50 FR 23331
NOTICES
DEPARTMENT OF COMMERCE
[C-549-501]
Preliminary Affirmative Countervailing Duty Determination; Certain Circular
Welded Carbon Steel Pipes and Tubes From Thailand
Monday, June 3, 1985
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AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that certain benefits which constitute bounties or grants
within the meaning of the countervailing duty law are being
provided to manufacturers, producers, or exporters in Thailand of certain circular welded
carbon steel pipes and tubes (pipes and tubes). The estimated net bounty or grant is 4.41
percent ad valorem during the period of review. However, during the period of review companies
exporting the products under investigation filed applications for the receipt of Tax Certificates for
Exports for shipments to the United States. Therefore, we are adjusting the bonding/deposit rate to
reflect the receipt of benefits under this program. We are directing the U.S. Customs Service to
suspend liquidation of all entries of certain circular welded carbon steel pipes and tubes from
Thailand that are entered, or withdrawn from warehouse, for consumption on or after the date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 on entries
of these products in an amount equal to 5.03 percent ad valorem.
If this investigation proceeds normally, we will make our final determination by August 7, 1985.
EFFECTIVE DATE: June 3, 1985.
FOR FURTHER INFORMATION CONTACT: Rick Herring or Mary Martin, Office of Investigations,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230;
Telephones: (202) 377-0187 and (202) 377-3464.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based upon our investigation, we preliminarily determine that there is a reasonable basis to believe
or suspect that benefits which constitute bounties or grants within the meaning of section 303 of
the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or
exporters in Thailand of certain circular welded carbon steel pipes and tubes. The
following programs are preliminarily determined to confer bounties or grants:
- Export Packing Credits
- Tax Certificates for Exports
We estimate the net bounty or grant to be 4.41 percent ad valorem during the period of review.
However, we are adjusting the bonding/deposit rate by 0.62 percent ad valorem to reflect the
receipt of benefits under the Tax Certificates for Exports program which would apply to pipes and
tubes entered into the United States after the date of publication of this notice.
Case History
On February 28, 1985, we received a petition filed on behalf of the Committee on Pipe & Tube
Imports (CPTI), its subcommittees on standard and line pipe, and the companies which are
members of those subcommittees, with respect to certain welded carbon steel pipes and tubes.
In compliance with the filing requirements of § 355.26 of the Commerce Regulations (19 CFR
355.26), the petition alleged that manufacturers, producers, or exporters in Thailand of
certain circular welded carbon steel pipes and tubes receive bounties or grants within the
meaning of section 303 of the Act.
The petition, as originally filed, covered both standard pipe, which is defined in the "Scope of
Investigation" section of this notice, and line pipe. By amendment dated March 12, 1985, for
petitioners clarified that the petition was being filed on behalf of the standard pipe subcommittee
and the line pipe subcommittee of the CPTI, and by individual manufacturers of standard pipe and
line pipe. By amendment dated March 14, 1985, petitioners withdrew the portion of the petition
dealing with line pipe.
We found that the petition contained sufficient grounds upon which to initiate a countervailing
duty investigation, and on March 20, 1985, we initiated such an investigation (50 FR 12062). We
stated that we expected to issue a preliminary determination by May 24, 1985. We also stated in
our initiation notice that the subcommittee on standard pipe and the
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individual manufacturers of standard pipe had standing to file the petition with respect to standard
pipe, and that the subcommittee on line pipe did not have standing with respect to standard pipe
because a majority of its membership does not produce standard pipe.
Since Thailand is not a "country under the Agreement" within the meaning of section 701(b) of
the Act and the merchandise being investigated is dutiable, sections 303 (a)(1) and (b) of the Act
apply to this investigation. Accordingly, petitioners are not required to allege that, and the United
States International Trade Commission is not required to determine whether, imports of this
merchandise cause or threaten material injury to a United States industry.
We presented a questionnaire to the government of Thailand in Washington, D.C., on March
29, 1985. The response to our questionnaire was received on May 3, 1985.
On April 15, 1985, United States Steel Corporation (U.S. Steel) became a party to the proceeding. On
April 24, 1985, U.S. Steel alleged that additional bounties or grants, not covered in our initiation
notice, are being conferred on the manufacture and exportation of the merchandise. Since these
new allegations were made on a timely basis, we are seeking additional information on the Export
Promotion Fund, business tax exemptions on export sales, and tax deductions based on increased
export earnings.
