92-309

NOTICES

DEPARTMENT OF COMMERCE

(C-517-501)

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

Monday, March 9, 1992

AGENCY: International Trade Administration/Import Administration, Department
of Commerce.

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

SUMMARY: The Department of Commerce has completed an administrative review of the
countervailing duty order on carbon steel wire rod from Saudi Ariabia. We determine
the total bounty or grant to be 0.01 percent ad valorem for the period of January 1, 1990
through December 31, 1990. In accordance with 19 CFR 355.7, any rate less than 0.50
percent ad valorem is de minimis.

EFFECTIVE DATE: March 9, 1992.

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

SUPPLEMENTARY INFORMATION:

Background

On December 26, 1991, the Department of Commerce (the Department) published in the
Federal Register (56 FR 66847) the preliminary results of its administrative review of the
countervailing duty order on carbon steel wire rod from Saudi Arabia (February 3,
1986; 51 FR 4206). The Department has now completed this administrative review 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. Such merchandise is 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 HTS item
numbers are provided for convenience and Customs purposes. The written description
remains dispositive.
The review covers the period January 1, 1990 through December 31, 1990 and four
programs: (1) Public Investment Fund loan to HADEED, (2) SABIC's transfer of SULB
shares to HADEED, (3) preferential provision of equipment of HADEED, and (4) income
tax holiday for joint venture projets in Saudia Arabia. The Saudi Iron and Steel Company
(HADEED) was the sole producer and/or exporter of carbon steel wire rod to the United
States during the review period.

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 section 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 Institutioins 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 orginally 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 are similar. The maximun 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.

Thus, in light of the factors described above, respondent argues that the Department has a
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

*8304

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 the Department has rejected respondent's argument regarding
integral linkage in the previous three reviews (see, Final Results of Countervailing
Duty Administrative Review; Carbon Steel Wire Rod from Saudi Arabia, 56 FR 26652,
June 10, 1991; and, Final Results of Countervailing Duty Administrative Reviews;
Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48158, September 24, 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: Any conclusion regarding the roles of PIF and SIDF in a broader
Saudi governmental policy initiative can only be reached by considering the historical
and practical development of each program up to the time the loan in question was
contracted. 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 despite the Department's repeated requests.
Therefore, since the factual information on the record relevant to the establishment and
development of PIF and SIDF is insufficient to demonstrate integral linkage, we will
continue to consider each program separately.

Comment 2: The respondent contends that it is unreasonable for the Department to
demand any more factual proof of integral linkage than what HADEED has provided. All
known existing evidence has been presented. For reasons relating primarily to the nature
of record-keeping during the early stages of Saudi Arabia's industrialization process,
better evidence appears not to exist. The Department is not justified in treating evidence
of linkage at inception as a criterion for finding integral linkage. Such a criterion is not
even explicitly listed in the Department's proposed regulation. Furthermore, the
Department's insistence on proof of such additional factors violates prescribed rules of
procedure by using factors purporting to be guidance as a final rule determining
substantive rights. The Court of International Trade has held that the Department must
follow the minimal "notice and comment" procedures embodied in the Administrative
Procedures Act (APA) before promulgating final rules. Ipsco, Inc. v. United Sttes, 687 F.
Supp. 614 (C.I.T. 1988).

Department's Position: With regard to the question of "integral linkage," the Department
has in these reviews consistently focused its attention on the relationship between the
programs in question and "an overall government policy or national development plan."
See, Final Results of Countervailing Duty Administrative Reviews; Carbon Steel Wire
Rod from Saudi Arabia, 56 FR 48158, September 24, 1991). This position was also
followed in the Final Affirmative Countervailing Duty Determination; Certain Fresh
Cut Flowers from the Netherlands (52 FR 3301, February 3, 1987) wherein the
Department would not find integral linkage because "the government was unable to
document the inclusion of (the programs) as part of an overall national energy program. *
* *" Id at 3309.
In requiring that this relationship be explicit at the inception(s) of the programs, the
Department violates no statutory or regulatory provision. Even if one turns to the
Department's proposed regulations, the decision herein is fully supported. 19 CFR
355.43(b)(6) of the proposed regulations tells us that when deciding an integral linkage
question the Secretary will examine "evidence of a government policy to treat industries
equally." This broad instruction is included on a list that explicitly advises parties that the
Department will consider the factors on the list together with "other factors." Thus, it is
within the Department's discretion to explicate each factor listed in the proposed
regulation, and to do so in accordance with Departmental precedent. This is precisely
what the Department has done with the second factor listed in the proposed regulation.

Comment 3: 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 benefited 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: 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: We disagree with respondent. We have considered and rejected
respondent's argument in the original investigation, and in the subsequent three reviews
(see, Final Affirmative Countervailing Duty Determination and Countervailing
Duty Order; Carbon Steel Wire Rod from Saudi Arabia, 51 FR 4206, February 3, 1986;
Final Results of Countervailing Duty Administrative Review; Carbon Steel Wire Rod
from Saudi Arabia, 56 FR 26652, June 10, 1991; and, Final Results of Countervailing
Duty Administrative Reviews; Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48158,
September 24, 1991, respectively). We determined that the loan in question was part of a
de facto specific program, and respondent has presented no new evidence that would
disturb this conclusion (other than that pertaining to "integral linkage"). Furthermore, the
Court of International Trade has found that Commerce "reasonably applied the Specificity
test" and has concluded that Commerce's determination that the Saudi government
provides PIF loans to a specific group of enterprises is in accordance with law. See, Saudi
Iron

*8305

and Steel Co. v. United States, 675 F. Supp. 1362 (C.I.T. 1987).

Comment 4: Petitioners contend that the Department's use of a composite benchmark
incorporating a short-term interest rate is incorrect. In calculating the benchmark, the
Department relied on the erroneous assumption that HADEED could have obtained the
SIDF's maximum loan limit of fifty percent of the project's total cost. In fact, the
maximum amount HADEED could have obtained from SIDF was SR400 million,
significantly less than fifty percent of the project's total cost.

Department's Position: We disagree. We have considered and rejected this argument in a
previous review. See, Final Results of Countervailing Duty Administrative Review;
Carbon Steel Wire Rod from Saudi Arabia, 56 FR 26652, June 10, 1991. Our
methodology remains unchanged from the original investigation. 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 Saudi Interbank
Offering Rate (SIBOR) for 1990, plus the normal one percent spread that is common for
commercial borrowings from private Saudi banks.

Final Results of Review

After reviewing all of the comments received, we determine the total bounty or grant to
be 0.01 percent ad valorem for the period January 1, 1990 through December 31, 1990.
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, 1990 and exported on or before December 31, 1990.
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. This administrative review 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: March 2, 1992.

Marjorie A. Chorlins,

Acting Assistant Secretary for Import Administration.

(FR Doc. 92-5422 Filed 3-6-92; 8:45 am)

BILLING CODE 3510-DS-M