[Federal Register: November 13, 2007 (Volume 72, Number 63)]
[Notices]
[Page 63875-63885]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ap07-37]
72 FR 63875, November 13, 2007
DEPARTMENT OF COMMERCE
International Trade Administration
[C-570-911]
Circular Welded Carbon Quality Steel Pipe from the People's
Republic of China: Preliminary Affirmative Countervailing Duty
Determination; Preliminary Affirmative Determination of Critical
Circumstances; and Alignment of Final Countervailing Duty Determination
with Final Antidumping Duty 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 circular welded carbon quality steel 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
further determines preliminarily that critical circumstances exist with
respect to imports of the subject merchandise. This notice also serves
to align the final countervailing duty determination in this
investigation
[[Page 63876]]
with the final determination in the companion antidumping duty
investigation of circular welded carbon quality steel pipe from the
People's Republic of China.
EFFECTIVE DATE: November 13, 2007.
FOR FURTHER INFORMATION CONTACT: Salim Bhabhrawala, Damian Felton, or
Shane Subler, 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) 482-1784, (202) 482-0133, or (202) 482-0189, respectively.
SUPPLEMENTARY INFORMATION:
Case History
The following events have occurred since the publication of the
Department of Commerce's (the Department) notice of initiation in the
Federal Register. See Notice of Initiation of Countervailing Duty
Investigation: Circular Welded Carbon Quality Steel Pipe from the
People's Republic of China, 72 FR 36668 (July 5, 2007) (Initiation
Notice).
On July 26, 2007, the Department selected the three largest Chinese
producers/exporters of circular welded carbon quality steel pipe (CWP),
Tianjin Shuangjie Steel Pipe Group Co., Ltd. (Shuangjie), Weifang East
Steel Pipe Co., Ltd. (East Pipe), and Zhejiang Kingland Pipeline and
Technologies Co., Ltd. (Kingland), as mandatory respondents. See
Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import
Administration, ``Respondent Selection'' (July 26, 2007). This
memorandum is on file in the Department's Central Records Unit in Room
B-099 of the main Department building (CRU). On July 27, 2007, we
issued the countervailing duty (CVD) questionnaire to the Government of
the People's Republic of China (GOC), East Pipe, Kingland, and
Shuangjie.
On July 31, 2007, the International Trade Commission (ITC) issued
its affirmative preliminary determination that there is a reasonable
indication that an industry in the United States is materially injured
by reason of allegedly subsidized imports of CWP from the People's
Republic of China (PRC). See Circular Welded Carbon-Quality Steel Pipe
from the PRC, Investigation Nos. 701-TA-447 and 731-TA-1116, 72 FR
43295 (Preliminary) (August 3, 2007).
On August 2, 2007, we published a postponement of the preliminary
determination of this investigation until November 5, 2007. See
Circular Welded Carbon Quality Steel Pipe from the People's Republic of
China: Notice of Postponement of Preliminary Determination in the
Countervailing Duty Investigation, 72 FR 42399 (August 2, 2007).
The Ad Hoc Coalition for Fair Pipe Imports from the PRC and the
United States Steel Workers (collectively, petitioners) filed a new
subsidy allegation on August 21, 2007. On September 7, 2007, the
Department determined to investigate aspects of the newly alleged
subsidy relating to currency retention. See Memorandum to Susan
Kuhbach, Director, AD/CVD Operations, Office 1, ``New Subsidy
Allegation'' (September 7, 2007). The GOC submitted comments responding
to petitioners' new subsidy allegation on September 10, 2007. Questions
regarding this newly alleged subsidy were sent to the GOC and the
respondent companies on September 11, 2007.
The petitioners alleged that critical circumstances exist with
respect to imports of CWP from the PRC on September 17, 2007. See 19
CFR 351.206. Shuangjie submitted comments responding to petitioners'
allegations of critical circumstances on September 24, 2007.
Petitioners responded to Shuangjie's comments on September 27, 2007.
The Department issued questionnaires to the respondent companies
regarding the critical circumstances allegation on October 24, 2007.
Responses to these questionnaires were received from Kingland and East
Pipe on October 31, 2007, and November 1, 2007, respectively. As
explained further below, Shuangjie did not respond. We address the
allegation of critical circumstances below.
On September 24, 2007, petitioners requested that the Department
extend the deadline for the submission of new subsidy allegations
beyond September 26, the normal deadline established in the
Department's regulations. See 19 CFR 351.301(d)(4)(i)(A). The
Department granted an extension of the deadline to October 5, and on
that date received additional new subsidy allegations from the
petitioners. The Department intends to address those allegations in the
near future.
We received responses to our CVD questionnaires from the GOC and
the respondent companies on September 17, 2007, September 24, 2007,
September 25, 2007, and October 19, 2007. The petitioners filed
comments on these responses as follows: GOC - September 24, 2007,
October 1, 2007 and October 11, 2007; East Pipe - September 25, 2007,
September 27, 2007, and October 1, 2007; Kingland - September 25, 2007,
and October 1, 2007; and, Shuangjie - September 25, 2007, and October
1, 2007.
We issued supplemental questionnaires to: East Pipe, Kingland and
Shuangjie on October 4, 2007; the GOC on October 9, 2007 and October
10, 2007; and Shuangjie on October 25, 2007. We received responses to
these supplemental questionnaires from the GOC on October 23, 2007;
East Pipe on October 18 and 19, 2007; and Kingland and Shuangjie on
October 18, 2007. Petitioners filed comments on these supplemental
responses as follows: Shuangjie on October 23, 2007, and East Pipe,
Kingland and Shuangjie on October 25, 2007.
On October 26, 2007, the petitioners submitted comments for
consideration in the preliminary determination.
On October 31, 2007, Shuangjie withdrew from the investigation and
requested that the Department return all of its proprietary fillings.
On August 20, 2007, Jiangsu Yulong Steel Pipe Co., Ltd.
(``Yulong''), requested that the Department reconsider its mandatory
respondent selection in this investigation. In addition, Yulong
requested that if the Department declined to revisit its mandatory
respondent selection process, that Yulong be allowed to participate as
a voluntary respondent. On August 23, 2007, the Department declined
Yulong's request that the Department revisit its mandatory respondent
selection process. However, the Department did state that it would
consider accepting Yulong as a voluntary respondent at a later date.
Yulong filed timely responses to the Department's CVD questionnaires on
September 17, 2007, and September 24, 2007.
Even though Shuangjie has withdrawn from the investigation, we were
unable to analyze Yulong's voluntary responses for consideration in
this preliminary determination. Shuangjie's October 31, 2007 withdrawal
came five days before the preliminary determination and, thus, the
Department was unable to complete the necessary analyses of Yulong's
submissions and issue the necessary supplemental questionnaires in
sufficient time for the preliminary determination. Furthermore, the
Department will not have sufficient time or resources to analyze
Yulong's responses during the remainder of this investigation. Based on
our experiences with the mandatory respondents in this investigation,
it is likely that detailed supplemental questionnaires will be required
in order to gather the information necessary to calculate an CVD rate
for Yulong. At this point in the proceeding, analyzing Yulong's
responses and issuing detailed
[[Page 63877]]
supplemental questionnaires prior to the final determination would be
extremely burdensome and would likely inhibit the timely completion of
the investigation. Consequently, the Department is not accepting Yulong
as a voluntary respondent and will not calculate an individual
countervailing duty rate for Yulong.
