[Federal Register: February 8, 2002 (Volume 67, Number 27)]
[Page 5976-5984]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-489-809]
Preliminary Negative Countervailing Duty Determination: Carbon
and Certain Alloy Steel Wire Rod From Turkey
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary negative countervailing duty
determination.
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SUMMARY: The Department of Commerce preliminarily determines that
countervailable subsidies are not being provided to producers or
exporters of carbon and certain alloy steel wire rod from Turkey.
EFFECTIVE DATE: February 8, 2002.
FOR FURTHER INFORMATION CONTACT: Jennifer D. Jones or S. Anthony
Grasso, Office of Antidumping/Countervailing Duty Enforcement, Group 1,
Import Administration, U.S. Department of Commerce, Room 3099, 14th
Street and Constitution Avenue, N.W., Washington,D.C. 20230; telephone
(202) 482-4194 and (202) 482-3853, respectively.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
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 (``URAA'') effective January 1, 1995
(``the Act''). In addition, unless otherwise indicated, all citations
to the Department of Commerce's (``the Department's'') regulations are
to 19 CFR Part 351 (April 2001).
Petitioners
The petitioners in this investigation are Co-Steel Raritan, Inc.,
GS Industries, Keystone Consolidated Industries, Inc., and North Star
Steel Texas, Inc. (collectively, ``petitioners'').
Case History
The following events have occurred since the publication of the
notice of initiation in the Federal Register. See Notice of Initiation
of Countervailing Duty Investigations: Carbon and Certain Alloy Steel
Wire Rod from Brazil, Canada, Germany, Trinidad and Tobago, and Turkey,
66 FR 49931 (October 1, 2001) (``Initiation Notice'').
On October 9, 2001, we issued countervailing duty (``CVD'')
questionnaires to the Government of the Republic of Turkey (``GRT'')
and the producers/exporters of the subject merchandise. Due to the
large number of producers and exporters of carbon and certain alloy
steel wire rod (``wire rod'' or ``subject merchandise'') in Turkey, we
decided to limit the number of responding companies to the two
producers/exporters with the largest volumes of exports to the United
States during the period of investigation: Colakoglu Metalurji, A.S.
(``Colakoglu'') and Habas Sinai ve Tibbi Gazlar Istihsal Endustrisi,
A.S. (``Habas''). See October 5, 2001 memorandum to Susan Kuhbach,
Respondent Selection, which is on file in the Department's Central
Records Unit in Room B-099 of the main Department building (``CRU'').
Also on October 9, we received a request from the petitioners to
amend the scope of this investigation to exclude certain wire rod. The
petitioners submitted further clarification with respect to their scope
amendment request on November 28, 2001. Additionally on November 28,
the five largest U.S. tire manufacturers and the industry trade
association, the Rubber Manufacturers Association (``the tire
manufacturers''), submitted comments on the proposed exclusion. Counsel
for the GRT and the companies submitted comments on this scope
amendment request also on November
[[Page 5977]]
28. On January 28, 2002, the tire manufacturers submitted a response to
the petitioners' amendment request.
On November 14, 2001, we postponed the preliminary determination of
this investigation until February 1, 2002. See Carbon and Certain Alloy
Steel Wire Rod From Brazil, Canada, Germany, Trinidad and Tobago, and
Turkey: Postponement of Preliminary Determinations of Countervailing
Duty Investigations, 66 FR 57036 (November 14, 2001).
The Department received the GRT and company responses to the
Department's questionnaires on November 30, 2001. On December 6, 2001,
the petitioners submitted comments regarding these questionnaire
responses. The Department issued supplemental questionnaires to the GRT
and the companies on December 13, 2001, and received responses to those
questionnaires on January 7, 2002. On January 14, 2002, the petitioners
submitted comments regarding these questionnaire responses. The
Department issued additional supplemental questionnaires to the
companies on January 17, 2002, and received responses to those
questionnaires on January 18, 2002. On January 24, 2002, the
respondents submitted replies to the petitioners' January 14, 2002
comments. Because of the lack of time between the Department's receipt
of these replies and the date of our preliminary determination, we were
unable to analyze these comments fully for the preliminary
determination. However, we will consider them in their entirety for our
final determination.
On December 5, 2001, the petitioners filed a critical circumstances
allegation with respect to Brazil, Germany, and Turkey. In a letter
filed on December 21, 2001, the petitioners extended this allegation to
include Trinidad and Tobago. On December 17, 2001, independently of
each other, the American Wire Producers Association and Saarstahl AG
submitted letters in opposition to the petitioners' critical
circumstances allegation. The petitioners filed supplemental critical
circumstances information and arguments relating to Turkey on December
19, 2001.
Period of Investigation
The period for which we are measuring subsidies is calendar year
2000.
Scope of Investigation
The merchandise covered by this investigation is certain hot-rolled
products of carbon steel and alloy steel, in coils, of approximately
round cross section, 5.00 mm or more, but less than 19.0 mm, 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; and (e)
concrete reinforcing bars and rods. Also excluded are (f) free
machining steel products (i.e., products that contain by weight one or
more of the following elements: 0.03 percent or more of lead, 0.05
percent or more of bismuth, 0.08 percent or more of sulfur, more than
0.04 percent of phosphorus, more than 0.05 percent of selenium, or more
than 0.01 percent of tellurium). All products meeting the physical
description of subject merchandise that are not specifically excluded
are included in this scope.
The products under investigation are currently classifiable under
subheadings 7213.91.3010, 7213.91.3090, 7213.91.4510, 7213.91.4590,
7213.91.6010, 7213.91.6090, 7213.99.0031, 7213.99.0038, 7213.99.0090,
7227.20.0010, 7227.20.0090, 7227.90.6051 and 7227.90.6058 of the HTSUS.
Although the HTSUS subheadings are provided for convenience and customs
purposes, the written description of the scope of these investigations
is dispositive.
