Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil: Preliminary Results of Countervailing Duty Administrative Review, 64700-64707 [2010-26403]
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and draft recommendations from one or
more of its subcommittees. NTIA will
post a detailed agenda on its Web site,
https://www.ntia.doc.gov, prior to the
meeting. There also will be an
opportunity for public comment at the
meeting.
Time and Date: The meeting will be
held on November 8, 2010, from 10 a.m.
to 1 p.m., Eastern Standard Time. The
times and the agenda topics are subject
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refer to NTIA’s Web site, https://www.
ntia.doc.gov, for the most up-to-date
meeting agenda and access information.
Place: The meeting will be held at the
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Telecommunications and Information
Administration, 1401 Constitution
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public meeting is physically accessible
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Comments provided via electronic mail
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Records: NTIA maintains records of
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records are available for public
inspection at NTIA’s Washington, DC
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any reports are available on NTIA’s
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Dated: October 15, 2010.
Kathy D. Smith,
Chief Counsel, National Telecommunications
and Information Administration.
[FR Doc. 2010–26382 Filed 10–19–10; 8:45 am]
BILLING CODE 3510–60–P
DEPARTMENT OF COMMERCE
Bureau of Industry and Security
Transportation and Related Equipment
Technical Advisory Committee; Notice
of Partially Closed Meeting
The Transportation and Related
Equipment Technical Advisory
Committee will meet on November 4,
2010, 9:30 a.m., in the Herbert C.
Hoover Building, Room 6087B, 14th
Street between Constitution &
Pennsylvania Avenues, NW.,
Washington, DC. The Committee
advises the Office of the Assistant
Secretary for Export Administration
with respect to technical questions that
affect the level of export controls
applicable to transportation and related
equipment or technology.
Public Session
1. Welcome and Introductions.
2. Review Status of Working Groups.
3. Proposals from the Public.
Closed Session
4. Discussion of matters determined to
be exempt from the provisions relating
to public meetings found in 5 U.S.C.
app. 2 §§ 10(a)(1) and 10(a)(3).
The open session will be accessible
via teleconference to 20 participants on
a first come, first serve basis. To join the
conference, submit inquiries to Ms.
Yvette Springer at
Yspringer@bis.doc.gov no later than
October 26, 2010.
A limited number of seats will be
available during the public session of
the meeting. Reservations are not
accepted. To the extent time permits,
members of the public may present oral
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However, to facilitate distribution of
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suggests that presenters forward the
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the meeting to Ms. Springer via email.
The Assistant Secretary for
Administration, with the concurrence of
the delegate of the General Counsel,
formally determined on October 15,
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2010, pursuant to Section 10(d) of the
Federal Advisory Committee Act, as
amended (5 U.S.C. app. 2 §§ (10)(d)),
that the portion of the meeting dealing
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For more information, call Yvette
Springer at (202) 482–2813.
Dated: October 15, 2010.
Yvette Springer,
Committee Liaison Officer.
[FR Doc. 2010–26408 Filed 10–19–10; 8:45 am]
BILLING CODE 3510–JT–P
DEPARTMENT OF COMMERCE
International Trade Administration
[C–351–829]
Certain Hot-Rolled Flat-Rolled CarbonQuality Steel Products From Brazil:
Preliminary Results of Countervailing
Duty Administrative Review
Import Administration,
International Trade Administration,
Department of Commerce.
AGENCY:
The Department of Commerce
(the Department) is conducting an
administrative review of the
countervailing duty (CVD) order on
certain hot-rolled flat-rolled carbonquality steel products (HRS) from Brazil
for the period January 1, 2008 through
December 31, 2008. For information on
the net subsidy for the company
reviewed, see the ‘‘Preliminary Results
of Administrative Review’’ section of
this notice. Interested parties are invited
to comment on the preliminary results
of this administrative review. See the
‘‘Disclosure and Public Comment’’
section of this notice, below.
SUMMARY:
DATES:
Effective Date: October 20, 2010.
FOR FURTHER INFORMATION CONTACT:
Myrna Lobo, Justin Neuman or Milton
Koch, AD/CVD Operations, Office 6,
Import Administration, International
Trade Administration, U.S. Department
of Commerce, 14th Street and
Constitution Avenue, NW., Washington,
DC 20230; telephone: (202) 482–2371,
(202) 482–0486 and (202) 482–2584,
respectively.
SUPPLEMENTARY INFORMATION:
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Background
On September 17, 2004, the
Department published in the Federal
Register the CVD order on HRS from
Brazil. See Agreement Suspending the
Countervailing Duty Investigation on
Hot-Rolled Flat-Rolled Carbon-Quality
Steel From Brazil; Termination of
Suspension Agreement and Notice of
Countervailing Duty Order, 69 FR 56040
(September 17, 2004) (HRS Order). The
order was issued five years after the
completion of the countervailing duty
investigation, and after the termination
of the agreement that suspended the
investigation. See Suspension of
Countervailing Duty Investigation:
Certain Hot-Rolled Flat-Rolled CarbonQuality Steel Products from Brazil, 64
FR 38797 (July 19, 1999); see also Final
Affirmative Countervailing Duty
Determination: Certain Hot-Rolled FlatRolled Carbon-Quality Steel Products
from Brazil, 64 FR 38742 (July 19, 1999)
(HRS Final Determination).
On September 1, 2009, the
Department published in the Federal
Register a notice of opportunity to
request an administrative review of this
order. See Antidumping or
Countervailing Duty Order, Finding, or
Suspended Investigation; Opportunity
to Request Administrative Review, 74
FR 45179 (September 1, 2009). On
September 30, 2009, the Department
received a timely request from Usinas
Siderurgicas de Minas Gerais
(USIMINAS) and its subsidiary,
Companhia Siderurgica Paulista
(COSIPA), to conduct an administrative
review of the countervailing duty order
applicable to its exports to the United
States for the period of January 1
through December 31, 2008. USIMINAS
and COSIPA (collectively, USIMINAS/
COSIPA) are related companies that
produce and export subject
merchandise. On October 26, 2009, the
Department initiated an administrative
review of the CVD order on HRS from
Brazil covering USIMINAS/COSIPA for
the period January 1, 2008 through
December 1, 2008. See Initiation of
Antidumping and Countervailing Duty
Administrative Reviews and Request for
Revocation in Part, 74 FR 54956
(October 26, 2009).
The Department issued questionnaires
to the Government of Brazil (GOB) and
USIMINAS/COSIPA on December 10,
2009. USIMINAS/COSIPA submitted
their joint questionnaire response on
February 1, 2010. On February 4, 2010,
the GOB submitted its questionnaire
response. Subsequently, at the
Department’s request, USIMINAS/
COSIPA submitted a revised copy of
their original questionnaire response
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removing unrelated materials
inadvertently included in the original
response.
On February 3, 2010, United States
Steel Corporation (petitioner) submitted
a timely request for the Department to
conduct on-site verifications of the
questionnaire responses submitted by
USIMINAS/COSIPA and the GOB. On
March 5, 2010, in response to a request
from the petitioner, the Department
extended the deadline for the
submission of new factual information
to April 1, 2010. On April 1, 2010,
petitioner submitted factual information
for consideration in this administrative
review. On June 7, 2010, the Department
extended the time limit for the
preliminary results of the countervailing
duty administrative review until
October 7, 2010. See Certain Hot-Rolled
Flat-Rolled Carbon-Quality Steel
Products from Brazil: Extension of Time
Limit for Preliminary Results of
Countervailing Duty Administrative
Review, 75 FR 32160 (June 7, 2010).
Included in this extension was the
Department’s decision to toll all
deadlines related to this proceeding by
seven days due to the closure of the
Federal Government from February 5
through February 12, 2010. See
Memorandum to the Record from
Ronald K. Lorentzen, Deputy Assistant
Secretary for Import Administration,
regarding ‘‘Tolling of Administrative
Deadlines As a Result of the
Government Closure During the Recent
Snowstorm’’ (February 12, 2010).
The Department issued supplemental
questionnaires to the GOB and
USIMINAS/COSIPA on June 25, 2010.
On July 26 and 27, respectively, the
GOB and USIMINAS/COSIPA submitted
their supplemental responses. The
Department issued supplemental
questionnaires to the GOB and
USIMINAS/COSIPA on September 14,
2010. On September 24 and 27,
respectively, the GOB and USIMINAS/
COSIPA submitted their supplemental
responses. On September 28,
USIMINAS/COSIPA submitted
additional supplemental information
requested by the Department.
Scope of the Order
For purposes of this review, the
products covered are certain hot-rolled
flat-rolled carbon-quality steel products
of a rectangular shape, of a width of 0.5
inch or greater, neither clad, plated, nor
coated with metal and whether or not
painted, varnished, or coated with
plastics or other non-metallic
substances, in coils (whether or not in
successively superimposed layers)
regardless of thickness, and in straight
lengths, of a thickness less than 4.75
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mm and of a width measuring at least
10 times the thickness. Universal mill
plate (i.e., flat-rolled products rolled on
four faces or in a closed box pass, of a
width exceeding 150 mm, but not
exceeding 1250 mm and of a thickness
of not less than 4 mm, not in coils and
without patterns in relief) of a thickness
not less than 4.0 mm is not included
within the scope of these investigations.
Specifically included in this scope are
vacuum degassed, fully stabilized
(commonly referred to as interstitial-free
(‘‘IF’’)) steels, high strength low alloy
(‘‘HSLA’’) steels, and the substrate for
motor lamination steels. IF steels are
recognized as low carbon steels with
micro-alloying levels of elements such
as titanium and/or niobium added to
stabilize carbon and nitrogen elements.
HSLA steels are recognized as steels
with micro-alloying levels of elements
such as chromium, copper, niobium,
titanium, vanadium, and molybdenum.
The substrate for motor lamination
steels contains micro-alloying levels of
elements such as silicon and aluminum.
Steel products to be included in the
scope of this investigation, regardless of
HTSUS definitions, are products in
which: (1) Iron predominates, by
weight, over each of the other contained
elements; (2) the carbon content is 2
percent or less, by weight; and (3) none
of the elements listed below exceeds the
quantity, by weight, respectively
indicated: 1.80 percent of manganese, or
1.50 percent of silicon, or 1.00 percent
of copper, or 0.50 percent of aluminum,
or 1.25 percent of chromium, or 0.30
percent of cobalt, or 0.40 percent of
lead, or 1.25 percent of nickel, or 0.30
percent of tungsten, or 0.012 percent of
boron, or 0.10 percent of molybdenum,
or 0.10 percent of niobium, or 0.41
percent of titanium, or 0.15 percent of
vanadium, or 0.15 percent of zirconium.
All products that meet the physical
and chemical description provided
above are within the scope of this order
unless otherwise excluded. The
following products, by way of example,
are outside and/or specifically excluded
from the scope of this order:
• Alloy hot-rolled steel products in
which at least one of the chemical
elements exceeds those listed above
(including e.g., ASTM specifications
A543, A387, A514, A517, and A506).
• SAE/AISI grades of series 2300 and
higher.
• Ball bearing steels, as defined in the
HTSUS.
• Tool steels, as defined in the
HTSUS.
• Silico-manganese (as defined in the
HTSUS) or silicon electrical steel with
a silicon level exceeding 1.50 percent.
