(Cite as: 51 FR 1268)

NOTICES

DEPARTMENT OF COMMERCE

[C-489-502]

Final Affirmative Countervailing Duty Determinations; Certain Welded Carbon

Steel Pipe and Tube Products From Turkey

Friday, January 10, 1986

*1268 AGENCY: Import Administration, International Trade Administration, Commerce.

ACTION: Notice.

SUMMARY: We determine that certain benefits which constitute subsidies within the meaning of the contervailing duty law are being provided to manufacturers, producers, or exporters in Turkey of certain welded carbon steel pipe and tube products (standard pipe and tube and line pipe). The estimated net subsidy is 18.81 percent ad valorem. However, we are taking into account several program- wide changes which occurred after our review period, but prior to the preliminary determinations, and we are adjusting the duty deposit rate accordingly. We determine that "critical circumstances" do not exist with regard to the subject merchandise.

We have notified the United States International Trade Commission (ITC) of our determinations. We are directing the U.S. Customs Service to continue to suspend liquidation of all entries of standard pipe and tube and line pipe from Turkey that are entered or withdrawn from warehouse for consumption, on or after October 28, 1985, and to require a cash deposit or bond on entries of these products in an amount equal to 17.80 percent ad valorem. Because we have determined that critical circumstances do not exist, we are also directing the U.S. Customs Service to terminate the suspension of liquidation of all entries of standard pipe and tube from Turkey that were entered or withdrawn from warehouse, for consumption, between July 30 and October 28, 1985.

EFFECTIVE DATE: January 10, 1986.

FOR FURTHER INFORMATION CONTACT:Peter Sultan or Mary Martin, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 377-1439 (Sultan) or 377-2830 (Martin).

SUPPLEMENTARY INFORMATION:

Final Determinations

Based upon our investigations, we determine that certain benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Turkey of certain welded carbon steel pipe and tube products. For purposes of these investigations, the following programs are found to confer subsidies:

- Export Tax Rebate and Supplemental Tax Rebate

- Preferential Export Financing

- Deduction from Taxable Income for Export Revenues

- Resource Utilization Support Fund

We determine the estimated net subsidy to be 18.81 percent ad valorem for all manufacturers, producers, or exporters in Turkey of certain welded carbon steel pipe and tube products. However, we are adjusting the duty deposit rate to reflect several program-wide changes that occurred after our review period but prior to our preliminary determinations. Thus, the cash deposit or bond on entries of these products will be 17.80 percent ad valorem.

Case History

On July 16, 1985, we received a petition in proper form from the Standard Pipe Subcommittee and Line Pipe Subcommittee of the Committee on Pipe and Tube Imports (CPTI) and by each of their member companies which produce standard pipe and tube and line pipe. In compliance with the filing requirements of s 355.26 of our regulations (19 CFR 355.26), the petition alleged that manufacturers, producers, or exporters in Turkey of certain welded carbon steel pipe and tube products directly or indirectly receive benefits which constitute subsidies within the meaning of section 701 of the Act, and that these imports materially injure, or threaten material injury to, a U.S. industry.

We found that the petition contained sufficient grounds upon which to initiate countervailing duty investigations on certain welded carbon steel pipe and tube products, and on August 2, 1985, we initiated such investigations (50 FR 32248, August 9, 1985). We stated that we expected to issue preliminary determinations by October 9, 1985.

On September 5, 1985, we received a request from petitioners that the preliminary determinations be postponed to October 21, 1985, and on September 12, 1985, we postponed these determinations in accordance with section 703(c)(1)(A) of the Act (50 FR 37891, Sept. 18, 1985).

On September 24, 1985, petitioners alleged that critical circumstances exist with respect to certain welded carbon steel pipe and tube products from Turkey.

Since Turkey is a "country under the Agreement" within the meaning of section 701(b) of the Act, an injury determination is required for these investigations. Therefore, we notified the ITC of our initiation. On August 30, 1985, the ITC determined that there is a reasonable indication that industries in the United States are materially injured by reason of imports of certain welded carbon steel pipe and tube products from Turkey (50 FR 37068, Sept. 11, 1985).

