(Cite as: 52 FR 47621)
NOTICES
DEPARTMENT OF COMMERCE
Certain Welded Carbon Steel Pipe and Tube Products From Turkey;
Preliminary Results of Countervailing Duty Administrative Review
Tuesday, December 15, 1987
*47621 AGENCY: International Trade Administration, Import Administration, Commerce.
ACTION: Notice of preliminary results of countervailing duty administrative review.
SUMMARY: The Department of Commerce has conducted an administrative review of the countervailing duty order on certain welded carbon steel pipe and tube products from Turkey. We preliminarily determine the net subsidy to be 16.52 percent ad valorem for the period October 28, 1985 through December 31, 1986. We invite interested parties to comment on these preliminary results.
EFFECTIVE DATE: December 15, 1987.
FOR FURTHER INFORMATION CONTACT: Susan Silver or Paul McGarr, Office of Compliance, International Trade Administartion, U.S. Department of Commerce, Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On March 7, 1986, the Department of Commerce ("the Department") published in the Federal Register (51 FR 7984) a countervailing duty order on certain welded carbon steel pipe and tube products from Turkey. On March 30, 1987, the petitioner, the Standard and Line Pipe Subcommittees of the Committee on Pipe and Tube Imports and their individual pipe and tube producers, and the Government of the Republic of Turkey requested in accordance with 19 CFR 355.10 an administrative review of the order. On March 31, 1987, two respondents, the Borusan Group ("Borusan") and Mannesmann Suemerbank made a similar request. We published the initiation on April 22, 1987 (52 FR 13268). The Department has now conducted that administrative review in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Scope of Review
The United States has developed a system of tariff classification based on the international harmonized system of Customs nomenclature. Congress is considering legislation to convert the United States to the Harmonized System ("HS") by January 1, 1988. In view of this, we will be providing both the appropriate Tariff Schedules of the United States Annotated ("TSUSA") item numbers and the appropriate HS item numbers with our product descriptions on a test basis, pending Congressional approval. As with the TSUSA, the HS item numbers are provided for convenience and Customs purposes. The written description remains dispositive.
We are requesting petitioners to include the appropriate HS item number(s) as well as the TSUSA item number(s) in all new petitions filed with the Department. A reference copy of the proposed Harmonized System schedule is available for consultation at the Central Records Unit, Room B-099, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230. Additionally, all Customs offices have reference copies, and petitioners may contact the Import Specialist at their local Customs office to consult the schedule.
Imports covered by the review are shipments of certain Turkish welded carbon steel pipe and tube having an outside diameter of 0.375 inch but not over 6 inches, currently classifiable under TSUSA items 610.3208, 610.3231, 610.3234, 610.3241, 610.3242, 610.3243, 610.3252, 610.3254, 610.3256, 610.3258, and 620.4925. TSUSA items 610.3208 and 610.3209 are commonly referred to by the industry as line pipe meeting American Petroleum Institute (API) specifications for 5L. TSUSA items 610.3231, 610.3234, 610.3241, 610.3242, 610.3243, 610.3252, 610.3254, 610.3256, 610.3258 and 620.4925 are commonly referred to by the industry as standard pipe or tube or structural tubing. Standard pipe or tube is produced to various American Society for Testing Materials (ASTM) specifications, most notably A-53, A-120 or A-135. Structural tubing is produced to various specifications most notably ASTM specifications A-500 and A-501.
Line pipe and standard pipe and tube are currently classifiable under HS item numbers 7306.10.1010, 7306.10.1050, 7306.30.1000, 7306.30.5025, 7306.30.5030, 7306.30.5040, 7306.30.5045, 7306.30.5050, 7306.30.5060, 7306.30.5065, 7306.30.5070 and 7306.30.5075. We invite comments from all interested parties on these HS classifications.
The review covers the period October 28, 1985 through December 31, 1986 and 7 programs.
Analysis of Programs
(1) Export Tax Rebate and Supplemental Tax Rebate
The Government of Trukey provided export tax rebates to exporters of pipe and tube products pursuant to Law 261 of July 1963 and Decrees 9/10624 of September 16, 1975, 85/10211 of December 26, 1985, and 86/11237 of November 28, 1986. Exporters were eligible to receive export tax rebates based on the percentage of export receipts converted from a foreign currency into Turkish lira. During the review period, exporters were required to convert at least 80 percent of their export receipts into Turkish lira in order to qualify for export tax rebates.
On February 25, 1985, Turkey became a signatory to the Agreement on Interpretation and Application of Articles IV, XVI and XXIII of the General Agreement on Tariffs and Trade ("the Subsidies Code"). The Government of Turkey also entered into a bilateral commitment with the United States, agreeing to eliminate specific subsidy programs. During the review period, the rate of basic export tax rebates on pipe and tube declined in small increments every two months from 11 to 8.4 percent.
