[Federal Register: April 20, 2001 (Volume 66, Number 77)]
[Notices]
[Page 20236-20240]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-560-813]
Notice of Preliminary Affirmative Countervailing Duty
Determination and Alignment of Final Countervailing Duty Determination
With Final Antidumping Duty Determination: Certain Hot-Rolled Carbon
Steel Flat Products From Indonesia
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary affirmative countervailing duty
determination.
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EFFECTIVE DATE: April 20, 2001.
FOR FURTHER INFORMATION CONTACT: Stephanie Moore at (202) 482-3692 or
Tipten Troidl at (202) 482-1767, Office of AD/CVD Enforcement VI, Group
II, Import Administration, U.S. Department of Commerce, Room 4012, 14th
Street and Constitution Avenue, NW., Washington, DC 20230.
Preliminary Determination
The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are being provided to certain
producers and
[[Page 20237]]
exporters of certain hot-rolled carbon steel flat products (subject
merchandise) from Indonesia. For information on the estimated
countervailing duty rates, please see the ``Suspension of Liquidation''
section of this notice.
SUPPLEMENTARY INFORMATION:
Petitioners
The petition in this investigation was filed by Bethlehem Steel
Corporation, U.S. Steel Group, a unit of USX Corporation, Gallatin
Steel Company, IPSCO Steel Inc., LTV Steel Company, Inc., National
Steel Corporation, Nucor Corporation, Steel Dynamics, Inc., Weirton
Steel Corporation, the Independent Steelworkers Union, and the United
Steelworkers of America (the petitioners).
Case History
Since the publication of the notice of initiation in the Federal
Register (see Notice of Initiation of Countervailing Duty
Investigations: Certain Hot-Rolled Carbon Steel Flat Products From
Argentina, India, Indonesia, South Africa, and Thailand, 65 FR 77580
(December 12, 2000) (Initiation Notice)), the following events have
occurred. On December 5, 2000, we issued countervailing duty
questionnaires to the Government of Indonesia (GOI) and to producers/
exporters of the subject merchandise. We received responses to our
initial questionnaires from the GOI and PT. Krakatau Steel (Krakatau),
the producer/exporter of the subject merchandise on January 31, 2001.
We then issued supplemental questionnaires to the GOI and Krakatau.
Beginning on March 7, 2001, we received supplemental questionnaire
responses from the GOI and Krakatau.
On January 18, 2001, we issued a partial extension of the due date
for this preliminary determination from February 7, 2001 to March 26,
2001. See Certain Hot-Rolled Carbon Steel Flat Products From India,
Indonesia, South Africa, and Thailand: Extension of Time Limit for
Preliminary Determinations in Countervailing Duty Investigations,
(Extension Notice) 66 FR 8199 (January 30, 2001).
On March 26, 2001, we amended the Extension Notice to take the full
amount of time to issue this preliminary determination. The extended
due date is April 13, 2001. See Certain Hot-Rolled Carbon Steel Flat
Products From India, Indonesia, South Africa, and Thailand: Extension
of Time Limit for Preliminary Determinations in Countervailing Duty
Investigations, 66 FR 17525 (April 2, 2001).
On April 10, 2001, we received comments from petitioners based on
their partial translation of the respondent's untranslated financial
statements. Petitioner's comments concerned the equityworthiness and
creditworthiness of Cold Rolling Mill of Indonesia (CRMI), and the
equityworthiness of Krakatau.
Scope of the Investigation
The merchandise subject to this investigation is certain hot-rolled
flat-rolled carbon-quality steel products of a rectangular shape, of a
width of 0.5 inch or greater, neither clad, plated, nor coated with
metal and whether or not painted, varnished, or coated with plastics or
other non-metallic substances, in coils (whether or not in successively
superimposed layers), regardless of thickness, and in straight lengths,
of a thickness of less than 4.75 mm and of a width measuring at least
10 times the thickness. Universal mill plate (i.e., flat-rolled
products rolled on four faces or in a closed box pass, of a width
exceeding 150 mm, but not exceeding 1250 mm, and of a thickness of not
less than 4 mm, not in coils and without patterns in relief) of a
thickness not less than 4.0 mm is not included within the scope of this
investigation.
Specifically included within the scope of this investigation are
vacuum degassed, fully stabilized (commonly referred to as
interstitial-free (IF)) steels, high strength low alloy (HSLA) steels,
and the substrate for motor lamination steels. IF steels are recognized
as low carbon steels with micro-alloying levels of elements such as
titanium or niobium (also commonly referred to as columbium), or both,
added to stabilize carbon and nitrogen elements. HSLA steels are
recognized as steels with micro-alloying levels of elements such as
chromium, copper, niobium, vanadium, and molybdenum. The substrate for
motor lamination steels contains micro-alloying levels of elements such
as silicon and aluminum.
