(Cite as: 51 FR 19583)
NOTICES
DEPARTMENT OF COMMERCE
[C-583-504]
Final Negative Countervailing Duty Determination; Oil Country Tubular Goods From Taiwan
Friday, May 30, 1986
*19583 AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We 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 net subsidy is 0.11 percent ad valorem. This rate is de minimis, and therefore this determination is negative. We have notified the United States International Trade Commission (ITC) of our determination.
EFFECTIVE DATE: May 30, 1986.
FOR FURTHER INFORMATION CONTACT: Laurel LaCivita or Loc Nguyen 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 377-0167 (Nguyen).
SUPPLEMENTARY INFORMATION:
Final Determination
Based on our investigation, we determine that the following programs are countervailable:
- Preferential Export Financing.
We determine the net countervailable benefits for OCTG 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 (the Act), are being provided to manufacturers, producers or exporters of OCTG in Taiwan.
Case History
On July 22, 1985, we received a petition in proper form filed by the Lone Star Steel Company and CF & I Steel Corporation, producers of OCTG. In compliance with the filing requirements of s 355.26 of our regulations (19 CFR 355.26), the petition alleged that manufacturers, producers or exporters of OCTG 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 *19584 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 such and investigation (50 FR 33384).
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, U.S. industry. Therefore, we notified the ITC of our initiation. On September 5, 1985, the ITC preliminarily determined that there is a reasonable indication that these imports materially injure a U.S. industry (50 FR 37066).
On August 20, 1985, we presented a questionnaire concerning the petitioners' allegations to the American Institute on Taiwan in Washington, DC. Responses to the questionnaire were received on September 20 and 23, 1985.
There is only one known producer of OCTG in Taiwan, the Far East Machinery Company, Ltd. (FEMCO). China Steel Corporation (China Steel), a state-owned supplier of pipe-and-tube inputs, responded to the Department's questionnaire concerning preferentially-priced inputs.
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 expected to issue our preliminary determination by November 29, 1985.
Verification was conducted in Taiwan from October 15, 1985, to November 5, 1985.
On November 29, 1985, we issued our preliminary negative determination.
Our notice of preliminary determination gave interested parties an opportunity to submit oral and written views. A hearing was not held because no interested party requested one in this case. Written views were received from petitioners on February 3 and 14, 1985, from respondents on February 4 and 14, 1985, and from China Steel on February 3, 1985.
On December 4, 1985, petitioners filed a request to extend the deadline date for a final determination in the countervailing duty investigation to correspond to the date of the final determination in the antidumping investigation, pursuant to section 606 of the Trade and Tariff Act of 1984. This request was granted on January 27, 1986 (51 FR 3377).
On January 16, 1986, respondents requested a delay on the deadline for the antidumping duty determination. Therefore, pursuant to section 735(a)(2) of the Act, we granted a postponement of the final antidumping and countervailing duty determinations on February 22, 1986 (51 FR 7308). We stated that we expected to issue a final determination by May 21, 1986. On April 16, 1986, the United States Steel Corporation (U.S. Steel) filed comments on our preliminary determination.
Scope of Investigation
The products covered by this investigation are "oil country tubular 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, 610.4210, 610.4220, 610.4225, 610.4230, 610.4235, 610.4240, 610.4310, 610.4320, 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 and 610.5244. This investigation includes OCTG 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 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 and China Steel, the verification, the amended response submitted after verification, and the briefs submitted by interested parties, we determine the following:
I. Programs Determined to be Countervailable
We determine that the following programs provide countervailable benefits to manufacturers, producers or exporters of OCTG 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 reduction 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 were set at rates equal to or below the minimum rates established for commercial lending during the review period. Because the rates given by commercial banks are near the maximum interest rate set by the Central Bank and because no further information is available regarding average commercial lending rates in Taiwan, we used the maximum lending rates set by the Central Bank as our short-term commercial benchmark.
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 determine that this program confers a benefit which constitutes 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 1984 exports to the United States of the product under investigation. The 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 to compensate export losses. Companies treat the export loss reserve as a business expense and deduct it from taxable income in one year, then settle *19585 the account and carry the reserve funds forward as taxable income for the next year. FEMCO received benefits from export loss reserves during the review period.