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• ASTM specifications A710 and
A736.
• USS Abrasion-resistant steels (USS
AR 400, USS AR 500).
• Hot-rolled steel coil which meets
the following chemical, physical and
mechanical specifications:
[In percent]
C
Mn
(max)
P
(max)
S
(max)
Si
Cr
Cu
Ni
(max)
0.10–0.14
0.90
0.025
0.005
0.30–0.50
0.30–0.50
0.20–0.40
0.20
Width = 44.80 inches maximum;
Thickness = 0.063–0.198 inches;
Yield
• Hot-rolled steel coil which meets
the following chemical, physical and
mechanical specifications:
Strength = 50,000 ksi minimum; Tensile
Strength = 70,000–88,000 psi.
[In percent]
C
Mn
P
(max)
S
(max)
Si
Cr
Cu
(max)
Ni
(max)
Mo
0.10–0.16
0.70–0.90
0.025
0.006
0.30–0.50
0.30–0.50
0.25
0.20
0.21
Width = 44.80 inches maximum;
Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum;
Tensile Strength = 105,000 psi Aim.
• Hot-rolled steel coil which meets
the following chemical, physical and
mechanical specifications:
[In percent]
C
Mn
P
(max)
S
(max)
Si
Cr
Cu
Ni
(max)
V (wt.)
(max)
Cb
(max)
0.10–0.14
1.30–1.80
0.025
0.005
0.30–0.50
0.50–0.70
0.20–0.40
0.20
0.10
0.08
Width = 44.80 inches maximum;
Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum;
Tensile Strength = 105,000 psi Aim.
• Hot-rolled steel coil which meets
the following chemical, physical and
mechanical specifications:
[In percent]
C
(max)
Mn
(max)
P
(max)
S
(max)
Si
(max)
Cr
(max)
Cu
(max)
Ni
(max)
Nb
(min)
Ca
Al
0.15
1.40
0.025
0.010
0.50
1.00
0.50
0.20
0.005
Treated
0.01–0.07
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Width = 39.37 inches; Thickness =
0.181 inches maximum; Yield
Strength = 70,000 psi minimum for
thicknesses ≤ 0.148 inches and 65,000
psi minimum for thicknesses > 0.148
inches; Tensile Strength = 80,000 psi
minimum.
• Hot-rolled dual phase steel, phasehardened, primarily with a ferriticmartensitic microstructure, contains 0.9
percent up to and including 1.5 percent
silicon by weight, further characterized
by either (i) tensile strength between
540 N/mm2 and 640 N/mm2 and an
elongation percentage ≥ 26 percent for
thicknesses of 2 mm and above, or (ii)
a tensile strength between 590 N/mm2
and 690 N/mm2 and an elongation
percentage ≥ 25 percent for thicknesses
of 2 mm and above.
• Hot-rolled bearing quality steel,
SAE grade 1050, in coils, with an
inclusion rating of 1.0 maximum per
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ASTM E 45, Method A, with excellent
surface quality and chemistry
restrictions as follows: 0.012 percent
maximum phosphorus, 0.015 percent
maximum sulfur, and 0.20 percent
maximum residuals including 0.15
percent maximum chromium.
• Grade ASTM A570–50 hot-rolled
steel sheet in coils or cut lengths, width
of 74 inches (nominal, within ASTM
tolerances), thickness of 11 gauge (0.119
inch nominal), mill edge and skin
passed, with a minimum copper content
of 0.20%.
The merchandise subject to this order
is classified in the Harmonized Tariff
Schedule of the United States (HTSUS)
at subheadings: 7208.10.15.00,
7208.10.30.00, 7208.10.60.00,
7208.25.30.00, 7208.25.60.00,
7208.26.00.30, 7208.26.00.60,
7208.27.00.30, 7208.27.00.60,
7208.36.00.30, 7208.36.00.60,
7208.37.00.30, 7208.37.00.60,
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7208.38.00.15, 7208.38.00.30,
7208.38.00.90, 7208.39.00.15,
7208.39.00.30, 7208.39.00.90,
7208.40.60.30, 7208.40.60.60,
7208.53.00.00, 7208.54.00.00,
7208.90.00.00, 7210.70.30.00,
7210.90.90.00, 7211.14.00.30,
7211.14.00.90, 7211.19.15.00,
7211.19.20.00, 7211.19.30.00,
7211.19.45.00, 7211.19.60.00,
7211.19.75.30, 7211.19.75.60,
7211.19.75.90, 7212.40.10.00,
7212.40.50.00, 7212.50.00.00. Certain
hot-rolled flat-rolled carbon-quality
steel covered by this order, including:
vacuum degassed, fully stabilized; high
strength low alloy; and the substrate for
motor lamination steel may also enter
under the following tariff numbers:
7225.11.00.00, 7225.19.00.00,
7225.30.30.50, 7225.30.70.00,
7225.40.70.00, 7225.99.00.90,
7226.11.10.00, 7226.11.90.30,
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7226.11.90.60, 7226.19.10.00,
7226.19.90.00, 7226.91.50.00,
7226.91.70.00, 7226.91.80.00, and
7226.99.00.00. Although the HTSUS
subheadings are provided for
convenience and Customs purposes, the
written description of the merchandise
covered by this order is dispositive.
Period of Review
The period for which we are
measuring subsidies, i.e., the period of
review (POR), is January 1, 2008
through December 31, 2008.
Subsidies Valuation Information
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Cross-Ownership
The Department’s regulations state
that cross-ownership exists between two
or more corporations where one
corporation can use or direct the
individual assets of the other
corporation(s) in essentially the same
ways it can use its own assets. See 19
CFR 351.525(b)(6)(vi). The regulation
specifies that this standard will
normally be met where there is a
majority voting ownership interest
between two corporations or through
common ownership of two (or more)
corporations. Id. The preamble to the
Department’s regulations further
clarifies the Department’s crossownership standard. See Countervailing
Duties; Final Rule, 63 FR 65347, 65401
(November 25, 1998) (CVD Preamble).
According to the CVD Preamble,
relationships captured by the crossownership definition include those
where the interests of two corporations
have merged to such a degree that one
corporation can use or direct the
individual assets (including subsidy
benefits) of the other corporation in
essentially the same way it can use its
own assets (including subsidy benefits).
Id. The cross-ownership standard does
not require one corporation to own 100
percent of the other corporation. In
certain circumstances, a large minority
voting interest (for example, 40 percent)
or a ‘‘golden share’’ may also result in
cross-ownership. Id. at 65401.
As such, the Department’s regulations
make it clear that we must examine the
facts presented in each case in order to
determine whether cross-ownership
exists. If we find that cross-ownership
exists and if one or more of the
relationships identified in 19 CFR
351.525(b)(6) exists, we treat all crossowned companies, to which at least one
of those relationships applies, as one
company, and calculate a single rate for
any countervailable subsidies that we
identify and measure, in accordance
with 19 CFR 351.525(b)(6).
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Further, in accordance with 19 CFR
351.525(b)(6)(iv), if the Department
determines that the suppliers of inputs
primarily dedicated to the production of
the downstream product are crossowned with the producers/exporters
under investigation, then the
Department will treat subsidies
provided to the input producers as
subsidies attributable to the production
of the downstream product.
In the original HRS investigation in
1999, the Department determined that
USIMINAS and COSIPA should be
treated as a single company because of
USIMINAS’ 49.79 percent ownership
stake in COSIPA and the fact that both
companies produced subject
merchandise. See HRS Final
Determination at 38744. This finding on
the relationship between USIMINAS
and COSIPA was reaffirmed in the
Department’s countervailing duty
investigation in 2002 of certain coldrolled carbon steel flat products (CRS)
from Brazil, in which both USIMINAS
and COSIPA were respondents. See
Final Affirmative Countervailing Duty
Determination: Certain Cold-Rolled
Carbon Steel Flat Products From Brazil,
67 FR 62128 (October 3, 2002) (CRS
Final Determination) and the
accompanying Issues and Decision
Memorandum (CRS I&D Memorandum)
at 4–5. Since the CRS investigation,
COSIPA has become a wholly-owned
subsidiary of USIMINAS, and remained
so throughout the current POR. COSIPA
produced the same steel products as its
parent company; USIMINAS produced
audited consolidated financial
statements for 2008 that included
COSIPA’s financial information; and
COSIPA’s own audited financial
statement for 2008 indicates that the
majority of its Board of Directors also
hold positions on USIMINAS’ Executive
Board. Based on this information, the
Department has determined that
USIMINAS and COSIPA were crossowned during the POR in accordance
with 19 CFR 351.525(b)(6)(vi). Further,
since they both produce and export
subject merchandise, we are treating
them as a single entity, USIMINAS/
COSIPA.
USIMINAS/COSIPA reported
affiliations during the POR with three
warehousing/processing/distributing
companies involved in the production
and sale of HRS, Fasal, S.A. (Fasal),
Dufer, S.A. (Dufer), and Rio Negro
Comercio e Industrial (Rio Negro), and
two of its suppliers of iron ore
consumed in the production of HRS,
Mineracao J. Mendes Ltda. (J. Mendes)
¸˜
and Companhia do Vale do Rio Doce
(Vale). To the extent that the subsidies
we are investigating are conferred on
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these companies, we must examine
whether cross-ownership exists among
and across producers, the inventory/
processing/distributor companies, and
the iron ore producers/suppliers.
USIMINAS/COSIPA submitted
information indicating that at the
beginning of 2008, COSIPA owned 51
percent of Dufer. In October 2008,
COSIPA purchased the remaining shares
of Dufer, making the company a whollyowned subsidiary of COSIPA.
USIMINAS/COSIPA also reported in its
July 27, 2010 supplemental
questionnaire response that ‘‘some
members of Usiminas’ (Cospa’s) {sic}
top management also sat on Dufer’s
board of directors.’’ USIMINAS/COSIPA
indicates that it was the sole supplier of
all the steel products that Dufer sells or
further processes. Based on this
information, we preliminarily determine
that Dufer and USIMINAS/COSIPA
were cross-owned during the POR in
accordance with 19 CFR
351.525(b)(6)(vi).
During the POR, USIMINAS owned
65.69 percent of Rio Negro’s shares.
Respondents also indicate in their July
27, 2010 response that ‘‘(s)ome members
of Usiminas’ top management also sit on
Rio Negro’s board of directors.’’
USIMINAS/COSIPA indicates that it
was the sole supplier of all steel that Rio
Negro sells or processes. Based on this
information, we preliminarily determine
that Rio Negro and USIMINAS/COSIPA
were cross-owned during the POR in
accordance with 19 CFR
351.525(b)(6)(vi).
On February 1, 2008, USIMINAS/
COSIPA acquired all the shares of J.
Mendes and its wholly-owned
subsidiaries, Somisa Siderurgica Oeste
de Minas Ltda. (Somisa) and Global
Mineracao Ltda. On July 1, 2008, the
¸˜
stockholders of USIMINAS/COSIPA
approved the merger of J. Mendes and
its two wholly-owned subsidiaries into
USIMINAS; those companies were then
extinguished. Based on information on
the record, we preliminarily determine
that J. Mendes was cross-owned with
USIMINAS/COSIPA, from February 1,
2008 through July 1, 2008, the date on
which it was extinguished and absorbed
by USIMINAS/COSIPA, in accordance
with 19 CFR 351.525(b)(6)(vi). Because
USIMINAS/COSIPA also absorbed the
subsidiaries Somisa and Global
Mineracao Ltda. when it merged with J.
