[Federal Register Volume 75, Number 39 (Monday, March 1, 2010)]
[Notices]
[Pages 9163-9181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4192]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-570-957]
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
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce preliminarily determines that
countervailable subsidies are being provided to producers and exporters
of certain seamless carbon and alloy steel standard, line, and pressure
pipe from the People's Republic of China. For information on the
estimated subsidy rates, see the ``Suspension of Liquidation'' section
of this notice. The Department of Commerce further preliminarily
determines that critical circumstances exist with respect to imports of
the subject merchandise.
DATES: Effective Date: March 1, 2010.
FOR FURTHER INFORMATION CONTACT: Shane Subler, Yasmin Nair, Joseph
Shuler, or Matthew Jordan, AD/CVD Operations, Office 1, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC
20230; telephone: (202) 482-0189, (202) 482-3813, (202) 482-4162, (202)
482-1293, and (202) 482-1540, respectively.
SUPPLEMENTARY INFORMATION:
Case History
The following events have occurred since the publication of the
Department of Commerce's (``Department'') notice of initiation in the
Federal Register. See Certain Seamless Carbon and Alloy Steel Standard,
Line, and Pressure Pipe from the People's Republic of China: Initiation
of Countervailing Duty Investigation, 74 FR 52945 (October 15, 2009)
(``Initiation Notice''), and the accompanying Initiation Checklist.
On November 4, 2009, the Department selected two Chinese producers/
exporters of certain seamless carbon and alloy steel standard, line,
and pressure pipe (``seamless pipe'') as mandatory respondents: (1)
Hengyang Steel Tube Group Int'l Trading Inc., Hengyang Valin Steel Tube
Co., Ltd., Hengyang Valin MPM Tube Co., Ltd., and their affiliate,
Xigang Seamless Steel Tube Co., Ltd. (collectively, ``Hengyang''); and
(2) Tianjin Pipe (Group) Corporation (``TPCO''). See Memorandum to
Edward Yang, Acting Deputy Assistant Secretary for Antidumping and
Countervailing Duty Operations, ``Respondent Selection Memo'' (November
4, 2009). This memorandum is on file in the Department's Central
Records Unit (``CRU'') in Room 1117 of the main Department building.
On November 6, 2009, the U.S. International Trade Commission
(``ITC'') published its affirmative preliminary determination that
there is a reasonable indication that an industry in the United States
is threatened with material injury by reason of allegedly subsidized
imports of seamless pipe from the People's Republic of China (``PRC'').
See Certain Seamless Carbon and Alloy Steel Standard, Line, and
Pressure Pipe From China, 74 FR 57521 (November 6, 2009).
On November 9, 2009, we issued a questionnaire to the Government of
the People's Republic of China (``GOC''), Hengyang, and TPCO. On
December 3, 2009, the Department published a postponement of the
deadline for the preliminary determination in this investigation until
February 16, 2010. See Certain Seamless Carbon and Alloy Steel
Standard, Line, and Pressure Pipe from the People's Republic of China:
Postponement of Preliminary Determination in the Countervailing Duty
Investigation, 74 FR 63391 (December 3, 2009).
In December 2009 and January 2010, we received responses to our
questionnaire from the GOC, Hengyang, and TPCO. See the GOC's Original
Questionnaire Response (January 7, 2010) (``GQR''), Hengyang's Original
Questionnaire Response (January 5, 2010) (``HQR''), and TPCO's Original
Questionnaire Response (December 31, 2009) (``TQR''). We sent
supplemental questionnaires to TPCO on January 27, 2010, and February
4, 2010. We received responses to these
[[Page 9164]]
supplemental questionnaires on February 3, 2010, and February 12, 2010.
We sent supplemental questionnaires to Hengyang on January 28, 2010,
and February 4, 2010. We received responses to these supplemental
questionnaires on February 4, 2010, and February 12, 2010. We sent a
supplemental questionnaire to the GOC on January 28, 2010, and received
a response to this questionnaire on February 4, 2010 (``G1SR'').
On January 7, 2010, United States Steel Corporation (``U.S.
Steel''), V&M Star L.P., TMK IPSCO, and United Steel, Paper and
Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union (collectively, ``Petitioners'') filed an
allegation of critical circumstances with regard to seamless pipe from
the PRC. On January 22, 2010, we requested that Hengyang and TPCO
submit shipment data related to this allegation. TPCO and Hengyang
submitted these data on February 2, 2010.
On January 7 and January 13, 2010, Petitioners submitted new
subsidy allegations requesting the Department to expand its
countervailing duty (``CVD'') investigation to include additional
subsidy programs.\1\ On February 17, 2010, the Department issued a
memorandum initiating certain of these new subsidy allegations. See
Memorandum from Yasmin Nair, International Trade Compliance Analyst,
Office 1 to Susan H. Kuhbach, Director, Office 1, ``New Subsidy
Allegations'' (February 17, 2010).
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\1\ See Petitioners' new subsidy allegations dated January 7,
2010, and January 13, 2010.
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On January 11, 2010, we issued a letter requesting that the GOC
update its original questionnaire response for the cross-owned
affiliates for which the respondent companies filed questionnaire
responses. The GOC filed its response on January 25, 2010.
On January 14, 2010, we issued a letter notifying the GOC that it
did not provide responses to certain questions in the original
questionnaire. In response to this letter, on January 25, 2010, the GOC
filed a submission with information pertaining to the provision of
steel rounds.
On February 12, 2010, Petitioners submitted comments for the
preliminary determination.
The Department originally extended the deadline for this
preliminary determination until February 16, 2010. As explained in the
memorandum from the Deputy Assistant Secretary for Import
Administration, the Department has 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. The revised
deadline for the preliminary determination of this investigation is now
February 22, 2010. See Memorandum to the Record from Ronald Lorentzen,
DAS for Import Administration, regarding ``Tolling of Administrative
Deadlines As a Result of the Government Closure During the Recent
Snowstorm,'' dated February 12, 2010.
Scope Comments
In accordance with the preamble to the Department's regulations, we
set aside a period of time in our Initiation Notice for parties to
raise issues regarding product coverage, and encouraged all parties to
submit comments within 20 calendar days of publication of that notice.
See Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May
19, 1997), and Initiation Notice, 74 FR at 52945. We did not receive
comments concerning the scope of the antidumping duty (``AD'') and CVD
investigations of seamless pipe from the PRC.
Scope of the Investigation
The scope of this investigation consists of certain seamless carbon
and alloy steel (other than stainless steel) pipes and redraw hollows,
less than or equal to 16 inches (406.4 mm) in outside diameter,
regardless of wall-thickness, manufacturing process (e.g., hot-finished
or cold-drawn), end finish (e.g., plain end, beveled end, upset end,
threaded, or threaded and coupled), or surface finish (e.g., bare,
lacquered or coated). Redraw hollows are any unfinished carbon or alloy
steel (other than stainless steel) pipe or ``hollow profiles'' suitable
for cold finishing operations, such as cold drawing, to meet the
American Society for Testing and Materials (``ASTM'') or American
Petroleum Institute (``API'') specifications referenced below, or
comparable specifications. Specifically included within the scope are
seamless carbon and alloy steel (other than stainless steel) standard,
line, and pressure pipes produced to the ASTM A-53, ASTM A-106, ASTM A-
333, ASTM A-334, ASTM A-335, ASTM A-589, ASTM A-795, ASTM A-1024, and
the API 5L specifications, or comparable specifications, and meeting
the physical parameters described above, regardless of application,
with the exception of the exclusion discussed below.
Specifically excluded from the scope of the investigation are
unattached couplings.
The merchandise covered by the investigation is currently
classified in the Harmonized Tariff Schedule of the United States
(``HTSUS'') under item numbers: 7304.19.1020, 7304.19.1030,
7304.19.1045, 7304.19.1060, 7304.19.5020, 7304.19.5050, 7304.31.6050,
7304.39.0016, 7304.39.0020, 7304.39.0024, 7304.39.0028, 7304.39.0032,
7304.39.0036, 7304.39.0040, 7304.39.0044, 7304.39.0048, 7304.39.0052,
7304.39.0056, 7304.39.0062, 7304.39.0068, 7304.39.0072, 7304.51.5005,
7304.51.5060, 7304.59.6000, 7304.59.8010, 7304.59.8015, 7304.59.8020,
7304.59.8025, 7304.59.8030, 7304.59.8035, 7304.59.8040, 7304.59.8045,
7304.59.8050, 7304.59.8055, 7304.59.8060, 7304.59.8065, and
7304.59.8070.
Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the merchandise subject to
this scope is dispositive.
Period of Investigation
The period for which we are measuring subsidies, i.e., the period
of investigation (``POI''), is January 1, 2008, through December 31,
2008.
Critical Circumstances
In their January 7, 2010, submission, Petitioners alleged that
critical circumstances exist with respect to imports of seamless pipe
from the PRC. Section 703(e)(1) of the Tariff Act of 1930, as amended
(``the Act'') states that if the petitioner alleges critical
circumstances, the Department will determine, on the basis of
information available to it at the time, if there is a reason to
believe or suspect that: (A) The alleged countervailable subsidy is
inconsistent with the World Trade Organization (``WTO'') Agreement on
Subsidies and Countervailing Measures (``SCM Agreement''), and (B)
there have been massive imports of the subject merchandise over a
relatively short period.
In accordance with 19 CFR 351.206(c)(2)(i), because Petitioners
submitted a critical circumstances allegation more than 20 days before
the scheduled date of the preliminary determination, the Department
must issue a preliminary critical circumstances determination not later
than the date of the preliminary determination. See, e.g., Change in
Policy Regarding Timing of Issuance of
[[Page 9165]]
Critical Circumstances Determinations, 63 FR 55364 (October 15, 1998).
As discussed in the ``Analysis of Programs'' section below, the
Department has preliminarily determined that TPCO and Hengyang received
countervailable export subsidies during the POI. For ``all other''
exporters, we are basing our finding on the experience of TPCO and
Hengyang and, therefore, we find that ``all others'' benefitted from
export subsidies. Export subsidies are inconsistent with the SCM
Agreement. Therefore, the criterion of section 703(e)(1)(A) of the Act
has been satisfied. See Notice of Preliminary Affirmative
Countervailing Duty Determination, Preliminary Affirmative Critical
Circumstances Determination, and Alignment of Final Countervailing Duty
Determination With Final Antidumping Duty Determination: Certain
Softwood Lumber Products From Canada, 66 FR 43186, 43189-90 (August 17,
2001); unchanged in Notice of Amended Final Affirmative Countervailing
Duty Determination and Notice of Countervailing Duty Order: Certain
Softwood Lumber Products From Canada, 67 FR 36070 (May 22, 2002).
In determining whether there are ``massive imports'' over a
``relatively short period'' pursuant to section 703(e)(1)(B) of the
Act, the Department normally compares shipments of the subject
merchandise for three months immediately preceding the filing of the
petition (i.e., the ``base period'') with the three months following
the filing of the petition (i.e., the ``comparison period''). In
addition, 19 CFR 351.206(h)(2) provides that an increase in imports of
15 percent during the ``relatively short period'' of time may be
considered ``massive.'' Finally, 19 CFR 351.206(i) defines ``relatively
short period'' as normally being the period beginning on the date the
proceeding begins (i.e., the date the petition is filed) and ending at
least three months later.
In accordance with 19 CFR 351.206(i), we are using the three months
preceding the filing of the petition (i.e., July to September 2009) as
the base period and the three months following the filing of the
petition (i.e., October to December 2009) as the comparison period.
Because Petitioners filed their petition on September 16, 2009, which
is the second half of the month, September is included in the base
period.
