(Cite as: 50 FR 49977)
NOTICES
DEPARTMENT OF COMMERCE
[C-585-504]
Preliminary Negative Countervailing Duty Determination; County Tubular Goods from Taiwan
Friday, December 6, 1985
*49977 AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that no benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters of oil country tubular goods (OCTG) in Taiwan. The estimated subsidy is 0.11 percent ad valorem. This rate is de minimis, and therefore our preliminary countervailing duty determination is negative.
If this investigation proceeds normally, we will make our final determination by February 13, 1986.
EFFECTIVE DATE: December 6, 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) 377-0189 (LaCivita) or 377-2830 (Martin)
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based on our investigation, we preliminarily determine that the following programs are countervailable:
- Preferential Export Financing.
*49978 We preliminarily determine the estimated net countervailable benefits for oil county tubular goods to be 0.11 percent ad valorem. Although we have determined these programs to be countervailable, the respondent received de minimis benefits during the review period. Therefore, we determine that no benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended, are being provided to manufacturers, producers or exporters of oil country tubular goods in Taiwan.
Case History
On July 22, 1985, we received a petition in proper form filed by the Lone Star Steel Company and CR&I Steel Corporation, producers of oil country tubular goods. 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 oil country tubular goods 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. In addition, the petition alleges that "critical circumstances" exist within the meaning of section 703(e)(1) of the Act.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on August 12, 1985, we initiated the investigation (50 FR 33384).
Since Taiwan is entitled to an injury determination under the section 701(b) of the Act, the International Trade Commission (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 September 5, 1985, the ITC determined that there is a reasonable industry (50 FR 37066).
On August 20, 1985, we presented a questionnaire concerning the petitioners' allegations to the American Institute on Taiwan in Washington, D.C. Responses to the questionnaire were received on September 20, 1985 and September 23, 1985.
On September 23, 1985, we received a timely request by petitioners for an extension of the deadline date for the preliminary determination. An extension was granted on September 26, 1985, (50 FR 40580). We stated that we expect to issue our preliminary determination by November 29, 1985.
There is only one known producer of oil country tubular goods in Taiwan, the Far East Machinery Company, Ltd (FEMCO). China Steel Corporation (CSC), a state-owned supplier of pipe and tube inputs, responded to the Department's questionnaire concerning preferentially-priced inputs.
Because of the extension of the preliminary determination, we were able to verify the responses to the questionnaires submitted by the authorities on Taiwan, the Far East Machinery Company and China Steel Corporation. Verification was conducted in Taiwan from October 15, 1985 to November 5, 1985.
Scope of the Investigation
The product covered by this investigation is "oil country tabular goods," which are hollow steel products of circular cross-section intended for use in drilling for oil or gas. These products include oil well casings, tubing, and drill pipe of carbon or alloy steel, whether welded or seamless, manufactured to either American Petroleum Institute (API) or non-API (such as proprietary) specifications as currently provided for in the Tariff Schedules of the United States, Annotated (TSUSA) under items 610.3216, 610.3219, 610.3233, 610.3234, 610.3242, 610.3243, 610.3249, 610.3252, 610.3254, 610.3256, 610.3258, 610.3262, 610.3264, 610.3721, 610.3722, 610.3751, 610.3925, 610.3935, 610.4025, 610.4035, 610.4225, 610.4235, 610.4325, 610.4335, 610.4942, 610.4944, 610.4946, 610.4954, 610.4955, 610.4956, 610.4957, 610.4966, 610.4967, 610.4968, 610.4969, 610.4970, 610.5221, 610.5222, 610.5226, 610.5234, 610.5240, 610.5242, 610.5243, 610.5244. This investigation includes oil country tubular goods that are in both finished and unfinished condition.
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).
For purposes of this preliminary determination, the period for which we are measuring subsidies (the review period) is calendar year 1984. Based upon our analysis of the petition, the responses to our questionnaires submitted by the Taiwan authorities, FEMCO, China Steel Corporation, and the amended response submitted after verification, we preliminarily determine the following:
I. Programs Preliminarily Determined To Be Countervailable
We preliminarily determine that the following programs provide countervailable benefits to manufactures, producers, or exporters of oil country tabular goods in Taiwan:
A. Preferential Export Financing
The Export Loan Discount Regulations of the Central Bank of China permit registered exporters in possession of a letter of credit to apply for low-cost export loans covering up to 85 percent of the value of the export transaction. Export loans are arranged through authorized foreign-currency banks, which may apply for an interest-rate accommodation from the Central Bank. Exporters settle the loan with foreign exchange within 180 days or pay an interest-rate penalty on the full amount of the loan.