¸˜
Mendes, and because Somisa had
outstanding loans under the FINAME
program under review (see ‘‘Analysis of
Programs’’ section, below), any
countervailable benefit that Somisa
received from these loans during the
POR will be attributed to USIMINAS/
COSIPA.
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The Department also finds that Fasal
is cross-owned with USIMINAS/
COSIPA, and that Vale is not crossowned with the companies under
review. Since much of the analysis
supporting our findings on crossownership regarding Fasal and Vale
involves business proprietary
information, this analysis is fully set
forth in the Memorandum to Barbara E.
Tillman, Director, AD/CVD Operations,
Office 6, from Justin M. Neuman,
International Trade Compliance
Analyst; Countervailing Duty
Administrative Review: Certain HotRolled Flat-Rolled Carbon-Quality Steel
from Brazil, dated concurrently with
this notice (Cross-Ownership
Memorandum), a public version of
which is on file in the Department’s
Central Records Unit (CRU) in Room
7046 of the main Department building.
Based on information on the record,
for purposes of these preliminarily
results, we determine that crossownership exists, as defined by 19 CFR
351.525(b)(6), among and across the
following companies involved in the
production and sale of the subject
merchandise: respondent HRS
producers/exporters, USIMINAS and
COSIPA; the inventory/processing/
distribution companies involved in the
production and distribution of HRS,
Fasal, Dufer, and Rio Negro; and the
iron-ore supply company, J. Mendes.
Allocation Period
Under 19 CFR 351.524(d)(2)(i), we
will presume the allocation period for
non-recurring subsidies to be the
average useful life (AUL) prescribed by
the Internal Revenue Service (IRS) for
renewable physical assets of the
industry under consideration (as listed
in the IRS’s 1977 Class Life Asset
Depreciation Range System, and as
updated by the Department of the
Treasury). This presumption will apply
unless a party claims and establishes
that these tables do not reasonably
reflect the AUL of the renewable
physical assets of the company or
industry under investigation.
Specifically, the party must establish
that the difference between the AUL
from the tables and the companyspecific AUL or country-wide AUL for
the industry under investigation is
significant, pursuant to 19 CFR
351.524(d)(2)(i) and (ii). For assets used
to manufacture steel products such as
HRS, the IRS tables prescribe an AUL of
15 years.
USIMINAS/COSIPA did not rebut the
presumption that the IRS tables should
be used. Therefore, we are using the 15year AUL as reported in the IRS tables
to allocate any non-recurring subsidies
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under investigation which were
provided directly to the producers and
exporters of the subject merchandise.
Benchmark Rate Information
For programs requiring the
application of a benchmark interest rate,
19 CFR 351.505(a)(1) states a preference
for using an interest rate that the
company would have paid on a
comparable commercial loan 1 on the
market. Also, 19 CFR 351.505(a)(3)(i)
stipulates that when selecting a
comparable commercial loan that the
recipient ‘‘could actually obtain on the
market’’ the Department will normally
rely on actual short-term and long-term
loans obtained by the firm. However,
when there are no comparable
commercial loans, the Department ‘‘may
use a national average interest rate for
comparable commercial loans,’’
pursuant to 19 CFR 351.505(a)(3)(ii).
Pursuant to 19 CFR 351.505(a)(2)(iii)
and (a)(2)(iv), if a program under review
is a government-provided loan program,
the preference would be to use a
company-specific annual average of
interest rates of comparable commercial
loans during the year in which the
government-provided loan was
approved. For this review, the
Department required benchmark rates to
determine benefits received from
FINAME loans provided by Banco
Nacional de Desenvolvimento
Economico e Social (BNDES), the
Brazilian National Development Bank.
USIMINAS/COSIPA did not report
having any comparable commercial
loans meeting the above criteria
outstanding during the POR. Therefore,
to calculate the benefit to USIMINAS/
COSIPA from FINAME loans, for these
preliminary results, in accordance with
19 CFR 351.505(a)(3)(ii), the Department
has used national average interest rates.
In response to our initial
questionnaire, the GOB provided
information regarding national average
interest rates in the form of the CDI rate
and the SELIC rate; the CDI rate is the
Interbank Deposit Rate and the SELIC
rate is the rate at which the central bank
provides overnight funds to banks.
Neither represents an interest rate at
which a commercial borrower could
obtain financing on the market.
Therefore for the purposes of these
preliminary results, we will rely on
information available from the Banco
Central do Brasil, Brazil’s central bank.
Specifically, for the fixed-rate loans in
Brazilian reais, we have used use an
1 A comparable commercial loan is a loan in the
same currency, with a similar maturity, and interest
rate structure (i.e., fixed vs. variable interest rate).
See Countervailing Duties; Final Rule, 63 FR 65348,
65362.
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annual average of the monthly rates
identified as interest rates for working
capital, for corporate entities for fixed
operations. For the loans denominated
in reais with the application of an
indexation factor, we are using an
annual average of the monthly rates
identified as the consolidated rate for
corporate entities. For these loans,
because there are inconsistencies in the
reported information about how the
loan program operates and the loan
information provided by USIMINAS/
COSIPA, and there are multiple
components of the loans, including
indexation, we believe it is appropriate
to use the consolidated rates which
represent a composite of the fixed,
indexed, and floating interest rates
available to corporate entities. For a
more detailed discussion of our
selection and use of the benchmark
interest rates, see Memorandum to the
File from The Team; Calculations for the
Preliminary Results: Usinas
Siderurgicas de Minas Gerais S.A. and
Companhia Siderugica Paulista
(USIMINAS/COSIPA), dated
concurrently with this notice (HRS
Calculation Memorandum).
Analysis of Programs
A. Program Preliminarily Determined To
Be Countervailable
National Bank for Economic and Social
Development Loans (BNDES) Loan
Program: FINAME
In the CRS Final Determination, we
determined that the FINAME loan
program was countervailable as an
import substitution program in
accordance with section 771(5A)(C) of
the Tariff Act of 1930, as Amended (the
Act). In a prior administrative review of
the instant order, the Department
decided that it was appropriate to
examine programs discovered in that
investigation that reasonably appeared
to provide countervailable subsidies to
USIMINAS/COSIPA, such as FINAME
loans. See Memorandum to the File,
from The Team; Additional Subsidy
Programs to be Included in the
Questionnaire for the Countervailing
Duty Administrative Review of Certain
Hot-Rolled Carbon Steel Flat Products
from Brazil (December 19, 2005), a
public document available in the CRU.
Although the prior administrative
review was subsequently rescinded (see
Certain Hot-Rolled Flat-Rolled CarbonQuality Steel Flat Products from Brazil:
Notice of Rescission of Countervailing
Duty Administrative Review, 71 FR 8278
(February 16, 2006)), the decision to
examine FINAME loans to producers of
HRS stands. Therefore, we requested
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complete information on all FINAME
loans outstanding during the POR.
The FINAME program was
established by BNDES in the 1990s to
finance purchases of Brazilian-produced
equipment. Essentially, financing was
only provided by BNDES for the
purchase of Brazilian-made equipment
and financing for imported equipment
could only be provided if that
equipment could not be obtained in
Brazil. Financing was not provided for
foreign-made equipment if the same
equipment was produced in Brazil.
FINAME loans are primarily made on an
indirect basis through agent banks.
The terms of FINAME loans vary
depending on whether the financing is
for imported or domestically-produced
equipment. For domestically-produced
equipment, FINAME finances up to 90
percent of the purchase for a small
business and up to 80 percent of the
purchase for a large company. If the
equipment is imported, or less than 60
percent Brazilian content, the financing
must be made from a basket of foreign
currencies. For imported equipment, a
maximum financing term of five years is
applied, and financing is available for
85 percent of the value of the equipment
for small businesses and for 80 percent
of the value for large businesses. During
the POR, USIMINAS/COSIPA had
outstanding FINAME loans granted for
the purchase of Brazilian-made
equipment. See ‘‘Benchmark Rate
Information,’’ above.
We are examining the specificity of
the FINAME financing that USIMINAS/
COSIPA received. In the absence of new
information or evidence of changed
circumstances that would warrant a
reconsideration of the countervailability
of this program, we continue to find this
program to be de jure specific as an
import substitution program because it
is only available to finance the purchase
of domestically-produced equipment.
See section 771(5A)(C) of the Act. We
further find that there is a financial
contribution, through the provision of
loans, under section 771(5)(D)(i) of the
Act.
To the extent that the interest rates on
these loans are lower than the
benchmark rate, a benefit exists in
accordance with 19 CFR 351.505(a). We
calculated the benefit in accordance
with sections 351.505(a)(5)(i) and
351.505(a)(5)(ii) of the Department’s
regulations, by comparing the actual
interest paid on the outstanding
FINAME loans during the POR, to the
amount of interest that would have been
paid on these loans using the
comparable commercial benchmark
rates noted in the ‘‘Benchmark Rate
Information’’ section above. The
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FINAME loans received by USIMINAS/
COSIPA have unique interest rates and
structures including monetary
correction (indexation) of the loan
principal. Because the structure of these
loans is complex, and much of the
information is business proprietary, the
calculation methodology for these loans
is discussed in more detail in the
preliminary calculation memorandum.
See HRS Calculation Memorandum. We
preliminarily determine that
USIMINAS/COSIPA received benefits
under the FINAME financing program
during the POR. We summed the
benefits from all loans to the crossowned companies, and divided this
total by the combined total sales of
USIMINAS/COSIPA during the POR.
We thus determine the countervailable
subsidy from FINAME loans to
USIMINAS/COSIPA to be 0.02 percent
ad valorem.
B. Program Preliminarily Determined To
Be Not Countervailable
Presumed Tax Credit for the Program of
Social Integration and the Social
Contributions of Billings on Inputs Used
in Exports (PIS/COFINS)
In 1970, through Supplementary Law
No. 7, the GOB established PIS. Under
the law, companies make PIS
contributions to a fund which is ‘‘a
means of creating wealth for * * *
employees.’’ In 1991, through
Supplementary Law No. 70, the GOB
established COFINS as a contribution
for the financing of social insurance
‘‘intended solely to defray the cost of
health care and social security and
assistance work.’’ At the time of the CRS
investigation, the Department
determined that PIS and COFINS taxes
were assessed on all products purchased
domestically but did not apply to the
sale of products that are exported. See
CRS I&D Memorandum at 15. Each
company was responsible for making
monthly payments of PIS and COFINS
based on the total value of its domestic
sales of goods and services.
In 1996, through Law No. 9363, the
GOB established the PIS/COFINS tax
credit program to provide a rebate of
PIS/COFINS contributions assessed on
the purchase of raw materials,
intermediate products, and packing
materials used in the production of
exports. The PIS and COFINS
‘‘presumed’’ tax credit was established to
prevent the cascading effect of these
taxes which accrue at each point in the
chain of production. Companies
calculated PIS/COFINS credits on a
monthly basis, and used the credit by
making deductions from the Industrial
Products Tax (IPI) due.
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64705
The ‘‘presumed’’ tax credit rate for PIS
and COFINS was 5.37 percent and
applied to exporters in all industries.