Based upon the monthly shipment data submitted by TPCO, we
preliminarily find that TPCO's shipments did not reach the minimum
threshold necessary for finding that imports have been massive over a
relatively short period. Therefore, we preliminarily determine that
critical circumstances do not exist with respect to imports of seamless
pipe from TPCO. For further discussion, see the Memorandum to the File,
``Critical Circumstances Analysis'' (February 22, 2010) (``Critical
Circumstances Analysis Memo''), on file in the Department's CRU.
Based upon the monthly shipment data submitted by Hengyang, we
preliminarily find that Hengyang's seamless pipe imports increased more
than 15 percent during the ``relatively short period,'' as required by
19 CFR 351.206(h)(2). See Critical Circumstances Analysis Memo.
Further, as explained above, we find that Hengyang received an export
subsidy, i.e., a subsidy inconsistent with the SCM Agreement.
Therefore, we preliminarily determine that the requirements of section
703(e)(1)(B) of the Act have been satisfied, and that critical
circumstances exist for Hengyang.
For ``all other'' exporters, we are basing our finding on data from
USITC Dataweb.\2\ We preliminarily determine that there were massive
imports over a relatively short period for ``all other'' producers/
exporters of seamless pipe from the PRC. For further discussion, see
Critical Circumstances Analysis Memo. Further, as explained above, we
find that ``all other'' producers and exporters received a subsidy
inconsistent with the SCM Agreement. Therefore, we preliminarily
determine that the requirements of section 703(e)(1)(B) of the Act have
been satisfied, and that critical circumstances exist for ``all
others.''
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\2\ http://dataweb.usitc.gov/
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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 the accompanying Issues and Decision
Memorandum (``CFS Decision Memorandum''). In CFS from the PRC, the
Department found that
given the substantial difference 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), 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 WTO, as the date from which the
Department will identify and measure subsidies in the PRC. 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 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 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 mandatory respondents. In both respects, the GOC has
failed to provide the requested information within the established
deadlines.
At pages 87-89 of the GQR, the GOC responded, ``No such information
is available,'' to the following questions on the steel rounds industry
in the PRC. The GOC provided no further explanation on the following
requested information:
The number of producers of steel rounds (e.g., billets,
blooms);
the total volume and value of domestic production of steel
rounds that is accounted for by companies in which
[[Page 9166]]
the GOC maintains an ownership or management interest either directly
or through other government entities; \3\
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\3\ 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
steel rounds and the total volume and value of domestic production of
steel rounds;
the percentage of domestic consumption accounted for by
domestic production; and
the names and addresses of the top ten steel rounds
companies--in terms of sales and quantity produced--in which the GOC
maintains and ownership or management interest, and identification of
whether any of these companies have affiliated trading companies that
sell imported or domestically produced steel rounds.
On page 91 of the GQR, the GOC responded that it was still
gathering information in response to the following question:
Are there 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.
With respect to the specific companies that produced the steel
rounds purchased by the mandatory 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. 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.'' 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:
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) controls of the company.
For any suppliers that the GOC claimed were directly, 100-percent
owned by individual persons during the POI, we requested the following:
Translated copies of source documents that demonstrate the
supplier's ownership during the POI, such as capital verification
reports, articles of association, share transfer agreements, or
financial statements.
Identification of the owners, members of the board of
directors, or managers of the suppliers who were also government or
Chinese Communist Party (``CCP'') officials during the POI.
A discussion of whether and how operational or strategic
decisions that are made by the management or board of directors are
subject to government review or approval.
For input suppliers with some direct corporate ownership or less-
than-majority state ownership during the POI, we explained that it was
necessary to trace back the ownership to the ultimate individual or
state owners. For these suppliers, we requested the following:
The total level (percentage) of state ownership of the
company's shares; the names of all government entities that own shares,
either directly or indirectly, in the company; whether any of the
owners are considered ``state-owned enterprises'' by the government;
and the amount of shares held by each government owner.
For each level of ownership, a translated copy of the
section(s) of the articles of association showing the rights and
responsibilities of the shareholders and, where appropriate, the board
of directors, including all decision making (voting) rules for the
operation of the company.
For each level of ownership, identification of the owners,
members of the board of directors, or managers of the suppliers who
were also government or CCP officials during the POI.
A discussion of whether and how operational or strategic
decisions that are made by the management or board of directors are
subject to government review or approval.
A statement of whether any of the shares held by
government entities have any special rights, priorities, or privileges,
e.g., with regard to voting rights or other management or decision-
making for the company; a statement of whether there are any
restrictions on conducting, or acting through, extraordinary meetings
of shareholders; whether there are any restrictions on the shares held
by private shareholders; and the nature of the private shareholders'
interest in the company, e.g., operational, strategic, or investment-
related, etc.
On page 92 of the GQR, the GOC stated that it had not obtained
complete ownership information for the suppliers to the mandatory
respondents. The GOC further stated that it expected to provide such
information when the Department determined which cross-owned affiliates
of the mandatory respondents would be required to file responses.
On January 11, 2010, we issued a letter requesting that the GOC
update its initial questionnaire response to include the cross-owned
affiliates for which the respondent companies filed questionnaire
responses. After the GOC requested an extension to the deadline for
filing this response, we set a final deadline of January 25, 2010.
On January 14, 2010, we issued a separate letter noting that the
GOC had failed to provide the information requested in the original
questionnaire regarding the ownership of the firms that produce the
steel rounds/billets used by the mandatory respondents. We pointed out
that the GOC had not requested, and the Department had not granted, an
extension of the deadline for submitting this information. We stated
that the requested information must be submitted by January 25, 2010.
On January 25, 2010, the GOC submitted a list of producers of the
steel rounds that respondents purchased during the POI. The GOC
identified the producers as state-owned enterprises (``SOEs''),
foreign-invested enterprises (``FIEs''), privately-held, or ``to be
updated.'' The GOC also submitted certain documentation on the
ownership of many of the producers designated as FIEs or privately-
held. However, for producers that the GOC claimed to be privately-
owned, the GOC did not answer the question on whether owners, members
of the board of directors, or managers of the suppliers were also
government or CCP officials during the POI. The GOC also did not
discuss whether and how operational or strategic decisions that are
made by the management or board of directors are subject to government
review or approval. For producers with some
[[Page 9167]]
direct corporate ownership or less-than-majority state ownership during
the POI, the GOC did not respond to our requests for the following
information:
The total level (percentage) of state ownership of the
company's shares; the names of all government entities that own shares,
either directly or indirectly, in the company; whether any of the
owners are considered ``state-owned enterprises'' by the government;
and the amount of shares held by each government owner.
For each level of ownership, identification of the owners,
members of the board of directors, or managers of the suppliers who
were also government or CCP officials during the POI.
A discussion of whether and how operational or strategic
decisions that are made by the management or board of directors are
subject to government review or approval.
A statement of whether any of the shares held by
government entities have any special rights, priorities, or privileges,
e.g., with regard to voting rights or other management or decision-
making for the company; a statement of whether there are any
restrictions on conducting, or acting through, extraordinary meetings
of shareholders; whether there are any restrictions on the shares held
by private shareholders; and the nature of the private shareholders'
interest in the company, e.g., operational, strategic, or investment-
related, etc.
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 our
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 or billets
generally, 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 certain requested
ownership information about the producers of the steel rounds purchased
by the respondents, we are assuming adversely that all of the
respondents' non-cross-owned suppliers of steel rounds are
``authorities.''
The Department's practice when selecting an adverse rate 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). 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. 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. See 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. See SAA, at 869.
To corroborate the Department's treatment of the companies that
produced the steel rounds and billets purchased by the mandatory
respondents as authorities 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''). In that case, the
Department determined that the GOC owned or controlled the entire hot-
rolled steel industry in the PRC. See Line Pipe from the PRC and
accompanying Issues and Decision Memorandum at Comment 1. Evidence on
the record of this investigation shows that many steel producers in the
PRC are integrated, producing both long products (rounds and billets)
and flat products (hot-rolled steel). See Memorandum to the File,
``Additional Information on Steel Rounds,'' dated February 22, 2010.
Consequently, government ownership in the hot-rolled steel industry is
a reasonable proxy for government ownership in the steel rounds and
billets industry.
For details on the calculation of the subsidy rate for the
respondents, see below at section I.C., ``Provision of Steel Rounds for
Less Than Adequate Remuneration.''
GOC--Electricity
The GOC also did not provide a complete response to the
Department's November 9, 2009 questionnaire regarding its alleged
provision of electricity for less than adequate remuneration.
Specifically, the Department requested that the GOC explain how
electricity cost increases are reflected in retail price increases. The
GOC responded that it was gathering this information, but it did not
request an extension from the Department for submitting this
information after the original questionnaire deadline date. On January
14, 2010, the Department reiterated its request for this information
and notified the GOC that this information would be accepted if the GOC
submitted it by January 25, 2010. However, the GOC's subsequent
supplemental questionnaire responses did not address the missing
information. 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 respond by the deadline dates, nor did it explain why it was
unable to provide the requested information, with the result that an
adverse inference is warranted in the application of facts available.
See section 776(b) of the Act. In drawing an adverse inverse 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
[[Page 9168]]
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. The
benchmark rates we have selected are derived from information submitted
by the GOC in the countervailing duty investigation of ``Certain
Kitchen Appliance Shelving and Racks from the People's Republic of
China'' and information from the record of the instant review. See
Memorandum to File from Yasmin Nair, International Trade Compliance
Analyst, Office 1, ``Electricity Rate Data'' (February 22, 2010).
For details on the calculation of the subsidy rate for the
respondents, see below at section I.D., ``Provision of Electricity for
Less Than Adequate Remuneration.''
GOC--TPCO's Other Subsidies
At pages 143-144 of TPCO Group's 2008 Audit Report in Exhibit 6 of
the TQR and at page 14 of its February 16, 2010 supplemental
questionnaire response, TPCO reported receipt of countervailable
grants. In our January 26, 2010, supplemental questionnaire to TPCO, we
instructed TPCO to provide information regarding other subsidies
identified in its 2008 financial statements and to provide the GOC with
the names of the programs under which these subsidies were given.
The Department requested that the GOC provide information about
these grants in the initial questionnaire and the January 27, 2010
supplemental questionnaire. In the GOC's February 4, 2010, supplemental
response, at page 10, the GOC did not provide the requested
information, asserting that it needed additional time to gather the
data. Although the GOC responded that it was gathering this
information, it did not request an extension from the Department for
submitting this information after the supplemental questionnaire
deadline date.
Because the GOC did not provide the requested information
concerning these grants, we preliminarily determine that necessary
information is not on the record and that the GOC did not provide
requested information by the submission deadline. Accordingly, the use
of facts otherwise available is appropriate. See sections 776(a)(1) and
(2)(B) of the Act. Also, 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 respond by the deadline
dates, nor did it explain why it is unable to provide the requested
information, with the result that an adverse inference is warranted in
the application of facts available. See section 776(b) of the Act.
For details on the calculation of the subsidy rate for TPCO, see
below at section I.G., ``Other Subsidies Received by TPCO.''
Subsidies Valuation Information
Allocation Period
The average useful life (``AUL'') period in this proceeding, as
described in 19 CFR 351.524(d)(2), is 15 years according to the U.S.
Internal Revenue Service's 1977 Class Life Asset Depreciation Range
System. See U.S. Internal Revenue Service Publication 946 (2008), How
to Depreciate Property, at Table B-2: Table of Class Lives and Recovery
Periods. No party in this proceeding has disputed this allocation
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)-(iv) direct the Department to attribute subsidies
received by certain other companies to the combined sales of those
companies if (1) cross-ownership exists between the companies, and (2)
the cross-owned companies produce the subject merchandise, are a
holding or parent company of the subject company, or produce an input
that is primarily dedicated to the production of the downstream
product. In the case of a transfer of a subsidy between cross-owned
companies, 19 CFR 351.525(b)(6)(v) directs the Department to attribute
the subsidy to the sales of the company that receives the transferred
subsidy.
