47 FR 44826
NOTICES
DEPARTMENT OF COMMERCE
Preliminary Negative Countervailing Duty Determination: Large Diameter Welded
Carbon Steel Pipes and Tubes From the Federal Republic of Germany
Tuesday, October 12, 1982
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AGENCY: International Trade Administration, Commerce.
ACTION: Preliminary negative countervailing duty determination.
SUMMARY: We preliminarily determine that benefits which constitute subsidies within the
meaning of the countervailing duty law are not being provided to manufacturers, producers,
or exporters in the Federal Republic of Germany (FRG) of large diameter welded carbon steel
pipes and tubes, as described in the "Scope of Investigation" section of this notice. If the
investigation proceeds
normally, we will make our final determination by December 17, 1982.
EFFECTIVE DATE: October 12, 1982.
FOR FURTHER INFORMATION CONTACT: Mary S. Clapp, Office of Investigations, Import
Administration, International Trade Administration, U.S. Department of Commerce, 14th
and Constitution Avenue, NW, Washington, D.C. 20230, telephone: (202) 377-2438.
SUPPLEMENTARY INFORMATION:
Preliminary determination
Based upon our investigation, we preliminarily determine that these is no reason to believe or
suspect that benefits which constitute subsidies within the meaning of section 701 of the Tariff Act
of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in
the FRG of large diameter welded carbon steel pipes and tubes, as described in the "Scope
of Investigation" section of this notice.
For purposes of this investigation, we preliminarily determine that while the following programs
are preliminarily determined to confer benefits to
Mannesmannroehren-Werke AG and Hoesch Rohr AG, the estimated net benefit to each
manufacturer is de minimis, and therefore, not countervailable.
ECSC loans.
ECSC rehabilitation assistance.
State investment grants.
Case History
On May 13, 1982, we received a petition from United States Steel Corporation filed on behalf of the
U.S. industry producing large diameter welded carbon steel pipes and tubes. The petition
alleged that certain benefits which constitute subsidies within the meaning of section 701 of the Act
are being provided, directly or indirectly, to the manufacturers, producers, or exporters in the
FRG of the steel product listed above.
We found the petition contained sufficient grounds upon which to initiate a countervailing
duty investigation, and on June 3, 1982 we initiated a countervailing duty investigation
(47 FR 24170). We stated that we expected to issue a preliminary determination by August 2,
1982. We subsequently determined that the investigation was "extraordinarily complicated," as
defined in section 703(c) of the Act, and postponed our preliminary determination for 65 days
until October 4, 1982 (47 FR 11738).
Since the FRG is a "country under the Agreement" within the meaning of section 701(b) of the Act,
an injury determination is required for this investigation. Therefore, we notified the U.S.
International Trade Commission (ITC) of our initiation. On June 21, 1982 the ITC determined that
there is a reasonable indication that these imports are materially injuring or threatening to
materially injure a U.S. industry.
We presented questionnaires concerning the allegations to the Delegation of the Commission of the
European Communities and to the government of the FRG in Washington, DC. On August 15, August
25, and September 2, 1982, we received the responses to the questionnaires. A supplemental
response was received on August 27, 1982.
Scope of Investigation
The product covered by this investigation is:
Large diameter welded carbon steel pipes and tubes
The product is fully described in Appendix 1 which appears with the notice of "Preliminary
Negative Countervailing Duty Determination: Large Diameter Welded Carbon Steel Pipes
and Tubes From France," in this issue of the Federal Register.
Mannesmannroehren-Werke AG (Mannesmann) and Hoesch Rohr AG (Hoesch), a
division of Hoesch Werke AG, are the only known producers and exporters in the FRG of the
subject product which is exported to the United States. The period for which we are measuring
subsidization is the calendar year 1981.
Analysis of Programs
Throughout this notice, general principles and conclusions of law applied by the Department of
Commerce to the facts of the current investigation concerning large diameter welded carbon steel
pipes and tubes are described in detail in Appendices 2 and 3, which appear with the notice
of "Preliminary Negative Countervailing Duty Determination: Large Diameter Welded
Carbon Steel Pipes and Tubes From France." Unless otherwise noted, we allocated each
company's countervailable benefits as follows:
Where benefits were provided to all steel production, they were allocated over the value of all steel
sales of the company receiving the benefit;
Where benefits were provided to pipes and tubes, they were allocated over the value of
those products.
Based upon our analysis of the petitions and responses to our questionnaires, we determine the
following.