The Department determined in the CRS
investigation that the GOB did not
determine the value, quantity or type of
inputs consumed in the production, by
any particular producer, of subject
merchandise, nor did the GOB take into
account any yield factors; this tax credit
rate was arbitrarily chosen for
administrative convenience. To
calculate its credit, a company divided
its export revenues, accumulated
through the prior month, by its total
sales revenues for the same period. This
export revenue ratio was then
multiplied by the company’s total value
of purchases as reflected in the
supplier’s sale invoices for raw
materials, semi-finished products, and
packaging materials used in the
production process. This amount was
then multiplied by the tax credit rate of
5.37 percent to yield the year-to-date
accumulated tax credit. In order to
calculate the credit for the current
month, the credit used through the prior
month was deducted from this
accumulated tax credit.
Consistent with the definition
provided in 19 CFR 351.102(b), we
treated PIS/COFINS taxes as indirect
taxes. (See CRS I&D Memorandum at
Comment 2). Further, because PIS/
COFINS was charged on inputs used to
make cold-rolled steel, it was charged
on goods at one stage of production that
were used in a succeeding stage of
production, thus falling within the
definitions provided in 19 CFR
351.102(b) of ‘‘cumulative indirect tax’’
and ‘‘prior-stage indirect tax.’’ See CRS
I&D Memorandum at 16.
In the CRS investigation, based on our
determination that PIS and COFINS
were prior-stage cumulative indirect
taxes, we examined whether the GOB
had a system or procedure in place,
within the meaning of 19 CFR
351.518(a)(4)(i), to confirm which
inputs and in what amounts were used
in the production of subject
merchandise. We determined that this
system was established as a simplified
and streamlined methodology to
implement and administer the tax rebate
for all companies in Brazil. The only
limitation imposed on companies
making rebate claims was that the
claims be limited to those inputs
defined under the PIS/COFINS rebate
law, which was broader than the
‘‘consumed in production’’ standard
provided for in 19 CFR 351.518(a)(1).
Companies reported their purchases of
inputs based on the assumption that all
goods purchased were consumed
equally in exported and domestically
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sold goods. Further confirmation was
not conducted by the government. As
such, we found that this system did not
permit the GOB to confirm which inputs
are being consumed in the production of
exported goods and in what amounts.
In addition, in the CRS investigation,
we found that the system did not
account for the fact that domestic and
export sales may include imported
inputs. Further, in determining the
actual amounts of inputs consumed in
final products, the GOB did not make
due allowance for waste, thereby raising
the concern that the claim amounts
were overstated. Because we found that
the GOB had not met the requirements
under 19 CFR 351.518(a)(4)(i), we
determined that the entire amount of the
credit granted on PIS/COFINS payments
conferred a benefit to the respondent
companies. In the CRS Final
Determination, we determined that,
according to section 771(5)(D)(ii) of the
Act, the granting of tax credits
constituted a financial contribution, and
because the PIS/COFINS rebates were
calculated based on a company’s export
revenue, i.e., were available only to
exporters, we found that this program
was de jure specific as an export
subsidy according to section 771(5A)(B)
of the Act.
In the current review of HRS, in
response to the initial questionnaire, the
GOB has reported widespread changes
to the administration of PIS/COFINS
since the CRS investigation. In order to
eliminate the distortions caused by the
cumulative regime of PIS/COFINS and
to promote tax neutrality, the GOB
introduced Law No. 10.637 of December
30, 2002, and Law No. 10.833 of
December 29, 2003, for PIS and
COFINS, respectively. These laws
revised the PIS/COFINS programs such
that they now operate as a value-added
tax (VAT) system. For the reasons
discussed above, as in the CRS
investigation we preliminarily
determine that the PIS/COFINS taxes
meet the definitions of an ‘‘indirect tax’’
and a ‘‘prior-stage indirect tax’’ within
the meaning of 19 CFR 351.102(b).
According to the revisions in the
legislation, PIS and COFINS taxes are
now collected at 1.65 percent and 7.6
percent, respectively, when companies
sell goods in the domestic market.
Companies also pay PIS and COFINS at
the rates of 1.65 percent and 7.6 percent,
respectively, when domestically
purchasing goods for resale, goods and
services used as inputs in the
production or manufacture of goods for
sale, storage of merchandise related to
sales, freight expenses related to sales,
etc. Goods that are exported do not
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generate any tax liability under the noncumulative PIS/COFINS regime.
To calculate the difference between
the taxes paid by a company on its
purchases and the taxes collected by a
company on its sales under the noncumulative PIS/COFINS system, the
total value of the company’s exports is
subtracted from the company’s overall
revenue before applying the combined
PIS/COFINS tax rate of 9.25 percent to
determine the amount of PIS/COFINS
taxes due to the government. Eligible
purchases of inputs, goods for resale,
etc., that were subject to PIS/COFINS
taxation are summed and multiplied by
the same 9.25 percent rate to determine
the total amount of PIS/COFINS taxes
already paid by the company on its
purchases. When a company has paid
more in PIS/COFINS taxes on its
purchases than it collects on its sales,
the company is due the difference.
When a company collects more in PIS/
COFINS on its sales than it pays on its
purchases, the company remits the
difference to the government. Brazilian
companies prepare monthly documents
that reconcile the amount of PIS/
COFINS taxes they paid on their
purchases and the amount of PIS/
COFINS taxes they collected on the
company’s total sales in each month.
These documents are filed with the
Brazilian Federal income tax authority.
In the CRS investigation, we found
that PIS/COFINS operated as a
cumulative, indirect tax for which
excessive remission was received by
respondents within the meaning of 19
CFR 351.518(a)(2). However, because
information provided by the GOB
indicates widespread changes in the
administration of PIS/COFINS since the
Department last examined this program
in the CRS investigation, we have
reexamined this program. For the
purposes of this review, we
preliminarily determine that the PIS/
COFINS program has been transformed
via Laws No. 10.637 and 10.833 and
now operates like a standard VAT
system. Based on the information on the
record, the PIS/COFINS program no
longer operates as a cumulative indirect
tax within the meaning of 19 CFR
102(b). Therefore, an analysis of the
program under 19 CFR 351.518 is no
longer appropriate. Because of the
program’s transformation into a
standard VAT program, we have
reexamined whether any remittance or
rebate received under this program is
excessive within the meaning of 19 CFR
351.517. See CVD Preamble at 65383.
Under 19 CFR 351.517, which addresses
the exemption or remission upon export
of indirect taxes, a benefit exists to the
extent that the amount remitted or
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exempted exceeds the amount levied
with respect to the production and
distribution of like products when sold
for domestic consumption. The record
demonstrates that the changes to the
program have eliminated the tax credits
granted upon export. The only credit is
itself based on the actual amount of PIS/
COFINS taxes already paid by a
company on its purchases, and there are
no credits granted upon export. Thus,
there is no benefit as defined under the
provisions of 19 CFR 351.517(a), which
define a benefit as the amount by which
the credit upon export exceeds the taxes
levied on the production and
distribution of like products sold for
domestic consumption. Therefore, for
purposes of these preliminary results,
we find that there is no benefit within
the meaning of 19 CFR 351.517(a).
Furthermore, we find that the laws
transforming these PIS/COFINS tax
credits into a VAT-like system did not
provide any ‘‘grandfathering’’ provisions
and therefore we find that there are no
benefits available under the old PIS/
COFINS structure. As such, we
preliminarily determine that the PIS/
COFINS program is not countervailable
within the meaning of section 771(5) of
the Act.
C. Programs Preliminarily Determined
To Be Not Used
We preliminarily determine that
USIMINAS/COSIPA did not apply for or
receive benefits during the POR under
the programs listed below:
1. Equity Infusions
In the investigation of HRS, we found
that the GOB had granted subsidies in
the form of equity infusions to
USIMINAS from 1983 through 1988,
and to COSIPA from 1983 through 1989,
and in 1991. The countervailable
benefits from those equity infusions
were fully allocated prior to the POR.
USIMINAS/COSIPA has not received
any other equity infusions that provide
countervailable benefits in the POR.
2. GOB Debt-to-Equity Conversions
In the investigation of HRS, we found
that the GOB had granted subsidies in
the form of debt-to-equity conversions
to COSIPA in 1992 and 1993 in
preparation for COSIPA’s privatization.
The countervailable benefits from those
debt-to-equity conversions were fully
allocated prior to the POR. USIMINAS/
COSIPA has not received any other
debt-to-equity conversions that provide
countervailable benefits in the POR.
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approved and the prior three years. The
GOB responded to this questionnaire on
September 24, 2010, but did not provide
detailed information. Given that the
FINEM loan issue arose late in the
proceeding, and the Department has not
had sufficient time to gather and assess
the information provided by the GOB,
the Department will continue to
examine the information provided by
the GOB and will request additional
information in order to complete our
analysis of whether this program
provides a countervailable subsidy to
USIMINAS/COSIPA for the final results.
3. National Bank for Economic and
Social Development Loans (BNDES)
Loan Programs
a. BNDES EXIM
b. BNDES Participacoes S.A.
(BNDESPAR)
4. Provincial Government Program:
PRO–INDUSTRIA
5. Programa de Financiamento as
Exportacoes (PROEX)
6. Program to Induce Industrial
Modernization of the State of Minas
Gerais (PROIM)
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D. Program For Which More Information
Is Required
BNDES FINEM Loan Program
In the CRS Final Determination, we
found the FINEM loan program not
countervailable based on information
provided by the GOB that showed that
FINEM loans were not specific: there
was no indication of de jure specificity
under section 771(5A)(D)(i) of the Act.
Further, the financing was provided to
a wide variety of industries ranging
from paper to electricity to farming
products, and the breakdown of FINEM
financing by industry indicated that the
steel industry was neither a
predominant user nor disproportionate
recipient of FINEM financing, and the
program was not de facto specific under
section 771(5A)(D)(iii) of the Act.
In the original questionnaire, the
companies reported FINAME loans and
other BNDES loans. See USIMINAS/
COSIPA’s February 1, 2010
questionnaire response at 17. In our
supplemental questionnaires, we sought
clarification of the BNDES programs
under which the loans reported by
USIMINAS/COSIPA had been provided.
The GOB identified certain BNDES
loans as FINEM loans for the financing
of investment projects. See the GOB’s
July 26, 2010 supplemental response at
1. These loans had been granted to
USIMINAS/COSIPA after the POI. Our
decision in the CRS Final Determination
that FINEM loans were de facto not
specific was based on our analysis of the
distribution of loans granted
contemporaneously with USIMINAS/
COSIPA’s FINEM loans outstanding
during the POI. Because the FINEM
loans outstanding during the POR are
new loans granted to USIMINAS/
COSIPA since the POI, it is appropriate
to examine whether this program is de
facto specific for the purposes of this
review. In the second supplemental
questionnaire, we asked the GOB to
provide information regarding this
program, in particular, the distribution
of loans by industry for the years in
which USIMINAS/COSIPA’s loans were
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Preliminary Results of Administrative
Review
In accordance with 19 CFR
351.221(b)(4)(i), we have calculated a
combined subsidy rate for USIMINAS/
COSIPA for the POR. We preliminarily
determine the total countervailable
subsidy to be 0.02 percent ad valorem
for USIMINAS/COSIPA, which is a de
minimis rate. See 19 CFR 351.106(c)(1).
