93-b02

NOTICES

DEPARTMENT OF COMMERCE

(C-517-501)

Carbon Steel Wire Rod From Saudi Arabia; Preliminary Results of Countervailing
Duty Administrative Review; Intent to Revoke Countervailing Duty Order

Tuesday, November 2, 1993

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

ACTION: Notice of preliminary results of countervailing duty administrative review;
intent to revoke countervailing duty order.

SUMMARY: The Department of Commerce is conducting an administrative review of the
countervailing duty order on carbon steel wire rod from Saudi Arabia. We
preliminarily determine the total bounty or grant to be 0.18 percent ad valorem for the
period January 1, 1991 through December 31, 1991. In accordance with 19 CFR 355.7,
any rate less than 0.50 percent ad valorem is de minimis. If these preliminary results are
sustained in the final results of this review, the Department will revoke the
countervailing duty order because the Saudi Iron and Steel Company (HADEED), the
sole producer and exporter of the subject merchandise in Saudi Arabia, has not applied
for or received any net subsidy on the merchandise for five consecutive years, and has
certified that it will not in the future apply for or receive any net subsidy on the
merchandise. We invite interested parties to comment on these preliminary results.

EFFECTIVE DATE: November 2, 1993.

FOR FURTHER INFORMATION CONTACT:

Philip Pia or Richard Herring, Office of Countervailing Compliance, International
Trade Administration, U.S. Department of Commerce, Washington, DC 20230;
telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On January 31, 1992, the Department of Commerce (the Department) published in the
Federal Register a notice of "Opportunity to Request Administration Review" (57 FR
3740) of the countervailing duty order on carbon steel wire rod from Saudi Arabia.
During March 1992, HADEED, the sole producer and exporter of the subject merchandise
in Saudi Arabia, requested an administrative review covering the period January 1,
1991 through December 31, 1991. A timely request for revocation of the
countervailing duty order, accompanied by the required certifications under 19 CFR
355.25 of the Department's regulations, was submitted by HADEED. We initiated the
review on March 16, 1992 (57 FR 9104). The Department has now conducted this
administrative review in accordance with section 751 of the Tariff Act of 1930, as
amended (the Act).

Scope of Review

Imports covered by the review are shipments of Saudi carbon steel wire rod. Carbon steel
wire rod is a coiled, semi-finished, hot-rolled carbon steel product of approximately
round solid cross section, not under 0.20 inch nor over 0.74 inch in diameter, tempered
or not tempered, treated or not treated, not manufactured or partly manufactured, and
valued over or under 4 cents per pound. Such merchandise is classifiable under item
numbers 7213.20.00, 7213.31.30, 7213.31.60, 7213.39.00, 7213.41.30, 7213.41.60,
7213.49.00 and 7213.50.00 of the Harmonized Tariff Schedule (HTS). The HTS item
numbers are provided for convenience and Customs purposes. The written description
remains dispositive.
The review covers the period January 1, 1991 through December 31, 1991, and three
programs. During the review period, there was only one Saudi producer and/or exporter
of the subject merchandise, the Saudi Iron and Steel Company (HADEED).
The Department intends to revoke the countervailing duty order, if at the time the
Department publishes the final results of this review, HADEED has demonstrated that it
has not applied for or received any net subsidy on the merchandise for five consecutive
years and is not likely in the future to apply for or receive any net subsidy on the
merchandise. As required by § 355.25(c)(2)(ii) of the Department's regulations, the
Department conducted a verification of the questionnaire responses submitted by the
Government of Saudi Arabia and HADEED.

