NOTICES

                        DEPARTMENT OF COMMERCE

                               [C-517-501]

   Carbon Steel Wire Rod From Saudi Arabia; Final Results of Countervailing Duty
                           Administrative Reviews

                         Tuesday, September 24, 1991

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 AGENCY: International Trade Administration/Import Administration
 Department or Commerce.

 ACTION: Notice of final results of countervailing duty administrative reviews.

 SUMMARY: On June 25, 1991, the Department of Commerce published the preliminary
 results of its administrative reviews of the countervailing duty order 

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 on
 carbon steel wire rod from Saudi Arabia (56 FR 28866). We have now completed these
 reviews and determine the total bounty or grant to be 0.13 percent ad valorem for the
 period January 1, 1988 through December 31, 1988 and 0.49 percent ad valorem for the
 period January 1, 1989 through December 31, 1989. In accordance with 19 CFR 355.7,
 any rate less than 0.50 percent ad valorem is de minimis.

 EFFECTIVE DATE: September 24, 1991.

 FOR FURTHER INFORMATION CONTACT:Philip Pia or Kelly Parkhill, Office of
 Countervailing Compliance, International Trade Administration, U.S. Department
 of Commerce, Washington, DC 20230; telephone: (202) 377-2786.

 SUPPLEMENTARY INFORMATION:

 Background

 On June 25, 1991, the Department of Commerce (the Department) published in the
 Federal Register (56 FR 28866) the preliminary results of its administrative reviews of the
 countervailing duty order on carbon steel wire rod from Saudi Arabia (February 3,
 1986; 51 FR 4206). The Department has now completed these administrative reviews in
 accordance with section 751 of the Tariff Act of 1930, as amended (the Tariff Act).

 Scope of Review

 Imports covered by these reviews are shipments of Saudi carbon steel wire rod. Carbon
 steel wire rod is a coiled, semi-finished, hot-rolled carbon steel product of approximately
 round solid cross section, not under 0.20 inch nor over 0.74 inch in diameter, tempered
 or not tempered, treated or not treated, not manufactured or partly manufactured, and
 valued over or under 4 cents per pound. During the 1989 review period, such
 merchandise was classifiable under item numbers 607.1400, 607.1710, 607.1720,
 607.1730, 607.2200 and 607.2300 of the Tariff Schedules of the United States
 Annotated (TSUSA). Such merchandise is currently classifiable under item numbers
 7213.20.00, 7213.31.30, 7213.31.60, 7213.39.00, 7213.41.30, 7213.41.60, 7213.49.00
 and 7213.50.00 of the Harmonized Tariff Schedule (HTS). The TSUSA and HTS item
 numbers are provided for convenience and Customs purposes. The written description
 remains dispositive.
 The reviews cover the periods January 1, 1988 through December 31, 1988, and January
 1, 1989 through December 31, 1989 and eight programs: (1) Public Investment Fund loan
 to HADEED, (2) SABIC's transfer of SULB shares to HADEED, (3) preferential provision of
 equipment to HADEED, (4) income tax holiday for joint venture projects in Saudi
 Arabia, (5) SABIC loan guarantees, (6) preferential provision of services by SABIC, (7)
 government procurement preferences, and (8) issuance of preferential government
 bonds. The Saudi Iron and Steel Company (HADEED) was the sole producer and exporter
 of carbon steel wire rod to the United States during the review periods.

 Analysis of Comments Received

 We gave interested parties an opportunity to comment on the preliminary results. We
 received comments from the respondent (HADEED), and the petitioners.

 Comment 1: The respondent argues that the Public Investment Fund (PIF) loan program
 and the Saudi Industrial Development Fund (SIDF) loan program are "integrally linked" as
 defined in § 355.43(b)(6) of the Department's proposed regulations; see,
 Countervailing Duties; Notice of Proposed Rulemaking and Request for Public
 Comments, 54 FR 23366, (May 31, 1989). Since PIF and SIDF are integrally linked, they
 should be considered together in determining whether loans provided by these two
 entities are limited to a specific enterprise or industry, or group of enterprises or
 industries. SIDF and PIF qualify for linkage under each factor identified in the
 Department's proposed regulations. These factors are (1) Evidence of a government
 policy to treat industries equally, (2) the purposes of the programs as stated in their
 enabling legislation, (3) the administration of the programs, (4) the manner of funding the
 programs, and (5) "other factors."