Assessment Rates/Cash Deposits
The Department intends to issue
assessment instructions to U.S. Customs
and Border Protection (CBP) 15 days
after the date of publication of the final
results of this review. If the final results
remain the same as these preliminary
results, the Department will instruct
CBP to liquidate without regard to
countervailing duties all shipments of
subject merchandise produced by
USIMINAS/COSIPA, entered, or
withdrawn from warehouse, for
consumption from January 1, 2008
through December 31, 2008. The
Department will also instruct CBP to
collect cash deposits of estimated
countervailing duties at a rate of 0.00
percent on shipments of the subject
merchandise produced by USIMINAS/
COSIPA, entered, or withdrawn from
warehouse, for consumption on or after
the date of publication of the final
results of this review.
We will instruct CBP to continue to
collect cash deposits for non-reviewed
companies at the most recent companyspecific or country-wide rate applicable
to the company. Accordingly, the cash
deposit rates that will be applied to
companies covered by this order, but
not examined in this review, are those
established in the most recently
completed administrative proceeding
for each company. These rates shall
apply to all non-reviewed companies
until a review of a company assigned
these rates is requested.
of the proceeding within five days of the
public announcement of this notice. See
19 CFR 351.224(b). Pursuant to 19 CFR
351.309, interested parties may submit
written comments in response to these
preliminary results. Unless the time
period is extended by the Department,
case briefs are to be submitted within 30
days after the date of publication of this
notice in the Federal Register. See 19
CFR 351.309(c). Rebuttal briefs, which
must be limited to arguments raised in
case briefs, are to be submitted no later
than five days after the time limit for
filing case briefs. See 19 CFR
351.309(d). Parties who submit
arguments in this proceeding are
requested to submit with the argument:
(1) A statement of the issues; (2) a brief
summary of the argument; and (3) a
table of authorities cited. Further, we
request that parties submitting written
comments provide the Department with
a diskette containing an electronic copy
of the public version of such comments.
Case and rebuttal briefs must be served
on interested parties, in accordance
with 19 CFR 351.303(f).
Interested parties may also request a
hearing pursuant to 19 CFR 351.310(c).
Interested parties who wish to request a
hearing, or to participate if one is
requested, must submit a written
request to the Assistant Secretary for
Import Administration, within 30 days
of the date of publication of this notice.
See id. Requests should contain: (1) The
party’s name, address and telephone
number; (2) the number of participants;
and (3) a list of issues to be discussed.
Unless extended, the Department will
issue the final results of this
administrative review, including the
results of its analysis of issues raised in
any written briefs, not later than 120
days after the date of publication of this
notice, pursuant to section 751(a)(3)(A)
of the Act. These preliminary results are
issued and published in accordance
with sections 751(a)(1) and 777(i)(1) of
the Act, and 19 CFR 351.221(b)(4).
Dated: October 7, 2010.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import
Administration.
[FR Doc. 2010–26403 Filed 10–19–10; 8:45 am]
BILLING CODE 3510–DS–P
Disclosure and Public Comment
We will disclose the calculations used
in our analysis to parties to this segment
PO 00000
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]]>Agencies
[Federal Register Volume 75, Number 202 (Wednesday, October 20, 2010)]
[Notices]
[Pages 64700-64707]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-26403]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[C-351-829]
Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From
Brazil: Preliminary Results of Countervailing Duty Administrative
Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty (CVD) order on certain
hot-rolled flat-rolled carbon-quality steel products (HRS) from Brazil
for the period January 1, 2008 through December 31, 2008. For
information on the net subsidy for the company reviewed, see the
``Preliminary Results of Administrative Review'' section of this
notice. Interested parties are invited to comment on the preliminary
results of this administrative review. See the ``Disclosure and Public
Comment'' section of this notice, below.
DATES: Effective Date: October 20, 2010.
FOR FURTHER INFORMATION CONTACT: Myrna Lobo, Justin Neuman or Milton
Koch, AD/CVD Operations, Office 6, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
2371, (202) 482-0486 and (202) 482-2584, respectively.
SUPPLEMENTARY INFORMATION:
[[Page 64701]]
Background
On September 17, 2004, the Department published in the Federal
Register the CVD order on HRS from Brazil. See Agreement Suspending the
Countervailing Duty Investigation on Hot-Rolled Flat-Rolled Carbon-
Quality Steel From Brazil; Termination of Suspension Agreement and
Notice of Countervailing Duty Order, 69 FR 56040 (September 17, 2004)
(HRS Order). The order was issued five years after the completion of
the countervailing duty investigation, and after the termination of the
agreement that suspended the investigation. See Suspension of
Countervailing Duty Investigation: Certain Hot-Rolled Flat-Rolled
Carbon-Quality Steel Products from Brazil, 64 FR 38797 (July 19, 1999);
see also Final Affirmative Countervailing Duty Determination: Certain
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64 FR
38742 (July 19, 1999) (HRS Final Determination).
On September 1, 2009, the Department published in the Federal
Register a notice of opportunity to request an administrative review of
this order. See Antidumping or Countervailing Duty Order, Finding, or
Suspended Investigation; Opportunity to Request Administrative Review,
74 FR 45179 (September 1, 2009). On September 30, 2009, the Department
received a timely request from Usinas Siderurgicas de Minas Gerais
(USIMINAS) and its subsidiary, Companhia Siderurgica Paulista (COSIPA),
to conduct an administrative review of the countervailing duty order
applicable to its exports to the United States for the period of
January 1 through December 31, 2008. USIMINAS and COSIPA (collectively,
USIMINAS/COSIPA) are related companies that produce and export subject
merchandise. On October 26, 2009, the Department initiated an
administrative review of the CVD order on HRS from Brazil covering
USIMINAS/COSIPA for the period January 1, 2008 through December 1,
2008. See Initiation of Antidumping and Countervailing Duty
Administrative Reviews and Request for Revocation in Part, 74 FR 54956
(October 26, 2009).
The Department issued questionnaires to the Government of Brazil
(GOB) and USIMINAS/COSIPA on December 10, 2009. USIMINAS/COSIPA
submitted their joint questionnaire response on February 1, 2010. On
February 4, 2010, the GOB submitted its questionnaire response.
Subsequently, at the Department's request, USIMINAS/COSIPA submitted a
revised copy of their original questionnaire response removing
unrelated materials inadvertently included in the original response.
On February 3, 2010, United States Steel Corporation (petitioner)
submitted a timely request for the Department to conduct on-site
verifications of the questionnaire responses submitted by USIMINAS/
COSIPA and the GOB. On March 5, 2010, in response to a request from the
petitioner, the Department extended the deadline for the submission of
new factual information to April 1, 2010. On April 1, 2010, petitioner
submitted factual information for consideration in this administrative
review. On June 7, 2010, the Department extended the time limit for the
preliminary results of the countervailing duty administrative review
until October 7, 2010. See Certain Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products from Brazil: Extension of Time Limit for
Preliminary Results of Countervailing Duty Administrative Review, 75 FR
32160 (June 7, 2010). Included in this extension was the Department's
decision to toll all deadlines related to this proceeding by seven days
due to the closure of the Federal Government from February 5 through
February 12, 2010. See Memorandum to the Record from Ronald K.
Lorentzen, Deputy Assistant Secretary for Import Administration,
regarding ``Tolling of Administrative Deadlines As a Result of the
Government Closure During the Recent Snowstorm'' (February 12, 2010).
The Department issued supplemental questionnaires to the GOB and
USIMINAS/COSIPA on June 25, 2010. On July 26 and 27, respectively, the
GOB and USIMINAS/COSIPA submitted their supplemental responses. The
Department issued supplemental questionnaires to the GOB and USIMINAS/
COSIPA on September 14, 2010. On September 24 and 27, respectively, the
GOB and USIMINAS/COSIPA submitted their supplemental responses. On
September 28, USIMINAS/COSIPA submitted additional supplemental
information requested by the Department.
Scope of the Order
For purposes of this review, the products covered are certain hot-
rolled flat-rolled carbon-quality steel products of a rectangular
shape, of a width of 0.5 inch or greater, neither clad, plated, nor
coated with metal and whether or not painted, varnished, or coated with
plastics or other non-metallic substances, in coils (whether or not in
successively superimposed layers) regardless of thickness, and in
straight lengths, of a thickness less than 4.75 mm and of a width
measuring at least 10 times the thickness. Universal mill plate (i.e.,
flat-rolled products rolled on four faces or in a closed box pass, of a
width exceeding 150 mm, but not exceeding 1250 mm and of a thickness of
not less than 4 mm, not in coils and without patterns in relief) of a
thickness not less than 4.0 mm is not included within the scope of
these investigations.
Specifically included in this scope are vacuum degassed, fully
stabilized (commonly referred to as interstitial-free (``IF'')) steels,
high strength low alloy (``HSLA'') steels, and the substrate for motor
lamination steels. IF steels are recognized as low carbon steels with
micro-alloying levels of elements such as titanium and/or niobium added
to stabilize carbon and nitrogen elements. HSLA steels are recognized
as steels with micro-alloying levels of elements such as chromium,
copper, niobium, titanium, vanadium, and molybdenum. The substrate for
motor lamination steels contains micro-alloying levels of elements such
as silicon and aluminum.
Steel products to be included in the scope of this investigation,
regardless of HTSUS definitions, are products in which: (1) Iron
predominates, by weight, over each of the other contained elements; (2)
the carbon content is 2 percent or less, by weight; and (3) none of the
elements listed below exceeds the quantity, by weight, respectively
indicated: 1.80 percent of manganese, or 1.50 percent of silicon, or
1.00 percent of copper, or 0.50 percent of aluminum, or 1.25 percent of
chromium, or 0.30 percent of cobalt, or 0.40 percent of lead, or 1.25
percent of nickel, or 0.30 percent of tungsten, or 0.012 percent of
boron, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent
of zirconium.
All products that meet the physical and chemical description
provided above are within the scope of this order unless otherwise
excluded. The following products, by way of example, are outside and/or
specifically excluded from the scope of this order:
Alloy hot-rolled steel products in which at least one of
the chemical elements exceeds those listed above (including e.g., ASTM
specifications A543, A387, A514, A517, and A506).
SAE/AISI grades of series 2300 and higher.
Ball bearing steels, as defined in the HTSUS.
Tool steels, as defined in the HTSUS.
Silico-manganese (as defined in the HTSUS) or silicon
electrical steel with a silicon level exceeding 1.50 percent.
[[Page 64702]]
ASTM specifications A710 and A736.
USS Abrasion-resistant steels (USS AR 400, USS AR 500).
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:
[In percent]
----------------------------------------------------------------------------------------------------------------
C Mn (max) P (max) S (max) Si Cr Cu Ni (max)
----------------------------------------------------------------------------------------------------------------
0.10-0.14 0.90 0.025 0.005 0.30-0.50 0.30-0.50 0.20-0.40 0.20
----------------------------------------------------------------------------------------------------------------
Width = 44.80 inches maximum; Thickness = 0.063-0.198 inches; Yield
Strength = 50,000 ksi minimum; Tensile Strength = 70,000-88,000 psi.
