(Cite as: 47 FR 15618)
NOTICES
DEPARTMENT OF COMMERCE
Prestressed Concrete Steel Wire Strand From Spain; Preliminary Affirmative Countervailing Duty Determination
Monday, April 12, 1982
*15618 AGENCY: International Trade Administration, Commerce.
ACTION: Preliminary affirmative countervailing duty determination.
SUMMARY: We have preliminarily determined that the government of Spain is providing its manufacturers, producers, and exporters of prestressed concrete steel wire strand with benefits that are bounties or grants within the meaning of the countervailing duty law. We preliminarily estimate the net bounty organt to be 1.44 percent of the f.o.b. value of the imported merchandise. Therefore, we are directing the U.S. Customs Service to suspend liquidation of all entries, or warehouse withdrawals for consumption of this merchandise and to require a cash deposit, bond, or other security in an amount equal to the estimated net bounty or grant. This investigation will proceed according to the statutory procedures.
EFFECTIVE DATE: April 12, 1982.
FOR FURTHER INFORMATION CONTACT:
John R. Brinkmann, Office of Investigations, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230 (202) 377-4929.
SUPPLEMENTARY INFORMATION:
Case History
On November 5, 1981, we received a petition in proper form from counsel on behalf of five domestic manufacturers of prestressed concrete steel wire strand (PC strand). Those manufacturers are: American Spring Wire Corporation, Armco Inc., Bethlehem Steel Corporation, Florida Wire & Cable Company, and Shinko Wire America, Inc. The petition alleges that the government of Spain pays or bestows, directly or indirectly, bounties or grants upon the manufacture, production, or exportation of PC strand within the meaning of section 303 of the Tariff Act of 1930, as amended ("the Act") through the following programs: (1) remission of indirect taxes upon export (Desgravacion Fiscal); (2) privileged circuit exporter credits; (3) export credit insurance; (4) credit for construction of warehouse facilities; and (5) benefits to the PC strand industry in the form of preferential terms of loans and grants to manufacturers of steel billets and steel wire rod.
After reviewing the petition, we determined that it contained sufficient grounds upon which to initiate a countervailing duty investigation. Therefore, on December 2, 1981, we announced our initiation (46 FR 58543) and stated that we would issue a preliminary determination on this case by January 29, 1982.
Because Spain is not a "country under the Agreement," within the meaning of section 701(b) of the Act, section 303 of the Act applies to this investigation. In addition, the merchandise covered by this investigation is dutiable. Therefore, no injury determination is required.
We presented a questionnaire concerning the allegations to the government of Spain at its embassy in Washington, D.C. We also included, where appropriate, questions concerning programs investigated in other Spanish countervailing duty cases. The government requested and received an extension of the time for its response to the questionnaire. On January 8, 1982, we postponed the preliminary determination and published a notice in the Federal Register on January 14, 1982 (47 FR 2141). The reason for the postponement was that we determined in accordance with section 703(e)(1)(B) of the Act that the investigation was extraordinarily complicated.
Scope of Investigation
The merchandise covered by this investigation is prestressed concrete steel wire strand, a product used to compress concrete in order to provide active resistance to loads in such items as girders, beams, pilings, and other building materials. PC strand is currently provided for under item number 642.1120 of the Tariff Schedules of the United States Annotated.
Analysis of Program
In its response, the government of Spain provided data for calendar years 1980 and 1981. The government identified two programs, the "Desgravacion Fiscal a la Exportacion" and the Privileged Circuit Exporter Credits, as having been utilized by the Spanish PC strand companies. Three firms are known to have produced and exported PC strand to the United States during this time period. They are Elaborados Metalicos, S.A. (EMESA), Trenzas y Cables de Acero, S.A. (TYCSA), and Nueva Montana Quijano, S.A. (NMQ). We verified the data pertaining to EMESA and TYCSA as these firms accounted for approximately 98 percent of the exports of PC strand from Spain to the U.S. in 1981.