The Central Bank sets the maximum and minimum interest rates for commercial lending in Taiwan. Export loans are set at rates equal to or below the minimum rates established for commercial lending.
The response indicates that FEMCO obtained export loans to finance exports of the products under investigation to the United States. Because these loans are contingent upon export performance and provide funds to borrowers at interest rates lower than those available for other purposes, we preliminarily determine that this program confers an export subsidy. To calculate the benefit, we compared the Central Bank's export-loan rate with its maximum short-term loan rate. We then multiplied the difference by the principal amount and allocated the benefit over the value of Femco's exports to the United States of the products under investigation. The extimated net subsidy is 0.10 percent ad valorem.
Article 31 of the Statute for Encouragement of Investment (SEI) permits exporters to establish an export loss reserve of up to one percent of the previous year's export exchange settlement to be used exclusively for compensating export losses. Companies treat the export loss reserve as a business expense and deduct it from taxable income in one year, then settle the account and carry the reserve funds forward as taxable income for the next year. FEMCO maintained an export loss reserve during the review period.
Because this program is contingent upon export sales, we preliminarily determine that it confers a benefit which constitutes an export subsidy. To *49979 calculate the benefits, we treated tax savings from the export loss reserve as a one-year interest-free loan. We compared the interest-free rate with the maximum lending rate set by the Central Bank. Dividing the benefit by the value of FEMCO's total 1984 exports, we found the estimated net subsidy to be 0.01 percent ad valorem.
II. Programs Preliminarily Determined Not To Confer Subsidies
We preliminarily determine the following programs do not confer subsidies on the manufacturers, producers or exporters of oil country tabular goods in Taiwan:
A. Business Tax Exemptions for Export Sales
The authorities on Taiwan levy a business tax on selling goods, rendering services or other profit seking activities within the territory of Taiwan. Article 29 of the SEI exempts export sales, which include sales to trading companies and to manufacturers for further processing before export, from the business tax. The response indicates that the amount of the exemption equals the amount of business tax due on each sale destined for export. Under the Act, the non-excessive rebate or exemption of indirect taxes levied at the final stage is not considered a subsidy. This exemption of indirect business taxes can be characterized as a remission of indirect taxes. Because the amount of the exemption is not greater than the amount of business tax due, we preliminarily determine that this program does not confer countervailable benefits within the meaning of the countervailing duty law.
The authorities on Taiwan levy a stamp tax on sales invoices. Article 33 of the SEI permits the reduction of the stamp tax from 0.4 percent to 0.1 percent for all invoices issued by a profit-seeking enterprise for transactions exempt from the business tax. The response indicates that the stamp tax reduction is less than the amount of stamp tax due on each sale destined for export. Under the Act, the non-excessive rebate or exemption of indirect taxes levied at the final stage is not considered a subsidy. Since the amount of the reduction is not greater than the amount of the stamp tax due, we preliminarily determine that this program does not confer countervailable benefits within the meaning of the countervailing duty law.
C. Preferential Prices for Raw Materials
We initiated an investigation based on information provided by the petitioner in Welded-Carbon Steel API Line Pipe from Taiwan (50 FR 32250), that the Taiwan authorities direct China Steel Corporation (China Steel) to provide coil at preferential prices to exporters. Under item (d) of theIllustrative 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).
In its response, China Steel, a state-owned corporation and a supplier of pipe and tube inputs, stated that it does have a two-tiered pricing policy. The first-tier price is applicable to domestic producers who manufacture goods for the Taiwan market. It is based on the landed, duty-paid price of imported hot- rolled coil. The second-tier price is offered to manufacturers who purchase coil to produce export products and is based on the landed, duty-free price of hot-rolled coil. The response indicates that both the first- and second-tier prices are set at or above world-market prices. Therefore, we preliminarily determine that this program does not confer benefits which constitute subsidies on exports of the subject merchandise.
D. Preferential Income Tax Ceiling--25 Percent
Petitioners allege that manufacturers, producers or exporters of oil country tubular goods in Taiwan benefit from a preferential income tax ceiling. Article 15 of the SEI permits productive enterprises and big trading companies to pay no more than 25 percent in corporate income taxes on income exceeding NT $500,000 rather than the 35 percent required by Taiwan's graduated corporate income tax law.
The responses indicate that Article 15 benefits are available to all productive enterprises, defined in the SEI as stock companies engaged in manufacturing, handicraft, mining, agriculture, forestry, fishery, animal husbandry, transportation, warehousing, public utilities, public facility construction and development, public housing construction, technical services, hotels and heavy machinery construction.