 The information on the record shows a Saudi government policy to treat industries
 equally. PIF and SIDF provide identical benefits--low-cost, long- term construction
 loans--on identical terms to a wide variety of industries. PIF and SIDF are two of five
 Specialized Credit Institutions that the Saudi government created to develop and
 diversify the Saudi economy. The PIF and SIDF share a common purpose as the only
 sources of low-cost financing for the industrial and manufacturing sector. PIF loans are
 available to companies with some government equity, and are suited for the types of large
 projects that the Saudi government would be most likely to undertake. SIDF loans, on the
 other hand, are available to companies with some private Saudi ownership and are best
 suited for small and medium-sized projects. Between them, the two programs address the
 borrowing needs of the entire range of Saudi industries.
 PIF and SIDF share a common purpose, based on statements in each entity's enabling
 legislation. PIF was created "to finance investment in the productive projects of a
 commercial nature." Similarly, SIDF was created "to support industrial development in
 the private sector of the Kingdom's economy." Both programs are aimed at financing
 development in the Saudi industrial and manufacturing sector.
 PIF and SIDF are administered in a comparable manner through SAMA (the Saudi Central
 Bank) and the Ministry of Finance and National Economy. Both PIF and SIDF are
 administered by boards of directors with a common chairman, the Minister of Finance
 and National Economy, with the remaining members drawn from SAMA and other Saudi
 government agencies.
 PIF and SIDF were originally funded through the Ministry of Finance and National
 Economy. Currently, both programs are self-sufficient. SAMA produces a consolidated
 balance sheet showing assets and liabilities of PIF and SIDF jointly. All information
 regarding budget allocations, disbursements and repayments of PIF and SIDF are
 published as consolidated statements.
 Other factors integrally linking PIF and SIDF include the fact that there are no de jure
 limitations on the types of industries eligible to receive loans under either fund. The
 lending practices and histories of both funds is similar. The maximum loan amount is SR
 500 million for PIF and SR 400 million for SIDF. The maximum loan period for both PIF
 and SIDF is 15 years. The PIF requires Saudi government equity participation in a project
 in order to obtain funds. Similarly, SIDF requires at least 25 percent equity contribution
 from private Saudi sources in order to obtain funds. PIF and SIDF each accounted for
 25.5 percent of the total outstanding loans and advances held by Saudi Specialized Credit
 Institutions in 1988.
 Thus, in light of the factors described above, respondent argues that the Department has
 compelling case for finding integral linkage between PIF and SIDF. The programs are part
 of the same overall government lending policy, they are intended to be complementary
 and to achieve the same purpose, they are administered and funded through the same
 governmental agency, and they provide similar benefits to the same sector of the Saudi
 economy. Based on a finding of integral linkage, the Department should consider PIF and
 SIDF programs together and find that neither is specifically provided and therefore
 countervailable.
 The petitioner argues that the Department has rejected respondent's argument regarding
 integral linkage in 

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 the previous review (see, Final Results of Countervailing
 Duty Administrative Review; Carbon Steel Wire Rod from Saudi Arabia, 56 FR 26652,
 June 10, 1991). The unique aspects of the PIF program cannot be hidden by lumping it
 together with other Saudi government financing programs such as SIDF, which were
 established for other reasons. Nothing the Saudi government does in providing other
 loans through separate programs detracts from PIF's specificity.

 Department's Position: Although the respondent has demonstrated that a number of
 similarities may exist between PIF and SIDF, any argument for integral linkage between
 the two programs must include a description of how the programs, at their inception(s),
 were directly related to an overall government policy or national development plan. See,
 Final Affirmative Countervailing Duty Determination: Certain Fresh Cut Flowers from
 the Netherlands, 52 FR 3301, 3309 (February 3, 1987).
 PIF was established in 1971, SIDF was established three years later in 1974. It may be
 that, in principle and practice, the respective roles of PIF and SIDF have evolved to
 complement and overlap each other. However, the fact that these programs were founded
 separately, three years apart, suggests (without other documented information) that the
 programs were not conceived as parts of a single program. Any conclusion regarding the
 roles of PIF and SIDF in a broader Saudi governmental policy initiative could only be
 reached by considering the historical and practical development of each program in its
 entirely. Documented information on the inception of the programs that explicitly ties
 PIF and SIDF as complementary parts of an overarching governmental policy directive
 has not been presented by the respondent. Therefore, since there is insufficient factual
 information on the record relevant to the establishment and development of PIF and
 SIDF, we will continue to consider each program separately.