I. Programs Preliminarily Determined To Confer Benefits
We preliminarily determine that benefits are being provided under the programs listed below to
manufacturers, producers, or exporters in the FRG of large diameter welded carbon steel pipes
and tubes included in this investigation.
A. ECSC Loans
For the reasons described in Appendix 3, we determine that ECSC loans from borrowings by the
ECSC on world capital markets confer benefits to the extent that they are made at preferential rates.
To calculate the benefit we used the loan methodology described in
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Appendix 2. The benchmark used is the corporate bond yield reported by the Organization for
Economic Co-operation and Development (OECD) based on the currency in which the loan was
denominated. The rate was the best available in the absence of any published, long-term rates for
commercial loans. We allocated the benefits over the value of each company's total steel sales.
Companies Receiving Benefits:
Hoesch
Under this program we calculated an ad valorem benefit rate of 0.025 percent for Hoesch.
Mannesmann
Under this program we calculated and ad valorem benefit rate of 0.020 percent for Mannesmann.
B. ECSC Rehabilitation Assistance
As described in Appendix 3, grants from the ECSC under this program are used to assist the
resettlement and retraining of steelworkers within and outside the steel industry as well as to
provide some unemployment and early retirement aids. Information furnished by Hoesch
indicates that it received funds for the retraining of workers within the steel industry. We will
obtain further information about Hoesch's receipt and use of ECSC grants. For the reasons
described in Appendix 3, we preliminary determine that the grants to Hoesch confer
countervailable benefits to the product under investigation where they relieve respondents of
expenses they would ordinarily incur in the normal course of business. We are countervailing
20.05 percent of the grants bestowed to Hoesch in 1981 because 20.05 percent of the ECSC budget
for 1981 was financed by government contributions.
We allocated the benefit for each company across the value of that company's total steel sales.
Because we considered that the grant was used for an item which is relatively small and is normally
expensed in the year received, we allocated the entire amount to the year of receipt (described in
Appendices 2 and 3).
Company Receiving Benefits:
Hoesch
Under this program we calculated an ad valorem benefit rate of 0.014 percent for Hoesch.
C. State Investment Grants
The state of North Rhine-Westphalia (NRW) provided funding to Hoesch to build a continuous coil
feeder. This machinery is used for the continuous production of pipes and tubes. We have
preliminarily determined that this program confers benefits on the product under investigation
because the allocation of state funds for the program appears to be industry specific.
Since the continuous coil feeder is used directly in pipe and tube production,
we allocated the subsidy across the value of the company's total pipe and tube sales. The
methodology for calculating the benefit value of grants is described in Appendix 2. The benefits are
allocated over a 15-year period, because the amount of the funding was well under $50 million.
Company Receiving Benefits:
Hoesch
Under this program we calculated an ad valorem benefit rate of 0.002 percent for Hoesch.
II. Programs Preliminarily Determined Not To Confer Subsidies
We preliminarily determine that the FRG government is not providing subsidies to manufacturers,
producers or exporters of large diameter welded carbon steel pipes and tubes under the
following programs.
A. Federal Programs
1. Federal Ministry of Research and Technology (BMFT). The BMFT funds projects for research and
development in the areas of energy and environmental
protection; information and production technologies; aerospace technology, medicine and
biology. In 1976 the Ministry established a Raw Materials and Technology Program under the
Directorate General for Energy and Environmental Protection. This program is administered by the
Kernforschungsanlage Juelich (KFA), a private organization, on the behalf of the BMFT.
The KFA examines applications for research and development projects under the Raw Materials
and Technology Program and reports to the BMFT on the technical value and costs of the proposed
projects. Companies, university institutes and research installations may apply for these funds. The
BMFT decides whether to grant funds for research based on the recommendation of the KFA.
The KFA, as the project manager, is in charge of disbursing funds, monitoring the projects'
technical progress and examining the interim and final research reports. An evaluation report on
the progress and results of all projects is prepared by the KFA for the BMFT. The iron and steel
industry has participated in a number of R & D projects funded by the BMFT.
In previous investigations ("Final Affirmative Countervailing Duty Determinations, Certain
Steel Products From the Federal Republic of Germany" (47 Fed. Reg. 39345)), we determined
that BMFT funds are not allocated by industrial sector, but by area of general research
applicability. In our previous investigations we found that the portion of BMFT funds going to the
iron and steel industry was insignificant in comparison with total BMFT disbursements.