On November 2, 2007, petitioners requested that the final
determination of this countervailing duty investigation be aligned with
the final determination in the companion antidumping duty investigation
in accordance with section 705(a)(1) of the Tariff Act of 1930, as
amended (the Act). We address this request below.
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, 72 FR at 36669.
On July 19, 2007, the petitioners submitted comments concerning the
scope of the CWP antidumping and countervailing duty investigations.
MAN FERROSTAAL INC., MACSTEEL SERVICE CENTERS USA, and SUNBELT GROUP
L.P. (collectively, FERROSTAAL) also submitted comments concerning the
scope of these investigations on July 19, 2007. The petitioners and
FERROSTAAL both submitted rebuttal comments on July 26, 2007.
We have analyzed the comments of the interested parties regarding
the scope of this investigation. See Memorandum to Stephen J. Claeys,
Deputy Assistant Secretary for Import Administration, Re: Scope of the
Antidumping and Countervailing Duty Investigations of Circular Welded
Carbon Quality Steel Pipe from the People's Republic of China,
``Analysis of Comments and Recommendation for Scope of Investigations''
(November 5, 2007). Our position on these comments is reflected below.
Scope of the Investigation
The scope of this investigation covers certain welded carbon
quality steel pipes and tubes, of circular cross-section, and with an
outside diameter of 0.372 inches (9.45 mm) or more, but not more than
16 inches (406.4 mm), whether or not stenciled, regardless of wall
thickness, surface finish (e.g., black, galvanized, or painted), end
finish (e.g., plain end, beveled end, grooved, threaded, or threaded
and coupled), or industry specification (e.g., ASTM, proprietary, or
other), generally known as standard pipe and structural pipe (they may
also be referred to as circular, structural, or mechanical tubing).
Specifically, the term ``carbon quality'' includes products in
which (a) iron predominates, by weight, over each of the other
contained elements; (b) the carbon content is 2 percent or less, by
weight; and (c) none of the elements listed below exceeds the quantity,
by weight, as indicated:
(i) 1.80 percent of manganese;
(ii) 2.25 percent of silicon;
(iii) 1.00 percent of copper;
(iv) 0.50 percent of aluminum;
(v) 1.25 percent of chromium;
(vi) 0.30 percent of cobalt;
(vii) 0.40 percent of lead;
(viii) 1.25 percent of nickel;
(ix) 0.30 percent of tungsten;
(x) 0.15 percent of molybdenum;
(xi) 0.10 percent of niobium;
(xii) 0.41 percent of titanium;
(xiii) 0.15 percent of vanadium; or
(xiv) 0.15 percent of zirconium.
Standard pipe is made primarily to American Society for Testing and
Materials (``ASTM'') specifications, but can be made to other
specifications. Standard pipe is made primarily to ASTM specifications
A-53, A-135, and A-795. Structural pipe is made primarily to ASTM
specifications A-252 and A-500. Standard and structural pipe may also
be produced to proprietary specifications rather than to industry
specifications. This is often the case, for example, with fence tubing.
Pipe multiple-stenciled to a standard and/or structural specification
and to any other specification, such as the American Petroleum
Institute (``API'') API-5L or 5L X-42 specifications, is also covered
by the scope of this investigation when it meets the physical
description set forth above and also satisfies one or more of the
following characteristics: is a single random length; less than 2.0
inches (50 mm) in outside diameter; has a galvanized and/or painted
surface finish; or has a threaded and/or coupled end finish.
The scope of this investigation does not include: (a) pipe suitable
for use in boilers, superheaters, heat exchangers, condensers, refining
furnaces and feedwater heaters, whether or not cold drawn; (b)
mechanical tubing, whether or not cold-drawn; (c) finished electrical
conduit; (d) finished scaffolding; (e) tube and pipe hollows for
redrawing; (f) oil country tubular goods produced to API
specifications; and (g) line pipe produced to only API specifications.
The pipe products that are the subject of this investigation are
currently classifiable in HTSUS statistical reporting numbers
7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40,
7306.30.50.55, 7306.30.50.85, 7306.30.50.90, 7306.50.10.00,
7306.50.50.50, 7306.50.50.70, 7306.19.10.10, 7306.19.10.50,
7306.19.51.10, and 7306.19.51.50. However, the product description, and
not the HTSUS classification, is dispositive of whether merchandise
imported into the United States falls within the scope of the
investigation.
Use of Facts Otherwise Available
Sections 776(a)(1) and (2) of the Act provide that the Department
shall apply ``facts otherwise available'' if, inter alia, necessary
information is not on the record or an interested party or any other
person: (A) withholds information that has been requested; (B) fails to
provide information within the deadlines established, or in the form
and manner requested by the Department, subject to subsections (c)(1)
and (e) of section 782 of the Act; (C) significantly impedes a
proceeding; or (D) provides information that cannot be verified as
provided by section 782(i) of the Act.
Where the Department determines that a response to a request for
information does not comply with the request, section 782(d) of the Act
provides that the Department will so inform the party submitting the
response and will, to the extent practicable, provide that party the
opportunity to remedy or explain the deficiency. If the party fails to
remedy the deficiency within the applicable time limits and subject to
section 782(e) of the Act, the Department may disregard all or part of
the original and subsequent responses, as appropriate. Section 782(e)
of the Act provides that the Department ``shall not decline to consider
information that is submitted by an interested party and is necessary
to the determination but does not meet all applicable requirements
established by the administering authority'' if the information is
timely, can be verified, is not so incomplete that it cannot be used,
and if the interested party acted to the best of its ability in
providing the information. Where all of these conditions are met, the
statute requires the Department to use the information if it can do so
without undue difficulties.
In this case, Shuangjie did not provide information we requested
that is necessary to determine a
[[Page 63878]]
countervailing duty rate for this preliminary determination.
Specifically, Shuangjie did not respond to the Department's October 24,
2007, request for shipment data relating to the allegation of critical
circumstances, did not respond to the Department's October 25, 2007,
supplemental questionnaire and, finally, on October 31, 2007, withdrew
all of its proprietary information from the record. Thus, in reaching
our preliminary determination, pursuant to section 776(a)(2)(A), and
(C) of the Act, we have based Shuangjie's countervailing duty rate on
facts otherwise available.
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. Section 776(b) of the
Act also authorizes the Department to use as adverse facts available
(AFA) information derived from the petition, the final determination, a
previous administrative review, or other information placed on the
record.
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 defined as
``{i{time} nformation 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 Statement of Administrative Action (SAA)
accompanying the Uruguay Round Agreements Act, H. Doc. No. 316, 103d
Cong., 2d Session (1994) at 870. Corroborate means that the Department
will satisfy itself that the secondary information to be used has
probative value. See SAA at 870. 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.
In selecting from among the facts available, the Department has
determined that an adverse inference is warranted, pursuant to section
776(b) of the Act because, in addition to not responding to all of our
requests for information, Shuangjie has withdrawn all of its
proprietary information and has withdrawn from all participation in the
investigation thereby precluding verification of the public information
remaining on the record. Thus, Shuangjie failed to cooperate by not
acting to the best of its ability, and our preliminary determination is
based on AFA.
