(Cite as: 49 FR 40628)
NOTICES
DEPARTMENT OF COMMERCE
[C-469-408]
Preliminary Affirmative Countervailing Duty Determination; Certain Welded Carbon Steel Pipes and Tubes From Spain
Wednesday, October 17, 1984
*40628 AGENCY: International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the Tariff Act of 1930, as amended ("the Act"), are being provided to manufacturers, produces, or exporters in Spain of certain welded carbon steel pipes and tubes ("welded pipes and tubes"). We estimate the net subsidy to be 1.14 percent ad valorem. In addition, we preliminarily determine that critical circumstances exist with respect to imports of welded pipes and tubes from Spain. We are directing the U.S. Customs Service to suspend liquidation of all unliquidated entries of welded pipes and tubes from Spain which are entered, or withdrawn from warehouse for consumption on or after the date which is 90 days before the date of publication of this notice in the Federal Register. The Customs Service shall require a cash deposit or bond on these products in the amounts equal to the estimated net subsidies. If this investigation proceeds normally, we will make our final determination by December 24, 1984.
EFFECTIVE DATE: October 17, 1984.
FOR FURTHER INFORMATION CONTACT: John M. Davies, Loc Nguyen, or Stuart Keitz, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230; telephone: (202) 377-1784, (202) 377- 0167, or (202) 377-1769.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based upon our investigation, we preliminarily determine there is reason to believe or suspect that certain benefits which constitute subsidies within the meaning of section 701 of the Act are being provided to manufacturers, producers, or exporters in Spain of welded pipes and tubes. The following programs are preliminarily determined to confer subsidies:
Medium- and Long-term Loans and Loan Guarantees, and
Certain Types of Short-term Loans Provided under the Privileged Circuit Exporter Credits Program.
We estimate the net subsidy to be 1.14 percent ad valorem.
Case History
On July 17, 1984, we received a petition from the Committee on Pipe and Tube Imports, a trade association composed of domestic pipe and tube producers, filed on behalf of the welded pipes and tubes industry. In compliance with the filing requirements of s 355.26 of the Commerce Regulations (19 CFR 355.26), petitioner alleged that manufacturers, producers, or exporters in Spain of welded pipes and tubes receive, directly or indirectly, benefits which constitute subsidies within the meaning of section 701 of the Act, and that these imports are materially injuring, or threatening material injury to, a U.S. industry. Petitioner also alleged that "critical circumstances" exist under section 703(e) of the Act.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on August 6, 1984, we initiated an investigation (49 FR 32248). We stated that we expected to issue a preliminary determination by October 10, 1984.
Since Spain is a "country under the Agreement" within the meaning of section 701(b) of the Act, an injury determination is required for this investigation. On August 31, 1984, the U.S. International Trade Commission ('ITC") determined that there is a reasonable indication that these imports are materially injuring, or threatening material injury to, a U.S. industry (49 FR 35871).
We presented a questionnaire concerning the allegations to the government of Spain at its embassy in Washington, D.C., on August 13, 1984. We received responses from the government of Spain on September 25, 1984, from CONDESA and PERFRISA on September 26, 1984, and from JMA on October 9, 1984.
Scope of Investigation
The products covered by this investigation are "certain welded carbon steel pipes and tubes," specifically, certain small-diameter circular welded carbon steel pipes and tubes and light-walled rectangular tubing.
Small-diameter circular welded carbon steel pipes and tubes, with an outside diameter of 0.375 inch or more but not over 4.5 inches and with a wall thickness of not less than 0.065 inch, are currently classified in the Tariff Schedules of the United States, Annotated (TSUSA) under items 610.3231, 610.3234, 610.3241, 610.3242, and 610.3243. These products, commonly referred to in the industry as standard pipe or structural tubing, are produced to various ASTM specifications, most notably A-120 and A-135.
Light-walled rectangular (including square) welded carbon steel pipes and tubes having a wall thickness of less than 0.156 inch are currently classified under TUSSA item 610.4928. These products, commonly referred to in the industry as mechanical or structural tubing, are generally produced to ASTM specifications A-500 or A-513.
