54 FR 25145
NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-508-601]
Oil Country Tubular Goods From Israel; Preliminary Results Of Countervailing
Duty Administrative Review
Tuesday, June 13, 1989
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AGENCY: International Trade Administration/Import Administration, Commerce.
ACTION: Notice of preliminary results of countervailing duty administrative review.
SUMMARY: The Department of Commerce has conducted an administrative review of the
countervailing duty order on oil country tubular goods from Israel. We preliminarily
determine that net subsidy to be 4.30 percent ad valorem for the period June 11, 1986 through
December 31, 1986 and 4.30 percent ad valorem for the period January 1, 1987 through December
31, 1987. We invite interested parties to comment on these preliminary results.
EFFECTIVE DATE: June 13, 1989.
FOR FURTHER INFORMATION CONTACT:Lorenza Olivas or Ilene Hersher, Office of Countervailing
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On March 6, 1987, the Department of Commerce ("the Department") published in the Federal
Register (52 FR 6999) a countervailing duty order on oil country tubular goods from
Israel. On March 31, 1988, Middle East Tube Co., Ltd.
("METCO"), the respondent, requested an administrative review of the order. We published the
initiation on April 27, 1988 (53 FR 15083). The Department has now conducted that administrative
review in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Scope of Review
The United States, under the auspices of the Customs Cooperation Council, has developed a system
of tariff classification based on the international harmonized system of customs nomenclature. On
January 1, 1989, the United States fully converted to the Harmonized Tariff Scheudle (HTS), as
provided for in section 1201 et seq. of the Omnibus Trade and Competitiveness Act of 1988. All
merchandise entered, or withdrawn
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from warehouse, for consumption on or after that date is now classified solely according to the
appropriate HTS item number(s)
Imports covered by this review are shipments of Israeli "oil country tubular goods (OCTG)," in both
finished and unfinished condition. OCTG consists of hollow steel products of circular cross-section
intended for use in drilling for oil or gas. These products include oil well casing and tubing, of
carbon or alloy steel, whether welded or seamless, manufactured to either American Petroleum
Institute ("API") or non-API (such as proprietary) specifications.
During the review period, such merchandise was classifiable under the following items of the Tarriff
Schedules of the United States Annotated:
610.3216
610.3219
610.3233
610.3234
610.3242
610.3243
610.3249
610.3252
610.3254
610.3256
610.3258
610.3262
610.3264
610.3721
610.3722
610.3751
610.3925
610.3935
610.4025
610.4035
610.4210
610.4220
610.4225
610.4230
610.4235
610.4240
610.4310
610.4320
610.4325
610.4335
610.4942
610.4944
610.4954
610.4955
610.4956
610.4957
610.4966
610.4967
610.4968
610.4969
610.4970
610.5221
610.5222
610.5234
610.5240
610.5242
610.5243
610.5244
This merchandise is currently classifiable under the following HTS items:
7304.20.10.00
7304.20.20.00
7304.20.30.00
7304.20.40.00
7304.20.50.10
7304.20.50.50
7304.20.60.10
7304.20.60.50
7304.20.20.00
7304.20.40.00
7304.20.60.00
7304.20.80.00
7304.20.10.30
7304.20.10.90
7304.20.20.00
7304.20.30.00
7304.20.40.10
7304.20.60.10
7304.20.60.50
7304.20.80.10
7304.20.80.50
The HTS item numbers are provided for convenience and Customs purposes. The written
description remains dispositive of the scope.
The review covers the period June 11, 1986 through December 31, 1987 and nineteen programs.
METCO was the only known exporter of OCTG to the United States during the period of review.
Analysis of Programs
(1) Investment Grants under the Encouragement of Capital Investment Law ("ECIL")
The purpose of the ECIL is to attract capita to Israel. In order to be
eligible for various benefits under the ECIL, including investment grants and long-term industrial
development loans, the applicant must obtain approved enterprise status. Approved enterprise
status is obtained after review of information submitted to the Israel Ministry of Industry and
Trade, Investment Center Division. The amount of the benefits received by approved enterprises
depends on the geographic location of the eligible enterprise.