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).
TPCO
TPCO responded to the Department's original and supplemental
questionnaires on behalf of itself, Tianjin Pipe Iron Manufacturing
Co., Ltd. (``TPCO Iron''); Tianguan Yuantong Pipe Product Co., Ltd.
(``Yuantong''); Tianjin Pipe International Economic and Trading Co.,
Ltd. (``TPCO International''); and TPCO Charging Development Co., Ltd.
(``Charging''). These companies are cross-owned within the meaning 19
CFR 351.525(b)(6)(vi) because of TPCO's substantial ownership position
in each of them. See the TQR at page 2 and Exhibits 1-3.
TPCO stated that TPCO Iron provides ``pig iron and direct reduced
iron'' to TPCO and that Yuantong provides ``threading and other
finishing processes to {TPCO's{time} seamless pipe production.'' \4\
Because TPCO Iron produced an input that is primarily dedicated to the
production of the downstream product, we are preliminarily attributing
subsidies received by TPCO Iron to TPCO, in accordance with 19 CFR
351.525(b)(6)(iv). Yuantong had direct involvement in the production of
subject merchandise during the POI. Thus, we are preliminarily
attributing subsidies received by Yuantong to TPCO, in accordance with
19 CFR 351.525(b)(6)(ii).\5\
---------------------------------------------------------------------------
\4\ See TQR at 5.
\5\ See Certain Oil Country Tubular Goods From the People's
Republic of China: Preliminary Affirmative Countervailing Duty
Determination, Preliminary Negative Critical Circumstances
Determination, 74 FR 47210, 47215 (September 15, 2009) (unchanged in
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 '')).
---------------------------------------------------------------------------
Regarding TPCO International, TPCO stated, ``{TPCO
International{time} is the trading company through which {TPCO{time}
exports all subject merchandise.'' Because TPCO International exported
subject merchandise during the POI, we are preliminarily cumulating the
benefit from subsidies received by TPCO International with subsidies
provided to TPCO, in accordance with 19 CFR 351.525(c). We are
preliminarily using TPCO's consolidated sales as the denominator for
subsidies to TPCO International. On page 12 of the TQR, TPCO stated
that TPCO consolidates directly-owned subsidiaries in which it holds an
equity share of more than 50 percent. On page 9 of the TQR, TPCO stated
that the consolidated sales totals in its financial statements are net
of
[[Page 9169]]
inter-company sales. Thus, TPCO's consolidated sales already include
TPCO International's sales (net of inter-company sales). By using
TPCO's consolidated sales as the denominator for subsidies to TPCO
International, we do not double-count TPCO International's sales in the
calculation of the subsidy rate.
With regard to Charging, TPCO stated on pages 4-5 of the TQR that
Charging acts as a trading company that purchased and provided steel
rounds to TPCO during the POI. If the GOC provided steel rounds to
Charging for less than adequate remuneration during the POI, the
supplier relationship between Charging and TPCO may fall under 19 CFR
351.525(b)(6)(iv) (subsidies to cross-owned input suppliers) or 19 CFR
351.525(b)(6)(v) (transfer of subsidies). As we stated in the previous
paragraph, however, TPCO consolidates the sales of directly-owned
subsidiaries in which it holds an equity share of more than 50 percent
(net of inter-company sales). Because TPCO consolidates Charging's
sales into its own sales, the attribution of the subsidy for TPCO's
purchases through Charging is identical under 19 CFR 351.525(b)(6)(iv)
or 19 CFR 351.525(b)(6)(v). Under both sections of the regulations, the
attribution of the subsidy is to TPCO's consolidated sales. Thus, we
are preliminarily attributing any subsidies under the provision of
steel rounds to Charging for less than adequate remuneration to TPCO's
consolidated sales, which includes Charging's sales.
On page 3 of our January 26, 2010, supplemental questionnaire to
TPCO, we asked TPCO to explain why it did not provide a response on
behalf of Tianjin TEDA Investment Holding Co., Ltd. (``TEDA''), Tianjin
Pipe Investment Holding Co., Ltd. (``TPCO Holding''), and China Cinda
Asset Management Corporation (``Cinda''), which have held majority
interests in TPCO since December 11, 2001. Under 19 CFR
351.525(b)(6)(iii), we would normally attribute to TPCO any subsidies
that these owners received while each was cross-owned with TPCO. In its
response dated February 16, 2010, TPCO responded that TEDA, a
government agency, is primarily involved in the operation and
management of assets and public infrastructure, and TPCO Holding was
originally established by the Tianjin SASAC (``State-owned Assets
Supervision and Administration Commission of the State Council'') for
the sole purpose of holding the assets of TPCO. In TPCO's explanation
of why it did not file a response for Cinda, it refers to the
Department's finding in OCTG from the PRC, in which the Department
found that TEDA and TPCO Holding were government agencies.\6\ TPCO
states ``for the same reasons,'' TPCO did not file a response for
Cinda, which was specifically established to restructure debt and non-
performing assets. Based on TPCO's response, we preliminarily determine
that these entities were government agencies since December 11, 2001.
Thus, we are preliminarily countervailing subsidies that these entities
provided to TPCO, rather than any subsidies that these entities may
have received. Moreover, as agencies of the government, we
preliminarily determine these entities to be ``government
authorities.''
---------------------------------------------------------------------------
\6\ See OCTG from the PRC, and accompanying Issues and Decision
Memorandum at 9 and Comment 40.
---------------------------------------------------------------------------
In the January 26, 2010, supplemental questionnaire, we also asked
TPCO questions about certain affiliates that may have met the cross-
ownership standard under 19 CFR 351.525(b)(6)(vi) and one or more of
the attribution standards under 19 CFR 351.525(b)(6)(ii)-(v). TPCO
provided responses to these questions in its February 12, 2010,
response at pages 5-6. Based on TPCO's responses, we preliminarily
determine that none of these affiliates met both the cross-ownership
standard of 19 CFR 351.525(b)(6)(vi) and one or more of the attribution
standards under 19 CFR 351.525(b)(6)(ii)-(v). Thus, we have not
included any subsidies to these companies in the subsidy calculation.
For other affiliated companies that TPCO identified in Exhibits 1
and 2 of the TQR, TPCO either held a small ownership share during the
POI or identified the companies as having no involvement with subject
merchandise. Thus, we have not included any subsidies to these
companies in the subsidy calculation.
Regarding the sales denominator for calculating TPCO's subsidy
rate, we note that the Department will attribute subsidies bestowed on
a parent or holding company to the consolidated sales of the parent or
holding company and its subsidiaries under 19 CFR 351.525(b)(6)(iii).
TPCO was a parent company to other companies during the POI. On page 12
of the TQR, TPCO stated, ``{TPCO{time} consolidated those directly
owned subsidiaries in which it holds more than 50% equity shares, as
well as those indirectly owned subsidiaries in which its wholly-owned
subsidiaries hold more than 50% equity shares.'' In accordance with 19
CFR 351.525(b)(6)(iii), we are preliminarily attributing subsidies to
TPCO to the consolidated sales of TPCO and its subsidiaries.
Therefore, based on information currently on the record, we
preliminarily determine that cross-ownership within the meaning of 19
CFR 351.525(b)(6)(vi) exists between TPCO, TPCO Iron, Yuantong, TPCO
International, and Charging. Moreover, pursuant to 19 CFR
351.525(b)(6)(iii), we are preliminarily attributing subsidies received
by TPCO to the consolidated sales of TPCO and its subsidiaries (net of
inter-company sales). TPCO Iron, Yuantong, and Charging are
consolidated into TPCO's sales; thus, we are preliminarily attributing
subsidies received by TPCO Iron, Yuantong, and Charging to TPCO's
consolidated sales (net of inter-company sales). For TPCO
International, we preliminarily have cumulated TPCO International's
subsidy benefits with TPCO's subsidy benefits. See 19 CFR 351.525(c).
We have preliminarily used TPCO's consolidated sales net of inter-
company sales as the denominator for subsidies to TPCO International.
Hengyang
As of this preliminary determination, Hengyang has responded to the
Department's original and supplemental questionnaires on behalf of
Hengyang Steel Tube Group International Trading, Inc. (``Hengyang
Trading''), Hengyang Valin Steel Tube Co., Ltd. (``Hengyang Valin''),
and Hengyang Valin MPM Tube Co., Ltd. (``Hengyang MPM''), and their
affiliated parties Xigang Seamless Steel Tube Co., Ltd. (``Xigang
Seamless''), Wuxi Seamless Special Pipe Co., Ltd. (``Special Pipe''),
Wuxi Resources Steel Making Co., Ltd. (``Resources Steel''), and
Jiangsu Xigang Group Co., Ltd. (``Xigang Group''). These companies are
cross-owned within the meaning of 19 CFR 351.525(b)(6)(vi) by virtue of
common ownership.\7\
---------------------------------------------------------------------------
\7\ See HQR at 2.
---------------------------------------------------------------------------
Hengyang reports the following roles for each of the seven
companies: \8\
---------------------------------------------------------------------------
\8\ See HQR at 2 and HQR at Vol. 5 p. 1-2.
---------------------------------------------------------------------------
Hengyang Valin: a parent company to Hengyang MPM and
Hengyang Trading, and a producer of subject merchandise;
Hengyang MPM: a producer of subject merchandise, as well
as a producer and supplier of an input to Hengyang Valin for production
of subject merchandise;
Hengyang Trading: an exporter of subject merchandise on
behalf of Hengyang Valin and Hengyang MPM;
Xigang Seamless: a producer and exporter of subject
merchandise;
[[Page 9170]]
Special Pipe: a producer of subject merchandise;
Resources Steel: a producer and supplier of an input to
Xigang Seamless and Special Pipe for production of subject merchandise;
and
Xigang Group: a holding company, and the parent of Xigang
Seamless, Special Pipe, and Resources Steel.
Because Hengyang Valin, Hengyang MPM, Xigang Seamless, and Special
Pipe are producers of subject merchandise, we are preliminarily
attributing subsidies received by any of these companies to the sales
of all four (excluding sales between the companies), in accordance with
19 CFR 351.525(b)(6)(ii).
During the POI, Hengyang Trading exported subject merchandise
produced by Hengyang Valin and Hengyang MPM. Thus, we are preliminarily
cumulating the benefit from subsidies received by Hengyang Trading with
the benefit from subsidies provided to Hengyang Valin and MPM, in
accordance with 19 CFR 351.525(c).
Hengyang identified Resources Steel as a producer and supplier of
steel billet to Xigang Seamless and Special Pipe. Because steel billet
is primarily dedicated to the production of the downstream product, we
are preliminarily attributing subsidies received by Resources Steel to
Resources Steel, Xigang Seamless, and Special Pipe, in accordance with
19 CFR 351.525(b)(6)(iv).
Xigang Group was the parent of Xigang Seamless, Special Pipe, and
Resources Steel during the POI. Thus, we are preliminarily attributing
subsidies received by Xigang Group to the consolidated sales of Xigang
Group and its subsidiaries, in accordance with 19 CFR
351.525(b)(6)(iii).
In a supplemental questionnaire dated January 28, 2010, we asked
Hengyang to provide responses on behalf of certain affiliates that met
the cross-ownership standard under 19 CFR 351.525(b)(6)(vi) and one or
more of the attribution standards under 19 CFR 351.525(b)(6)(ii)-(v).
Hengyang is scheduled to provide this response on February 22, 2010. We
intend to address this response in a post-preliminary determination.
