(Cite as: 51 FR 36579)
NOTICES
DEPARTMENT OF COMMERCE
[C-469-009]
Carbon Steel Wire Rod From Spain; Preliminary Results of Countervailing Duty Administrative Review
Tuesday, October 14, 1986
*36579 AGENCY: International Trade Administration, Department of 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 carbon steel wire rod from Spain. The review covers the period February 24, 1984 through September 30, 1984 and seven programs.
As a result of the review, the Department has preliminarily determined the net subsidy to be 7.76 percent ad valorem for Forjas Alavesas, S.A., and 24.04 percent ad valorem for all other firms during the period of review. Interested parties are invited to comments on these preliminary results.
EFFECTIVE DATE: October 14, 1986.
FOR FURTHER INFORMATION CONTACT:Susan Silver or Paul McGarr, Office of Compliance, International Trade Administration, U.S. Department of Commerce, Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On July 10, 1984, the Department of Commerce ("the Department") published inthe Federal Register (49 FR 18089) a countervailing duty order on carbon steel wire rod from Spain. We began this review of the order under our old regulations. On October 1, 1985, after the promulgation of our new regulations, a Spanish exporter, Forjas Alavesas, S.A., requested in accordance with s 355.10 of the Commerce Regulations that we complete the administrative review of this order. We published the initiation of the administrative review on November 27, 1985 (50 FR 48825). The Department has now conducted that administrative review in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act"). We revoked the order effective October 1, 1984 (50 FR 37018, September 11, 1985).
Scope of Review
Imports covered by the review are shipments of Spanish carbon steel wire rod which includes coiled, semi-finished, hot-rolled carbon steel products of approximately round solid cross-section, not under 0.20 inch nor over 0.74 inch in diameter, no tempered or treated, not partly manufactured, and valued over 4 cents per pound. Such merchandise is currently classifiable under item 607.1700 of the Tariff Schedules of the United States Annotated.
The review covers the period February 24, 1984 through September 30, 1984 and seven programs: (1) A rebate of indirect taxes upon exportation under the DFE; (2) Operating capital loans; (3) Long-term loans; (4) Capital grants for pollution control, energy conservation and economic development; (5) Short-term Privileged Circuit Exporter Credit programs other than operating capital loans; (6) Research and development programs; and (7) Accelerated depreciation and reduction in taxes.
We received a response from Forjas Alavesas, S.A., but we did not receive responses from the Spanish government or from any other firm.
Analysis of Programs
Spain employs a cascading tax system. Under this system, the government levies a turnover tax ("IGTE") on each sale of a product through its various stages of production, up to (but not including) the final sale in Spain. Upon exportation of the product, the government, under the Desgravacion Fiscal a la Exportacion ("the DFE"), rebates both these accumulated IGTE indirect taxes and certain final stage taxes.
Although the Spanish government rebates upon exportation all indirect taxes paid under the cascading tax system, the Tariff Act and the Commerce Regulations allow the rebate of only the following: (1) Indirect taxes borne by inputs which are physically incorporated in the exported product (see Annex 1.1 of Part 355 of the Commerce Regulations); and (2) indirect taxes levied at the final stage (see Annex 1.2 of Part 355 of the Commerce Regulations). If the payment upon export exceeds the total amount of allowable indirect taxes described above, the Department considers the difference to be an overrebate of indirect taxes and, therefore, a subsidy.
We requested information concerning the indirect tax incidence on physically incorporated inputs used to produce carbon steel wire rod to determine whether the DFE rebates allowable indirect taxes. However, we did not receive this information. Therefore, we consider the entire DFE rebate to provide a countervailable benefit.
On July 11, 1984, the Spanish government reduced the DFE rebate on steel products from 14.5 percent to 12.3 percent of the f.o.b. invoice price. To calculate the benefit for all firms other than Forjas Alavesas, the single firm responding to the questionnaire, we prorated these two rates according to the proportion of the review period that each rate was in effect. On this basis, we preliminarily determine the benefit to be 13.89 precent ad valorem.
Forjas Alavesas used imported as well as domestically produced billets as an input for making wire rod. The DFE rebate is paid only on the domestic value- added content of each shipment. In addition, the Spanish government deducts one percent of the DFE payment if the date of payment from customers is later than 90 days from the date of shipment. We verified the actual amount of DFE payments on wire rod received by Forjas Alavesas during the review period and allocated that amount over the total f.o.b. value of the merchandise exported by the company during the review period. Based on this information, we preliminarily determine that Forjas Alavesas received a *36580 weighted- average benefit of 7.08 percent ad valorem.
The Spanish government directs banks to make long-term loans to companies in certain industries at rates or on terms inconsistent with commercial considerations. Such loans are provided for approximately ten years. Forjas Alavesas received long-term loans for pollution control and plant modernization that had outstanding balances during the review period.
To calculate the benefit from these loans, we used the loan methodology in the Subsidies Appendix attached to the notice of final affirmative countervailing duty determination and countervailing duty order on cold-rolled carbon steel flat-rolled products from Argentina (49 FR 18006, April 26, 1984). Forjas Alavesas did not obtain any comparable commercial loans in the years in which it received the non-commercial long-term loans. Therefore, we used as our long-term commercial benchmark the national average interest rate for long-term loans, as published by the Bank of Spain in its Boletin Estadistico. Because we were unable to obtain the national average rate of return on equity to calculate the weighted cost of capital, we used the long- term commercial benchmark rate as the discount rate.
