NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-517-501]
Carbon Steel Wire Rod From Saudi Arabia; Final Results of Countervailing Duty
Administrative Review and Revocation of Countervailing Duty Order
Tuesday, November 15, 1994
*58814
AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative review and
revocation of countervailing duty order.
SUMMARY: The Department of Commerce (the Department) has completed an
administrative review of the countervailing duty order on carbon steel wire rod from
Saudi Arabia. We 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. In addition, because the
requirements for revocation of the order have been met by the Government of the
Kingdom of Saudi Arabia and the sole producer of the subject merchandise pursuant to
19 CFR 355.25(a)(2) and 355.25(b)(2), the Department is revoking the countervailing
duty order.
EFFECTIVE DATE: November 15, 1994.
FOR FURTHER INFORMATION CONTACT: Joe Kaesshaefer or Kelly Parkhill, Office of
Countervailing Compliance, International Trade Administration, U.S. Department
of Commerce, Washington, DC 20230; telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On November 2, 1993, the Department published in the Federal Register the preliminary
results of its administrative review and intent to revoke
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countervailing duty
order on carbon steel wire rod from Saudi Arabia (58 FR 58537). The Department has
now completed this administrative review in accordance with section 751 of the Tariff Act
of 1930, as amended (the Tariff Act).
Scope of Review
Imports covered by this 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 period is January 1, 1991 through December 31, 1991. This review involves
one company, the Saudi Iron and Steel Company (HADEED), and three programs: (1)
Public Investment Fund (PIF) loan to HADEED, (2) Saudi Basic Industries Corporation's
(SABIC) transfer of Steel Rolling Company (SULB) shares to HADEED, and (3) preferential
provision of equipment to HADEED. HADEED is the sole producer/exporter of carbon
steel wire rod in Saudi Arabia.
The Department's determination to revoke the countervailing duty order is based on
the following. First, in accordance with the requirements of section 355.25(b)(2), the
Government of the Kingdom of Saudi Arabia has requested that the Department revoke
the countervailing duty order on carbon steel wire rod from Saudi Arabia. Second,
in accordance with the requirements of sections 355.25(b)(2) and 355.22(a)(2),
certifications executed by officials of HADEED and the Government of the Kingdom of
Saudi Arabia attest to the fact that the producer/exporter has not received any net
subsidy during the January 1 through December 31, 1991 period of review. Third, in
accordance with the requirements of section 355.25(a)(2)(i) of the Department's
regulations, the Department has found the absence of net subsidies based on
administrative reviews conducted for each of the past five consecutive years. Fourth, in
accordance with the requirements of section 355.25(b)(2), HADEED has certified that it
will neither apply for nor receive any net subsidy in the future. Accordingly, the
Department has found that the producer/exporter covered by the order is not likely to
apply for or receive any net subsidy in the future from any program found
countervailable or from any other countervailable programs.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the preliminary results. We
received comments from the respondent, HADEED, and the petitioners.
Comment 1: HADEED argues that recent developments in Commerce practice warrant a
reexamination of PIF linkage to the Saudi Industrial Development Fund (SIDF). HADEED
cites to a memorandum examining the possibility of integral linkage of programs in the
sixth administrative review on Live Swine from Canada as the basis for its claim that the
Department has changed its practice with respect to integral linkage. (See, Memorandum
from CVD Team to Joseph A. Spetrini, Acting Assistant Secretary for Import
Administration (October 13, 1993), which is on file in the Central Records Unit (Room
B099 of the Main Commerce Building) (Integral Linkage Memorandum).) As cited by
HADEED,
The Department acknowledges that: "if the multiple programs are created at separate
points in time, the Department has not required that * * * an express statement that the
programs are complementary parts of an overarching governmental policy be made
when the first program is enacted." The Department stated further that it seeks
information showing "an express intention to create multiple programs, whether at the
same time or separately," which are designed to be "complementary parts of an
overarching governmental policy directive." (Integral Linkage Memorandum at 4 as
cited, with emphasis added, by HADEED. Respondent's case brief at 3.)
HADEED concludes from this that the Integral Linkage Memorandum now recognizes
that: (1) linked programs need only be complementary, not identical; (2) linked programs
can be created at separate points in time; and (3) explicit documentation of linkage is not
required at the time of the enactment of the first program. According to HADEED, this
recent development has eliminated two of the Department's three previous barriers to
finding that PIF and SIDF are integrally linked and requires a reexamination of the record
evidence on linkage as it pertains to the inception of SIDF.