Scope of the Investigation
The products under investigation are circular welded carbon steel pipes and tubes, with an
outside diameter of .375 inch or more but not over 16 inches, of any wall thickness, and currently
classifiable in the Tariff Schedules of the United States Annotated (TSUSA), under items 610.3231,
610.3234, 610.3241, 610.3242, 610.3243, 610.3252, 610.3254, 610.3256, 610.3258 and
610.4925. These products, commonly referred to in the industry as standard pipe or structural
tubing, are produced to various ASTM specifications, most notably A-120, A-53, and A-135.
Analysis of Programs
Throughout this notice, we refer to certain general principles applied to the facts of the instant
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, 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 the response is incorrect, we accept the response for purposes of the preliminary
determination. All such responses, of course, are subject to verification. If the response cannot be
supported at verification, and the program is otherwise countervailable, the program will be
considered to confer a bounty or grant in the final determination.
For purposes of this determination, the period for which we are measuring bounties or grants (the
review period) is calendar year 1984.
There are two Thai producers of circular welded carbon steel pipes and tubes (pipes and tubes)
which account for 95 percent of the exports of the subject merchandise to the United States during
the period for which we are measuring bounties or grants: Saha Thai Pipe Company and Thai Steel
Pipe Industry Company.
Based upon our analysis of the petition and the response to our questionnaire, we preliminarily
determine the following:
I. Programs Determined To Confer Bounties or Grants
We determine that bounties or grants are being provided to manufacturers,
producers, or exporters in Thailand of pipes and tubes under the following programs.
A. Export Packing Credits
Petitioners allege that producers and exporters of the products under investigation receive
preferential export financing. Export packing credits are short-term loans used for either
pre-shipment or post-shipment financing. These loans, which are provided through commercial
banks, can be rediscounted at the Bank of Thailand through its export refinancing facility.
Under the "Regulations Governing the Rediscount of Promissory Notes Arising from Exports" (B.E.
2514), the commercial banks charge the borrower a maximum of seven percent interest per annum
for the export credit, and then the bank rediscounts these loans at five percent interest with the
Bank of Thailand. On October 1, 1984, the discount rate was increased to nine percent and the
rediscount rate was increased to seven percent. These loans are provided in baht for up to 180
days.
Because only exporters are eligible for these loans, we determine that they are countervailable to
the extent that they are provided at preferential rates. As the benchmark for short-term loans, it is
our practice to use the national average commercial interest rate or the most comparable,
predominant
commercial interest rate for short-term financing. For purposes of this preliminary determination,
we are using a weighted-average interest rate as calculated by the Bank of Thailand and
included in the questionnaire response of the government, as best information available. During
verification, we will gather additional information on commercial short-term interest rates to
determine whether this is the most appropriate benchmark for short-term loans in Thailand.
Comparing this weighted-average interest rate to the rate charged on export packing credits, we
find that the rate on export packing credits is preferential, and, therefore, preliminarily determine
that these loans confer bounties or grants on the products under investigation. During the period of
review, Thai Steel Pipe used export packing credits on exports to the United States. Applying
this average commercial bank interest rate as the benchmark, we calculate an estimated net bounty
or grant of 4.41 percent ad valorem for exports to the United States.
B. Tax Certificates for Exports
Petitioners allege that producers and exporters of the products under investigation receive tax
certificates on their exports. The government of Thailand issues tax certificates to exporters
to rebate indirect taxes on
inputs into the exported product. In Thailand indirect tax rebates are authorized under two
programs.
In 1981, a program for rebating indirect taxes was implemented through the "Tax and Duty
Compensation of Exported Goods Produced in the Kingdom Act" (hereinafter the Tax and Duty Act).
The rebate rates under the Tax and Duty Act are computed on the basis of a 1975 input/output
(I/O) study. The statistical base for the I/O study was updated in 1980. Using the I/O study, the
Thai Ministry of Finance computes the value of total inputs (both imports and local purchases) at
ex-factory prices. They also calculate the import duties and indirect taxes on each input. The
Ministry then calculates the ratio of indirect taxes to the ex-factory prices of the final product to
determine the rebate rate for each type of product. This rate is then applied to the FOB value of the
export to determine the
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amount of rebate that will be provided. Under the Tax and Duty Act the rebates are paid to
companies through tax certificates which can be used to pay other tax liabilities. These tax
certificates can also be transferred to other companies which can use them to pay their tax
liabilities. The current rebate rates on 99 covered products are listed in the "Notification of the
Ministry of Finance" No. Or. 1/2524.
