[Federal Register Volume 75, Number 112 (Friday, June 11, 2010)]
[Notices]
[Pages 33245-33262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14111]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-570-966]
Drill Pipe From the People's Republic of China: Preliminary
Affirmative Countervailing Duty Determination
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are being provided to
producers and exporters of drill pipe from the People's Republic of
China (the PRC). For information on the estimated subsidy rates, see
the ``Suspension of Liquidation'' section of this notice.
DATES: Effective Date: June 11, 2010
FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Eric Greynolds, AD/
CVD Operations, Office 3, Import Administration, U.S. Department of
Commerce, Room 4014, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230; telephone: 202-482-4793 and 202-482-6071,
respectively.
SUPPLEMENTARY INFORMATION:
[[Page 33246]]
Case History
On December 31, 2009, the Department received the petition filed in
proper form by the petitioners.\1\ This investigation was initiated on
January 20, 2010. See Drill Pipe From the People's Republic of China:
Initiation of Countervailing Duty Investigation, 75 FR 4345 (January
27, 2010) (Initiation Notice), and accompanying Initiation
Checklist.\2\
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\1\ Petitioners are VAM Drilling USA, Inc., Texas Steel
Conversions, Inc., Rotary Drilling Tools, TMK IPSCO, and United
Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied
Industrial and Service Workers International Union, AFL-CIO-CLC.
\2\ A public version of this and all public Departmental
memoranda are on file in the Central Records Unit (CRU), Room 1117
in the main building of the Commerce Department.
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On April 8, 2010, the Department postponed the deadline for the
preliminary determination. See Drill Pipe From the People's Republic of
China: Notice of Postponement of Preliminary Determination in the
Countervailing Duty Investigation, 75 FR 17902 (April 8, 2010).
Normally, under section 703(c)(1)(B) of the Tariff Act of 1930, as
amended (the Act), the Department extends the due date of a preliminary
determination to no later than 130 days after the day on which the
investigation was initiated. However, as explained in the memorandum
from the Deputy Assistant Secretary (DAS) for Import Administration,
the Department exercised its discretion to toll deadlines for the
duration of the closure of the Federal Government from February 5
through February 12, 2010. Thus, all deadlines in this segment of the
proceeding have been extended by seven days. See Memorandum to the File
from Ronald K. Lorentzen, DAS for Import Administration, regarding
``Tolling of Administrative Deadlines As a Result of the Government
Closure During the Recent Snowstorm'' (February 12, 2010). As such, we
extended the due date of the preliminary determination to no later than
137 days after the day on which the Department initiated the
investigation. Because that date falls on a weekend, the deadline for
completion of this preliminary determination is the next business day,
i.e., June 7, 2010.
In the Initiation Notice, the Department stated that it intended to
rely on data from U.S. Customs and Border Patrol (CBP) for purposes of
selecting the mandatory respondents. See Initiation Notice, 75 FR at
4347. On January 25, 2010, the Department released the results of a
query performed on CBP's custom database for calendar year 2009. See
Memorandum to the File from Eric B. Greynolds, Program Manager, AD/CVD
Operations, Office 3, regarding ``Release of Initial Customs and Border
Patrol Data'' (January 25, 2010). Due to the large number of producers
and exporters of drill pipe in the PRC, we determined that it was not
practicable to individually investigate each producer and/or exporter.
We, therefore, selected two producers and/or exporters of drill pipe to
be mandatory respondents: Giant Oil Technology and Service Co., Ltd.
(Giant Oil) and Xigang Seamless Steel Tube Co., Ltd. (Xigang), the two
largest publicly identifiable producers and/or exporters of the subject
merchandise. See Memorandum to John M. Andersen, Acting DAS for AD/CVD
Operations, from Eric B. Greynolds, Program Manager, AD/CVD Operations,
Office 3, through Melissa G. Skinner, Director, AD/CVD Operations,
Office 3, regarding ``Respondent Selection'' (February 23, 2010). Also
on February 23, 2010, we issued the initial countervailing duty (CVD)
questionnaire to the Government of the People's Republic of China (the
GOC) and selected mandatory respondents, to whom we also issued a
confirmation of shipment questionnaire on the same date.\3\
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\3\ On February 25, 2010, the Department issued an addendum to
the initial questionnaire to the GOC, Giant Oil, and Xigang. See
Addendum to the Initial Questionnaire issued by the Department
(February 25, 2010).
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On March 5, 2010, Xigang submitted its response to the shipment
questionnaire in which the company claimed that it did not export
subject merchandise to the United States during the period of
investigation (POI). See Xigang's Shipment Questionnaire Response at 1-
2 (March 5, 2010). Regarding Giant Oil, neither the GOC nor the
Department was able to obtain a working address for the company. See
GOC's Drill Pipe submission (March 8, 2010) and the Memorandum to the
File from Eric B. Greynolds, Program Manager, AD/CVD Operations, Office
3, regarding ``Inability to Find Working Address for Giant Oil
Technology and Service Ltd.'' (March 19, 2010). Because the initial
questionnaire and confirmation of shipment questionnaire could not be
delivered to the company, Giant Oil did not submit a response to the
Department.
Therefore, on March 19, 2010, the Department selected two other
producers and/or exporters to be mandatory respondents in this
investigation: DP Master Manufacturing Co., Ltd. (DP Master) and Wuxi
Seamless Pipe Co., Ltd. (WSP). See Memorandum to John M. Andersen,
Acting DAS for AD/CVD Operations, from Eric B. Greynolds, Program
Manager, AD/CVD Operations, Office 3, through Melissa G. Skinner,
Director, AD/CVD Operations, Office 3, regarding ``Selection of
Mandatory Respondents'' (March 19, 2010). DP Master, initially an
interested party who requested to be a voluntary respondent,\4\
received a copy of the initial CVD questionnaire on February 23, 2010.
On March 19, 2010, the Department also issued the initial CVD
questionnaire to WSP, which later reported that it did not export
subject merchandise to the United States during the POI. See Memorandum
to the File from Eric B. Greynolds, Program Manager, AD/CVD Operations,
Office 3, regarding ``WSP's Questionnaire Response'' (June 3, 2010).
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\4\ See section 782(a) of the Act.
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On April 16 and 23, 2010, we received DP Master's initial
questionnaire response. DP Master responded to the questionnaire on
behalf of itself and its four affiliated companies: Jiangyin Sanliang
Petroleum Machinery Co., Ltd. (SPM); Jiangyin Liangda Drill Pipe Co.,
Ltd. (Liangda); Jiangyin Sanliang Steel Pipe Trading Co., Ltd. (SSP);
and Jiangyin Chuangxin Oil Pipe Fittings Co., Ltd. (Chuangxin).
Collectively, all companies are known as the DP Master Group. On April
20, 2010, we received the GOC's initial questionnaire response.
Regarding supplemental questionnaires, we issued to the DP Master
Group a supplemental questionnaire and an addendum to that
questionnaire on April 29, 2010, and May 4, 2010, respectively. We
received the company's response on May 18, 2010. We issued to the GOC a
supplemental questionnaire on May 12, 2010, and an addendum to that
questionnaire on May 18, 2010. We received the GOC's response on May
27, 2010.
Period of Investigation
The POI for which we are measuring subsidies is January 1, 2009
through December 31, 2009, which corresponds to the most recently
completed fiscal year. See 19 CFR 351.204(b)(2).
Scope of the Investigation
The products covered by this investigation are steel drill pipe,
and steel drill collars, whether or not conforming to American
Petroleum Institute (API) or non-API specifications, whether finished
or unfinished (including green tubes suitable for drill pipe), without
regard to the specific chemistry of the steel (i.e.,
[[Page 33247]]
carbon, stainless steel, or other alloy steel), and without regard to
length or outer diameter. The scope does not include tool joints not
attached to the drill pipe, nor does it include unfinished tubes for
casing or tubing covered by any other antidumping (AD) or CVD order.
The subject products are currently classified in the following
Harmonized Tariff Schedule of the United States (HTSUS) categories:
7304.22.0030, 7304.22.0045, 7304.22.0060, 7304.23.3000, 7304.23.6030,
7304.23.6045, 7304.23.6060, 8431.43.8040 and may also enter under
8431.43.8060, 8431.43.4000, 7304.39.0028, 7304.39.0032, 7304.39.0036,
7304.39.0040, 7304.39.0044, 7304.39.0048, 7304.39.0052, 7304.39.0056,
7304.49.0015, 7304.49.0060, 7304.59.8020, 7304.59.8025, 7304.59.8030,
7304.59.8035, 7304.59.8040, 7304.59.8045, 7304.59.8050, and
7304.59.8055.\5\
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\5\ Prior to February 2, 2007, these imports entered under
different tariff classifications, including 7304.21.3000,
7304.21.6030, 7304.21.6045, and 7304.21.6060.
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While HTSUS subheadings are provided for convenience and Customs
purposes, the written description of the scope of this investigation is
dispositive.
Scope Comments
In accordance with the Preamble to the Department's regulations
(see Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May
19, 1997) (Preamble)), in the Initiation Notice, we set aside a period
of time for parties to raise issues regarding product coverage, and
encouraged all parties to submit comments within 20 calendar days of
publication of the Initiation Notice. On February 12, 2010, the
Department received scope comments from petitioners and Downhole Pipe
and Equipment, L.P. (Downhole Pipe) and Command Energy Services
International, Ltd. (Command Energy), U.S. importers of drill pipe from
the PRC. On February 22, 2010, Downhole Pipe and Command Energy
submitted to the Department comments in response to petitioners'
February 12, 2010 scope comments.
The Department is evaluating the comments submitted by the parties
and will issue its decision regarding the scope of the AD and CVD
investigations in the preliminary determination of the companion AD
investigation, which is due for signature on August 5, 2010.
Injury Test
Because the PRC is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (the ITC) is required to determine whether imports of the
subject merchandise from the PRC materially injure, or threaten
material injury to, a U.S. industry. On March 8, 2010, the ITC
published its preliminary determination finding that there is a
reasonable indication that an industry in the United States is
threatened with material injury by reason of imports of drill pipe and
drill collars from the PRC. See Drill Pipe and Drill Collars From
China, Investigation Nos. 701-TA-474 and 731-TA-1176 (Preliminary), 75
FR 10501 (March 8, 2010).
Application of the Countervailing Duty Law to Imports From the PRC
On October 25, 2007, the Department published Coated Free Sheet
Paper From the People's Republic of China: Final Affirmative
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) (CFS
from the PRC), and accompanying Issues and Decision Memorandum (CFS
Decision Memorandum). In CFS from the PRC, the Department found that
* * * given the substantial differences between the Soviet-
style economies and China's economy in recent years, the
Department's previous decision not to apply the CVD law to these
Soviet-style economies does not act as a bar to proceeding with a
CVD investigation involving products from China.
See CFS Decision Memorandum at Comment 6. The Department has affirmed
its decision to apply the CVD law to the PRC in subsequent final
determinations. See, e.g., Circular Welded Carbon Quality Steel Pipe
From the People's Republic of China: Final Affirmative Countervailing
Duty Determination and Final Affirmative Determination of Critical
Circumstances, 73 FR 31966 (June 5, 2008) (CWP from the PRC), and
accompanying Issues and Decision Memorandum (CWP Decision Memorandum)
at Comment 1.
Additionally, for the reasons stated in the CWP Decision
Memorandum, we are using the date of December 11, 2001, the date on
which the PRC became a member of the World Trade Organization (WTO), as
the date from which the Department will identify and measure subsidies
in the PRC for purposes of this investigation. See CWP Decision
Memorandum at Comment 2.
Use of Facts Otherwise Available and Adverse Inferences
Sections 776(a)(1) and (2) of the Act provide that the Department
shall apply ``facts otherwise available'' if, inter alia, necessary
information is not on the record or an interested party or any other
person: (A) Withholds information that has been requested; (B) fails to
provide information within the deadlines established, or in the form
and manner requested by the Department, subject to subsections (c)(1)
and (e) of section 782 of the Act; (C) significantly impedes a
proceeding; or (D) provides information that cannot be verified as
provided by section 782(i) of the Act.
Section 776(b) of the Act further provides that the Department may
use an adverse inference in applying the facts otherwise available when
a party has failed to cooperate by not acting to the best of its
ability to comply with a request for information.
GOC--Steel Rounds
The Department is investigating the alleged provision of steel
rounds for less than adequate remuneration (LTAR) by the GOC. We
requested information from the GOC about the PRC's steel rounds
industry in general and the specific companies that produced the steel
rounds purchased by the respondents. In both respects, the GOC has
failed to provide the requested information within the established
deadlines.
Regarding the PRC's steel rounds industry in general, the GOC
responded at page 49 of its April 20, 2010 initial questionnaire
response, that, for purposes of this investigation, it understands the
term ``steel rounds'' to refer to billets in a round shape that may be
an input used in the production of seamless pipe, including drill pipe.
At page 50 of the initial questionnaire response, the GOC stated that,
``there is no official statistics readily available regarding the
production and consumption of steel rounds in China.'' The GOC added
that there is no association in China that has responsibility for the
production, exportation, or consumption of steel rounds.\6\ The GOC
provided no further explanation on the following requested information:
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\6\ See GOC Initial Questionnaire Response (IQR) (April 20,
2010) at 50.
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The number of producers of steel rounds;
The total volume and value of domestic production of steel
rounds that is accounted for by companies in which the GOC maintains an
ownership or management interest either directly or through other
government entities; \7\
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\7\ Includes governments at all levels, including townships and
villages, ministries, or agencies of those governments including
state asset management bureaus, state-owned enterprises and labor
unions.
