting a risk premium
to be added to a national interest rate in order to establish an appropriate benchmark for
companies considered uncreditworthy. Therefore, we have treated loans to an
uncreditworthy company as an equity infusion by the government. We believe this
treatment is justified by the great risks, very junior status, and low probability of
repayment of these loans. To the extent that principal and/or interest is actually paid
these loans, however, the subsidy (which is calculated using our equity methodology,
infra) is reduced dollar for dollar in the year of repayment. Moreover, in no case do we
countervail a loan subsidy to a creditworthy or uncreditworthy company more than if the
government gave the principal as an outright grant.

Equity

Petitioners allege that government purchases of equity in respondent steel companies
constitute a countervailable subsidy equal to the entire amount of the equity purchased.
Many respondents claim that such equity purchases are investments on commerical
terms, and thus are not subsidies to these companies.
It is well settled that government equity ownership per se is not a subsidy. Such
ownership is a subsidy only when it is on terms inconsistent with commerical
considerations. An equity subsidy potentially arises when the government makes equity
infusions into a company which is sustaining deep or significnat continuing losses. If such
losses have been incurred, then we consider from whom the equity was purchased and at
what price.
If the government buys previously issued shares on the market and not directly from the
company, there is no subsidy to the company. This is true no matter what price the
government pays, since any overpayment benefits only the prior shareholders and not
the company.
If the government buys shares directly from the company (either a new issue or
corporate treasury stock) and similar shares are traded in a market, a subsidy arises if the
government pays more than the prevailing market price. To avoid any effect on the
market price resulting from the government's purchase or speculation in anticipation of
such purchase, we used for comparison a market price on a date sufficiently preceding the
government's action. Any amount of overpayment is treated as a grant to the company.
It is more difficult to judge the possible subsidy effects of direct government infusions of
equity where there is no market price for the shares since they were untraded (as where,
for example, the government is already sole owner of the company). As a matter of
principle, government equity participation can be a legitimate commercial venture.
Often, however, as in many of these steel cases, equity infusions follow massive or
sustained losses and are part of national government programs to sustain or rationalize
an industry which otherwise would be noncompetitive. We respect the government's
characterization of its infusion as equity in a commercial venture. However, to the extent
in any year that the government realizes a rate of return on its equity investment less
than the average rate of return on equity investment for the country as a whole (thus
including returns on both successful and unsuccessful investments), its equity infusion is
considered a subsidy. Under no circumstances do we countervail an amount greater than
that which is calculated treating the government's equity infusion as an outright grant.

Forgiveness of Debt

Where we have found that the government has forgiven an outstanding debt obligation,
we have treated this as a grant to the company equal to the outstanding principal at the
time of forgiveness. Where outstanding debt has been converted into equity (i.e., the
government receives shares in the company in return for eliminating debt obligations of
the company), a subsidy may result. The existence and extent of such subsidies are
determined by treating the conversions as an equity infusion in the amount of the
remaining principal of the debt. We then calculate the value of the subsidy by using our
equity methodology, supra.

Coal Assistance.

Petitioners alleged that respondent steel companies outside the Federal Republic of
Germany that buy German coal benefit from assistance given by the German government
to German producers of coking coal. The issue of indirect subsidization of German
steelmakers through the German government's assistance to German coking coal is
considered separately in the "Notice of Preliminary Affirmative Countervailing Duty
Determinations; Certain Steel Products from the Federal Republic of Germany," appearing
in this issue of the Federal Register.
In the absence of special circumstances, a party receiving a benefit on the production of
its merchandise is not assumed to share that benefit with an unrelated purchaser. It is in
the commercial interest of a firm receiving a subsidy not to share the benefits with
customers, but rather to pass it on to its shareholders in the form of greater net earnings.
This view has previously been expressed by the Department in the "Preliminary
Affirmative Countervailing Duty Determination; Sodium Gluconate from the
European Economic Community" (46 FR 45975).
Moreover, the German government's assistance to its coking coal industry does not
reduce the price of German coking coal below the world price. So long as non-German
coal can be purchased more cheaply, we see no measurable benefit to non-German
steelmakers who purchase German coal, whether or not it is subsidized.
Petitioners argue that German assistance to its coking coal industry exerts downward
pressure on the price of coal in all markets in which German coking coal is sold. If so, we
believe that such downward pressure would affect the price of coal worldwide, and thus
benefit all steelmakers everywhere. Similarly, if the German coking coal assistance were
eliminated and if German coal mine operations consequently were reduced or ceased, any
consequent rise in the price of coking coal would likely have worldwide effects and thus
affect steelmakers everywhere. Therefore we do not accept petitioners' contention that
the FRG's assistance to its coking coal industry during 1981 had a significant downward
effect on the price of coking coal which preferentially benefited steelmakers purchasing
German coal.