Steel products to be included in the scope of this investigation,
regardless of definitions in the Harmonized Tariff Schedule of the
United States (HTS), are products in which: (i) Iron predominates, by
weight, over each of the other contained elements; (ii) the carbon
content is 2 percent or less, by weight; and (iii) none of the elements
listed below exceeds the quantity, by weight, respectively indicated:
1.80 percent of manganese, or 2.25 percent of silicon, or 1.00 percent
of copper, or 0.50 percent of aluminum, or 1.25 percent of chromium, or
0.30 percent of cobalt, or 0.40 percent of lead, or 1.25 percent of
nickel, or 0.30 percent of tungsten, or 0.10 percent of molybdenum, or
0.10 percent of niobium, or 0.15 percent of vanadium, or 0.15 percent
of zirconium.
All products that meet the physical and chemical description
provided above are within the scope of this investigation unless
otherwise excluded. The following products, by way of example, are
outside or specifically excluded from the scope of this investigation:
Alloy hot-rolled steel products in which at least one of
the chemical elements exceeds those listed above (including, e.g., ASTM
specifications A543, A387, A514, A517, A506).
SAE/AISI grades of series 2300 and higher.
Ball bearings steels, as defined in the HTS.
Tool steels, as defined in the HTS.
Silico-manganese (as defined in the HTS) or silicon
electrical steel with a silicon level exceeding 2.25 percent.
ASTM specifications A710 and A736.
USS Abrasion-resistant steels (USS AR 400, USS AR 500).
All products (proprietary or otherwise) based on an alloy
ASTM specification (sample specifications: ASTM A506, A507).
Non-rectangular shapes, not in coils, which are the result
of having been processed by cutting or stamping and which have assumed
the character of articles or products classified outside chapter 72 of
the HTS.
The merchandise subject to this investigation is classified in the
HTS at subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00,
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60,
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60,
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30,
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90,
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00,
7208.90.00.00, 7211.14.00.90, 7211.19.15.00, 7211.19.20.00,
7211.19.30.00, 7211.19.45.00, 7211.19.60.00, 7211.19.75.30,
7211.19.75.60, and 7211.19.75.90. Certain hot-rolled flat-rolled
carbon-quality steel covered by this investigation, including: vacuum
degassed fully stabilized; high strength low alloy; and the substrate
for motor lamination steel may also enter under the following tariff
numbers: 7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00,
7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30,
7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00,
[[Page 20238]]
7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. Subject merchandise
may also enter under 7210.70.30.00, 7210.90.90.00, 7211.14.00.30,
7212.40.10.00, 7212.40.50.00, and 7212.50.00.00. Although the HTS
subheadings are provided for convenience and U.S. Customs purposes, the
Department's written description of the merchandise under investigation
is dispositive.
In the scope section of the Initiation Notice for this
investigation, the Department encouraged all parties to submit comments
regarding product coverage by December 26, 2000. The Department is
presently considering a request to amend the scope of this
investigation to exclude a particular specialty steel product. We will
issue our determination on this request prior to the final
determination.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are references
to the provisions codified at 19 CFR Part 351 (2000).
Injury Test
Because Indonesia is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (ITC) is required to determine whether imports of the
subject merchandise from Indonesia materially injure, or threaten
material injury to, a U.S. industry. On January 4, 2001, the ITC
published its preliminary determination finding that there is a
reasonable indication that an industry in the United States is being
materially injured, or threatened with material injury, by reason of
imports from Indonesia of the subject merchandise. See Hot-Rolled Steel
Products from Argentina, China, India, Indonesia, Kazakhstan,
Netherlands, Romania, South Africa, Taiwan, Thailand, and Ukraine, 66
FR 805 (January 4, 2001).
Alignment With Final Antidumping Duty Determination
On March 23, 2001, the petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion antidumping duty investigation.
Therefore, in accordance with section 705(a)(1) of the Act, we are
aligning the final determination in this investigation with the final
determinations in the antidumping duty investigations of hot-rolled
carbon steel flat products.
Period of Investigation
The period for which we are measuring subsidies (the POI) is
calendar year 1999.
Allocation Period
Under section 351.524(d)(2) of the CVD Regulations, we will presume
the allocation period for non-recurring subsidies to be the average
useful life (AUL) of renewable physical assets for the industry
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class
Life Asset Depreciation Range System, as updated by the Department of
Treasury. The presumption will apply unless a party claims and
establishes that these tables do not reasonably reflect the AUL of the
renewable physical assets for the company or industry under
investigation, and the party can establish that the difference between
the company-specific or country-wide AUL for the industry under
investigation is significant.