Programs Preliminarily Determined To Be Bounties or Grants to PC Strand Manufacturers, Producers, and Exporters
We preliminarily determine that the government of Spain is providing bounties or grants to its manufacturers, producers, and exporters of PC strand through working capital loans under the Privileged Circuit Exporter Credits Program.
The government of Spain requires all Spanish commercial banks to maintain a specific percentage of their lendable funds in priviliged circuit accounts. These funds are made available to exporters at preferential interest rates. While there is no actual outlay of government funds, the benefits conferred on the companies are the result of a government mandated program to promote exports. Of the four privileged circuits identified by petitioner, we preliminarily determine that one, the working capital loan, was received by the PC strand producers.
Under this privileged circuit program, firms may obtain working capital loans for one year or less in amounts that do not exceed 16 percent of the value of their exports in the previous year. With exporter's cards, firms may obtain loans up to 24 percent of the value of their exports in the previous year. In 1981, the interest rate for this privileged circuit program was 10 percent, including commissions and fees.
To calculate the amount of the bounty or grant to PC strand producers, we computed the interest on the working capital loans using the 10 percent rate under the privileged circuit program, less commissions and fees, and compared it with the interest using an average rate or the rate received commercially by each of the firms on loans on similar duration. The differential for each firm was prorated over that firm's total exports of all products.
Programs Preliminarily Determined not To Be Bounties or Grants to PC Strand Manufacturers, Producers, and Exporters
We preliminarily determine that the government of Spain is not providing bounties or grants to its manufacturers, producers, and exporters of PC strand under the following:
1. Desgravacion Fiscal A la Exportacion (DFE). Spain employs a *15619 cascading tax system that is a turnover tax (IGTE) levied on each sale of a product through its various stages of production, up to (but not including) the ultimate sale at the retail level. The DFE is the mechanism used in Spain for the rebate of these accumulated taxes (hereafter referred to as 'indirect taxes') upon exportation of that product.
In this case we have determined that the DFE is a non-excessive rebate of indirect taxes paid on items physically incorporated into PC strand since those payments meet the requirements of our three-prong test. That test, consisting of three lines of inquiry, all of which must be answered in the affirmative in order to find that an export payment such as the DFE is not a subsidy, was supported by a recent Court of International Trade determination (Industrial Fasteners Group, American Importers Association v. United States, 2 CIT ----, Slip Op. 81-99, October 29, 1981) and involves ascertaining the following:
(1) Whether the (export payment) operates for the purpose of rebating indirect taxes, (2) whether there is a clear link between eligibility for (export payments) and payment of indirect taxes, and (3) whether the government has reasonably calculated and documented the actual indirect tax incidence borne by (exported products) and has demonstrated a clear link between such tax incidence and the amount of the (export payment).
In the instant case we find that the Spanish government has reasonably calculated the DFE payments to be rebated to exporters by utilizing an elaborate input-output matrix of the economy which defines indirect tax incidences on a sectoral basis. The fiscal scheme of border taxation which evolves from this input-output system is used to ascertain the DFE rebate for specific products.
To demonstrate the actual indirect tax incidence on PC strand the government of Spain provided a "structure of cost" analysis of the product, which identified inputs incorporated into the product and the indirect tax incidence burdening each input. It was this "structure of cost" analysis which we verified to establish what inputs were physically incorporated into the final product in order to determine the proper level of indirect taxes.
