NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-274-803]
Preliminary Affirmative Countervailing Duty Determination: Steel Wire Rod From
Trinidad and Tobago
Monday, August 4, 1997
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AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: August 4, 1997.
FOR FURTHER INFORMATION CONTACT: Todd Hansen, Vincent Kane, or Sally Hastings,
Office of Antidumping/Countervailing Duty Enforcement, Group I, Office 1, Import
Administration, U.S. Department of Commerce, Room 1874, 14th Street and Constitution
Avenue, NW., Washington, DC 20230; telephone (202) 482-1276, 482- 2815, or 482-3464,
respectively.
Preliminary Determination:
The Department preliminarily determines that countervailable subsidies are being provided
to Caribbean Ispat Limited ("CIL"), a producer and exporter of steel wire rod from
Trinidad and Tobago. For information on the estimated countervailing duty rates,
please see the Suspension of Liquidation section of this notice.
Case History
Since the publication of the notice of initiation in the Federal Register on March 24, 1997
(62 FR 13866), the following events have occurred.
On April 1, 1997, we issued countervailing duty questionnaires to the Government of
Trinidad and Tobago ("GOTT") and to CIL concerning petitioners' allegations. We
received responses to our questionnaires from CIL and the GOTT on May 27 and May 29,
1997, respectively. We issued supplemental questionnaires to parties on June 13, 1997, and
received responses on June 30, 1997. On May 2, 1997, we postponed the preliminary
determination in this investigation until July 28, 1997 (62 FR 25172, May 8, 1997).
Scope of Investigation
The products covered by this investigation are certain hot-rolled carbon steel and alloy
steel products, in coils, of approximately round cross section, between 5.00 mm (0.20
inch) and 19.0 mm (0.75 inch), inclusive, in solid cross- sectional diameter. Specifically
excluded are steel products possessing the above noted physical characteristics and
meeting the Harmonized Tariff Schedule of the United States (HTSUS) definitions for (a)
Stainless steel; (b) tool steel; (c) high nickel steel; (d) ball bearing steel; (e) free machining
steel that contains by weight 0.03 percent or more of lead, 0.05 percent or more of
bismuth, 0.08 percent or more of sulfur, more than 0.4 percent of phosphorus, more than
0.05 percent of selenium, and/or more than 0.01 percent of tellurium; or (f) concrete
reinforcing bars and rods.
The following products are also excluded from the scope of this investigation:
Coiled products 5.50 mm or less in true diameter with an average partial decarburization
per coil of no more than 70 microns in depth, no inclusions greater than 20 microns,
containing by weight the following: carbon greater than or equal to 0.68 percent; aluminum
less than or equal to 0.005 percent; phosphorous plus sulfur less than or equal to 0.040
percent; maximum combined copper, nickel and chromium content of 0.13 percent; and
nitrogen less than or equal to 0.006 percent. This
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product is commonly referred to
as "Tire Cord Wire Rod."
Coiled products 7.9 to 18 mm in diameter, with a partial decarburization of 75 microns or
less in depth and seams no more than 75 microns in depth; containing 0.48 to 0.73 percent
carbon by weight. This product is commonly referred to as "Valve Spring Quality Wire Rod."
The products under investigation are currently classifiable under subheadings
7213.91.3000, 7213.91.4500, 7213.91.6000, 7213.99.0030, 7213.99.0090,
7227.20.0000, and 7227.90.6050 of the HTSUS. Although the HTSUS subheadings are
provided for convenience and customs purposes, our written description of the scope of
this investigation is dispositive.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are references to the provisions of the
Tariff Act of 1930, as amended by the Uruguay Round Agreements Act effective January 1,
1995 (the "Act").
Injury Test
Because Trinidad and Tobago is a "Subsidies Agreement Country" within the meaning of
section 701(b) of the Act, the International Trade Commission (ITC) is required to
determine whether imports of wire rod from Trinidad and Tobago materially injure, or
threaten material injury to, a U.S. industry. On April 30, 1997, the ITC published its
preliminary determination finding that there is a reasonable indication that an industry in
the United States is being materially injured or threatened with material injury by reason of
imports from Trinidad and Tobago of the subject merchandise (62 FR 23485).
