NOTICES
DEPARTMENT OF COMMERCE
[C-796-601]
Preliminary Affirmative Countervailing Duty Determination:
Carbon Steel Wire
Rod From Zimbabwe
Wednesday, June 4, 1986
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AGENCY: Import Administration, International Trade
Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that certain benefits which
constitute bounties or grants within the meaning of the
countervailing duty law are being provided to manufacturers,
producers, or exporters in Zimbabwe of carbon steel wire rod
(wire rod). The estimated net bounty or grant is 51.35 percent ad
valorem for all manufacturers, producers, or exporters in
Zimbabwe of wire rod.
We are directing the U.S. Customs Service to suspend liquidation of
all entries of wire rod from Zimbabwe that are entered, or
withdrawn from warehouse, for consumption on or after the date of
publication of this notice, and to require a cash deposit or bond on
entries of this product in the amount equal to the estimated net
bounty or grant.
If this investigation proceeds normally, we will make our final
determination on or before August 11, 1986.
EFFECTIVE DATE: June 4, 1986.
FOR FURTHER INFORMATION CONTACT: Barbara Tillman or Ellie
Shea, Office of Investigations, Import Administration,
International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW., Washington,
DC 20230; telephone: (202) 377-2438 or 377-0184.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based on our investigation, we preliminarily determine that there is
reason to believe or suspect that certain benefits which constitute
bounties or grants within the meaning of section 303 of the Tariff
Act of 1930, as amended (the Act), are being provided to
manufacturers, producers, or exporters in Zimbabwe of wire rod.
For purposes of this preliminary determination, the following
programs are found to confer bounties or grants:
- Export Incentive Scheme; and
- Government Equity Infusions and Other Financial Assistance to
Ziscosteel- Zimbabwe Iron & Steel Co. Ltd. for the Years
1982-1985.
We preliminarily determine the estimated net bounty or grant to be
51.35 percent ad valorem for all
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manufacturers,
producers, or exporters in Zimbabwe of wire rod.
Case History
On March 4, 1986, we received a petition in proper form from
Armco, Inc., Atlantic Steel Co., Georgetown Steel Corp., North Star
Steel Texas, Inc., and Raritan River Steel Co., filed on behalf of the
U.S. industry producing wire rod. In compliance with the filing
requirements of § 355.26 of the Commerce Regulations (19 CFR
355.26), the petition alleges that manufacturers, producers, or
exporters in Zimbabwe of wire rod, directly or indirectly, receive
benefits which constitute bounties or grants within the meaning of
section 303 of the Act.
We found that the petition contained sufficient grounds upon which
to initiate a countervailing duty investigation, and on March 24,
1986, we initiated an investigation (51 FR 10906). We stated that we
expected to issue a preliminary determination on or before May 28,
1986.
Since Zimbabwe is not a "country under the Agreement" within the
meaning of section 701(b) of the Act, sections 303(a)(1) and 303(b)
of the Act apply to this investigation. Accordingly, petitioners are
not required to allege that, and the U.S. International Trade
Commission is not required to determine whether, imports of this
merchandise materially injure, or threaten material injury to, a U.S.
industry.
On April 1, 1986, we presented a questionnaire to the government of
Zimbabwe, in Washington, DC, concerning the petitioners'
allegations, and we requested a response by April 30, 1986. This
date was extended to May 9, 1986 for the government response and
May 12, 1986 for the company responses. On May 22, 1986, we
received a partial response from the government of Zimbabwe. No
response has been received from the manufacturers, producers, or
exporters of wire rod in Zimbabwe.
Scope of Investigation
For purposes of this investigation, the term "carbon steel wire rod"
covers a coiled, semi-furnished, hot-rolled carbon steel product of
approximately round solid cross-section, not under 0.20 inch in
diameter, nor over 0.74 inch in diameter, tempered or not
tempered, treated or not treated, not manufactured or partly
manufactured, and value over or under 4 cents per pound. Wire rod
is currently classifiable under items 607.14, 607.17, 607.22, and
607.23 of the Tariff Schedules of the United States.
Analysis of Programs
Throughout this notice, we refer to certain general principles
applied to the facts of the current investigation. These general
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).