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[[Page 33248]]
The total volume and value of domestic consumption of
steel rounds and the total volume and value of domestic production of
steel rounds;
The percentage of domestic consumption accounted for by
domestic production;
The names and addresses of the top ten steel rounds
companies--in terms of sales and quantity produced--in which the GOC
maintains an ownership or management interest, and identification of
whether any of these companies have affiliated trading companies that
sell imported or domestically produced steel rounds; and
Trade publications which specify the prices of the good/
service within your country and on the world market. Provide a list of
these publications, along with sample pages from these publications
listing the prices of the good/service within your country and in world
markets during the POI.
On May 12, 2010, we issued a supplemental questionnaire noting that
the GOC had failed to provide the information requested in the original
questionnaire regarding the steel rounds industry in the PRC.\8\ At
page 11 of its May 27, 2010 supplemental questionnaire response, the
GOC reiterated that ``there are no official statistical data regarding
these questions and would add that it is also unable to check, confirm
the correctness of, let alone submit data concerning this market due to
the nature of the products.''
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\8\ See Department's First Supplemental Questionnaire Issued to
the GOC (May 12, 2010) at 3.
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With respect to the specific companies that produced the steel
rounds purchased by the respondents, we asked the GOC to provide
particular ownership information for these producers so that we could
determine whether the producers are ``authorities'' within the meaning
of section 771(5)(B) of the Act.\9\ Specifically, we stated in our
questionnaire that the Department normally treats producers that are
majority-owned by the government or a government entity as
``authorities.'' \10\ Thus, for any steel rounds producers that were
majority government-owned, the GOC needed to provide the following
ownership information if it wished to argue that those producers were
not authorities:
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\9\ See Department's Initial Questionnaire (February 23, 2010)
at Appendix 5.
\10\ Id.
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Translations of the most recent capital verification
report predating the POI and, if applicable, any capital verification
reports completed during the POI. Translation of the most recent
articles of association, including amendments thereto.
The names of the ten largest shareholders and the total
number of shareholders, a statement of whether any of these
shareholders have any government ownership (including the percentage of
ownership), and an explanation of any other affiliation between these
shareholders and the government.
The total level (percentage) of state ownership, either
direct or indirect, of the company's shares; the names of all
government entities that own shares in the company; and the amount of
shares held by each.
Any relevant evidence to demonstrate that the company is
not controlled by the government, e.g., that the private, minority
shareholder(s) control the company.\11\
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\11\ Id.
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On page 54 of the initial questionnaire response, the GOC reported
that all but one of the producers that supplied steel rounds to the DP
Master Group were state-owned enterprises (SOEs). The GOC did not
provide a response to the above questions, thereby conceding that those
steel round producers are government authorities. The DP Master Group
also identified the firms that produced the steel rounds that it
acquired during the POI and, with the exception of a single producer,
stated that all of the steel rounds acquired during the POI were
produced by SOEs.\12\
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\12\ See DP Master Group IQR (April 16, 2010) at Exhibit 13.
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With regard to the remaining producer of steel rounds, the GOC
stated that it ``does not have sufficient time to obtain the
information requested at Appendix 5 for this response but will provide
it in due course.\13\ Based on the name of the steel round producer
that the GOC reported, the Department requested that the GOC provide
specific documents regarding that supplier, which were submitted to the
Department in the PC Strand From the PRC investigation.\14\ See Pre-
Stressed Concrete Steel Wire Strand From the People's Republic of
China: Final Affirmative Countervailing Duty Determination, 75 FR 28557
(May 21, 2010) (PC Strand from the PRC), and accompanying Issues and
Decision Memorandum (PC Strand Decision Memorandum). At page 11 of its
May 27, 2010 supplemental questionnaire response, the GOC stated that
the steel round producer is related to but different than the producer
in PC Strand from the PRC. As such, the GOC stated that the documents
requested by the Department are not applicable. The GOC, however, did
not provide the information requested at Appendix 5 for this steel
rounds producer.
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\13\ See GOC IQR at 54.
\14\ See Department's First Supplemental Questionnaire Issued to
the GOC at 3.
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Based on the above, we preliminarily determine that the GOC has
withheld necessary information that was requested of it and, thus, that
the Department must rely on ``facts available'' in making this
preliminary determination. See sections 776(a)(1) and (a)(2)(A) of the
Act. Moreover, we preliminarily determine that the GOC has failed to
cooperate by not acting to the best of its ability to comply with our
request for information. Consequently, an adverse inference is
warranted in the application of facts available. See section 776(b) of
the Act.
With respect to the GOC's failure to provide requested information
about the production and consumption of steel rounds, we are assuming
adversely that the GOC's dominance of the market in the PRC for this
input results in significant distortion of the prices and, hence, that
use of an external benchmark is warranted. With respect to the GOC's
failure to provide ownership information about a certain producer of
the steel rounds, we are assuming adversely that this producer is a
government authority.
The Department's practice when selecting adverse information from
among the possible sources of information is to ensure that the result
is sufficiently adverse ``as to effectuate the statutory purposes of
the adverse facts available rule to induce respondents to provide the
Department with complete and accurate information in a timely manner.''
See Notice of Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909,
8932 (February 23, 1998) (Semiconductors From Taiwan). The Department's
practice also ensures ``that the party does not obtain a more favorable
result by failing to cooperate than if it had cooperated fully.'' See
Statement of Administrative Action (SAA) accompanying the Uruguay Round
Agreements Act, H.R. Doc. No. 103-316, vol. 1 at 870 (1994).
Section 776(c) of the Act provides that, when the Department relies
on secondary information rather than on information obtained in the
course of an investigation or review, it shall, to the extent
practicable, corroborate that information from independent sources that
are reasonably at its disposal.
[[Page 33249]]
Secondary information is ``information derived from the petition that
gave rise to the investigation or review, the final determination
concerning the subject merchandise, or any previous review under
section 751 concerning the subject merchandise.'' See, e.g., SAA at
870. The Department considers information to be corroborated if it has
probative value. Id. To corroborate secondary information, the
Department will, to the extent practicable, examine the reliability and
relevance of the information to be used. The SAA emphasizes, however,
that the Department need not prove that the selected facts available
are the best alternative information. Id. at 869.
To corroborate the Department's treatment of a certain company that
produced the steel rounds purchased by the DP Master Group as an
authority and our finding that the GOC dominates the domestic market
for this input, we are relying on Circular Welded Carbon Quality Steel
Line Pipe From the People's Republic of China: Final Affirmative
Countervailing Duty Determination, 73 FR 70961 (November 24, 2008)
(Line Pipe From the PRC), and accompanying Issues and Decision
Memorandum (Line Pipe Decision Memorandum).\15\ In that case, the
Department determined that the GOC owned or controlled the entire hot-
rolled steel industry in the PRC. See Line Pipe Decision Memorandum at
Comment 1. Evidence on the record of this investigation shows that many
steel producers in the PRC are integrated producers, manufacturing both
long products (rounds and billets) and flat products (hot-rolled
steel). See Memorandum to the File from Kristen Johnson, Trade Analyst,
AD/CVD Operations, Office 3, regarding ``Additional Information on
Steel Rounds'' (June 7, 2010).
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\15\ This approach is consistent with the Department's approach
to the steel rounds industry in the PRC in Certain Seamless Carbon
and Alloy Steel Standard Line, and Pressure Pipe From the People's
Republic of China: Preliminary Affirmative Countervailing Duty
Determination, Preliminary Affirmative Critical Circumstances
Determination, 75 FR 9163, 9165 (March 1, 2010).
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Consequently, government ownership in the hot-rolled steel industry
is a reasonable proxy for government ownership in the steel rounds and
billets industry. As a result, we find that the use of an external
benchmark is warranted for calculating the benefit that the DP Master
Group received from purchasing steel rounds from an SOE during the POI.
For details on the calculation of the subsidy rate, see below at
``Provision of Steel Rounds for LTAR.''
GOC--Green Tubes
The Department is investigating the alleged provision of green
tubes for LTAR by the GOC. We requested information from the GOC about
the PRC's green tubes industry in general and the specific companies
that produced green tubes purchased by the respondents. Regarding
producers of green tubes, both the GOC and the DP Master Group reported
that the only supplier of green tubes to the companies during the POI
is an SOE, thereby conceding that the green tube producer is a
government authority.\16\ With respect to the production and
consumption of green tubes in the PRC, the GOC has failed to provide
the requested information within the established deadlines (see
discussion below).
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\16\ See GOC IQR at 59; and DP Master Group IQR at Exhibit 14.
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At page 58 of the April 20, 2010 initial questionnaire response,
the GOC stated that, ``there is no official statistics readily
available regarding the production and consumption of green tubes in
China.'' The GOC added that there is no association in China that has
responsibility for the production, exportation, or consumption of green
tubes.\17\ The GOC provided no further explanation on the following
requested information:
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\17\ See GOC IQR at 59.
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The number of producers of green tubes;
The total volume and value of domestic production of green
tubes that is accounted for by companies in which the GOC maintains an
ownership or management interest either directly or through other
government entities; \18\
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\18\ Includes governments at all levels, including townships and
villages, ministries, or agencies of those governments including
state asset management bureaus, state-owned enterprises and labor
unions.
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The total volume and value of domestic consumption of
green tubes and the total volume and value of domestic production of
green tubes;
The percentage of domestic consumption accounted for by
domestic production;
The total volume and value of imports of green tubes;
The names and addresses of the top ten green tubes
companies--in terms of sales and quantity produced--in which the GOC
maintains an ownership or management interest, and identification of
whether any of these companies have affiliated trading companies that
sell imported or domestically produced green tubes;
A discussion of what laws or policies govern the pricing
of green tubes, the levels of production of green tubes, or the
development of green tubes capacity;
Price controls on green tubes or any price floors or
ceilings;
The role of state-owned trading companies in the
distribution of both domestic and imported green tubes and whether the
state-owned trading companies are affiliated with the state-owned green
tubes producers;
VAT and import tariff rates in effect for green tubes;
An explanation of any export tariff on green tubes;
An explanation of any export licensing requirements on
green tubes;
A list of the industries in the PRC that purchase green
tubes directly, using a consistent level of industrial classification;
and
Trade publications which specify the prices of the good/
service within your country and on the world market. Provide a list of
these publications, along with sample pages from these publications
listing the prices of the good/service within your country and in world
markets during the period of investigation.
On May 12, 2010, we issued a supplemental questionnaire noting that
the GOC had failed to provide the information requested in the original
questionnaire regarding the green tubes industry in the PRC.\19\ At
page 13 of its May 27, 2010, supplemental questionnaire response, the
GOC stated that ``there is no well-established definition for green
tubes'' and reiterated that ``there are no official statistical data
regarding these questions and that it is also unable to check, confirm
the correctness of, let alone submit data concerning this market due to
the nature of the products.'' The GOC explained that in past cases it
has consulted the National Statistics Bureau (SSB) to ascertain the
number of producers of a particular input and related information.\20\
Specifically, in past cases, the GOC explained that it has examined
SSB, Major Industrial Output Statistics as the data source for
information regarding the annual production of an input or the total
production of an input accounted for by SOEs.\21\ However, for green
tubes no such data are collected or reported.\22\ Insomuch as this
source does not keep such data, the GOC explained that it has been
unable to obtain any data from any
[[Page 33250]]
alternative source.\23\ The GOC further added that an adverse inference
is not appropriate for selecting the benchmark for purchases of green
tubes because even the petitioners concede that ``no price data are
published for unfinished green tube for drill pipe production.'' \24\
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\19\ See Department's First Supplemental Questionnaire Issued to
the GOC at 4.
\20\ See GOC First Supplemental Questionnaire Response (First
SQR) (May 27, 2010) at 14.
\21\ Id.
\22\ Id.
\23\ Id.
\24\ Id. at 14, with reference to the Petition at Volume III,
page III-26.
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With respect to the GOC's failure to provide requested information
about the production and consumption of green tubes in the PRC, we
preliminarily find that the GOC acted to the best of its ability in
responding to the Department's information request. Unlike its response
with respect to steel rounds, the GOC provided details regarding the
efforts it took to obtain information regarding green tubes. Therefore,
the Department must rely on ``facts available'' in making the
preliminary determination on the PRC green tubes industry. See section
776(a)(1) of the Act. Because the record is void of any information on
the production and consumption of green tubes in the PRC, we find that
the use of an external benchmark is warranted for calculating the
benefit that the DP Master Group received from purchasing green tubes
from an SOE during the POI.
For a discussion of the external benchmark used and details on the
calculation of the subsidy rate, see below at ``Provision of Green
Tubes for LTAR.''