Research and Development Grants and Loans

Grants and preferential loans awarded by a government to finance research that has
broad application and yields results which are made publicly available are not subsidies.
Programs of organizations or institutions established to finance research on problems
affecting only a particular industry or group of industries (e.g., metallurgical testing to
find ways to make cold-rolled sheet easier to galvanize) and which yield results that are
available only to producers in that country (or a limited number of countries) confer a
subsidy on the products which benefit from the results of the research and development
("R&D"). On the other hand, programs which provide funds for R&D in a wide range of
industries are not countervailable even when a portion of the funds is provided to the
steel sector.
Once we determine that a particular program is countervailable, we calculate the value of
the subsidy by reference to the form in which the R&D was funded. An R&D grant is
treated as an "untied" grant; a loan for R&D is treated as any other preferential loan.

Labor Subsidies

To be countervailable, a benefit program for workers must give preferential benefits to
workers in a particular industry or in a particular region. Whether or not the program
benefits specifically some workers and not others is determined by looking at both
program eligibility and participation. Even where provided to workers in specific
industries, social welfare programs are countervailable only to the extent that they
relieve the firm of costs it would ordinarily incur--for example, the government's

*30549

assumption of a firm's obligation partially to fund worker pensions.
Labor-related subsidies are generally conferred in the form of grants and are treated as
untied grants for purposes of subsidy calculation. Where they are quite small and
expensed by the company in the year received, we likewise allocated them only to the
year received. However, where they were more than one percent of gross revenues (or,
where we do not know gross revenues, one percent of the value of 1981 steel production),
we allocated them over five years.

Appendix C.--Programs Administered by Organizations of the European Communities

I. The ECSC

On April 8, 1965, the three separate European communities--the European Coal and Steel
Community ("ECSC"), the European Economic Community ("EEC"), and the European
Atomic Energy Community ("EURATOM")--signed a treaty to merge into the European
Communities ("EC"). Article 9 of the merger treaty established the Commission of the
European Communities as the High Authority of each of the formerly independent
institutions. The merger became effective in 1967.
The ECSC itself was established by the Treaty of Paris in 1951 to modernize production,
improve quality, and assure a supply of coal and steel to the member countries. The
Treaty of Paris governs all programs intended directly to affect the steel industry. Funds
for these programs flow from two sources: (1) ECSC borrowings on international capital
markets, and (2) the ECSC budget, substantially derived from producer-generated funds.