Petitioners
The petition in this investigation was filed by Connecticut Steel Corp., Co- Steel Raritan, GS
Industries, Inc., Keystone Steel & Wire Co., North Star Steel Texas, Inc. and Northwestern
Steel and Wire (the petitioners), six U.S. producers of wire rod.
Subsidies Valuation Information
Period of Investigation
The period for which we are measuring subsidies (the "POI") is calendar year 1996.
Allocation Period
In the past, the Department has relied upon information from the U.S. Internal Revenue
Service ("IRS") on the industry-specific average useful life of assets, in determining the
allocation period for nonrecurring subsidies. See General Issues Appendix appended to
Final Countervailing Duty Determination; Certain Steel Products from Austria ("General
Issues Appendix") 58 FR 37217, 37226 (July 9, 1993). However, in British Steel plc. v.
United States, 879 F. Supp. 1254 (CIT 1995) ("British Steel"), the U.S. Court of International
Trade (the "Court") ruled against this methodology. In accordance with the Court's remand
order, the Department calculated a company-specific allocation period for nonrecurring
subsidies based on the average useful life ("AUL") of non- renewable physical assets. This
remand determination was affirmed by the Court on June 4, 1996. British Steel, 929 F. Supp.
426, 439 (CIT 1996).
In this investigation, the Department has followed the Court's decision in British Steel.
Therefore, for purposes of this preliminary determination, the Department has calculated a
company-specific AUL. Based on information provided by respondents, the Department has
preliminarily determined that the appropriate allocation period for CIL is 15 years.
Equityworthiness
In analyzing whether a company is equityworthy, the Department considers whether or not
that company could have attracted investment capital from a reasonable, private investor
in the year of the government equity infusion based on information available at that time.
In this regard, the Department has consistently stated that a key factor for a company in
attracting investment capital is its ability to generate a reasonable return on investment
within a reasonable period of time.
In making an equityworthiness determination, the Department examines the following
factors, among others:
1. Current and past indicators of a firm's financial condition calculated from that firm's
financial statements and accounts;
2. Future financial prospects of the firm including market studies, economic forecasts, and
projects or loan appraisals;
3. Rates of return on equity in the three years prior to the government equity infusion;
4. Equity investment in the firm by private investors; and
5. Prospects in world markets for the product under consideration.
In start up situations and major expansion programs, where past experience is of little use
in assessing future performance, we recognize that the factors considered and the relative
weight placed on such factors may differ from the analysis of an established enterprise.
For a more detailed discussion of the Department's equityworthiness criteria see the
General Issues Appendix at 37244.
Petitioners allege that the Iron and Steel company of Trinidad and Tobago Limited
("ISCOTT"), the predecessor to CIL, was unequityworthy from 1980-1995. In our initiation
notice (62 FR 13886, 13868; March 24, 1997), we stated that we would investigate ISCOTT's
equityworthiness for the period 1983-1990. We have now undertaken that examination,
consistent with our past practice. See, Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from France, 58 FR 37304 (July 8, 1993) ("Steel
from France").
For this investigation, we have preliminarily determined that ISCOTT is unequityworthy
during the period 1986 through 1994. For a discussion of this determination, see the section
of this notice on "Equity Infusions."
Equity Methodology
In measuring the benefit from a government equity infusion to an unequityworthy
company, the Department compares the price paid by the government for the equity to a
market benchmark, if such a benchmark exists, i.e., the price of publicly traded shares of
the company's stock or an infusion by a private investor at the time of the government's
infusion (the latter may not always constitute a proper benchmark based on the specific
circumstances in a particular case).
Where a market benchmark does not exist, the Department has determined in this
investigation to continue to follow the methodology described in the General Issues
Appendix at 37239. Following this methodology, equity infusions made into an
unequityworthy firm are treated as grants. Using the grant methodology for equity
infusions into an unequityworthy company is based on the premise that an
unequityworthiness finding by the Department is tantamount to saying that the company
could not have attracted investment capital from a reasonable investor in the infusion year
based on the available information.
Creditworthiness
When the Department examines whether a company is creditworthy, it is essentially
attempting to determine if the company in question could obtain commercial financing at
commonly available interest rates. If a company receives comparable long-term financing
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from commercial sources, that company will normally be considered
creditworthy. In the absence of comparable commercial borrowings, the Department
examines the following factors, among others, to determine whether or not a firm is
creditworthy:
1. Current and past indicators of a firm's financial health calculated from that firm's financial
statements and accounts;
2. The firm's recent past and present ability to meet its costs and fixed financial obligations
with its cash flow; and
3. Future financial prospects of the firm including market studies, economic forecasts, and
projects or loan appraisals.