In order to receive a grant under the ECIL, an applicant must obtain an economic viability
evaluation of the proposed investment from the Industrial Development Bank of Israel. METCO
received approvals for grants in 1971, 1974, 1975 and 1976. According to the approval
documents, these grants were contingent upon increased exports. Therefore, we preliminarily
determine that the grants given to METCO are export subsidies.
Using the declining balance methodology, we allocated each grant received over 15 years, the
average useful life of assets in the steel industry, according to the "Asset Guideline Classes" of the
Internal Revenue Service. Because there is no fixed-rate long-term borrowing in Israel, we
used as a discount rate a variable rate. The discount rate is the national average short-term
borrowing rate for new Israeli shekels, adjusted for inflation, during the period of review as
published in the Bank of Israel annual report. We allocated the benefit from these grants over
METCO's total exports. On this basis, we preliminarily determine the benefit from this program to
be 0.003 percent ad
valorem for the period June 11, 1986 through December 31, 1986 and 0.001 percent ad valorem
for the period January 1, 1987 through December 31, 1987.
(2) Insurance from Israel Foreign Trade Risk Insurance Corporation ("IFTRIC")
The Exchange Rate Risk Insurance Scheme ("EIS"), which is operated by IFTRIC, insures exporters
against losses occurring when the rate of devaluation of the shekel does not keep pace with the rate
of inflation. If the rate of inflation is higher than the rate of devaluation, the exporter is
compensated in an amount equal to the difference between the two rates multiplied by the value
added by each exporter to the exported merchandise. If the rate of devaluation is higher than the
change in the domestic price index, however, the exporter must compensate IFTRIC. The premium
is paid on the basis of the value-added of the exports.
In determining whether an export insurance program provides a countervailable benefit, we
examine whether the premiums and other charges are adequate to cover the program's long-term
operating costs and losses. We found in the Final Countervailing Duty Determination; Oil
Country Tubular Goods from Israel ("OCTG"), (52 FR 1649, January 15, 1987), that this
program conferred a countervailable benefit on exports of OCTG from Israel because the EIS
operated
at a loss in the five years from 1981 through 1985, and that five years is a sufficiently long period to
establish that the premiums and other charges are inadequate to cover the long-term operating
costs and losses of the program. In the Final Affirmative Countervailing Duty
Determination; Certain Fresh Cut Flowers from Israel (52 FR 3316, February 3, 1987), we
found that the EIS also operated at a loss in 1986. In 1987, we found that the EIS continued to
operate at a loss. On this basis, we preliminarily determine that this program is countervailable.
We calculated the benefit from this program by dividing the net amount of compensation METCO
received by the value of its total OCTG exports during the period of review. On this basis, we
preliminarily determine the benefit from this program to be 4.30 percent ad valorem for the period
June 11, 1986 through December 31, 1986 and 4.30 percent ad valorem for the period January 1,
1987 through December 31, 1987.
(3) Long-term Industrial Development Loans
METCO received long-term industrial development loans under the ECIL that had outstanding
balances during the review period. In the final determination in OCTG, we determined that these
loans were limited to a specific enterprise or industry, or group of enterprises or industries,
because we had no information
on the approval process or actual distribution of the loans. However, in the Final Affirmative
Countervailing Duty Determination; Industrial Phosphoric Acid from Israel
("Industrial Phosphoric Acid") (52 FR 25448, July 7, 1987), we determined that long-term
industrial development loans are countervailable only to the extent that the applicable interest
rates are less than those on loans to companies located in the Central Zone (i.e., the heavily
populated and developed zone). Because METCO is located in the Central Zone, it paid the highest
rate charged for long-term loans at that time. Therefore, we preliminarily determine that these
loans to METCO are not countervailable.
(4) Bank of Israel Export Loans
The Government of Israel provides short-term financing to exporters in
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Israel through the following credit funds administered by the Bank of Israel:
(a) Export Production Fund (EPF).