Moreover, the equipment purchased is used exclusively in the Mannesmann Research Institute
and is not used in a production capacity. Therefore, we preliminarily find this not to confer a
countervailable benefit under the Act.
2. Investment Premium Act--Articles 4, 4a, and 4b. Benefits under articles 4, 4a, and 4b of the
Investment Premium Act are available to domestic producers throughout the FRG for research and
development projects, for investments in energy production and distribution and for the general
promotion of capital investments.
The eligibility requirements stated in FRG administrative regulations do not extend preferential
treatment to any specific industry or group of industries or a particular geographic region. Since
benefits under this program appear to be generally available on equal terms to all industries in the
FRG, we preliminarily determine that payments under this program are not countervailable.
3. Loans From Credit Institutions Controlled by the FRG. The Kreditanstalt fur Weideraufbau was
established as part of the National Recovery Program after World War II. This credit institution is
approximately 80 percent owned by the FRG and 20 percent owned by various political
subdivisions of the FRG. The bank offers long-term commercial development loans to industries at
interest rates
lower than those available on comparable commercial loans. This institution makes loans available
without regard to specific industries or regions. Therefore, we do not find benefits it may confer to
be subsidies on the product under investigation within the meaning of the Act.
4. European Recovery Program (ERP). This program began with the Marshall Plan for the postwar
rehabilitation of Western Europe. ERP funds are reserved exclusively for industrial rehabilitation
and promotion. The source of funds for this program is a system of principal and interest
repayments from Marshall Plan loans. A committee, which includes members of the government,
directs the allocation of ERP funds according to the
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guidelines of the ERP Special Fund. These guidelines, adopted annually, state eligibility criteria,
application procedures and use of ERP funds. The terms and conditions of ERP loans are published
in the Federal Journal. Hoesch has received benefits under this program.
The Department has verified information that ERP funds are disbursed to all branches of industry
and that no specific industry, group of industries or industries in a particular region are the main
beneficiaries of these funds. Therefore, we have preliminarily determined that this program does
not confer benefits which constitute subsidies within the meaning of the Act.
5. Labor Assistance. Article 54 of the Labor Promotion Act of 1969 provides FRG steel companies
with labor assistance as part of a national manpower
policy. This Article provides employers with loans for costs incurred for training hard-to-place
employees.
Benefits received pursuant to this program are available on equal terms to all industries in the FRG
regardless of location or sector. Therefore, we have preliminarily determined these benefits not to
constitute subsidies within the meaning of the Act.
6. Federal Environment Agency, Umweltbundesamt (UBA). The UBA manages federal government
funds which can be provided as reimbursement for up to 50 percent of a company's investment in
air pollution equipment. The investment must be for a demonstration project and the technology
must be transferable to comparable existing facilities.
We have preliminarily determined that UBA pollution control funds do not confer countervailable
benefits since these funds are generally available on equal terms, and we have no evidence that the
steel industry in the FRG is a major beneficiary of this program.
B. State Programs.
1. North Rhine-Westphalia--Research and Development. We have knowledge of an "Action Program
for the Ruhr District" sponsored by the state government of NRW. This program is funded entirely
by the NRW government. The "Technology
Program Steel," a sub-program of the Action Program, provides R & D funds to projects with
innovative features. All projects and the funding levels are publicly announced. Any reports
generated by the project and any patents that result from technological innovations must also be
publicly announced and made publicly available.
Our present understanding of NRW's R & D program leads us to find that the funds disbursed do not
constitute a subsidy within the meaning of the Act since all project results are made publicly
available.
2. North Rhine-Westphalia--Pollution control grants. The state of NRW provides partial funding for
installing pollution control equipment through direct grants to firms whose plants need to meet
new environmental standards.
While the program is open to firms in any industry with pollution problems, applicants must
demonstrate the financial ability to undertake these projects.
We have preliminarily determined that this program does not confer benefits which constitute
subsidies on the product under investigation because the allocation of state funds for the programs
is generally available on equal terms to industries located in the state of NRW.
C. ECSC Research and Development Programs
Article 55 of the Treaty of Paris provides funding in the form of grants
for up to 60 percent of an R & D project's cost. The projects must be for improvements in the
production and use of coal and steel.
The Department has evidence that the results of the R & D projects are made publicly available.
Additionally, the research results of projects for which companies receive ECSC R & D loans made
under Article 55 of the Treaty of Paris are also made publicly available. Since the results of
research conducted under these programs are publicly available, we preliminarily determine that
the benefits do not constitute subsidies within the meaning of the Act.