Scope Comments
In the Initiation Notice, we invited comments on the scope of this
proceeding. As noted above, on October 9, 2001, we received a request
from the petitioners to amend the scope of this investigation and the
companion CVD and antidumping duty (``AD'') wire rod investigations.
Specifically, the petitioners requested that the scope be amended to
exclude high carbon, high tensile 1080 grade tire cord and tire bead
quality wire rod actually used in the production of tire cord and bead,
as defined by specific dimensional characteristics and specifications.
On November 28, 2001, the petitioners further clarified and
modified their October 9 request. The petitioners suggested the
following five modifications and clarifications: (1) Expand the end-use
language of the scope exclusion request to exclude 1080 grade tire cord
and tire bead quality that is used in the production of tire cord, tire
bead, and rubber reinforcement applications; (2) clarify that the scope
exclusion requires a carbon segregation per heat average of 3.0 or
better to comport with recognized industry standards; (3) replace the
surface quality requirement for tire cord and tire bead with simplified
language specifying maximum surface defect length; (4) modify the
maximum soluble aluminum from 0.03 to 0.01 for tire bead wire rod; and
(5) reduce the maximum residual element requirements to 0.15 percent
from 0.18 percent for both tire bead and tire cord wire rod and add an
exception for chromium-added tire bead wire rod to allow a residual of
0.10 percent for copper and nickel and a chromium content of 0.24 to
0.30 percent.
Also on November 28, 2001, the tire manufacturers submitted a
letter to the Department in response to petitioners' October 9, 2001
submission regarding the scope exclusion. In this letter, the tire
manufacturers supported the petitioners' request to exclude certain
1080 grade tire cord and tire bead wire rod used in the production of
tire cord and bead.
Additionally, the tire manufacturers requested that the Department
clarify whether 1090 grade was covered by the petitioners' exclusion
request. The tire manufacturers further requested an exclusion from the
scope of this investigation for 1070 grade wire rod and related grades
(0.69 percent or more of carbon) because, according to the tire
manufacturers, domestic production cannot meet the requirements of the
tire industry.
The tire manufacturers stated their opposition to defining scope
exclusions on the basis of actual end use of the product. Instead, the
tire manufacturers support excluding the product if it is imported
pursuant to a purchase order from a tire manufacturer or a tire cord
wire manufacturer in the Untied States. Finally, the tire manufacturers
urged the Department to adopt the following specifications to define
the excluded product: A maximum nitrogen content of 0.0008 percent for
tire cord and 0.0004 percent for tire bead; maximum weight for copper,
nickel, and chromium, in the aggregate, of 0.0005 percent for both
types of wire rod. In their view, there should be no additional
specifications and tests, as proposed by the petitioners.
On January 28, 2002, the tire manufacturers responded to the
petitioners' November 28, 2001 letter. The tire manufacturers continue
to have three major concerns about the product exclusion requested by
the petitioners. First, the tire manufacturers urge that 1070 grade
tire cord quality wire rod be excluded (as it was in the 1999 Section
201 investigation). Second, they continue to object to defining the
exclusion by actual end use. Finally, they reiterate their earlier
position on
[[Page 5978]]
the chemical specifications for the excluded product.
At this point in the proceeding, we recognize that the interested
parties have both advocated excluding certain tire rod and tire core
quality wire rod. However, the Department continues to examine this
issue. Therefore, for this preliminary determination we have not
amended the scope, and this preliminary determination applies to the
scope as described in the Initiation Notice.
We plan to reach a decision as early as possible in these
proceedings. Interested parties will be advised of our intentions prior
to the final determination and will have the opportunity to comment.
Injury Test
Because Turkey 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 the
subject merchandise from Turkey materially injure, or threaten material
injury to, a U.S. industry. On October 15, 2001, the ITC transmitted to
the Department its preliminary determination that there is a reasonable
indication that an industry in the United States is being materially
injured by reason of imports from Turkey of the subject merchandise.
See Carbon and Certain Alloy Steel Wire Rod From Brazil, Canada, Egypt,
Germany, Indonesia, Mexico, Moldova, South Africa, Trinidad and Tobago,
Turkey, Ukraine, and Venezuela, Investigations Nos. 701-TA-417-421 and
731-TA-953-963, Determinations and Views of the Commission, USITC
Publication No. 3456, 66 FR 54539 (October 29, 2001).
Critical Circumstances
The petitioners have alleged that critical circumstances within the
meaning of section 703(e) of the Act exist with respect to the subject
merchandise.
We need not address the critical circumstances allegation at this
time. Because our preliminary determination is negative, we are not
ordering a suspension of liquidation pursuant to section 703(d) of the
Act. Consequently, retroactive suspension of liquidation pursuant to
section 703(e)(2) of the Act is not applicable.
Subsidies Valuation Information
Allocation Period
Pursuant to 19 CFR 351.524(b), non-recurring subsidies are
allocated over a period corresponding to the average useful life
(``AUL'') of the renewable physical assets used to produce the subject
merchandise. 19 CFR 351.524(d)(2) creates a rebuttable presumption that
the AUL will be taken from the U.S. Internal Revenue Service's 1977
Class Life Asset Depreciation Range System (the ``IRS Tables''). For
wire rod, the IRS Tables prescribe an AUL of 15 years. None of the
responding companies or interested parties disputed this allocation
period. Therefore, we have used the 15-year allocation period for all
respondents.
Attribution of Subsidies
19 CFR 351.525(a)(6) directs that the Department will attribute
subsidies received by certain affiliated companies to the combined
sales of those companies. Based on our review of the responses, we find
that ``cross ownership'' does not exist with respect to certain
Colakoglu or Habas affiliates, as discussed below.
Colakoglu: Colakoglu reports that it has numerous subsidiaries and
affiliations with various companies. However, our analysis indicates no
basis to attribute any subsidies received by these other subsidiaries
or affiliates to the production of the subject merchandise.
