(Cite as: 50 FR 41924)
NOTICES
DEPARTMENT OF COMMERCE
[C-583-503]
Preliminary Affirmative Countervailing Duty Determination; Welded Carbon Steel Line Pipe From Taiwan
Wednesday, October 16, 1985
*41924 AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to manufacturers, producers or exporters of welded carbon steel line pipe (line pipe) in Taiwan. The estimated net subsidy is 1.15 percent ad valorem.
We have notified the United States International Trade Commission (ITC) of our determination. We are directing the U.S. Customs Service to suspend liquidation of all entries of line pipe from Taiwan that are entered or withdrawn from warehouse for consumption, on or after the date of publication of this notice, and to require a cash deposit or bond on entries of this product in an amount equal to the bonding rate.
If this investigation proceeds normally, we will make our final determination by December 23, 1985.
EFFECTIVE DATE: October 16, 1985.
FOR FURTHER INFORMATION CONTACT:Laurel LaCivita or Mary Martin, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 377-3003 (LaCivita) or 377-3464 (Martin).
SUPPLEMENTARY INFORMATION:
Based upon our investigation, we preliminarily determine that there is reason to believe or suspect that certain benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers or exporters of line pipe in Taiwan. For purposes of this investigation, the following programs are found to confer subsidies:
- Tax Exemptions for Export Sales.
We preliminarily determine the estimated net subsidy to be 1.15 percent ad valorem for all manufacturers, producers or exporters of line pipe in Taiwan.
Case History
On July 16, 1985, we received a petition in proper form filed by the Line Pipe Subcommittee of the Committee of Pipe and Tube Imports (CPTI) and by each of its member companies who produce line pipe. In compliance with the filing requirements of s 355.26 of our regulations (19 CFR 355.26), the petition alleges that manufacturers, producers or exporters of line pipe in Taiwan directly or indirectly receive benefits which constitute subsidies within the meaning of section 701 of the Act, and that these imports materially injure, or threaten material injury to, a U.S. industry.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on August 5, 1985, we initiated such an investigation (50 FR 32751). We stated that we expected to issue a preliminary determination by October 9, 1985.
Since Taiwan is entitled to an injury determination under section 701(b) of the Act, the ITC is required to determine whether imports of the subject merchandise from Taiwan materially injure, or threaten material injury to, a U.S. industry. Therefore, we notified the ITC of our initiation. On August 30, 1985, the ITC determined that there is a reasonable indication that these imports materially injure a U.S. industry (50 FR 36159).
On August 15, 1985, we presented a questionnaire concerning the petitioners' allegations to the American Institute in Taiwan in Washington, D.C. Responses to the questionnaire were received on September 20, 1985 and September 23, 1985.
There are two known producers of welded carbon steel line pipe in Taiwan, *41925 the Far East Machinery Company, Ltd. (FEMCO) and Kao Using Chang Iron and Steel Corporation (KHC). China Steel Corporation (CSC) responded to the Department's questionnaire concerning preferentially-priced inputs.
Scope of the Investigation
The product covered by this investigation is welded carbon steel line pipe, with an outside diameter of .375 inch or more but not over 16 inches, and with a wall thickness of not less than .065 inch, currently classified in the Tariff Schedules of the United States, Annotated (TSUSA) under items 610.3208 and 610.3209. This product is produced to various American Petroleum Institute (API) specifications for line pipe, most notably API-5L or API-5X.
Analysis of Programs
Throughout this notice, we refer to certain general principles applied to the facts of the current investigation. These principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina; Final Affirmative Countervailing Duty Determination and Countervailing Duty Order," which was published in the April 26, 1984, issue of the Federal Register (49 FR 18006).
Consistent with our practice in preliminary determinations, when 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 are subject to 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.
For purposes of this preliminary determination, the period for which we are measuring subsidies, "the review period", is calendar year 1984, which corresponds to the respondents' fiscal and financial year.
Based upon our analysis of the petition and the responses to our questionnaire submitted by the Taiwan authorities, FEMCO, KHC, CSC, we preliminarily determine the following:
I. Programs Preliminary Determined To Confer Subsidies
We preliminarily determine that subsidies are being provided to manufacturers, producers or exporters of line pipe in Taiwan under the following programs:
Under Article 31 of the Statute for Encouragement of Investment (SEI), exporters are able to set aside an export loss reserve of up to one percent of export sales from the previous year. The reserve is treated as a deduction from taxable income and is identified as a liability on company accounts. Should a company's export loss reserve exceed one percent during the tax year, excess funds are carried forward as taxable income in the subsequent year.