GOC--Electricity
The GOC also did not provide a complete response to the
Department's February 23, 2010 initial questionnaire regarding its
alleged provision of electricity for LTAR. Specifically, the Department
requested that the GOC explain how electricity cost increases are
reflected in retail price increases.\25\ In its April 20, 2010
questionnaire response, the GOC responded that it was unable to provide
provincial price proposals for 2006 and 2008.\26\ The GOC's response
also explained theoretically how the national price increases should be
formulated; however, the response did not explain the actual process
that led to the price increases.\27\ Therefore, on May 12, 2010, the
Department issued a supplemental questionnaire reiterating its request
for this information.\28\ However, the GOC's subsequent supplemental
questionnaire response did not address the missing information.\29\ The
GOC also did not provide sufficient answers to the Department's
questions. For example, we asked the GOC to explain how the NDRC
developed the national price increase. In response, the GOC provided
the Interim Rules on Sales Price of Electricity, but did not provide an
explanation on how the NDRC developed the national price increase.\30\
Similarly, we asked the GOC to explain the methodology used to
calculate each of the cost element increases; however, in response, the
GOC stated ``the methodology used to calculate each of these cost
element increases are mainly common practices of costing.'' \31\ We
also asked the GOC to explain how all significant cost elements are
accounted for within the province's price proposal. To which, the GOC
simply stated ``significant cost elements will normally be accounted
for within the province's price proposal in a manner consistent with
the relevant rules on costing and pricing of electricity.'' \32\
---------------------------------------------------------------------------
\25\ See Department's Initial Questionnaire at Appendix 6.
\26\ See GOC IQR at 62.
\27\ Id. at 61-67.
\28\ See Department's First Supplemental Questionnaire Issued to
the GOC at 5-9.
\29\ See GOC First SQR at 17-24.
\30\ Id. at 18.
\31\ Id. at 22.
\32\ Id.
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Consequently, we preliminarily determine that the GOC has withheld
necessary information that was requested of it and, thus, that the
Department must rely on ``facts available'' in making our preliminary
determination. See section 776(a)(1), section 776(a)(2)(A), and section
776(a)(2)(B) of the Act. Moreover, we preliminarily determine that the
GOC has failed to cooperate by not acting to the best of its ability to
comply with our request for information as it did not explain why it
was unable to provide the requested information. Therefore, an adverse
inference is warranted in the application of facts available. See
section 776(b) of the Act. In drawing an adverse inference, we find
that the GOC's provision of electricity constitutes a financial
contribution within the meaning of section 771(5)(D) of the Act and is
specific within the meaning of section 771(5A) of the Act. We have also
relied on an adverse inference in selecting the benchmark for
determining the existence and amount of the benefit. See section
776(b)(2) of the Act and section 776(b)(4) of the Act. As such, we have
placed on the record of this investigation, the July 1, 2008
electricity rate schedules, which were submitted to the Department by
the GOC in the CVD investigation on PC Strand from the PRC, and which
reflect the highest rates that the respondents would have paid in the
PRC during the POI. See PC Strand Decision Memorandum at ``Federal
Provision of Electricity for LTAR.'' Specifically, we have selected the
highest rates for ``large industrial users'' for the peak, valley, and
normal ranges. See Memorandum to File from Kristen Johnson, Trade
Analyst, AD/CVD Operations, Office 3, regarding ``Electricity Rate
Data'' (June 7, 2010).
For details on the calculation of the subsidy rate for the DP
Master Group, see below at ``Provision of Electricity for LTAR.''
Subsidies Valuation Information
Allocation Period
Under 19 CFR 351.524(b), non-recurring subsidies are allocated over
a period corresponding to the average useful life (AUL) of the
renewable physical assets used to produce the subject merchandise.
Pursuant to 19 CFR 351.524(d)(2), there is a rebuttable presumption
that the AUL will be taken from the U.S. Internal Revenue Service's
1977 Class Life Asset Depreciation Range System (IRS Tables), as
updated by the Department of Treasury. For the subject merchandise, the
IRS Tables prescribe an AUL of 15 years. No interested party has
claimed that the AUL of 15 years is unreasonable.
Further, for non-recurring subsidies, we have applied the ``0.5
percent expense test'' described in 19 CFR 351.524(b)(2). Under this
test, we compare the amount of subsidies approved under a given program
in a particular year to sales (total sales or total export sales, as
appropriate) for the same year. If the amount of subsidies is less than
0.5 percent of the relevant sales, then the benefits are allocated to
the year of receipt rather than allocated over the AUL period.
Attribution of Subsidies
The Department's regulations at 19 CFR 351.525(b)(6)(i) state that
the Department will normally attribute a subsidy to the products
produced by the corporation that received the subsidy. However, 19 CFR
351.525(b)(6)(ii)-(v) provides that the Department will attribute
subsidies received by certain other companies to the combined sales of
those companies when: (1) Two or more corporations with cross-ownership
produce the subject merchandise; (2) a firm that received a subsidy is
a holding or parent company of the subject company; (3) a firm that
produces an input that is primarily dedicated to the production of the
downstream product; or (4) a corporation producing non-subject
merchandise received a subsidy and transferred the subsidy to a
[[Page 33251]]
corporation with cross-ownership with the subject company.
According to 19 CFR 351.525(b)(6)(vi), 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. This regulation states that
this standard will normally be met where there is a majority voting
interest between two corporations or through common ownership of two
(or more) corporations. The Court of International Trade (CIT) has
upheld the Department's authority to attribute subsidies based on
whether a company could use or direct the subsidy benefits of another
company in essentially the same way it could use its own subsidy
benefits. See Fabrique de Fer de Charleroi v. United States, 166 F.
Supp. 2d 593, 600-604 (CIT 2001).
DP Master Group
As discussed above, the DP Master Group companies are: DP Master,
SPM, Liangda, SSP, and Chuangxin. DP Master, SPM, and Liangda are
involved in the production of drill pipe.\33\ Neither DP Master nor its
affiliates are integrated producers; they purchase green tubes and
steel rounds for their various pipe production facilities.\34\
---------------------------------------------------------------------------
\33\ See DP Master Group IQR at 8.
\34\ Id. at 12.
---------------------------------------------------------------------------
Specifically, DP Master produces and exports drill pipe, drill
collar, and heavy weight drill pipe.\35\ SPM provides machining and
threading services for the drill pipes produced by DP Master.\36\
Liangda manufactures drill collars for DP Master and provides heat
treatment services for the drill pipe produced by DP Master.\37\ SSP
purchases and supplies green tubes to DP Master and Liangda for the
production of drill pipe.\38\ Chuangxin, a holding company, is the
parent company of the other four companies; it is not involved in the
production and/or sale of drill pipe.\39\
---------------------------------------------------------------------------
\35\ Id. at 12. Also, DP Master is the only company within the
DP Master Group that exports subject merchandise. Id. at 8.
\36\ Id. at 13.
\37\ Id.
\38\ Id. at 12.
\39\ Id. at 8.
---------------------------------------------------------------------------
DP Master, SPM, Liangda, SSP, and Chuangxin are managed and/or
controlled by the same individuals.\40\ In accordance with 19 CFR
351.525(b)(6)(vi), we preliminarily determine that DP Master, SPM,
Liangda, SSP, and Chuangxin are cross-owned companies. For subsidies
received by DP Master, SPM, and Liangda, the companies involved in the
production of subject merchandise, we have attributed those subsidies
to the consolidated sales of DP Master, SPM, and Liangda, exclusive of
intra-company sales. For subsidies received by SSP, the trading
company, we have attributed those subsidies to the consolidated sales
of SSP, DP Master, SPM, and Liangda, exclusive of intra-company sales.
For subsidies received by DP Master, SPM, Liangda, SSP, and Chuangxin,
we have attributed those subsidies to the consolidated sales of DP
Master, SPM, Liangda, SSP, and Chuangxin, exclusive of intra-company
sales.
---------------------------------------------------------------------------
\40\ Id. at 12.
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Benchmarks and Discount Rates
The Department is investigating loans received by the DP Master
Group from Chinese policy banks and state-owned commercial banks
(SOCBs), which are alleged to have been granted on a preferential, non-
commercial basis. The Department is also investigating various grants
received by the DP Master Group. Therefore, the derivation of the
Department's benchmark and discount rates is discussed below.
Benchmark for Short-Term RMB Denominated Loans: Section
771(5)(E)(ii) of the Act explains that the benefit for loans is the
``difference between the amount the recipient of the loan pays on the
loan and the amount the recipient would pay on a comparable commercial
loan that the recipient could actually obtain on the market.''
Normally, the Department uses comparable commercial loans reported by
the company for benchmarking purposes. See 19 CFR 351.505(a)(3)(i). If
the firm did not have any comparable commercial loans during the
period, the Department's regulations provide that we ``may use a
national interest rate for comparable commercial loans.'' See 19 CFR
351.505(a)(3)(ii).
As noted above, section 771(5)(E)(ii) of the Act indicates that the
benchmark should be a market-based rate. However, for the reasons
explained in CFS from the PRC, loans provided by Chinese banks reflect
significant government intervention in the banking sector and do not
reflect rates that would be found in a functioning market. See CFS
Decision Memorandum at Comment 10. Because of this, any loans received
by respondents from private Chinese or foreign-owned banks would be
unsuitable for use as benchmarks under 19 CFR 351.505(a)(2)(i).
Similarly, because Chinese banks reflect significant government
intervention in the banking sector, we cannot use a national interest
rate for commercial loans as envisaged by 19 CFR 351.505(a)(3)(ii).
Therefore, because of the special difficulties inherent in using a
Chinese benchmark for loans, the Department is selecting an external
market-based benchmark interest rate. The use of an external benchmark
is consistent with the Department's practice. For example, in Softwood
Lumber from Canada, the Department used U.S. timber prices to measure
the benefit for government-provided timber in Canada. See Notice of
Final Affirmative Countervailing Duty Determination and Final Negative
Critical Circumstances Determination: Certain Softwood Lumber Products
From Canada, 67 FR 15545 (April 2, 2002) (Softwood Lumber from Canada),
and accompanying Issues and Decision Memorandum (Softwood Lumber
Decision Memorandum) at ``Analysis of Programs, Provincial Stumpage
Programs Determined to Confer Subsidies, Benefit.''
We are calculating the external benchmark using the regression-
based methodology first developed in CFS from the PRC and more recently
updated in LWTP from the PRC. See CFS Decision Memorandum at Comment
10; see also Lightweight Thermal Paper From the People's Republic of
China: Final Affirmative Countervailing Duty Determination, 73 FR 57323
(October 2, 2008) (LWTP from the PRC), and accompanying Issues and
Decision Memorandum (LWTP Decision Memorandum) at ``Benchmarks and
Discount Rates.'' This benchmark interest rate is based on the
inflation-adjusted interest rates of countries with per capita gross
national incomes (GNIs) similar to the PRC. The benchmark interest rate
takes into account a key factor involved in interest rate formation
(i.e., the quality of a country's institutions), which is not directly
tied to the state-imposed distortions in the banking sector discussed
above.
This methodology relies on data published by the World Bank and
International Monetary Fund (see further discussion below). For the
year 2009, the World Bank, however, has not yet published all the
necessary data relied on by the Department to compute a short-term
benchmark interest rate for the PRC. Specifically, the following data
are not yet available: World Governance Indicators and World Bank
classifications of lower-middle income countries based on GNI per
capita in U.S. dollars. Therefore, for purposes of this preliminary
determination, where the use of a short-term benchmark rate for 2009 is
required, we have applied the 2008 short-term benchmark rate for the
PRC, as calculated by the Department (see discussion below). The
[[Page 33252]]
Department notes that the current 2008 loan benchmark may be updated,
pending the release of all the necessary 2009 data, by the final
determination.
The 2008 short-term benchmark was computed following the
methodology developed in CFS from the PRC. We first determined which
countries are similar to the PRC in terms of GNI, based on the World
Bank's classification of countries as: Low income; lower-middle income;
upper-middle income; and high income. The PRC falls in the lower-middle
income category, a group that includes 55 countries as of July 2007. As
explained in CFS from the PRC, this pool of countries captures the
broad inverse relationship between income and interest rates.
Many of these countries reported lending and inflation rates to the
International Monetary Fund and are included in that agency's
international financial statistics (IFS). With the exceptions noted
below, we have used the interest and inflation rates reported in the
IFS for the countries identified as ``low middle income'' by the World
Bank. First, we did not include those economies that the Department
considered to be non-market economies for AD purposes for any part of
the years in question, for example: Armenia, Azerbaijan, Belarus,
Georgia, Moldova, and Turkmenistan. Second, the pool necessarily
excludes any country that did not report both lending and inflation
rates to IFS for those years. Third, we removed any country that
reported a rate that was not a lending rate or that based its lending
rate on foreign-currency denominated instruments. For example, Jordan
reported a deposit rate, not a lending rate, and the rates reported by
Ecuador and Timor L'Este are dollar-denominated rates; therefore, the
rates for these three countries have been excluded. Finally, for the
calculation of the inflation-adjusted short-term benchmark rate, we
also excluded any countries with aberrational or negative real interest
rates for the year in question.
For the resulting inflation-adjusted benchmark lending rate, see
Memorandum to the File from Kristen Johnson, Trade Analyst, AD/CVD
Operations, Office 3, regarding ``2008 Short-Term Interest Rate
Benchmark'' (June 7, 2010). Because these are inflation-adjusted
benchmarks, it is necessary to adjust the respondent's interest
payments for inflation. This was done using the PRC inflation rate as
reported in the IFS.
Benchmark for Long-Term RMB Denominated Loans: The lending rates
reported in the IFS represent short- and medium-term lending, and there
are no sufficient publicly available long-term interest rate data upon
which to base a robust long-term benchmark. To address this problem,
the Department has developed an adjustment to the short- and medium-
term rates to convert them to long-term rates using Bloomberg U.S.
corporate BB-rated bond rates. See Light-Walled Rectangular Pipe and
Tube From the People's Republic of China: Final Affirmative
Countervailing Duty Investigation Determination, 73 FR 35642 (June 24,
2008) (LWRP from the PRC), and accompanying Issues and Decision
Memorandum (LWRP Decision Memorandum) at ``Discount Rates.'' In Citric
Acid from the PRC, this methodology was revised by switching from a
long-term mark-up based on the ratio of the rates of BB-rated bonds to
applying a spread which is calculated as the difference between the
two-year BB bond rate and the n-year BB bond rate, where n equals or
approximates the number of years of the term of the loan in question.