HADEED argues that the PIF loan program and the SIDF loan program are "integrally
linked" as defined in section 355.43(b)(6) of the Department's proposed regulations; see
Countervailing Duties; Notice of Proposed Rulemaking and Request for Public
Comments, 54 FR 23366 (May 31, 1989). Since PIF and the SIDF are integrally linked,
they should be considered together in determining whether loans provided by these two
entities are limited to a specific enterprise or industry, or group of enterprises or
industries. SIDF and PIF qualify for linkage under each factor identified in the
Department's proposed regulations. These factors are (1) the administration of the
programs, (2) evidence of a government policy to treat industries equally, (3) the
purposes of the programs as stated in their enabling legislation, (4) the manner of funding
the programs, and (5) "other factors."
HADEED argues that the information on the record shows a Saudi government policy to
treat industries equally. PIF and SIDF provide identical benefits-- low-cost, long-term
construction loans--on identical terms to a wide variety of industries. PIF and SIDF are
two of five Specialized Credit Institutions that the Saudi government created to develop
and diversify the Saudi economy. The PIF and SIDF share a common purpose as the only
sources of low-cost financing for the industrial and manufacturing sector. PIF loans are
available to companies with some government equity, and are suited for the types of large
projects that the Saudi government would be most likely to undertake. SIDF loans, on the
other hand, are available to companies with some private Saudi ownership and are best
suited for small and medium-sized projects. Between them, the two programs address the
borrowing needs of the entire range of Saudi industries.
PIF and SIDF share a common purpose, based on statements in each entity's enabling
legislation. PIF was created "to finance investment in the productive projects of a
commercial nature." Similarly, SIDF was created "to support industrial development in
the private sector of the Kingdom's economy." Both programs are aimed at financing
development in the Saudi industrial and manufacturing sector.
PIF and SIDF are administered in a comparable manner through SAMA (the Saudi Central
Bank) and the Ministry of Finance and National Economy. Both PIF and SIDF are
administered by boards of directors with a common chairman, the Minister of Finance
and National Economy, with the remaining members drawn from SAMA and other Saudi
government agencies.
PIF and SIDF were originally funded through the Ministry of Finance and National
Economy. Currently, both
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programs are self-sufficient. SAMA produces a
consolidated balance sheet showing assets and liabilities of PIF and SIDF jointly. All
information regarding budget allocations, disbursements and repayments of PIF and SIDF
are published as consolidated statements.
According to HADEED, other factors integrally linking PIF and SIDF include the fact that
there are no de jure limitations on the types of industries eligible to receive loans under
either fund. The lending practices and histories of both funds are similar. The maximum
loan amount is SR 500 million for PIF and SR 400 million for SIDF. The maximum loan
period for both PIF and SIDF is 15 years. The PIF requires Saudi government equity
participation in a project in order to obtain funds. Similarly, SIDF requires at least 25
percent equity contribution from private Saudi sources in order to obtain funds.
Thus, in light of the factors described above, HADEED argues that the Department has a
compelling case for finding integral linkage between PIF and SIDF. The programs are part
of the same overall government lending policy, they are intended to be complementary
and to achieve the same purpose, they are administered and funded through the same
governmental agency, and they provide similar benefits to the same sector of the Saudi
economy. Based on a finding of integral linkage, the Department should consider PIF and
SIDF programs together and find that they are not specifically provided and therefore not
countervailable.
The petitioner argues that the Department has rejected respondent's argument regarding
integral linkage in the previous three reviews (see Final Results of Countervailing
Duty Administrative Review; Carbon Steel Wire Rod from Saudi Arabia, 56 FR 26652,
June 10, 1991; and, Final Results of Countervailing Duty Administrative Reviews;
Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48158, September 24, 1991). The
unique aspects of the PIF program cannot be hidden by lumping it together with other
Saudi government financing programs such as SIDF, which were established for other
reasons. Nothing the Saudi government does in providing other loans through separate
programs detracts from PIF's specificity.
Department's Position: HADEED's arguments regarding integral linkage have been
addressed and rejected in three previous reviews (see Final Results of Countervailing
Duty Administrative Review; Carbon Steel Wire Rod from Saudi Arabia, 56 FR 26652,
June 10, 1991; and, Final Results of Countervailing Duty Administrative Reviews;
Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48158, September 24, 1991). Further, a
full reading of the Integral Linkage Memorandum and the Department's previous
decisions on integral linkage in this case clearly indicates that: (1) the Department's
practice with respect to integral linkage has not changed; and (2) a re-examination of the
Department's decision with respect to PIF's linkage to SIDF is not warranted.