We presented a questionnaire concerning the allegations to the government of Turkey in Washington, DC on August 15, 1985. Responses to our questionnaire were received from the government of Turkey and from the following producers in Turkey of certain welded carbon steel pipe and tube products: the Borusan group of companies, Mannesmann-Suemerbank Boru Endustris (Mannesmann- Suemerbank), Yucel Boru ve Profil *1269 Endustrisi (Yucel Boru), Erkboru Profil Sanayi ve Ticaret, and Umran Spiral Welded Pipe Inc. Because the latter two companies did not export to the United States during 1984 and the first six months of 1985, we have not used their responses for our determinations. On the basis of information contained in the other responses, we made preliminary determinations on October 21, 1985 (50 FR 43597, Oct. 28, 1985). We verified the responses of the government of Turkey, the Borusan group, Mannesmann- Suemerbank, and Yucel Boru in Turkey between November 4 and 16, 1985.

We held a hearing on December 2, 1985, at which the parties addressed the issues raised in these investigations. Before and after the hearing, petitioners and respondents filed briefs discussing these issues.

Scope of Investigations

The products covered by these investigations are:

(1) Welded carbon steel pipe and tube, with an outside diameter of .375 inch or more, but not over 16 inches, of any wall thickness, currently classifiable in the Tariff Schedules of the United States, Annotated (TSUSA), under items 610.3231, 610.3234, 610.3241, 610.3242, 610.3243, 610.3252, 610.3254, 610.3256, 610.3258, and 610.4925. These products, commonly referred to in the industry as standard pipe or tube, are produced to various ASTM specifications, most notably A-120, A-53 or A-135; and

(2) Welded carbon steel line pipe with an outside diameter of .375 inch or more, but not over 16 inches, and with a wall thickness of not less than .065 inch, currently classifiable in the TSUSA, under items 610.3208 and 610.3209. These products are produced to various American Petroleum Institute (API) specifications for line pipe, most notably API-L or API-LX.

Analysis of Programs

Throughout this notice, we refer to certain general principles applied to the facts of the current investigations. These principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina; Final Affirmative Countervailing Duty Determination and Countervailing Duty Order," which was published in the April 26, 1984, issue of the Federal Register (49 FR 18006).

For purposes of these final determinations, the period for which we are measuring subsidization ("the review period") is calendar year 1984. The subsidy rates set forth in this notice are country-wide rates.

It is the Department's policy to take into account program-wide changes when these are implemented after the review period, but before a preliminary determination, and when we can verify these changes. Where these conditions are met the rate for cash deposit or bonding purposes is raised or lowered, as appropriate. This policy is desirable because it promotes the expeditious elimination or curtailment of subsidies. The recognition of program-wide changes also permits the Department to adjust the duty deposit rate to correspond as nearly as possible to the eventual duty liability.

In these investigations we discovered that, subsequent to the review period, but prior to the preliminary determinations, a number of programs were either eliminated, newly instituted, or altered in such a way as to result in a fundamental change in the bestowal of benefits. Descriptions of these program- wide changes, and of our treatment of them, follow in the description of the programs.

Although there were no imports of line pipe from Turkey into the United States during the review period, we believe that the circumstances of the production and exportation of standard pipe and tube are so similar to those of line pipe that the incidence of subsidization would be the same for both products. Also, line pipe has begun to be imported into the United States from Turkey since the review period. Therefore, we are attributing the subsidy rates found on the production and exportation of standard pipe and tube to line pipe also.

Based upon our analysis of the petition, the responses to our questionnaire, our verification, and comments filed by petitioners and respondents, we determine the following:

I. Programs Determined to Confer Subsidies

We determine that subsidies are provided to manufacturers, producers, or exporters in Turkey of certain welded carbon steel pipe and tube products under the following programs.

A. Export Tax Rebate and Supplemental Tax Rebate. The government of Turkey provides tax rebates to exporters of certain products, pursuant to Law number 261 of July 1963, and Decree number 7/10624 of September 16, 1975, as amended by Decree numbers 8/2625 (April 23, 1981), 8/4397 (April 22, 1982) and 83/7542 (December 29, 1983).

In its questionnaire response, the government of Turkey states that the objectives of this program are to expand the range of exportable products, to increase the competitiveness of those products in world markets, and to increase the variety and volume of industrial products among Turkey's exports.