Selection of the Adverse Facts Available Rate
In deciding which facts to use as AFA, section 776(b) of the Act
and 19 CFR 351.308(c)(1) authorize the Department to rely on
information derived from (1) the petition, (2) a final determination in
the investigation, (3) any previous review or determination, or (4) any
information placed on the record. It is the Department's practice to
select, as AFA, the highest calculated rate in any segment of the
proceeding. See, e.g., Certain In-shell Roasted Pistachios from the
Islamic Republic of Iran: Final Results of Countervailing Duty
Administrative Review, 71 FR 66165 (November 13, 2006), and
accompanying Issues and Decision Memorandum at ``Analysis of
Programs.''
The Department's practice when selecting an adverse margin from
among the possible sources of information is to ensure that the margin
is sufficiently adverse ``as to effectuate the purpose of the facts
available role 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 SAA at 870. In choosing the appropriate
balance between providing a respondent with an incentive to respond
accurately and imposing a rate that is reasonably related to the
respondent's prior commercial activity, selecting the highest prior
margin ``reflects a common sense inference that the highest prior
margin is the most probative evidence of current margins, because, if
it were not so, the importer, knowing of the rule, would have produced
current information showing the margin to be less.'' See Rhone Poulenc,
Inc. v. United States, 899 F. 2d 1185, 1190 (Fed. Cir. 1990).
Because Shuangjie failed to act to the best of its ability, as
discussed above, for each program examined, we made the adverse
inference that Shuangjie benefitted from the program unless the record
evidence made it clear that Shuangjie could not have received benefits
from the program because, for example, we have preliminarily found the
program not countervailable. See, e.g., Certain Cold-Rolled Carbon
Steel Flat Products From Korea; Final Affirmative CVD Determination, 67
FR 62102 (October 3, 2002) and accompanying Issues and Decision
Memorandum at ``Methodology and Background Information.'' To calculate
the program rates, we have generally relied upon the highest program
rate calculated for any responding company in this investigation as
adverse facts available. See Certain In-shell Roasted Pistachios from
the Islamic Republic of Iran: Final Results of Countervailing Duty
Administrative Review, 71 FR 66165 (November 13, 2006) and accompanying
Issues and Decision Memorandum at ``Analysis of Programs.''
Thus, for programs based on the provision of goods at less than
adequate remuneration, we have used the Kingland rate for the provision
of hot-rolled steel for less than adequate remuneration. For value
added tax (``VAT'') programs, we are unable to utilize company-specific
rates from this proceeding because neither respondent received any
countervailable subsidies from these subsidy programs. Therefore, for
VAT programs we are applying the highest subsidy rate for any program
otherwise listed, which in this instance is Kingland's rate for the
provision of hot-rolled steel for less than adequate remuneration.
Similarly, for the grant programs, we are not relying on the
highest calculated preliminary subsidy rate because it is de minimis.
Instead, we are applying the highest calculated preliminary subsidy
rate, which in this instance is Kingland's rate for the provision of
hot-rolled steel for less than adequate remuneration.
Finally, for the seven alleged income tax programs pertaining to
either the reduction of the income tax rates or the payment of no
income tax, we have applied an adverse inference that Shuangjie paid no
income tax during the period of investigation (i.e., calendar year
2006). The standard income tax rate for corporations in the PRC is 30
percent, plus a 3 percent provincial income tax rate. Therefore, the
highest possible benefit for these seven income tax rate programs is 33
percent. We are applying the 33 percent AFA rate on a combined basis
(i.e., the seven programs combined provided a 33 percent benefit). This
33 percent AFA rate does not apply to income tax deduction or credit
programs. For income tax
[[Page 63879]]
deduction or credit programs we are applying the highest subsidy rate
for any program otherwise listed, which in this instance is Kingland's
rate for provisions of hot-rolled-steel at less than adequate
remuneration. See Memorandum to the File, entitled ``Selection of the
Adverse Facts Available Rate for Tianjin Shuangjie Steel Pipe Co.,
Ltd.'' (November 5, 2007) (this memorandum is on file in the
Department's CRU).
We do not need to corroborate the calculated subsidy rates we are
using as AFA because they are not considered secondary information as
they are based on information obtained in the course of this
investigation. See section 776(c) of the Act; see also the SAA at 870.
We have also identified certain instances in which the GOC has
failed to cooperate to the best of its ability in providing requested
information. First, in our questionnaire, we asked the GOC to provide
information about the hot-rolled steel industry in the PRC (including a
description of the industry, users of hot rolled steel in the PRC, and
whether hot-rolled steel producers are state-owned enterprises). The
GOC limited its response to the ``hot-rolled steel narrow strip''
industry, arguing that this narrow strip industry was separate from the
hot-rolled steel industry. In our supplemental questionnaire, we asked
the GOC to provide the requested information for the hot-rolled steel
industry as a whole. While some limited information was provided in the
GOC's supplemental questionnaire response (October 23, 2007), the GOC
stated, ``We hope to prove (sic) the Department a broader analysis of
hot-rolled steel producers at a later date.'' Similarly, in response to
our supplemental questionnaire seeking additional information on rates
charged for water in Tianjin (where Shuangjie is located), the GOC
responded that it had contacted the local agencies and was awaiting
their reply (this rate information had also been requested in our
initial questionnaire).
The failure to provide this information within the established
deadlines has impeded our investigation. Moreover, the GOC has not
provided us with any plausible explanation as to why it cannot provide
us with the information within the established deadlines. Therefore, we
preliminarily determine that the GOC has failed to act to the best of
its ability and we are applying facts available with an adverse
inference to address these omissions. With respect to hot-rolled steel,
the Department is preliminarily rejecting prices in the PRC as possible
benchmarks for determining whether hot-rolled steel is being provided
for less than adequate remuneration. With respect to water, we are
preliminarily finding that this input is being provided for less than
adequate remuneration for Shuangjie, as AFA.
Critical Circumstances
On September 17, 2007, petitioners requested that the Department
make an expedited finding that critical circumstances exist with
respect to imports of CWP from the PRC. Section 703(e)(1) of 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 the alleged
countervailable subsidy is inconsistent with the WTO Agreement on
Subsidies and Countervailing Measures (the SCM Agreement) and whether
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 the 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., Policy
Bulletin 98/4 regarding Timing of Issuance of Critical Circumstances
Determinations, 63 FR 55364 (October 15, 1998). Due to resource
constraints, we were unable to accommodate petitioners' request that
the Department make an expedited determination with respect to critical
circumstances. Specifically, given the complex issues inherent to this
investigation, i.e., the second countervailing duty investigation of
imports from the PRC, as well as the multiple other ongoing antidumping
and countervailing duty investigations, the Department was unable to
make a critical circumstances determination prior to the preliminary
results of this investigation.
We preliminarily find that East Pipe received no countervailable
subsidies inconsistent with the SCM Agreement. Therefore, in accordance
with section 703(e)(1) of the Act, we preliminarily determine that
critical circumstances do not exist with respect to imports of CWP from
East Pipe.
As discussed in the Analysis of Programs section below, the
Department has preliminarily determined that Kingland received
countervailable export subsidies during the POI. These export subsidies
are inconsistent with the SCM Agreement. Although the countervailable
subsidy rate for these export subsidies is de minimis, use of an export
subsidy program is sufficient to make an affirmative preliminary
determination of critical circumstances under section 703(e)(1)(A) of
the Act. 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); and
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) (the unchanged final
determination).
Regarding Shuangjie, we have made an adverse inference that
Shuangjie benefitted from countervailable export and import
substitution subsidy programs pursuant to our determination to apply
AFA to this company.