Specifically, although cross-ownership may exist with these other
companies, they do not produce the subject merchandise as required in
19 CFR 351.525(b)(6), nor do they meet any of the other criteria
specified in 19 CFR 351.525(b)(6).
Habas: Habas reports that it has numerous subsidiaries and
affiliations with various companies. However, our analysis indicates no
basis to attribute any subsidies received by these other subsidiaries
or affiliates to the production of the subject merchandise.
Specifically, although cross-ownership may exist with these other
companies, they do not produce the subject merchandise as required in
19 CFR 351.525(b)(6), nor do they meet any of the other criteria
specified in 19 CFR 351.525(b)(6).
Benchmark Interest Rates for Short-term Loans
The Department uses company-specific interest rates, where
possible, to determine whether government-provided loans under
investigation confer a benefit. (See 19 CFR 351.505(a)(2)). In this
case, neither Colakoglu nor Habas submitted company-specific benchmark
interest rates for lira denominated loans.
Where no company-specific benchmark interest rates are available,
19 CFR 351.505(a)(3)(ii) directs us to use a national average interest
rate as the benchmark. The GRT does not maintain or publish data
concerning the predominant national average short-term interest rates
in Turkey. Therefore, we have calculated benchmark interest rates for
lira denominated loans based on the short-term interest rates in Turkey
for 2000 as reported weekly by The Economist. This methodology is
consistent with Certain Welded Carbon Steel Pipes and Tubes and Welded
Carbon Steel Line Pipe from Turkey; Final Results of Countervailing
Duty Administrative Review, 65 FR 49230 (August 11, 2000) (``1998 Pipe
Final'') and Certain Pasta From Turkey; Final Results of Countervailing
Duty Administrative Review, 66 FR 64398 (December 13, 2001) (``1999
Pasta Final'').
We note that short-term interest rates in Turkey fluctuated
significantly during the POI. Consequently, we have calculated monthly
benchmark rates. Therefore, for example, the interest rate paid on a
government loan obtained in January 2000 has been compared to the
interest rate paid on a benchmark loan obtained the same month.
With respect to US dollar denominated loans, Habas has provided the
interest rates it paid on short-term US dollar denominated commercial
loans. In accordance with 19 CFR 351.505(a)(2), we have used these
interest rates as the benchmark rate for Habas.
Pursuant to 771(5)(E)(ii) of the Act, the Department uses a
``comparable commercial loan that the recipient could actually obtain
on the market'' as the benchmark in determining whether a government
provided loan confers a benefit. In the preamble of the Department's
regulations, it states that it is the Department's practice to normally
compare effective interest rates rather than nominal rates in making
this comparison. However, where effective rates are not available, the
preamble reads that we will compare nominal rates or, as a last resort,
nominal to effective rates. See 63 CFR at 65362 (November 25, 1998).
For our preliminary determination, the respondents argue that we
should use the effective rates paid by the companies on the government
loans being investigated. These effective rates include required
commissions and fees paid to the intermediary banks that guarantee the
loans (as required by the Turkish Eximbank). As noted above, we would
normally use the effective rates paid on the government loan. However,
our benchmark rates drawn from The Economist do not include these
commissions or fees. At this time, we have insufficient information on
the record to either adjust the rates reported
[[Page 5979]]
by the respondents or the benchmark rates drawn from The Economist to
account for these commissions and fees. However, we will examine this
issue for the final determination and make adjustments if appropriate.
Regarding Pre-Shipment Loans from the Turkish Eximbank, Habas
reported only effective rates, i.e., inclusive of the commissions and
fees paid to intermediary banks. Thus, for these loans, we compared the
effective rates to our nominal benchmark rates. However, in all other
instances, we compared the benchmark rates to the companies' reported
rates, exclusive of the commissions and fees paid to intermediary
banks, i.e., we made our comparison on a nominal basis.
Adjusting for Inflation
During the POI, the inflation rate in Turkey exceeded 25 percent,
as shown in the International Monetary Fund's International Financial
Statistics (``IFS''). Adjusting the subsidy benefits and the sales
figures for inflation neutralizes any potential distortion in our
subsidy calculations caused by high inflation and the timing of the
receipt of the subsidy. Consistent with the methodology used in 1998
Pipe Final and 1999 Pasta Final, we calculated the ad valorem subsidy
rates for each program by multiplying the benefit in the month of
receipt by the rate of inflation from the month of receipt until the
end of the POI. Next, we adjusted the monthly sales values in the same
way and added these adjusted values, thus obtaining total sales for the
POI valued at December 2000 prices. In these calculations, we used the
Wholesale Price Index Wholesale Price Index as reported in the IFS.
Analysis of Programs
Based upon our analysis of the petition and the responses to our
questionnaires, we determine the following:
I. Programs Preliminarily Determined To Be Countervailable
A. Deduction from Taxable Income for Export Revenue
According to Article 40 of the Income Tax Law, documented
expenditures made to earn business income are deductible from taxable
income. On January 1, 1995, Article 19 of Law No. 4108 amended Article
40 to allow taxpayers to deduct expenses related to export,
construction, maintenance, assembly or transportation activities
abroad, in an amount not to exceed 0.5 percent of the hard currency
income resulting from these activities, in addition to other expenses
specified in this article.
Consistent with Certain Welded Carbon Steel Pipes and Tubes and
Welded Carbon Steel Line Pipe from Turkey; Final Results and Partial
Rescission of Countervailing Duty Administrative Reviews, 63 FR 18885,
18886 (April 16, 1998) (``1996 Pipe Final''), we have preliminarily
determined that this tax exemption is a countervailable subsidy. First,
the exemption provides a financial contribution within the meaning of
section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a) because it
represents revenue forgone by the GRT. The exemption provides a benefit
in the amount of the tax saving to the company pursuant to section
771(5)(E) of the Act and 19 CFR 351.509(a). Also, the subsidy is
specific under section 771(5A)(B) of the Act because its receipt is
contingent upon export performance.