In start up situations and major expansion programs, where past experience is of little use
in assessing future performance, we recognize that the factors considered and the relative
weight placed on such factors may differ from the analysis of an established enterprise. For
a more detailed discussion of the Department's creditworthiness criteria, see, e.g., Steel
from France at 37304, and Final Affirmative Countervailing Duty Determination;
Certain Steel Products from the United Kingdom 58 FR 37393, 37395 (July 9, 1993).
Petitioners have alleged that ISCOTT was uncreditworthy from 1980-1995. In our initiation
notice (62 FR 13866, 13868; March 24, 1997), we stated that we would investigate ISCOTT's
creditworthiness for the period 1983-1990. We did not include the years prior to 1983
because we determined that investments in and loans to the company through 1982 were
on terms consistent with commercial considerations in Carbon Steel Wire Rod From
Trinidad and Tobago: Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order 49 FR 480 (January 4, 1984) ("Wire Rod I") and petitioners
did not provide any new evidence to lead us to change our previous determination.
Regarding the period after 1990, petitioners provided no evidence in the petition to
support their claim that ISCOTT was uncreditworthy. On June 13, 1997, petitioners
supplemented their original allegation with financial information contained in the GOTT's
May 29, 1997 response.
Based on a review of petitioners' June 13, 1997 submission, as well as the information in the
responses, we preliminarily determine that ISCOTT was uncreditworthy during the period
1985-1994. ISCOTT did not show a profit for any year during this period and continued to
rely upon support from the GOTT to meet fixed payments. The company's gross profit ratio
was consistently negative in each of the years in which it had sales. Additionally, the
company's operating profit (net income before depreciation, amortization, interest and
financing charges) was consistently negative. The firm continued to show an operating loss
in each year it was in production, and was never able to cover its variable costs.
Regarding 1983, 1984, 1995, and 1996, we did not examine ISCOTT's creditworthiness
because ISCOTT did not receive any countervailable loans, equity infusions, or
nonrecurring grants in those years.
Discount Rates
We have calculated the long-term uncreditworthy discount rates for the period 1985
through 1994, to be used in calculating the countervailable benefit for nonrecurring grants
and equity infusions in this investigation because the respondent did not incur any debt
appropriate for use as discount rates, following the methodology described in Final
Affirmative Countervailing Duty Determination: Grain-Oriented Electrical Steel from
Italy ("GOES") 59 FR 18357, 18358 (April 18, 1994). Specifically, we took the highest prime
term loan rate available in Trinidad and Tobago in each year as listed in the Central Bank
of Trinidad and Tobago: Handbook of Key Economic Statistics and added to this a risk
premium of 12% of the median prime lending rate to establish the uncreditworthy discount
rate.
Privatization Methodology
In the General Issues Appendix, we applied a new methodology with respect to the
treatment of subsidies received prior to the sale of a company (privatization).
Under this methodology, we estimate the portion of the purchase price attributable to prior
subsidies. We compute this by first dividing the privatized company's subsidies by the
company's net worth for each year during the period beginning with the earliest point at
which nonrecurring subsidies would be attributable to the POI (i.e., in this case 1981 for
CIL) and ending one year prior to the privatization. We then take the simple average of the
ratios. The simple average of these ratios of subsidies to net worth serves as a reasonable
surrogate for the percent that subsidies constitute of the overall value of the company.
Next, we multiply the average ratio by the purchase price to derive the portion of the
purchase price attributable to repayment of prior subsidies. Finally, we reduce the benefit
streams of the prior subsidies by the ratio of the repayment amount to the net present value
of all remaining benefits at the time of privatization. In the current investigation, we are
analyzing the privatization of ISCOTT in 1994.
Based upon our analysis of the petition and responses to our questionnaires, we
preliminarily determine the following:
I. Programs Preliminarily Determined To Be Countervailable
A. Export Allowance Under Act No. 14
Under the provisions of Act No. 14 of 1976, as codified in Section 8(1) of the Corporation
Tax Act, companies in Trinidad and Tobago with export sales may deduct an export
allowance in calculating their corporate income tax. The allowance is equal to the ratio of
export sales over total sales multiplied by net income. Regardless of the magnitude of the
export allowance, however, companies must pay a minimum income tax in the amount of
the business levy or the corporate income tax, whichever is greater.