Because this program is contingent upon export sales, we determine that it confers a benefit which constitutes an export subsidy. To calculate the benefit received in 1984, we treated tax savings from the export loss reserve as a one-year interest-free loan received in mid-1983 at the time the income tax forms were filed. We compared the interest-free rate with the maximum lending rate set by the Central Bank and divided the benefit by the value of FEMCO's total 1984 exports and found the net subsidy to be 0.01 percent ad valorem.
II. Programs Determined Not to Confer Subsidies
We determine that the following programs do not confer subsidies on the manufacturers, producers or exporters of OCTG 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 seeking 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 amount of the exemption equals the amount of business tax due on each sale destined for export. Companies pay the business tax monthly and receive exemptions for export at that time. However, if the export remains unconfirmed at the time the taxes are due, or, if the goods are sold to trading companies or to other manufacturers for further processing before export, companies initially report the sale as a domestic sale, then apply for the business tax exemptions at the time of export. Such exemptions take the form of a rebate of taxes paid. Under the Act, the non-excessive remission of indirect taxes levied at the final stage is not considered a subsidy. We verified that the amount of the exemption or rebate is not greater than the amount of business tax due; therefore, we determine that this program does not confer countervailable benefits on manufacturers, producers or exporters of OCTG 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 stamp tax reduction is less than the amount of stamp tax due on each sale destined for export. Under the Act, the non- excessive remission of indirect taxes levied at the final stage is not considered a subsidy. Because we verified that the amount of the reduction is not greater than the amount of the stamp tax due, we determine that this program does not confer countervailable benefits within the meaning of the countervailing duty law.
C. Preferential Prices for Raw Materials
Petitioners alleged that the Taiwan authorities direct China Steel to provide coil at preferential prices to exporters.
China Steel, a state-owned corporation and a supplier of pipe-and-tube inputs, maintains a two-tiered pricing policy. The higher 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 lower 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.
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). Based on an examination of China Steel's second-tier prices for hot-rolled coil used in the production of OCTG, and of the World Market prices for such coil, we found that China Steel's prices were at world- market levels; therefore, we determine that China Steel's two-tiered pricing policy does not confer a counteravailable benefit within the meaning of the countervailing duty law.
D. Preferential Income Tax Ceiling--25 Percent
Petitioners alleged that manufacturers, producers or exporters of OCTG 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.
Article 15 benefits are available to all productive enterprises, defined in the SEI as stock companies engaged in manufacturing, handicrafts, 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 countervailable because respondents were unable to demonstrate that these benefits were not limited to a specific enterprise or industry, or group of enterprises or industries. However, in the Final Negative Countervailing Duty Determination: Welded Carbon Steel Line Pipe from Taiwan (50 FR 53363) (Line Pipe), we determined that these benefits were not limited to a specific industry or enterprise or group of industries or enterprises; therefore, we determine that this program does not confer a subsidy within the meaning of the countervailing duty law.
E. 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.
Article 10 benefits are available to all productive enterprises defined above. In prior cases, we found this program to be countervailable because respondents were unable to demonstrate that these benefits were not limited to a specific enterprise or industry, or group of enterprises or industries. However, in Line Pipe, we determined that these benefits are not limited to a specific enterprise or industry, or group of enterprises or industries; therefore, we determine that this program does not confer a subsidy within the meaning of the countervailing duty law.
III. Programs Determined Not to be Used
We determine that the following programs are not used by the manufacturers, producers, or exporters of OCTG in Taiwan:
*19586 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 conforms with the needs for development of economic and national defense industries and are capital-intensive and/or technology-intensive in nature to use a marginal tax rate of no more than 22 percent. We verified that FEMCO did not use the 22-perent tax ceiling.
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 provided that 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.
We verified that FEMCO neither claimed accelerated depreciation nor took a tax holiday during the period of review.
C. Duty Exemptions and Deferrals 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.
We verified that FEMCO did not receive duty exemptions or deferrals.
D. 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. We verified that FEMCO did not use Article 84 financing with respect to U.S. sales of the products under investigation.
Petitioners' Comments
Comment 1: Petitioners allege that the Department did not conduct a complete verification of FEMCO's short-term loan history due to the Central Bank's refusal to allow the Department to examine its discount loan records. They maintain that because the Department was unable to examine the Central Bank's records, it was unable to confirm whether FEMCO reported all of its subsidized short-term loans. Petitioners further argue that since all of FEMCO's exports of OCTG to the U.S. meet the criteria for low-cost export financing, it is reasonable to believe that FEMCO received export financing for all of its OCTG export sales. Petitioners request that the Department use best information available to determine that FEMCO received preferential export financing for all of its OCTG exports to the United States.