In this investigation, no party to the proceeding has claimed that
the AUL listed in the IRS tables does not reasonably reflect the AUL of
the renewable physical assets for the firm or industry under
investigation. Therefore, in accordance with section 351.524(d)(2) of
the CVD Regulations, we will allocate non-recurring subsidies over 15
years, the AUL listed in the IRS tables for the steel industry.
Creditworthiness
Petitioners alleged that Krakatau was uncreditworthy in the years
in which it received GOI loans and equity infusions. See Initiation
Notice and Office of AD/CVD Enforcement VI, Initiation Checklist
(Checklist), public versions are available in the Central Records Unit,
Room B-099. In order to make a determination with respect to Krakatau's
creditworthiness, we have determined that more information is needed.
We have requested additional information from Krakatau and provided a
deadline of April 27, 2001. Krakatau is in the process of providing
translations of its financial statements for the years 1985 through
1995. We anticipate that this information will be submitted to the
Department prior to verification. After we collect additional
information and conduct verification, we will prepare an analysis
memorandum addressing the company's creditworthiness during this
period. Before our final determination, we will provide all parties
with an opportunity to comment on this memorandum. Comments on our
creditworthy analysis, as well as our preliminary determination will be
addressed in the final determination.
I. Programs Preliminarily Determined To Be Countervailable
A. Two-Step Loan Program
Pursuant to Government Regulation number 12/1969, the Ministry of
Finance through Bank Indonesia, which is Indonesia's Central Bank, can
borrow money denominated in foreign currencies to lend to Indonesian
companies. As stated in the Final Affirmative Countervailing Duty
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from
Indonesia, 64 FR 73155, 73161 (December 29, 1999) (CTL Plate), two-step
loans are drawn from credit facilities (i.e., lines of credit) in the
billing currencies of foreign equipment suppliers. These loans are
converted into rupiah based on the exchange rate on the drawing date,
and carry an established interest rate of four percent. In CTL Plate,
we determined this program to be countervailable. Id. No new
substantive information or evidence of changed circumstances has been
submitted in this investigation to warrant reconsideration of this
finding.
In 1995, the year in which the credit facility was extended, a
lending rate of four percent would have been inconsistent with an
interest rate the company would have received on a comparable
commercial loan, and would thus provide a countervailable benefit in
accordance with section 771(5)(E)(ii) of the Act. Moreover, there is no
information on the record of this investigation which would indicate
that the two-step loan was provided to Krakatau pursuant to a program
to which other companies ostensibly had access. Therefore, we
preliminarily determine that the loan was specific to Krakatau under
section 771(5A)(D)(i) of the Act.
To calculate the benefit from this program, we compared the
interest rate Krakatau paid on the two-step loan during the POI to the
benchmark interest rate the company would have paid for a comparable
commercial loan. For the benchmark interest rate, we used the average
cost of long-term fixed-rate loans in Indonesia as the interest rates
that would have been paid by a creditworthy company, specifically the
rates offered by commercial banks in Indonesia as reported in the
Indonesian Financial Statistics, submitted in the March 20, 2001, GOI
questionnaire
[[Page 20239]]
response. This difference was then divided by Krakatau's total sales
during the POI. On this basis, we preliminarily determine the
countervailable subsidy from this program to be 1.01 percent ad valorem
for Krakatau.
B. Equity Infusions to Krakatau From the Government of Indonesia
Petitioners alleged that the GOI provided various equity infusions
into Krakatau and its subsidiary, the CRMI. Petitioners alleged that in
1995, the GOI converted approximately 1.298 trillion rupiah of debt
into equity. In addition, petitioners alleged that the GOI provided
Krakatau with equity infusions totaling 1.6 trillion rupiah in the five
years prior to December 31, 1992. Petitioners also alleged two equity
infusions into CRMI. We initiated on these two allegations under the
following programs: ``1989 Equity Infusion to CRMI'' and ``Three-Step
Equity Infusion to CRMI.'' See the Initiation Notice and Checklist.
According to the response of the GOI and Krakatau, equity infusions
or debt-to-equity conversions were provided to Krakatau in various
years. In addition, all of the alleged equity infusions were provided
to Krakatau. The details of the equity infusions and conversions are
proprietary, and are discussed in the Business Proprietary Calculations
Memorandum.
Section 771(5)(E)(i) of the Act and section 351.507(a)(1) of the
CVD Regulations state that, in the case of government-provided equity
infusion, a benefit is conferred if an equity investment decision is
inconsistent with the usual investment practice of private investors.
Consistent with the methodology discussed in section 351.507(a)(2)
of the CVD Regulations, the first question in analyzing a benefit with
respect to an equity infusion is whether, at the time of the infusion,
there was a market price for similar newly-issued equity. If so, the
Department will consider an equity infusion to be inconsistent with the
usual investment practice of private investors if the price paid by the
government for newly-issued shares is greater than the price paid by
private investors for the same, or similar, newly-issued shares.