Of the companies investigated, only Habas utilized this tax
exemption on the tax return it filed in 2000. The Department typically
treats tax exemptions as recurring grants in accordance with 19 CFR
351.524(c)(1). To calculate the countervailable subsidy under this
program, we divided the tax savings realized during the POI by the
company's export sales during the POI, adjusting for inflation as
described in the Subsidies Valuation Information section above. On this
basis, we preliminarily determine the countervailable subsidy from this
program to be 0.11 percent ad valorem for Habas.
B. Export Credit Bank of Turkey (``Turkish Eximbank'') Subsidies
1. Pre-Shipment Export Loans
Through this program, the Turkish Eximbank extends short-term US
dollar and Lira denominated loans to exporters through intermediary
commercial banks. Turkish Eximbank allocates certain credit lines to
these intermediary banks. The intermediary commercial banks, which take
the risk that the borrower may default, can require additional fees to
offset this risk and may also charge a commission. Exporters,
manufacturers-exporters, and export-oriented manufacturers are eligible
to participate in this program provided they exported a specified
amount during the previous calendar year and they commit to future
exports within a specified period of time. Like all other export-
related short-term loans, the pre-shipment export loans are exempted
from the Resource Utilization Support Fund tax (``KKDF''), Banking and
Insurance tax (``BIST''), and stamp tax (see Foreign Exchange Loan
Assistance, infra).
The Department has previously found that these loans confer a
countervailable subsidy within the meaning of section 771(5) of the Act
because the interest rate paid on these loans is less than the amount
the recipient would pay on a comparable commercial loan. See, 1999
Pasta Final, Decision Memorandum at p. 4 (December 13, 2001). The loans
provide a financial contribution in the form of a direct transfer of
funds from the GRT, pursuant to section 771(5)(D)(i) of the Act, that
bestow a benefit in the amount of the difference between the benchmark
interest rate (including the taxes listed above) and the interest rate
and fees paid by the recipient companies. (See section 771(5)(E)(ii) of
the Act). In 1999 Pasta Final, we found the pre-shipment export loans
to be specific in accordance with section 771(5A)(B) of the Act because
receipt of these loans is contingent upon export performance. We have
also previously found that these loans are not tied to a particular
export destination and have, therefore, treated this program as an
untied export loan program which renders it countervailable regardless
of whether or not the loans were used for exports to the United States.
( See Certain Welded Carbon Steel Pipes and Tubes and Welded Carbon
Steel Line Pipe from Turkey; Preliminary Results of Countervailing Duty
Administrative Review, 65 FR 18070, 18072 (April 6, 2000)). In this
investigation, no new information has been provided that would warrant
reconsideration of these determinations.
Pursuant to 19 CFR 351.505(a), we have calculated the benefit as
the difference between the payments of interest and taxes that
Colakoglu and Habas made on their pre-shipment export loans during the
POI and the payments the companies would have made on comparable
commercial loans. We divided the resulting benefit by the value of each
company's exports during the POI, adjusting for inflation as described
in the Subsidies Valuation Information section above. On this basis, we
preliminarily determine the countervailable subsidy from this program
to be 0.04 percent ad valorem for Colakoglu and 0.11 percent ad valorem
for Habas.
2. Foreign Trade Corporate Companies Rediscount Credit Facility
The Foreign Trade Corporate Companies Rediscount Credit Facility
was implemented to assist large export trading companies in their
export financing needs. This program is
[[Page 5980]]
specifically designed to benefit the Foreign Trade Corporate Companies
(``FTCC'') and the Sectoral Foreign Trade Companies (``SFTC''). An FTCC
is a company whose export performance equaled or exceeded US dollar 50
million in the previous year. An SFTC is a company that includes at
least ten small- and medium-scale enterprises operating in similar
sectors together. The goal of the Foreign Trade Corporate Companies
Rediscount Credit Facility is to promote exportation and diversify
export products and markets while enabling the exporters to benefit
from favorable borrowing rates which would increase the competitiveness
of exporters in foreign markets.
For the eligible companies, the Turkish Eximbank will provide
short-term export credits based on their past export performance.
Through this credit program, the Turkish Eximbank extends short-term
export credit directly to exporters in lira and foreign currencies up
to 100 percent of FOB export commitments with a repayment period up to
180 days. Additionally, companies are exempt from taxes, duties, and
related fees associated with the operations and processes of obtaining
these credits under the provisions of the Export Encouragement Decree
and Communiques. Of the companies investigated, only Colakoglu received
Eximbank short-term export credits under this program.
We have preliminarily determined that this program is a
countervailable subsidy within the meaning of section 771(5) of the
Act. The loans constitute a financial contribution in the form of a
direct transfer of funds under section 771(5)(D)(i) of the Act. A
benefit exists under section 771(E)(ii) of the act in the amount of
difference between the payment of interest and taxes that Colakoglu
made on its Foreign Trade Corporate Companies Rediscount loan during
the POI and the payment the company would have made on a comparable
commercial loan. The program is specific pursuant to section 771(5A)(B)
of the Act because receipt of the loans is contingent upon export
performance.
Pursuant to 19 CFR 351.505(a), we have calculated the benefit as
the difference between the payment of interest and taxes that Colakoglu
made on its Foreign Trade Corporate Companies Rediscount loan during
the POI and the payment the company would have made on a comparable
commercial loan. This benefit was divided by Colakoglu's total exports
to the United States during the POI, adjusting for inflation as
described in the Subsidies Valuation Information section above. On this
basis, we determine the countervailable subsidy from this program to be
0.00 percent ad valorem for Colakoglu.