At verification we learned that, before implementing this program in 1975, Turkey's State Planning Organization conducted a study of the tax incidence on exported products. On a product-by-product basis, information on the costs of production and tax incidence was obtained from producers. The competitive position of a product in international markets, and thus its need for a tax rebate, was also taken into account. Rates of rebate were not to exceed the tax incidence on the product and could be lower where the full amount of the rebate was not necessary to make a product internationally competitive. The taxes that were meant to be rebated, which are set out in List A in Decree number 7/10624, are primarily indirect taxes, although several direct taxes are also included.

Eligible products are classified in ten lists, each list having a separate rebate rate. The amount of rebate is calculated by applying the applicable rebate rate to the amount of the FOB value of the exported goods which is repatriated and converted into Turkish lira. (Where exports are transported on Turkish vessels, the CIF value of the exported goods is used.) To be eligible for a rebate on a particular shipment, at least 80 percent of the sales proceeds must be repatriated and converted into Turkish lira. The rates of rebate during 1984 for certain welded carbon steel pipe and tube products were 20 percent from January 1 to April 1, 16 percent from April 1 to September 1, and 11 percent from September 1.

In order to determine whether export payments, purportedly operating as a rebate of indirect taxes, are in fact a bona fide rebate of indirect taxes, the Department examines whether: (1) The program operates for the purpose of rebating indirect taxes; (2) there is a clear link between eligibility for export payments and indirect taxes paid; and (3) the government has reasonably calculated and documented the actual indirect tax incidence borne by the product concerned and has demonstrated a clear link between such tax incidence and the rebate amount paid on export.

Where these conditions are met, the Department considers that a rebate system does not confer a subsidy to the extent that it rebates prior stage indirect taxes on inputs that are physically incorporated in the exported products and indirect taxes levied at the final *1270 stage. To the extent that the rebates exceed the payment of such indirect taxes we would find that a countervailable benefit is being provided.

The taxes that were meant to be rebated under this program are primarily indirect taxes, although several direct taxes are included. Thus, we find that this program operated for the purpose of rebating indirect taxes.

Our examination of the process whereby the government studied the tax incidence on each product before adding it to the list of products for which rebates are available leads us to conclude that there is a link between eligibility for the rebates and indirect taxes paid, that the government of Turkey reasonably calculated and documented the actual indirect tax incidence by pipe and tube products, and that it demonstrated a clear link between such tax incidence and the rebate amount paid.

However, we were unable to verify the payment by the companies of indirect taxes on physically incorporated inputs. Consequently, we cannot follow our usual practice of not countervailing that portion of the rebate that represents such indirect taxes. Furthermore, with the introduction in Turkey on January 1, 1985, of a value added tax, all indirect taxes on physically incorporated inputs into pipe and tube (except import duties, from which exporters are largely exempt) and indirect taxes at the final stage have been abolished. Yet the export tax rebates remain. Thus, we determine that the full amount of the rebate is countervailable.

In addition to basic export tax rebates described above, the government of Turkey also provides supplemental tax rebates to exporters that have annual exports of more than $2 million. The rates of these supplemental rebates were reduced during 1984. Effective September 1, 1984, the rates applicable to exports of certain welded carbon steel pipe and tube products were 3.3 percent for exports of between $2 million and $10 million, 6.6 percent for exports of between $10 million and $30 million, and 5.5 percent for those above $30 million. For a company with annual exports of less than $30 million, these rates are applied on a graduated basis. If annual exports are more than $30 million, the 5.5 percent rate applies to the entire amount, including the first $2 million.

To calculate the benefit, we divided the amount of basic and supplemental rebate earned by each company on exports to the United States during the review period by the value of such exports. We then weight-averaged the resulting ad valorem benefit for each company by the company's proportion of the value of Turkish exports of the subject merchandise to the United States. On this basis, we calculated a subsidy of 14.68 percent ad valorem. However, we recognize that the substantial reductions in the rates of rebate during 1984 have resulted in a significant change in the benefit levels under this program. Accordingly, we have adjusted the duty deposit rate to reflect the current rebate rates, in effect since September 1, 1984. To calculate a duty deposit rate, we weight-averaged the current nominal rebate rates applicable to each company by the company's proportion of the value of exports of the subject merchandise to the United States. In this weight-average calculation we took into account that companies may not fully utilize this program if they do not repatriate and convert into Turkish lira all of their export proceeds. Thus, we reduced one company's nominal rate to reflect the fact that it did not apply for rebate payments on the full amount of its proceeds from exports to the United States during 1984. On this basis, we calculated a duty deposit rate of 14.01 percent ad valorem.