If actual private investor prices are not available, then the
Department will determine whether the firm funded by the government-
provided infusion was equityworthy or unequityworthy at the time of the
equity infusion. (See section 351.507(a)(3)(i) of the CVD Regulations.)
Section 351.507(a)(4)(ii) of the CVD Regulations further stipulates
that the Department will ``normally require from the respondents the
information and analysis completed prior to the infusion upon which the
government based its decision to provide the equity infusion.'' Absent
the existence or provision of an analysis or study, containing
information typically examined by potential private investors
considering an equity investment, on which the government based its
decision to invest, the Department will normally determine that the
equity infusion provides a countervailable benefit. This is because,
before making a significant equity infusion, it is the usual investment
practice of private investors to evaluate the potential risk versus the
expected return, using the most objective criteria and information
available to the investor.
In this instance, Krakatau reported that there was no market price
for a similarly newly-issued equity at the time of the GOI equity
infusions and debt-to-equity conversions into Krakatau. Therefore, we
must determine whether Krakatau was equityworthy or unequityworthy at
the time of the equity infusions and conversions.
The first criterion examined by the Department to determine
whether, from the perspective of a reasonable private investor,
Krakatau showed an ability to generate a reasonable rate of return
within a reasonable period of time, is an objective analysis of
Krakatau prepared prior to the government-provided equity infusions and
conversions which the government based its decisions to invest. Based
on our examination of the responses of the GOI and Krakatau, we have
preliminarily determined that no objective studies of Krakatau had been
prepared prior to the GOI's investment decisions on which the GOI could
have based its investment decisions for the equity infusions and debt-
to-equity conversions.
Therefore, we preliminarily determine that the GOI's equity
infusions and conversions into Krakatau constitute countervailable
subsidies within the meaning of section 771(5) of the Act. These
investments provide a financial contribution, as described in section
771(5)(D)(i) of the Act. Also, we preliminarily determine that this
program is specific under section 771(5A)(D)(i) of the Act because the
equity infusions/conversions were limited to Krakatau. Finally, because
no objective analysis was performed containing information typically
examined by potential private investors considering an equity
investment prior to the GOI's decisions to invest in Krakatau, the
investment decisions were inconsistent with the usual investment
practice of private investors. Therefore, a benefit exists according to
section 771(5)(E)(i) of the Act in the amount of the equity infusions
and the amount of the debt-to-equity conversions.
To calculate the benefit applicable to the POI, we applied the
Department's standard grant methodology. We divided the total benefits
attributable to the equity infusions and conversions by Krakatau's
total sales during the POI. On this basis, we preliminarily determine
the countervailable subsidy from this program to be 15.52 percent ad
valorem for Krakatau.
II. Program Preliminarily Determined Not Used
A. Bank of Indonesia Rediscount Loans
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with 703(d)(1)(A)(i) of the Act, we have calculated
an individual rate for Krakatau, the only company under investigation.
We preliminarily determine that the total estimated net countervailable
subsidy rate is 16.53 percent ad valorem. The All Others rate is 16.53
percent ad valorem, which is the rate calculated for Krakatau.
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of the
subject merchandise from Indonesia, which 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 the merchandise in the amount indicated above.
This suspension will remain in effect until further notice.
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 nonproprietary 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
[[Page 20240]]
determination within 45 days after the Department makes its final
determination.
Public Comment
In accordance with 19 CFR 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing is tentatively scheduled to
be held 57 days from the date of publication of the preliminary
determination, at the U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to
request a hearing must submit a written request within 30 days of the
publication of this notice in the Federal Register to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230.
Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; and, (3)
to the extent practicable, an identification of the arguments to be
raised at the hearing. In addition, six copies of the business
proprietary version and six copies of the non-proprietary version of
the case briefs must be submitted to the Assistant Secretary no later
than 50 days from the date of publication of the preliminary
determination. As part of the case brief, parties are encouraged to
provide a summary of the arguments not to exceed five pages and a table
of statutes, regulations, and cases cited. Six copies of the business
proprietary version and six copies of the non-proprietary version of
the rebuttal briefs must be submitted to the Assistant Secretary no
later than 5 days from the date of filing of the case briefs. An
interested party may make an affirmative presentation only on arguments
included in that party's case or rebuttal briefs. Written arguments
should be submitted in accordance with 19 CFR 351.309 and will be
considered if received within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act. Effective January 20, 2001, Bernard T. Carreau is
fulfilling the duties of the Assistant Secretary for Import
Administration.
Dated: April 13, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 01-9859 Filed 4-19-01; 8:45 am]
BILLING CODE 3510-05-P