C. Foreign Exchange Loan Assistance
The Turkish Undersecretariat of Foreign Trade Regulation 95/7,
Article 14, allows the Turkish Central Bank, commercial banks,
insurance companies, and other organizations to exempt certain fees on
loans or credits used in export-related and foreign-exchange earning
activities. Specifically, loans obtained for these activities are
exempt from the KKDF tax, the BIST, and stamp tax. Both the KKDF and
BIST taxes are calculated based on a certain percentage of the interest
paid on the qualifying loan. The stamp tax is calculated based on a
certain percentage of the principal amount.
In prior proceedings, the Department has treated the KKDF, BIST,
and stamp tax exemptions, collectively, under the ``Foreign Exchange
Loan Assistance program'' when these exemptions were linked to
underlying loans which were countervailable. (See, e.g., Certain Welded
Carbon Steel Pipes and Tubes and Welded Carbon Steel Line Pipe from
Turkey; Final Results of Countervailing Duty Administrative Review, 64
FR 44496, 44497 (August 16, 1999) (``1997 Pipe Final'')).
Alternatively, the Department has treated these exemptions under the
name of the countervailable loan on which these fees are calculated,
such as ``pre-shipment export loans.'' More recently, in 1999 Pasta
Final, the Department treated these exemptions separately, under
``KKDF,'' ``BIST,'' and ``stamp tax'' exemptions. Furthermore, in 1999
Pasta Final, because these exemptions are allowed both on loans at
preferential interest rates (see Pre-Shipment Export Loans, supra) and
on loans at non-preferential interest rates, we included the
countervailable benefit from these exemptions in the benefit on the
underlying countervailable loan, when applicable, and as separate
benefits when linked to non-countervailable loans. We continue to
follow this methodology in the instant investigation. Therefore, tax
exemptions on preferential rate, pre-shipment export loans, foreign
trade corporate rediscount facilities, and export-related guarantees
(see taxes, duties and credit charges exemption, infra) have been
included in the calculation of the countervailable benefit for those
programs. This discussion, therefore, addresses only KKDF tax
exemptions and BIST tax exemptions on non-preferential export-related
loans. For a discussion of the stamp tax exemption, see ``Programs
Preliminarily Determined to be not Countervailable,'' infra.
1. KKDF Tax Exemptions
In prior proceedings, the Department has found that KKDF tax
exemptions confer a countervailable subsidy within the meaning of
section 771(5) of the Act. (See, e.g., 1999 Pasta Final; Certain Welded
Carbon Steel Pipes and Tubes and Welded Carbon Steel Line Pipe from
Turkey; Preliminary Results and Partial Recission Administrative
Review, 62 FR 64808, 64810 (December 9, 1997) (``1996 Pipe Prelim'');
and Certain Welded Carbon Steel Pipes and Tubes and Welded Carbon Steel
Line Pipe from Turkey; Preliminary Results of Countervailing Duty
Administrative Review, 62 FR 16782, 16785 (April 8, 1997) (``1995 Pipe
Prelim'')). Nothing on the record of the instant investigation directs
us to reexamine our prior decisions.
Therefore, we preliminarily determine, according to section
771(5)(D)(ii) of the Act, that the KKDF tax exemptions provide a
financial contribution in the form of revenue forgone by the GRT. We
further preliminarily determine, according to section 771(5)(E)(ii)of
the Act, that they provide a benefit in the amount of the tax
exemptions. Finally, because the tax exemptions are contingent upon
export performance, we preliminarily determine that they are specific
in accordance with section 771(5A)(B) of the Act. Thus, we
preliminarily determine that KKDF tax exemptions are countervailable.
During the POI, Colakoglu received and paid interest on US dollar
export-related loans from various commercial banks; Habas received and
paid interest on both Lira and US dollar export-related loans from
various commercial banks. The Department treats tax exemptions as
recurring grants in accordance with 19 CFR 351.524(c)(1). To calculate
the countervailable subsidy on KKDF tax exemptions, we divided the
total amount of the exemptions received by each respondent on export-
related loans outstanding during the POI by the value of each
respondent's exports during the POI, adjusting for inflation as
described in the Subsidies Valuation Information section, supra. On
this basis, we preliminarily determine the countervailable subsidy from
this program to be 0.05 percent ad valorem for Colakoglu and 0.01
percent ad valorem for Habas.
2. BIST Exemption
In prior proceedings, the Department has found that BIST exemptions
confer a countervailable subsidy within the
[[Page 5981]]
meaning of section 771(5) of the Act. (See, e.g., 1999 Pasta Final;
1996 Pipe Prelim, 62 FR 64808, 64810; and 1995 Pipe Prelim, 62 FR
16782, 16785). Nothing on the record of the instant investigation
directs us to reexamine our prior decisions. We therefore preliminarily
determine, according to section 771(5)(D)(ii) of the Act, that the BIST
exemptions provide a financial contribution in the form of revenue
forgone by the GRT. We also preliminarily determine, according to
section 771(5)(E)(ii)of the Act, that they provide a benefit in the
amount of the tax exemptions. Finally, because the tax exemptions are
contingent upon export performance, we preliminarily determine that
they are specific in accordance with section 771(5A)(B) of the Act.
Therefore, we preliminarily determine that BIST exemptions are
countervailable.
During the POI, Colakoglu received and paid interest on US dollar
export-related loans from various commercial banks; Habas received and
paid interest on both Lira and US dollar export-related loans from
various commercial banks. The Department treats tax exemptions as
recurring grants in accordance with 19 CFR 351.524(c)(1). To calculate
the countervailable subsidy on BIST tax exemptions, we divided the
total amount of the exemptions received by each respondent on export-
related loans outstanding during the POI by the value of each
respondent's exports during the POI, adjusting for inflation as
described in the Subsidies Valuation Information section, supra. On
this basis, we preliminarily determine the countervailable subsidy from
this program to be 0.08 percent ad valorem for Colakoglu and 0.03
percent ad valorem for Habas.