B. Preferential Export Financing. Preferential short-term export financing was available pursuant to Decree number 84/7557 of January 1984. (In our preliminary determinations we stated that medium-term export loans were also available under this program; we learned at verification that they are not.) This preferential export financing is obtained through commercial banks, with the Central Bank of Turkey rediscounting part or all of the loan amount. Such financing was classified as certificated and non-certificated. In the case of certificated credits, the lender could rediscount the entire loan amount with the Central Bank; for uncertificated credits only a part of the loan could be rediscounted. Certificated credits were those for which the exporter needed to have an export incentive certificate from the State Planning Organization. This program is countervailable because it provided financing to exporters, at interest rates below comparable commercial rates.

All three companies had loans with principal outstanding under this program during the review period. To calculate the benefit derived from this program, we compared the cost of the financing to the cost of comparable commercial financing. Because these loans are related to exports, and because the loans reported relate to exports of all products to all markets, we allocated the benefits over the value of each company's total exports of all products during the review period. We then weight-averaged the resulting ad valorem benefit for each company by the company's proportion of the value of Turkish exports of the subject merchandise to the United States. On this basis, we calculated a subsidy of 3.74 percent ad valorem.

However, short-term export financing under Decree number 84/7557 was abolished by Decree number 84/8861, which became effective on January 1, 1985. We verified that all such loans were repaid prior to our preliminary determinations. We have taken the elimination of this program into account by excluding it from the duty deposit rate.

C. Deduction from Taxable Income for Export Revenues. Article 8 of the Turkish Corporation Tax Law, as amended by Law No. 2362, permits producers that export industrial products valued in excess of $250,000 annually to deduct 20 percent of their export revenues from taxable corporate income. A 5 percent deduction is provided to exporters that are not producers.

However, under Article 94 of the Turkish Income Tax Law, as amended by Law No. 2772, these deductions are reduced. If the income from the deduction is distributed to shareholders, the deduction is reduced by 25 percent; if the income is retained, the reduction is 20 percent.

This program is countervailable because it provides a benefit which is contingent upon export performance.

All three companies used these deductions. The benefit is the amount of tax savings realized by using the deduction. Each company's benefits were allocated over the value of its total exports during the review period. By weight-averaging the resulting ad valorem benefit for each company by the company's proportion of the value of Turkish exports of the subject merchandise to the United States, we calculated an estimated net subsidy of 0.39 percent ad valorem.

D. Payments to Exporters from the Resource Utilization Support Fund (RUSF). The RUSF was created by Decree number 84/8860 which was published in the Official Journal on December 15, 1984, and became effective January 1, 1985. This fund provides payments to exporters and is also the source of funding for payments to investors with investment incentive certificates under the General Incentives Program. Exporters are eligible to receive payments in the amount of 4 *1271 percent of the FOB value of the exported goods which is repatriated into Turkish lira. (Where exports are transported on Turkish vessels, the CIF value of the exported goods is used.) Because these payments were not available for those exports which had benefited from Preferential Export Financing loans, exporters with such loans outstanding did not make full use of this program immediately after its inception. Because this element of the program provides for payments on the basis of export performance, we determine that it confers a countervailable benefit on exports.

This program did not exist during our review period and the exporters of the subject merchandise did not receive these payments on exports to the United States during the first six months of 1985. However, it is the Department's policy to adjust the duty deposit rate to correspond as nearly as possible to the eventual duty liability in cases where changes have occurred after the period for which we are measuring subsidization and prior to our preliminary determination. We have taken into account the elimination of the Preferential Export Financing program, which, in the sense that eligibility for benefits was mutually exclusive, preceded this program. Also, it appears that these benefits are granted automatically. Thus, we are adjusting the bonding rate to include benefits under this program.

In calculating the benefit, we took into account that this program operates in the same way as the export tax rebate, insofar as payment is made only on the amount of export proceeds that is repatriated into Turkish lira, and thus the program may not be fully utilized by exporters. We took the 1984 utilization experience of these companies under the export tax rebate program on exports to the United States, as best information to assess utilization under this program. We then weight-averaged the companies' rates. On this basis, we are adjusting the duty deposit rate to include an estimated net subsidy of 3.40 percent ad valorem.

