NOTICES
DEPARTMENT OF COMMERCE
[C-796-601]
Final Affirmative Countervailing Duty Determination and
Countervailing Duty
Order; Carbon Steel Wire Rod from Zimbabwe
Friday, August 15, 1986
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AGENCY: Import Administration, International Trade
Administration, Commerce.
ACTION: Notice.
SUMMARY: We 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 47.33 percent ad valorem for all manufacturers,
producers, or exporters in Zimbabwe of wire rod.
We are directing the U.S. Customs Service to continue 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entered, or withdrawn from warehouse, for consumption on or after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
on entries of this product in the amount equal to the estimated net
bounty or grant.
EFFECTIVE DATE: August 15, 1986.
FOR FURTHER INFORMATION CONTACT: Barbara Tillman or Lori
Cooper, 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 377-8320.
SUPPLEMENTARY INFORMATION:
Final Determination
Based upon our investigation, we determine 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 final determination, the following
programs are found to confer bounties or grants:
- Export Incentive Scheme.
Export Promotion.
- Government Equity Infusions into Ziscosteel-Zimbabwe Iron &
Steel Co. Ltd.
The estimated net bounty or grant is 47.33 percent ad valorem for
all 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 (March 31, 1986)).
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.
We reviewed the response of the government of Zimbabwe and
determined that it failed to provide even the most basic information
requested in all countervailing duty questionnaires, such as
copies of the laws and regulations governing the alleged bounty or
grant programs. Neither did the response include any of the official
government documents and statistical reports requested, nor did it
provide any information regarding Zimbabwe's financial system
and lending practices. Such information is an essential part of any
response, because it provides the Commerce Department
(Department) with the information to identify the normal
commercial patterns of financial transactions in a given country.
With regard to specific questions on the alleged programs, the
response consisted of statements that the companies were not
eligible to use most
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of the alleged bounty or grant
programs, and that the government's equity infusions into
Ziscosteel-Zimbabwe Iron & Steel Co. Ltd. (Zisco) were
commercially reasonable.
Because we had not received a complete and timely response from
the respondents, we based our preliminary determination on the
best information available, which included information in the
petition, in reference materials maintained by the Department and,
in one limited instance, in the response. On May 28, 1986, we made
our preliminary affirmative determination stating that benefits
which constitute bounties or grants are being provided to the
manufacturers, producers, or exporters in Zimbabwe of wire rod
(51 FR 20327 (June 4, 1986)).
On May 30, 1986, we informed the government of Zimbabwe that
we would consider for our final determination a complete response
if submitted to the Department no later than June 19, 1986. We
received no further response from the government of Zimbabwe
or the companies; therefore, our final determination is based upon
the best information available, as required by § 355.39 of the
Department's regulations (19 CFR 355.39). In seeking the best
information available, we have obtained information from
independent sources regarding the alleged bounties or grants to
supplement information supplied by petitioners.
Scope of Investigation
For purposes of this investigation, the term "carbon steel wire rod"
covers a coiled, semi-finished, 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 valued 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" (49 FR 18006 (April 26, 1984)).
The response provided by the government of Zimbabwe in this
investigation was incomplete and untimely. Furthermore, no
response was received from the manufacturers, producers, or
exporters of wire rod in Zimbabwe. Therefore, for purposes of this
final 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 Zimbabwe;
therefore, we are unable to include such information in estimating
the benefit from programs alleged in the petition to be bounties or
grants. Because we did not receive a complete response in time to
verify the information submitted, we sought information from
available sources to determine the countervailability and level of
benefits of the programs under investigation. As best information
available, we also used the estimates of benefits included in the
petition. For equity infusions into Zisco, we used information for the
years 1982-85 obtained from the company's published annual
reports and other sources. For the sales value used in calculating
the ad valorem rates for the domestic bounties or grants, we used,
as best information available, the total sales value for Zisco, as
provided in the response. We used this value because petitioners
provided no information on total sales value, and because we were
unable to obtain this figure from public sources.
For purposes of this final 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 determine the following:
I. Programs Determined To Confer Bounties Or Grants
We determine that bounties or grants are being provided to
manufacturers, producers, or exporters in Zimbabwe of 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 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 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 Steel Summary 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 0.51 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. 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.
The respondents did not provide an adequate response in this case,
and petitioners were unable to provide information as to whether
and to what extent the wire rod industry receives countervailable
benefits under this program. Furthermore, the Department has been
unable to discover any information on this program through
independent research. Given this complete lack of information, we
are applying, as best information available, the ad valorem subsidy
rate found for the Export Incentive Scheme, the only other export
bounty or grant program examined in this investigation. On this
basis, we determine an estimated net bounty or grant of 10.51
percent ad valorem.
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C. Government Equity Infusions into
Ziscosteel-Zimbabwe Iron & Steel Co. Ltd.
Petitioners allege that Zisco, which is 88.98 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.