A countervailable subsidy exists within the meaning of section 771(5A) of the Act where
there is a financial contribution from the government which confers a benefit and is specific
within the meaning of section 771(5A) of the Act.
We have determined that the export allowance is a countervailable subsidy within the
meaning of section 771(5) of the Act. The export allowance provides a financial
contribution because in granting it the GOTT forgoes revenue that it is otherwise due. The
export allowance is specific, under section 771(5A)(B), because its receipt is contingent
upon export performance.
CIL made a deduction for the export allowance on its 1995 income tax return, which was
filed during the POI. Because the export allowance is claimed and realized on an annual
basis in the course of filing the corporate income tax return, we have determined that the
benefit from this program is recurring. To calculate the countervailable subsidy from the
export allowance, we divided CIL's tax savings during the POI by the total value of its
export sales during the POI. On this basis, we preliminarily determine the countervailable
subsidy from this program to be 3.45 percent ad valorem.
B. Equity Infusions
In 1978, ISCOTT and the GOTT entered into a Completion and Cash Deficiency Agreement
("CCDA") with
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several private commercial banks in order to obtain a part of the
financing needed for construction of ISCOTT's plant. Under the terms of the CCDA, the GOTT
was obligated to provide certain equity financing toward completion of construction of
ISCOTT's plant, to cover loan payments to the extent not paid by ISCOTT, and to provide
cash as necessary to enable ISCOTT to meet its current liabilities.
During the period from 1983 to 1989, a period of continuing losses, ISCOTT and the GOTT
commissioned several studies to determine the financially preferable course of action for
the company. Options included a shut-down of the plant, lease or sale of the plant, or
continued GOTT operation of the plant. In 1983, a Committee appointed by the Cabinet
concluded that it would cost ISCOTT more to shut the plant down than to keep it in
operation. In 1985, recognizing that ISCOTT's management lacked the technical expertise to
operate the plant efficiently, the GOTT signed a training, technical and management
contract with two established international steel producers, Voest Alpine and Neue
Hamburger Stahlwerke ("NHSW"), to increase ISCOTT's production efficiency. In 1987, the
GOTT commissioned the International Finance Corporation ("IFC") to evaluate ISCOTT's
prospects and recommend alternatives. The IFC completed its evaluation in August of 1987
and recommended that the GOTT enter into negotiations aimed at leasing ISCOTT's plant to
a private producer.
During 1988, the GOTT conducted lease negotiations with NHSW but late in that year the
negotiations broke down. P.T. Ispat Indo ("Ispat"), a company affiliated with CIL, then came
forward and expressed an interest in leasing the plant. In a February 13, 1989 letter to the
GOTT, the IFC expressed its support for lease of the plant to Ispat. On April 8, 1989, the
GOTT and Ispat reached agreement on a 10-year lease agreement with an option for Ispat to
purchase the assets after five years.
In December of 1994, CIL, the company created by Ispat to lease and operate the plant,
exercised the purchase option and purchased the plant. The purchase price was based on an
independent evaluation by a private consultant, as specified in the Plant Lease Agreement,
less credits that CIL received for improvements made in the plant. The Plant Sale
Agreement committed CIL to make additional expenditures on the plant for environmental
and production upgrades.
In Wire Rod I, the Department determined that payments or advances made by the GOTT to
ISCOTT during its start-up years were not countervailable. In making this determination,
the Department took into consideration the fact that it is not unusual for a large, capital
intensive project to have losses during the start-up years, the fact that several independent
studies forecast a favorable outcome for ISCOTT, and the fact that ISCOTT enjoyed several
important natural advantages. On these bases, advances to ISCOTT through April of 1983,
the end of the original POI, were found to be not countervailable.
Subsequent to the POI in Wire Rod I, ISCOTT continued to incur significant losses. In each of
the years from 1983 through 1994, it recorded losses ranging from TT $142,600,000 to TT
$376,700,000 with accumulated losses during this period amounting to TT
$1,611,700,000. In fact, the company did not show a profit in any of its years of operation.