3. Foreign Currency Expenditure Tax Exemption (``FCET'')
Although we received no information from the GRT regarding this
program, Colakoglu reported having received this exemption as a
countervailable benefit during the POI. We will be requesting
additional information on this program from the GRT. Based solely on
Colakoglu's response, we preliminarily determine that it received a
countervailable benefit in the amount of the exemption granted under
this program. We preliminarily determine that this program provides a
financial contribution in the form of foregone revenue under section
771(D)(ii) of the Act. Furthermore, we preliminarily determine that
this program is specific under section 771(5A)(B) of the Act because it
is an export subsidy.
The Department treats tax exemptions as recurring grants in
accordance with 19 CFR 351.524(c)(1). To calculate the countervailable
subsidy on Colakoglu's FCET exemptions, we divided the total amount of
the exemptions received by Colakoglu on export-related loans
outstanding during the POI by the value of Colakoglu's exports during
the POI, adjusting for inflation as described in the Subsidies
Valuation Information section, supra. On this basis, we preliminarily
determine the countervailable subsidy from this program to be 0.00%
percent ad valorem for Colakoglu.
D. Taxes, Duties, and Credit Charges Exemptions
The GRT states that in order to benefit from the Taxes, Duties, and
Credit Charges Exemption program, a company must hold an ``investment
incentive certificate'' and demonstrate that it can achieve U.S.
$10,000 of exports within two years upon the completion of the physical
investment. According to the GRT, during the investment stage, there
are certain taxes, such as for operations and processes of obtaining
standard credits through banks, and other official dues, such as land
registration and company registration. Under this program, a company
that holds an investment incentive certificate and commits to export
U.S. $10,000, is exempt from paying these taxes otherwise due. These
exemptions are conferred under Temporary Article 2 of the Law No. 3505
(December 31, 1988).
Colakoglu, in its January 24, 2002, submission, and the GRT, in its
January 7, 2002, response, state that this program falls under the
umbrella of the General Incentive Program (``GIP''). Moreover,
Colakoglu and the GRT argue that the petitioners and the Department are
confusing this program with the Investment Allowance program also under
the GIP. We agree with Colakoglu and the GRT that this program is part
of the GIP. However, we do not agree that this program is actually part
of the Investment Allowance program. In the ``Verification Report of
the Government of Turkey,'' dated March 25, 1996, on the record of
Certain Welded Carbon Steel Pipes and Tubes and Welded Carbon Steel
Line Pipe From Turkey; Final Results of Countervailing Duty
Administrative Reviews, 62 FR 43984 (August 18, 1997), under the
section ``Taxes, Fees (Duties), Charge Exemption,'' it states that
companies that obtain financing for their investment projects are
exempted from paying taxes, duties, and charges that they would
otherwise have to pay if they make an export commitment. Moreover, it
quotes government officials as stating that this is the only GIP
program with an export requirement. This position coincides with the
GRT's statements in the instant investigation that in order to benefit
from this program a company must make an export commitment. See GRT's
November 30, 2001 Questionnaire Response at 36, 39. This export
commitment is what distinguishes this program from the Investment
Allowance program.
During the POI, Habas obtained a loan from a foreign bank for
investment in a power plant. Habas posted bank guarantees issued by a
Turkish bank on this loan. The letters of guarantee, in accordance with
this program, were exempt from the stamp tax, the KKDF, and the BIST.
As discussed below, we preliminarily determine the stamp tax
exemption to be non-countervailable. See Stamp Tax, infra. As
previously discussed under the Foreign Exchange Loan Assistance
program, we preliminarily are determining that exemptions from paying
the KKDF and the BIST are countervailable subsidies within the meaning
of section 771(5) of the Act. These exemptions, according to section
771(5)(D)(ii) of the Act, represent revenue forgone by the GRT and
provide a benefit, according to 771(5)(E)(ii) of the Act, in the amount
of the tax savings to the company. Also, this subsidy program is
specific in accordance with 771(5A)(B) of the Act because its receipt
is contingent upon export performance.
The Department typically treats tax exemptions as recurring grants
in accordance with 19 CFR 351.524(c)(1). Thus, to calculate the
countervailable subsidy, we divided the tax savings realized during the
POI by the company's export sales during the POI. On this basis, we
determine the countervailable subsidy from this program to be 0.36
percent ad valorem for Habas.
Colakoglu reported certain tax exemption in response to our
questions about this program. Based on our analysis of Colakoglu's
response, the reported exemptions related to the company's export
financing. Therefore, we have calculated the benefit for Colakoglu
under export loan programs described above.
II. Programs Preliminarily Determined To Be Not Countervailable
A. General Incentives Encouragement Program (``GIEP'')
Under the GIEP, which is the successor to GIP examined in Certain
Pasta from Turkey; Final Affirmative
[[Page 5982]]
Countervailing Duty Determination, 61 FR 30366 (June 14, 1996) (``Pasta
Investigation Final'') and the 1998 Pipe Final, companies engaging in a
wide variety of investment projects, including the expansion or
modernization of production facilities, infrastructure improvement, and
research and development, can obtain an investment incentive
certificate for the project from the GRT. This certificate makes the
company eligible for certain benefit programs as specified on each
certificate. These certificates are granted on a project basis;
therefore, a company may have more than one certificate. The
application for a certificate includes a description of the investment
project, a feasibility study, and a list of the machinery and equipment
that the company plans to buy in connection with the project. The
Department has previously found that some parts of the GIP/GIEP
programs are not countervailable while other parts of the program are
countervailable. (See Pasta Investigation Final, 63 FR 30366, 30369-
30372).