D. Federal Coal Production Assistance
The FRG provides production assistance to producers of coking coal used by the iron and steel
industry. In recent prior investigations, we found that benefits bestowed upon the manufacturer of
an input do not usually flow down to the purchaser of that input if the sale is transacted at arm's
length (see e.g., "Final Affirmative Countervailing Duty Determinations: Certain Steel
Products from Belgium" (47 FR 26309)). In an arm's length transaction, the seller generally
attempts to maximize its total revenue by charging as high a price and selling as large a volume as
the market will bear.
The issue of sales of FRG coal within the FRG is more complicated for two reasons: (1) The FRG
government restricts the importation of coal into the
FRG; and (2) some FRG steel producers are related to Ruhrkohle, the major subsidized coal
producer. With respect to the coal import restrictions, the issue is whether the comparison of
prices for FRG coal and prices for non-FRG coal remains valid if FRG manufacturers cannot
ordinarily buy non-FRG coal. But for the import restrictions, FRG purchasers of subsidized FRG
coal would not be considered subsidized themselves unless the price of FRG coal undercuts the
market price of coal.
In recent previous investigations ("Final Affirmative Countervailing Duty Determinations,
Certain Steel Products From the Federal Republic of Germany" (47 FR 39345)), we were
advised formally by the government of the FRG that the restrictions on the importation of coal into
the FRG are inseparably linked with the benefits paid to the FRG coal industry; and that the present
restrictions on importation of coal would not exist in the absence of such benefits to the coal
industry so long as the cost of producing coal in the FRG remains significantly above world market
price levels. As the FRG government has clearly stated, "It is not possible to discontinue the
payment of assistance (to the coal industry) and maintain the ban on imports at the same time." To
do so "would burden the FRG steel industry with the competitive disadvantages raised by difficult
conditions in the FRG coal deposits as well as with the costs of FRG coal."
The coal subsidies and coal import restrictions are thus part and parcel of a
comprehensive program designed to assist the FRG coal industry, from which FRG steel producers
receive no benefits. In fact, the FRG steel producers are thereby prevented from buying coal at
world prices, and required to pay a slight premium. Production assistance to the FRG coal industry
benefits that industry alone and doe not operate to benefit the manufacture or production of steel.
Since we conclude no benefit exists, under any reasonably foreseeable conditions, restrictions on
the purchase of coal by FRG steel producers cannot properly be viewed as an offset impermissibly
used in calculating net subsidies to FRG steel producers. The offset issue simply does not arise
since, on the basis of verified information currently available to us, there is no "gross subsidy"
(from which an "offset" would occur) to the FRG steel producers resulting from FRG subsidization of
coal.
As previously noted, the other complication of the issue of sales of FRG coal within the FRG is the
fact that some FRG steel producers are related to
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Ruhrkohle, the subsidized FRG coal producer. Based on the verified facts of previous investigations
("Final Affirmative Countervailing Duty Determinations: Certain Steel Products from the
Federal Republic of Germany" (47 FR. 39345)), we conclude that even FRG coal consumers
related to Ruhrkohle do not benefit from FRG subsidization of coal. In the first place there appears
to be no price discrimination within the FRG between sales to
purchasers related to Ruhrkohle and unrelated purchasers. Therefore, the fact of relationship does
not detract from the arm's length nature of the transfer price. Second, even though the
establishment in 1969 of Ruhrkohle, a government-supported entity, may have relieved the steel
companies of certain costs and financial liabilities they would have incurred in closing the mines
taken over by Ruhrkohle, the effect of these benefits was dissipated prior to the period for which we
are measuring subsidies. Finally, we note that the FRG steel producers have consistently opposed
the requirement to continue to operate the FRG coal mines and to by FRG coal. We conclude that if
the related FRG steel producers were benefiting from the FRG government's comprehensive plan to
subsidize coal and restrict imports, they would not be so opposed.
Clearly then, the structure of the German coal subsidy system is such as to restrict any benefits to
the coal industry itself and provide no advantages to purchasers of FRG coal, wherever located. If
any broader benefits flow from the subsidies in FRG coal, such benefits apply equally to all
consumers in the world, including the U.S. steel industry. Such subsidies may operate to increase
worldwide supply relative to worldwide demand and thereby lower the world market price of coal
on a uniform basis for all coal purchasers. This universal benefit cannot be viewed as a subsidy to
one coal purchaser vis-a-vis another such purchaser.