Analysis of Programs

(1) Public Investment Fund Loan to HADEED

The Public Investment Fund (PIF) was established in 1971 as one of five specialized credit
institutions set up by the Government of Saudi Arabia. The other specialized credit
institutions are the Saudi Industrial Development Fund (SIDF), the Saudi Agricultural
Bank, the Saudi Credit Bank and the Real Estate Development Fund. These specialized
credit institutions are funded completely by the Saudi government and were the only
sources of long-term financing in Saudi Arabia during the review period.
The PIF was established in 1971 to provide financing to large-scale, commercially
productive projects that have some equity participation of the Saudi government. PIF
by-laws exclude firms or projects without Saudi government equity from applying to the
PIF for financing. Because the application of the government equity participation
requirement has limited benefits under this program to a small number of enterprises, we
have previously determined that PIF loans are provided to a specific group of enterprises
in Saudi Arabia, and that the PIF loan to HADEED is contervailable to the extent that it
is given on terms inconsistent with commercial considerations (see, Carbon Steel Wire
Rod from Saudi Arabia; Final Results of Countervailing Duty Administrative
Reviews, 56 FR 48158 (September 24, 1991)). No new information of changed
circumstances regarding this program was provided that would lead the Department to
revise this conclusion.
The loan contract between the PIF and HADEED requires that HADEED pay a variable
commission, or interest, on the outstanding balance based on its profitability in the
preceding semester. During 1991, HADEED made repayments of loan principal and
commission on its PIF loan.
Using the two sources for medium- to long-term industrial financing available in Saudi
Arabia, private commercial banks and the SIDF, we have constructed a composite
interest rate benchmark for 1991 to determine whether the PIF loan to HADEED was on
terms inconsistent with commercial considerations. Since the PIF loan covered 60
percent of HADEED's total project costs, for our benchmark we assumed that HADEED
could have financed 50 percent of its total project costs with a SIDF loan (the maximum
eligibility for a company with at least 50 percent Saudi ownership) and the remaining 10
percent of project costs with a Saudi commercial bank loan. The SIDF loan portion of the
benchmark was used because, of all the specialized credit institutions, it is the only fund
besides the PIF which lends to industrial or manufacturing projects and, is most
representative of what

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HADEED would otherwise have to pay for long-term
loans in Saudi Arabia. We used the 2 percent flat rate of interest applied to SIDF loans in
1991. The commercial bank portion of the benchmark was based on the average Saudi
Interbank Offering Rate (SIBOR) for 1991, plus a one-quarter of one percent spread.
Because the composite benchmark for 1991 is less than the actual commission, or interest
rate, that HADEED paid on its PIF loan in 1991, we preliminarily determine that the PIF
loan was not inconsistent with commercial considerations for the period January 1, 1991
through December 31, 1991.

(2) SABIC's Transfer of SULB Shares to HADEED

The Saudi Arabian Basic Industries Corp. (SABIC) was established in 1976 by the
Government of Saudi Arabia as an industrial development corporation. SABIC has been
the majority shareholder in HADEED since the steel company's inception in 1979. In
1982, SABIC acquired all of the remaining shares in the Steel Rolling Company (SULB), a
Saudi producer of steel reinforcing bars of which SABIC had been the majority
shareholder since 1979. In December 1982, SABIC decided to transfer its shares in SULB
to HADEED in return for new HADEED stock. Through the stock transfer, SULB became a
wholly-owned subsidiary of HADEED.
In Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order; Carbon Steel Wire Rod From Saudi Arabia, (51 FR 4206; February 3, 1986)
(Saudi Wire Rod), we determined that HADEED was unequityworthy in December 1982
and that the transfer of SABIC's shares in SULB to HADEED in exchange for additional
shares in HADEAED was inconsistent with commercial considerations.
For this review, we preliminarily determine that the most appropriate methodology to
use in measuring the benefit from equity infusions made or provided on terms
inconsistent with commercial considerations is what we call the "grant" approach. (For a
full discussion of this issue, see the Equity section of the General Issues Appendix to Final
Affirmative Countervailing Duty Determination: Certain Steel Products From Austria,
58 FR 37217, July 9, 1993). We calculated that benefit to HADEED from the acquisition of
SULB by using the declining balance methodology described in the Department's
Proposed Rules (see, §355.49(b)(3) of Countervailing Duties; Notice of Proposed
Rulemaking and Request for Public Comments, 54 FR 23366, May 31, 1989). For the
discount rate we used the 2 percent flat rate of interest applied to SIDF loans during the
year of the infusion, 1983, as representative of the national average long-term interest
rate (HADEED contracted no long-term loans, in 1983 that could have been used as a
benchmark). We then divided the amount of the grant allocated to the review year by
HADEED's total sales in 1991. On this basis, we preliminarily determine the benefit from
this equity infusion to be 0.17 percent ad valorem for the period January 1, 1991 through
December 31, 1991.