DOC Position: We disagree. The Department conducted a complete verification of FEMCO's loan transactions (see FEMCO Verification Report). Furthermore, the Department examined that loan ledgers regarding commercial and export financing at the branch of the International Commercial Bank of China (ICBC) which FEMCO uses.
The ICBC's records matched those reported by FEMCO with respect to the dates of disbursement and repayment of principal and interest and with respect to the terms and conditions of all such loans; therefore, the Department maintains that FEMCO's loan reporting was accurate and complete and, as such, should be sole basis for determining whether a subsidy was received.
Comment 2: Petitioners allege that the Department did not verify the lending rates charged by independent commercial banks in Taiwan, nor whether these banks require compensating balances in return for granting commercial loans. U.S. Steel, an interested party to the proceeding, further contends that the benchmark used to quantify benefits on short-term export loans should recognize that compensating balances requirements increase effective interest rates, citing the preliminary affirmative countervailing duty determination Certain Steel Products from Brazil (49 FR 17988, 17991). Petitioners and U.S. Steel request that the Department use best information available to construct a benchmark assuming the existence of compensating balances to raise the benchmark to the effective commercial lending rate.
DOC Position: We disagree. The Department did verify the minimum and maximum lending rates set by the Central Bank to which all commerical banks must adhere (See Government Verification Report). Because there was no allegation of, and we found no evidence of, a uniform requirement for compensating balances and no government publication gives a definitive measure of the extent to which compensating balances are actually used, we have determined not to use compensating balances in calculating our benchmark interest rate.
Comment 3: Petitioners allege that FEMCO may have qualified for a preferential income tax ceiling of 22 percent under the Statute for Encouragement of Investment (SEI). They further allege that because the authorities on Taiwan refused to provide a list of all companies receiving such financing, the Department should infer that FEMCO was among the companies on that list. Petitioners note that FEMCO's original tax return held by the City Tax Administration listed the company's tax rate whereas the copy held by FEMCO did not provide this information; therefore, petitioners argue that the Department should use the best information available to assume that FEMCO received the ceiling rate of 22 percent.
DOC Position: We disagree. FEMCO does not qualify for the 22-percent rate under Article 2.1 of the Categories and Criteria for Special Encouragement of Important Productive Enterprises. Furthermore, the Department examined FEMCO's tax forms kept on file at the City Tax Administration which reported tha FEMCO paid taxes at the 25-percent rate. Since this is the tax form filed with the tax authorities, this adequately establishes that the firm paid taxes at the 25-percent rate. Therefore, we maintain that FEMCO did not receive the more favorable 22-percent tax rate.
Comment 4: Petitioners argue that the Department should countervail the SEI's provision of a 25-percent tax rate to all productive enterprises as defined in Article 3 of the SEI. Petitioners maintain that the 25-percent rate is not generally available because various industries, and "non-productive" activities, such as interest income, are excluded from using this rate.
DOC Position: We disagree. Eligibility for the programs covers a wide variety of industries including those in the manufacturing, service, and agricultural sectors. Therefore, we have determined that benefits under this program are not *19587 limited to a specific enterprise or industry, or group of enterprises or industries within the meaning of the Act. (See Analysis of Programs section of this notice.)
Comment 5: Petitioners allege that during verification, the Department determined that carbon and alloy steel seamless pipes, including OCTG, were among the metallurgical products qualifying for accelerated depreciation under Artilce 6 of the SEI. They further allege that the Department failed to properly verify this program because the Ministry of Finance, which authorizes the benefits and "would naturally be presumed to maintain a list," informed the Department that a list of Article 6 beneficiaries does not exist.
DOC Position: We disagree. Petitioners incorrectly quote the verification report with respect to the findings on OCTG. The OCTG that FEMCO produces is neither a carbon steel seamless pipe nor an alloy steel seamless pipe, and therefore, expansion or establishment of its OCTG facilities does not qualify for such benefits.
Furthermore, the Department cannot consider a verification deficient based on the presumption that a government agency should maintain a list of its beneficiaries. The Department examined FEMCO's depreciation schedules to determine utilization of the accelerated depreciation provision of Article 6 of the SEI. Upon examination of these records, and those at the City Tax Administration, we found no evidence that this provision had been used.