A. ECSC Programs Preliminarily Determined To Be Subsidies

With respect to ECSC borrowings, the ECSC enjoys a very high credit rating because of its
quasi-governmental nature. It is therefore able to raise funds at interest rates lower than
those which would be available to European steel companies. When the ECSC re-lends
these borrowed funds to a company without increasing the interest rate, any difference
between the lower interest rate passed on and the rate otherwise available to the steel
company in the commercial financial market (the "benchmark") is a benefit to the
company. For this reason we preliminarily determine that ECSC loans raised through
capital market funding are counteravailable insofar as they offer preferential interest
rates to steel companies.
Consequently any loan involving ECSC funds borrowed on international capital markets,
provided under an ECSC assistance program, confers counteravailable benefits if the loan
is at a preferential interest rate.
1. ECSC Industrial Investment Loans. Article 54 of the Treaty of Paris authorizes the ECSC
to provide loans to steel companies in member countries for reducing production costs,
increasing production, or facilitating product marketing. Loans provided under this
program are funded exclusively from ECSC borrowings on world capital markets. For the
reasons discussed above, we preliminarily determine that this program confers
counteravailable benefits to loan recipients to the extent that the interest rates are
preferential (as determined using the appropriate loan methodology described in
Appendix B).
2. ECSC Housing Loans for Workers. Article 54(2) of the Treaty of Paris authorizes the
ECSC to provide loans for residential housing for steel workers. In some cases these loans
are provided directly to steel companies. In other cases, they are administered through
financial institutions or housing authorities. These loans for the construction or purchase
of homes are at highly concessionary one percent interest rates.
The preferential ECSC housing loans provide benefits directly to steel workers. We believe
they also indirectly benefit the employer steel companies by relieving them of certain
labor wage costs. That is, if steel workers were unable to obtain housing loans at these
highly advantageous rates, the companies which employ them would be required to pay
higher wages.
Our information to date indicates that ECSC funding for housing loans derives from both
its budget and funds borrowed on international capital markets. To the extent that the
loans derive from the budget, we preliminarily determine that they are not
counteravailable for the reasons indicated below in section B of this Appendix. To the
extent they derive from ECSC borrowings on world capital markets, they confer a subsidy
if the loan recipient could not have obtained a commercial loan on comparable terms.
The proportion of total ECSC housing loans funded from borrowed money rather than
from the budget in a given year is considered the preferential housing loan amount
received in that year.
In 1980, the most recent year for which data are available, the portion of new ECSC
housing loans financed by borrowings amounted to 42.24 percent. In 1979 the same
portion was 17.94 percent; in 1978, 7.8 percent; and in 1977, 13.95 percent. For 1981 we
are using as the best information available the 1980 information. Where these loans are
not given directly to a steel company or are given to a steel company which merely
serves as a disbursing agent, they yield a benefit to steel workers to the extent that the
workers need not obtain a mortgage at the going commercial rate. The subsidy in these
cases is the difference between what the workers pay on the ECSC housing loans and what
they would have paid on a non-subsidized loan. In the absence of country-specific
information on unsubsidized mortgage rates, we are estimating this rate by using as our
benchmark the national long-term corporate debt rate. We believe this entire benefit is a
subsidy on all steel production of the employer firm, allocated as described in Appendix B
for labor subsidies.
On the other hand, where these loans are given directly to a company which disburses
only a small portion of them, the subsidy value is calculated using the appropriate
methodology for preferential loans as described in Appendix B.
3. ECSC Loan Guarantees. Under Article 54 of the Treaty of Paris, the ECSC is authorized
to guarantee loans from commercial lenders to coal and steel companies. Since these
guarantees are intended specifically for the steel industry, we find the resulting benefits to
be counteravailable. The counteravailable benefit is based on the difference between the
interest rate charged by private lenders to commercial customers in the ordinary course
of business and the rates available with an ECSC loan guarantee.