CONDESA, JMA, and PERFRISA are the only known producers and exporters in Spain of the subject products which were exported to the United States during the calendar year 1983, the period for which we are measuring subsidization. Altos Hornos de Vizcaya, S.A. and its subsidiary Laminaciones de Lesaca, S.A. produced but did not export welded pipes and tubes to the U.S. during 1983. CONDESA, JMA, and PERFRISA accounted for about 95 percent of Spanish welded pipes and tubes imports during 1983.
Analysis of Programs
CONDESA, JMA, and PERFRISA answered our questionnaire. For purposes of this preliminary determination, we have used the information provided by these companies.
Certain subsidies discussed in this notice were conveyed through a series of laws and decrees issued by the government of Spain. Those laws and decrees include the following:
Decree 669/1974 of March 14, 1974:
This decree established the National Steel Industry Program, 1974-1982. To achieve the specific goals established by this program, the government authorized certain benefits for integrated and non-integrated steel firms which included preferential loans and loan terms, accelerated amortization of non- liquid *40629 investments, substantial reduction of certain taxes, and expropriation of land for new plant construction.
Law 60/1978 of December 23, 1978:
This law authorized government aid in the form of preferential loans and loan terms and capital infusions for the three integrated steel producers in Spain, including AHV and ENSIDESA.
Order of May 22, 1980:
This order authorized the Banco de Credito Industrial ("BCI") to extend additional government credits to non-integrated steel companies who had made investments under Decree 669/1974. BCI is a government credit institution which issues loans to companies in the Spanish steel industry.
Royal Decree 878/1981 of May 8, 1981:
This decree, also known as the Integral Iron and Steel Reconversion Plan, provided aid to the integrated steel producers in the form of preferential interest rates and terms on outstanding loans, new loans with preferential interest rates and terms, loan guarantees, and capital infusions. Certain of the subsidy programs are administered by the Institution Nacional de Industria ("INI"), a public holding company created in 1941 as an autonomous government agency to promote and stimulate the industrial development of Spain. INI's responsibilities cover a variety of sectors ranging from basic services to basic industries such as iron and steel.
General principles applied to the facts in this investigation are described in the "subsidies Appendix" contained in the Federal Register notice of our Final Affirmative Countervailing Duty Determination and Countervailing Duty Order on Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina (49 FR 18006).
We have found that there are no significant differences in the size and structure of the companies under investigation and in the usage of programs determined to confer subsidies. Therefore, in accordance with 19 CFR 355.28(a)(3), we have calculated a country-wide ad valorem subsidy rate, not company-specific ad valorem subsidy rates, for purposes of this preliminary determination.
Consistent with our practice in preliminary determinations, where a response to an allegation denies the existence of a program, receipt of benefits under a program, or eligibility of a company or industry under a program, and the Department has no persuasive evidence showing that the response is incorrect, we accept the response for purposes of the preliminary determination. All such responses, of course, are subject to rigorous verification. If the response cannot be supported at verification and the program is otherwise countervailable, the program will be considered a subsidy in the final determination.
Based upon our analysis of the petition, the material provided by the government of Spain in response to our questionnaire, and other available information, we determine the following:
I. Programs Preliminarily Determined to Confer Subsidies
We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Spain of welded pipes and tubes under the following programs:
A. Medium- and Long-term Loans and Loan Guarantees
Petitioner alleged benefits which constitute subsidies in the form of preferential loans, loan terms and loan guarantees. We requested information from each company under investigation on all medium- and long-term loans outstanding during the period of investigation. CONDESA, JMA, and PERFRISA reported medium- and long-term loans outstanding during the period for which we are measuring subsidization. Based on the company responses, we preliminarily determine that JMA and PERFRISA received loans from BCI at rates or on terms inconsistent with commercial considerations. None of the companies reported receiving loans with INI or other types of government guarantees.