The alternative program authorizing the rebate of indirect taxes is the "Announcement of the
Ministry of Finance" No. 256/2524. This rebate authorization was announced in 1971 and revised in
1978. According to the
response of the government of Thailand, this "flat rate rebate" is available only to exporters of
galvanized steel pipe with coupling which is not a product under investigation; the flat rate
rebate also was not used by any of the producers who exported the subject merchandise during the
review period.
Accordingly, for this preliminary determination, we have analyzed only the rebate program
provided through the Tax and Duty Act.
Traditionally, we have applied a three-prong test to determine whether the rebate of prior stage
cumulative indirect taxes borne by inputs that are physically incorporated into the final product
confers a bounty or grant. Under this test, we examine whether: (1) The program involved operates
for the purpose of rebating indirect taxes; (2) there is a clear link between eligibility for payments
on exports and indirect taxes paid; and (3) the government has reasonably calculated and
documented the actual tax incidence borne by the product concerned and has demonstrated a
clear link between such tax incidence and the rebate amount paid on export.
Where an indirect tax rebate system incorporates rebates on import duties, or where there is a
fixed duty drawback system instead of an individual duty drawback system (Thailand operates
an individual duty drawback system), we have determined that we must apply a linkage analysis
similar to our test for rebate systems that are designed only to rebate indirect taxes.
First, the Department examines whether the system is intended to operate as a
drawback system. Next, the Department analyzes whether the government properly ascertained
the level of the fixed drawback. This includes a review of the sample, including the documentation
and accuracy of the information gathered from the sample on input coefficients, import prices and
rates of duty on imported inputs, the ratio of imported inputs to domestically produced inputs
(when, for a given imported input, there is also domestic production of the input), and the exchange
rates used to convert import prices denominated in a foreign currency to the local currency.
Finally, we review whether the rebate schedules are revised periodically so that the drawback
amount reflects the amount of duty (and indirect taxes, if there is a combined duty and indirect tax
rebate system) paid.
Where these conditions are met, the Department will consider that a rebate system that rebates
both indirect taxes and import duties, or a fixed duty drawback system, does not confer a bounty or
grant when the amount rebated for duties and indirect taxes on physically incorporated inputs
equals (or is less than) the fixed amount set in the schedule for the exported product. When the
system rebates duties and indirect taxes on both physically incorporated and non-physically
incorporated inputs, we would find a bounty or grant exists to the extent that the fixed rebate
exceeds the allowable rebate on physically incorporated inputs. Based on these tests, we
preliminarily determine the following:
The Tax and Duty Act provides that the taxes and duties eligible for rebate include those on
materials, equipment, spare parts, machinery, fuels and other energy used in production. Taxes
such as income tax, payment of royalties to the government for mineral rights, and taxes which are
otherwise refundable or exempt are excluded from the rebate. Thus, the program operates to
rebate indirect taxes and import duties.
The eligibility criteria for the Tax and Duty Act rebate program when considered in conjunction
with the government's response, including copies of the input/output tables, the conversions codes
and the Ministry of Finance rebate charts, leads us to conclude that there is a link between
eligibility for the rebate and indirect taxes and import duties actually paid.
We have reviewed the documentation submitted by the government in their response showing their
detailed calculation of the rebate rates. Under the Tax and Duty Act, these calculations itemize the
inputs and list ex-factory prices, import values, import taxes, and domestic indirect taxes. The
inputs itemized in the government's calculations include non-physically incorporated items.
Because under the Tax and Duty Act rebate program, non-physically incorporated items are
included in the rebate calculations at the final stage, we preliminarily determine that there is an
excessive remission of indirect taxes on exported goods. To calculate the amount of the overrbate,
we have taken into account the following factors. Under the program, the government
calculates a "full" rebate rate that includes both import duties and indirect taxes, and a "normal"
rebate rate which includes only indirect taxes. The normal rebate rate is claimed when firms
participate in the customs duty drawback or exemption programs on imported raw materials, or
when firms do not use imported materials in the production process. For purposes of this
preliminary determination, we are calculating the overrebate based only on the normal rate, since
according to the government response, all rebates applied for or received by pipe and tube
producers were calculated at the rate of 1.96 percent which is the normal rate of rebate.