Yet, despite these negative results and a worldwide downturn in the steel industry, the
GOTT continued to invest in ISCOTT. In each of the years from 1983 to 1994, the GOTT made
advances to ISCOTT ranging from TT $33,027,000 to TT $433,633,000 with an overall
total for these years of TT $1,787,466,000. These advances were made in accordance with
the terms of the CCDA, which obligated the GOTT to cover loan payments and meet current
operating expenses to the extent that ISCOTT was unable to meet these obligations.
Given the Department's decision in Wire Rod I that the GOTT's initial decision to invest in
ISCOTT and its additional investments through the first quarter of 1983 were consistent
with commercial considerations, the issue presented in this investigation is whether and at
what point the GOTT ceased to behave as a reasonable private investor. In our view, despite
the favorable factors underlying the earlier investment decisions, at some point in a
succession of heavy losses such as those incurred by ISCOTT, a private investor would have
reached the conclusion that further investment in the company was not warranted. For the
reasons explained below, we determine that the advances made to ISCOTT after 1985 were
inconsistent with the usual investment practice of a private investor.
As detailed in Wire Rod I, ISCOTT started operations in 1981. According to studies
supporting the initial decision to invest, it was reasonable to expect that the company
would experience difficulties in start-up. In a developing country such as Trinidad and
Tobago, personnel with the skill and expertise required to operate a large steel plant were
not readily available. Thus, the learning curve for the management and operation of the
plant was expected to be prolonged.
Despite the fact that the expectations for these early years were low, the GOTT
demonstrated its continuing concern about the viability of the venture. In 1983, in light of
ISCOTT's deteriorating financial condition and changing market expectations, the GOTT
established a Committee to study several options for the future of the company, including
liquidation of ISCOTT. While the Committee's report mentions factors that likely would not
have been taken into consideration by a private investor, such factors do not appear to
have influenced the Committee's recommendation. (Since the report and the
recommendation of the Committee are business proprietary, they are not discussed here.
The Department's review of the report is contained in a July 24, 1997, business proprietary
memorandum from team to Richard W. Moreland, Acting Deputy Assistant Secretary for
AD/CVD Enforcement, Group I ("Equityworthiness Memorandum"), the public version of
which is in the public file of the Central Records Unit, HCHB Room B-099 of the Department
of Commerce.)
Consistent with the recommendations made in the report, the GOTT continued to support
ISCOTT's operations. In 1984, although the company still operated at a loss, revenues and
cash flow from operations both improved. However, that trend was shortlived. In 1985,
ISCOTT suffered significant losses. These losses were of such a magnitude that a
reevaluation of the company's prospects was warranted before committing further funds to
ISCOTT. By the end of 1985, the company had accumulated losses of TT $1,331,842,000
and outstanding debt of TT $1,277,845,000 of which TT $718,122,000 was owed to the
GOTT. A private investor considering investment in ISCOTT at this time would have
concluded that acceptable returns on investment were not likely to occur within a
reasonable period of time. It is our opinion that any investment in ISCOTT after 1985 would
not have been consistent with the usual investment practice of private investors.
Further, we are not persuaded by the GOTT's claim that a default on the loan would have
resulted in an acceleration of the loan. In view of certain provisions in the CCDA, the GOTT
apparently could have avoided an acceleration of
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the loan in the event of default.
(Because these provisions are business proprietary, however, we have not included them in
this notice. Relevant details of the Department's discussion of these provisions are recorded
in the Equityworthiness Memorandum.)
Therefore, in view of the large and continued losses in the years prior to 1986, we
preliminarily determine that GOTT's advances to ISCOTT in 1986 and in the years that
followed through 1994 constitute countervailable subsidies under section 771(5) of the
Act. These advances were inconsistent with the usual investment practice of private
investors and constituted specific financial contributions in which a benefit was conferred.
To calculate the benefit, we followed the "Equity Methodology" described above. The benefit
allocated to the POI was adjusted according to the "Privatization Methodology" described
above. The adjusted amount was divided by CIL's total sales of all products during the POI.
On this basis, we calculated a subsidy of 11.37 percent.
C. Benefits Associated With the 1994 Sale of ISCOTT's Assets to CIL
In December 1994, after all of ISCOTT's manufacturing activities had been sold, ISCOTT was
nothing but a shell company with liabilities exceeding its assets. CIL, on the other hand, had
purchased most of ISCOTT's assets without being burdened by ISCOTT's liabilities.