The "structure of cost" indicated that steel wire rod, the major input physically incorporated into PC strand, accounted for approximately 75% of the total cost of producing the product. Three other inputs (lead, packing and other materials) accounted for approximately 1.95% of the total cost. The remaining factors included in the cost of producing PC strand were not identified in this "structure of cost" and therefore these other factors were not considered in the calculation of the total indirect tax incidence of items physically incorporated into the production of PC strand. We did verify from company production records, however, the inputs and their relationship to the total cost of the finished product. Our verification of these figures at EMESA and TYCSA showed the "structure of cost" inputs and percentages to be correct. Based on the 1980 IGTE tax rate of 2.4% which we verified as accurate, the total indirect tax burden (including two final stage taxes) on PC strand in 1980 was 12.55%. The DFE rate in 1980 did constitute an over-rebate of indirect taxes because the DFE rebate for PC strand was 15.5 percent. However, in January, 1981, the government of Spain increased the IGTE tax rate by 58 percent to 3.8 percent, making the 1981 indirect tax burden on PC strand 19.74 percent. A further increase in the IGTE tax rate in January, 1982, to 4.6 percent increased the indirect tax burden to 23.92 percent. As a result of the increases in the tax rate, the over-rebate was eliminated. Our determination is based on the most recent period for which complete information is available. We preliminarily find, therefore, that the current DFE rebate of 15.5 percent is less than the indirect tax burden borne by this product in 1981 and 1982 and therefore, in the case, the DFE is not a benefit which constitute a bounty or grant.
2. Benefits to the Steel Industry. One of the allegations raised by petitioner is that manufacturers of PC strand benefited from indirect subsidies by purchasing wire rod or billets from subsidized Spanish steel makers. The Department has verified that both EMESA and TYSCA purchased only steel wire rod for their strand production and that these purchases were made from a variety of unrelated domestic and international suppliers at prices which were reasonably comparable. Our verification indicates that these purchases were arms-length transactions. We, therefore, have preliminarily determined that these manufacturers of PC strand are not receiving benefits which constitute bounties or grants as a result of their transactions with unrelated steel wire rod suppliers.
Programs Preliminarily Determined To Be Not Applicable Or Not Utilized By PC Strand Manufacturers, Producers, or Exporters
We preliminarily determine that the following programs, which were described in the notice of initiation, are not applicable or not utilized by the PC strand producers:
1. Certain Privileged Circuit Exporter Credits--Those privileged circuit programs alleged by the petitioner but not utilized by P.C. strand producers are:
(a) Commercial Services Loans,
2. Warehouse Construction Loans.
4. Other benefit programs included in this investigation from prior Spanish countervailing duty cases.
Verification
In accordance with section 766(a) of the Act, we verified the information submitted in the original response and relied upon in this determination. We used normal verification procedures to verify the government response. This included inspection of government documents, discussions with government and trade association officials, and on-site inspection of the manufacturers' operations and records.
Preliminary Determination
As a result of our investigation, we preliminarily determine that the government of Spain provides its manufacturers, producers, and exporters of prestressed concrete steel wire strand with bounties or grants estimated to be 1.44 percent of the f.o.b. value of this merchandise.
Suspension of Liquidation
In accordance with section 703 of the Act, we are directing the U.S. Customs Service to suspend, upon publication of this notice, the liquidation of all entries, or warehouse withdrawals for consumption of the merchandise subject to this investigation and to require a cash deposit, bond or other security in the amount of 1.44 percent ad valorem. This suspension will remain in effect until further notice.
Public Comment
In accordance with s 355.35 of the Commerce Department's regulations, we will hold a public hearing, if requested, on April 29, 1982, at 10:00 a.m. in Conference Room A of the Commerce Department building, to afford interested parties an opportunity to comment on this preliminary determination. All requests for hearings must be submitted within ten days of this notice's publication to the Deputy Assistant Secretary for Import Administration, at the U.S. Department of Commerce, Room 3099B, 14th Street and Constitution Avenue, N.W., *15620 Washington, D.C. 20230. They should contain: (1) the party's name, address, 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 for Import Administration by April 26, 1982. Oral presentations will be limited to the issues discussed in the briefs.
All written views should be filed in accordance with 19 CFR 355.43, within thirty days of this notice's publication, at the above address, and in at least ten copies.
This determination is published in accordance with section 703(f) of the Act (19 U.S.C. 1671b(f)).
Gary N. Horlick,
Deputy Assistant Secretary for Import Administration.
April 5, 1982.