At Volume 1, page 7 of the HQR, Hengyang stated that Hengyang
Trading also exports subject merchandise produced by an unaffiliated
producer, although Hengyang stated that Hengyang Trading did not export
this merchandise to the United States during the POI. At Volume 5,
pages 7-8 of the HQR, Hengyang stated that Xigang Seamless purchased
and exported subject merchandise produced by unaffiliated companies
during the POI. Although any subsidies to the unaffiliated producers
would normally be cumulated with subsidies provided to these trading
companies pursuant to 19 CFR 351.525(c), the Department has, in some
instances, limited the number of producers it examines where their
merchandise was not exported to the United States during the POI or
accounted for a very small share of respondent's exports to the United
States. In this investigation, we have not sent CVD questionnaires to
the unaffiliated suppliers because their merchandise was not exported
to the United States during the POI or accounted for a minor share of
Hengyang's exports to the United States.\9\ See, e.g., Pasta From
Italy, in which one of the mandatory respondents was a trading company
that exported pasta produced by multiple pasta manufacturers, but the
Department limited its analysis to the two major pasta manufacturers
that supplied the trading company during the period of review. See
Certain Pasta from Italy: Final Results of the Fourth Countervailing
Duty Administrative Review, 66 FR 64214 (December 12, 2001) (``Pasta
from Italy''), and accompanying Issues and Decision Memorandum at
``Attribution.''
---------------------------------------------------------------------------
\9\ Hengyang Trading did not export subject merchandise produced
by unaffiliated producers to the United States during the POI. See
the HQR at Volume 1, page 7. The percentage of Xigang Seamless's
exports of subject merchandise to the United States from
unaffiliated producers is business proprietary information. See the
HQR at Volume 5, page 8.
---------------------------------------------------------------------------
Benchmarks and Discount Rates
Benchmarks 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 as a benchmark.\10\ If the firm did not have
any comparable commercial loans during the period, the Department's
regulations provide that we ``may use a national average interest rate
for comparable commercial loans.'' \11\
---------------------------------------------------------------------------
\10\ See 19 CFR 351.505(a)(3)(i).
\11\ 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. For the reasons explained in
CFS from the PRC,\12\ 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. 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, 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.\13\
---------------------------------------------------------------------------
\12\ See CFS Decision Memorandum at Comment 10.
\13\ 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 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 \14\ and more
recently updated in LWTP from the PRC.\15\ 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, and takes
into account a key factor involved in interest rate formation, that of
the quality of a country's institutions, that is not directly tied to
the state-imposed distortions in the banking sector discussed above.
---------------------------------------------------------------------------
\14\ See CFS Decision Memorandum at Comment 10.
\15\ See 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 8-
10.
---------------------------------------------------------------------------
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.\16\ As explained in CFS from the PRC, this pool of countries
[[Page 9171]]
captures the broad inverse relationship between income and interest
rates.
---------------------------------------------------------------------------
\16\ See The World Bank Country Classification, http://econ.worldbank.org/.
---------------------------------------------------------------------------
Many of these countries reported lending and inflation rates to the
International Monetary Fund, and they 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, 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 each year the
Department calculated an inflation-adjusted short-term benchmark rate,
we have also excluded any countries with aberrational or negative real
interest rates for the year in question.
The resulting inflation-adjusted benchmark lending rates are
provided in the respondents' preliminary calculation memoranda. See
Memorandum to File, ``Preliminary Determination Calculation Memorandum
for (TPCO),'' (February 22, 2010) (``TPCO Calculation Memo''); see also
Memorandum to File, ``Preliminary Determination Calculation Memorandum
for (Hengyang),'' (February 22, 2010) (``Hengyang Calculation Memo'').
Because these are inflation-adjusted benchmarks, it is necessary to
adjust the respondents' interest payments for inflation. This was done
using the PRC inflation figure as reported in the IFS. See TPCO
Calculation Memo and Hengyang Calculation Memo.
Benchmarks for Long-Term Loans
The lending rates reported in the IFS represent short- and medium-
term lending, and there are not sufficient publicly available long-term
interest rate data upon which to base a robust benchmark for long-term
loans. 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,
e.g., Light-Walled Rectangular Pipe and Tube From People's Republic of
China: Final Affirmative Countervailing Duty Investigation
Determination, 73 FR 35642 (June 24, 2008) and accompanying Issues and
Decision Memorandum (``LWRP Decision Memo'') at 8. 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. Finally, because these long-term rates are net of inflation as
noted above, we adjusted the PRC respondents' payments to remove
inflation.
Benchmarks for Foreign Currency-Denominated Loans
For foreign currency-denominated short-term loans, the Department
used as a benchmark the one-year dollar interest rates for the London
Interbank Offering Rate (``LIBOR''), plus the average spread between
LIBOR and the one-year corporate bond rates for companies with a BB
rating. See LWTP Decision Memo at 10. For long-term foreign currency-
denominated loans, the Department added the applicable short-term LIBOR
rate to a spread which is calculated as the difference between the one-
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.
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 agreed
to provide the subsidy.
Analysis of Programs
Based upon our analysis of the petition and the responses to our
questionnaires, we preliminarily determine the following:
I. Programs Preliminarily Determined To Be Countervailable
A. Policy Loans to the Seamless Pipe Industry
The Department is examining whether seamless pipe producers receive
preferential lending through state-owned commercial or policy banks.
According to the allegation, preferential lending to the seamless 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 information and responses of
the GOC, we preliminarily determine that loans received by the seamless
pipe industry from state-owned commercial banks (``SOCBs'') were made
pursuant to government directives.
Record evidence demonstrates that the GOC, through its directives,
has highlighted and advocated the development of the seamless 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 (``Plan'') was to
develop key steel types that were mainly imported; high strength,
anticrushing and corrosion resistant petroleum pipe was among the
listed products. 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.
See Memorandum to File from Yasmin Nair, Analyst regarding ``Additional
Documents Placed on the Record'' (February 22, 2010) (``Additional
Documents Memo'').
Similarly, in the Development Policies for the Iron and Steel
Industry (July 2005) at Article 16, the GOC states that it will ``* * *
enhance the R&D, design, and manufacture level in relation to the key
technology, equipment and facilities for the Chinese steel industry.''
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. See Petition at Exhibit III-
[[Page 9172]]
10. 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. See Additional Documents Memo. 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. Steel
tube for oil well pipe, high-pressure boiler pipe, and long-distance
transmission pipe was named in the Industrial Catalogue as an
``encouraged project.'' See Petition at Exhibit III-44. For the
``encouraged'' projects, Decision 40 outlines several support options
available to the government, including financing.
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 Memo at Comment
6. Based on our review of the sub-national plans submitted by the GOC
in this investigation, we find that they mirror the national
government's objective of supporting and promoting the production of
innovative and high-value added products, including seamless pipe.
Examples from the five-year plans of the provinces and/or
municipalities where each of the respondents is located follow:
Outline of the 10th Five-Year Plan for the National Economic and
Social Development of Tianjin Municipality: ``For metallurgical
industry, we attach importance to the development of high quality
and efficiency steel products and high grade metal products, such as
seamless steel tube and cold rolled sheet, and carry out the oil
steel pipe extension and east-movement project of steel.'' See GQR
at Exhibit GOC-12.
Outline of the 11th Five-Year Program of Social and Economic
Development of Tianjin Municipality: ``Build a pipe production base,
mainly producing seamless pipes * * * Develop a production capacity
of 2600 seamless pipes, 10 million plates, and 1 million first class
metal products by 2010.'' See GQR at Exhibit GOC-13.
10th Five-Year Plan for Industrial Development in Tianjin:
``Surrounding the object of establishing a national manufacturing
base for seamless steel tube and metallic products, metallurgy
industries will actively optimize structure, properly adjust layout,
and develop advantageous products. We shall let the backward
techniques and facilities give way to latest applicable technologies
to treat pollution properly, promote development of quality steel
and metallic products with high added value and huge domestic demand
represented by seamless steel tube and cold rolled sheet * * *'' See
GQR at Exhibit GOC-16.
Outline of the 11th Five-Year Program for the Development of the
Industrial Economy of Tianjin: ``Development objective: * * *
Production capacities of major products: * * * production of rolled
steel exceeds 30 million tons, including 2.6 million tons of
seamless steel tubes * * * One of the world largest technical
equipment leading seamless steel tube production base and important
domestic high grade sheet and metal products production base shall
be established here * * * Key projects and investment: There shall
be a total investment of 32.5 billion Yuan during the period of the
11th Five-Year Program, mainly including the project of seamless
steel tube, stainless steel tube and heavy caliber welding steel
tubes with a total investment of 3.6 billion Yuan contributed by
TPCO, Shuangjie Steel Tubes and other companies * * *'' See GQR at
Exhibit GOC-17.
Outline of the 10th Five-Year Plan for National Economy and
Social Development of Tianjin Binhai New Area: ``Complete the
eastward movement of Tianjin Steel Factory relying on the current
conditions of Steel Pipe Company and No.3 Gas Factory, establish the
manufacturing base and metallurgical casting base for steel of
quality and efficiency and its hot-processed products.'' See G1SR at
Exhibit 1.
Notice of Tianjin Municipal People's Government Concerning the
Printing and Distribution of the Outline for the 11th Five-Year
Program for the National Economic and social Development in Tianjin
Binhai New Area: ``4. Constructing deep processing base of petroleum
steel pipe and high quality steel material--We shall quicken
technology innovation and structural adjustment, extend industrial
link, enhance the concentration effort, strive the commanding point
of the industry, consolidate and develop the leading position of
deep processing of petroleum steel pipe and high quality steel
material.'' See G1SR at Exhibit 2.
Outlines of the 10th and 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.'' See GQR at
Exhibit GOC-14 and 15.
Outline of the 11th Five-Year Plan of Social and Economic
Development of Jiangsu Province: ``We shall lay emphasis upon the
development of competitive industries * * * By setting up industrial
bases of integrated circuit, photoelectric display, petrochemical
industry, metallurgy, shipbuilding, and paper making, we shall
increase shares of competitive industries in the manufacturing
industry. Focus shall be put on developing special metallurgy,
petrochemical, new building material and other basic industries. We
shall actively speed up development of special steel, * * *'' See
GQR at Exhibit GOC-9.
Outline of the 10th Five-Year Plan of Social and Economic
Development of Wuxi Municipality: ``We should insist on the guidance
of market, support the consumer products with big market share, fill
the blanket area in domestic market, replace the exported products,
high class facility class, upgrade and update products with
competitive and high added value, new products with good
industrialization base and comparative relativeness and dragging
force, endeavor to construct 10 distinctive product group of
electronic devices, * * * steel & iron and metal products and form a
batch of international renowned brand and brands famous in China and
Jiangsu.'' See GQR at Exhibit GOC-10.
Outline of the 11th Five-Year Plan of Social and Economic
Development of Wuxi Municipality: ``We will take such industries as
metallurgy, chemical industry and so on as the foundation,
prioritize products of several domains such as new composition
material and high polymer material, new ceramic material, special
steel and product, * * *'' See GQR at Exhibit GOC-11.
Outline of the 10th Five-Year Plan of Social and Economic
Development of Hunan Province: ``We shall optimize the structure,
form the characteristics and enlarge the production of high quality
plate and strip material, seamless tube, rigid line, manganese and
other deep processing and special alloy products.'' See GQR at
Exhibit GOC-4.
Outline of the 11th Five-Year Program of Social and Economic
Development of Hunan Province: ``We shall vigorously import advanced
technological equipment and production techniques * * *; concentrate
on development of high-quality excellent steel materials such as
plates, tubes and bars etc * * *'' See GQR at Exhibit GOC-5.