(3) Preferential Provision of Equipment to HADEED

Under a lease/purchase arrangement, the Royal Commission for Jubail and Yanbu built
for HADEED two bulk ship unloaders at the Jubail industrial port for unloading iron ore,
and constructed a conveyor belt system for transporting iron ore from the pier to
HADEED's plant in the Jubail Industrial Estate. When construction of these facilities was
completed in 1982, the Commission transferred custody to HADEED under a
lease/purchase agreement.
As originally planned, the bulk ship unloader and conveyor system was built to serve
both HADEED and an adjacent plant in the Jubail Industrial Estate. The second plant was
not built, however, leaving HADEED as the sole user of this equipment. The terms of the
lease/purchase agreement require that HADEED must repay the equipment and
construction costs plus a two-percent fee for the cost of money in 20 annual installments.
The annual payments are stepped, with the lowest payment levels occurring at the
beginning and the highest payment levels occurring at the end of the 20-year period.
In the Saudi Wire Rod, we found that the two-percent cost-of-money fee is the
Commission's standard charge for recovery of costs on other facilities in the Jubail
Industrial Estate. Of the projects examined, a urea berthside handling system built for the
exclusive use of another company located in the Estate was the most comparable to
HADEED's ship unloader and conveyor system. Therefore, we compared the repayment
schedule for HADEED's ship unloader and conveyor system to the repayment schedule for
a berthside handling system. Although both agreements carried the standard
cost-of-money fee, we found that HADEED's end-loaded, stepped repayment schedule was
more advantageous than the annuity-style repayment schedule on the berthside handling
system. Therefore, we determined that HADEED's ship unloader and conveyor system was
provided on preferential terms. Moreover, because the equipment is used exclusively by
HADEED, we found that it was provided to a specific enterprise and, thus, confers a
bounty or grant. No new information or evidence of changed circumstances has been
provided to alter that determination.
To calculate the benefit, we compared the principal and fees being paid in each year by
HADEED to the principal and fees that would be paid under the repayment schedule used
for the berthside handling system. We allocated the sum of the present values of the
differences in the two repayment schedules over 20 years, using a two-percent discount
rate. The resulting benefit for 1991 was divided by HADEED's total sales in 1991. On this
basis, we preliminarily determine the benefit from the preferential provision of the
unloader and conveyor system to be 0.01 percent ad valorem for the period January 1,
1991 through December 31, 1991.

Preliminary Results of Review

As a result of the review, we preliminarily determine the total bounty or grant to be 0.18
percent ad valorem for the period January 1, 1991 through December 31, 1991. In
accordance with 19 CFR §355.7, any aggregate net subsidy rate less than 0.50 percent ad
valorem is de minimis, and will be disregarded.
Therefore, the Department intends to instruct the Customs Service to liquidate, without
regard to countervailing duties, all shipments of this merchandise exported on or
after January 1, 1991 and exported on or before December 31, 1991.
The Department also intends to instruct the Customs Service to waive cash deposits of
estimated countervailing duties, as provided by section 751(a)(1) of the Tariff Act (as
amended), on all shipments of this merchandise entered, or withdrawn from warehouse,
for consumption on or after the date of publication of the final results of this review.
Parties to the proceeding may request disclosure of the calculation methodology and
interested parties may request a hearing not later than 10 days after the date of
publication of this notice. Interested parties may submit written arguments in case briefs
on these preliminary results within 30 days of the date of publication. Rebuttal briefs,
limited to arguments raised in case briefs, may be submitted seven days after the time
limit for filing the case brief. Any hearing, if requested,

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will be held seven days
after the scheduled date for submission of rebuttal briefs. Copies of case briefs and
rebuttal briefs must be served on interested parties in accordance with 19 CFR 355.38(e).
Representatives of parties to the proceeding may request disclosure of proprietary
information under administrative protective order no later than 10 days after the
representative's client or employer becomes a party to the proceeding, but in no event
later than the date the case briefs, under 19 CFR 355.38(c), are due.
The Department will publish the final results of this administrative review, including the
results of its analysis of issues raised in any case or rebuttal brief or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the
Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: October 15, 1993.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

(FR Doc. 93-26933 Filed 11-1-93; 8:45 am)

BILLING CODE 3510-DS-M