Because this program is contingent upon export sales, we preliminarily determine that it confers a benefit which constitutes an export subsidy. To calculate the benefit, we multiplied the corporate tax rate by the amount of tax deductions claimed by the respondent companies, then divided the tax savings by the value of the respondent companies' total 1984 exports. The estimated net subsidy is 0.03 percent ad valorem.
B. Tax Exemption for Export Sales
Articles 29 and 30 of the SEI and Articles 41 through 45 of the Enforcement Rules of the SEI, provide exporters with an exemption from the gross business receipts tax and a reduction of the invoice stamp tax. To apply for export sales tax relief, exporters submit export shipping documents, letters of credit and other documents to the local tax authorities who verify the export-sales transactions and exempt them from the 0.75 percent gross business receipts tax and reduce the invoice stamp tax rate from 0.4 percent to 0.1 percent. These programs may be used simultaneously.
The gross business receipt tax exemption and the invoice stamp tax reduction provide relief from two types of taxes that arguably are indirect taxes.
Under U.S. countervailing duty law, the non-excessive rebate of indirect taxes levied at the final stage, and of prior-stage cumulative indirect taxes borne by inputs that are physically incorporated into the final product, is not considered a subsidy. However, because the response does not indicate that bases for the gross business receipts tax and invoice stamp tax calculations, we believe that this program should be countervailed for the purpose of the preliminarily determination.
To calculate the benefit, we added the amount of the tax savings from each program and allocated the resulting sum over the value of the respondent companies' total 1984 exports. The estimated net subsidy is 1.12 percent ad valorem.
II. Program Preliminarily Determined Not To Confer a Subsidy
We preliminarily determine that subsidies are not provided to the manufacturers, producers or exporters of line pipe in Taiwan under the following program:
A. Preferential Prices for Raw Materials
Petitioners allege that the Taiwan authorities are directing China Steel Corporation (CSC), a state-owned corporation and a supplier of pipe and tube inputs, to provide coil at preferential prices to exporters in order to make it easier for them to export. However, in their questionnaire response, CSC submitted information which indicates that although they do have a two-tiered pricing policy, all coil prices are set at or above world-market prices. Under item (d) of the Illustrative List of Export Subsidies annexed to the Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade, a price preference for inputs used in the production of export goods constitutes a subsidy only if the preference lowers the price below world-market levels (See, Final Negative Countervailing Duty Determination: Certain Steel Wire Nails from the Republic of Korea, 47 FR 39549). Therefore, we preliminarily determine that this program does not confer a benefit which constitutes a subsidy on exports of the subject merchandise.
III. Program Preliminarily Determined Not To Be Used
We preliminarily determine that the following program is not used by the manufacturers, producers or exporters of line pipe in Taiwan:
A. Preferential Export Financing
The Export Financing Program was established by the Export Loan Discount Regulations of the Central Bank of China. All registered exporters who have received a letter of credit are eligible for low-cost financing which covers up to 85 percent of the export transaction. Export financing loans are arranged through authorized foreign currency banks, which apply for an interest-rate accommodation from the Central Bank. Exporters have 180 days to settle the loan with foreign exchange or pay an interest-rate penalty on the full amount of the loan.
The response indicates that neither respondent company received export financing under the Export Loan *41926 Discount Regulations of the Central Bank of China for exports of the products under investigation to the United States. Therefore, we preliminarily determine this program not to be used.
Verification
In accordance with 776(a) of the Act, we will verify all data used in making our final determination.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of welded carbon steel line pipe from Taiwan which are entered, or withdrawn from warehouse, for consumption, on or after the date of publication of this notice in the Federal Register and to require a cash deposit or bond equal to 1.15 percent ad valorem for each entry of this merchandise from Taiwan. This suspension will remain in effect until further notice.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non- privileged and non-confidential 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 determine whether these imports materially injure, or threaten material injury to, a U.S. industry within 120 days after the Department makes its preliminary affirmative determination or 45 days after its final affirmative determination, whichever is latest.
Public Comment
In accordance with s 355.35 of our regulations, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination at 10:00 a.m. on November 19, 1985, at the U.S. Department of Commerce, Room 1413, 14th Street and Constitution Avenue, NW., Washington, DC 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 the publication of this notice.
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, at least 10 copies of the pre-hearing briefs must be submitted to the Deputy Assistant Secretary by November 12, 1985. Oral presentations will be limited to issues raised in the briefs.
In accordance with 19 CFR 355.33(d) and 19 CFR 355.34, written views will be considered if received not less than 30 days before the final determination or, if a hearing is held, within 7 days after the hearing transcript is available.
This notice is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).
Gilbert B. Kaplan,
Acting Deputy Assistant Secretary for Import Administration.
October 9, 1985.
[FR Doc. 85-24676 Filed 10-15-85; 8:45 am]
BILLING CODE 3510-05-M