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:
[In percent]
----------------------------------------------------------------------------------------------------------------
C Mn P (max) S (max) Si Cr Cu (max) Ni (max) Mo
----------------------------------------------------------------------------------------------------------------
0.10-0.16 0.70-0.90 0.025 0.006 0.30-0.50 0.30-0.50 0.25 0.20 0.21
----------------------------------------------------------------------------------------------------------------
Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi
Aim.
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
V (wt.)
C Mn P (max) S (max) Si Cr Cu Ni (max) (max) Cb (max)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.10-0.14 1.30-1.80 0.025 0.005 0.30-0.50 0.50-0.70 0.20-0.40 0.20 0.10 0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------
Width = 44.80 inches maximum; Thickness = 0.350 inches maximum;
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi
Aim.
Hot-rolled steel coil which meets the following chemical,
physical and mechanical specifications:
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
C (max) Mn (max) P (max) S (max) Si (max) Cr (max) Cu (max) Ni (max) Nb (min) Ca Al
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.15 1.40 0.025 0.010 0.50 1.00 0.50 0.20 0.005 Treated 0.01-0.07
--------------------------------------------------------------------------------------------------------------------------------------------------------
Width = 39.37 inches; Thickness = 0.181 inches maximum; Yield Strength
= 70,000 psi minimum for thicknesses <= 0.148 inches and 65,000 psi
minimum for thicknesses > 0.148 inches; Tensile Strength = 80,000 psi
minimum.
Hot-rolled dual phase steel, phase-hardened, primarily
with a ferritic-martensitic microstructure, contains 0.9 percent up to
and including 1.5 percent silicon by weight, further characterized by
either (i) tensile strength between 540 N/mm2 and 640 N/mm2 and an
elongation percentage >= 26 percent for thicknesses of 2 mm and above,
or (ii) a tensile strength between 590 N/mm2 and 690 N/mm2 and an
elongation percentage >= 25 percent for thicknesses of 2 mm and above.
Hot-rolled bearing quality steel, SAE grade 1050, in
coils, with an inclusion rating of 1.0 maximum per ASTM E 45, Method A,
with excellent surface quality and chemistry restrictions as follows:
0.012 percent maximum phosphorus, 0.015 percent maximum sulfur, and
0.20 percent maximum residuals including 0.15 percent maximum chromium.
Grade ASTM A570-50 hot-rolled steel sheet in coils or cut
lengths, width of 74 inches (nominal, within ASTM tolerances),
thickness of 11 gauge (0.119 inch nominal), mill edge and skin passed,
with a minimum copper content of 0.20%.
The merchandise subject to this order is classified in the
Harmonized Tariff Schedule of the United States (HTSUS) at subheadings:
7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 7208.25.30.00,
7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 7208.27.00.30,
7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 7208.37.00.30,
7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 7208.38.00.90,
7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 7208.40.60.30,
7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 7208.90.00.00,
7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 7211.14.00.90,
7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 7211.19.45.00,
7211.19.60.00, 7211.19.75.30, 7211.19.75.60, 7211.19.75.90,
7212.40.10.00, 7212.40.50.00, 7212.50.00.00. Certain hot-rolled flat-
rolled carbon-quality steel covered by this order, including: vacuum
degassed, fully stabilized; high strength low alloy; and the substrate
for motor lamination steel may also enter under the following tariff
numbers: 7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00,
7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30,
[[Page 64703]]
7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00,
7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. Although the HTSUS
subheadings are provided for convenience and Customs purposes, the
written description of the merchandise covered by this order is
dispositive.
Period of Review
The period for which we are measuring subsidies, i.e., the period
of review (POR), is January 1, 2008 through December 31, 2008.
Subsidies Valuation Information
Cross-Ownership
The Department's regulations state that cross-ownership exists
between two or more corporations where one corporation can use or
direct the individual assets of the other corporation(s) in essentially
the same ways it can use its own assets. See 19 CFR 351.525(b)(6)(vi).
The regulation specifies that this standard will normally be met where
there is a majority voting ownership interest between two corporations
or through common ownership of two (or more) corporations. Id. The
preamble to the Department's regulations further clarifies the
Department's cross-ownership standard. See Countervailing Duties; Final
Rule, 63 FR 65347, 65401 (November 25, 1998) (CVD Preamble). According
to the CVD Preamble, relationships captured by the cross-ownership
definition include those where the interests of two corporations have
merged to such a degree that one corporation can use or direct the
individual assets (including subsidy benefits) of the other corporation
in essentially the same way it can use its own assets (including
subsidy benefits). Id. The cross-ownership standard does not require
one corporation to own 100 percent of the other corporation. In certain
circumstances, a large minority voting interest (for example, 40
percent) or a ``golden share'' may also result in cross-ownership. Id.
at 65401.
As such, the Department's regulations make it clear that we must
examine the facts presented in each case in order to determine whether
cross-ownership exists. If we find that cross-ownership exists and if
one or more of the relationships identified in 19 CFR 351.525(b)(6)
exists, we treat all cross-owned companies, to which at least one of
those relationships applies, as one company, and calculate a single
rate for any countervailable subsidies that we identify and measure, in
accordance with 19 CFR 351.525(b)(6).
Further, in accordance with 19 CFR 351.525(b)(6)(iv), if the
Department determines that the suppliers of inputs primarily dedicated
to the production of the downstream product are cross-owned with the
producers/exporters under investigation, then the Department will treat
subsidies provided to the input producers as subsidies attributable to
the production of the downstream product.
In the original HRS investigation in 1999, the Department
determined that USIMINAS and COSIPA should be treated as a single
company because of USIMINAS' 49.79 percent ownership stake in COSIPA
and the fact that both companies produced subject merchandise. See HRS
Final Determination at 38744. This finding on the relationship between
USIMINAS and COSIPA was reaffirmed in the Department's countervailing
duty investigation in 2002 of certain cold-rolled carbon steel flat
products (CRS) from Brazil, in which both USIMINAS and COSIPA were
respondents. See Final Affirmative Countervailing Duty Determination:
Certain Cold-Rolled Carbon Steel Flat Products From Brazil, 67 FR 62128
(October 3, 2002) (CRS Final Determination) and the accompanying Issues
and Decision Memorandum (CRS I&D Memorandum) at 4-5. Since the CRS
investigation, COSIPA has become a wholly-owned subsidiary of USIMINAS,
and remained so throughout the current POR. COSIPA produced the same
steel products as its parent company; USIMINAS produced audited
consolidated financial statements for 2008 that included COSIPA's
financial information; and COSIPA's own audited financial statement for
2008 indicates that the majority of its Board of Directors also hold
positions on USIMINAS' Executive Board. Based on this information, the
Department has determined that USIMINAS and COSIPA were cross-owned
during the POR in accordance with 19 CFR 351.525(b)(6)(vi). Further,
since they both produce and export subject merchandise, we are treating
them as a single entity, USIMINAS/COSIPA.
USIMINAS/COSIPA reported affiliations during the POR with three
warehousing/processing/distributing companies involved in the
production and sale of HRS, Fasal, S.A. (Fasal), Dufer, S.A. (Dufer),
and Rio Negro Comercio e Industrial (Rio Negro), and two of its
suppliers of iron ore consumed in the production of HRS,
Minera[ccedil][atilde]o J. Mendes Ltda. (J. Mendes) and Companhia do
Vale do Rio Doce (Vale). To the extent that the subsidies we are
investigating are conferred on these companies, we must examine whether
cross-ownership exists among and across producers, the inventory/
processing/distributor companies, and the iron ore producers/suppliers.
USIMINAS/COSIPA submitted information indicating that at the
beginning of 2008, COSIPA owned 51 percent of Dufer. In October 2008,
COSIPA purchased the remaining shares of Dufer, making the company a
wholly-owned subsidiary of COSIPA. USIMINAS/COSIPA also reported in its
July 27, 2010 supplemental questionnaire response that ``some members
of Usiminas' (Cospa's) {sic{time} top management also sat on Dufer's
board of directors.'' USIMINAS/COSIPA indicates that it was the sole
supplier of all the steel products that Dufer sells or further
processes. Based on this information, we preliminarily determine that
Dufer and USIMINAS/COSIPA were cross-owned during the POR in accordance
with 19 CFR 351.525(b)(6)(vi).
During the POR, USIMINAS owned 65.69 percent of Rio Negro's shares.
Respondents also indicate in their July 27, 2010 response that ``(s)ome
members of Usiminas' top management also sit on Rio Negro's board of
directors.'' USIMINAS/COSIPA indicates that it was the sole supplier of
all steel that Rio Negro sells or processes. Based on this information,
we preliminarily determine that Rio Negro and USIMINAS/COSIPA were
cross-owned during the POR in accordance with 19 CFR 351.525(b)(6)(vi).
On February 1, 2008, USIMINAS/COSIPA acquired all the shares of J.
Mendes and its wholly-owned subsidiaries, Somisa Siderurgica Oeste de
Minas Ltda. (Somisa) and Global Minera[ccedil][atilde]o Ltda. On July
1, 2008, the stockholders of USIMINAS/COSIPA approved the merger of J.
Mendes and its two wholly-owned subsidiaries into USIMINAS; those
companies were then extinguished. Based on information on the record,
we preliminarily determine that J. Mendes was cross-owned with
USIMINAS/COSIPA, from February 1, 2008 through July 1, 2008, the date
on which it was extinguished and absorbed by USIMINAS/COSIPA, in
accordance with 19 CFR 351.525(b)(6)(vi). Because USIMINAS/COSIPA also
absorbed the subsidiaries Somisa and Global Minera[ccedil][atilde]o
Ltda. when it merged with J. Mendes, and because Somisa had outstanding
loans under the FINAME program under review (see ``Analysis of
Programs'' section, below), any countervailable benefit that Somisa
received from these loans during the POR will be attributed to
USIMINAS/COSIPA.
[[Page 64704]]
The Department also finds that Fasal is cross-owned with USIMINAS/
COSIPA, and that Vale is not cross-owned with the companies under
review. Since much of the analysis supporting our findings on cross-
ownership regarding Fasal and Vale involves business proprietary
information, this analysis is fully set forth in the Memorandum to
Barbara E. Tillman, Director, AD/CVD Operations, Office 6, from Justin
M. Neuman, International Trade Compliance Analyst; Countervailing Duty
Administrative Review: Certain Hot-Rolled Flat-Rolled Carbon-Quality
Steel from Brazil, dated concurrently with this notice (Cross-Ownership
Memorandum), a public version of which is on file in the Department's
Central Records Unit (CRU) in Room 7046 of the main Department
building.
Based on information on the record, for purposes of these
preliminarily results, we determine that cross-ownership exists, as
defined by 19 CFR 351.525(b)(6), among and across the following
companies involved in the production and sale of the subject
merchandise: respondent HRS producers/exporters, USIMINAS and COSIPA;
the inventory/processing/distribution companies involved in the
production and distribution of HRS, Fasal, Dufer, and Rio Negro; and
the iron-ore supply company, J. Mendes.
Allocation Period
Under 19 CFR 351.524(d)(2)(i), we will presume the allocation
period for non-recurring subsidies to be the average useful life (AUL)
prescribed by the Internal Revenue Service (IRS) for renewable physical
assets of the industry under consideration (as listed in the IRS's 1977
Class Life Asset Depreciation Range System, and as updated by the
Department of the Treasury). This presumption will apply unless a party
claims and establishes that these tables do not reasonably reflect the
AUL of the renewable physical assets of the company or industry under
investigation. Specifically, the party must establish that the
difference between the AUL from the tables and the company-specific AUL
or country-wide AUL for the industry under investigation is
significant, pursuant to 19 CFR 351.524(d)(2)(i) and (ii). For assets
used to manufacture steel products such as HRS, the IRS tables
prescribe an AUL of 15 years.