Comment 6: Petitioners allege that the Department's verification of FEMCO's use of the tax holiday provision of Article 6 of the SEI was inadequate. The Department learned at verification that FEMCO had approval of a four-year tax holiday stemming from the 1982 purchase of specific machinery. Petitioners allege that since FEMCO did not volunteer this information in its questionnaire response, and that, since it is difficult to believe that FEMCO would not have taken advantage of other benefits of Article 6 of the SEI, the Department should assume that FEMCO received a tax holiday upon introduction of its OCTG capacity.
DOC Position: We disagree. The Department verified at the local tax authorities, and at FEMCO, that FEMCO did not take a tax holiday in conjunction with its purchase of the approved capital equipment.
Comment 7: Petitioners fully support the arguments made by the Committee of Pipe and Tube Imports ("CPTI"), petitioners in the countervailing duty investigation of welded carbon steel line pipe from Taiwan, with respect to China Steel's provision of inputs at three price levels. (See Final Negative Countervailing Duty Determination 50 FR 53363). FEMCO was a respondent company in this investigation. The first-tier price is based on the CIF landed duty- paid price of imported coil for producers selling domestically. The second- tier price is based on the CIF landed duty-free price of imported coil for producers selling for export. The third-tier price is a variance price lowering the second-tier price to compensate for declining world prices. In particular, petitioners believe that the prices of China Steel's inputs should have been compared to the actual price that domestic users such as FEMCO paid for their imported inputs in order to determine if the China Steel sales provided a subsidy as argued by CPTI.
DOC Position: 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 "those commercially available on the world market to their exporters", i.e., below world-market levels. Accordingly, in determining whether China Steel's prices were preferential, we compared not only the actual prices FEMCO paid China Steel to the actual prices FEMCO paid for imported coil, but also compared the prices FEMCO paid China Steel to generally available world-market prices for coil. In so doing, we found that the prices were at or above the benchmark prices. Therefore, there was no subsidy.
Comment 8: Petitioners maintain that the Department was unable to verify the price FEMCO paid for its hot-rolled coil from China Steel, and hence, must use best information to determine that FEMCO purchased hot-rolled coil for OCTG at the variance, or lowest, price.
DOC Position: The Department examined FEMCO's contract with China Steel for API hot-rolled coil used to make OCTG; we traced this purchase through its invoice, transfer voucher and ledger entry. We determined that the price paid was above the world-market price.
Comment 9: U.S. Steel argues that the proper benchmark interest rate to quantify the subsidy rate for short-term export loans should include nonbank financing. They cite the final affirmative countervailing duty determinations on Cold Rolled Sheet from Korea (49 FR 47284, 47287), Cold Rolled Sheet from Argentina (49 FR 18006, 1807), and Wire Rod from Saudi Arabia (51 FR 4206, 4208) as cases where the Department determined the benchmark by weight averaging the interest rates on short-term domestic credit, both bank and nonbank, as the best approximation of what firms pay for financing, absent preferential export loans.
DOC Position: In the cases cited by U.S. Steel, we did not use average of bank and non-bank credits as our benchmark. In the Korean case, we used the weighted-average cost of all short-term credit to measure the preference built into the government's rediscount mechanism for short-term export loans. In that investigation, we still used the government-mandated ten-percent interest rate as our short-term interest-rate benchmark for other programs. In the Saudi Arabian case, we looked only to long-term loan programs and used an average of commerical bank lending rates and generally-available government lending rates. Our normal practice is to look to the lending rates available in the country from either commercial banks or generally-available government sources. If the government mandates an interest-rate ceiling, as it does in Taiwan, we would still use those rates provided they were generally available.
Comment 10: U.S. Steel argues that the state-owned China Steel Corporation (China Steel) provides hot-rolled coil at preferential prices to OCTG exporters. They allege that the authorities on Taiwan restrict coil imports, thus requiring producers of OCTG in Taiwan to buy the domestic coil. They contend that, because of this import restriction, it is irrelevant as a matter of law and policy whether China Steel's preferentially-priced coil (for export use) is sold at, above, or below world prices.