II. Programs Determined Not To Confer Subsidies

We determine that subsidies are not being provided to manufacturers, producers, or exporters in Turkey of certain welded carbon steel pipe and tube products under the following program:

A. General Incentives Program. The General Incentives Program is designed to implement the targets of Turkey's five-year development plan and annual development programs. The government of Turkey in its questionnaire response states that the goals of the General Incentives Program are to remove development disparities among different regions, to assure economically efficient investments by region and by sector, and to direct savings to the most economically suitable investment areas.

Three distinct programs are available under the General Incentives Program. These are: (1) Income and corporation tax allowances; (2) exemptions from customs duties and other duties, fees and taxes; and (3) rebates of interest. (The programs providing exemptions from customs duties and other duties, fees and taxes and interest rebates on export credits are discussed in the section of this notice entitled "Programs Determined Not to be Used.") In order to receive benefits under any of the three programs, a company within an eligible sector or industry was required to obtain an investment incentive certificate from Turkey's State Planning Organization.

1. Interest Rebates. Pursuant to Decree number 83/7507, eligible companies with investment incentive certificates were able to receive low-interest medium- and long-term investment loans and short-term export loans. These loans were disbursed by commercial banks, which received interest rebates of up to 8 percent. These rebates were passed along in the form of reduced interest to borrowers. The interest rebates were made from an Interest Spread Return Fund administered by the Central Bank of Turkey.

2. Income and Corporation Tax Allowances. This program provides investment deductions to companies with an incentive certificate which are eligible under the General Incentives Program. These are deductions from taxable income based upon investments in new assets. The amount of the deduction varies from 30 percent to 100 percent of the cost of the investment, depending on the region and the economic sector in which the investment is made. A deduction of at least 30 percent is available to all holders of investment incentive certificates.

During our review period, the sectors and industries which are eligible for benefits were listed on a General Incentives Table. Producers of spiral tube were included on the table. Some of the sectors and industries listed on this table qualified for benefits only with respect to export oriented investments; however, for the great majority, including spiral tube producers, there was no export requirement.

Also, under the income and corporation tax allowances program, greater benefits were available to eligible companies which located in priority development regions of Turkey and to certain designated industries. None of the producers of the subject merchandise is located in these priority development regions, and pipe and tube is not among these designated industries.

The list of sectors and industries on the General Incentives Table and those which actually received investment incentive certificates encompass a broad spectrum of the Turkish economy, in agriculture, mining and manufacturing. Thus, since benefits received by producers of the subject merchandise are not contingent on investments being export oriented, we determine that they are not export subsidies. In addition, these benefits are not conditioned on location in a priority development region, and we thus determine that the programs providing income and corporation tax allowances and interest rebates under the General Incentives Program are not domestic subsidies because their benefits are not limited to a specific enterprise or industry, or group of enterprises or industries.

B. Customs Duty Exemption Under Decree Number 84/8861. Under Decree number 84/8861, which became effective on January 1, 1985, exporters in Turkey may obtain a customs duty exemption on the importation of raw materials used in the manufacture and packaging of exported goods. To be eligible for this exemption, exporters must obtain an export incentive certificate from Turkey's State Planning Organization.

Because the non-excessive drawback, rebate or remission of customs duties on imported items physically incorporated in the final product is not a subsidy, we determine that this program is not countervailable.

III. Programs Determined Not To Be Used

We determine that manufacturers, producers, or exporters in Turkey of certain welded carbon steel pipe and tube products did not use the following programs:

A. Exemptions from or Deferrals of Customs Duties and Other Duties, Fees and Taxes. Under the General Incentives Program, eligible companies with investment incentive certificates are exempt from customs duties and other taxes on imports of capital equipment related to the investment project for which the investment incentive certificate is issued. Deferrals *1272 of duties were discontinued. (In our preliminary determinations, we stated that exemptions under this program were also available for imports of raw materials. At verification we learned that this is not the case; such exemptions are given under Decree Number 84/8861, discussed above.) We verified that this program was not used during the review period.

B. Interest Rebates on Export Financing. Companies with investment incentive certificates under the General Incentives Program are eligible to receive export financing with interest rebates. We verified that this program was not used during the review period.

C. $25 Per Ton Back-up Fund. Exporters of certain iron and steel products are eligible to receive a $20 per ton payment from Turkey's Support and Price Stability Fund for each ton of domestically produced iron and steel used in the exported product. (It was once $25 per ton; hence the name of the program.) Certain welded carbon steel pipe and tube products are not among the products eligible for these payments.