USIMINAS/COSIPA did not rebut the presumption that the IRS tables
should be used. Therefore, we are using the 15-year AUL as reported in
the IRS tables to allocate any non-recurring subsidies under
investigation which were provided directly to the producers and
exporters of the subject merchandise.
Benchmark Rate Information
For programs requiring the application of a benchmark interest
rate, 19 CFR 351.505(a)(1) states a preference for using an interest
rate that the company would have paid on a comparable commercial loan
\1\ on the market. Also, 19 CFR 351.505(a)(3)(i) stipulates that when
selecting a comparable commercial loan that the recipient ``could
actually obtain on the market'' the Department will normally rely on
actual short-term and long-term loans obtained by the firm. However,
when there are no comparable commercial loans, the Department ``may use
a national average interest rate for comparable commercial loans,''
pursuant to 19 CFR 351.505(a)(3)(ii).
---------------------------------------------------------------------------
\1\ A comparable commercial loan is a loan in the same currency,
with a similar maturity, and interest rate structure (i.e., fixed
vs. variable interest rate). See Countervailing Duties; Final Rule,
63 FR 65348, 65362.
---------------------------------------------------------------------------
Pursuant to 19 CFR 351.505(a)(2)(iii) and (a)(2)(iv), if a program
under review is a government-provided loan program, the preference
would be to use a company-specific annual average of interest rates of
comparable commercial loans during the year in which the government-
provided loan was approved. For this review, the Department required
benchmark rates to determine benefits received from FINAME loans
provided by Banco Nacional de Desenvolvimento Economico e Social
(BNDES), the Brazilian National Development Bank. USIMINAS/COSIPA did
not report having any comparable commercial loans meeting the above
criteria outstanding during the POR. Therefore, to calculate the
benefit to USIMINAS/COSIPA from FINAME loans, for these preliminary
results, in accordance with 19 CFR 351.505(a)(3)(ii), the Department
has used national average interest rates.
In response to our initial questionnaire, the GOB provided
information regarding national average interest rates in the form of
the CDI rate and the SELIC rate; the CDI rate is the Interbank Deposit
Rate and the SELIC rate is the rate at which the central bank provides
overnight funds to banks. Neither represents an interest rate at which
a commercial borrower could obtain financing on the market. Therefore
for the purposes of these preliminary results, we will rely on
information available from the Banco Central do Brasil, Brazil's
central bank. Specifically, for the fixed-rate loans in Brazilian
reais, we have used use an annual average of the monthly rates
identified as interest rates for working capital, for corporate
entities for fixed operations. For the loans denominated in reais with
the application of an indexation factor, we are using an annual average
of the monthly rates identified as the consolidated rate for corporate
entities. For these loans, because there are inconsistencies in the
reported information about how the loan program operates and the loan
information provided by USIMINAS/COSIPA, and there are multiple
components of the loans, including indexation, we believe it is
appropriate to use the consolidated rates which represent a composite
of the fixed, indexed, and floating interest rates available to
corporate entities. For a more detailed discussion of our selection and
use of the benchmark interest rates, see Memorandum to the File from
The Team; Calculations for the Preliminary Results: Usinas Siderurgicas
de Minas Gerais S.A. and Companhia Siderugica Paulista (USIMINAS/
COSIPA), dated concurrently with this notice (HRS Calculation
Memorandum).
Analysis of Programs
A. Program Preliminarily Determined To Be Countervailable
National Bank for Economic and Social Development Loans (BNDES) Loan
Program: FINAME
In the CRS Final Determination, we determined that the FINAME loan
program was countervailable as an import substitution program in
accordance with section 771(5A)(C) of the Tariff Act of 1930, as
Amended (the Act). In a prior administrative review of the instant
order, the Department decided that it was appropriate to examine
programs discovered in that investigation that reasonably appeared to
provide countervailable subsidies to USIMINAS/COSIPA, such as FINAME
loans. See Memorandum to the File, from The Team; Additional Subsidy
Programs to be Included in the Questionnaire for the Countervailing
Duty Administrative Review of Certain Hot-Rolled Carbon Steel Flat
Products from Brazil (December 19, 2005), a public document available
in the CRU. Although the prior administrative review was subsequently
rescinded (see Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Flat
Products from Brazil: Notice of Rescission of Countervailing Duty
Administrative Review, 71 FR 8278 (February 16, 2006)), the decision to
examine FINAME loans to producers of HRS stands. Therefore, we
requested
[[Page 64705]]
complete information on all FINAME loans outstanding during the POR.
The FINAME program was established by BNDES in the 1990s to finance
purchases of Brazilian-produced equipment. Essentially, financing was
only provided by BNDES for the purchase of Brazilian-made equipment and
financing for imported equipment could only be provided if that
equipment could not be obtained in Brazil. Financing was not provided
for foreign-made equipment if the same equipment was produced in
Brazil. FINAME loans are primarily made on an indirect basis through
agent banks.
The terms of FINAME loans vary depending on whether the financing
is for imported or domestically-produced equipment. For domestically-
produced equipment, FINAME finances up to 90 percent of the purchase
for a small business and up to 80 percent of the purchase for a large
company. If the equipment is imported, or less than 60 percent
Brazilian content, the financing must be made from a basket of foreign
currencies. For imported equipment, a maximum financing term of five
years is applied, and financing is available for 85 percent of the
value of the equipment for small businesses and for 80 percent of the
value for large businesses. During the POR, USIMINAS/COSIPA had
outstanding FINAME loans granted for the purchase of Brazilian-made
equipment. See ``Benchmark Rate Information,'' above.
We are examining the specificity of the FINAME financing that
USIMINAS/COSIPA received. In the absence of new information or evidence
of changed circumstances that would warrant a reconsideration of the
countervailability of this program, we continue to find this program to
be de jure specific as an import substitution program because it is
only available to finance the purchase of domestically-produced
equipment. See section 771(5A)(C) of the Act. We further find that
there is a financial contribution, through the provision of loans,
under section 771(5)(D)(i) of the Act.
To the extent that the interest rates on these loans are lower than
the benchmark rate, a benefit exists in accordance with 19 CFR
351.505(a). We calculated the benefit in accordance with sections
351.505(a)(5)(i) and 351.505(a)(5)(ii) of the Department's regulations,
by comparing the actual interest paid on the outstanding FINAME loans
during the POR, to the amount of interest that would have been paid on
these loans using the comparable commercial benchmark rates noted in
the ``Benchmark Rate Information'' section above. The FINAME loans
received by USIMINAS/COSIPA have unique interest rates and structures
including monetary correction (indexation) of the loan principal.
Because the structure of these loans is complex, and much of the
information is business proprietary, the calculation methodology for
these loans is discussed in more detail in the preliminary calculation
memorandum. See HRS Calculation Memorandum. We preliminarily determine
that USIMINAS/COSIPA received benefits under the FINAME financing
program during the POR. We summed the benefits from all loans to the
cross-owned companies, and divided this total by the combined total
sales of USIMINAS/COSIPA during the POR. We thus determine the
countervailable subsidy from FINAME loans to USIMINAS/COSIPA to be 0.02
percent ad valorem.
B. Program Preliminarily Determined To Be Not Countervailable
Presumed Tax Credit for the Program of Social Integration and the
Social Contributions of Billings on Inputs Used in Exports (PIS/COFINS)
In 1970, through Supplementary Law No. 7, the GOB established PIS.
Under the law, companies make PIS contributions to a fund which is ``a
means of creating wealth for * * * employees.'' In 1991, through
Supplementary Law No. 70, the GOB established COFINS as a contribution
for the financing of social insurance ``intended solely to defray the
cost of health care and social security and assistance work.'' At the
time of the CRS investigation, the Department determined that PIS and
COFINS taxes were assessed on all products purchased domestically but
did not apply to the sale of products that are exported. See CRS I&D
Memorandum at 15. Each company was responsible for making monthly
payments of PIS and COFINS based on the total value of its domestic
sales of goods and services.
In 1996, through Law No. 9363, the GOB established the PIS/COFINS
tax credit program to provide a rebate of PIS/COFINS contributions
assessed on the purchase of raw materials, intermediate products, and
packing materials used in the production of exports. The PIS and COFINS
``presumed'' tax credit was established to prevent the cascading effect
of these taxes which accrue at each point in the chain of production.
Companies calculated PIS/COFINS credits on a monthly basis, and used
the credit by making deductions from the Industrial Products Tax (IPI)
due.
The ``presumed'' tax credit rate for PIS and COFINS was 5.37
percent and applied to exporters in all industries. The Department
determined in the CRS investigation that the GOB did not determine the
value, quantity or type of inputs consumed in the production, by any
particular producer, of subject merchandise, nor did the GOB take into
account any yield factors; this tax credit rate was arbitrarily chosen
for administrative convenience. To calculate its credit, a company
divided its export revenues, accumulated through the prior month, by
its total sales revenues for the same period. This export revenue ratio
was then multiplied by the company's total value of purchases as
reflected in the supplier's sale invoices for raw materials, semi-
finished products, and packaging materials used in the production
process. This amount was then multiplied by the tax credit rate of 5.37
percent to yield the year-to-date accumulated tax credit. In order to
calculate the credit for the current month, the credit used through the
prior month was deducted from this accumulated tax credit.
Consistent with the definition provided in 19 CFR 351.102(b), we
treated PIS/COFINS taxes as indirect taxes. (See CRS I&D Memorandum at
Comment 2). Further, because PIS/COFINS was charged on inputs used to
make cold-rolled steel, it was charged on goods at one stage of
production that were used in a succeeding stage of production, thus
falling within the definitions provided in 19 CFR 351.102(b) of
``cumulative indirect tax'' and ``prior-stage indirect tax.'' See CRS
I&D Memorandum at 16.
In the CRS investigation, based on our determination that PIS and
COFINS were prior-stage cumulative indirect taxes, we examined whether
the GOB had a system or procedure in place, within the meaning of 19
CFR 351.518(a)(4)(i), to confirm which inputs and in what amounts were
used in the production of subject merchandise. We determined that this
system was established as a simplified and streamlined methodology to
implement and administer the tax rebate for all companies in Brazil.
The only limitation imposed on companies making rebate claims was that
the claims be limited to those inputs defined under the PIS/COFINS
rebate law, which was broader than the ``consumed in production''
standard provided for in 19 CFR 351.518(a)(1). Companies reported their
purchases of inputs based on the assumption that all goods purchased
were consumed equally in exported and domestically
[[Page 64706]]
sold goods. Further confirmation was not conducted by the government.
As such, we found that this system did not permit the GOB to confirm
which inputs are being consumed in the production of exported goods and
in what amounts.