 Comment 2: The respondent argues that, contrary to the Department's preliminary
 results, PIF loans are not limited to a specific group of enterprises, and therefore, they are
 not countervailable. HADEED contends that the Department's preliminary determination
 that the Saudi government, through PIF, provides loans to "a specific enterprise or
 industry or group of enterprises or industries" within the meaning of section 1677(5)(B),
 is incorrect. The basis for the Department's determination is the erroneous assumption
 that only six companies have effectively benefitted from the program. In reality, 24
 companies in a wide variety of industries have received PIF financing. The 18 companies
 that are at least 50 percent-owned by either SABIC or PETROMIN should be treated as
 separate entities. The Department has, in effect, found that there is an intercorporate
 transfer of benefits based solely on corporate relationships with SABIC or PETROMIN.
 Such an application of the specificity test based on a commonality of shareholders is
 without precedent and contravenes the Department's established policy not to assume
 automatic transfer of benefits based on related party status. Respondents cite the
 following cases in defense of their argument: Carbon Steel Wire Rod from Malaysia, 53 FR
 13303 (April 22, 1988); Industrial Phosphoric Acid from Israel, 52 FR 25447 (July 7,
 1987); Operators for Jalousie and Awning Windows from El Salvador, 51 FR 41516
 (November 17, 1986); Low-Fuming Brazing Copper Rod and Wire from New Zealand, 50
 FR 31638 (August 5, 1985); and Carbon Steel Structural Shapes from Luxembourg, 47 FR
 39364 (September 7, 1982).

 The petitioner contends that PIF provides benefits almost exclusively to the projects
 undertaken by a few companies with controlling government ownership and therefore
 constitute a specific group of enterprises in Saudi Arabia.
 Department's Position: As we stated in our preliminary results, the application of the
 government equity participation requirement limited benefits under this program to a
 small number of enterprises. The cases cited by respondent are not relevant because they
 deal with the question of collapsing related corporate bodies into a single entity for the
 purpose of determining the transfer of countervailable benefits. The issue here is the
 correctness of the Department's determination that PIF benefits are limited to a specific
 group of enterprises. As in the original investigation, the number of actual recipients was
 lower than the number of named recipients (because of majority ownership
 considerations). The Court of International Trade found that the record in the original
 investigation contained substantial evidence to support Commerce's determination that
 the operations of other named recipients of PIF loans were projects of three enterprises,
 Saudia Airlines, SABIC, and PETROMIN. That determination was based in large part upon
 evidence of majority ownership interest in the companies named as recipients of PIF
 loans. The Court decision states, in part, that "Commerce determined, as a matter of fact,
 that the Saudi government provides PIF benefits to a specific group of enterprises, based
 on a finding that all PIF loans since 1978 and most PIF loans since 1973 have been
 provided to only three companies and their projects. The Court finds Commerce
 reasonably applied the specificity test and holds Commerce's determination that the
 Saudi government provides PIF loans to a specific group of enterprises is in accordance
 with law." See, Saudi Iron and Steel Co. v. United States, 675 F. Supp. 1362 (C.I.T. 1987).

 Comment 3: The respondent argues that the Department incorrectly determined that the
 income tax holiday is limited to a specific group of enterprises, and is therefore
 countervailable. Respondent claims that there is no evidence in the record to support the
 allegation that the income tax holiday is anything more than a program designed to
 encourage foreign investors to share their technical expertise with Saudi Arabia
 through Saudi joint ventures in a wide variety of industries. In the absence of such
 evidence, the income tax holiday should be considered a valid component of Saudi
 Arabia's domestic policy of industrial development and not subject to countervailing
 duties. Contrary to the Department's preliminary finding, there is no evidence that
 suggests that the 25 percent ownership requirement substantially limits the number of
 licensed foreign investors who qualify for the income tax holiday or that the ownership
 requirement has a more restrictive effect when supplied to the income tax holiday than
 when applied to SIDF loans. Rather than limit the pool of eligible recipients, the 25
 percent Saudi ownership requirement has the long-term goal of ensuring that Saudi
 industrial diversification is accompanied by significant Saudi participation in new
 industries.

 Petitioner contends that the record clearly demonstrates that the income tax holiday is
 restricted to companies meeting the following criteria: (1) Saudi participation amounts to
 at least 25 percent of total capital; (2) the foreign capital is invested in projects other than
 petroleum related and mineral extraction ventures; and (3) the investment is
 accompanied by the provision of foreign technical know-how and expertise. Therefore,
 the Department correctly determined this tax holiday to be specific and countervailable.

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 Department's Position: We disagree with respondent. We have considered and
 rejected respondent's argument in previous reviews of this countervailing duty order.
 (See, the Comment 6 in Final Results of Countervailing Duty Administrative Review;
 Carbon Steel Wire Rod from Saudi Arabia, 56 FR 26652, June 10, 1991). The respondent
 has not presented new evidence that gives us reason to reconsider this argument.