In addition to basic export tax rebates, the Turkish government provided supplemental tax rebates to companies with annual export revenues of more than U.S. $2 million. During the review period, the rates of these rebates also declined every two months. For companies with export revenues between $2-10 million, the supplemental rebate rates were reduced from 6 to 2.4 percent; for companies with export revenues between $10-30 million, the rates were reduced from 12 to 4.8 percent; and for companies with export revenues over $30 million, the rates were reduced from 10 to 4 percent.
We calculated the benefit by allocating the total amount of basic and supplemental rebates each company received over its total f.o.b. value of exports during the review period. We then weight-averaged the resulting benefit by each company's proportion of pipe and tube exports to the United States. On this basis, we preliminarily determine the benefit from this program to be 7.96 percent ad valorem during the review period.
Effective January 1, 1987, pursuant to Communique 87/3 of Decree 86/11237, the Government of Turkey eliminated *47622 basic and supplemental export tax rebates on exports of iron and steel products to the United States. Under Transity Article 2 of this decree, exporters were still eligible for rebates on shipments that occurred after December 1, 1986 for which irrevocable letters of credit had been opened prior to December 1, 1986. We verified that exporters received rebate payments only for shipments with letters of credit opened prior to December 1, 1986, and that there were no rebate payments received for shipments where letters of credit were opened or amended after December 1, 1986.
Finally, exporters submitted letters to the Turkish government renouncing eligibility for export tax rebate payments after July 31, 1987 for shipments where letters of credit opened prior to December 1, 1986 were still outstanding.
We preliminarily determine that for this program the cash deposit of estimated countervailing duties will be zero.
Payments to exporters from the Resource Utilization Support Fund ("RUSF"), created by Decree 84/8860, went into effect on January 1, 1985. RUSF payments were intended to replace preferential export financing that was simultaneously eliminated by Decree 84/8861. Exporters were eligible to receive payments of 4 percent of the f.o.b. value of export receipts that were converted from foreign currency into Turkish lira. On March 16, 1986, by Decree 86/10520, the rate of RUSF payments was reduced to 2 percent. Because this program is contingent upon export performance, we preliminarily determine that it confers a countervailable benefit on exports.
We calculated the benefit by allocating the amount of RUSF payments each company received over its total f.o.b. value of exports during the review period. We then weight-averaged the resulting benefit by each company's proportion of pipe and tube exports to the United States. On this basis, we preliminarily determine the benefit from this program to be 1.78 percent ad valorem during the review period.
Effective January 1, 1987, pursuant to Decree 86/11085, the Government of Turkey eliminated RUSF payments on exports. Under Transitory Article 1 of this decree, exporters were still eligible to receive RUSF payments on shipments that occurred after November 1, 1986 for which irrevocable letters of credit had been opened prior to November 1, 1986. We verified that exporters received RUSF payments only for shipments with letters of credit opened prior to November 1, 1986, and that there were no RUSF payments received for shipments where letters of credit were opened or amended after November 1, 1986.
Finally, exporters submitted letters to the Turkish government renouncing eligibility for RUSF payments after July 31, 1987 for shipments where letters of credit opened prior to November 1, 1986 were still outstanding.
We preliminarily determine that for this progam the cash deposit of estimated countervailing duties will be zero.
(3) Export Revenue Tax Deduction
Section 8 of Law 5422, as amended by section 6 of Law 2362 of January 1, 1982, permits producers that annually export industrial products valued in excess of U.S.$250,000 to deduct 20 percent of their export revenue from taxable corporate income. A five percent deduction is provided to exporters that are not producers. Thus, for products exported through a trading company, a total of 25 percent of the value of exports could be used as a deducation.
Under section 94 of the Turkish Income Tax Law, as revised by Decree 86/10415, tax deductions are subject to a "countervailing tax" of 10 percent of the deduction. In addition, export revenue tax deductions are subject to a 3 percent surcharge on the countervailing tax. The corporate tax rate was 46 percent. Because we consider the benefit from this program to occur when income tax returns are filed, we examined the tax return for tax year 1985 filed in 1986. There were no exports of pipe and tube to the United States during the 1985 portion of the review period.
We calculated the benefit by multiplying the amount of each company's deduction by the corporate tax rate and subtracting the amount of the countervailing tax and surcharge paid on the deduction. We allocated the result over the company's total f.o.b. value of exports during the review period. We then weight-averaged the resulting benefit by each company's proportion of pipe and tube exports to the United States. We preliminarily determine the benefit from this program to be 6.78 percent ad valorem during the review period.
The General Incentives Program ("GIP") provides benefits intended to encourage investments and stimulate the Turkish economy. The program is designed to meet the targets of Turkey's five-year and annual development plans. Companies applying for GIP benefits must obtain an investment incentive certificate from the State Planning Organization, which reviews proposed projects and considers such factors as supply and demand for the product, need for additional productive capacity, potential profitability, and the effect on employment. Benefits are equally available to producers for the domestic market and for export. However, for the corporate tax allowance program of the GIP, different regions and sectors have different levels of benefits.