In prior cases, we found this program to be a subsidy based upon insufficient evidence that the program is non-specific. However, the evidence in this case indicates that these benefits are not limited to an industry or enterprise or group of industries or enterprises. Therefore, we preliminarily determine that this program does not confer countervailable benefiits within the meaning of the countervailing duty law.
III. Programs Preliminarily Determined Not To Be Used
We preliminarily determine that the following programs are not used by the manufacturers, producers, or exporters of oil country tubular goods in Taiwan:
A. Preferential Income Tax Ceiling--22 Percent
Article 15 of the SEI also permits enterprises engaged in the basic metal production industry, heavy machinery industry, petrochemical industry or other important productive enterprises which conform with the needs for development of economic and national defense industries and are capital-intensive and/or technolgy-intensive in nature to use a marginal tax rate of no more than 22 percent. The response stated that Femco did not use the 22 percent tax ceiling. Therefore, we preliminarily determine this program not to be used.
B. Accelerated Depreciation and Tax Holiday
Article 6 of the SEI permits newly-established productive enterprises to select one of the following benefits: (1) A tax holiday of up to five years providing the company depreciates its assets according to Taiwan's Service Life of Fixed Assets; or (2) accelerated depreciation on the service life of machinery, equipment and buildings, construction facilities, and communication and transportation facilities. In addition, Article 6 permits expanding enterprises to select (1) a tax-holiday of up to four years on the income derived from increased capacity, if it depreciates its assets according to Taiwan's Service Life of Fixed Assets, or (2) a rapid depreciation of the newly purchased equipment beginning in the year in which the machines begin operation.
The response stated that Femco did not claim accelerated depreciation or take a tax holiday during the period of review. Therefore, we preliminarily determine this program not to be used.
*49980 C. Tax Credit for Investment in Production Equipment
Under Article 10 of the SEI, productive enterprises may deduct from income tax payable an amount of up to 15 percent of the value of capital equipment purchased during the year. In the event that the amount of the tax credit exceeds the value of income tax payable, the balance may be carried forward for up to four subsequent years.
The response stated that FEMCO did not claim this credit on the tax return filed during the review period. Therefore, we preliminarily determine this program not to be used.
D. Duty Exemptions and Deferral on Imported Equipment
Article 21 of the SEI allows productive enterprises to pay import duties in a series of installments beginning one year from the date of importation on selected machinery and equipment that is not manufactured domestically. In addition, qualified enterprises may be exempt from paying import duties on selected machinery and equipment which is used for the establishment or expansion of an approved project or for research and development.
The response stated that FEMCO did not receive duty exemptions or deferrals. Therefore, we preliminarily determine this program not to be used.
E. Preferential Long-Term Loans
Article 84 of the SEI permits the Executive Yuan to establish and administer a special development fund to promote investments of interest to national economic development. The response stated that FEMCO did not use Article 84 financing in relation to the products under investigation. Therefore, we preliminarily determine this program not to be used.
Preliminary Negative Determination of Critical Circumstances
Petitioners alleged that imports of oil country tubular goods from Taiwan present "Critical circumstances." Under section 703(e)(1) of the Act, critical circumstances exist when the Department has a reasonable basis to believe or suspect that (1) the alleged subsidy is inconsistent with the Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the General Agreement of Tariffs and Trade ("the Subsidies Code"), and (2) there have been massive imports of the class or kind of merchandise which is the subject of the investigation over a relatively short period.
Based upon our analysis, the export subsidies bestowed upon oil country tubular goods in Taiwan are de minimis.
Accordingly, we preliminarily determine that this subsidy is not inconsistent with the Subsidies Code.
Since we have determined the the subsidies are not inconsistent with Code commitments, we need not determine whether there have been massive imports. Accordingly, we preliminarily determine that "critical circumstances" do not exist with respect to oil country tubular goods from Taiwan.
Verification
In accordance with 776(a) of the Act, we conducted a verification of the information provided in the questionnaire response. Our final determination will be based on verified information.
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 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.
If our final determination is affirmative, the ITC will determine whether these imports materially injure, or threaten material injury to, a U.S. industry within 45 days after publication of our notice in the Federal Register.
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 January 9, 1986 at the U.S. Department of Commerce, Room 1412, 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 for a hearing 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 January 2, 1985. Oral presentations will be limited to issues raised in the briefs.
In accordance with 19 CFR 335.33(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 10 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.
November 29, 1985.
[FR Doc. 85-29038 Filed 12-5-85; 8:45 am]
BILLING CODE 3510-DS-M