 Comment 4: The respondent claims that the Department erroneously included a
 short-term interest rate in its calculation of a long-term interest rate benchmark for
 measuring the subsidy attributable to HADEED's PIF loan. In previous reviews, the
 Department has used the interest rates on HADEED's other commercial borrowings to
 construct a benchmark. However, in this review HADEED had no other outstanding
 liabilities. Thus, the respondent claims that the absence of a borrowing alternative
 justifies dropping that component from the benchmark. Respondent claims that there are
 a number of alternatives that HADEED would have exercised in order to obtain financing
 in lieu of a PIF loan. Such alternatives are far more rational and likely than the
 Department's assumption that HADEED would have borrowed the capital directly from a
 Saudi commercial bank. Furthermore, the Department's Proposed Regulations direct it to
 use a short-term benchmark rate for measuring the subsidy attributable to a preferential
 long-term loan as a last resort. (See, § 355.44(b)(4)(iv), (b)(5)(v) of Countervailing
 Duties; Notice of Proposed Rulemaking and Request for Public Comments, 54 FR 23366,
 (May 31, 1989). The inclusion of a short- term loan component in the construction of a
 long-term composite benchmark is inconsistent with Department practice and precedent.
 Petitioners contend that the Department's use of a composite benchmark incorporating a
 short-term interest rate is correct and that it accurately reflects what HADEED otherwise
 would have had to pay in Saudi Arabia absent PIF lending.

 Department's Position: We disagree with the respondent. The loan in question is a
 long-term loan. We requested information on average long-term commercial lending
 rates from respondent and were told that such information was not available in Saudi
 Arabia. Therefore, we have used short- to medium-term private bank commercial rates
 and the only long-term lending rates for which we have information, SIDF rates, to
 construct composite interest rate benchmarks for each review period. Since the PIF loan
 covered 60 percent of HADEED's total project costs, for our benchmark we assumed that
 HADEED could have financed 50 percent of its total project costs with a SIDF loan (the
 maximum eligibility for a company with at least 50 percent Saudi ownership) and the
 remaining 10 percent of project costs with a Saudi commercial bank loan. The
 commercial bank portion of the benchmark was based on the average Jeddah Interbank
 Offering Rate (JIBOR) for 1988 and 1989, plus the normal one percent spread that is
 common in short- to medium-term commercial borrowings from private Saudi banks. We
 agree with respondent that Proposed Regulations § 355.44(b)(4)(vi) permits the
 Department to use a short-term benchmark rate in the case of a fixed rate, long-term loan
 provided by a government only as a sixth and last resort.
 However, because we have no information on the other five alternatives, we have
 resorted to the JIBOR rate. Any factual information regarding this issue submitted by
 HADEED after publication of our preliminary results is untimely and has not been used to
 recalculate our benchmark for the final results.
 Comment 5: The respondent claims that the Department used the incorrect profit figure in
 its calculation of the benefit from the income tax holiday. Rather than use the net income
 amount stated in HADEED's financial report, the Department should recalculate an
 adjusted profit or loss figure according to the methodology required by Saudi
 government guidelines.
 Department's Position: We disagree. The respondent has not provided sufficient factual
 information that would give us a basis to consider its argument.

 Final Results of Review

 After reviewing all of the comments received, we determine the total bounty or grant to
 be 0.13 percent ad valorem for the period January 1, 1988 through December 31, 1988,
 and 0.49 percent ad valorem for the period January 1, 1989 through December 31, 1989.
 In accordance with 19 CFR 355.7, any rate less than 0.50 percent ad valorem is de
 minimis.
 Therefore, the Department will instruct the Customs Service to liquidate, without regard
 to countervailing duties, all shipments of this merchandise exported on or after
 January 1, 1988 and exported on or before December 31, 1989.
 The Department will also instruct the Customs Service to waive cash deposits of estimated
 countervailing duties on all shipments of this merchandise entered, or withdrawn
 from warehouse, for consumption, on or after the date of publication of these final results
 of administrative review. The waiving of cash deposits of estimated countervailing
 duties shall remain in effect until publication of the final results of the next
 administrative review.
 These administrative reviews and notice are in accordance with section 751(a)(1) of the
 Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
 Dated: September 17, 1991.

 Eric I. Garfinkel,

 Assistant Secretary for Import Administration.

 [FR Doc. 91-22891 Filed 9-23-91; 8:45 am]

 BILLING CODE 3510-DS-M