In making our preliminary determination, we relied on information
contained in the petition and in reference materials maintained by
the Department as the best information available. Since that time,
through independent research, we have obtained information to
supplement or replace much of that which was used for the
preliminary determination, including Zisco's published, audited
financial statements for 1982-84.
For the final determination, we are using, as the best information
available, information from the financial statements and other
sources, which shows that, during 1985, the government of
Zimbabwe converted loans it had made to Zisco into stock
holdings, or equity, at the rate of one Zimbabwe dollar per share.
The total amount of the conversion during 1985 was
$Z178,235,000. Our review of Zisco's audited financial statements
revealed no other government equity infusions or other financial
assistance for the years 1982-85. Based on this information,
government assistance, in the form of equity infusions, totaled
$Z178,235,000 million for the period 1982-1985.
Our research has confirmed that Zisco has been incurring large
losses since 1981. Therefore, as best information available, we are
assuming that Zisco has been and continues to be unequityworthy.
Using information from the petition, and from publications and
materials maintained and obtained 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 was able to obtain or
develop information on Zisco's rate of return on equity during the
review period. Therefore, as best information available, we are
using Zisco's rate of return on equity for 1984, which we have
developed from the audited 1984 financial statement. 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 between
1982-85. 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 26.31 percent ad valorem.
II. Program Determined Not To Confer Bounties or Grants
We determine that bounties or grants are not being provided to the
manufacturers, producers, or exporters in Zimbabwe of wire rod
under the following program:
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.
Respondents did not provide an adequate response in this case, and
petitioners were unable to provide information as to whether and to
what extent the wire rod industry receives countervailable benefits
under this program. However, through independent research, the
Department has obtained copies of relevant portions of the
Zimbabwe Income Tax Act of 1974 and amendments thereto.
These laws state that the training investment allowance is a tax
deduction available to all taxpayers for any training building, any
addition or alteration to any training building, or any training
equipment which is brought into use during the year of assessment.
Therefore, as best information available, we determine that this
program is not limited to a specific enterprise or industry, or group
of enterprises or industries, and thus is not countervailable.
III. Program Determined Not To Be Used
We determine that the following program was not used by the
manufacturers, producers, or exporters in Zimbabwe of wire rod:
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.
Respondents did not provide an adequate response in this case, and
petitioners were unable to provide information as to whether and to
what extent the wire rod industry receives countervailable benefits
under this program. However, the Department has obtained copies
of relevant sections of the Zimbabwe Income Tax Act, relating to
benefits to companies located in growth point areas. Under these
laws, companies located in a growth point area are eligible for:
- A special initial allowance, or tax deduction, of 100 percent on
new commercial or industrial buildings, and
- An investment allowance equal to 15 percent on the construction
of, or additions or alterations to, commercial or industrial
buildings, or staff housing, and on new or unused articles,
implements, machinery, and utensils used in a growth point
business.
We have also obtained a copy of the law prescribing the designated
growth point areas and a Zimbabwe Department of Physical
Planning map showing the location of the growth point areas. Annex
B, page 10, of the petition specifies the location of the headquarters
and plant facilities of the companies under investigation. Based
upon our review of the list and of the map, neither company is
located in a growth point area. Therefore, as best information
available, we determine that this program was not used.
Petitioners' Comment
Petitioners argue that both statute and case law require the
Department to make its final determination on the basis of the best
information available, given the respondents' failure to submit an
adequate response.
DOC Position
We agree. See the "Case History" and "Analysis of Programs" sections
of this notice.
Best Information Available
In accordance with section 776(b) of the Act, we used the best
information available in making our final determination.
Administrative Procedures
We afforded interested parties an opportunity to submit written
views in accordance with § 355.34 of our regulations (19 CFR
355.34). Written comments were received from counsel
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for
the petitioners on July 14, 1986. We also afforded the parties to the
proceeding an opportunity to present views orally before the
Department at a public hearing in accordance with 355.35 of our
regulations (19 CFR 355.35). No hearing was requested.
Suspension of Liquidation
The suspension of liquidation ordered in our preliminary
affirmative determination shall remain in effect until further notice.
The estimated net bounty or grant is 47.33 percent ad valorem. In
accordance with section 706(a)(4) of the Act, we are directing the
U.S. Customs Service to require a cash deposit in the amount
indicated above for each entry of wire rod from Zimbabwe which
is entered, or withdrawn from warehouse, for consumption on or
after the date of publication of this notice in the Federal Register,
and to assess countervailing duties in accordance with sections
706(a)(1) and 751 of the Act.
This notice is published pursuant to section 705(d) of the Act (19
U.S.C. 1671d(d)).
Lee W. Mercer,
Deputy Assistant Secretary for Trade Administration.
August 11, 1986.
[FR Doc. 86-18488 Filed 8-14-86; 8:45 am]
BILLING CODE 3510-DS-M