See Citric Acid and Certain Citrate Salts From the People's Republic of
China: Final Affirmative Countervailing Duty Determination, 74 FR 16836
(April 13, 2009) (Citric Acid from the PRC), and accompanying Issues
and Decision Memorandum (Citric Acid Decision Memorandum) at Comment
14.
Discount Rates: Consistent with 19 CFR 351.524(d)(3)(i)(A), we have
used, as our discount rate, the long-term interest rate calculated
according to the methodology described above for the year in which the
government provided the subsidy.
Analysis of Programs
I. Programs Preliminarily Determined To Be Countervailable
A. Policy Loans to Chinese Drill Pipe Producers
The Department is examining whether drill pipe producers receive
preferential lending through SOCBs or policy banks. According to the
allegation, preferential lending to the drill pipe industry is
supported by the GOC through the issuance of national and provincial
five-year plans, industrial plans for the steel sector, catalogues of
encouraged industries, and other government laws and regulations. Based
on our review of the responses and documents provided by the GOC, we
preliminarily determine that loans received by the drill pipe industry
from SOCBs and policy banks were made pursuant to government
directives.
Record evidence demonstrates that the GOC, through its directives,
has highlighted and advocated the development of the drill pipe
industry. At the national level, the GOC has placed an emphasis on the
development of high-end, value-added steel products through foreign
investment as well as through technological research, development, and
innovation. In laying out this strategy, the GOC has identified the
specific products it has in mind. For example, an ``objective'' of the
10th Five-Year Plan for the Metallurgical Industry (the Plan) was to
develop key steel types that were mainly imported; high strength,
anticrushing, corrosion resistant petroleum pipe, high pressure boiler
pipe, and welded pipe used in oil and gas transmission pipelines were
among the listed products.\41\ Moreover, among the ``Policy Measures''
set out in the Plan for achieving its objectives was the encouragement
of enterprises to cooperate with foreign enterprises, particularly in
the production and development of high value-added products and high-
tech products.\42\
---------------------------------------------------------------------------
\41\ See GOC IQR at Exhibit 12 for the Plan at ``(III)
Implementation Main Points; 2. Production Structure Readjustment.''
\42\ Id. at ``(V) Policy Measures.''
---------------------------------------------------------------------------
Similarly, in the Development Policies for the Iron and Steel
Industry (July 2005) at Article 16, the GOC states that it will
``enhance the research and development as well as designing and
manufacture levels of major technical equipment of our iron and steel
industry.'' \43\ To accomplish this, the GOC states it will provide
support to key steel projects relying on domestically produced and
newly developed equipment and facilities, through tax and interest
assistance, and scientific research expenditures.\44\
---------------------------------------------------------------------------
\43\ Id. at Exhibit 10.
\44\ Id. at Article 16.
---------------------------------------------------------------------------
Later in 2005, the GOC implemented the Decision of the State
Council on Promulgating the ``Interim Provisions on Promoting
Industrial Structure Adjustment'' for Implementation (No. 40 (2005))
(Decision 40) in order to achieve the objectives of the Eleventh Five-
Year Plan.\45\ Decision 40 references the Directory Catalogue on
Readjustment of Industrial Structure (Industrial Catalogue), which
outlines the projects which the GOC deems ``encouraged,''
``restricted,'' and ``eliminated,'' and describes how these projects
will be considered under government policies.\46\ Steel tube for oil
well pipe, high-pressure boiler pipe, and long-distance transportation
pipe for oil and gas were named in the Industrial
[[Page 33253]]
Catalogue as an ``encouraged project.'' \47\ For the ``encouraged''
projects, Decision 40 outlines several support options available from
the government, including financing.\48\
---------------------------------------------------------------------------
\45\ Id. at Exhibit 13.
\46\ Id. at ``Chapter III Catalogue for the Guidance of
Industrial Structural Adjustment.''
\47\ Id. at Exhibit 14 for Industrial Catalogue at ``VII Iron
and Steel.''
\48\ Id. at Exhibit 13 at Article 17.
---------------------------------------------------------------------------
Turning to the provincial and municipal plans, the Department has
described the inter-relatedness of national level plans and directives
with those at the sub-national level. See LWTP Decision Memorandum at
Comment 6. Based on our review of the sub-national plans, we find that
they mirror the national government's objective of supporting and
promoting the production of innovative and high-value added products,
including drill pipe.
Examples from the five-year plans of the Jiangsu province where the
DP Master Group companies are located are as follows:
Outline of the 11th Five-Year Program for Industrial Structural
Adjustment and Development in Jiangsu: ``Emphasize on the
development of high-quality steel products with high added value and
high technological content such as motor plates, shipbuilding steel
plates, * * * pinion steel, oil well billet, special pipes and
sticks, and highly qualified high-carbon hard wires.'' \49\
---------------------------------------------------------------------------
\49\ Id. at Exhibit 15 at ``6. Development Priority.''
---------------------------------------------------------------------------
The 10th Five-Year Program for Industrial and Commercial
Restructuring of Jiangsu: ``We should develop functional metallic
materials, stainless steel cold-rolled sheet, high-speed railway
steel, oil well and pipeline steel, * * * hard alloy products and
etc.'' \50\
---------------------------------------------------------------------------
\50\ Id. at Exhibit 17 at ``Section 1. Optimizing the Industrial
Structure; 1. Prioritizing the Development of High Technologies; New
Materials Industry.''
---------------------------------------------------------------------------
Special Program (Guihua) on Adjustment & Development of Iron and
Steel Industries during the Eleventh Five-year Period in Jiangsu:
``We shall strengthen the guidance of industrial policies, the
support from credit policy and the regulation by fiscal and taxation
policies to guide the direction of investments.''
See Memorandum to the File from Kristen Johnson, Trade Analyst, AD/CVD
Operations, Office 3, regarding ``Additional Document for Jiangsu
Province--Development of Iron and Steel Industries'' (June 7, 2010).
As noted in Citric Acid from the PRC: \51\
In general, the Department looks to whether government plans or
other policy directives lay out objectives or goals for developing
the industry and call for lending to support those objectives or
goals. Where such plans or policy directives exist, then we will
find a policy lending program that is specific to the named industry
(or producers that fall under that industry).\52\ Once that finding
is made, the Department relies upon the analysis undertaken in CFS
from the PRC \53\ to further conclude that national and local
government control over the SOCBs results in the loans being a
financial contribution by the GOC.\54\
---------------------------------------------------------------------------
\51\ See Citric Acid Decision Memorandum at Comment 5.
\52\ See CFS Decision Memorandum at 49, and LWTP Decision
Memorandum at 98.
\53\ See CFS Decision Memorandum at Comment 8.
\54\ See Certain New Pneumatic Off-The-Road Tires from the
People's Republic of China: Final Affirmative Determination of Sales
at Less Than Fair Value and Partial Affirmative Determination of
Critical Circumstances, 73 FR 40485 (July 15, 2008) (OTR Tires from
the PRC), and the accompanying Issues and Decision Memorandum OTR
Tires Decision Memorandum) at 15; and LWTP Decision Memorandum at
11.
Therefore, on the basis of the record information described above, we
preliminarily determine that the GOC has a policy in place to encourage
the development of production of drill pipe through policy lending.
The DP Master Group reported that DP Master and SPM had outstanding
loans during the POI.\55\ In its April 20, 2010 questionnaire response,
the GOC provided information on the banks that provided lending to the
companies and reported that there is government ownership in each
bank.\56\ Consistent with our determination in prior proceedings, we
preliminarily find these banks to be SOCBs. See, e.g., Certain Oil
Country Tubular Goods From the People's Republic of China: Final
Affirmative Countervailing Duty Determination, Final Negative Critical
Circumstances Determination, 74 FR 64045 (December 7, 2009) (OCTG from
the PRC), and accompanying Issues and Decision Memorandum (OCTG
Decision Memorandum) at Comment 20.
---------------------------------------------------------------------------
\55\ See DP Master Group IQR at 22.
\56\ See GOC IQR at 10-11.
---------------------------------------------------------------------------
The loans to drill pipe producers from SOCBs in the PRC constitute
a direct financial contribution from the government, pursuant to
section 771(5)(D)(i) of the Act, and they provide a benefit equal to
the difference between what the recipients paid on their loans and the
amount they would have paid on comparable commercial loans (see section
771(5)(E)(ii) of the Act). Finally, we preliminarily determine that the
loans are de jure specific within the meaning of section 771 of the Act
because of the GOC's policy, as illustrated in the government plans and
directives, to encourage and support the growth and development of the
drill pipe industry.
To calculate the benefit, we compared the amount of interest DP
Master and SPM paid on their outstanding loans to the amount they would
have paid on comparable commercial loans. See 19 CFR 351.505(a). In
conducting this comparison, we used the interest rates described in the
``Benchmarks and Discount Rates'' section above. We have attributed
benefits under this program to total consolidated sales of DP Master,
SPM, and Liangda (exclusive of intra-company sales), as discussed in
the ``Attribution of Subsidies'' section above. On this basis, we
preliminarily determine a countervailable subsidy of 0.87 percent ad
valorem for the DP Master Group.
B. Two Free, Three Half Tax Exemption for FIEs
The Foreign Invested Enterprise and Foreign Enterprise Income Tax
Law (FIE Tax Law), enacted in 1991, established the tax guidelines and
regulations for FIEs in the PRC. The intent of this law is to attract
foreign businesses to the PRC. According to Article 8 of the FIE Tax
Law, FIEs which are ``productive'' and scheduled to operate not less
than 10 years are exempt from income tax in their first two profitable
years and pay half of their applicable tax rate for the following three
years. FIEs are deemed ``productive'' if they qualify under Article 72
of the Detailed Implementation Rules of the Income Tax Law of the
People's Republic of China of Foreign Investment Enterprises and
Foreign Enterprises. The Department has previously found this program
countervailable. See, e.g., CFS Decision Memorandum at 10-11.
DP Master and Liangda are ``productive'' FIEs and received benefits
under this program during the POI.\57\ SPM, SSP, and Chuangxin are
domestically-owned companies.\58\
---------------------------------------------------------------------------
\57\ See DP Master Group IQR at 29-30.
\58\ Id. at 15-16.
---------------------------------------------------------------------------
We preliminarily determine that the exemption or reduction in the
income tax paid by ``productive'' FIEs under this program confers a
countervailable subsidy. The exemption/reduction is a financial
contribution in the form of revenue forgone by the GOC and it provides
a benefit to the recipients in the amount of the tax savings. See
sections 771(5)(D)(ii) and 771(5)(E) of the Act and 19 CFR
351.509(a)(1). We further preliminarily determine that the exemption/
reduction afforded by this program is limited as a matter of law to
certain enterprises, i.e., ``productive'' FIEs, and, hence, is specific
under section 771(5A)(D)(i) of the Act. See CFS Decision Memorandum at
Comment 14.
For the 2008 tax year (for which tax returns were filed during the
POI), DP Master was in its third year of
[[Page 33254]]
profitability and was eligible for 50 percent reduction in its income
tax liability.\59\ Liangda was in its first year of eligibility and
received a 100 percent reduction in its income tax liability for tax
year 2008.\60\
---------------------------------------------------------------------------
\59\ Id. at 30.
\60\ Id. at 30.
---------------------------------------------------------------------------
To calculate the benefit, we treated the income tax savings enjoyed
by DP Master and Liangda as a recurring benefit, consistent with 19 CFR
351.524(c)(1), and divided the companies' tax savings received during
the POI by the total consolidated sales of DP Master, SPM, and Liangda
(exclusive of intra-company sales), as discussed in the ``Attribution
of Subsidies'' section above. To compute the amount of the tax savings,
we compared the income tax amount that each respondent would have paid
in absence of the program. On this basis, we preliminarily determine a
countervailable subsidy of 9.05 percent ad valorem for the DP Master
Group.
Further, the respondents reported that the GOC terminated the Two
Free, Three Half Tax Exemption for FIEs on January 1, 2008, under the
2008 Enterprise Income Tax Law (EITL).\61\ We find that respondents'
claims of termination do not meet the requirements specified under 19
CFR 351.526(d)(1), which provide that the Department will not find a
program to be terminated and a program-wide change warranted if it
finds that the administering authority continues to provide residual
benefits under the program. As indicated in the EITL and the Notice of
the State Council on the Implementation of the Transitional
Preferential Policies in Respect of the Enterprise Income Tax
(Transitional Period Notice),\62\ from January 1, 2008, enterprises
that previously enjoyed this program may continue to enjoy any
preferential treatment previously enjoyed until the expiration of the
transitional time period. For enterprises that previously had not
enjoyed preferential treatment, the preferential time period shall be
calculated from 2008. The GOC reported that this program will be
terminated at the expiration of the transitional period in 2012.
---------------------------------------------------------------------------
\61\ See GOC IQR at Exhibit 25 for the EITL.
\62\ Id. at Exhibit 26 for the Transitional Period Notice.