DOC Position: There is no evidence that the authorities on Taiwan restrict imports. We verified that FEMCO did import hot-rolled coil; therefore, we need not address whether a prohibition on the importation of a product makes comparison to world market-prices irrelevant. Finally, comparison to world-market prices is consistent with the law and with paragraph (d) of the Annex to the Subsidies Code.
Comment 11: U.S. Steel argues that a subsidy is being provided to FEMCO in the form of reduced electricity rates by the state-run Taiwan Power Co. and that this should be included in the final determination because the Department's practice is to consider program-wide changes that occur prior to the preliminary determination.
DOC Position: U.S. Steel did not submit this allegation until 30 days *19588 before the final determination. There was ample opportunity to submit this allegation in time for the Department to investigate. Since this allegation was submitted far too late to be investigated, we have not done so. In addition, as a general rule, we may take into account program-wide changes which occur after the period of investigation and before the preliminary determination if we have verified information on the change and the magnitude of the resulting subsidy. We do not have verified information that FEMCO has received benefits that constitute a subsidy in the form of reduced electricity rate by the state run Taiwan Power Co.; therefore, we cannot include this in our final determination.
Comment 12: U.S. Steel alleges that subsidies are also being provided to the steel industry in Taiwan by the Ministry of Economic Affairs (MOEA) in a plan that allows the industry to extend the period of bank checks and to pay tariffs at a date subsequent to importation of machinery and other plant facilities. They content that the MOEA will also ask local banks to be lenient in approving loans to the steel industry. U.S. Steel argues that since this program, and the one discussed in Comment 4, were adopted in mid-1985, before the Department's preliminary determination, they should be included in the subsidy rate for this final determination.
DOC Position: See our response to Petitioner's eleventh comment.
Respondent's Comments
Comment 1: Respondent argues that in regard to the Preferential Export Financing Program, the Department should use the number of days outstanding, and not assume a full 180-day term, when calculating the benefits for short- term loans.
DOC Position: We agree. Our short-term loan methodology includes the number of days outstanding as one of the variables in the formula for calculating a subsidy rate. We verified the number of days each loan was outstanding and used this in the calculation.
China Steel's Comments
Comment 1: China Steel asserts that the world-market price for coil is the price available to customers in the position of the respondents, which in this investigation is the price available to Southeast Asian coil users on the open world market.
DOC Position: We disagree. See our response to Petitioner's seventh and eighth comment.
Comment 2: China Steel argues that the appropriate price comparison for world- market-price analysis is between China Steel's base price for hot-rolled coil and the base price for hot-rolled coil offered by foreign suppliers.
DOC Position: We disagree. In this case, the appropriate price comparison is between the final F.O.B. price offered by foreign suppliers for each grade, quality, and size of hot-rolled coil and between China Steel's second-tier ex- works price of the comparable grade, quality and size of hot-rolled coil.
Comment 3: China Steel argues that a restriction on imports, as alleged by U.S. Steel, does not constitute a countervailable subsidy per se, rather, U.S. countervailing duty law determines whether inputs are preferentially priced by reference to world market price.
DOC Position: See our response to Petitioners' tenth comment.
Final Negative Determination of Critical Circumstances
Petitioners alleged that imports of OCTG 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, ad XXIII of the General Agreement of 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. We generally consider the following concerning massive imports: (1) The volume and value of the imports; (2) seasonal trends; and (3) the share of domestic consumption accounted for by the imports.
Based upon our analysis, the export subsidies bestowed upon OCTG in Taiwan are de minimis. Accordingly, we preliminarily determined that these subsidies are not inconsistent with the Subsidies Code.
Since we have determined that the subsidies are not inconsistent with Code commitments, we need not determine whether there have been massive imports. Accordingly, we determine that "critical circumstances" do not exist with respect to OCTG from Taiwan.
Verification
In accordance with 776(a) of the Act, we conducted a verification of the information provided in the questionnaire response. During verification, we followed normal verification procedures, including meeting with government officials and inspection of documents, as well as on-site inspection of the companies producing and exporting the merchandise under investigation to the U.S.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the ITC of our determination. Since this determination is negative, the investigation will be terminated upon the publication of this notice in the Federal Register. Hence, the ITC is not required to make a final injury determination.
This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)).
Paul Freedenberg,
Asssitant Secretary for Trade Administration.
May 21, 1986.
[FR Doc. 86-12163 Filed 5-29-86; 8:45 am]
BILLING CODE 3510-DS-M