Outline of the 10th Five-Year Plan of Social and Economic
Development of Hengyang Municipality: ``Focus shall be put on
singling out these six pillar industries for support such as
metallurgy, machinery, * * * We shall attach great importance to ten
key enterprises and ten knock-out products. The ten key enterprises
include: * * * Hengyang Steel Tube Group Corporation * * *'' See GQR
at Exhibit GOC-6.
Outline of the 11th Five-Year Program of Social and Economic
Development of Hengyang Municipality: ``We shall stress the
development of such major industries such as iron and steel smelting
and tube processing, * * * we shall introduce international
strategic investment, promote tube processing and manufacturing * *
* Up to 2010, the smelting of steel and iron and the output for
affiliated industrial clusters of tube processing shall reach 14
billion.'' See GQR at Exhibit GOC-7.
As noted in Citric Acid from the PRC: \17\
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\17\ See Citric Acid from the PRC, and Citric Acid Decision
Memo, at Comment 5.
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
[[Page 9173]]
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).\18\ Once that finding is made, the
Department relies upon the analysis undertaken in CFS from the PRC
\19\ to further conclude that national and local government control
over the SOCBs results in the loans being a financial contribution
by the GOC.\20\
---------------------------------------------------------------------------
\18\ See CFS Decision Memorandum, at 49; and LWTP Decision
Memorandum, at 98.
\19\ See CFS Decision Memorandum, at Comment 8.
\20\ 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 Memo'') 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 seamless pipe through policy
lending. The loans to seamless pipe producers from Policy Banks and
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)(2) of the Act). Finally, we
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 seamless pipe industry.
To calculate the benefit under the policy lending program, we used
the benchmarks described under ``Subsidies Valuation--Benchmarks and
Discount Rates'' above. See also 19 CFR 351.505(c). On this basis, we
preliminarily determine that Hengyang received a countervailable
subsidy of 1.44 percent ad valorem and TPCO received a countervailable
subsidy of 0.88 percent ad valorem.
B. Export Loans From the Export-Import Bank of China
TPCO
On page 20 of the GQR, the GOC reported that the Export-Import Bank
of China (``EIBC'') provided TPCO with three loans that were
outstanding during the POI. The GOC claimed that none of the loans
related to exportation of subject merchandise.
Based on the proprietary description of these loans at page 21 of
the GOC's response, however, we preliminarily find that one of the
loans is a countervailable export loan from the EIBC.\21\ As a loan
from a government policy bank, this loan constitutes a direct financial
contribution from the government, pursuant to section 771(5)(D)(i) of
the Act. We further determine that the export loan is specific under
section 771(5A)(B) of the Act because receipt of the financing is
contingent upon export. Also, we determine that the export loan confers
a benefit within the meaning of section 771(5)(E)(ii) of the Act.
---------------------------------------------------------------------------
\21\ We have addressed the proprietary details of this loan in
the TPCO Calculation Memo.
---------------------------------------------------------------------------
To calculate the benefit under this program, we compared the amount
of interest paid against the export loan to the amount of interest that
would have been paid on a comparable commercial loan. As our benchmark,
we used the short-term interest rates discussed above in the
``Benchmarks and Discount Rates'' section. To calculate the net
countervailable subsidy rate, we divided the benefit by TPCO's export
sales value for the POI. On this basis, we preliminarily determine the
net countervailable subsidy rate to be 0.08 percent ad valorem.
Hengyang
On page 14 of the HQR, Hengyang reported two loans made to Hengyang
Valin that are ``contingent on the loans being used for anticipated
activities that generate exports of high-tech products.'' \22\ On page
15 of the HQR, Hengyang stated that all of Hengyang Valin's exports
benefit from these loans.
---------------------------------------------------------------------------
\22\ See HQR at 14.
---------------------------------------------------------------------------
On page 28 of the GQR, the GOC stated, ``Hengyang Valin received
{proprietary amount of{time} export contingent loans from {the
EIBC{time} .''
We preliminarily find that Hengyang's loans from the EIBC that were
outstanding during the POI are countervailable export loans. As a loan
from a government policy bank, these loans constitute a direct
financial contribution from the government, pursuant to section
771(5)(D)(i) of the Act. We further determine that the export loans are
specific under section 771(5A)(B) of the Act because receipt of the
financing is contingent upon export. Also, we determine that the export
loans confer a benefit within the meaning of section 771(5)(E)(ii) of
the Act.
To calculate the benefit under this program, we compared the amount
of interest paid against the export loans to the amount of interest
that would have been paid on a comparable commercial loan. As our
benchmark, we used the short-term interest rates discussed above in the
``Benchmarks and Discount Rates'' section. To calculate the net
countervailable subsidy rate, we divided the benefit by Hengyang's
export sales value for the POI. On this basis, we preliminarily
determine the net countervailable subsidy rate to be 1.03 percent ad
valorem.
C. Provision of Steel Rounds for Less Than Adequate Remuneration
As discussed under ``Use of Facts Otherwise Available and Adverse
Inferences,'' above, we are preliminarily relying on ``adverse facts
available'' (``AFA'') for our analysis regarding the GOC's provision of
steel rounds and billets to seamless pipe producers. First, as a result
of the GOC's failure to provide requested ownership information for the
companies that produced the steel rounds and billets purchased by the
mandatory respondents in this investigation, we are treating all
unaffiliated producers of steel rounds and billets as ``authorities''
within the meaning of section 771(5)(B) of the Act. Therefore, we
preliminarily determine that seamless pipe producers have received a
financial contribution from the government in the form of the provision
of a good. See section 771(5)(D)(iii) of the Act.
To determine whether this financial contribution results in a
subsidy to the seamless pipe producers, we followed 19 CFR
351.511(a)(2) for identifying an appropriate market-based benchmark for
measuring the adequacy of the remuneration for the steel rounds and
billets. The potential benchmarks listed in this regulation, in order
of preference are: (1) Market prices from actual transactions within
the country under investigation for the government-provided good (e.g.,
actual sales, actual imports, or competitively run government auctions)
(``tier one'' benchmarks); (2) world market prices that would be
available to purchasers in the country under investigation (``tier
two'' benchmarks); or (3) prices consistent with market principles
based on an assessment by the Department of the government-set price
(``tier three'' benchmarks). 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 from Canada and accompanying Issues and Decision
Memorandum at ``Analysis of Programs, Provincial Stumpage
[[Page 9174]]
Programs Determined to Confer Subsidies, Benefit.''
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 CVD 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 Countervailing Duties; Final Rule, 63 FR 65348,
65377 (November 25, 1998) (``CVD Preamble''). The CVD Preamble further
recognizes that distortion can occur when the government provider
constitutes a majority, or in certain circumstances, a substantial
portion of the market.
As explained under ``Use of Facts Otherwise Available and Adverse
Inferences,'' above, we are preliminarily relying on AFA to determine
that GOC authorities play a predominant role in the PRC market for
steel rounds and billets. Because of the predominant role played by GOC
authorities in the production of steel rounds and billets, we
preliminarily determine that the prices actually paid in the PRC for
steel rounds and billets during the POI are not appropriate tier one
benchmarks under our regulations.
Turning to tier two benchmarks, i.e., world market prices available
to purchasers in the PRC, we have placed on the record the benchmark
price information that we used in the final determination of OCTG from
the PRC. See OCTG from the PRC, and accompanying Issues and Decision
Memorandum at Comment 13a; see also Memorandum to the File dated
February 22, 2010, ``Steel Rounds Benchmark Prices.'' The benchmark
price that we used in OCTG from the PRC is a compilation of the
following prices: Export prices from Steel Business Briefing (``SBB'')
for billet from Latin America, Turkey, the Black Sea/Baltic region; SBB
East Asia import prices; and two series of London Metal Exchange
prices.
The benchmark price from OCTG from the PRC represents an average of
commercially-available world market prices for steel rounds and billets
that would be available to purchasers in the PRC. We note that, in
addition to OCTG from the PRC, the Department has relied on pricing
data from industry publications such as SBB in other recent CVD
proceedings involving the PRC. See, e.g., CWP Decision Memorandum at 11
and LWRP Decision Memo at 9. Also, 19 CFR 351.511(a)(2)(ii) states that
where there is more than one commercially available world market price,
the Department will average the prices to the extent practicable.
Therefore, we have averaged the prices to calculate an overall
benchmark.
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. Regarding delivery charges, we have included the freight
charges that would be incurred to deliver steel rounds to the
respondents' plants. We have also added import duties, as reported by
the GOC, and the value-added tax (``VAT'') applicable to imports of
steel rounds and billet into the PRC. We have compared these prices to
the respondents' actual purchase prices, including any taxes and
delivery charges incurred to deliver the product to the respondents'
plants.
Comparing the adjusted benchmark prices to the prices paid by the
respondents for their steel rounds and billet, we preliminarily
determine that the GOC provided steel rounds and billet for less than
adequate remuneration, and that a benefit exists in the amount of the
difference between the benchmark and what the respondents paid. See 19
CFR 351.511(a).
Finally, with respect to specificity, the GOC at page 91 of the GQR
stated, ``Steel rounds (billets in round shape that can be used to
produce seamless pipe) are {used{time} by the seamless pipe
industry.'' 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.
Based on the above, we preliminarily determine that the GOC
conferred a countervailable subsidy on TPCO and Hengyang through the
provision of steel rounds for less than adequate remuneration. To
calculate the subsidy, we took the difference between the delivered
world market price and what each respondent paid for steel rounds,
including delivery charges, during the POI. On this basis, we
preliminarily calculated a net countervailable ad valorem subsidy rate
of 4.98 percent for TPCO and 2.82 percent for Hengyang.
D. Provision of Electricity for Less Than Adequate Remuneration
For the reasons explained in the ``Use of Facts Otherwise Available
and Adverse Facts Available'' 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.
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 companies' reported
information on the amounts of electricity they purchased and the
amounts they paid for electricity during the POI. We compared the rates
paid by TPCO and Hengyang for their electricity to the highest rates
that they 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 valley and normal ranges were
selected from the GQR at Exhibit 85, Electricity Sale Rate Schedule of
Zhejiang Grid. The peak rate is the electricity rate for Dongguan City
as reported in the GOC's March 12, 2009 supplemental questionnaire
response at Exhibit S2-4 in the CVD investigation of ``Certain Kitchen
Appliance Shelving and Racks from the People's Republic of China.'' See
Memorandum to File from Yasmin Nair, International Trade Compliance
Analyst, Office 1, ``Electricity Rate Data'' (February 22, 2010). This
benchmark reflects the adverse inference 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.
On this basis, we preliminarily determine the countervailable
subsidy to be 1.53 percent ad valorem for TPCO and 3.91 percent ad
valorem for Hengyang.
E. The State Key Technology Project Fund
TPCO reported that it received funds from the State Key Technology
Renovation Fund in 2003. In Exhibit V-
[[Page 9175]]
1 of the GQR, the GOC provided the notice for implementation of the
fund. The notice states that the purpose of the program is to ``support
the technological renovation of key industries, key enterprises and key
products * * *'' The notice also states, ``The enterprises shall be
mainly selected from large-sized state-owned enterprises and large-
sized state holding enterprises among the 512 key enterprises, 120
pilot enterprise groups and the leading enterprises of the
industries.''
The Department has previously found this program to be
countervailable. See, e.g., Certain New Pneumatic Off-the-Road Tires
From the People's Republic of China: Final Affirmative Countervailing
Duty Determination and Final Negative Determination of Critical
Circumstances, 73 FR 40480 (July 15, 2008), and the accompanying Issues
and Decision Memorandum at page 23 and Comment G.7.
We preliminarily determine that TPCO received a countervailable
subsidy under the State Key Technology Renovation Fund. We find that
this grant is a direct transfer of funds within the meaning of section
771(5)(D)(i) of the Act, providing a benefit in the amount of the
grant. See 19 CFR 351.504(a). Further, we preliminarily determine that
the grant provided under this program is limited as a matter of law to
certain enterprises; i.e., large-sized state-owned enterprises and
large-sized state holding enterprises among the 512 key enterprises.