To determine the estimated net bounty or grant from this excessive remission of indirect taxes, we
calculated the indirect tax incidence on physically incorporated inputs at FOB prices. We compared
this allowable rebate to the authorized rebate available to pipe and tube producers. We then
compared the percentage by which the authorized rebate would exceed the allowable rebate. Using
this methodology, we calculated an estimated net bounty or grant of 0.62 percent ad valorem.
Because this is a recurring program, we are allocating the benefit to the year of receipt.
The first shipments of the merchandise under investigation to the U.S. were in the last quarter of
1984. Although applications for tax certificates were filed based on these exports, no tax
certificates based on these exports were received by either producer during the review period.
Since applications have
been filed and the tax certificates are forthcoming, the benefits accorded under this program will
apply to pipes and tubes imported into the United States after the date of publication of this notice.
Therefore, we are adjusting the bonding/deposit rate to reflect the receipt of the tax certificates.
This results in an estimated bonding/deposit rate of 0.62 percent ad valorem.
II. Programs Determined Not To Be Used
We preliminarily determine that the manufacturers, producers or exporters in Thailand of
pipes and tubes do not use the following programs which were listed in our notice of initiation.
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A. Investment Promotion Act
Petitioners allege that producers and exporters of the products under investigation receive benefits
under the Investment Promotion Act. The Investment Promotion Act (B.E. 2520) of 1977 provides
incentives for investment to promote development of the Thai economy. Administered by the
Board of Investment, the Investment Promotion Act authorizes the exemption of import duties and
certain taxes. According to the response of the government of
Thailand, neither Saha Thai nor Thai Steel Pipe receive benefits under this program.
B. Export Processing Zones
In 1979, Export Processing Zones were authorized through the "industrial Estates Authority of
Thailand Act" (B.E. 2522). One export processing zone has been set up in Thailand.
According to the response of the government of Thailand, neither Saha Thai nor Thai Steel
Pipe is located in the export processing zone.
C. Rediscount of Industrial Bills
Petitioners allege that producers and exporters of the product under investigation receive benefits
from the rediscount of Industrial bills. The Bank of Thailand authorizes rediscounts for
short-term promissory notes arising from industrial activity. The Bank of Thailand's
"Regulations Governing the Rediscount of Promissory Notes Arising from Industrial
Undertakings" permit commercial banks to rediscount short-term promissory notes for industrial
purchases. These industrial promissory notes are also called industrial bills. According to the
response of the government of Thailand, neither Saha
Thai nor Thai Steel Pipe use this program.
D. Electricity Discount for Exporters
Petitioners allege that exporters of the products under investigation receive discounts of electricity
charges. The three electricity authorities in Thailand provides a discount of 20 percent on the
electricity rates charged to producers of export products. The discount is calculated as a credit
which is deducted from each company's electric bill. According to the response of the government
of Thailand, neither Saha Thai nor Thai Steel Pipe use this program.
E. Assistance to Trading Companies
Petitioners allege that trading companies in Thailand receive benefits under the Investment
Promotion Act. In 1978 the Board of Investment authorized certain incentives to eligible trading
companies under section 36 of the Investment Promotion Act. These incentives included duty
exemption for both raw materials and essential materials used in export production, exemptions of
certain business taxes, double deduction of foreign marketing expenses for income tax purposes
and permission to maintain foreign currency accounts. According to the response of the
govenment of Thailand, Saha Thai and Thai
Steel Pipe do not export the subject merchandise through Thai trading companies.
F. Tax Exemption for Promoted Industries
Petitioners allege that "promoted" industries are exempt from certain sales taxes. According to the
response of the government of Thailand, this program is not used.
Verification.
In accordance with section 776(a) of the Act, we will verify the data used in making our final
determination. As previously stated, we will not accept any statement in the response that cannot
be verified in 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 certain circular welded carbon steel pipes and tubes from
Thailand which are entered, or withdrawn from warehouse, for consumption on 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 5.03 ad valorem. This
suspension will remain in effect until further notice.
Public Comment
In accordance with § 355.35 of our regulations (19 CFR 355.35), 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 June 26, 1985, at the U.S. Department of Commerce, room 1851,
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 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,
pre-hearing briefs in at least 10 copies must be submitted to the Deputy Assistant Secretary by June
19, 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 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)).
Dated: May 24, 1985.
Alan F. Holmer,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 85-13207 Filed 5-31-85; 8:45 am]
BILLING CODE 3510-DS-M