Investment Allowances
In 1963, the Turkish Income Tax Law, Articles 1-5, initiated the
investment allowance which allows a company who has qualified for an
``Investment Incentive Certificate'' to deduct certain investment
expenditures from its taxable income. These allowances fall under the
umbrella of GIEP. An investment must meet certain qualifications to be
deductible: for example, investments which generally qualify under this
program are those related to buildings, machinery, equipment, and
vehicles related to the main activity of the business. Furthermore,
varying levels of deduction are granted depending upon the location,
type of investment, or amount of investment: (1) a 40 percent allowance
is available in developed regions; (2) a 100 percent allowance is
available in Priority Development Regions and Organized Industrial
Regions; and (3) an allowance of up to 200 percent for certain
industrial investments of at least US $250 million. Investments
qualifying for the maximum 200 percent allowance must meet two of the
following criteria: provide international competitiveness, necessitate
high technology, produce a high amount of value added, increase tax
revenues, or increase employment.
We note that the investigation of the 200 percent investment
allowance is limited to those companies who have qualified for the
allowance based on the ``international competitiveness'' criterion.
(See September 24, 2001 Initiation Checklist). Neither Colakoglu nor
Habas reported receiving the entire 200 percent investment allowance
during the POI.
During the POI, both Colakoglu and Habas used certain GIEP
Investment Allowance benefits. Colakoglu reports receiving an
Investment Allowance based on its investment providing international
competitiveness, increasing tax revenues and increasing employment.
Habas reports receiving Investment Allowances based on its investments
providing international competitiveness, necessitating high technology
and increasing employment. The tax deduction which Colakoglu used
during the POI resulted from an investment incentive certificate
approved in 1998. The tax deduction which Habas used during the POI
resulted from multiple investment incentive certificates approved in
the following years: 1994 -1997, 1999, and 2000. In both 1998 Pipe
Final and 1999 Pasta Final, we analyzed the specificity of the
Investment Allowances by examining the specificity of the investment
incentive certificates. We have applied the same type of analysis to
the Investment Allowances used by Habas and Colakoglu in this
investigation.
In order to determine whether the Investment Allowance benefits are
specific, in law or in fact, to an enterprise or industry, according to
section 771(5A)(D) of the Act, as we did in the 1998 Pipe Final and
1999 Pasta Final, we examined the following factors as applicable to
the investment incentive certificates: (1) whether the enabling
legislation expressly limits access to the subsidy to an enterprise or
industry; (2) whether the actual recipients of the subsidy, whether
considered on an enterprise or industry basis, are limited in number;
(3) whether an enterprise or industry is a predominant user of the
subsidy; (4) whether an enterprise or industry receives a
disproportionately large amount of the subsidy; and (5) whether the
manner in which the authority providing the subsidy has exercised
discretion in the decision to grant the subsidy indicates that an
enterprise or industry is favored over others.
Consistent with the Department's treatment of de jure specificity
in 1998 Pipe Final and 1999 Pasta Final, we find that this program's
enabling legislation does not expressly limit access to an enterprise
or industry; therefore, the subsidy is not de jure specific.
In determining whether this program is de facto specific, we
examined information supplied by the GRT, including a breakdown of the
number of companies within each industry and region that received
investment incentive certificates for 1998 - 2000. This data shows that
more than 10,000 certificates were issued to different companies in
numerous and varied industries and regions throughout Turkey.
Similarly, when compared to the number of certificates issued to other
sectors, including agriculture, mining, and services, e.g., there is no
record evidence which indicates that either respondent, or the steel
industry as a whole, received a disproportionate number of
certificates. Instead, we find the record evidence in this
investigation indicates that investment incentive certificates were
widely and evenly distributed with no one sector, enterprise, or region
receiving a disproportionate amount.
Therefore, we preliminarily determine that the steel industry did
not receive a disproportionate number of investment incentive
certificates during the time period 1998-2000 when compared to the
overall number of certificates issued. On this basis, we preliminarily
determine that the Investment Allowances received under investment
incentive certificates issued between 1998-2000 are not specific
pursuant to section 771(5A) of the Act and, therefore, not
countervailable.
Although the GRT has not provided in the instant investigation
distribution information for investment incentive certificates granted
prior to 1998, we note that in the 1998 Pipe Final, we confirmed that
the iron and steel industry did not disproportionately benefit from
investment incentive certificates for the year 1996. Based on our
finding in 1998 Pipe Final, we preliminarily determine that the steel
industry did not receive a disproportionate number of investment
incentive certificates during 1996. On this basis, we preliminarily
determine that the Investment Allowances received under investment
incentive certificates issued in 1996 are not specific under section
771(5A) of the Act and, therefore, are not countervailable.
Finally, we note that Habas received certain Investment Allowances
based on investment incentive certificates issued in 1994, 1995, and
1997. Because we do not have distribution information for these
investment incentive certificates, we are unable to analyze the
specificity of this program in 1994, 1995, and 1997. However, we are
issuing a request for this information which we will analyze for the
final determination.
[[Page 5983]]
B. Export Credit Bank of Turkey Subsidies
Export Credit Insurance Program
Through this program, exporters can obtain short-term export credit
insurance from the Turkish Eximbank. These are one-year blanket
insurance policies which cover up to 90 percent of losses incurred due
to political risks (e.g., cancellation of the buyer's import permit or
license and losses resulting from war, revolution, etc.) and commercial
risks (e.g., the insolvency of the buyer or the refusal or failure of
the buyer to take delivery of the goods). The insurance provided under
this program is a post-shipment insurance because the Turkish Eximbank
becomes liable only if the loss occurs on or after the date of
shipment.
The premium rates differ depending on the following factors: (1)
whether the buyer is a public or a private entity, (2) the risk
classification of the buyer's country, (3) the payment terms, and (4)
the length of the credit period. Previously, it was obligatory for
companies taking pre-shipment export loans (see above) to use the
export credit insurance program. However, since February 1997, use of
the export credit insurance program is voluntary for borrowers under
the pre-shipment export loan programs.