B. ECSC Programs Preliminarily Determined Not To Be Subsidies

The ECSC budget for assistance to coal and steel producers is funded by levies on coal and
steel producers within the ECSC member states. We examined the ECSC financial
statements for 1971-1980, inclusive, and found that, for those years, the amount of funds
generated by levies on producers exceeded the total amount of ECSC assistance provided
through budget-funded programs. Therefore, we preliminary determine that any ECSC
assistance provided from the ECSC budget does not provide a countervailable benefit. We
will seek further information concerning the extent to which producer-generated funds
are appropriately earmarked for these forms of program assistance.
1. ECSC Industrial Reconversion Loans. Under Article 56 of the Treaty of Paris, the ECSC
provides loans to companies or public authorities for investments in new non-steel
ventures in regions of declining steel industry activity. The goal of the loan program is to
provide employment for former steel workers in new industries. This program does not
appear to benefit steel companies. Therefore, we preliminarily determine that it does not
confer subsidies on steel.
2. ECSC Labor Assistance and Rehabilitation Aids. Under Article 56 of the Treaty of Paris,
the ECSC provides matching grants to member states for programs that assist former
steelworkers presently unemployed or in training for a new trade. The program must be
aimed specifically at steel industry workers, and at least 50 percent of its funding must be
provided by the member state. The ECSC portion of the program is funded from its
budget. For the reasons discussed above, we preliminarily determine that this program
does not confer countervailable benefits.
3. ECSC R&D Grants. Article 55 of the Treaty of Paris provides funding in the form of
grants for up to 60 percent of an R&D project's cost. The projects must be for
improvements in the production and use of coal and steel. The results of the project
become the property of the ECSC and are made available to all members.
These grants are funded exclusively from the ECSC budget. Therefore, for the reasons
discussed above, we preliminarily determine that this program does not confer
countervailable benefits.
4. ECSC Interest Rebates. Certain Article 54 loans qualify for further interest reductions
depending on whether they are for environmental projects, removal of industrial
bottlenecks, promotion of steel industry competitiveness, or stabilization of coal
production. The rebates generally reduce the

*30550

interest expense for the first five
years of the loan repayment schedule by three percentage points. The interest rebates are
paid out of the ECSC's budget. For the reasons discussed above with respect to all budget-
financed programs, we preliminarily determine that this program does not confer
countervailable benefits.
5. ECSC Coal and Coke Aids. Petitioners have alleged that ECSC assistance to coal
producers in EC countries constitutes an indirect benefit to steel producers purchasing
that coal. However, the ECSC coal aids are bestowed on all types of coal. Therefore the
ECSC aids on coal cannot be intended to benefit, and do not benefit, the steel industry in
particular. Under section 771(5)(B) of the Act, there is no subsidy to steel in these
circumstances, even though steel producers in EC countries purchase some ECSC coal.
In addition, we have found that non-repayable coal and coke aids from the ECSC are paid
out of the ECSC's budget. For the reasons discussed above, they are therefore not
considered to confer countervailable benefits.

C. ECSC Programs for Which Additional Information Is Needed

1. ESCS Research and Development ("R&D") Loans. R&D loans confer countervailable
benefits on recipients if: (1) The research benefits a product under investigation; (2) the
funding source is countervailable (e.g., from ECSC borrowings on capital markets rather
than from the ECSC budget); (3) the results are not generally available; and (4) the
recipient could not have obtained a commercial loan on comparable terms without
government intervention.
Based upon information available to date, it is unclear how widely available the results of
research are, and from which source the funds derive. We will seek more information
upon which to base a determination.

II. The European Investment Bank

The European Investment Bank ("EIB") was created by the Treaty of Rome establishing the
EEC to fund projects that serve regional needs in Europe. Article 130 of the Treaty of
Rome authorizes the EIB to make loans and guarantee finance projects in all sectors of the
economy. These projects include the provision of funds to further the development of low
income regions. Funds are drawn from debt instruments floated on world capital markets
and from investment earnings. Because EIB loans are designed by charter to serve
regional needs, we find them to be countervailable where the interest rate is less than the
rate which would have been available commercially from a private lender without
government intervention.
The EIB also provides loan guarantees to companies in EC member countries. Again,
because this guarantee was available in some but not all regions, it is regarded as a
countervailable benefit.

III. The European Regional Development Fund

The European Regional Development Fund was established by the EEC to provide funding
in the form of low-interest loans for industrial projects designed to correct regional
imbalances within the EEC. The fund also awards interest subsidies on EIB loans.
We preliminarily determine that this program was not utilized by any of the
manufacturers, producers or exporters for any of the products from countries under
investigation.

[FR Doc. 82-18992 Filed 7-13-82; 8:45 am]

BILLING CODE 3510-25-M