The liabilities remaining with ISCOTT after the sale of productive assets to CIL had to be
repaid, assumed, or forgiven. In 1995, the National Gas Company of Trinidad and Tobago
Limited ("NGC") and the National Energy Corporation of Trinidad and Tobago Limited
("NEC"), a wholly owned subsidiary of NGC, wrote off loans owed to them by ISCOTT totaling
TT $77,225,775. Similarly, Trinidad and Tobago National Oil Company Limited
("TRINTOC") wrote off debts owed by ISCOTT totaling TT $10,492,830 as bad debt. While no
specific act eliminated this debt, indeed ISCOTT still had a residual accounts payable
balance on its books in 1996, CIL (and consequently the subject merchandise) received a
benefit as a result of the debt being left behind in ISCOTT.
Treating these liabilities as a subsidy to CIL is consistent with the Department's
determination in GOES at 18359. In that case, the GOI liquidated Finsider and its main
operating companies in 1988 and assembled the group's most productive assets into a new
operating company, ILVA S.p.A. In GOES, a substantial portion of the liabilities and the
losses associated with the assets were not distributed to ILVA. Instead, they remained
behind in Terni Acciai Speciali, a main operating unit of Finsider.
In this case, to calculate the benefit during the POI, we used our standard grant
methodology and applied an uncreditworthy discount rate. The debt outstanding after the
December 1994 sale of assets to CIL (adjusted as described below) was treated as grants
received at the time of the sale of the assets.
After the 1994 sale of assets, certain non-operating assets (e.g., cash and accounts
receivable) remained in ISCOTT. These assets have been used to fund repayment of ISCOTT's
remaining accounts payable. In order to account for the fact that certain assets, including
cash, were left behind in ISCOTT, we have subtracted this amount from the liabilities
outstanding after the 1994 transfer sale of assets.
The benefit allocated to the POI was adjusted according to the "Privatization Methodology"
described above. The adjusted amount was divided by CIL's total sales of all products
during the POI. On this basis, we determine the estimated net subsidy to be 1.22 percent ad
valorem for CIL.
II. Programs Preliminarily Determined To Be Not Countervailable
A. Import Duty Concessions Under Section 56 of the Customs Act
Section 56 of the Customs Act of 1983 provides for full or partial relief from import duties
on certain machinery, equipment, and raw materials used in an approved industry. The
approved industries that may benefit from this relief are listed in the Third Schedule to
Section 56. In all, 76 industries are eligible to qualify for relief under Section 56.
Companies in these industries that are seeking import duty concessions apply by letter to
the Tourism and Industries Development Company, which reviews the application and
forwards it with a recommendation to the Ministry of Trade and Industry. If the Ministry of
Trade and Industry approves the application, the applicant receives a Duty Relief License,
which specifies the particular items for which import duty concessions have been
authorized. CIL received import duty exemptions under Section 56 of the Customs Act
during the POI.
In its June 30, 1997, supplemental response, the GOTT provided a breakdown of the
number of licenses issued by industry during the first six months of the POI. During the POI,
the Ministry of Trade and Industry issued a large number of licenses to a wide cross section
of industries. Some of the licenses were new issuances and others were renewals of licenses
previously issued. Thus, the recipients of the exemption were not limited to a specific
industry or group of industries. The breakdown of licenses by industry also indicated that
the steel industry was not a predominant user of the subsidy nor did it receive a
disproportionate share of benefits under this program. For these reasons, we preliminarily
determine that import duty concessions under Section 56 of the Customs Act are not
limited to a specific industry or group of industries, hence, are not countervailable.
B. Point Lisas Industrial Estates Lease
The Point Lisas Industrial Port Development Company ("PLIPDECO") owns and operates
Point Lisas Industrial Estate. Prior to 1994, PLIPDECO was 98 percent government-owned.
Since then, PLIPDECO's issued share capital has been held 43 percent by the government, 8
percent by Caroni Limited, a wholly-owned government entity, and 49 percent by 2,500
individual and corporate shareholders whose shares are traded on the Trinidad and
Tobago Stock Exchange.
ISCOTT, the predecessor company to CIL, entered into a 30-year lease contract for a site at
Point Lisas in 1983, retroactive to 1978. The 1983 lease rental was revised in 1988. In 1989,
the site was subleased to CIL at the revised rental fee. In 1994, ISCOTT and PLIPDECO
signed a novation of the lease whereby ISCOTT's name was replaced on the lease by CIL's.