In the 1999 Pasta Final, the Department found that for the calendar
year 1999 the premiums paid for the export credit insurance and other
income generated by the program exceeded the insurance claims paid to
participating companies. Upon review of information provided by the GRT
in the current investigation, we preliminarily find that for the year
2000 the premiums paid for the export credit insurance and other income
generated by the program also exceeded the insurance claims paid to
participating companies. On this basis, consistent with the 1999 Pasta
Final, and in accordance with 19 CFR 351.520(a)(1), we preliminarily
find the export credit insurance program to be not countervailable.
C. Foreign Exchange Loan Assistance
Stamp Tax
In the 1999 Pasta Final, we found this program to be non-
countervailable. Specifically, in the 1999 Pasta Final, we found that
the stamp tax exemption is an indirect tax as defined in 19 CFR
351.102(b). In accordance with 19 CFR 351.517(a), the non-excessive
exemption of indirect taxes upon exports is not countervailable.
Nothing on the record of the current investigation indicates that the
stamp tax exemptions on export-related loans were excessive. Therefore,
consistent with the 1999 Pasta Final, we preliminarily determine that
the stamp tax exemption on pre-shipment and other export-related loans
is not countervailable.
D. Customs Duty Exemption
A Customs Duty Exemption program was first established in Turkey on
January 24, 1980, by the Export Promotion Decree numbered 8/82. On
December 23, 1999, the GRT issued ``Resolution Concerning Domestic
Processing Regime,'' Resolution Number 99/13819, with the intent of
increasing Turkish exports by allowing procurement of raw materials at
world market prices. Under this program, companies are exempt from
paying customs duties and value added taxes (``VAT'') on raw material
imports to be used in the production of exported goods. In place of
payments, a company will provide a letter of guarantee worth twice the
value of the imported raw material. The guarantee letter is returned to
the company upon fulfillment of the committed export.
To participate in this program a company must hold an ``Inward
Processing Certificate,'' which lists the amount of raw materials to be
imported and the amount of product to be exported. The key issues
determining eligibility for this exemption are whether a company has
fulfilled its commitments made in previous inward processing
certificates granted to the company and whether the kind and amount of
the good to be exported is appropriate to the kind and amount of raw
material to be imported. In cases where excess raw materials are
requested, an appropriate amount of raw material will be calculated and
approved. Additionally, according to the import processing system, the
value of imported raw material cannot exceed the value of the committed
export.
In regard to the customs duty exemption granted under this program,
pursuant to 19 CFR 351.519(a)(1)(ii), a benefit exists to the extent
that the exemption extends to inputs that are not consumed in the
production of the exported product, making normal allowances for waste,
or if the exemption covers charges other than import charges that are
imposed on the input. In regard to the VAT exemption granted under this
program, pursuant to 19 CFR 351.518(a)(1), a benefit exists to the
extent that the exemption extends to inputs that are not consumed in
the production of the exported product, making normal allowance for
waste, or if the exemption covers taxes other than indirect taxes that
are imposed on the input.
Colakoglu and Habas imported raw materials used in the production
of wire rod under Inward Processing Certificates. However, there is no
indication that either company used these raw material inputs for any
other product besides those exported or that the amount received under
these exemptions was otherwise excessive. On this basis, we
preliminarily determine that the tax and duty exemption on raw material
imports under the Inward Processing Certificates are not
countervailable.
III. Programs Preliminarily Determined Not To Have Been Used
Based on the information provided in the responses, we determine no
responding companies applied for or received benefits under the
following programs during the POI:
A. General Incentives Encouragement Program
1. Incentive Program on Domestically Obtained Goods
2. 200% Investment Allowances
3. Subsidized Credit Facility
4. Incentives Granted to Less Developed and Industrial Belt Regions
a. Law 4325 Land Allocation
b. Electricity Discounts
c. Special Incentives for East and Southeast Turkey
B. Export Credit Bank of Turkey Subsidies
1. Past Performance Related Foreign Currency Loans
2. Revolving Export Credits
3. Buyers Credits
C. Payments for Exports on Turkish Ships/State Aid for Exports Program
D. Energy Incentive
IV. Program Preliminarily Determined to Have Been Terminated
Based on the information provided in the responses, we
preliminarily determine that the following program has been terminated:
[[Page 5984]]
General Incentives Encouragement ProgramRUSF
a. RUSF Vat Rebates of 15% for Domestically Sourced Machinery &
Equipment
b. RUSF Payments of 15% of a Company's Investment
c. Payments to Exporters in the amount of 4% of FOB Value of Certain
Export Receipts
V. Program Preliminarily Determined to Not Exist
Based on the information provided in the responses, we
preliminarily determine that the following program does not exist:
Advanced Refunds of Tax Savings
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by the respondents prior to making our final
determination.
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.
In accordance with section 705(b)(3) of the Act, if our preliminary
determination is negative, the ITC will make its final determination
within 75 days after the Department makes its final determination.
Public Comment
Case briefs for this investigation must be submitted no later than
one week after the issuance of the last verification report. Rebuttal
briefs must be filed within five days after the deadline for submission
of case briefs. A list of authorities relied upon, a table of contents,
and an executive summary of issues should accompany any briefs
submitted to the Department. Executive summaries should be limited to
five pages total, including footnotes. Section 774 of the Act provides
that the Department will hold a public hearing to afford interested
parties an opportunity to comment on arguments raised in case or
rebuttal briefs, provided that such a hearing is requested by an
interested party. If a request for a hearing is made in this
investigation, the hearing will tentatively be held two days after the
deadline for submission of the rebuttal briefs at the U.S. Department
of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC
20230. Parties should confirm by telephone the time, date, and place of
the hearing 48 hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, within 30 days of the publication of this notice. Requests should
contain: (1) the party's name, address, and telephone number; (2) the
number of participants; and (3) a list of the issues to be discussed.
Oral presentations will be limited to issues raised in the briefs.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
February 2, 2002
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-3119 Filed 2-7-02; 8:45 am]
BILLING CODE 3510-DS-S