Generally, to calculate a subsidy on these loans, we used the loan methodology detailed in the Subsidies Appendix. For fixed rate loans, we used long-term benchmark interest rates developed in previous countervailing duty investigations on Certain Steel Wire Rod from Spain (49 FR 51428) and on Carbon Steel Wire Rod from Spain (49 FR 19551). As best information on the weighted average cost of capital, we used the long-term benchmark interest rates used for fixed rate loans.
The loans reported by JMA and PERFRISA contained provisions for deferred principal repayment. We verified in our investigation of Certain Steel Products from Spain that loans made at preferential interest rates to these companies and loans made at commercial rates within and outside of Spain contained similar deferral provisions. Therefore, for purposes of this preliminary determination, we are not treating deferral of principal repayments as a separate countervailable benefit.
We allocated the countervailable benefit from each loan over the total sales values of steel production of the company. We preliminarily determine that the ad valorem subsidy for medium- and long-term loans is 0.05 percent for JMA and 0.06 percent for PERFRISA.
B. Certain Types of Short-term Loans Provided Under the Privileged Circuit Exporter Credits Program
Petitioner alleged benefits which constitute subsidies in the form of short- term preferential loans. We requested information on all short-term loans outstanding during the period for which we are measuring subsidization. CONDESA, JMA, and PERFRISA reported that they had obtained short-term financing under the Privileged Circuit Exporter Credits Program during the period of investigation.
The government of Spain requires all Spanish commercial banks to maintain a specific percentage of their lendable funds in privileged circuit accounts. These funds are made available to exporters at preferential interest rates through a variety of credit programs. While there is no direct 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 circuit programs available to companies we preliminarily determine that welded pipes and tubes producers benefited from two programs, the working-capital loans program and the pre-financing of exports program.
For this preliminary determination, we compared nominal rates with nominal rates in our calculation of subsidies. For the final determination, we will try to get more information concerning these loans in order to make comparisons of effective to effective rates, where appropriate.
All three Spanish producers reported that they received working-capital loans. Under the Privileged Circuit Exporter Credits Program, firms may obtain working-capital loans for one year, the total of which is not to exceed a specified percentage of their previous year's exports. In 1983, the privileged circuit working-capital loan interest rate ceiling mandated by the Government was 10 percent, including fees and commissions.
To calculate the subsidy we compared the interest rate charged on working- capital loans with the national average commercial interest rate on loans. In our *40630 September 11, 1984, Final Affirmative Countervailing Duty Determination on Potassium Chloride from Spain (49 FR 36424), we chose the weighted-average commercial lending rate for loans of one to three years as our benchmark for working-capital loans. Accordingly, we used the 1983 weighted- average commercial lending rate of 17.64 percent for loans of one to three years as our 1983 benchmark for short-term working-capital loans.
To determine the benefit, we compared the interest rate charged on working- capital loans with the national average commercial interest rate of 17.64 percent. This interest differential was multiplied by the working-capital loan amounts and by the term of the loans to arrive at the 1983 benefit amount. The total 1983 benefit amount for each company was allocated over the sales value of total company exports in 1983. We preliminarily determine that the ad valorem subsidy for working-capital loans is 0.42 percent for CONDESA, 1.93 percent for JMA, and 0.45 percent for PERFRISA.
CONDESA and PERFRISA reported that they also received preferential short-term Privileged Circuit Exporter Credit loans for prefinancing of exports. These loans varied from two to nine months in duration and were used to finance exports of welded pipes and tubes to the United States.
In our September 11, 1984, Final Affirmative Countervailing Duty Determination on Potassium Chloride from Spain (49 FR 36424), we chose the weighted-average commercial lending rate for loans of three months as our benchmark for export prefinancing loans. Accordingly, we used the 1983 weighted-average commercial lending rate of 17.12 percent for loans of three months as our 1983 benchmark for short-term loans for prefinancing of exports.