Contrary to HADEED's assertion, the fact that linked programs need only be
complementary is not a recent change in Departmental practice. The Department has
never based its PIF linkage decision on the fact that PIF and SIDF are not identical. As
stated in the 1988, 1989 and 1990 administrative reviews, "Documented information on
the inception of the programs that explicitly ties PIF and SIDF as complementary parts of
an overarching governmental policy directive has not been presented by the respondent
[despite the Department's repeated requests."] (Bracketed portion from the 1990
administrative review only.) Final Results of Countervailing Duty Administrative
Reviews; Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48160, September 24, 1991
and Final Results of Countervailing Duty Administrative Reviews; Carbon Steel Wire
Rod from Saudi Arabia, 57 FR 8304, March 9, 1992. Furthermore, HADEED completely
misrepresents the Department when it states that the Department previously "recognized"
that PIF and SIDF are complementary. [FN1]
FN1 The sentence from which HADEED draws its conclusion that the Department has
already determined that PIF and SIDF are complementary reads as follows, "It may be
that, in principle and practice, the respective roles of PIF and SIDF have evolved to
complement and overlap each other." Final Results of Countervailing Duty
Administrative Reviews; Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48160,
September 24, 1991 (emphasis added). This sentence is at the beginning of the paragraph
that concludes that respondents have failed to provide the necessary factual information
that PIF and SIDF were "complementary parts of an overarching policy directive." Id.
It is also clear that the Integral Linkage Memorandum did not change the Department's
practice with respect to a supposed timing requirement for the creation of linked
programs. The Department never based its PIF linkage decision on the fact that PIF and
SIDF were not created simultaneously. Rather, "the fact that these programs were
founded separately, three years apart, suggests (without other documented information)
that the programs were not conceived as parts of a single program." Final Results of
Countervailing Duty Administrative Reviews; Carbon Steel Wire Rod from Saudi
Arabia, 56 FR 48160, September 24, 1991 (emphasis added). That the Integral Linkage
Memorandum follows the same standard can be clearly discerned from the following
discussion preceding the Department's determination that the Tripartite Program is not
integrally linked to the other three programs:
Therefore, as we explained in Carbon Steel Wire Rod (57 FR at 8304), in order to prevail
on a claim of integral linkage, the claimant should be able to point to a clear undisputed
statement in the enabling legislation or some other authoritative source indicating an
express intention to create multiple programs, whether at the same time or separately,
which are designed to be "complementary parts of an overarching governmental policy
directive." * * * For instance, it is easy to state that the purpose of two separate programs
is the same. * * * However, absent an objective indication by the government of why it
created two (or more) programs instead of one, it is very difficult if not impossible to
conclude that the government actually intended to have the programs complement one
another. Similarly, if the government's policy is truly to treat the industries covered by
the various programs equally, it is reasonable to expect the government to have made
this intention clear. Integral Linkage Memorandum at 4 (emphasis added).
Finally, with respect to HADEED's claim that the Department has changed its practice and
no longer requires explicit documentation demonstrating linkage at the inception of the
first program, an examination of the cited passage clearly shows that the passage is
describing a long-standing Departmental practice rather than a recent change in practice.
[FN2] The Department has not based its previous PIF linkage determinations solely on the
lack of documentation linking PIF and SIDF at the inception of PIF. Rather, HADEED has
consistently failed to present documented information at the inception of either PIF or
SIDF that explicitly ties the two programs as complementary parts of an overarching
governmental policy directive. It is the lack of the type of documentation indicated in the
above passage from the Integral Linkage Memorandum (i.e., "a clear undisputed
statement in the enabling legislation or some other authoritative source indicating an
express intention to create multiple programs. * * *"), that has led the Department to
consistently find that PIF and SIDF are not integrally linked.
FN2 If the multiple programs are created at separate points in time, the Department has
not required that such an express statement be made when the first program is enacted.
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Finally, it is the Department's practice as set forth in section 355.43(b)(6) of the
Department's proposed regulations to consider, among other factors, the following in
determining whether two programs are integrally linked: "the administration of the
programs, evidence of a government policy to treat industries equally, the purposes of
the programs as stated in their enabling legislation, and the manner of funding the
programs." The Department has interpreted the second factor in a strict manner, so as to
conform our interpretation of "integral linkage" to the purpose of the specificity test as a
whole. The specificity test was designed to avoid carrying the countervailing duty law
to absurd results by countervailing public highways and bridges, i.e., programs, which
clearly benefit the economy at large, as opposed to identifiable and specific segments of
the economy. See, e.g., Carlisle Tire and Rubber Co., v. United States, 564 F. Supp. 834,
838 (Court of International Trade, 1983). "Integral linkage" should not be interpreted to
create a loophole which would allow de facto specific subsidy programs benefitting only
particular segments of the economy to escape the imposition of countervailing duties.