Negative Determinations of Critical Circumstances

Petitioners alleged that "critical circumstances" exist with respect to imports of the subject merchandise. Under section 705(a)(2) of the Act, we must determine whether critical circumstances exist as alleged under section 703(e). Critical circumstances exist when: "(A) the subsidy is inconsistent with the Agreement; and (B) there have been massive imports of the class or kind of merchandise which is the subject of the investigation over a relatively short period."

Because we have determined that there have not been massive imports of standard pipe and tube or line pipe over a relatively short period, we need not address the issue of whether the subsidies in these investigations are inconsistent with the Subsidies Code.

To determine whether there have been massive imports of the products under investigation over a relatively short period of time, we considered: (1) Whether imports have surged recently; (2) whether recent import penetration ratios have increased significantly; and (3) whether recent imports are significantly above the average calculated over the last three years. Based upon our analysis of the information, we determine that imports of standard pipe and tube and imports of line pipe have not been massive over a relatively short period.

Since massive imports of standard pipe and tube and of line pipe do not exist over a relatively short period of time, we determine that critical circumstances do not exist with respect to standard pipe and tube and line pipe from Turkey.

Petitioners' Comments

Comment 1: Petitioners argue that the Department should find that critical circumstances exist with respect to the subject merchandise.

DOC Position: We disagree with petitioners' contention that imports of these products have been massive over a relatively short period--a prerequisite for a finding of critical circumstances.

Comment 2: Petitioners argue that benefits provided under the General Incentives Program are countervailable subsidies, despite the fact that they are not limited to a specific enterprise or industry, or group of enterprises or industries.

DOC Position: We have verified that the General Incentives Program not only is generally available to Turkish industries, but that the pipe and tube industries receive no benefits providing a de facto advantage. The petitioners rely upon the Court of International Trade decision in Cabot Corp. v. United States, Cit , Slip Op. 85-102 (Oct. 4, 1985) for the proposition that we are to countervail generally available programs. We do not follow that decision.

Comment 3: Petitioners argue that, because of the elimination of indirect taxes on physically incorporated inputs into the subject merchandise, the export tax rebate has become a straight export subsidy. They also argue that where, as here, recurring export payments are tied to particular shipments, the subsidy should be calculated on the amount that will be available to be collected on each shipment.

DOC Position: We agree. See the section of this notice entitled "Programs Determined to Confer Subsidies."

Comment 4: With respect to the Preferential Export Financing program, petitioners argue that the Department should not take its elimination into account by reducing the deposit rate, unless all benefits have ceased before July 30, 1985, the date of suspension of liquidation for standard pipe and tube.

DOC Position: Because we have now determined that critical circumstances do not exist with respect to either product, the date on which suspension begins is October 28, 1985, which is after the last loans were repaid. Thus, the argument raised by petitioners is moot.

Comment 5: Petitioners argue that the deposit rate should include benefits available under the new Resource Utilization Support Fund.

DOC Position: We agree. See the section of this notice entitled "Programs Determined to Confer Subsidies."

Respondents' Comments

Comments were submitted by counsel for the government of Turkey, for the Borusan Group and for Mannesmann-Suemerbank.

Comment 1: The government of Turkey argues that the Export Tax Rebate program operates as a bona fide non-excessive rebate of indirect taxes and thus is not countervailable.

DOC Position: Unitl 1985 the Export Tax Rebate program did operate primarily to rebate indirect taxes. It would have been countervailable only to the extent that some direct taxes were rebated and hence may have constituted an overrebate. The issue is moot, however, because the government of Turkey instituted a value-added tax in January 1985, replacing most direct and indirect taxes. The incidental indirect taxes remaining, taxes on banking and insurance transactions, are not taxes on physically-incorporated inputs. Therefore, as of 1985 the tax rebate in its entirety is countervailable.

Comment 2: The government of Turkey argues that the Department should take into account the changed status of the Export Tax Rebate program, based upon the significant change in Turkish tax law on January 1, 1985, and calculate a weighted-average rate for 1984 and the first six months of 1985.