---------------------------------------------------------------------------
C. Exemption From City Construction Tax and Education Tax for FIEs
Pursuant to the Circular Concerning Temporary Exemption from Urban
Maintenance and Construction Tax and Additional Education Fees for
Foreign-Funded and Foreign Enterprises (GUOSHUIFA {1994{time} No. 38),
the local tax authorities exempt all FIEs and foreign enterprises from
the city maintenance and construction tax and education fee
surcharge.\63\ The GOC explained that the construction tax is based on
the amount of product tax, value added tax, and/or business tax
actually paid by the taxpayer.\64\ For tax payers located in urban
areas, the rate is seven percent; for taxpayers located in counties or
townships, the rate is five percent; and for taxpayers located in areas
other than urban areas, counties, and townships, the rate is one
percent.\65\ Regarding the education fee surcharge, the DP Master Group
reported that FIEs pay only one percent of the actual amount of the
product tax, value-added tax, and business tax paid, whereas other
entities pay four percent of that amount.\66\ DP Master and Liangda are
FIEs and, therefore, received exemptions under this program.
---------------------------------------------------------------------------
\63\ See GOC First SQR at Exhibit 3.
\64\ Id. at 9.
\65\ Id.
\66\ See DP Master Group First Supplemental Questionnaire
Response (May 18, 2010) at 33.
---------------------------------------------------------------------------
Consistent with our finding in Racks from the PRC, we preliminarily
determine that the exemptions from the city construction tax and
education surcharge under this program confer a countervailable
subsidy. See Certain Kitchen Shelving and Racks from the People's
Republic of China: Final Affirmative Countervailing Duty Determination,
74 FR 37012 (July 27, 2009) (Racks from the PRC), and accompanying
Issues and Decision Memorandum (Racks from the PRC Decision Memorandum)
at ``Exemption from City Construction Tax and Education Tax for FIEs in
Guangdong Province.'' The exemptions are financial contributions in the
form of revenue forgone by the government and provide a benefit to the
recipient in the amount of the savings. See section 771(5)(D)(ii) of
the Act and 19 CFR 351.509(a)(1). We also preliminarily determine that
the exemptions afforded by this program are limited as a matter of law
to certain enterprises, i.e., FIEs, and, hence, specific under section
771(5A)(D)(i) of the Act. To calculate the benefit, we treated DP
Master's and Liangda's tax savings and exemptions as a recurring
benefit, consistent with 19 CFR 351.524(c)(1).
To compute the amount of city construction tax savings, we first
determined the rate the companies would have paid in the absence of the
program. At page 36 of the May 18, 2010, supplemental questionnaire
response, SPM, not an FIE, reported that it paid a five percent ``Urban
Maintenance and Construction Tax.'' SPM, DP Master, and Liangda are all
located in Chuangxin Village, Jiangyin City.\67\ Therefore, we
preliminarily determine that DP Master and Liangda should have paid a
construction tax of five percent.\68\ Next, we compared the rate the
companies would have paid in the absence of the program (five percent
during the POI) with the rate the companies paid (zero), because they
are FIEs.
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\67\ See DP Master Group IQR at 9.
\68\ After issuance of this determination, we will issue a
supplemental questionnaire to the GOC and the DP Master Group
requesting confirmation on the rate that should have been paid by DP
Master and Liangda.
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To compute the amount of the savings from the education fee
exemption, we compared the rate the companies would have paid in the
absence of the program (four percent during the POI) with the rate the
companies paid (one percent).
To calculate the total benefit under the program, we summed the
construction tax savings and the education fee exemptions. To calculate
the net subsidy rate, we divided the companies' tax savings received
during the POI by the total consolidated sales of DP Master, SPM, and
Liangda (exclusive of intra-company sales), as discussed in the
``Attribution of Subsidies'' section above. On this basis, we
preliminarily determine the countervailable subsidy to be 0.57 percent
ad valorem for the DP Master Group.
D. Import Tariff and VAT Exemptions for FIEs and Certain Domestic
Enterprises Using Imported Equipment in Encouraged Industries
Enacted in 1997, the Circular of the State Council on Adjusting Tax
Policies on Imported Equipment (Guofa No. 37) (Circular 37) exempts
both FIEs and certain domestic enterprises from the VAT and tariffs on
imported equipment used in their production so long as the equipment
does not fall into prescribed lists of non-eligible items. The National
Development and Reform Commission (NDRC) and the General Administration
of Customs are the government agencies responsible for administering
this program. Qualified enterprises receive a certificate either from
the NDRC or one of its provincial branches. To receive the exemptions,
a qualified enterprise only has to present the certificate to the
customs officials upon importation of the equipment. The objective of
the program is to encourage foreign investment and to introduce foreign
advanced technology equipment and
[[Page 33255]]
industry technology upgrades. The Department has previously found this
program to be countervailable. See, e.g., Citric Acid Decision
Memorandum at ``VAT Rebate on Purchases by FIEs of Domestically
Produced Equipment.'' DP Master, an FIE, reported receiving VAT and
tariff exemptions under this program for imported equipment.
We preliminarily determine that the VAT and tariff exemptions on
imported equipment confer a countervailable subsidy. The exemptions are
a financial contribution in the form of revenue forgone by the GOC and
the exemptions provide a benefit to the recipients in the amount of the
VAT and tariff savings. See section 771(5)(D)(ii) of the Act and 19 CFR
351.510(a)(1). We further preliminarily determine that the VAT and
tariff exemptions under this program are specific under section
771(5A)(D)(iii)(I) of the Act because the program is limited to certain
enterprises. As described above, only FIEs and certain domestic
enterprises are eligible to receive VAT and tariff exemptions under
this program. As noted above under the ``Two Free/Three Half Tax
Exemption for FIEs'' program, the Department finds FIEs to be a
specific group under section 771(5A)(D)(i) of the Act. The additional
certain enterprises requiring approval by the NDRC do not render the
program to be non-specific. This analysis is consistent with the
Department's approach in prior CVD proceedings. See, e.g., CFS Decision
Memorandum at Comment 16, and OTR Decision Memorandum at ``VAT and
Tariff Exemptions for FIEs and Certain Domestic Enterprises Using
Imported Equipment on Encouraged Industries.''
Normally, we treat exemptions from indirect taxes and import
charges, such as the VAT and tariff exemptions, as recurring benefits,
consistent with 19 CFR 351.524(c)(1) and allocate these benefits only
in the year that they were received. However, when an indirect tax or
import charge exemption is provided for, or tied to, the capital
structure or capital assets of a firm, the Department may treat it as a
non-recurring benefit and allocate the benefit to the firm over the
AUL. See 19 CFR 351.524(c)(2)(iii) and 19 CFR 351.524(d)(2). Therefore,
we are examining the VAT and tariff exemptions that DP Master received
under the program during the POI and prior years.
To calculate the amount of import duties exempted under the
program, we multiplied the value of the imported equipment by the
import duty rate that would have been levied absent the program. To
calculate the amount of VAT exempted under the program, we multiplied
the value of the imported equipment (inclusive of import duties) by the
VAT rate that would have been levied absent the program. Our derivation
of VAT in this calculation is consistent with the Department's approach
in prior cases. See, e.g., Line Pipe Decision Memorandum at Comment 8
(``* * * we agree with petitioners that VAT is levied on the value of
the product inclusive of delivery charges and import duties''). Next,
we summed the amount of duty and VAT exemptions received in each year.
For each year, we then divided the total grant amount by the
corresponding total sales for the year in question. For certain years,
DP Master's total amount of VAT and tariff exemptions was more than 0.5
percent of total sales for the respective year. Therefore, for these
exemptions, we had to determine whether DP Master's VAT and tariff
exemptions were tied to the capital structure or capital assets of the
firm. Based on the description of the items imported in those years, we
preliminarily find that the exemptions were for capital equipment.\69\
As such, for these exemptions, we have allocated the benefit over the
15-year AUL using discount rates described under the ``Benchmarks and
Discount Rates'' section above.
---------------------------------------------------------------------------
\69\ See DP Master Group First SQR at Exhibit 39.
---------------------------------------------------------------------------
For the other years, DP Master's total amount of the VAT and tariff
exemptions was less than 0.5 percent of the total consolidated sales of
DP Master, SPM, and Liangda (exclusive of intra-company sales).
Therefore, for those exemptions, we expensed the benefit to the year in
which the benefit was received, consistent with 19 CFR 351.524(a). On
this basis, we preliminarily determine the countervailable subsidy to
be 0.14 percent ad valorem for the DP Master Group.
Further, the GOC reported that pursuant to the Announcement of
Ministry of Finance, China Customs, and State Administration of
Taxation, No. 43 (2008) (Notice 43), dated December 25, 2008, the VAT
exemption linked to imported equipment under this program has been
terminated but the import tariff exemption has not been terminated.\70\
Article 1 of Notice 43 states that as of January 1, 2009, VAT on
imported equipment for self-use in domestic and foreign investment
projects as encouraged and stipulated in Circular 37 will be resumed
and the custom duty exemption will remain in effect. Article 4 of
Notice 43 provides for a transition period for the termination of the
VAT exemption. Under Article 4, for a project which has a letter of
confirmation prior to November 10, 2008, and the imported equipment has
been declared with customs before June 30, 2009, VAT and tariff can be
exempted. However, for imported equipment for which the import customs
declaration is made on or after July 1, 2009, VAT will be collected. As
such, the GOC stated the latest possible date for companies to claim or
apply for a VAT exemption under this program was June 30, 2009. The GOC
reported that there is no replacement VAT exemption program.
---------------------------------------------------------------------------
\70\ See GOC IQR at 28 and Exhibit 29.
---------------------------------------------------------------------------
Under 19 CFR 351.526(a)(1) and (2), the Department may take a
program-wide change to a subsidy program into account in establishing
the cash deposit rate if it determines that subsequent to the POI, but
before the preliminary determination, a program-wide change occurred
and the Department is able to measure the change in the amount of
countervailable subsidies provided under the program in question. With
regard to this program, we determine that a program-wide change has not
occurred and have not adjusted the cash deposit rate. Under
351.526(d)(1), the Department will only adjust the cash deposit rate of
a terminated program if there are no residual benefits. However, this
program still provides for residual benefits up through and including
the POI.
E. Provision of Green Tubes for LTAR
The Department is investigating whether producers, acting as
Chinese government authorities, sold green tubes to the DP Master Group
for LTAR. The DP Master Group (specifically, SSP) reported purchasing
green tubes during the POI directly from a green tube producer. Both
the DP Master Group and the GOC reported that the producer from which
the respondents obtained green tubes is an SOE.\71\ As a result, we
determine that the producer, which supplied the DP Master Group with
green tubes during the POI, is a government authority and provided to
the DP Master Group a financial contribution, in the form of a
governmental provision of a good. See section 771(5)(D)(iv) of the Act.
---------------------------------------------------------------------------
\71\ See DP Master Group IQR at Exhibit 14, and GOC IQR at 59.
---------------------------------------------------------------------------
Having addressed the issue of financial contribution, we must next
analyze whether the sale of green tubes to the DP Master Group by a
producer designated as a government authority conferred a benefit
within the meaning of section 771(5)(E)(iv) of the Act. The
Department's regulations at 19 CFR
[[Page 33256]]
351.511(a)(2) set forth the basis for identifying appropriate market-
determined benchmarks for measuring the adequacy of remuneration for
government-provided goods or services. These potential benchmarks are
listed in hierarchical order by preference: (1) Market prices from
actual transactions within the country under investigation (e.g.,
actual sales, actual imports or competitively run government auctions)
(tier one); (2) world market prices that would be available to
purchasers in the country under investigation (tier two); or (3) an
assessment of whether the government price is consistent with market
principles (tier three). As we explained in Softwood Lumber from
Canada, the preferred benchmark in the hierarchy is an observed market
price from actual transactions within the country under investigation
because such prices generally would be expected to reflect most closely
the prevailing market conditions of the purchaser under investigation.
See Softwood Lumber Decision Memorandum at ``Market-Based Benchmark.''
Beginning with tier one, we must determine whether the prices from
actual sales transactions involving Chinese buyers and sellers are
significantly distorted. As explained in the Preamble:
Where it is reasonable to conclude that actual transaction
prices are significantly distorted as a result of the government's
involvement in the market, we will resort to the next alternative
{tier two{time} in the hierarchy.
See Preamble to Countervailing Duty Regulations, 63 FR 65348, 65377
(November 25, 1998) (Preamble). The Preamble further recognizes that
distortion can occur when the government provider constitutes a
majority or, in certain circumstances, a substantial portion of the
market.
In our February 23, 2010 initial questionnaire and May 12, 2010
supplemental questionnaire, we instructed the GOC to provide the
percentage of green tubes production accounted for by SOEs during the
POI. In its initial and supplemental questionnaire responses, the GOC
indicated that there were no official statistics readily available
regarding the production and consumption of green tubes in the PRC and,
therefore, did not provide the requested information.\72\
---------------------------------------------------------------------------
\72\ See GOC IQR at 58, and GOC First SQR at 13-15.
---------------------------------------------------------------------------
Section 776(a)(1) of the Act states that if the necessary
information is not available on the record, then the Department shall
use the facts otherwise available (FA) in reaching the applicable
determination. In this investigation, the GOC has stated for the
various reasons noted above that the data requested by the Department
does not exist and, therefore it is unable to obtain the percentage of
green tube production accounted for by SOEs during the POI. As a
result, we lack the necessary information to determine whether the GOC
has a predominant role in the domestic market for this input that
results in significant distortion of the prices. Moreover, at this
stage of the investigation neither the GOC nor the DP Master Group has
submitted data that could be used as a tier-one green tube benchmark.