Permitting respondent governments to loosely connect two or more programs which
were otherwise designed to serve different purposes would create the type of loophole the
Department seeks to avoid. See Final Results of Countervailing Duty Administrative
Review; Live Swine from Canada, 59 FR 12246 (March 16, 1994). Moreover, the creation
of such a loophole would be contrary to the intent of Congress. S. Rep. No. 71, 100th
Congress, First Session 123 (June 12, 1987). Congress stated that the Department should
avoid taking an "overly narrow" or "overly restrictive" view of its authority to determine
specificity. Thus, the Department has required documented information from the
inception of one or the other of the programs that explicitly ties PIF and SIDF as
complementary parts of an overarching governmental policy directive. See Carbon Steel
Wire Rod from Saudi Arabia; Final Results of Countervailing Duty Administrative
Review, 57 FR 8304 (March 9, 1992). Information of this nature has not been provided
by respondent; therefore there is no information on the record that would tie SIDF and
PIF at the inception of one or the other. We have thus considered each program
separately.
Comment 2: The respondent contends that it is unreasonable for the Department to
demand any more factual proof of integral linkage than that which HADEED has provided.
All known existing evidence has been presented. For reasons relating primarily to the
nature of record-keeping during the early stages of Saudi Arabia's industrialization
process, better evidence appears not to exist. The Department is not justified in treating
evidence of linkage at inception as a criterion for finding integral linkage. Such a criterion
is not even explicitly listed in the Department's proposed regulation. Furthermore, the
Department's insistence on proof of such additional factors violates prescribed rules of
procedure by using factors purporting to be guidance as a final rule determining
substantive rights. The Court of International Trade has held that the Department must
follow the minimal "notice and comment" procedures embodied in the Administrative
Procedures Act (APA) before promulgating final rules. Ipsco, Inc. v. United States, 687 F.
Supp. 614, (Court of International Trade, 1988).
Department's Position: With regard to the question of "integral linkage," the Department
has consistently focused its attention on the relationship between the programs in
question and "an overall government policy or national development plan." See Final
Results of Countervailing Duty Administrative Reviews; Carbon Steel Wire Rod from
Saudi Arabia, 56 FR 48158, September 24, 1991. This interpretation was clearly stated
in the Final Affirmative Countervailing Duty Determination; Certain Fresh Cut Flowers
from the Netherlands (52 FR 3301, February 3, 1987) wherein the Department would not
find integral linkage because "the government was unable to document the inclusion of
[the programs] as part of an overall national energy program * * *" Id. at 3309.
In requiring that this relationship be explicit at the inception of one or the other of the
programs, the Department violates no statutory or regulatory provision. Even if one
turns to the Department's proposed regulations, the decision herein is fully supported.
Section 355.43(b)(6) of the proposed regulations tells us that when deciding an integral
linkage question the Secretary will examine "evidence of a government policy to treat
industries equally." This broad instruction is included on a list that explicitly advises
parties that the Department will consider the factors on the list together with "other
factors." Thus, it is within the Department's discretion to elaborate on each factor listed in
the proposed regulation. This is precisely what the Department has done with the second
factor listed in the proposed regulation.
Comment 3: HADEED argues that, contrary to the Department's preliminary results, PIF
loans are not limited to a specific group of enterprises, and therefore, they are not
countervailable. HADEED contends that the Department's preliminary determination that
the Saudi government, through PIF, provides loans to "a specific enterprise or industry or
group of enterprises or industries" within the meaning of 19 U.S.C. 1677(5)(B), is
incorrect. The basis for the Department's determination is the erroneous assumption that
only six companies have effectively benefited from the program. In reality, 24 companies
in a wide variety of industries have received PIF financing. The 18 companies that are at
least 50 percent-owned by either SABIC or Petromin (government- owned corporations)
should be treated as separate entities. The Department has, in effect, found that there is an
intercorporate transfer of benefits based solely on corporate relationships with SABIC or
Petromin. Such an application of the specificity test based on a commonality of
shareholders is without precedent and contravenes the Department's established policy
not to assume automatic transfer of benefits based on related party status. Respondents
cite the following cases in defense of their argument: Industrial Phosphoric Acid from
Israel, 52 FR 25447 (July 7, 1987); Operators for Jalousie and Awning Windows from El
Salvador, 51 FR 41516 (November 17, 1986); Low-Fuming Brazing Copper Rod and Wire
from New Zealand, 50 FR 31638 (August 5, 1985); and Carbon Steel Structural Shapes
from Luxembourg, 47 FR 39364 (September 7, 1982).