During the POI, CIL paid the 1988 revised rental fee for the site.
Under section 771(5) of the Act, in order for a subsidy to be countervailable it must, inter
alia, confer a benefit. In the case of goods or services, a benefit is normally conferred if the
goods or services are provided for less than adequate remuneration. The adequacy of
remuneration is determined in relation to prevailing market conditions for the good or
service provided in the country of exportation.
In establishing lease rates for sites in the industrial estate, PLIPDECO uses a standard
schedule of lease rates as a starting point for negotiating with prospective tenants. The
standard lease rates reflect PLIPDECO's evaluation of the market value of land in the estate.
Negotiated rates differ from the standard rates based on various factors, such as the size of
the lot, the type of business,
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the attractiveness of the tenant, and the date on which
the lease rate was signed.
Because the rates are negotiated individually with each tenant, the rate paid by CIL (and
other tenants) is specific. Therefore, it is necessary to examine whether PLIPDECO is
receiving adequate remuneration for the land it leases to CIL.
The site leased by ISCOTT in 1983 and now occupied by CIL is the largest site in the Point
Lisas Industrial Estate with an overall area that is considerably more than double the size of
the next largest site. Nevertheless, during the POI, CIL's lease fee per square meter for this
site appears to have been in line with the lease fees for other sites. This fact indicates that
CIL's lease rate is consistent with prevailing market conditions, at least in the Point Lisas
Industrial Estate. A further indication that the rates paid by tenants of the estate, including
CIL, provide adequate remuneration is the substantial private participation in PLIPDECO
since 1994. On these bases, we preliminarily determine that CIL's lease rates have provided
adequate remuneration for its site in the Point Lisas Industrial Estate.
At this time, we have no information regarding whether other industrial estates are in
operation in Trinidad and Tobago and, if so, what rates are charged by these estates. For
our final determination, we will attempt to obtain any available information on lease rates
for other industrial estates that may be located in Trinidad and Tobago.
C. Preferential Natural Gas Prices
NGC is the sole supplier of natural gas to industrial and commercial users in Trinidad and
Tobago. NGC provides gas pursuant to individual contracts with each of its customers.
Natural gas prices to small consumers are fixed with an annual escalator. Prices to large
consumers are negotiated individually based on annual volume, contract duration,
payment terms, use made of the gas, any take or pay requirement in the contract, NGC's
liability for damages, and whether new pipeline is required. Prices must be approved by
NGC's Board of Directors. The GOTT indicates that none of the current members of the board
is a government official nor do any government laws or regulations regulate the pricing of
natural gas.
The price paid by CIL for natural gas during the POI was established in a January 1, 1989
contract between ISCOTT and NGC, which ISCOTT assigned to CIL on April 28, 1989.
Average price data submitted by the GOTT for large industrial users of natural gas indicate
that the price paid by CIL during the POI was in line with the average price paid by large
industrial users overall.
Based on the same analysis described above regarding the lease at Point Lisas Industrial
Estate, we have preliminarily determined that the prices paid by CIL to NGC provide
adequate remuneration for the natural gas supplied to CIL. Therefore, we have
preliminarily determined that NGC's provision of natural gas to CIL is not a countervailable
subsidy under section 771(5) of the Act.
III. Program for Which More Information Is Needed
A. Preferential Electricity Prices
The Trinidad and Tobago Electric Commission ("TTEC"), which is wholly- owned by the
GOTT, is the sole supplier of electric power in Trinidad and Tobago. Prior to December
23, 1994, TTEC generated the power, which it sold. But on and after this date, TTEC divested
its power generating assets to the Power Generating Company of Trinidad and Tobago
Limited ("PowerGen"), which is now the sole producer of power in the country. PowerGen is
owned 51 percent by TTEC, 39 percent by Southern Electric International Trinidad Inc.,
and 10 percent by Amoco Power Resources Corporation.
The rates and tariffs for the sale of electricity are set by the Public Utilities Commission
("PUC"), an independent authority. In setting rates, the PUC takes into account cost of
service studies done by TTEC. Rates are comprised of a flat rate based on energy
consumption and a flat demand charge. Adjustments are made for fuel costs and
movements in exchange rates between the Trinidad and Tobago dollar and the U.S.
dollar.