For ``all other'' exporters, we are basing our finding on the
experience of Kingland and, therefore, find that ``all others''
benefitted from export subsidies.
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 the import volume 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). Section
351.206(h)(1) of our regulations provides that, in determining whether
imports of the subject merchandise have been ``massive,'' the
Department normally will examine: (i) the volume and value of the
imports; (ii) seasonal trends; and (iii) the share of domestic
consumption accounted for by the imports. 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.
On October 31, 2007, Kingland filed its monthly shipment data for
subject merchandise exported to the United States for calendar years
2005 and 2006, and for January through September 2007. Based upon these
data, we preliminarily find that Kingland's CWP
[[Page 63880]]
imports increased more than 15 percent during the ``relatively short
period.'' See Memorandum to the File Re ``Critical Circumstances
Analysis for Zhejiang Kingland Pipeline and Technologies Co., Ltd.
Import Shipment Analysis for Zhejiang Kingland Pipeline and
Technologies Co., Ltd. and ``All Others'' (November 5, 2007) (Import
Analysis Memorandum) (this memorandum is on file in the Department's
CRU). 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 Kingland.
Regarding Shuangjie, as part of our adverse facts available
determination we have made an adverse inference that there were massive
imports from Shuangjie over a relatively short period. See Notice of
Preliminary Determination of Sales at Less Than Fair Value and
Affirmative Preliminary Determination of Critical Circumstances: Wax
and Wax/Resin Thermal Transfer Ribbons from Japan, 68 FR 71072, 71076-
77 (December 22, 2003); and Notice of Final Determination of Sales at
Less Than Fair Value and Affirmative Final Determination of Critical
Circumstances: Wax and Wax/Resin Thermal Transfer Ribbons from Japan,
69 FR 11834 (March 12, 2004) (the unchanged final determination).
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 Shuangjie.
For ``all others,'' we preliminarily determine that there were
massive imports over a relatively short period based on import
statistics from the ITC's Dataweb (adjusted to remove East Pipe's and
Kingland's shipments). See Import Analysis Memorandum. 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.''
Alignment of Final Countervailing Duty Determination with Final
Antidumping Duty Determination
On July 5, 2007, the Department initiated the countervailing duty
and antidumping duty investigations on CWP from the PRC. See Initiation
Notice and Initiation of Antidumping Duty Investigation: Circular
Welded Carbon Quality Steel Pipe from the People's Republic of China,
72 FR 36663 (July 5, 2007). The countervailing duty investigation and
the antidumping duty investigation have the same scope with regard to
the merchandise covered.
On November 2, 2007, petitioners submitted a letter, in accordance
with section 705(a)(1) of the Act, requesting alignment of the final
countervailing duty determination with the final determination in the
companion antidumping duty investigation of CWP from the PRC.
Therefore, in accordance with section 705(a)(1) of the Act, and 19 CFR
351.210(b)(4), we are aligning the final countervailing duty
determination with the final determination in the companion antidumping
duty investigation of CWP from the PRC. The final countervailing duty
determination will be issued on the same date as the final antidumping
duty determination, which is currently scheduled to be issued on or
about March 18, 2008. See Postponement of Preliminary Determination of
Antidumping Duty Investigation: Circular Welded Carbon Quality Steel
Pipe from the People's Republic of China (signed, November 1, 2007)
(this memorandum is on file in the Department's CRU).
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). In that determination, the Department found, ''. . .
given the substantial differences between the Soviet-style economies
and the PRC'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.'' CFS from the PRC, and accompanying Issues and
Decision Memorandum at Comment 6; see also Memorandum to David M.
Spooner, Countervailing Duty Investigation of Coated Free Sheet Paper
from the People's Republic of China - Whether the Analytical Elements
of the Georgetown Steel Opinion are Applicable to China's Present-day
Economy at 2 (March 29, 2007) (Georgetown Steel Memo).
The GOC, in an October 11, 2007 submission in this proceeding,
argues that the Department should not investigate certain newly alleged
subsidies that occurred before 2005, the period of investigation in the
CFS from the PRC proceeding. Citing the Georgetown Steel Memo, the GOC
claims that the Department found that ``it is possible to determine
whether the PRC Government has bestowed a benefit upon a Chinese
producer (i.e., the subsidy can be identified and measured) and whether
any such benefit is specific,'' as of 2005. See Georgetown Steel Memo
at 2. The GOC additionally points to Final Affirmative Countervailing
Duty Determination: Sulfanilic Acid from Hungary, 67 FR 60223 and
accompanying Issues and Decision Memorandum at Comment 1 (September 25,
2003) (Sulfanilic Acid from Hungary), in which the Department declined
to countervail capital infusions received by the respondent in the year
prior to Hungary's transition to a market economy, when Hungary also
became subject to the countervailing duty law. Finally, the GOC notes
that in the preamble to the Department's countervailing duty
regulations, the Department states that it intends to continue its
practice of only countervailing subsidies bestowed after a country's
status is changed to market economy. See Countervailing Duties; Final
Rule, 63 FR 65348, 65360 (November 25, 1998) (CVD Preamble).
We have carefully reviewed CFS from the PRC, the Georgetown Steel
Memo, and the CVD Preamble, and do not agree with the GOC that we are
precluded from investigating subsidies bestowed prior to 2005. In
particular, although 2005 served as the period of investigation in CFS
from the PRC, we found loans given prior to 2005 under the Policy
Lending Program to be countervailable. See CFS from the PRC and
accompanying Issues and Decision Memorandum at Comment 12. More
importantly, although we found that we could apply the CVD law to
imports from the PRC, we did not squarely address the issue of how far
back in time we should find countervailable subsidies. Now that this
issue has been clearly presented in this investigation, we
preliminarily determine that it is appropriate and administratively
desirable to identify a uniform date from which the Department will
identify and measure subsidies in the PRC for purposes of the CVD law.
We preliminarily determine that date to be December 11, 2001, the
date on which the PRC became a member of the WTO. Prior to this date,
many changes were occurring in the PRC's economy. Many of the
obligations undertaken by the PRC pursuant to its accession to the WTO
were in line with the PRC's objective of economic reform. See Report of
the Working Party on the Accession of China, WT/ACC/CHN/49 (October 1,
2001), for example, at paragraph 4. Taken together, these changes would
permit the Department to determine whether the GOC has bestowed a
countervailable subsidy on Chinese producers. See Georgetown Steel
Memo; CFS from the PRC at
[[Page 63881]]
Comments 1 and 6. Finally, the GOC acknowledged the changing nature of
its economy in so far as its Accession Protocol contemplates the
application of the CVD law to the PRC, even while it remains a non-
market economy (NME). See Protocol of Accession of the People's
Republic of China, WT/L/432 (November 23, 2001) at Section 15(b); see
also, CFS at Comment 1. Therefore, for this preliminary determination,
we have selected the date of December 11, 2001, as the date from which
we will measure countervailable subsidies in the PRC.
Period of Investigation
The period for which we are measuring subsidies, or the period of
investigation (POI), is calendar year 2006.
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 for assets used to manufacture primary steel mill products. 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) directs that the Department will 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, produce an input that
is primarily dedicated to the production of the downstream product, or
transfer a subsidy to a cross-owned company. 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, 604 (CIT 2001).
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.