The petitioner contends that PIF provides benefits almost exclusively to the projects
undertaken by a few companies with controlling government ownership and therefore
constitute a specific group of enterprises in Saudi Arabia.
Department's Position: We disagree with respondent. We have considered and rejected
respondent's argument in the original investigation, and in the subsequent three reviews
(see Final Affirmative Countervailing Duty Determination and Countervailing
Duty Order; Carbon Steel Wire Rod from Saudi Arabia, 51 FR 4206, February 3, 1986;
Final Results of Countervailing Duty Administrative Review; Carbon Steel Wire Rod
from Saudi Arabia, 56 FR 26652, June 10, 1991; and, Final Results of Countervailing
Duty Administrative Reviews; Carbon Steel Wire Rod from Saudi Arabia, 56 FR
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48158, September 24, 1991, respectively). We determined that the loan in
question was part of a de facto specific program, and respondent has presented no new
evidence that would disturb this conclusion (other than that pertaining to " integral
linkage").
We based this determination on the fact that there were three holding companies, SABIC,
Petromin, and Saudia Airlines, which had 50 percent or more ownership in virtually all of
the PIF loan recipients. The Court of International Trade examined this analysis as it
pertained to the original investigation of the subject merchandise, and held that the
Department "reasonably applied the specificity test," and that the determination was in
accordance with law. See Saudi Iron and Steel Co. v. United States, 675 F. Supp. 1362
(Court of International Trade 1987).
Comment 4: Petitioners contend that the Department's use of a composite benchmark
incorporating a short-term interest rate is incorrect. In calculating the benchmark, the
Department relied on the erroneous assumption that HADEED could have obtained the
SIDF's maximum loan limit of fifty percent of the project's total cost. In fact, the
maximum amount HADEED could have obtained from SIDF was SR 400 million,
significantly less than fifty percent of the project's total cost.
Department's Position: We disagree. We have considered and rejected this argument in a
previous review. The Department has previously found that the SIDF, in fact, often loaned
combined amounts greater than the "cap" to a single company. We concluded that it was
reasonable to include more than SR 400 million in the benchmark. See Final Results of
Countervailing Duty Administrative Review; Carbon Steel Wire Rod from Saudi
Arabia, 56 FR 26652 (June 10, 1991). Our methodology remains unchanged from the
original investigation. 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 commercial bank portion of the benchmark was based on the
average Saudi Interbank Offering Rate (SIBOR) for 1990, plus the normal one percent
spread that is common for commercial borrowing from private Saudi banks.
Final Results of Review
After reviewing all of the comments received, we 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.
Therefore, the Department will 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; in addition, the
Department will instruct the Customs Service to refund with interest any deposits of
estimated duties on such entries.
We have determined that the Government of the Kingdom of Saudi Arabia has met the
requirements for revocation of the countervailing duty order pursuant to 19 CFR
355.25(a)(2) and 19 CFR 355.25(b)(2). Based upon certifications by HADEED and the
Government of the Kingdom of Saudi Arabia, as well as the Department's administrative
determinations, we have determined that HADEED, the only producer of the subject
merchandise, has not applied for or received any net subsidy for five consecutive years.
In addition, HADEED has certified that it will not apply for or receive any net subsidy
under a program deemed by the Department to be countervailable. We therefore
determine that there is no likelihood that this company will apply for or receive any net
subsidy in the future. Accordingly, we are revoking the countervailing duty order.
The Department will instruct the Customs Service to terminate suspension of liquidation
on entries of the subject merchandise and to liquidate, without regard to
countervailing duties, such merchandise exported on or after January 1, 1992, the
first day after the period reviewed herein. We will also instruct the Customs Service to
refund any deposits of estimated duties on such entries.
Administrative Protective Order (APO)
This notice serves as the only reminder to parties subject to APO of their responsibilities
concerning the return or destruction of proprietary information disclosed under APO in
accordance with 19 CFR 353.34(d). Failure to comply is a violation of the APO.
This administrative review and notice are in accordance with section 751(a)(1) of the Act
(19 U.S.C. 1675(a)(1)), and 19 CFR 355.22 and 19 CFR 355.25.
Dated: October 27, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-28184 Filed 11-14-94; 8:45 am]
BILLING CODE 3510-DS-P