For the above reasons, we have preliminarily determined that FRG steel
producers unrelated to Ruhrkohle do not benefit from production assistance paid to producers of
coking coal used by the iron and steel industry; and that FRG steel producers related to Ruhrkohle
do not benefit from coking coal production assistance.
III. Programs Preliminarily Determined Not To Be Used
We preliminarily determine that the following programs which are listed in the notice of "Initiation
of Countervailing Duty Investigation" are not used by the manufacturers, producers, or
exporters of the product subject to this investigation.
A. Investment Premium Act--Articles 1, 2, and 3
Domestic investors building new, or expanding existing, operations in certain regions of the FRG
receive cash reimbursements from the FRG tax authority based on a percentage of capital
investment costs. These reimbursements are available to industries situated in the "zonal border
areas" adjacent to the German Democratic Republic, as well as other areas which are economically
depressed. Under the Investment Premium Act investors have a legal claim to reimbursements
once the eligibility requirements are satisfied.
In principle, all industries meeting the requirements receive the reimbursements and no industrial
sector in the regions covered by the Investment Premium Act Benefits more than any other.
Articles 1, 2, and 3 of the Investment Premium Act limit assistance to regions with depressed
economic structures. Neither of the firms being investigated is eligible for funds under these
provisions because they are not located in regions which are subject to these provisions.
B. Joint Scheme: Improvement of Regional Economic Structure
This Joint Scheme combines equal portions of federal and state funds that are provided by the
budgets of those two levels of government. The funds are used to reimburse companies for capital
investment costs up to certain ceilings, usually between 10 and 25 percent of investment costs.
Neither of the companies being investigated has received benefits under this program.
C. Federal Sales Assistance
In addition to the FRG coking coal production assistance described above in the Federal Coal
Production Assistance section, some FRG steel producers receive rebates of a portion of the cost of
transporting coal to their
facilities. The information provided by respondents indicates that they did not receive funds under
this program.
D. ECSC Interest Rebates
The petitioners alleged that certain Article 54 industrial investment loans and certain Article 56
industrial reconversion loans qualify for further interest reductions. However, neither of the firms
being investigated has recevied benefits under either of these programs.
Programs for Which Additional Information Is Needed
At this time we do not have enough information to make a determination regarding possible
subsidization through the programs listed below:
Investment grants for capital investment in the iron and steel industry.
MInistry of Defense--research and technology projects.
Capital Levy Bank--"Last enausgleichsbank".
State Credit Bank.
Credit offices of the states.
State coal assistance.
ECSC coal and coke aids.
Verification
In accordance with section 776(a) of the Act, we will verify all data used in making our final
determination.
Summary of Preliminary Benefits
We have preliminarily determined that benefits which do not constitute subsidies within the
meaning of the countervailing duty law are being provided to the manufacturers, producers,
or exporters in the FRG of large diamete welded carbon steel pipes and tubes in the
following amounts:
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Manufacturer/Producer/Exporter Advalorem rate (percent)
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Mannesmannroehen-Werke AG ............................................... 0.020
Hoesch Rohr AG, a division of Hoesch Werke AG ........................... 0.041
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These net benefit rates are de minimis and therefore the preliminary
determination is negative.
ITC Notification
In accordance with section 703(e) of the Act, we will notify the ITC of our determination.
Public Comment
In accordance with § 355.35 of the Commerce Department Regulations, if requested, we will hold a
public hearing to afford interested parties an opportunity to comment on this preliminary
determination at 2:00 p.m. on November 1, 1982 at the U.S. Department of Commerce, Room
3104, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Individuals who wish to
participate in the hearing must submit a request to the Deputy Assistant Secretary for Import
Administration, Room 3099B, at the above address within ten days of this notice's publication.
Requests should contain: (1) The party's name, address
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and telephone number; (2) the number of participants; (3) the reason for attending; and (4) a list of
the issues to be discussed. In addition, prehearing briefs must be submitted to the Deputy Assistant
Secretary by October 25, 1982. Oral presentations will be limited to issues raised in the briefs.
All written views should be filed in accordance with 19 CFR 355.34, within thirty days of this
notice's publication, at the above address and in at least ten copies.
October 4, 1982.
Gary N. Horlick,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 82-27944 Filed 10-8-82; 8:45 am]
BILLING CODE 3510-25-M