East Pipe: In its response, East Pipe reported that it is
affiliated with East Pipe Transportation Facility Co., Ltd. (East
Highway). East Pipe states that East Highway's primary business is to
install highway guardrails in the PRC and that East Highway did not
produce subject merchandise during the POI. East Pipe further contends
that East Highway cannot be considered the holding company of East Pipe
because its ownership interest in East Pipe is nominal (the details of
the relationship between these two companies are proprietary).
Given the unusual nature of the ownership relation between these
companies, we preliminarily agree that any subsidies to East Highway
should not be attributed to East Pipe under 19 CFR 351.525(b)(6)(iii).
Moreover, because East Highway does not produce subject merchandise, we
preliminarily determine that any subsidies it receives should not be
attributed to East Pipe under 19 CFR 351.5252(b)(6)(ii). See Memorandum
from Salim Bhabhrawala to Susan Kuhbach Re: Preliminary Negative
Countervailing Duty Determination: Circular Welded Carbon Quality Steel
Pipe from the People's Republic of China; Calculations for the
Preliminary Determination for Weifang East Steel Pipe Co., Ltd.
(November 5, 2007).
East Pipe acknowledges a second company with which it is legally
affiliated by virtue of a long-term investment, but which East Pipe
views as commercially independent (the details of the relationship
between these two companies are also proprietary). According to East
Pipe, the company does not produce the subject merchandise and does not
provide inputs to East Pipe. Because the company does not produce
subject merchandise or otherwise fall within the situations described
in 19 CFR 351.525(b)(6)(iii)-(v), we do not need to reach the issue of
whether this company and East Pipe are cross-owned within the meaning
of 19 CFR 351.525(b)(6)(vi), and we are not attributing any subsidies
received by this company to East Pipe. Consequently, we are limiting
our investigation to subsidies received by East Pipe.
Kingland: Kingland has responded to the Department's original and
supplemental questionnaires on behalf of itself; its parent company,
Kingland Group Co., Ltd. (Kingland Group); Beijing Kingland Century
Technologies Co. (Kingland Century); Zhejiang Kingland Pipeline
Industry Co., Ltd. (Kingland Industry); and Shanxi Kingland Pipeline
Co., Ltd. (Shanxi Kingland). According to Kingland, Kingland Group and
Kingland Century do not produce the subject merchandise. However,
because Kingland Group is the parent company of Kingland, we are
preliminarily attributing subsidies received by Kingland Group to
Kingland, in accordance with 19 CFR 351.525(b)(6)(iii).
With respect to Kingland Century, this company is a domestic
trading company and does not produce any merchandise. Instead, it
purchased and provided inputs to Kingland during the POI. Because it is
not an input producer, we are not treating Kingland Century as an input
supplier as described in 19 CFR 351.525(b)(6)(iv) (which refers to
subsidies received by the input producer). Instead, for the preliminary
determination, we are treating these inputs as being provided directly
to Kingland. See Memorandum from Shane Subler to Susan Kuhbach Re:
Preliminary Affirmative Countervailing Duty Determination: Circular
Welded Carbon Quality Steel Pipe from the People's Republic of China;
Calculations for the Preliminary Determination for Zhejiang Kingland
Pipeline and Technologies Co., Ltd.; Kingland Group Co., Ltd., and
Beijing Kingland Century Technologies Co. (November 5, 2007) (Kingland
Calculation Memorandum).
Kingland Industry and Shanxi Kingland produced and sold subject
merchandise domestically during the POI. Therefore, in accordance with
19 CFR 351.525(b)(6)(ii), we are preliminarily including Kingland
Industry and Shanxi Kingland in the subsidy calculation.
Kingland also identified other affiliated companies whose names
indicated that they might be involved in the production or sales of
CWP. In response to our supplemental questionnaire, Kingland reported
that these companies do not produce or sell the subject merchandise.
See Kingland's supplemental questionnaire response (October 19, 2007)
at pages 1-6. For one of these companies, CNOOC Kingland Pipeline Co.,
Ltd. (CNOOC Kingland), Kingland stated it produces certain casings tube
and steel pipes that are outside the scope of the investigation.
Furthermore, Kingland provided evidence on CNOOC Kingland's shareholder
voting rights, board of directors, and management to demonstrate that
cross-ownership did not exist between Kingland and CNOOC Kingland
during the POI. After
[[Page 63882]]
reviewing the current record, we preliminarily determine that cross-
ownership did not exist between Kingland and CNOOC Kingland during the
POI. Moreover, we have preliminarily accepted Kingland's claims that
CNOOC Kingland Pipeline does not produce subject merchandise.
Finally, Kingland's organization chart shows several additional
companies that appear to be service companies with no relationship to
the subject merchandise or companies in which the responding companies
held a very limited share of ownership during the POI. We have
discussed these companies in a separate, proprietary memorandum,
entitled ``Zhejiang Kingland Pipeline Co., Ltd.: Cross-owned
Companies'' (November 5, 2007) (this memorandum is on file in the
Department's CRU). We have preliminarily excluded these companies from
the subsidy calculation.
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 Kingland, Kingland Group, Kingland
Century, Kingland Industry, and Shanxi Kingland. Because we
preliminarily determine that Kingland, Kingland Industry, and Shanxi
Kingland are cross-owned producers of the subject merchandise, as
addressed in 19 CFR 351.525(b)(6)(ii), we are attributing the subsidies
received by the three companies to their combined sales. We also
preliminarily determine that subsidies received by Kingland Group
should be attributed to the consolidated sales of the parent company
and its subsidiaries. See 19 CFR 351.525(b)(6)(iii).
Benchmark
Petitioners alleged that Baosteel received countervailable loans
and that it was uncreditworthy (see, Initiation Notice, 72 FR at
36671). Because we did not select Baosteel as a mandatory respondent in
this investigation, we are making no finding regarding that company's
creditworthiness.
Analysis of Programs
Based upon our analysis of the petition and the responses to our
questionnaires, wedetermine the following:
I. Programs Preliminarily Determined to Be Countervailable
A. Provision of Inputs for Less than Adequate Remuneration
Hot-rolled Steel
The Department initiated an investigation into whether state-owned
steel producers in the PRC provide hot-rolled steel to CWP producers
for less than adequate remuneration. In response to the Department's
questions on the PRC's hot-rolled steel industry in the original
questionnaire, the GOC provided information on the hot-rolled steel
narrow strip industry, as discussed in the Selection of the Adverse
Facts Available Rate section, above. Citing information from market
observer MYSTEEL and industry journal articles, the GOC claims that the
hot-rolled steel narrow strip industry does not compete with other hot-
rolled steel products because narrow strip has a lower market price, is
used primarily to produce CWP and light section steel, and has a
production process that is different from hot-rolled steel sheet. The
GOC argues further that pipe producers incur additional cost in
slitting hot-rolled steel sheet into a narrow strip product.
In their pre-preliminary comments, the petitioners reject the GOC's
argument that hot-rolled steel narrow strip production is a separate
industry. Referring to price information provided by the GOC, the
petitioners contend that prices for hot-rolled steel narrow strip and
hot-rolled wide coil move in tandem. Moreover, citing the respondents'
reported purchase information, petitioners argue that the respondents
use both products in their production of subject merchandise.
Therefore, the petitioners argue that the Department should analyze the
hot-rolled steel industry as a whole, not only the production of hot-
rolled steel narrow strip.