DOC Position: We disagree. One of the reasons why the Department recognizes alterations (after its review period) in programs, which result in a fundamental change in the bestowal of benefits, is to adjust the deposit rate to correspond more accurately to eventual duty liability. Because of the elimination in 1985 of prior stage indirect taxes on physically incorporated inputs into certain welded carbon steel pipe and tube products and indirect taxes levied at the final stage, the entire amount of export tax rebates in 1985 is countervailable. We have adjusted our deposit rate to reflect this fact.

Comment 3: All respondents argue that if the Export Tax Rebate program is countervailed, the rate should reflect actual utilization, rather than the levels of rebate nominally available.

The Borusan Group further argues that its rate for this program should reflect the amount of benefit actually received in 1984, not the amount applied for in 1984.

DOC Position: We agree that the rate should be calculated on the basis of actual utilization. We have calculated *1273 the subsidy rate for this program on the basis of rebates earned during the review period. In calculating the duty deposit rate, we took into account the fact that one of the companies persistently did not repatriate and convert into Turkish lira the entire amount of its export earnings on sales to the United States. See section of this notice entitled "Programs Determined to Confer Subsidies."

When a tax program operates to rebate a fixed proportion of the value of each shipment, which is known to the exporter during the review period, we countervail the amount of benefit earned during the period, rather than the amount received "Certain Carbon Steel Products from Brazil: Final Affirmative Countervailing Duty Determinations" (49 F.R. 17988, 17991, April 26, 1984); "Ceramic Tile from Mexico; Final Results of Administrative Review of Countervailing Duty Order" (49 F.R. 9919, March 16, 1984). The rationale for countervailing amounts received applies when the recipient could not anticipate precisely how much would be received and hence could not make business decisions based upon benefits earned.

Comment 4: The government of Turkey and Mannesmann-Suemerbank argue that the rate for the Export Tax Rebate program should be reduced to account for: (i) Government-mandated delays in receiving payment as provided in section 771(6)(B) of the Act, and (ii) the payment of a portion of the rebate with low-interest bonds.

DOC Position: We disagree with both of the proposed reductions.

The delays in receiving payment, described by counsel for Mannesmann- Suemerbank as being due to "Government procedures and bureaucratic delays," are administrative; they are not mandated by government order.

With regard to payment of a portion of the rebate with low-interest bonds, we do not have verified information to support this claim. Although we learned at verification that one company had received low-interest bonds in part-payment of the rebates on two export sales, and were subsequently informed by another company that it had also been paid with such bonds, we do not have verified information to show that it is common practice to make payment in this manner. Also, there is no evidence that the other company subject to these investigations received the rebates in this manner. Further, we cannot speculate that receipt of these bonds warrants any reduction in the net subsidy at all, much less what that amount should be.

Comment 5: All respondents argue that the Department's calculation of the rate for the Export Tax Rebate program was incorrect, in that it was based on an erroneous assumption concerning the operation of the supplemental tax rebate.

DOC Position: We agree. The operation of the supplemental rebate was clarified at verification and we have adjusted our calculation.

Comment 6: Mannesmann-Suemerbank argues that it is entitled to an offset from the rate for the Export Tax Rebate program for indirect taxes paid in 1985 on physically incorporated imputs.

DOC Position: The questionnaire response of the government of Turkey and information obtained at verification show that indirect taxes on physically incorporated inputs were abolished by January 1, 1985. If Mannesmann- Suemerbank continued to pay such taxes during the first six months of 1985, we must regard this as an aberration. Verified information supplied by the government of Turkey is controlling in this situation.

Comment 7: All respondents argue that the Preferential Export Financing program should be excluded from the deposit rate because it has been eliminated.

DOC Position: We agree. See "Programs Determined to Confer Subsidies" section of this notice.

Comment 8: All respondents argue that payments to exporters from the RUSF should not be countervailed, because countervailable benefits should be measured on a receipt basis and none of the companies had received payments on exports to the United States under this program during the period covered by the Department's questionnaire. They also contend that the value of benefits is too speculative and uncertain to measure at this point.

DOC Position: We disagree. In order to apply our program-wide change methodology consistently, we must take into account not only the elimination of benefits (as we have done with regard to the Preferential Export Financing program), but also the introduction of new ones. Although none of the companies had received RUSF payments on exports to the United States as of June 30, 1985, the record shows that the two companies that exported to the United States in 1985 have applied for such payments, and we know of no legal or administrative impediments to receipt. Because benefits are a fixed proportion of export value, their valuation is not speculative or uncertain. We have taken into account that payment is made only on the amount of export proceeds repatriated and converted into Turkish lira.