The response provided by the government of Zimbabwe in this
investigation was incomplete and ultimely. Furthermore, no
response was received from the manufacturers, producers, or
exporters of wire rod in Zimbabwe. Therefore, for purposes of this
preliminary determination, we are using the best information
available as required under § 355.39 of our regulations (19 CFR
355.39). The Department has no record of past countervailing
duty investigations or administrative reviews involving
Zimbabawe and, therefore, we are unable to include such
information in estimating the benefit from programs alleged in the
petition to the bounties or grants. If we do not receive a complete
response in time to verify the information submitted, we will
continue to seek information from available sources to determine
the countervailability and level of benefits of the programs under
investigation. As best information available, we are using the
estimates of benefits included in the petition. For equity infusions
into Ziscosteel-Zimbabwe Iron & Steel Co. Ltd. (Zisco), we are
also using information obtained from published sources. For the
sales value used in calculating the ad valorem rates for the domestic
bounties or grants, we are using, as best information available, the
total sales value for Zisco, as provided in the response. We are using
this value because petitioners provided no information on total
sales value, and we were unable to obtain this figure from public
sources. For those programs on which the petitioners provided no
estimates of benefits and for which we were unable to develop
information from published sources, we are requesting additional
information to determine whether a bounty or grant is being
conferred.
For purposes of this preliminary determination, the period for
which we are measuring bounties or grants ("the review period") is
calendar year 1985 . Based upon our analysis of the petition and the
best information available, we preliminarily determine the
following:
I. Programs Preliminarily Determined To Confer Bounties or Grants
We preliminarily determine that bounties or grants are being
provided to manufacturers, producers, or exporters in Zimbabwe
of carbon steel wire rod under the following programs:
A. Export Incentive Scheme. Petitioners allege that, under the
Export Incentive Scheme, the Zimbabwean wire rod industry
receives the following benefits:
- a tax-free payment equal to at least nine percent of the f.o.b. value
of qualifying exported goods;
- bonus allocations of foreign exchange calculated at the rate of one
percent of the f.o.b. value of the exporter's manufactured exports;
and
- a tax-free payment of five percent of the value of exports within a
given period, which are over and above the company's exports
registered for the same period during the previous year.
Based upon the best information available, we preliminarily
determine that the companies under investigation received a
tax-free payment equal to at least nine percent of the f.o.b. value of
qualifying exported goods, resulting in an estimated net bounty or
grant of nine percent ad valorem, and that they also received bonus
allocations of foreign exchange calculated at the rate of one percent
of the f.o.b. value of manufactured exports, resulting in an
estimated net bounty or grant of one percent ad valorem.
Based upon the best information available, we preliminarily
determine that the companies under investigation received an
additional tax-free payment of five percent of the increase in the
value of exports between 1984 and 1985. To calculate the benefit
from this payment, we took five percent of the difference between
the value of the 1984 and 1985 exports of wire rod to the United
States, as reported in the Department of Commerce Special
Summary Steel Invoice Data. We allocated that amount over the
value of exports of wire rod to the United States in 1985, resulting in
an estimated net bounty or grant of .51 percent ad valorem.
Therefore, to calculate the total estimated net bounty or grant
received through the Export Incentive Scheme, we summed the Ad
valorem rates found under each component to arrive at an
estimated net bounty or grant of 10.51 percent ad valorem.
B. Government Equity Infusions and Other Financial Assistance to
Ziscosteel- Zimbabwe Iron & Steel Co., Ltd. for Years 1982-1985.
Petitioners
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allege that Zisco, which is 49.7 percent
state-owned, has benefitted from government equity infusions and
other government financial assistance, including cash grants, on
terms inconsistent with commercial considerations. Petitioners also
allege that Zisco has been uncreditworthy and unequityworthy
since 1982. Information submitted in the petition indicates that
Zisco has been incurring losses since at least 1982.
As best information available, we have used petitioners' information
which states that the government of Zimbabwe provided to Zisco
30 million Zimbabwe dollars ($Z30 million) in 1983 to cover the
company's cash shorfalls and $Z200 million in 1984 for a capital
development program. Petitioners have provided additional
information indicating that the government of Zimbabwe
provided $Z120 million in 1985 to the national railways and Zisco.
As best information available, we are assuming that one-half of the
$Z120 million was allocated to Zisco. Based on these figures,
government assistance totaled $Z290 million for the period
1983-1985.