Hence, we preliminarily find that the subsidy is specific under section
771(5A)(D)(i) of the Act.
To calculate the countervailable subsidy, we used our standard
methodology for non-recurring grants. See 19 CFR 351.524(b). Because
the grant exceeded 0.5 percent of TPCO's sales in the year the grant
was approved (i.e., 2003), we have allocated the benefit over the 15-
year AUL using the discount rate described under the ``Benchmarks and
Discount Rates'' section above. On this basis, we preliminarily
determine the countervailable subsidy to be 0.01 percent ad valorem for
TPCO.
F. Subsidies Provided in the Tianjin Binhai New Area and the Tianjin
Economic and Technological Development Area
TPCO reported that it used two programs for companies in the
Tianjin Binhai New Area (``TBNA''): the Science and Technology Fund
Program and the Accelerated Depreciation Program. TPCO received a grant
under the Science and Technology Fund Program and paid reduced income
taxes under the Accelerated Depreciation Program. TPCO also reported
that it purchased land-use rights and rented land-use rights for
different plots of land within the TBNA during the POI and prior to the
POI.
Science and Technology Fund
The GOC's measures for the Science and Technology Fund, which the
GOC provided at 134 of the GQR, describe the fund's purpose as follows:
(1) Promote the construction of the science-technology infrastructure
in TBNA; (2) enhance science-technology renovation and service
abilities; (3) improve the business environment of renovation
entrepreneurship; and 4) construct a new science-technology renovation
system. On page 138 of the GQR, the GOC stated that eligibility for the
program is limited to enterprises within the TBNA Administrative
Committee's jurisdiction.
We preliminarily determine that TPCO received a countervailable
subsidy during the POI under the TBNA Science and Technology Fund
Program. We find that this grant is a direct transfer of funds within
the meaning of section 771(5)(D)(i) of the Act, providing a benefit in
the amount of the grant. See 19 CFR 351.504(a). We further determine
preliminarily that grants under this program are limited to enterprises
located in a designated geographic region (i.e., the TBNA). Hence, the
grants are specific under section 771(5A)(D)(iv) of the Act.
To calculate the countervailable subsidy, we used our standard
methodology for non-recurring grants. See 19 CFR 351.524(b). Because
the benefit was less than 0.5 percent of TPCO's consolidated sales
during the POI, we have preliminarily expensed the entire amount to the
POI. See 19 CFR 351.524(b)(2). On this basis, we preliminarily
determine the countervailable subsidy to be 0.03 percent ad valorem for
TPCO.
Accelerated Depreciation Program
Regarding the Accelerated Depreciation program, the GOC circular
for the program (Exhibit 109 of the GQR) stipulates that enterprises in
the TBNA may shorten the depreciation period of certain fixed assets by
a maximum of 40 percent of the present depreciation period. On page 147
of the GQR, the GOC stated that eligibility for the program is limited
to enterprises within the TBNA.
We preliminarily determine that TPCO received a countervailable
subsidy during the POI under the Accelerated Depreciation program. The
Accelerated Depreciation program constitutes a financial contribution
in the form of revenue forgone that is otherwise due within the meaning
of section 771(5)(D)(ii) of the Act, with the benefit equaling the
income tax savings (see 19 CFR 351.509(a)). The program affected TPCO's
income taxes for the 2007 tax year. Thus, under the normal standard in
19 CFR 351.509(b), TPCO received a benefit from this program in 2008,
when it filed its 2007 annual tax return. Further, we determine
preliminarily that the reduction afforded by this program is limited to
enterprises located in designated geographic regions and, hence, is
specific under section 771(5A)(D)(iv) of the Act.
To calculate the benefit, we divided the reduction in TPCO's income
taxes resulting from the program by TPCO's consolidated sales, in
accordance with 19 CFR 351.524(c)(1) and 19 CFR 351.525(b)(6)(iii). On
this basis, we preliminarily determine the countervailable subsidy to
be 0.58 percent ad valorem for TPCO.
Land
Regarding land, TPCO and its reporting cross-owned affiliates are
all located in the TBNA, and TPCO, TPCO Iron, and Yuantong have
purchased ``granted'' land-use rights within the TBNA. At page 86 of
the GQR, the GOC reported that TPCO obtained its land-use rights in
accordance with Article 11 of Decree 21 of the Ministry of Land and
Resources. Article 11, at Exhibit 73 of the GQR, establishes provisions
for the ``agreement-based assignment of the right to use state-owned
land.'' Article 11 states that the ``agreement-based assignment of the
right to use state-owned land'' refers to the land user's right to use
state-owned land for a certain period, and to the land user's payment
of a fee to the state for the land-use right. TPCO and TPCO Iron
purchased their land-use rights from the Dongli District Land and
Resource Administration Bureau, and Yuantong purchased its land-use
rights from the Tianjin Port Bonded Zone Land and Resource
Administration Bureau.
The Department determined in LWS that the provision of land-use
rights constitutes the provision of a good within the meaning of
section 771(5)(D)(iii) of the Act.\23\ The Department also found that
when the land is in an industrial park located
[[Page 9176]]
within the seller's (e.g., county's or municipality's) jurisdiction,
the provision of the land-use rights is regionally specific (see
section 771(5A)(D)(iv) of the Act).\24\ In the instant investigation,
the TBNA is a designated area within the jurisdictions that provided
land-use rights to TPCO and its cross-owned affiliates since December
11, 2001. Therefore, consistent with LWS, we preliminarily find that
TPCO's purchases of granted land-use rights give rise to
countervailable subsidies to the extent that the purchases conferred a
benefit. We will continue to evaluate for the final determination the
circumstances under which TPCO received land for LTAR pursuant to its
location in this zone.
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\23\ See Laminated Woven Sacks From the People's Republic of
China: Final Affirmative Countervailing Duty Determination and Final
Affirmative Determination, in Part, of Critical Circumstances, 73 FR
35639 (June 24, 2008) (``LWS''), and the accompanying Issues and
Decision Memorandum at Comment 8.
\24\ Id. at Comment 9.
---------------------------------------------------------------------------
To determine whether TPCO received a benefit, we have analyzed
potential benchmarks in accordance with 19 CFR 351.511(a). First, we
look to whether there are market-determined prices within the country.
See 19 CFR 351.511(a)(2)(i). In LWS, the Department determined that
``Chinese land prices are distorted by the significant government role
in the market'' and, hence, that usable tier one benchmarks do not
exist.\25\ The Department also found that tier two benchmarks (world
market prices that would be available to purchasers in the PRC) are not
appropriate.\26\ See 19 CFR 351.511(a)(2)(ii). Therefore, the
Department determined the adequacy of remuneration by reference to tier
3 and found that the sale of land-use rights in the PRC was not
consistent with market principles because of the overwhelming presence
of the government in the land-use rights market and the widespread and
documented deviation from the authorized methods of pricing and
allocating land.\27\ See 19 CFR 351.511(a)(2)(iii). There is
insufficient new information on the record of this investigation to
warrant a change from the findings in LWS.
---------------------------------------------------------------------------
\25\ Id. at Comment 10.
\26\ Id. at section IV.A.1, ``Analysis of Programs--Government
Provision of Land for Less Than Adequate Remuneration.''
\27\ Id. at Comment 10.
---------------------------------------------------------------------------
For these reasons, we are not able to use Chinese or world market
prices as a benchmark. Therefore, we are preliminarily comparing the
price that TPCO paid for its granted land-use rights with comparable
market-based prices for land purchases in a country at a comparable
level of economic development that is reasonably proximate to, but
outside of, the PRC. Specifically, we are preliminarily comparing the
price TPCO paid to sales of certain industrial land in industrial
estates, parks, and zones in Thailand, consistent with LWS.
To calculate the benefit, we computed the amount that TPCO would
have paid for its granted land-use rights and subtracted the amount
TPCO actually paid for each purchase. For purchases in which the
subsidy amount exceeded 0.5 percent of TPCO's sales in the year of
purchase, we have used the discount rate described under the Benchmarks
and Discount Rates section above to allocate the benefit over the life
of the land-use rights contract. For these purchases, we divided the
amount allocated to the POI by TPCO's consolidated sales during the
POI. For purchases in which the benefit was less than 0.5 percent of
TPCO's consolidated sales in the year of the purchase, we have
preliminarily expensed the entire amount to the year in which TPCO
purchased the land-use rights. See 19 CFR 351.524(b)(2). On this basis,
we preliminarily determine the total countervailable subsidy for all of
TPCO's land-use rights purchases to be 0.11 percent ad valorem during
the POI.
TPCO also reported that it rented certain land parcels within the
TBNA from TPCO Holding during the POI. Specifically, on pages 45-46 of
the TQR, TPCO reported that it operates on the largest of these three
parcels under a lease agreement that it signed with TPCO Holding in
2005. TPCO also stated that it will compensate TPCO Holding for the
lease of two other parcels under terms that TPCO and TPCO Holding will
memorialize in 2009. Finally, TPCO explained that it rented office
space in the TBNA from another party during the POI.\28\
---------------------------------------------------------------------------
\28\ The information on this party is business proprietary.
Thus, we have addressed this information in the TPCO Calculation
Memo.
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As we explained above in the ``Attribution of Subsidies'' section,
we preliminarily determine that TPCO Holding was an authority within
the meaning of section 771(5)(B) of the Act at the time of the lease
agreement and throughout the POI. Moreover, we preliminarily determine
that this subsidy is de facto specific because it is limited to TPCO
(section 771(5A)(D)(iii)(I) of the Act). Therefore, consistent with OTR
Tires from the PRC, we preliminarily find that TPCO's lease of land
under the 2005 lease gives rise to a countervailable subsidy to the
extent that the lease conferred a benefit.\29\
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\29\ See OTR Tires Decision Memo at Comment F.12.
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To determine whether TPCO received a benefit, we are following the
same steps outlined above for the purchase of land-use rights.
Specifically, we are preliminarily comparing the rent TPCO paid to
industrial rental rates for factory space in Thailand during the POI.
We are preliminarily attributing the subsidy to TPCO's consolidated
sales, in accordance with 19 CFR 351.525(b)(6)(iii).
On this basis, we preliminarily determine the countervailable
subsidy to be 2.55 percent ad valorem for TPCO.
G. Other Subsidies Received by TPCO
For the reasons explained in the ``Use of Facts Otherwise Available
and Adverse Facts Available'' section above, we are basing our
determination regarding the government's provision of other subsidies
received by TPCO in part on AFA.
The information submitted by TPCO in its February 16, 2010,
response regarding these subsidies is business proprietary.
Consequently, we have addressed these subsidies in the TPCO Calculation
Memo.
We preliminarily determine that TPCO received countervailable
subsidies. We find that these subsidies are a direct transfer of funds
within the meaning of section 771(5)(D)(i) of the Act, providing a
benefit in the amount of the grant. See 19 CFR 351.504(a). We
determine, in the absence of a response from the GOC, that the
subsidies received under this program are limited to TPCO. Hence, we
find that these subsidies are specific under section 771(5A)(D)(i) of
the Act.
To calculate the countervailable subsidy, we used our standard
methodology for non-recurring grants. See 19 CFR 351.524(b). Because
the benefit was less than 0.5 percent of TPCO's consolidated sales
during the POI, we have preliminarily expensed the entire amount to the
POI. See 19 CFR 351.524(b)(2). On this basis, we preliminarily
determine the countervailable subsidy to be 0.03 percent ad valorem for
TPCO.