To determine the benefit, we compared the interest rate charged on prefinancing of exports with the national average commercial interest rate of 17.12 percent. This interest differential was multiplied by the working capital loan amounts and by the term of the loans to arrive at the 1983 benefit amount. The total 1983 benefit amount for each company was allocated over the sales value of total company exports in 1983. We preliminarily determine that the ad valorem subsidy for short-term prefinancing of exports is 0.56 percent for CONDESA and 0.28 percent for PERFRISA.
II. Programs Preliminarily Determined Not To Confer Subsidies
We preliminarily determine that subsidies are not being provided to manufactuers, producers, or exporters in Spain of welded pipes and tubes under the following program:
A. Rebates of Indirect Taxes on Exports Under the Desgravacion Fiscal a la Exportation ("DFE")
Petitioner alleged that countervailable benefits are conferred on Spanish producers of welded pipes and tubes under the DFE program by the excessive rebate of indirect taxes on the export of welded pipes and tubes.
Spain employs a cascading tax system under which a turnover tax is levied on each intermediate sale of a product through its various stages of production, up to, but not including, the final sale at the retail level. The DFE is the program designed to rebate to exporters these accumulated turnover taxes as well as final stage taxes on exportation.
To calculate the amount of subsidy potentially conferred by the DFE it is necessary to determine whether the remission of indirect taxes is excessive. According to the government response, the indirect taxes borne by sheet (the only input identified as physically incorpoated in the final product) and the corresponding share of sheet to the value of welded pipes and tubes, resulted in an allowable rebate that exceeded the DFE payment of 14.5 percent (prior to July 11, 1984) and 12.3 percent (on or after July 11, 1984).
Information submitted by respondents indicates that CONDESA had purchased sheets and plates in coil from unrelated suppliers and therefore had paid turnover taxes on these physically incorporated inputs. PERFRISA had purchased sheets and plates in coil from a related supplier, but, according to its response, these raw materials were purchased at arm's-length prices and turnover taxes were paid on these purchases.
Accordingly, we find that the DFE does not constitute an excessive remission of indirect taxes for CONDESA and PERFRISA and hence confers no subsidy.
III. Programs Preliminarily Determined Not To Be Used
We have preliminarily determined that manufacturers, producers, or exporters in Spain of welded pipes and tubes do not use the following programs that were identified in the notice of initiation of Countervailing Duty Investigation of Certain Welded Carbon Steel Pipes and Tubes from Spain.
A. Certain Benefits Under Decree 669/1974
We preliminarily determined in section 1-A above that medium- and long-term loans and loan terms provided under Decree 669/1974 are countervailable. In addition, we preliminarily determine that the following types of benefits provided under Decree 669/1974 were not used by CONDESA, JMA, or PERFRISA during the period of investigation:
(1) Accelerated Depreciation of Non-liquid Investments,
(2) Reduction of Certain Taxes, and
(3) Expropriation of Land for New Construction.
B. Certain Benefits Under the Privileged Circuit Exporter Credits Program
We discussed the Privileged Circuit Exporter Credits Program in section 1-B above. We preliminarily determined that two programs, working-capital loans and prefinancing of exports provide subsidies to welded pipes and tubes manufacturers, producers, or exporters. In addition, we preliminarily determine that the following programs identified in our notice of initiation were not used by CONDESA, JMA, or PERFRISA during the period of investigation:
(1) Commercial Services Loans, and
C. Warehouse Construction Loans
Exporters desiring to construct warehouse facilities adjacent to loading zones may borrow 70-75 percent of the total investment. We preliminarily determine CONDESA, JMA, and PERFRISA have received no loans under this program.
D. National and Regional Investment Incentives Programs
The government of Spain and regional and municipal authorities provide various investment incentive programs. We preliminarily determine that CONDESA, JMA, and PERFRISH have not participated in these regional programs.
IV. Programs for Which Additional Information Is Needed
Petitioner alleged that the producers of welded pipes and tubes purchase their steel inputs from Spanish producers which may themselves be subsidized. At this time, we do not have sufficient information from petitioner or respondents to determine whether countervailable benefits are being provided or to quantify the ad valorem amount of the possible subsidies regarding steel inuts. CONDESA responded that it purchases steel inputs *40631 from unrelated companies. PERFRISA responded that it purchases an unspecified amount of its raw material inputs from a related supplier.