Comment 9: The government of Turkey argues that if the Department countervails the RUSF payments to exporters, it should take into account delays in receiving benefits and Turkey's high inflation rate in calculating the benefit. Also, Borusan argues that if the Department countervails this program it should take into account the factors which make utilization lower than the nominal rate of benefit.

DOC Position: Under section 771(6)(B) of the Act, an offset is allowed for "any loss in the value of the subsidy resulting from its deferred receipt, if the deferral is mandated by Government order." The delays in receiving RUSF payments and the effect of inflation are not such allowable offsets.

We have taken into account the fact that, because RUSF payments are made only on the amount of export proceeds repatriated into Turkish lira, utilization of this program may be lower than the normal rate of benefit.

Comment 10: The government of Turkey and Mannesmann-Suemerbank argue that benefits to producers of the subject merchandise under the General Incentives Program are not countervailable because these benefits are not limited to a specific enterprise or industry or group of enterprises or industries. In the alternative, they argue that these benefits should not be countervailable because producers of the subject merchandise have ceased to be eligible under the GIP.

DOC Position: We agree with the first argument. See the section of this notice entitled "Programs Determined Not to Confer Subsidies."

Comment 11: Borusan argues that its subsidy rate is significantly lower than those of the other firms, and that it is entitled to a company specific rate.

DOC Position: The difference in the levels of subsidization between Borsuan and the weighted-average rate is not large enough for us to consider it significant.

Comment 12: All respondents argue that the Department has no basis for finding that critical circumstances exist in these investigations, because: (i) Imports have not been massive over a relatively short period, and (ii) the subsidies are not inconsistent with the Subsidies Code.

DOC Position: Because we have determined that critical circumstances are not present, for lack of massive imports over a relatively short period, the issue raised by respondents with *1274 respect to the second prong of the test are moot.

Verification

In accordance with section 776(a) of the Act, we verified all information used in making our final determinations. During verification we followed standard verification procedures, including meeting with government officials, inspection of documents and ledgers, and tracing the information in the responses to source documents, accounting ledgers, and financial statements.

Suspension of Liquidation

In accordance with section 703(d) of the Act, on October 28, 1985, we instructed the U.S. Customs Service to suspend liquidation of all entries of standard pipe and tube from Turkey which were entered, or withdrawn from warehouse, for consumption on or after July 30, 1985, and to suspend liquidation of all unliquidated entries of line pipe from Turkey which were entered, or withdrawn from warehouse, for consumption on or after October 28, 1985.

Because we have now determined that critical circumstances do not exist with respect to either product, we are directing the U.S. Customs Service to terminate suspension of liquidation of all entries of standard pipe and tube from Turkey that were entered or withdrawn from warehouse, for consumption, between July 30 and October 28, 1985, and to release any bond, or other security, and refund any cash deposit on these entries. As of the date of publication of this notice in the Federal Register, the liquidation of all entries, or withdrawals from warehouse, for consumption, of these products will continue to be suspended and the Customs Service shall require an ad valorem cash deposit or bond for all such entries of these products at 17.80 percent ad valorem.

This suspension will remain in effect until further notice.

ITC Notification

In accordance with section 705(f) of the Act, we will notify the ITC of our determinations. In addition, we are making available to the ITC all non- privileged and non-confidential information relating to these investigations. We will allow the ITC access to all privileged and confidential 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 Deputy Assistant Secretary for Import Administration.

The ITC will determine these imports materially injure, or threaten material injury to, a U.S. industry within 45 days of the publication of this notice.

If the ITC determines that whether material injury or the threat of material injury does not exist, these proceedings will be terminated and all estimated duties deposited or security posted as a result of the suspension of liquidation will be refunded or cancelled. If, however, the ITC determines that such injury does exist, we will issue a countervailing duty order, directing Customs officers to assess a countervailing duty on certain welded carbon steel pipe and tube products from Turkey entered, or withdrawn from warehouse, for consumption, on or after the date of suspension of liquidation, equal to the net subsidy amount indicated in the "Suspension of Liquidation" section of this notice.

This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)).

Paul Freedenberg,

Assistant Secretary for Trade Administration.

January 6, 1986.

[FR Doc. 86-594 Filed 1-9-86; 8:45 am]

BILLING CODE 3510-DS-M