There is no indication in the petition of the form in which this
government assistance was provided; therefore, for purposes of this
preliminary determination, we are assuming that all government
assistance to Zisco was in the form of equity infusions. Our own
research has confirmed that Zisco has been incurring large losses
since 1981. Therefore, as best information available, we are
assuming that Zisco has been unequityworthy since the time of the
first alleged equity infusion in 1983. Using information from the
petition and from publications and materials maintained by the
Department, we calculated the benefit from these infusions
according to the rate of return shortfall methodology outlined in the
Subsidies Appendix. Neither the petitioners nor the Department
were able to obtain or develop information on Zisco's rate of return
on equity. Therefore, as best information avalable, we are using
Zisco's rate of return on sales, which we have developed based on
Zisco's total sales in 1985, as provided in the response, and Zisco's
losses in 1984 (the most recent year for which this statistic is
available), as reported in the 1985 Quarterly Economic Review of
Zimbabwe and Malawi. For the national average rate of return, we
used the 1985 average monthly earnings yield for industrial shares
of 6.38 percent, as published in the Reserve Bank of Zimbabwe's
Quarterly Economic and Statistical Review (December 1985). We
multiplied the rate of return shortfall by the total amount of equity
received by Zisco since 183. We then allocated the aggregate benefit
over the value of Zisco's total sales in 1985, resulting in an estimated
net bounty or grant of 40.84 percent ad valorem.
II. Programs for Which We Need Additional Information
Information regarding the level of benefits received under the
following programs was not supplied by petitioners. We also have
been unable to obtain any information on the level of benefits or
potential countervailability of these programs from any sources
other than the petition. Therefore, we preliminarily determine that
we need additional information on the following programs.
A. Export Promotion. Petitioners allege that the Zimbabwean wire
rod industry benefits from export promotional assistance, including
financial assistance for participation in trade expositions, from the
Export Promotion Section of the Ministry of Trade and Commerce.
Since the respondents did not provide a complete response in this
investigation, and the Department was not able to obtain any
information about this program, we cannot quantify the amount of
any bounty or grant that may have been received.
B. Training Investment Allowance. Petitioners allege that the
Zimbabwean wire rod industry may benefit from a training
investment allowance, available to businesses which construct new
buildings and purchase new equipment. The allowance, which is to
be used exclusively for employee training, is equivalent to fifty
percent of the costs of new buildings and/or equipment.
Since the respondents did not provide a complete response in this
investigation, and the Department was not able to obtain any
information about this program, we cannot quantify the amount of
any bounty or grant that may have been received.
C. Regional Tax Incentives. Petitioners allege that the Zimbabwean
wire rod industry benefits from special tax incentives to encourage
commercial and industrial development in prescribed
"growth-point areas." Industries in the designated areas benefit from
special depreciation rates, including an investment allowance of 15
percent on buildings, machinery, and furniture, and a special initial
allowance of 100 percent, instead of the normal 2.5 percent, on new
commercial buildings.
Since the respondents did not provide a complete response in this
investigation, and the Department was not able to obtain any
information about this program, we cannot quantify the amount of
any bounty or grant that may have been received.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of carbon
steel wire rod from Zimbabwe which are entered, or withdrawn
from warehouse, for consumption on or after the date of publication
of this notice in the Federal Register and to require a cash deposit or
bond for each entry of this merchandise in the amount of the
estimated net bounty or grant. The estimated net bounty or grant is
51.35 percent ad valorem for all manufacturers, producers, or
exporters in Zimbabwe of carbon steel wire rod. This suspension
will remain in effect until further notice.
Verification
In accordance with section 776(a) of the Act, if we receive complete
responses in a timely manner, we will verify the information used in
making our final determination. We will not accept any statement in
a response that cannot be verified for our final determination.
Public Comment
In accordance with § 355.35 of the Commerce Regulations, we will
hold a public hearing, if requested, to afford interested parties an
opportunity to comment on this preliminary determination at
10:00 a.m. on June 30, 1986, at the U.S. Department of Commerce,
Room 3708, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230. Individuals who wish to participate in the
hearing must submit a request to the Deputy Assistant Secretary for
Import Administration, Room B-099, at the above address within
ten days of the publication of this notice in the Federal Register.
Requests should contain: (1) The party's name, address, and
telephone number; (2) the number of participants; (3) the reason for
attending; and (4) a list of the issues to be discussed. In addition, at
least ten copies of the confidential version and seven copies of the
nonconfidential version of the pre-hearing briefs must be submitted
to the Deputy Assistant Secretary by June 23, 1986. Oral
Presentations will be limited to issues raised in the briefs. In
accordance with 19 CFR 355.33(d) and 19 CFR 355.34, written
views will be considered if received not less than 30 days before the
final determination or, if a hearing is
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held, within ten days
after the hearing transcript is available.
This notice is published pursuant to section 703(f) of the Act (19
U.S.C. 1671b(f)).
John L. Evans,
Acting Deputy Assistant Secretary for Import Administration.
May 28, 1988.
[FR Doc. 86-12503 Filed 6-3-86; 8:45 am]
BILLING CODE 3510-DS-M