In addition, we do not have sufficient information at this time to determine whether countervailable benefits are being provided to or to quantify the ad valorem amount of possible subsidies received by JMA with respect to DFE or steel inputs. Information in Department files does indicate that JMA purchases and pays turnover taxes on scrap metal which is used to make sheet for pipe and tube production.
Affirmative Determination of Critical Circumstances
Petitioner alleged that "critical circumstances" exist with respect to imports of certain welded carbon steel pipes and tubes from Spain. Under section 703(e)(1) of the Act, critical circumstances exist when there is a reasonable basis to believe or suspect that: "(A) the alleged subsidy is inconsistent with the Agreement, and (B) there have been massive imports of the class or kind of merchandise which is the subject of the investigation over a relatively short period."
A. Inconsistency with the Agreement
One of the subsidies alleged in this case is short-term working capital loans under the Privileged Circuit Exporter Credits Program. As discussed above, we have preliminarily determined that each of these three Spanish producers has received countervailable subsidies from such loans.
In 1982, Spain acceded to the Subsidies Code with a time-limited reservation concerning its current export subsidy programs. On November 15, 1982, in our Final Affirmative Countervailing Duty Determination on Certain Steel Products from Spain, we concluded that "Spain's reservation does not preclude us from finding, for purposes of a critical circumstances determination, that Privileged Circuit Exporter Credits are inconsistent with the Subsidies Code." We continue to believe this; therefore this criterion for critical circumstances is satisified.
B. Massive Imports
In determining whether imports of welded pipes and tubes from Spain have been massive over a relatively short period of time, we have considered the following factors: whether recent imports have increased significantly; whether recent import penetration ratios have increased significantly; whether the pattern of recent imports may be explained by seasonal factors; and whether recent imports are significantly above average imports calculated over the last three years. Based on these factors, we find that imports of welded pipes and tubes from Spain have been massive over a relatively short period of time.
For the reasons discussed above, we preliminarily determine that critical circumstances exist within the meaning of section 705(a)(2) of the Act. Therefore, as discussed in the "Suspension of Liquidation" section below, the suspension of liquidation of entries of welded pipes and tubes from Spain will commence 90 days prior to publication of this notice in the Federal Register.
Verification
In accordance with section 776(a) of the Act, we will verify all data used in making our final determination.
Suspension of Liquidation
In accordance with section 703 of the Act, we are directing the U.S. Customs Service to suspend liquidation of all unliquidated entries of welded pipes and tubes from Spain which are entered, or withdrawn from warehouse, for consumption, or or after the date of publication of this notice in the Federal Register. The Customs Service shall require a cash deposit or the posting of a bond for each such entry of this merchandise in the amount of 1.14 percent ad valorem. 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 nonprivilieged and nonconfidential information relating to this investigation. We will allow the ITC access to all privileged and confidential 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 Deputy Assistant Secretary for Import Administration. The ITC will make its determination of whether these imports materially injure, or threaten to materially injure, a U.S. industry 45 days after the Department makes its final affirmative determination.
Public Comment
In accordance with s 355.35 of the Commerce Department Regulations, if requested, we will hold a public hearing to afford interested parties an opportunity to comment on this preliminary determination on November 8, 1984, at 10:00 a.m. at the U.S. Department of Commerce, Room 3708, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230. Individuals who wish to participate in the hearing must submit a request to the Deputy Assistant Secretary for Import Administration, Room B-099, at the above address within 10 days of this notice's publication.
Requests 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 in at least 10 copies must be submitted to the Deputy Assistant Secretary by September 30, 1984. Oral presentations will be limited to issues raised in the briefs. All written views should be filed in accordance with 19 CFR 355.34, within 30 days of this notice's publication, at the above address and in at least 10 copies.
Alan F. Holmer,
Deputy Assistant Secretary for Import Administration.
October 10, 1984