We preliminarily agree with petitioners and do not find the
producers of hot-rolled steel narrow strip to be an industry separate
from the wider hot-rolled steel industry because there is no clear
distinction between hot-rolled steel narrow strip and other hot-rolled
steel. The GOC relies on price information provided by MYSTEEL to
define hot-rolled steel narrow strip as having a width of less than
1000 millimeters and hot-rolled steel sheet as having a width of no
less than 1250 millimeters. However, these definitions leave out a
classification for products between 1000 millimeters and 1250
millimeters wide. Therefore, there is no specific width that
distinguishes hot-rolled steel narrow strip from other hot-rolled steel
sheet. Moreover, all of the products are hot-rolled steel, which is the
input product on which the Department initiated an investigation.
Therefore, we are basing our preliminary analysis on the hot-rolled
steel industry as a whole.
Kingland reported that it purchased hot-rolled steel for its CWP
from GOC-owned hot-rolled steel producers and suppliers. East Pipe
reported that it purchased its steel input for CWP entirely from
privately owned suppliers. Therefore, we preliminarily determine that
the GOC did not provide East Pipe with hot-rolled steel for CWP during
the POI and our analysis is limited to Kingland.
In its response, the GOC listed the industries that use hot-rolled
steel: ``construction, automobile, electronic appliance, machineries,
chemical industries, and long transmission pipelines, etc.'' See GOC
questionnaire response at 56 (September 17, 2007). We preliminarily
find that these industries are ``limited in number'' and, hence, that
the provision of hot-rolled steel is de facto specific under section
771(5A)(D)(i) of the Act. See also Notice of Final Affirmative
Countervailing Duty Determination: Certain Cold-Rolled Carbon Flat
Steel Products from the Republic of Korea, 67 FR 62102 (October 3,
2002) and accompanying Issues and Decision Memorandum at Comment 1 and
Comment 2, where the Department found that Posco's provision of hot-
rolled coil was countervailable.
We further determine preliminarily that the GOC's provision of hot-
rolled steel through its state-owned producers is a financial
contribution within the meaning of section 771(5)(D)(iii) and that it
confers a benefit on CWP producers because the good is being sold for
less than adequate remuneration as described in section 771(5)(E)(iv).
In determining what constitutes adequate remuneration, the Department
is not relying on prices in the PRC, as explained in the Selection of
the Adverse Facts Available Rate section, above. Instead, in accordance
with 19 CFR 351.511(a)(2), we have used a world market price as a
benchmark to compare to the respondents' reported purchase prices from
state-owned steel suppliers. Specifically, we used the ``World Export
Price'' from Steel Benchmarker, as provided in Exhibit 38 of the
petitioners' pre-preliminary comments (October 26, 2007).
To calculate the benefit, we compared the monthly weighted-average
price paid by Kingland for hot-rolled steel purchased from state-owned
enterprises (SOEs) to the average monthly prices reported in Steel
Benchmarker. Steel Benchmarker does not include prices for January -
March 2006; therefore, we have used the April 2006 price as a
surrogate. On this basis, we preliminarily determine that Kingland
received a countervailable benefit of 16.57 percent ad valorem.
For certain of Kingland's suppliers, we did not have information
about their
[[Page 63883]]
ownership and did not have time to request it for this preliminary
determination, therefore, it is unclear what portion of this steel is
provided by SOEs. We intend to seek this supplier information for our
final determination. For the preliminary determination, we have relied
on neutral facts available and treated this pool of steel as having
been provided by suppliers in the same proportion as reported for known
SOE and non-SOE suppliers. See Kingland Calculation Memorandum.
B. Other Subsidies (Kingland)
Kingland, Kingland Group, and Kingland Industry reported that they
received different city, district, and provincial grants related to
export assistance, research and development, and other business
activities in 2004, 2005, and 2006. Kingland only identified two of
these programs, the ``Electromechanical Products Technologies
Renovation Project Fund'' and ``Superstar Enterprise'' award, as public
information. Kingland designated information about the other programs
as business proprietary. Therefore, we have addressed these programs in
more detail in the Kingland Calculation Memorandum. Current information
on the record does not indicate that these grants are tied to any of
the programs discussed in this notice.
We preliminarily determine that all the grants received in 2004 and
2005 should be expensed in those years, i.e., prior to the POI because
even if they were treated as non-recurring, the total amount received
was less than 0.5 percent of the relevant sales in those years (see 19
CFR 351.524(b)(2)). Hence, they would confer no benefit in the POI.
For the export assistance grants received in 2006, certain of them
pertained to markets other than the United States. We have not included
these in our analysis pursuant to 19 CFR 351.525(b)(4). For the
remaining export assistance grant, we preliminarily determine the grant
is a countervailable subsidy within the meaning of section 771(5) of
the Act. It is a financial contribution under section 771(5)(D)(i), and
it provides a benefit in the amount of the grant (see 19 CFR
351.504(a)). Finally, because it is contingent upon export performance,
it is specific under section 771(5A)(B).
To calculate the benefit, we divided the amount received by
Kingland's export sales in 2006. On this basis, we preliminarily
determine that a countervailable subsidy of less than .005 percent ad
valorem exists for Kingland. Where the countervailable subsidy rate for
a program is less than .005 percent, the program is not included in the
total countervailing duty rate. See, e.g., Final Results of
Countervailing Duty Administrative Review: Low Enriched Uranium from
France, 70 FR 39998 (July 12, 2005), and the accompanying Issues and
Decision Memorandum at ``Purchases at Prices that Constitute 'More than
Adequate Remuneration''' (citing Final Results of Administrative
Review: Certain Softwood Lumber Products from Canada, 69 FR 75917
(December 20, 2004)).
Kingland Group reported that it received a Super Star Enterprise
award from Huzhou City. Kingland Group explained that Huzhou City
granted this award based on the total value of a company's sales. The
company met the relevant sales threshold for 2005 and received this
award in 2006.
We preliminarily determine that Kingland received a countervailable
subsidy under the Huzhou City Super Star Enterprises award 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 preliminarily determine
that the grant provided under this program is limited as a matter of
law to certain enterprises, i.e., enterprises that exceed certain sales
values during a year. 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 award was not tied to any specific product, we attributed the
subsidy to the consolidated sales of the Kingland Group. Also, because
the benefit was less than 0.5 percent, the entire amount was attributed
to the POI. On this basis, we preliminarily determine the
countervailable subsidy to be 0.02 percent ad valorem for Kingland.
For the remaining grants, we intend to seek further information for
our final determination.
II. Programs Preliminarily Determined to Be Not Countervailable
A. Government Policy Lending Program
In CFS from the PRC, the Department found Government Policy Lending
to provide a countervailable subsidy because record evidence indicated
that: (i) the GOC had a policy in place to encourage and support the
growth and development of the forestry and paper industry through
preferential financing initiatives as illustrated in the GOC's five-
year plans and industrial policies; and (ii) the GOC's policy toward
the paper industry was carried out by the central and local governments
through the provision of loans extended by GOC Policy Banks and state-
owned commercial banks. See CFS from the PRC and accompanying Issues
and Decision Memorandum at Comment 8.
In this investigation, the evidence submitted to date does not
support a finding that the CWP industry in the PRC received
preferential financing pursuant to the GOC's Iron and Steel Policy.
Therefore, we preliminarily determine that producers and exporters of
CWP in the PRC did not receive government policy loans. We will,
however, continue to investigate whether the GOC's Iron and Steel
Policy or other plans apply to the CWP industry, and, if so, the
purpose of those policies and whether preferential lending was provided
to the CWP industry pursuant to those policies.