Furthermore, we note that the Department has determined that various
steel inputs cannot serve as viable tier-one benchmarks in several CVD
investigations involving the PRC. See, e.g., Line Pipe Decision
Memorandum at Comment 5, see also PC Strand Decision Memorandum at
``Provision of Wire Rod for LTAR.'' The Department finds no evidence
that the GOC is not cooperating to the best of its ability and, thus,
we preliminarily determine that the application of FA is warranted.
Specifically, pursuant to section 776(a)(1) of the Act, we
preliminarily determine that there is no suitable data on domestic
prices for green tubes that are available which could serve as a viable
tier-one benchmark as described under 19 CFR 351.511(a)(2)(i).
Consequently, as there are no other available tier-one benchmark
prices, we have turned to tier two, i.e., world market prices available
to purchasers in the PRC.
We examined whether the record contained data that could be used as
a tier-two green tubes benchmark under 19 CFR 351.511(a)(2)(ii). The
Department has on the record of the investigation CIF import prices
from various countries into the PRC of HTS category 7304.23, ``seamless
drill pipe, other than stainless, for use in drilling for oil or gas,''
as sourced from Global Trade Atlas.\73\ Petitioners argue that these
data constitute actual import prices for green tubes and, thus, may
serve as the basis for a tier-two benchmark under 19 CFR
351.511(a)(2)(ii). We have reviewed the pricing data sourced from
Global Trade Atlas and preliminarily determine that they are not
appropriate for use as a tier-two benchmark. Petitioners' green tube
prices are not broken out by month but are instead reported on an
annual basis.\74\ Given that SSP reported its green tube purchases on a
monthly basis, the preferred benchmark would be monthly purchases.
Therefore, we preliminarily determine that annual green tube prices
sourced from Global Trade Atlas are not suitable.
---------------------------------------------------------------------------
\73\ See Petitioners' CVD Benchmark Data Submission (Benchmark
Submission) (May 24, 2010) at Exhibit 1.
\74\ Id.
---------------------------------------------------------------------------
In addition, petitioners have placed on the record of the
investigation monthly pricing data for the POI of seamless pipe and
tube from various countries, as sourced from the Metal Bulletin
Research (MBR).\75\ The DP Master Group placed the same seamless pipe
and tube pricing data from the MBR on the record of the investigation
as well as seamless pipe and tube pricing data from the Steel Business
Briefing (SBB) and SteelOrbis (SO).\76\ In its May 28, 2010 and June 1,
2010 submissions, the DP Master Group argues that the seamless pipe and
tube pricing data from the MBR, SBB, and SO represent pipe and tube
products that are at a slightly more advanced stage of finishing than
green tube products.\77\ The DP Master Group therefore argues that, in
order to derive a benchmark that is comparable to green tubes, the
Department should average the seamless pipe and tube prices from the
MBR, SBB, and SO with the steel rounds pricing data that it supplied in
its questionnaire responses.\78\ For the steel rounds pricing data
supplied by the DP Master Group, see the DP Master Group's April 16,
2010 questionnaire response at Exhibit 13 and May 18, 2010 supplemental
questionnaire response at Exhibit 44.
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\75\ See January through June pricing data in petitioners'
December 31, 2009 petition, Volume I at Exhibit 15; see July through
December pricing data in petitioners' May 28, 2010 submission at
Exhibit 1.
\76\ See DP Master Group's Benchmark Rebuttal and Supplemental
Factual Information Submission (Benchmark Rebuttal) (May 28, 2010)
submission at 15 and Exhibits 52 through 54.
\77\ See DP Master Group Benchmark Rebuttal 14.
\78\ Id. at 15.
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Alternatively, the DP Master Group argues that, in order to more
closely approximate green tube pricing, the Department could discount
the prices for seamless pipe and tube, as sourced from MBR, SBB, and
SO, by the value added during the production process, namely heat
treating, upsetting, and other processes performed on green tube to
produce seamless pipe and tube. The DP Master Group contends that green
tubes represent only 60 percent of the value of the seamless pipe and
tube products under consideration as a green tube benchmark and, thus,
to the extent the Department uses the seamless pipe and tube prices as
a proxy for green tube prices, the Department should reduce the
seamless pipe and tube prices by 40
[[Page 33257]]
percent. The DP Master Group supports its argument in this regard with
an affidavit from an engineer.\79\
---------------------------------------------------------------------------
\79\ See DP Master Group's Additional Comments Submission
(Additional Comments) (June 1, 2010) at Exhibit 57.
---------------------------------------------------------------------------
In their May 28, 2010 and June 1, 2010 submissions, petitioners
argue against calculating the green tubes benchmark as the average of
steel rounds and seamless pipe and tube prices. Petitioners contend
that producing green tubes, drill pipe, and drill collars is a
complicated and exacting process, and that such products must be
manufactured to withstand severe conditions during the drilling
process.\80\ In contrast, argue petitioners, steel rounds (also known
as billets) are merely pieces of steel that are not comparable to green
tubes.
---------------------------------------------------------------------------
\80\ See Petitioners' Comments Regarding Preliminary
Determination Submission (Prelim Comments) (May 28, 2010) at 3, and
petitioners' Response to DP Master's Rebuttal Comments Submission
(Response Submission) (June 1, 2010).
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In this preliminary determination, we agree with petitioners that
it is not appropriate to construct a green tube benchmark that is equal
to the average of seamless pipe and tube prices and steel rounds
prices. In light of the extensive further manufacturing required to
produce seamless pipe and tube, we preliminarily determine that
seamless pipe and tubes are more similar to green tubes than steel
rounds.
Therefore, we have used the seamless pipe and tube pricing data, as
sourced from MBR, SBB, and SO to construct our green tubes benchmark.
We note that the Department has relied on pricing data from industry
publications in recent CVD proceedings involving the PRC. See, e.g.,
CWP Decision Memorandum at ``Hot-Rolled Steel for LTAR,'' and LWRP
Decision Memorandum at ``Hot-Rolled Steel for LTAR.'' Concerning the
comparability of seamless pipe and tube, we note that the Department
has acknowledged the ``overlap'' between green tubes and other types of
seamless pipe and tube (e.g., casing and tubing) ``with respect to
diameter, wall thickness, and length'' as well as an overlap with
regard to strength and alloy requirements. See Oil Country Tubular
Goods from Austria: Initiation of Countervailing Duty Investigation, 67
FR 20739, 20740 (April 26, 2002), and accompanying Initiation Checklist
at 15.
In this preliminary determination, we have determined not to reduce
the seamless pipe and tube prices by 40 percent as advocated by the DP
Master Group. In its June 1, 2010 submission, the DP Master Group
relies on an affidavit from an engineer.
The affidavit states:
In my experience in the industry (as detailed in the attached
bio), tool joints and their connection to a standard 30 foot drill
pipe represent about half of the cost of finished drill pipe, with
the upset and heat-treated tube the other half of the value. With
the upset and heat-treated tube (which could be called unfinished or
semi-finished drill pipe), the green tube represents approximately
60 percent of the cost before attaching the tool joint, and the
upsetting and heat treating process presents about 40 percent of the
cost before attaching tool joints.\81\
---------------------------------------------------------------------------
\81\ See DP Master Group Additional Comments at Exhibit 57.
Aside from the engineer's assertions in the narrative of the affidavit,
there is no discussion, description, or documentation to support the
engineer's cost estimates. As a result, we find that the DP Master
Group has not sufficiently supported its argument in this regard.
Furthermore, we have preliminarily determined not to use certain
price series for seamless pipe and tube, as supplied by the DP Master
Group in its May 28, 2010 submission. Specifically, we preliminarily
determine not to use prices for seamless pipe and tube exported from
Ukraine to Turkey; Italy to the United Arab Emirates (UAE); and Japan
to the UAE; as sourced from SO, on the grounds that it is not
reasonable to conclude that these prices would be available to
purchasers of seamless pipe and tube in the PRC, as described under 19
CFR 351.511(a)(2)(ii).
To determine whether the green tubes supplier, acting as a
government authority, sold green tubes to the DP Master Group for LTAR,
we compared the prices SSP paid to the supplier to the green tubes
benchmark price. We conducted our comparison on a monthly basis. To
arrive at a single monthly benchmark green tubes price, we simple
averaged the prices for each month. When conducting the price
comparison, we converted the benchmark to the same currency and unit of
measure as reported by SSP for its purchases of green tubes.
As explained in 19 CFR 351.511(a)(2)(iv), when measuring the
adequacy of remuneration under tier one or tier two, the Department
will adjust the benchmark price to reflect the price that a firm
actually paid or would pay if it imported the product, including
delivery charges and import duties. Accordingly, we have added import
duties and the VAT applicable to imports of green tubes into the PRC,
as reported by the GOC. See 19 CFR 351.511(a)(2)(iv). In addition, in
accordance with 19 CFR 351.511(a)(2)(iv), we have added ocean freight
costs to our green tubes benchmark price. Because our green tube
benchmark consists of prices from North America, Europe, the Middle
East, and Asia, we have added to the benchmark ocean freight costs from
around the world. Specifically, for green tubes benchmark prices from
the United States, we used ocean freight rates for shipments from the
United States to the PRC.\82\ For green tubes benchmark prices from
Europe, Japan, and the Middle East, we used the ocean freight utilized
in OCTG from the PRC and submitted on the record of the investigation
by the DP Master Group. Specifically, we utilized an ocean freight rate
corresponding to exports from Turkey, Black/Baltic Seas, Mediterranean,
and London Metal Exchange (Far East) (LME).\83\ In addition, in
accordance with 19 CFR 351.511(a)(2)(iv), we have added inland freight
costs to the green tubes benchmark as well as to SSP's domestic
purchases of green tubes. Our inclusion of inland freight costs in LTAR
benefit calculation is consistent with the Department's practice. See,
e.g., PC Strand Decision Memorandum at Comment 13.
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\82\ These publicly available ocean rate data were originally
submitted on the record of PC Strand from the PRC and placed on the
record of the instant investigation. See the Preliminary Calculation
Memorandum.
\83\ See DP Master Group IQR at Exhibit 13; see also Preliminary
Calculations Memorandum.
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Comparing the benchmark unit prices to the unit prices paid by SSP
for green tubes, we determine that green tubes were provided for LTAR
and that a benefit exists in the amount of the difference between the
benchmark and what the respondent paid. See section 771(5)(E)(iv) of
the Act and 19 CFR 351.511(a). We calculated the total benefit by
multiplying the unit benefit by the quantity of green tubes purchased.
Finally, with respect to specificity, we determine that the program
is specific under section 771(5A)(D)(iii)(I) of the Act because the
industries that utilize green tubes are limited. This finding is in
keeping with the Department's determination in other China CVD
investigations where we found the industries that used a particular
steel input to be limited. See e.g., OCTG Decision Memorandum at
``Provision of Steel Rounds for LTAR.''
We find that the GOC's provision of green tubes for LTAR to be a
domestic subsidy as described under 19 CFR 351.525(b)(3). Therefore, to
calculate the net subsidy rate, we divided the benefit by a denominator
comprised of total
[[Page 33258]]
consolidated sales of DP Master, SSP, SPM, and Liangda (exclusive of
intra-company sales), as discussion in the ``Attribution of Subsidies''
section above. On this basis, we preliminarily determine a
countervailable subsidy of 4.96 percent ad valorem for the DP Master
Group.
F. Provision of Electricity for LTAR
For the reasons explained in the ``Use of Facts Otherwise Available
and Adverse Inferences'' section above, we are basing our determination
regarding the government's provision of electricity in part on AFA.
In a CVD case, the Department requires information from both the
government of the country whose merchandise is under investigation and
the foreign producers and exporters. When the government fails to
provide requested information concerning alleged subsidy programs, the
Department, as AFA, typically finds that a financial contribution
exists under the alleged program and that the program is specific.
However, where possible, the Department will normally rely on the
responsive producer's or exporter's records to determine the existence
and amount of the benefit to the extent that those records are useable
and verifiable. The DP Master Group provided data on the electricity
the companies consumed and the electricity rates paid during the POI.
Consistent with this practice, the Department finds that the GOC's
provision of electricity confers a financial contribution, under
section 771(5)(D)(iii) of the Act, and is specific, under section
771(5A) of the Act. To determine the existence and amount of any
benefit from this program, we relied on the DP Master Group's reported
information on the amounts of electricity all group companies purchased
and the amounts they paid for electricity during the POI. We compared
the rates paid by the DP Master Group for their electricity to the
highest rates that they would have paid in the PRC during the POI.
In its May 27, 2010 supplemental questionnaire response, the GOC
reported that the rate schedules that went into effect on July 1, 2008,
were replaced with new provincial electricity rate schedules on
November 20, 2009.\84\ The GOC added that the electricity rate schedule
for Jiangsu Province went into effect on December 18, 2009.\85\ The GOC
provided 2009 provincial electricity rate schedules in its May 27, 2010
submission at Exhibit 17. However, given that these 2009 electricity
rate schedules were submitted to the Department on the eve of the
preliminary determination of this investigation, we are unable to
thoroughly review those provincial rates schedules for use in this
determination.\86\
---------------------------------------------------------------------------
\84\ See GOC First SQR at 24.
\85\ Id.
\86\ For the final determination, we intend to examine the 2009
provincial electricity rate schedules, which were submitted by the
GOC.