Since these loans benefit a company's total production, we allocated the benefit over the company's total sales during the review period. On this basis, we preliminarily determine the benefit from this program to be 0.43 percent ad valorem for Forjas Alavesas during the review period.
For all other firms, we are using the rate for long-term loans from the notice of final affirmative countervailing duty determination on oil country tubular goods (49 FR 47060, November 30, 1984), which is the highest contemporaneous rate from another Spanish case, as the best information available. On this basis, we preliminarily determine the benefit to be 5.75 percent ad valorem.
The Basque Regional Government in Spain provides grants under Law 11/1981 of November 18, 1981, which established the "Center for Energy and Mineral Conservation (CADEM)." These grants are provided to companies in the Basque region that purchase equipment for energy conservation. Orders 478, 627 and 628 established the requirements for obtaining benefits under CADEM. The Basque Regional Government in Spain also provides grants under Order 8/1983 to industries in the Basque region that install pollution control equipment in their plants.
These government grants are designed to cover a portion of total investment by firms in purchasing certain new energy conservation and pollution control equipment required by the Basque government.
Because we were unable to determine whether these grants were provided to more than one industry in the Basque region, and we know of only one company that received these benefits, we consider them to be countervailable.
The Regional Board of the Province of Alava, through Agreements of October 30, 1981 and November 7 and 23, 1981, provides grants to certain industries located in priority zones. Because these grants are available only in certain priority zones within the Province of Alava, we consider them to be countervailable.
Forjas Alavesas received grants under CADEM, Order 8/1983 of the Basque government, and the Regional Board of the Province of Alava during the review period.
To calculate the benefits we applied the grant methodology from the Subsidies Appendix using a 15-year allocation period (the average useful life of assets in the steel industry, according to the U.S. Internal Revenue Service Class Life Asset Depreciation Range System) and the same discount rate as described for the long-term loans. Because these grants benefit a company's total production, we allocated the benefit over total sales of all steel products by Forjas Alavesas during the review period. On this basis, we preliminarily determine that Forjas Alavesas received a benefit of 0.25 percent ad valorem.
For all other firms, we are using as the best information available the rate for Forjas Alavesas, which is the highest contemporaneous rate.
The Spanish government requires banks to set aside funds for short-term operating capital loans as part of its Privileged Circuit Exporter Credit program, which provides short-term financing to exporters at preferential rates. The operating capital loans are granted for a period of less than one year.
Forjas Alavesas had no loans from this program on which interest was due during the review period. Therefore, we preliminarily determine that Forjas Alavesas received no benefits from this program during the review period.
For all other firms, we are using the rate from the final determination in oil country tubular goods from Spain as the best information available. On this basis, we preliminarily determine the benefit to be 3.46 percent ad valorem.
(5) Other Programs
We also examined the following programs and preliminarily find that Forjas Alavesas did not use them during the review period.
A. Short-term Privileged Circuit Exporter Credit loans other than operating capital loans;
B. Research and development incentives; and
C. Accelerated depreciation and reduction in taxes.
We found that short-term export credits under the Privileged Exporter Circuit program provided a countervailable benefit of 0.69 percent ad valorem in the notice of final results of administrative review of the countervailing duty order on amoxicillin trihydrate and its salts from Spain (49 FR 12730, March 30, 1984). Therefore, we are using this rate as the best information available for all other firms. Because the Department has never found research and development incentives and accelerated depreciation and reduction in taxes to constitute or provide a countervailable benefit in any Spanish case, we preliminarily determine there to be no benefit from these programs.
Preliminary Results of Review
As a result of the review, we preliminarily determine the net subsidy to be 7.66 percent ad valorem for Forjas Alavesas and 24.04 percent ad valorem for all other firms. Because we consider these rates to be significantly different as defined in section 706(a)(2) of the Tariff Act, we are granting a company- specific rate to Forjas Alavesas.
The Department intends to instruct the Customs Service to assess countervailing duties of 7.76 percent of the f.o.b. invoice price on all shipments of Spanish carbon steel wire rod from Forjas Alavesas, S.A., and 24.04 percent of the f.o.b. invoice price of shipments of this merchandise from all other firms entered, or withdrawn from warehouse, for consumption on or after February 16, 1984 and exported on or before September 30, 1984.
Because we revoked this order effective October 1, 1984, we do not intend to instruct the Customs Service to collect a cash deposit of estimated countervailing duties.
Interested parties may submit written comments on these preliminary results within 25 days of the date of publication of this notice and may request disclosure and/or a hearing within 10 *36581 days of the date of publication. Any hearing, if requested, will be held 30 days after the date of publication or the first workday afterward. 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 Tariff Act (19 U.S.C. 1675(a)(1)) and s 355.10 of the Commerce Regulations (50 FR 32556, August 13, 1985).
Dated: October 7, 1986.
Gilbert B. Kaplan,
Deputy Assistant Secretary, Import Administration.
BILLING CODE 3510-DS-M