(a) Export Shipment Fund (ESF).
(a) Import-for-Export Fund (IEF).
We determined in Industrial Phosphoric Acid that loans under these funds were not provided
at preferential rates after July 1985. Therefore, we preliminarily determine that these loans from
the Bank of Israel are not countervailable.
(5) Other Programs
We also examined the following programs and preliminarily determine that METCO did not use
them during the review period:
a. Dividends and Interest Tax Benefits Under section 46 of the ECIL.
b. Drawback Grants.
c. ECIL Interest Subsidy Payments.
d. ECIL Loans.
e. ECIL Preferential Accelerated Depreciation.
f. Encouragement of Industrial Research and Development Law.
g. Equity Maintenance Allowance.
h. Labor Training Grants.
i. Special Export Financing.
j. Reduced Corporate and Income Tax Rates Under Section 47 of the ECIL.
k. Tax Deductible Inventory Adjustment.
Preliminary Results of Review
As a result of the review, we preliminarily determine the net subsidy to be
4.30 percent ad valorem for the period June 11, 1986 through December 31, 1986 and 4.30
percent ad valorem for the period January 1, 1987 through December 31, 1987.
Section 707 of the Act provides that the difference between the amount of a cash deposit, or the
amount of any bond or security, for an estimated countervailing duty and the duty
determined under a countervailing duty order shall be disregarded to the extent that the
estimated duty is lower than the duty determined under the order, which was published on March
6, 1987. The rate in our preliminary determination (51 FR 21201, June 11, 1986) was 2.12 percent
ad valorem and is lower than the rate determined in this review.
In accordance with section 705(a)(1) of the Act, the final determination in this case was extended
to coincide with the final antidumping determination on the same products from Israel.
Because, pursuant to Article 5.3 of the Subsidies Code, we cannot impose suspension of liquidation
for more than 120 days without the issuance of a countervailing duty order, we terminated
the suspension of liquidation for entries or withdrawals made on or after October 9, 1986 and
before March 6, 1987, the date of publication of the countervailing duty order. We
reinstated suspension of liquidation and the requirement for collection of estimated
countervailing duties for entries or withdrawals of the subject merchandise made on or after
the date of publication of the countervailing duty order.
Therefore, the Department intends to instruct the Customs Service to assess countervailing
duties of 2.12 percent of the f.o.b. invoice price on all shipments of this merchandise entered, or
withdrawn from warehouse, for consumption on or after June 11, 1986 and before October 9, 1986.
Entries or withdrawals made on or after October 9, 1986 and before March 6, 1987 are not subject
to countervailing duties. The Department intends to instruct the Customs Service to assess
countervailing duties of 4.30 percent of the f.o.b. invoice price on all shipments of this
merchandise entered, or withdrawn from warehouse, for consumption on or after March 6, 1987
and exported on or before December 31, 1987.
Further, the Department intends to instruct the Customs Service to collect a cash deposit of
estimated countervailing duties, as provided by section 751(a)(1) of the Act, of 4.30
percent of the f.o.b. invoice price on all shipments of Israeli OCTG entered, or withdrawn from
warehouse, for consumption on or after the date of publication of the final results of this
administrative review.
Interested parties may submit written comments on these preliminary results within 30 days of the
date of publication of this notice and may request disclosure and/or a hearing within 10 days of the
date of publication. Any hearing, if requested, will be held 44 days after the date of publication or
the following workday. Any request for an administrative protective order must
be made no later than five days after the date of publication. The Department will publish the final
results of this administrative review including the results of its analysis of issues raised in any such
written comments or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Act (19 U.S.C.
1675(a)(1)) and § 355.22 of the Commerce Regulations published in the Federal Register on
December 27, 1988 (53 FR 52354) (to be codified at 19 CFR 355.22).
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
Date: June 8, 1989.
[FR Doc. 89-14045 Filed 6-12-89; 8:45am]
BILLING CODE 3510-DS-M