B. Provision of Inputs for Less than Adequate Remuneration
Electricity
Electricity: According to the GOC, electricity in the PRC is
produced by numerous power plants and it is transmitted for local
distribution by two state-owned transmission companies, State Grid and
China South Power Grid. Generally, prices for uploading electricity to
the grid and transmitting it are regulated by the GOC, as are the final
sales prices. See, e.g., Circular on Implementation Measures Regarding
Reform of Electricity Prices, (FAGAIJIAGE {2005{time} No. 514,
National Development and Reform Commission) at Appendix 3 of the
Provisional Measures on Prices for Sales of Electricity at Article 29
(``Government departments in charge of pricing at various levels shall
be responsible for the administration and supervision of electricity
sales prices.''), provided within the GOC response at Exhibit 114
(September 17, 2007).
Electricity consumers are divided into broad categories such as
residential, commercial, large-scale industry and agriculture. The
rates charged vary across customer categories and within customer
categories based on the amount of electricity consumed. Moreover, among
industrial users, certain industries are specifically broken out and
these industries receive special, discounted rates. Based on our review
of the rate schedules submitted for two of the three provinces in which
the respondents are located, discounted rates are established for
producers of calcium carbide, electrolyte caustic alkali, synthetic
ammonia, yellow phosphorus with electric furnace, and chemical
fertilizer producers. For the third province, discounted rates are
established for the production of chlor alkali, electrolyte aluminum,
and chemical fertilizer. Thus, there is not a
[[Page 63884]]
discounted rate for CWP producers and, according to the GOC, the number
of customers in the large-scale enterprise category (which includes the
CWP producers) ranges from over 400 to more than 2200, across these
three localities.
Based on the record evidence, we preliminarily determine that the
provision of electricity to large-scale enterprises in the PRC is
neither de jure nor de facto specific. Although producers in a few
particular industries are eligible for discounts under the law, all
other large-scale enterprises within a locality pay the same rate for
their electricity. Moreover, the absence of price discrimination among
most users may also support a preliminary finding that electricity is
not being provided to CWP producers for less than adequate
remuneration. See Countervailing Duties; Final Rule, 63 FR 65348, 65378
(November 25, 1998) (discussing that, where the government is the sole
provider of a good or service, especially in the case of electricity,
land or water, the Department may assess whether the government price
was set in accordance with market principles, which may include an
analysis of whether there is price discrimination among the users of
the good or service that is provided and that ``{w{time} e would only
rely on a price discrimination analysis if the government good or
service is provided to more than a specific enterprise or industry, or
group thereof.'').
On this basis, we preliminarily determine that the GOC's provision
of electricity does not confer a countervailable subsidy.
Water
Water: According to the GOC, water suppliers in the PRC are highly
localized. Many suppliers are SOEs, particularly in cities, but there
is also private ownership. Water prices generally are regulated by the
local governments. See, e.g., the Regulation on Administration of City
Water Supply (Decree 158 of the State Council, 1994), provided within
the GOC response at Exhibit 118 (September 17, 2007).
East Pipe's water supplier, Weifang Treated Water Company, Ltd., is
a majority privately owned company. Therefore, for East Pipe, we
preliminarily determine that water is not provided by an ``authority''
and, hence, that no countervailable subsidy is bestowed. See section
771(5)(b) of the Act. We will continue to examine whether East Pipe's
water supplier is a private entity during the course of this
investigation. Regarding Shuangjie, the GOC did not provide water rate
schedules.
For Kingland, the GOC has provided the Circular on Adjusting the
Water Resource Charge Rate ZHEJAIFEI {2004{time} No. 209 and Circular
of Huzhou City People's Government on Approving and Forwarding the
Provisional Regulation on the Collection of River Network Water Supply
Fee Issued by City Water Resource Bureau HUZHENGFA {2002{time} No. 39,
provided within the GOC supplemental response as exhibits S - 5 and S -
6 (October 23, 2007). These two schedules show that uniform rates are
charged, with no discounts for any industry groups.
Therefore, for the same reasons described above for electricity, we
preliminarily determine that record evidence demonstrates that the
provision of water in Zhejiang Province and Huzhou City (location of
Kingland Pipe) is neither de jure nor de facto specific. Consequently,
we preliminarily find that the government's provision of water does not
confer a countervailable subsidy on Kingland.
Because the GOC has failed to provide the requested rate
information for water purchased by Shuangjie, we are preliminarily
treating this program as countervailable for this company. See
Selection of Adverse Facts Available Rate section, above.
C. VAT Rebates (originally referred to as ``Export Incentive Payments
Characterized as ``VAT Rebates'')
According to the GOC, the ``exemption, deduction and refund'' of
VAT applies if a manufacturer exports its self-produced goods by itself
or via a trading company. See Article 1 of the Circular on Further
Promotion of Methodology of ``Exemption, Deduction, and Refund'' of Tax
for Exported Goods (CAISHUI (2002) No. 7) provided within the GOC
response at Exhibit 98. Under the ``VAT refund system,'' when a
producer/exporter purchases inputs (e.g,, raw materials, components,
fuel and power) it pays a VAT based on the purchase price of inputs.
The GOC reported the VAT rates paid by CWP producers/exports for inputs
are as follows: hot-rolled steel strips, zinc and electricity power at
a rate of 17 percent; fuel at 13 percent; and water at 6 percent. Once
the exporter/producer exports subject merchandise, a VAT payment and
tax exemption form is prepared and filed with the relevant state tax
authority. CWP exporters receive a VAT refund of 13 percent of the
export price.
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.'' 19 CFR 351.517(a); see also 19
CFR 351.102 (for a definition of ``indirect tax''). Information in the
company responses shows that East Pipe and Kingland paid the VAT on
their inputs, and applied for and received a VAT refund on their export
sales.
To determine whether a benefit was provided under this program, the
Department analyzed whether the amount of VAT exempted during the POI
exceeded the amount levied with respect to the production and
distribution of like products when sold for domestic consumption.
Because the VAT rate levied on CWP in the domestic market (17 percent)
exceeded the amount of VAT exempted upon the export of CWP (13
percent), the Department preliminarily determines that, for the
purposes of this investigation, the VAT refund received upon the export
of CWP does not confer a countervailable benefit.
III. Post-POI Programs
E. Government Restraints on Exports
Hot-rolled Steel and Zinc: Petitioners alleged that the GOC
restrains exports of hot-rolled steel and zinc by means of export
taxes, which artificially suppress the price a producer in the PRC can
charge for these inputs into CWP.
In its response, the GOC provided the Announcement on Adjustments
of Provisional Import or Export Duty for Certain Merchandises (PRC
Customs Announcement No. 22, 2007) See Exhibit 122 of the GOC
questionnaire response (September 17, 2007). This document shows that
on May 30, 2007, the GOC announced a provisional export duty rate for
hot-rolled steel of five percent and an increase in the provisional
export duty rate for zinc from five percent to ten percent. These
changes were implemented retroactively to begin on July 1, 2006.
The POI for this investigation is January 1, 2006 through December
31, 2006, and the export restraints allegedly giving rise to a subsidy
were announced on May 30, 2007, i.e., after the POI. Although the
export duties were implemented retroactively, there is no basis to
conclude that the export duties affected the prices paid by the
respondents for hot-rolled steel and zinc prior to May 30, 2007,
because those purchases had already been made. Therefore, any subsidy
conferred by the export duties on hot-rolled steel and zinc would
properly be addressed under our Program-wide Change regulation, 19 CFR
351.526(a). That regulation states that the Department may take a
program-wide change into account in establishing the estimated
countervailing duty cash deposit rate if:
[[Page 63885]]
(1) the Department determines that subsequent to the period of
investigation or review, but before a preliminary determination in an
investigation, a program-wide change has occurred; and (2) the
Department is able to measure the change in the amount of
countervailable subsidies provided under the program in question.