H. Import Tariff and VAT Exemptions for FIEs 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 No. 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 or its provincial branch provides a
certificate to enterprises that receive the exemption. The objective of
[[Page 9177]]
the program is to encourage foreign investment and to introduce foreign
advanced technology equipment and industry technology upgrades.
TPCO Group, through TPCO International, received VAT and tariff
exemptions under this program. TPCO received these exemptions due to
its status as a qualified domestic enterprise that received a
Certificate for State-Encouraged Projects, according to the GQR at page
70. Hengyang Valin and Hengyang MPM also reported using this program
during the POI.
We preliminarily determine that 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
they provide a benefit to the recipient 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).
As described above, FIEs and certain domestic enterprises are
eligible to receive VAT and tariff exemptions under this program. In
CFS from the PRC, the Department found the beneficiaries of this
program to be specific within the meaning of section 771(5A)(D)(iii)(I)
of the Act. See CFS Decision Memorandum at Comment 16 (discussing and
affirming the preliminary determination that this program is specific
under section 771(5A)(D)(iii)(I) of the Act despite the fact that the
``pool of companies eligible for benefits is larger than FIEs''). No
information has been provided in this investigation to demonstrate that
the beneficiary companies are a non-specific group. Therefore,
consistent with the determination in CFS from the PRC, we preliminarily
find that the VAT and tariff exemptions extended under this program are
provided to a group of industries and that the subsidy is specific.
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 the benefits to the
year in which 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).
In the instant investigation, TPCO and Hengyang have provided a
list of VAT and tariff exemptions that they received for imported
capital equipment during the 15-year AUL period. In light of our
preliminary determination to find subsidies only after December 11,
2001, we have not examined VAT and tariff exemptions prior to this
date. To calculate the countervailable subsidy, we used our standard
methodology for non-recurring grants. See 19 CFR 351.524(b). For
certain years prior to the POI, TPCO and Hengyang reported VAT and
tariff exemptions that were more than 0.5% of their sales. Based on
TPCO's and Hengyang's information, we preliminarily determine that the
VAT and tariff exemptions were for capital equipment. We have allocated
the benefit over the 15-year AUL using the discount rate described
under the ``Benchmarks and Discount Rates'' section above.
For TPCO and Hengyang, the total amount of VAT and tariff
exemptions received during the POI did not exceed 0.5% of their POI
sales. Based on TPCO's and Hengyang's information, we preliminarily
determine that the VAT and tariff exemptions were for capital
equipment. Thus, we have preliminarily expensed the entire amount to
the POI. See 19 CFR 351.524(b)(2).
To calculate the countervailable subsidy, we used our standard
methodology for non-recurring grants. See 19 CFR 351.524(b).
Specifically, we used the discount rate described above in the
``Benchmarks and Discount Rates'' section to calculate the amount of
the benefit for the POI. On this basis, we preliminarily determine that
a countervailable benefit of 0.18 percent ad valorem exists for TPCO,
and that a countervailable benefit of 0.44 percent ad valorem exists
for Hengyang.
I. Income Tax Credits for Domestically Owned Companies Purchasing
Domestically Produced Equipment
According to the Provisional Measures on Enterprise Income Tax
Credit for Investment in Domestically Produced Equipment for Technology
Renovation {Projects{time} (CAI SHU ZI {1999{time} No. 290), a
domestically invested company may claim tax credits on the purchase of
domestic equipment if the project is compatible with the industrial
policies of the GOC. Specifically, a tax credit up to 40 percent of the
purchase price of the domestic equipment may apply to the incremental
increase in tax liability from the previous year.\30\ The Department
has previously found this program countervailable. See, e.g., Line Pipe
from the PRC and accompanying Issues and Decision Memorandum at 25-26.
---------------------------------------------------------------------------
\30\ See GQR at 51.
---------------------------------------------------------------------------
Hengyang reported that Hengyang MPM received this benefit during
the POI. See HQR at 24.
We preliminarily determine that income tax credits for the purchase
of domestically produced equipment are countervailable subsidies. The
tax credits are a financial contribution in the form of revenue forgone
by the government and provide a benefit to the recipients in the amount
of the tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR
351.509(a)(1). We further preliminarily determine that these tax
credits are contingent upon use of domestic over imported goods and,
hence, are specific under section 771(5A)(C) of the Act.
To calculate the benefit, we treated the income tax savings enjoyed
by Hengyang MPM as a recurring benefit, consistent with 19 CFR
351.524(c)(1), and divided the company's tax savings by the combined
total sales of Hengyang Valin, Hengyang MPM, Xigang Seamless, and
Special Pipe, minus inter-company sales, during the POI. On this basis,
we preliminarily determine that a countervailable subsidy of 0.34
percent ad valorem exists for Hengyang under this program.
J. ``Two Free, Three Half'' Program
Under Article 8 of the FIE Tax Law, an FIE that is ``productive''
and is scheduled to operate for more than ten years may be exempted
from income tax in the first two years of profitability and pay income
taxes at half the standard rate for the next three years. See GOC's
January 25, 2010, cross-owned companies submission at Exhibit P-1. The
Department has previously found this program countervailable. See,
e.g., CFS Decision Memorandum at 10-11.
Hengyang reported that Special Pipe and Resources Steel used this
program during the POI.\31\
---------------------------------------------------------------------------
\31\ See HQR at Volume 5, page 37.
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We preliminarily determine that the exemption or reduction of 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 recipient in the amount of the tax savings. See
section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also
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.
[[Page 9178]]
To calculate the benefit, we treated the income tax savings enjoyed
by Special Pipe and Resources Steel as a recurring benefit, consistent
with 19 CFR 351.524(c)(1). To compute the amount of the tax savings, we
compared the income tax rate the above companies would have paid in the
absence of the program with the income tax rate the company actually
paid. We divided Special Pipe's tax savings during the POI by the
combined sales of Special Pipe, Xigang Seamless, Hengyang Valin, and
Hengyang MPM (exclusive of inter-company sales). We divided Resources
Steel's tax savings during the POI by the combined sales of Resources
Steel, Special Pipe, and Xigang Seamless (exclusive of inter-company
sales). On this basis, we preliminarily determine that Hengyang
received a countervailable subsidy of 0.27 percent ad valorem under
this program.
K. Local Income Tax Exemption and Reduction Programs for ``Productive''
FIEs
Under Article 9 of the FIE Tax Law, the provincial governments have
the authority to exempt FIEs from the local income tax of three
percent. See the GOC's January 25, 2010, cross-owned companies
submission at Exhibit P-1.
The Department has previously found this program to be
countervailable. See, e.g., CFS Decision Memorandum at pages 12-13; see
also Citric Acid Decision Memorandum at page 21.
Hengyang reported that Seamless Pipe and Resources Steel used this
program during the POI.\32\
---------------------------------------------------------------------------
\32\ See HQR at Volume 5, page 39.
---------------------------------------------------------------------------
We preliminarily determine that the exemption from or reduction in
the local income tax received by ``productive'' FIEs under this program
confers a countervailable subsidy. The exemption or reduction is a
financial contribution in the form of revenue forgone that is otherwise
due by the government, and it provides a benefit to the recipient in
the amount of the tax savings, per section 771(5)(D)(ii) of the Act and
19 CFR 351.509(a)(1). We also preliminarily determine that the
exemption or 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.
To calculate the benefit for Special Pipe and Resources Steel, we
treated the income tax savings enjoyed by the companies as a recurring
benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of
the tax savings, we compared the local income tax rate that the
companies would have paid in the absence of the program (i.e., three
percent) with the income tax rate the companies actually paid (i.e.,
zero percent).
For Special Pipe, we divided the company's tax savings received
during the POI by the combined POI sales of Special Pipe, Xigang
Seamless, Hengyang Valin, and Hengyang MPM, minus inter-company sales.
For Resources Steel, we divided the company's tax savings received
during the POI by the combined sales of Resources Steel, Special Pipe,
and Xigang Seamless. On this basis, we preliminarily determine that
Hengyang received a countervailable subsidy of 0.07 percent ad valorem.
L. Government Debt Forgiveness
TPCO
On pages 26-27 of the TQR, TPCO reported that in 2006 and 2008 it
settled claims related to loans that continued to be outstanding after
a debt-to-equity transaction occurring in 2001. TPCO settled debt held
by China Orient Asset Management Corporation and Cinda. See TPCO
Calculation Memo.
We preliminarily determine that through this settlement the GOC
forgave debt owed by TPCO and, thus, provided a financial contribution
to TPCO in the form of a direct transfer of funds (section 771(5)(D)(i)
of the Act). The benefit to TPCO is the amount of the debt forgiven
(section 771(5)(D)(i) of the Act and 19 CFR 351.508(a)). Additionally,
we preliminarily determine that this subsidy is de facto specific
because it is limited to TPCO (section 771(5A)(D)(iii)(I) of the Act).
Forgiveness of part of the debt occurred in 2006, and approval for
forgiveness of the remainder of the debt occurred in 2008. To calculate
the countervailable subsidy for the debt forgiveness approved in each
year, we used our standard methodology for non-recurring benefits. See
19 CFR 351.524(b). Because the amount of the 2006 portion of the debt
forgiveness exceeded 0.5 percent of TPCO's sales in 2006, we have
allocated the benefit over the 15-year AUL using the discount rate
described under the Benchmarks and Discount Rates section above. We
attributed the subsidy amount for the POI to TPCO's consolidated sales.
On this basis, we preliminarily determine the countervailable subsidy
to be 0.04 percent ad valorem for TPCO.
For the debt forgiveness approved in 2008, the benefit was less
than 0.5 percent of TPCO's consolidated sales during the POI. Thus, we
have preliminarily expensed the entire amount to the POI. See 19 CFR
351.524(b)(2). On this basis, we preliminarily determine the
countervailable subsidy to be 0.11 percent ad valorem for TPCO. The
Department may seek further information following this preliminary
determination regarding the extent of forgiveness.
Hengyang
In the HQR at Volume 5, pages 24-27, Hengyang reported that Xigang
Group and Resources Steel underwent loan restructurings since December
11, 2001, through the POI. The information on these loan restructurings
is business proprietary. Thus, we have addressed the information in the
Hengyang Calculation Memo.
We preliminarily determine that through this settlement the GOC
forgave debt owed by Xigang Group and Resources Steel and, thus,
provided a financial contribution to Xigang Group and Resources Steel
in the form of a direct transfer of funds (section 771(5)(D)(i) of the
Act). The benefit to Xigang Group and Resources Steel is the amount of
the debt forgiven (19 CFR 351.508(a)). Additionally, we preliminarily
determine that this subsidy is de facto specific as it is limited to
Xigang Group and Resources Steel (section 771(5A)(D)(iii)(I) of the
Act).
Approval for forgiveness of debt occurred in 2005, 2006, 2007, and
2008. To calculate the countervailable subsidy for the debt forgiveness
approved in each year, we used our standard methodology for non-
recurring benefits. See 19 CFR 351.524(b). Because the amount of the
2005 and 2007 portions of the debt forgiveness exceeded 0.5 percent of
Xigang Group's sales in 2005 and 2007, respectively, we have allocated
the benefit for each year over the 15-year AUL using the discount rate
described under the Benchmarks and Discount Rates section above. We
attributed the subsidy amount for the POI to Xigang Group's
consolidated sales.
For the debt forgiveness approved in 2006, the benefit was less
than 0.5 percent of Xigang Group's consolidated sales. Thus, we have
preliminarily expensed the entire amount to 2006. See 19 CFR
351.524(b)(2).
For the debt forgiveness approved during the POI, the benefit was
less than 0.5 percent of Xigang Group's and Resources Steel's
consolidated sales during the POI. Thus, we have preliminarily expensed
the entire amount to the POI. See 19 CFR 351.524(b)(2).