In addition, in the CRS investigation, we found that the system did
not account for the fact that domestic and export sales may include
imported inputs. Further, in determining the actual amounts of inputs
consumed in final products, the GOB did not make due allowance for
waste, thereby raising the concern that the claim amounts were
overstated. Because we found that the GOB had not met the requirements
under 19 CFR 351.518(a)(4)(i), we determined that the entire amount of
the credit granted on PIS/COFINS payments conferred a benefit to the
respondent companies. In the CRS Final Determination, we determined
that, according to section 771(5)(D)(ii) of the Act, the granting of
tax credits constituted a financial contribution, and because the PIS/
COFINS rebates were calculated based on a company's export revenue,
i.e., were available only to exporters, we found that this program was
de jure specific as an export subsidy according to section 771(5A)(B)
of the Act.
In the current review of HRS, in response to the initial
questionnaire, the GOB has reported widespread changes to the
administration of PIS/COFINS since the CRS investigation. In order to
eliminate the distortions caused by the cumulative regime of PIS/COFINS
and to promote tax neutrality, the GOB introduced Law No. 10.637 of
December 30, 2002, and Law No. 10.833 of December 29, 2003, for PIS and
COFINS, respectively. These laws revised the PIS/COFINS programs such
that they now operate as a value-added tax (VAT) system. For the
reasons discussed above, as in the CRS investigation we preliminarily
determine that the PIS/COFINS taxes meet the definitions of an
``indirect tax'' and a ``prior-stage indirect tax'' within the meaning
of 19 CFR 351.102(b).
According to the revisions in the legislation, PIS and COFINS taxes
are now collected at 1.65 percent and 7.6 percent, respectively, when
companies sell goods in the domestic market. Companies also pay PIS and
COFINS at the rates of 1.65 percent and 7.6 percent, respectively, when
domestically purchasing goods for resale, goods and services used as
inputs in the production or manufacture of goods for sale, storage of
merchandise related to sales, freight expenses related to sales, etc.
Goods that are exported do not generate any tax liability under the
non-cumulative PIS/COFINS regime.
To calculate the difference between the taxes paid by a company on
its purchases and the taxes collected by a company on its sales under
the non-cumulative PIS/COFINS system, the total value of the company's
exports is subtracted from the company's overall revenue before
applying the combined PIS/COFINS tax rate of 9.25 percent to determine
the amount of PIS/COFINS taxes due to the government. Eligible
purchases of inputs, goods for resale, etc., that were subject to PIS/
COFINS taxation are summed and multiplied by the same 9.25 percent rate
to determine the total amount of PIS/COFINS taxes already paid by the
company on its purchases. When a company has paid more in PIS/COFINS
taxes on its purchases than it collects on its sales, the company is
due the difference. When a company collects more in PIS/COFINS on its
sales than it pays on its purchases, the company remits the difference
to the government. Brazilian companies prepare monthly documents that
reconcile the amount of PIS/COFINS taxes they paid on their purchases
and the amount of PIS/COFINS taxes they collected on the company's
total sales in each month. These documents are filed with the Brazilian
Federal income tax authority.
In the CRS investigation, we found that PIS/COFINS operated as a
cumulative, indirect tax for which excessive remission was received by
respondents within the meaning of 19 CFR 351.518(a)(2). However,
because information provided by the GOB indicates widespread changes in
the administration of PIS/COFINS since the Department last examined
this program in the CRS investigation, we have reexamined this program.
For the purposes of this review, we preliminarily determine that the
PIS/COFINS program has been transformed via Laws No. 10.637 and 10.833
and now operates like a standard VAT system. Based on the information
on the record, the PIS/COFINS program no longer operates as a
cumulative indirect tax within the meaning of 19 CFR 102(b). Therefore,
an analysis of the program under 19 CFR 351.518 is no longer
appropriate. Because of the program's transformation into a standard
VAT program, we have reexamined whether any remittance or rebate
received under this program is excessive within the meaning of 19 CFR
351.517. See CVD Preamble at 65383. Under 19 CFR 351.517, which
addresses the exemption or remission upon export of indirect taxes, a
benefit exists to the extent that the amount remitted or exempted
exceeds the amount levied with respect to the production and
distribution of like products when sold for domestic consumption. The
record demonstrates that the changes to the program have eliminated the
tax credits granted upon export. The only credit is itself based on the
actual amount of PIS/COFINS taxes already paid by a company on its
purchases, and there are no credits granted upon export. Thus, there is
no benefit as defined under the provisions of 19 CFR 351.517(a), which
define a benefit as the amount by which the credit upon export exceeds
the taxes levied on the production and distribution of like products
sold for domestic consumption. Therefore, for purposes of these
preliminary results, we find that there is no benefit within the
meaning of 19 CFR 351.517(a). Furthermore, we find that the laws
transforming these PIS/COFINS tax credits into a VAT-like system did
not provide any ``grandfathering'' provisions and therefore we find
that there are no benefits available under the old PIS/COFINS
structure. As such, we preliminarily determine that the PIS/COFINS
program is not countervailable within the meaning of section 771(5) of
the Act.
C. Programs Preliminarily Determined To Be Not Used
We preliminarily determine that USIMINAS/COSIPA did not apply for
or receive benefits during the POR under the programs listed below:
1. Equity Infusions
In the investigation of HRS, we found that the GOB had granted
subsidies in the form of equity infusions to USIMINAS from 1983 through
1988, and to COSIPA from 1983 through 1989, and in 1991. The
countervailable benefits from those equity infusions were fully
allocated prior to the POR. USIMINAS/COSIPA has not received any other
equity infusions that provide countervailable benefits in the POR.
2. GOB Debt-to-Equity Conversions
In the investigation of HRS, we found that the GOB had granted
subsidies in the form of debt-to-equity conversions to COSIPA in 1992
and 1993 in preparation for COSIPA's privatization. The countervailable
benefits from those debt-to-equity conversions were fully allocated
prior to the POR. USIMINAS/COSIPA has not received any other debt-to-
equity conversions that provide countervailable benefits in the POR.
[[Page 64707]]
3. National Bank for Economic and Social Development Loans (BNDES) Loan
Programs
a. BNDES EXIM
b. BNDES Participacoes S.A. (BNDESPAR)
4. Provincial Government Program: PRO-INDUSTRIA
5. Programa de Financiamento as Exportacoes (PROEX)
6. Program to Induce Industrial Modernization of the State of Minas
Gerais (PROIM)
D. Program For Which More Information Is Required
BNDES FINEM Loan Program
In the CRS Final Determination, we found the FINEM loan program not
countervailable based on information provided by the GOB that showed
that FINEM loans were not specific: there was no indication of de jure
specificity under section 771(5A)(D)(i) of the Act. Further, the
financing was provided to a wide variety of industries ranging from
paper to electricity to farming products, and the breakdown of FINEM
financing by industry indicated that the steel industry was neither a
predominant user nor disproportionate recipient of FINEM financing, and
the program was not de facto specific under section 771(5A)(D)(iii) of
the Act.
In the original questionnaire, the companies reported FINAME loans
and other BNDES loans. See USIMINAS/COSIPA's February 1, 2010
questionnaire response at 17. In our supplemental questionnaires, we
sought clarification of the BNDES programs under which the loans
reported by USIMINAS/COSIPA had been provided. The GOB identified
certain BNDES loans as FINEM loans for the financing of investment
projects. See the GOB's July 26, 2010 supplemental response at 1. These
loans had been granted to USIMINAS/COSIPA after the POI. Our decision
in the CRS Final Determination that FINEM loans were de facto not
specific was based on our analysis of the distribution of loans granted
contemporaneously with USIMINAS/COSIPA's FINEM loans outstanding during
the POI. Because the FINEM loans outstanding during the POR are new
loans granted to USIMINAS/COSIPA since the POI, it is appropriate to
examine whether this program is de facto specific for the purposes of
this review. In the second supplemental questionnaire, we asked the GOB
to provide information regarding this program, in particular, the
distribution of loans by industry for the years in which USIMINAS/
COSIPA's loans were approved and the prior three years. The GOB
responded to this questionnaire on September 24, 2010, but did not
provide detailed information. Given that the FINEM loan issue arose
late in the proceeding, and the Department has not had sufficient time
to gather and assess the information provided by the GOB, the
Department will continue to examine the information provided by the GOB
and will request additional information in order to complete our
analysis of whether this program provides a countervailable subsidy to
USIMINAS/COSIPA for the final results.
Preliminary Results of Administrative Review
In accordance with 19 CFR 351.221(b)(4)(i), we have calculated a
combined subsidy rate for USIMINAS/COSIPA for the POR. We preliminarily
determine the total countervailable subsidy to be 0.02 percent ad
valorem for USIMINAS/COSIPA, which is a de minimis rate. See 19 CFR
351.106(c)(1).
Assessment Rates/Cash Deposits
The Department intends to issue assessment instructions to U.S.
Customs and Border Protection (CBP) 15 days after the date of
publication of the final results of this review. If the final results
remain the same as these preliminary results, the Department will
instruct CBP to liquidate without regard to countervailing duties all
shipments of subject merchandise produced by USIMINAS/COSIPA, entered,
or withdrawn from warehouse, for consumption from January 1, 2008
through December 31, 2008. The Department will also instruct CBP to
collect cash deposits of estimated countervailing duties at a rate of
0.00 percent on shipments of the subject merchandise produced by
USIMINAS/COSIPA, entered, or withdrawn from warehouse, for consumption
on or after the date of publication of the final results of this
review.
We will instruct CBP to continue to collect cash deposits for non-
reviewed companies at the most recent company-specific or country-wide
rate applicable to the company. Accordingly, the cash deposit rates
that will be applied to companies covered by this order, but not
examined in this review, are those established in the most recently
completed administrative proceeding for each company. These rates shall
apply to all non-reviewed companies until a review of a company
assigned these rates is requested.
Disclosure and Public Comment
We will disclose the calculations used in our analysis to parties
to this segment of the proceeding within five days of the public
announcement of this notice. See 19 CFR 351.224(b). Pursuant to 19 CFR
351.309, interested parties may submit written comments in response to
these preliminary results. Unless the time period is extended by the
Department, case briefs are to be submitted within 30 days after the
date of publication of this notice in the Federal Register. See 19 CFR
351.309(c). Rebuttal briefs, which must be limited to arguments raised
in case briefs, are to be submitted no later than five days after the
time limit for filing case briefs. See 19 CFR 351.309(d). Parties who
submit arguments in this proceeding are requested to submit with the
argument: (1) A statement of the issues; (2) a brief summary of the
argument; and (3) a table of authorities cited. Further, we request
that parties submitting written comments provide the Department with a
diskette containing an electronic copy of the public version of such
comments. Case and rebuttal briefs must be served on interested
parties, in accordance with 19 CFR 351.303(f).
Interested parties may also request a hearing pursuant to 19 CFR
351.310(c). Interested parties who wish to request a hearing, or to
participate if one is requested, must submit a written request to the
Assistant Secretary for Import Administration, within 30 days of the
date of publication of this notice. See id. Requests should contain:
(1) The party's name, address and telephone number; (2) the number of
participants; and (3) a list of issues to be discussed.
Unless extended, the Department will issue the final results of
this administrative review, including the results of its analysis of
issues raised in any written briefs, not later than 120 days after the
date of publication of this notice, pursuant to section 751(a)(3)(A) of
the Act. These preliminary results are issued and published in
accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR
351.221(b)(4).
Dated: October 7, 2010.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2010-26403 Filed 10-19-10; 8:45 am]
BILLING CODE 3510-DS-P