In this investigation, East Pipe and Kingland submitted their
monthly purchase prices for hot-rolled steel and zinc for periods prior
to and following the May 30, 2007, announcement. The data show
fluctuations in the prices of these inputs both before and after the
announcement of the export duties. Moreover, the data available for the
months after the announcement are limited. For these reasons, we cannot
measure the subsidy, if any, arising from the imposition of the export
duties, and we are not including these alleged subsidy programs in our
cash-deposit rates.
IV. Programs Determined To Be Terminated
A.Exemption from Payment of Staff and Worker Benefits for Export-
oriented Industries
The Department has determined that this program was terminated on
January 1, 2002, with no residual benefits. See CFS from the PRC and
accompanying Issues and Decision Memorandum at ``Programs Determined to
be Terminated.''
V. Programs Preliminarily Determined To Be Not Used By East Pipe and
Kingland
We preliminarily determine that East Pipe and Kingland did not
apply for or receive benefits during the POI under the programs listed
below.
A.Loans and Interest Subsidies Provided Pursuant to the Northeast
Revitalization Program
B. The ``Two Free, Three Half'' Program
C. Reduced Income Tax Rates for Foreign Invested Enterprises (FIEs)
Based on Location
D. Local Income Tax Exemption and Reduction Program for ``Productive''
FIEs
E. Income Tax Exemption Program for Export-oriented FIEs
F. Corporate Income Tax Refund Program for Reinvestment of FIE Profits
in Export-oriented Enterprises
G. Reduced Income Tax Rate for Technology and Knowledge Intensive FIEs
H. Reduced Income Tax Rate for High or New Technology FIEs
I. Preferential Tax Policies for Research and Development at FIEs
J. Income Tax Credits on Purchases of Domestically Produced Equipment
by Domestically Owned Companies
K. Income Tax Credits on Purchases of Domestically Produced Equipment
by FIEs
L. Program to Rebate Antidumping Legal Fees in Shenzen and Zhejiang
Provinces
M. Funds for ``Outward Expansion'' of Industries in Guangdong Province
N. Export Interest Subsidy Funds for Enterprises Located in Shenzhen
and Zhejiang Provinces
O. Loans Pursuant to Liaoning Province's Five-year Framework
P. VAT and Tariff Exemptions on Imported Equipment
Q. VAT Rebates on Domestically Produced Equipment
R. The State Key Technologies Renovation Project Fund
S. Grants to Loss-making State-owned Enterprises
T. Provision of Inputs for Less Than Adequate Remuneration: Natural Gas
U. Foreign Currency Retention Program
For purposes of this preliminary determination, we have relied on
the GOC's and respondent companies' responses to preliminarily
determine non-use of the programs listed above. During the course of
verification, the Department will further investigate whether these
programs were used by respondent companies during the POI.
VI. Programs for Which More Information is Required
A.Provision of Land for Less than Adequate Remuneration
Citing Article 29 of the Implementation Rules of the Law on
Administration of Land, land-use rights can be obtained from the
government in one of three ways: 1) purchase; 2) lease; and 3) as an
equity investment (see GOC response at Exhibit 121 (September 17,
2007)). The GOC further states that the price of land-use rights may be
determined by means of public bidding, auction, independent appraisal,
and negotiation.
East Pipe reported that it obtained its land-use rights through the
management buy-out of Maite Steel in 2001 and East Pipe has provided
appraisals which, it claims, demonstrate that adequate remuneration was
paid for the land. Kingland Group purchased its land use rights in 2000
and transferred a portion of these to Kingland Pipeline in 2002.
Kingland provided reference prices contemporaneous with its purchase of
land-use rights for similar industrial land.
The GOC has indicated, and the company responses appear to confirm,
that the administration of state-owned lands is highly decentralized
with the authority to sell, lease, or invest land-use rights left to
local authorities. At this time, we do not have sufficient information
from the local governments to determine whether their provision of
land-use rights to East Pipe and Kingland confers a countervailable
subsidy. In particular, we do not know how prices for land-use rights
are set or the methods for transferring land-use rights. We intend to
seek further information on these questions and to issue an interim
analysis describing our preliminary findings with respect to this
program before the final determination so that parties will have the
opportunity to comment on our findings before the final determination.
Other Subsidies (Kingland)
As explained in the Programs Preliminarily Determined to Be
Countervailable section, above, Kingland received grants from various
city, district, and provincial governments. We have preliminarily
determined certain of these grants to be countervailable. However, for
the other grants, we intend to seek further information regarding the
programs under which they were given.
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
calculated an individual rate for each exporter/manufacturer of the
subject merchandise. We preliminarily determine the total estimated net
countervailable subsidy rates to be:
------------------------------------------------------------------------
Net
Exporter/Manufacturer Subsidy
Rate
------------------------------------------------------------------------
Tianjin Shuangjie Steel Pipe Co., Ltd., Tianjin Shuangjie 264.98
Steel Pipe Group Co., Ltd., Tianjin Wa Song Imp. & Exp.
Co., Ltd., and Tianjin Shuanglian Galvanizing Products Co.,
Ltd........................................................
Weifang East Steel Pipe Co., Ltd............................ 0
[[Page 63886]]
Zhejiang Kingland Pipeline and Technologies Co., Ltd., 16.59
Kingland Group Co., Ltd, Beijing Kingland Centruy
Technologies Co., Zhejiang Kingland Pipeline Industry Co.,
Ltd., and Shanxi Kingland Pipeline Co., Ltd................
All Others.................................................. 16.59
------------------------------------------------------------------------
Sections 703(d) and 705(c)(5)(A) of the Act state that for
companies not investigated, we will determine an ``all others'' rate by
weighting the individual company subsidy rate of each of the companies
investigated by each company's exports of the subject merchandise to
the United States. However, the ``all others'' rate may not include
zero and de minimis rates or any rates based solely on the facts
available. In this investigation, because we have only one rate that
can be used to calculate the ``all others'' rate, Kingland's rate, we
have assigned that rate to ``all others.''
In accordance with sections 703(d)(1)(B) and (2) of the Act, we are
directing CBP to suspend liquidation of all entries of CWP 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), for Kingland, Shuangjie, and for ``all
other'' Chinese exports of CWP, 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. Neither the suspension of liquidation nor the requirement for
a cash deposit or bond will apply to merchandise produced and exported
by East Pipe because the Department has preliminarily determined that
East Pipe did not receive any countervailable subsidies.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and non-proprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Disclosure and Public Comment
In accordance with 19 CFR 351.224(b), we will disclose to the
parties the calculations for this preliminary determination within five
days of its announcement.
Case briefs for this investigation must be submitted no later than
one week after the issuance of the last verification report. See 19 CFR
351.309(c) (for a further discussion of case briefs). Rebuttal briefs
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.
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 tentatively 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, N.W., Washington, D.C. 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 Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, 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.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: November 5, 2007.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
[FR Doc. E7-22144 Filed 11-9-07; 8:45 am]
BILLING CODE 3510-DS-S