---------------------------------------------------------------------------
Therefore, for this preliminary determination, we are using the
electricity rates schedules dated July 1, 2008 as the source of our
benchmark electricity rates for use in the benefit calculations. As
such, we have placed on the record of this investigation, the July 1,
2008, electricity rate schedules, which were submitted to the
Department by the GOC in the CVD investigation on PC Strand from the
PRC, and which reflect the highest rates that the respondents would
have paid in the PRC during the POI. Specifically, we have selected the
highest rates for ``large industrial users'' for the peak, valley, and
normal ranges. The normal and peak rates were selected from the
Electricity Sale Rate Schedule of Shanghai. The valley rate was
selected from the Electricity Sale Rate Schedule of Beijing. For those
electricity rate schedules and electricity rate benchmark chart, see
Memorandum to File from Kristen Johnson, Trade Analyst, AD/CVD
Operations, Office 3, regarding ``Electricity Rate Benchmark Data''
(June 7, 2010). This benchmark reflects an adverse inference, which we
have drawn as a result of the GOC's failure to act to the best of its
ability in providing requested information about its provision of
electricity in this investigation.
Consistent with our approach in PC Strand from the PRC, to measure
whether the DP Master Group received a benefit under this program, we
first calculated the variable electricity cost the respondents paid by
multiplying the monthly kilowatt hours (KWH) consumed at each price
category (e.g., peak, normal, and valley) by the corresponding
electricity rates charged at each price category in Jiangsu Province.
Next, we calculated the benchmark variable electricity cost by
multiplying the monthly KWH respondents consumed at each price category
(e.g., peak, normal, and valley) by the highest electricity rate
charged at each price category, as reflected in the electricity rate
benchmark chart. To calculate the benefit for each month, we subtracted
the variable electricity cost paid by respondents during the POI from
the monthly benchmark variable electricity cost.
To measure whether the DP Master Group received a benefit with
regard to their transmitter capacity charge, we first multiplied the
monthly transmitter capacity charged to respondents by the
corresponding consumption quantity. Next, we calculated the benchmark
transmitter capacity cost by multiplying respondents' consumption
quantities by the highest transmitter capacity rate reflected in the
electricity rate benchmark chart. To calculate the benefit, we
subtracted the transmitter costs paid by respondents during the POI
from the benchmark transmitter costs.
We then calculated the total benefit received during the POI under
this program by summing the benefits stemming from the DP Master
Group's variable rate payments and transmitter capacity payments.
To calculate the net subsidy rate pertaining to electricity
payments made by the DP Master Group, we divided the benefit amount by
the total consolidated sales of DP Master, SPM, SSP, Liangda, and
Chuangxin (exclusive of intra-company sales), as discussion in the
``Attribution of Subsidies'' section above. On this basis, we
preliminarily determine a countervailable subsidy of 0.13 percent ad
valorem for the DP Master Group.
II. Programs Preliminarily Determined Not To Provide Countervailable
Benefits During the POI
A. Provision of Steel Rounds for LTAR
The Department is investigating whether producers and suppliers,
acting as Chinese government authorities, sold steel rounds to the DP
Master Group for LTAR. The DP Master Group (specifically, DP Master and
Liangda) reported purchasing steel rounds during the POI from trading
companies as well as directly from steel round producers. In all
instances, the DP Master Group was able to identify the firm that
produced the steel rounds that the companies acquired during the POI.
In their questionnaire responses,\87\ both the DP Master Group and the
GOC indicated that, with the exception of a single producer
(hereinafter referred to as Producer A), all of the steel rounds
acquired by the respondents during the POI were produced by SOEs.\88\
As a result, for those producers that the DP Master Group identified as
SOEs, we determine that the producers are
[[Page 33259]]
government authorities that provided to the respondent a financial
contribution, in the form of a governmental provision of a good. See
section 771(5)(D)(iv) of the Act.
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\87\ See DP Master Group First SQR at Exhibit 41, and GOC IQR at
53-54.
\88\ The identity of Producer A is business proprietary.
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Regarding Producer A, in the initial questionnaire, the Department
instructed the GOC to provide ownership information for all input
suppliers/producers that the GOC claimed were not GOC authorities.\89\
In its questionnaire response, the GOC stated that, with regard to
Producer A, the GOC did `` * * * not have sufficient time to obtain the
information requested in Appendix 5 for this response but will provide
it in due course.'' \90\ In its May 12, 2010 supplemental questionnaire
response, the Department stated, ``to the extent that the GOC has
provided information on Producer A in another investigation before the
Department, please submit that information for Producer A on the record
of this investigation.'' \91\ The Department then referenced several
exhibits from PC Strand from the PRC in which the GOC had supplied
ownership information for an input producer with the same name as
Producer A.\92\ In its supplemental questionnaire response, the GOC
claimed that, though the firms were related and had similar names,
Producer A was not the same input producer as the one examined in the
context of the PC Strand from the PRC.\93\ The GOC further stated that,
to the best of its knowledge, one shareholder of Producer A is a
company based in Hong Kong and publicly listed on the Hong Kong and
Clearing Limited stock exchanges.\94\ The GOC did not, however, provide
ownership information for Producer A as originally requested by the
Department in the initial questionnaire.
---------------------------------------------------------------------------
\89\ See Department's Initial Questionnaire at II-12, II-13, and
Appendix 5.
\90\ See GOC IQR at page 54.
\91\ See Department SQR Issued to the GOC at 3.
\92\ Id.
\93\ See GOC First SQR at 11.
\94\ Id.
---------------------------------------------------------------------------
Sections 776(a)(1) and (2) of the Act provide that the Department
shall apply ``facts otherwise available'' if, inter alia, necessary
information is not on the record or an interested party or any other
person: (A) Withholds information that has been requested; (B) fails to
provide information within the deadlines established, or in the form
and manner requested by the Department, subject to subsections (c)(1)
and (e) of section 782 of the Act; (C) significantly impedes a
proceeding; or (D) provides information that cannot be verified as
provided by section 782(i) of the Act.
Section 776(b) of the Act further provides that the Department may
use an adverse inference in applying the facts otherwise available when
a party has failed to cooperate by not acting to the best of its
ability to comply with a request for information.
We preliminarily determine that the GOC did not provide the
information requested by the Department as it pertains to Producer A.
First, the GOC failed to respond to the ownership questions contained
in the Department's initial questionnaire. Second, when given a second
opportunity to supply ownership information regarding Producer A, as
requested in the supplemental questionnaire, the GOC, instead merely
stated that the input producer examined in PC Strand from the PRC was
not the same as Producer A. We find that in failing to provide the
requested information the GOC did not act to the best of its ability.
Accordingly, in selecting from among the facts available, we are
drawing an adverse inference with respect to Producer A and determine
that Producer A is a GOC authority whose sales of steel rounds to the
DP Master Group during the POI constitutes a financial contribution, in
the form of the provision of a good, within the meaning of section
771(5)(D)(iv) of the Act.
Having addressed the issue of financial contribution, we must next
analyze whether the sale of steel rounds to the DP Master Group by
producers designated as government authorities conferred a benefit
within the meaning of section 771(5)(E)(iv) of the Act. The
Department's regulations at 19 CFR 351.511(a)(2) set forth the basis
for identifying appropriate market-determined benchmarks for measuring
the adequacy of remuneration for government-provided goods or services.
These potential benchmarks are listed in hierarchical order by
preference: (1) Market prices from actual transactions within the
country under investigation (e.g., actual sales, actual imports or
competitively run government auctions) (tier-one); (2) world market
prices that would be available to purchasers in the country under
investigation (tier-two); or (3) an assessment of whether the
government price is consistent with market principles (tier-three). As
we explained in Softwood Lumber from Canada, the preferred benchmark in
the hierarchy is an observed market price from actual transactions
within the country under investigation because such prices generally
would be expected to reflect most closely the prevailing market
conditions of the purchaser under investigation. See Softwood Lumber
Decision Memorandum at ``Market-Based Benchmark.''
Beginning with tier-one, we must determine whether the prices from
actual sales transactions involving Chinese buyers and sellers are
significantly distorted. As explained in the Preamble:
Where it is reasonable to conclude that actual transaction
prices are significantly distorted as a result of the government's
involvement in the market, we will resort to the next alternative
{tier two{time} in the hierarchy.
See Preamble, 63 FR 65377. The Preamble further recognizes that
distortion can occur when the government provider constitutes a
majority or, in certain circumstances, a substantial portion of the
market.
In our February 23, 2010 initial questionnaire and May 12, 2010
supplemental questionnaire, we instructed the GOC to provide the
percentage of steel rounds production accounted for by SOEs during the
POI. In its initial and supplemental questionnaire responses, the GOC
indicated that there were no official statistics readily available
regarding the production and consumption of steel rounds in the PRC
and, therefore, did not provide the requested information.\95\
---------------------------------------------------------------------------
\95\ See GOC IQR at 58, and GOC First SQR at 11-12.
---------------------------------------------------------------------------
We preliminarily determine that the GOC did not provide the
information requested by the Department as it pertains to the share of
steel rounds accounted for by SOEs during the POI despite having been
given more than one opportunity to do so. We preliminarily determine
that, in failing to provide the requested information, the GOC did not
act to the best of its ability. Therefore, in accordance with section
776(b) of the Act, we are drawing an adverse inference with respect to
the percentage of steel rounds produced by SOEs during the POI.
Specifically, we determine that SOEs accounted for a dominant share of
the steel rounds market in the PRC during the POI and that domestic
prices for steel rounds cannot serve as a viable tier one benchmark, as
described under 19 CFR 351.511(a)(2)(i). Consequently, as there are no
other available tier one benchmark prices, we have turned to tier two,
i.e., world market prices available to purchasers in the PRC.
We examined whether the record contained data that could be used as
a tier-two steel rounds benchmark under 19 CFR 351.511(a)(2)(ii). The
Department has on the record of the investigation prices for steel
rounds, as
[[Page 33260]]
sourced from the SBB.\96\ No other interested party submitted tier-two
steel rounds prices on the record of this investigation. Therefore, we
find that the data from the SBB should be used to derive a tier-two,
world market price for steel rounds that would be available to
purchasers of steel rounds in the PRC. We note that the Department has
relied on pricing data from SBB in recent CVD proceedings involving the
provision of steel rounds for LTAR. See OCTG Decision Memorandum at
``Provision of Steel Rounds for LTAR.''
---------------------------------------------------------------------------
\96\ See DP Master Group IQR at Exhibit 13, and DP Master Group
First SQR at Exhibit 44.
---------------------------------------------------------------------------
To determine whether steel rounds suppliers, acting as government
authorities, sold steel rounds to the DP Master Group for LTAR, we
compared the prices that DP Master and Liangda paid to the suppliers to
the steel rounds benchmark price. We conducted our comparison on a
monthly basis. SBB provides multiple prices for each month of the POI.
Specifically, the SBB data contain steel rounds export prices for Latin
America, Turkey, the Black Sea/Baltic regions, and East Asia as well as
steel rounds price data from the London Metal Exchange (LME) cash bid
settlement prices series. The Department used these same price series
from SBB to derive the steel rounds benchmark in OCTG from the PRC. See
OCTG Decision Memorandum at ``Provision of Steel Rounds for LTAR'' and
Comment 13A. Our regulations, at 19 CFR 351.511(a)(2)(ii), state that
where there is more than one commercially available world market price,
the Department will average the prices to the extent practicable.
Therefore, consistent with 351.511(a)(2)(ii), we averaged the price
series noted above. When conducting the price comparison, we converted
the benchmark to the same currency and unit of measure as reported by
DP Master and Liangda for their purchases of steel rounds.
Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of
remuneration under tier one or tier two, the Department will adjust the
benchmark price to reflect the price that a firm actually paid or would
pay if it imported the product, including delivery charges and import
duties. Accordingly, we have added import duties and the VAT applicable
to imports of steel rounds into the PRC, as reported by the GOC. In
addition, in accordance with 19 CFR 351.511(a)(2)(iv), we have added
ocean freight costs to our steel rounds benchmark price. Specifically,
we have added to the steel rounds benchmark the same ocean freight
rates added to the steel rounds benchmark calculated in OCTG from the
PRC. In addition, in accordance with 19 CFR 351.511(a)(2)(iv), we have
added inland freight costs to the steel rounds benchmark as well as to
DP Master's and Liangda's domestic purchases of steel rounds. Our
inclusion of inland freight costs in the LTAR benefit calculation is
consistent with the Department's practice. See, e.g., PC Strand
Decision Memorandum at Comment 13.
Finally, with respect to specificity, the GOC stated that steel
rounds are used by producers of various types of seamless pipe
(including the drill pipe industry).\97\ Therefore, we preliminarily
determine that this subsidy is specific because the recipients are
limited in number. See section 771(5A)(D)(iii)(I) of the Act. See OCTG
Decision Memorandum at Comment 12. We further find the GOC's provision
of steel rounds for LTAR to be a domestic subsidy as described under 19
CFR 351.525(b)(3).
---------------------------------------------------------------------------
\97\ See GOC IQR at 52.
---------------------------------------------------------------------------
Comparing the benchmark unit prices to the unit prices paid by the
respondents for steel rounds, we preliminarily determine that steel
rounds were not provided for LTAR and that a benefit does not exist.
See section 771(5)(E)(iv) of the Act and 19 CFR 351.511(a).