Prior to 1985, the industries for which benefits were available were listed on a General Incentives Table. However, on November 11, 1985, pursuant to Decree 85/10011, this table was replaced by a list of industries that were not eligible to receive benefits for new investment, but could continue to receive benefits for modernization of existing facilities. These restrictions applied to industries that were located within the most developed region of Turkey (the region where pipe and tube exporters are located), and new investments in seam welded pipe were among those proscribed.
We verified that pipe and tube exporters used the following programs under the GIP:
(A) Corporate Income Tax Allowances
The GIP provides deductions from taxable income based upon a percentage of a company's total investment. The amount of the deduction ranges from 30 to 100 percent of the cost of the investment, depending on the region and sector in which the investment is made. A deduction of at least 30 percent is available to all holders of investment incentive certificates within any region or sector.
Under the corporate tax allowance program, companies located in the first or second priority regions for development within Turkey are entitled to higher rates of deduction than companies located in the more developed or "normal" regions. All pipe and tube exporters are located in the "normal" regions and, therefore, are entitled to only the lowest tax deduction rates. Based on an eligibility rate of 30 percent, four pipe and tube companies claimed corporate tax deductions on their investments during the review period.
(B) Other GIP Benefits Used.
(1) Communique 85/1 provides exemptions from customs duties and other taxes on imports of capital equipment related to the investment *47623 project listed on the investment incentive certificate.
(2) Decree 83/7507 provided companies with investment incentive certificates interest rebates of up to 8 percent on medium-term investment credits, and interest rebates of up to 7 percent on short-term export credits issued by commercial banks. Effective January 1, 1985, such interest rebates were abolished by Article 10 of Decree 84/8860, but companies with outstanding balances on medium-term investment credits were still eligible for interest rebates during the review period. Companies were no longer eligible for interest rebates on short-term export credits.
All five companies received exemptions on customs duties and other taxes on imported capital equipment during the review period. One exporter, Borusan, received interest rebates on medium-term investment credits that still had outstanding balances during the review period.
Any firm with an investment incentive certificate automatically qualifies for corporate income tax allowances, exemptions from customs duties and other taxes on imports of capital equipment and interest rebates on investment credits. We examined a computer printout listing approximately 800 investment incentive certificates issued to compaines located in the most developed region (eligible for the lowest level of benefits) of Turkey, the region where pipe and tube exporters are located. We verified that firms within a wide variety of industries, including the chemical, textile, food, machinery, transportation and metal industries, received investment certificates and GIP benefits at the same rates. The computer printout listed GIP benefits under the following programs: corporate income tax allowances, exemptions from customs duties and other taxes on imports of capital equipment, and RUSF interest rebates.
The GIP investment incentive certificates are widely used and are not provided "to a specific enterprise or industry or group of enterprises or industries." The pipe and tube industry is not eligible for benefits on more favorable terms than those available to other industries. Therefore, we preliminarily determine that the General Incentives Program does not confer countervailable benefits to pipe and tube exporters.
(5) Other Programs
We also examined the following programs and preliminarily determine that Turkish pipe and tube exporters did not use them:
(A) Support Price Stability Fund;
(B) Preferential export financing under Decree 84/8861; and
(C) Export credits under Communique No. 1.
Preliminary Results of Review
As a result of our review, we preliminarily determine the net subsidy to be 16.52 percent ad valorem for the period October 28, 1985 through December 31, 1986.
Section 707 of the Tariff Act provides that the difference between the deposit of an estimated countervailing duty and the final assessed duty under a countervailing duty order shall be disregarded to the extent that the estimated duty is less than the final assessed duty and refunded to the extent that the estimated duty is higher than the final assessed duty, for merchandise entered, or withdrawn from warehouse, for consumption before the date of publication of a final affirmative injury determination by the International Trade Commission, which in this case was March 3, 1986 (51 FR 7342).
The Department therefore intends to instruct the Customs Service to assess countervailing duties of 16.52 percent of the f.o.b. invoice price on all shipments of this merchandise entered, or withdrawn from warehouse, for consumption on or after October 28, 1985 and exported on or before December 31, 1986.
Because of the termination of the export tax rebate and RUSF programs, the Department intends to instruct the Customs Service to collect a cash deposit of estimated countervailing duties of 6.78 percent of the f.o.b. invoice price on all shipments of this merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this review. This deposit requirement will remain in effect until publication of the final results of the next administrative review.
Interested parties may submit written comments on these preliminary results within 30 days of the date publication of this notice, and may request disclosure and/or a hearing within 7 days of the date of publication. Any hearing, if requested, will be held 30 days from the date of publication or the next workday following. Any request for an administrative protective order must be made no later than five days after the date of publication. The Department will publish the final results of this administative review including the results of its analysis of issues raised in any such written comments or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.10.
Gilbert B. Kaplan,
Acting Assistant Secretary Import Administration.
Date: December 9, 1987.
[FR Doc. 87-28778 Filed 12-14-87; 8:45 am]
BILLING CODE 3510-DS-M