On this basis, we preliminarily determine the countervailable
subsidy
[[Page 9179]]
to be 2.66 percent ad valorem for Hengyang. The Department may seek
further information following this preliminary determination regarding
the extent of forgiveness.
II. Program Preliminarily Determined Not Countervailable
A. Export Restrictions on Coke
Petitioners alleged that the GOC imposed export restrictions on
coke in the form of export quotas, related export licensing and export
duties. Petitioners maintain that such export restraints had a direct
and discernible effect on the Chinese domestic prices of coke, thereby,
artificially lowering them compared to world market prices.
Accordingly, petitioners asserted that the GOC's export restraints on
coke provided a countervailable subsidy to Chinese seamless pipe
producers during the POI.
The Department has countervailed export restraint allegations in
only a limited number of cases. In Final Affirmative Countervailing
Duty Determination and Countervailing Duty Order; Leather From
Argentina, 55 FR 40212 (October 2, 1990), we found an embargo on hide
exports to provide a countervailable subsidy to Argentine leather
producers based on a long-term historical price comparison that
demonstrated a clear link between the imposition of the embargo and the
divergence of prices. In Coated Free Sheet Paper from Indonesia: Final
Affirmative Countervailing Duty Determination, 72 FR 60642 (October 25,
2007), and accompanying Issues and Decision Memorandum at Comment 24,
we found that a log embargo provided a countervailable benefit to paper
producers, in part, based upon independent studies that stated that the
log embargo provided a subsidy to downstream producers.
At Exhibit 31 of their February 12, 2010, pre-preliminary
determination comments, Petitioners submitted an economic study from
the Brattle Group on the economic effects of export restraints on the
price of coke in the PRC. Given the relatively recent submission date,
the Department has not had sufficient time to fully consider the
information presented in this study. However, based on an initial
analysis of this study as well as the other record evidence, we
preliminarily find that the record does not support a finding that this
program is countervailable. The study provides an economic model that
explains, in theory, how export restraints might have an impact on
quantities and prices. The economic model and the other limited data on
the record do not demonstrate that the GOC is entrusting or directing
private entities to provide coke to the respondents and, therefore, the
record does not support a finding of a government financial
contribution. Moreover, the record evidence does not sufficiently
demonstrate a link between the particular export restraints pertaining
to coke and the historic trends in domestic and world coke supply and
prices, and does not address other possible contributing factors behind
the trends in those quantities and prices. In particular, the study
provides data for the period January 2006 through May 2009 for Chinese
domestic coke prices and Chinese export coke prices. Although the data
show that domestic Chinese prices have been lower than export prices
from the PRC, the data do not show a connection between the export
restraints and this price difference. Therefore, consistent with our
findings in OCTG from the PRC,\33\ we preliminarily continue to find
the program to be not countervailable.
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\33\ See OCTG from the PRC, and accompanying Issues and Decision
Memorandum at Comment 32.
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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 (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. On page 39 of the GQR, the GOC reported that
the VAT levied on seamless pipe sales in the domestic market (17
percent) exceeded the amount of VAT exempted upon the export of
seamless pipe (13 percent). There is, therefore, no excess VAT
exemption. Thus, we preliminarily determine that the VAT exempted on
the export of seamless pipe is not countervailable.
III. Program for Which More Information Is Required
Deed Tax Exemption for SOEs Undergoing Mergers or Restructuring
In Hengyang's February 16, 2010, supplemental questionnaire
response at page 14, Hengyang reported that Hengyang Valin received a
one-time benefit from this program. Because Hengyang did not report
this potential subsidy until its February 16, 2010, submission, we did
not have enough time to request further information from the GOC
regarding this program. Further, to determine whether any potential
benefit from this program exceeded 0.5 percent of Hengyang's sales in
the year of approval, we requested Hengyang's 2003 sales figures.\34\
We granted Hengyang an extension until February 22, 2010, to submit
this information.\35\ Because we lack necessary information from the
GOC and Hengyang, we intend to address the countervailability of this
program in a post-preliminary determination.
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\34\ See the Department's February 16, 2010, letter to Hengyang,
``Third Supplemental Questionnaire.''
\35\ See the Department's February 17, 2010, letter to Hengyang,
``Request for Extension of Time to File a Response to the
Department's Supplemental Questionnaire.''
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IV. Programs Preliminarily Determined To Be Not Used by Respondents or
To Not Provide Benefits During the POI
A. Sub-central Government Programs To Promote Famous Export Brands and
China World Top Brands
TPCO reported that it received a grant under this program in 2007.
On page 50 of the TQR, TPCO stated that the program relates to TPCO's
trademark and does not relate to any specific merchandise.
We preliminarily determine that the total amount of the grant was
less than 0.5 percent of TPCO's consolidated and unconsolidated sales
in 2007. Thus, without prejudice to whether this is a countervailable
subsidy, we preliminarily have allocated the benefit exclusively to
2007 pursuant to 19 CFR 351.524(b)(2). As a result, we preliminarily
determine that TPCO received no benefit from this program during the
POI.
B. Exemptions for SOEs From Distributing Dividends to the State
In the HQR at Vol. 5, page 23, Hengyang reported a potential
exemption under this program. All of the details of this potential
exemption, including the Hengyang company that received the benefit,
are business proprietary. Thus, we have addressed the information in
the Hengyang Calculation Memo.
We preliminarily determine that the benefit from this potential
exemption was less than 0.5 percent of the appropriate sales
denominator in the year of approval, which was prior to the
[[Page 9180]]
POI. Thus, without prejudice to whether this is a countervailable
subsidy, we preliminarily have allocated any benefit exclusively to the
year of approval pursuant to 19 CFR 351.524(b)(2). As a result, we
preliminarily determine that Hengyang received no benefit from this
program during the POI.
C. Other Programs
Based upon responses by the GOC, TPCO, and Hengyang, we
preliminarily determine that TPCO and Hengyang did not apply for or
receive benefits during the POI under the programs listed below.
1. Preferential Loan Programs
a. Treasury Bond Loans to Northeast
b. Preferential Loans for State-Owned Enterprises
c. Preferential Loans for Key Projects and Technologies
d. Preferential Lending to Seamless Pipe Producers and Exporters
Classified as ``Honorable Enterprises''
e. Loans and Interest Subsidies Provided Pursuant to the Northeast
Revitalization Program
2. Equity Programs
a. Debt-to-Equity Swap for TPCO
b. Equity Infusion in TPCO
c. Exemptions for SOEs From Distributing Dividends to the State
d. Loan and Interest Forgiveness for SOEs \36\
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\36\ We have found company-specific debt forgiveness for TPCO
and Hengyang under the Government Debt Forgiveness program, as
described above.
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3. Tax Benefit Programs
a. Preferential Income Tax Policy for Enterprises in the Northeast
Region
b. Forgiveness of Tax Arrears For Enterprises in the Old Industrial
Bases of Northeast China
c. Reduction in or Exemption from Fixed Assets Investment
Orientation Regulatory Tax
d. Preferential Tax Programs for Foreign-Invested Enterprises
Recognized as High or New Technology Enterprises
e. Income Tax Reductions for Export-Oriented Foreign-Invested
Enterprises
4. Tariff and Indirect Tax Programs
a. Stamp Exemption on Share Transfers Under Non-Tradable Share
Reform
b. Export Incentive Payments Characterized as ``VAT Rebates''
5. Land Grants and Discounts
a. Provision of Land to SOEs for Less Than Adequate Remuneration
6. Provision of Inputs for Less than Adequate Remuneration
a. Provision of Electricity and Water at Less than Adequate
Remuneration to Seamless Pipe Producers Located in Jiangsu Province
b. Provision of Coking Coal for Less than Adequate Remuneration
7. Grant Programs
a. Foreign Trade Development Fund (Northeast Revitalization
Program)
b. Export Assistance Grants in Zhejiang Province
c. Program to Rebate Antidumping Fees in Zhejiang Province
Subsidies for Development of Famous Export Brands and China World Top
Brands
d. Grants to Loss-Making SOEs
e. Export Interest Subsidies in Liaoning Province
8. Other Regional Programs
a. High-Tech Industrial Development Zones
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by the respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we have
calculated a rate for each individually investigated producer/exporter
of the subject merchandise. Section 705(c)(5)(A)(i) of the Act states
that for companies not investigated, we will determine an ``all
others'' rate equal to the weighted average countervailable subsidy
rates established for exporters and producers individually
investigated, excluding any zero and de minimis countervailable subsidy
rates, and any rates determined entirely under section 776 of the Act.
Notwithstanding the language of section 705(c)(1)(B)(i)(I) of the
Act, we have not calculated the ``all others'' rate by weight averaging
the rates of TPCO and Hengyang, because doing so risks disclosure of
proprietary information. Therefore, we have calculated a simple average
of the two responding firms' rates. Since both TPCO and Hengyang
received countervailable export subsidies and the ``all others'' rate
is a simple average based on the individually investigated exporters
and producers, the ``all others'' rate includes export subsidies.
We preliminarily determine the total estimated net countervailable
subsidy rates to be:
------------------------------------------------------------------------
Net subsidy
Exporter/manufacturer rate
------------------------------------------------------------------------
Tianjin Pipe (Group) Co., Tianjin Pipe Iron Manufacturing 11.06
Co., Ltd., Tianguan Yuantong Pipe Product Co., Ltd.,
Tianjin Pipe International Economic and Trading Co.,
Ltd., and TPCO Charging Development Co., Ltd.............
Hengyang Steel Tube Group Int'l Trading, Inc., Hengyang 12.97
Valin Steel Tube Co., Ltd., Hengyang Valin MPM Tube Co.,
Ltd., Xigang Seamless Steel Tube Co., Ltd., Wuxi Seamless
Special Pipe Co., Ltd., Wuxi Resources Steel Making Co.,
Ltd., and Jiangsu Xigang Group Co., Ltd..................
All Others................................................ 12.02
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In accordance with sections 703(d)(1)(B) and (d)(2) of the Act, we
are directing U.S. Customs and Border Protection (``CBP'') to suspend
liquidation of all entries of seamless pipe 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 merchandise in the
amounts indicated above. Moreover, in accordance with section
703(e)(2)(A) of the Act, for Hengyang and ``all other'' Chinese
exporters of seamless pipe, we are directing CBP to apply the
suspension of liquidation to any unliquidated entries entered, or
withdrawn from warehouse for consumption, on or after the date 90 days
prior to the date of publication of this notice in the Federal
Register.
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
[[Page 9181]]
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), we will disclose to the
parties the calculations for this preliminary determination within five
days of its announcement. Due to the anticipated timing of verification
and issuance of verification reports, 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)(i) (for
a further discussion of case briefs). Rebuttal briefs must be filed
within five days after the deadline for submission of case briefs,
pursuant to 19 CFR 351.309(d)(1). 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. See 19 CFR
351.309(c)(2) and (d)(2).
Section 774 of the Act provides that the Department will hold a
public hearing to afford interested parties an opportunity to comment
on arguments raised in case or rebuttal briefs, provided that such a
hearing is requested by an interested party. If a request for a hearing
is made in this investigation, the hearing will be held two days after
the deadline for submission of the rebuttal briefs, pursuant to 19 CFR
351.310(d), at the U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230. Parties should confirm
by telephone the time, date, and place of the hearing 48 hours before
the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Acting
Assistant Secretary for Import Administration, U.S. Department of
Commerce, Room 1870, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230, within 30 days of the publication of this notice,
pursuant to 19 CFR 351.310(c). Requests should contain: (1) The party's
name, address, and telephone; (2) the number of participants; and (3) a
list of the issues to be discussed. Oral presentations will be limited
to issues raised in the briefs. See id.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: February 22, 2010.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2010-4192 Filed 2-26-10; 8:45 am]
BILLING CODE 3510-DS-P