B. Export Incentive Payments Characterized as ``VAT Rebates''
The Department's regulations state that in the case of an exemption
upon export of indirect taxes, a benefit exists only to the extent that
the Department determines that the amount exempted ``exceeds the amount
levied with respect to the production and distribution of like products
when sold for domestic consumption.'' See 19 CFR 351.517(a); see also
19 CFR 351.102(a)(28) (for a definition of ``indirect tax''). To
determine whether the GOC provided a benefit under this program, we
compared the VAT exemption upon export to the VAT levied with respect
to the production and distribution of like products when sold for
domestic consumption. The GOC reported that the VAT levied on drill
pipe sales in the domestic market is 17 percent and that the VAT
exemption upon the export of drill pipe is 13 percent. Thus, we have
preliminarily determined that the VAT exempted upon the export of drill
pipe did not confer a countervailable benefit because the amount of the
VAT rebated on export is lower than the amount paid in the domestic
market.
C. GOC and Sub-Central Government Grants, Loans, and Other Incentives
for Development of Famous Brands and China World Top Brands
DP Master reported that it received a one-time award in 2008 for
being a Jiangsu Province Famous Brand.\98\ We preliminarily find that
the award represents less than 0.5 percent of total consolidated sales,
as well as total consolidated export sales, for DP Master, SPM, and
Liangda for 2008. As such, this grant is expensed in 2008, the year of
receipt, under 19 CFR 351.524(b)(2), and not allocable to the POI. See
Memorandum to the File from Kristen Johnson, Trade Analyst, AD/CVD
Operations, Office 3, regarding ``DP Master Group Grants'' (June 7,
2010) (Grant Memorandum).
---------------------------------------------------------------------------
\98\ See DP Master Group IQR at 54, First SQR at 12-13.
---------------------------------------------------------------------------
Consistent with our past practice, we therefore have not included
this program in our preliminary net countervailing duty rate
calculations. See, e.g., CFS Decision Memorandum at ``Analysis of
Programs, Programs Determined Not To Have Been Used or Not To Have
Provided Benefits During the POI for GE,'' and Final Results of
Countervailing Duty Administrative Review: Low Enriched Uranium from
France, 70 FR 39998 (July 12, 2005) (Uranium from France), and
accompanying Issues and Decision Memorandum (Uranium Decision
Memorandum) at ``Purchases at Prices that Constitute More than Adequate
Remuneration,'' (citing Notice of Final Results of Countervailing Duty
Administrative Review and Rescission of Certain Company-Specific
Reviews: Certain Softwood Lumber Products From Canada, 69 FR 75917
(December 20, 2004), and accompanying Issues and Decision Memorandum at
``Other Programs Determined to Confer Subsidies'').
D. Scientific Innovation Award
In its May 18, 2010 submission, in response to a financial
statement item, DP Master reported that it received a one-time
scientific innovation award in 2008.\99\ We preliminarily find that the
award represents less than 0.5 percent of total consolidated sales, as
well as total consolidated export sales, for DP Master, SPM, and
Liangda for 2008. As such, this grant is expensed in 2008, the year of
receipt, under 19 CFR 351.524(b)(2), and not allocable to the POI. See
Grants Memorandum.
---------------------------------------------------------------------------
\99\ See DP Master Group First SQR at 9-10.
---------------------------------------------------------------------------
Consistent with our past practice, we therefore have not included
this program in our preliminary net
[[Page 33261]]
countervailing duty rate calculations. See, e.g., CFS Decision
Memorandum at ``Analysis of Programs, Programs Determined Not To Have
Been Used or Not To Have Provided Benefits During the POI for GE,'' and
Uranium Decision Memorandum at ``Purchases at Prices that Constitute
More than Adequate Remuneration.''
E. Development Fund Grant
In the May 18, 2010 submission, SPM reported that it received a
development fund grant in 2008.\100\ We preliminarily find that the
award represents less than 0.5 percent of total consolidated sales, as
well as total consolidated export sales, for DP Master, SPM, and
Liangda for 2008. As such, this grant is expensed in 2008, the year of
receipt, under 19 CFR 351.524(b)(2), and not allocable to the POI. See
Grant Memorandum.
---------------------------------------------------------------------------
\100\ Id. at 19-20.
---------------------------------------------------------------------------
Consistent with our past practice, we therefore have not included
this program in our preliminary net countervailing duty rate
calculations. See, e.g., CFS Decision Memorandum at ``Analysis of
Programs, Programs Determined Not To Have Been Used or Not To Have
Provided Benefits During the POI for GE,'' and Uranium Decision
Memorandum at ``Purchases at Prices that Constitute More than Adequate
Remuneration.''
F. VAT Rebates to Welfare Enterprises
In its May 18, 2010 submission, in response to a financial
statement item, SPM reported that it received VAT rebates in 2007 and
2008.\101\ SPM explained that the rebates date back to when it was
``Yinhui Plastic Steel Factory,'' which was a ``welfare'' enterprise
and, thus, entitled to a refund of output VAT paid to the tax bureau in
the prior year. SPM stated that a ``welfare'' enterprise is an
enterprise which hires a certain number of handicapped persons up to 50
percent or more of total production personnel of the enterprise.\102\
We preliminarily find that, to the extent any recurring tax benefit was
received in the form of a tax rebate, which may have been excessive, it
would be expensed in the year of receipt, i.e., 2007 and 2008, under 19
CFR 351.524(a) and (c), and not allocable to the POI.
---------------------------------------------------------------------------
\101\ Id.
\102\ See ``Circular of the State Administration of Taxation on
the Question Concerning Tax Exemption and Reduction for Social
Welfare Production Units Run by Civil Affairs Departments,'' (Guo
Shui Fa (1990) No. 127), provided at Exhibit 31 of DP Master Group's
SQR (public version).
---------------------------------------------------------------------------
Consistent with our past practice, we therefore have not included
this program in our preliminary net countervailing duty rate
calculations. See, e.g., CFS Decision Memorandum at ``Analysis of
Programs, Programs Determined Not To Have Been Used or Not To Have
Provided Benefits During the POI for GE,'' and Uranium Decision
Memorandum at ``Purchases at Prices that Constitute More than Adequate
Remuneration.''
III. Programs for Which More Information Is Necessary
A. Technology To Improve Trade R&D Fund
DP Master reported that it received a one-time award in 2009 from
the Jiangsu Treasury Department under the Technology to Improve Trade
R&D Fund program, which benefitted the company's research and
development efforts.\103\ Because we lack complete information on this
program, we intend to seek additional information from the GOC and the
DP Master Group after the preliminary determination. Specifically, we
intend to request information on the program's purpose, the laws/
regulations related to the program, government agencies that administer
the program, the application process, eligibility criteria, and
specificity data.
---------------------------------------------------------------------------
\103\ See DP Master Group First SQR at 5-6, 8.
---------------------------------------------------------------------------
B. Grant Received by Chuangxin
In its May 18, 2010 submission, in response to a question regarding
a financial statement item, Chuangxin reported that it received a one-
time award in 2009.\104\ Because we lack complete information on this
program, we intend to seek additional information from the GOC and the
DP Master Group after the preliminary determination. Specifically, we
intend to request information on the program's purpose, the laws/
regulations related to the program, government agencies that administer
the program, the application process, eligibility criteria, and
specificity data.
---------------------------------------------------------------------------
\104\ Id. at 17.
---------------------------------------------------------------------------
C. Provision of Land-Use Rights Within Designated Geographical Areas
for LTAR
In the questionnaire responses, the DP Master Group certified that
none of the companies are located in a special, economic, development,
or trade zone, in Jiangyin City.\105\ Additionally, the DP Master Group
certified that none of the companies acquired land-use rights based
upon being located within a special, economic, development, or trade
zone during the period December 11, 2001 through December 31,
2009.\106\ We, however, recognize that there is conflicting information
on the record as to whether the DP Master Group companies are or are
not located in a special, economic, development, or trade zone.
Specifically, we note that the business licenses for DP Master,
Liangda, and Chuangxin state that these companies are located in the
Shengang Industrial Zone, Jiangyin City.\107\ Also, according to DP
Master's financial statement for the year ending December 31, 2007, the
company is registered in a coastal economic open zone.\108\
---------------------------------------------------------------------------
\105\ Id. at 40.
\106\ Id. at 41.
\107\ See DP Master Group IQR at Exhibit 9, page 632, 638, and
640.
\108\ Id. at Exhibit 3, page 236.
---------------------------------------------------------------------------
Given this conflicting information on the record, we intend to seek
additional information regarding the location of the companies from the
GOC and the DP Master Group after the issuance of this preliminary
determination.
IV. Programs Preliminarily Determined To Be Not Used
We preliminarily determine that the DP Master Group did not apply
for or receive benefits during the POI under the programs listed below:
1. Export Loans from Policy Banks and SOCBs
2. Treasury Bond Loans
3. Preferential Loans for SOEs
4. Preferential Loans for Key Projects and Technologies
5. Preferential Lending to Drill Pipe Producers and Exporters
Classified as Honorable Enterprises
6. Debt-to-Equity (D/E) Swaps
7. Loans and Interest Forgiveness for SOEs
8. Income Tax Credits for Domestically-Owned Companies Purchasing
Domestically-Produced Equipment
9. Reduction In or Exemption From Fixed Assets Investment Orientation
Regulatory Tax
10. Local Income Tax Exemption and Reduction Programs for Productive
FIEs
11. Preferential Tax Programs for FIEs Recognized as High or New
Technology Enterprises
12. Income Tax Reductions for Export-Oriented FIEs
13. Deed Tax Exemption for SOEs Undergoing Mergers or Restructuring
14. Provision of Land to SOEs for LTAR
15. Provision of Hot-Rolled Steel for LTAR
16. Provision of Coking Coal for LTAR
17. Provision of Electricity at LTAR to Drill Pipe Producers Located in
Jiangsu Province
[[Page 33262]]
18. Provision of Water at LTAR to Drill Pipe Producers Located in
Jiangsu Province
19. State Key Technology Project Fund
20. Export Assistance Grants
21. Programs to Rebate Antidumping Legal Fees
22. Grants and Tax Benefits to Loss-Making SOEs at National and Local
Level
23. Subsidies Provided to Drill Pipe Producers Located in Economic and
Technological Development Zones (ETDZs) in Tianjin Binhai New Area
24. Subsidies Provided to Drill Pipe Producers Located in ETDZs in
Tianjin Economic and Technological Development Areas
25. Subsidies Provided to Drill Pipe Producers Located in High-Tech
Industrial Development Zones.
Verification
In accordance with section 782(i)(1) of the Act, we intend to
verify the information submitted by the DP Master Group, WSP, Xigang,
and the GOC prior to making our final determination.\109\
---------------------------------------------------------------------------
\109\ With regard to WSP and Xigang, we will verify each
company's claim that it did not export subject merchandise to the
United States during the POI.
---------------------------------------------------------------------------
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we have
calculated an individual rate for subject merchandise produced and
exported by the DP Master Group. We preliminarily determine the total
estimated net countervailable subsidy rate to be:
------------------------------------------------------------------------
Net subsidy
Producer/Exporter ad valorem
rate (%)
------------------------------------------------------------------------
DP Master Manufacturing Co., Ltd. (DP Master), Jiangyin 15.72
Sanliang Petroleum Machinery Co., Ltd. (SPM); Jiangyin
Liangda Drill Pipe Co., Ltd. (Liangda); Jiangyin
Sanliang Steel Pipe Trading Co., Ltd. (SSP), and
Jiangyin Chuangxin Oil Pipe Fittings Co., Ltd.
(Chuangxin) (collectively, DP Master Group)............
All Others.............................................. 15.72
------------------------------------------------------------------------
Sections 703(d) and 705(c)(5)(A) of the Act state that for
companies not investigated, we will determine an all others rate by
weighting the individual company subsidy rate of each of the companies
investigated by each company's exports of the subject merchandise to
the United States. The all others rate may not include zero and de
minimis net subsidy rates, or any rates based solely on the facts
available. Because we have calculated a rate for only the DP Master
Group, the rate for the DP Master Group is the all others rate.
In accordance with sections 703(d)(1)(B) and (2) of the Act, we are
directing CBP to suspend liquidation of all entries of the subject
merchandise from the PRC that are entered or withdrawn from warehouse,
for consumption on or after the date of the publication of this notice
in the Federal Register, and to require a cash deposit or bond for such
entries of the merchandise in the amounts indicated above.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and non-proprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Disclosure and Public Comment
In accordance with 19 CFR 351.224(b), the Department will disclose
to the parties the calculations for this preliminary determination
within five days of its announcement. Case briefs for this
investigation must be submitted no later than one week after the
issuance of the last verification report. See 19 CFR 351.309(c) (for a
further discussion of case briefs). Rebuttal briefs, which must be
limited to issues raised in the case briefs, must be filed within five
days after the deadline for submission of case briefs. See 19 CFR
351.309(d). A list of authorities relied upon, a table of contents, and
an executive summary of issues should accompany any briefs submitted to
the Department. Executive summaries should be limited to five pages
total, including footnotes.
In accordance with 19 CFR 351.310(c), we will hold a public
hearing, if requested, to afford interested parties an opportunity to
comment on this preliminary determination. Individuals who wish to
request a hearing must submit a written request within 30 days of the
publication of this notice in the Federal Register to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230.
Parties will be notified of the schedule for the hearing and parties
should confirm the time, date, and place of the hearing 48 hours before
the scheduled time. Requests for a public hearing should contain: (1)
Party's name, address, and telephone number; (2) the number of
participants; and (3) to the extent practicable, an identification of
the arguments to be raised at the hearing.
This determination is issued and published pursuant to sections
703(f) and 777(i) of the Act.
Dated: June 7, 2010.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration
[FR Doc. 2010-14111 Filed 6-10-10; 8:45 am]
BILLING CODE 3510-DS-P