For billing purposes, TTEC classifies electricity consumers into one of the following
categories: residential, commercial, industrial, and street lighting. Industrial users are
further classified into one of four categories depending on the voltage at which they take
power and the size of the load taken. CIL is the sole user in the very large load category
taking its power at 132 kV for loads over 25,000 KVA. Other large industrial users take
power at 33 kV or 66 kV and at loads from 199 to 25,000 KVA.
In its June 30, 1997, supplementary response, the GOTT supplied a cost of service study
incorporating 1996 data. The GOTT recently informed us that the study is only provisional
and a final study, with revised figures, will be issued soon. Given the relevancy of this study
to our analysis, we are requesting that the GOTT supply us with a copy of the final study
when it is becomes available. We will consider the results of this study as well as all other
information on the record regarding TTEC's provision of electricity to CIL in making our
final determination.
IV. Programs Preliminarily Determined To Be Not Used
A. Export Promotion Allowance
B. Corporate Tax Exemption
V. Program Preliminarily Determined Not To Exist
A. Loan Guarantee From the Trinidad and Tobago Electricity Commission
By 1988, ISCOTT had accumulated TT $19,086,000 in unpaid electricity bills owed to TTEC.
To manage this debt, TTEC obtained a loan from the Royal Bank in the amount of TT
$19,000,000, which enabled TTEC to more readily carry the receivable due from ISCOTT.
By 1991, ISCOTT extinguished its debt to TTEC.
At no time during this period did TTEC provide a guarantee to ISCOTT which enabled
ISCOTT to secure a loan to settle the outstanding balance on its account. The financing
obtained by TTEC from the Royal Bank benefitted TTEC rather than ISCOTT because it
allowed TTEC to have immediate use of funds that otherwise would not have been available
to it. On this basis, we preliminarily determine that TTEC did not provide a loan guarantee
to ISCOTT for purposes of securing a loan to settle the outstanding balance owed to TTEC.
Therefore, we preliminarily determine that this program did not exist.
Verification
In accordance with section 782(i) of the Act, we will verify the information submitted by
respondents prior to making our final determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we have calculated a subsidy rate for
CIL, the one company under investigation. We are also applying CIL's rate to any companies
not investigated or any new companies exporting the subject merchandise.
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to
suspend liquidation of all entries of steel wire rod from Trinidad and Tobago which are
entered, or withdrawn from warehouse, for consumption on or after the date of the
publication of this notice in the Federal Register, and to require a cash deposit or bond for
such entries of the
*41933
merchandise in the amounts indicated below. This suspension
will remain in effect until further notice.
Company Ad Valorem Rate
CIL--16.04 percent
All Others--16.04 percent
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In
addition, we are making available to the ITC all nonprivileged and nonproprietary
information relating to this investigation. We will allow the ITC access to all privileged and
business proprietary 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 Assistant Secretary for Import Administration.
If our final determination is affirmative, the ITC will make its final determination within 45
days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if requested, to afford
interested parties an opportunity to comment on this preliminary determination. The
hearing will be held on September 22, 1997, at the U.S. Department of Commerce, Room
3708, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230. Individuals who
wish to request a hearing must submit a written request within 30 days of the publication of
this notice in the Federal Register to the Assistant Secretary for Import Administration,
U.S. Department of Commerce, Room 1874, 14th Street and Constitution Avenue, N.W.,
Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
Requests for a public 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, eight copies of the business proprietary version and
three copies of the nonproprietary version of the case briefs must be submitted to the
Assistant Secretary no later than September 8, 1997. Eight copies of the business
proprietary version and three copies of the nonproprietary version of the rebuttal briefs
must be submitted to the Assistant Secretary no later than September 15, 1997. An
interested party may make an affirmative presentation only on arguments included in that
party's case or rebuttal briefs. Parties who submit an argument in this proceeding are
requested to submit with the argument (1) a statement of the issue and (2) a brief summary
of the argument. Written arguments should be submitted in accordance with 19 CFR
351.309 and will be considered if received within the time limits specified above.
If this investigation proceeds normally, we will make our final determination by October 14,
1997.
This determination is published pursuant to sections 703(f) and 777(i) of the Act.
Dated: July 28, 1997.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-20489 Filed 8-1-97; 8:45 am]
BILLING CODE 3510-DS-P