[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17681]


[[Page Unknown]]

[Federal Register: July 20, 1994]


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DEPARTMENT OF COMMERCE
[C-475-815]

 

Notice of Initiation of Countervailing Duty Investigation: Small 
Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and 
Pressure Pipe From Italy

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: August 20, 1994.

FOR FURTHER INFORMATION CONTACT: Vincent Kane, Office of Countervailing 
Investigations, Import Administration, U.S. Department of Commerce, 
Room 3099, 14th Street and Constitution Avenue, NW., Washington, DC 
20230; telephone (202) 482-2815.

Initiation

The Petition

    On June 23, 1994, Gulf States Tubes, a division of Quanex 
Corporation, (hereinafter ``petitioner'') filed with the Department of 
Commerce (``the Department'') a countervailing duty petition on behalf 
of the United States industry producing small diameter circular 
seamless carbon and alloy steel standard, line and pressure pipe 
(hereinafter ``seamless pipe''). In accordance with section 701 of the 
Tariff Act of 1930, as amended (``the Act''), petitioner alleges that 
manufacturers, producers, or exporters of the subject merchandise in 
Italy receive countervailable subsidies.

Injury Test

    Because Italy is a ``country under the Agreement'' within the 
meaning of section 701(b) of the Act, Title VII of the Act applies to 
this investigation. Accordingly, the U.S. International Trade 
Commission (``ITC'') must determine whether imports of the subject 
merchandise from Italy materially injure, or threaten material injury 
to, a U.S. industry.

Standing

    Petitioner has stated that it has standing to file the petition 
because it is an interested party as defined in sections 771(9)(C) and 
771(9)(D) of the Act and that it has filed the petition on behalf of 
the U.S. industry producing the like product. If any interested party, 
as described in sections 771(9)(C), (D), (E), or (F), wishes to 
register support for, or opposition to, this petition, such party 
should file written notification with the Assistant Secretary for 
Import Administration, Room B-099, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, DC 20230.

Scope of the Investigation

    For purposes of this investigation, seamless pipes are seamless 
carbon and alloy (other than stainless) steel pipes, of circular cross-
section, not more than 114.3 mm (4.5 inches) in outside diameter, 
regardless of wall thickness, manufacturing process (hot-finished or 
cold-drawn), end finish (plain end, bevelled end, upset end, threaded, 
or threaded and coupled), or surface finish. These pipes are commonly 
known as standard pipe, line pipe or pressure pipe, depending upon the 
application. They may also be used in structural applications.
    The seamless pipes subject to this investigation are currently 
classifiable under subheadings 7304.10.10.20, 7304.10.50.20, 
7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24, 
7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60, 
7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and 
7304.59.80.25 of the Harmonized Tariff Schedule of the United States 
(``HTSUS'').
    The following information further defines the scope of this 
investigation, which covers pipes meeting the physical parameters 
described above:
    Specifications, Characteristics and Uses: Seamless pressure pipes 
are intended for the conveyance of water, steam, petrochemicals, 
chemicals, oil products, natural gas and other liquids and gasses in 
industrial piping systems. They may carry these substances at elevated 
pressures and temperatures and may be subject to the application of 
external heat. Seamless carbon steel pressure pipe meeting the American 
Society for Testing and Materials (``ASTM'') standard A-106 may be used 
in temperatures of up to 1000 degrees fahrenheit, at various American 
Society of Mechanical Engineers (``ASME'') code stress levels. Alloy 
pipes made to ASTM standard A-335 must be used if temperatures and 
stress levels exceed those allowed for A-106 and the ASME codes. 
Seamless pressure pipes sold in the United States are commonly produced 
to the ASTM A-106 standard.
    Seamless standard pipes are most commonly produced to the ASTM A-53 
specification and generally are not intended for high temperature 
service. They are intended for the low temperature and pressure 
conveyance of water, steam, natural gas, air and other liquids and 
gasses in plumbing and heating systems, air conditioning units, 
automatic sprinkler systems, and other related uses. Standard pipes 
(depending on type and code) may carry liquids at elevated temperatures 
but must not exceed relevant ASME code requirements.
    Seamless line pipes are intended for the conveyance of oil and 
natural gas or other fluids in pipe lines. Seamless line pipes are 
produced to the API 5L specification.
    Seamless pipes are commonly produced and certified to meet ASTM A-
106, ASTM A-53 and API 5L specifications. Such triple certification of 
pipes is common because all pipes meeting the stringent A-106 
specification necessarily meet the API 5L and ASTM A-53 specifications. 
Pipes meeting the API 5L specification necessarily meet the ASTM A-53 
specification. However, pipes meeting the A-53 or API 5L specifications 
do not necessarily meet the A-106 specification. To avoid maintaining 
separate production runs and separate inventories, manufacturers triple 
certify the pipes. Since distributors sell the vast majority of this 
product, they can thereby maintain a single inventory to service all 
customers.
    The primary application of ASTM A-106 pressure pipes and triple 
certified pipes is in pressure piping systems by refineries, 
petrochemical plants and chemical plants. Other applications are in 
power generation plants (electrical-fossil fuel or nuclear), and in 
some oil field uses (on shore and off shore) such as for separator 
lines, gathering lines and metering runs. A minor application of this 
product is for use as oil and gas distribution lines for commercial 
applications. These applications constitute the majority of the market 
for the subject seamless pipes. However, A-106 pipes may be used in 
some boiler applications.
    The scope of this investigation includes all multiple-stenciled 
seamless pipe meeting the physical parameters described above and 
produced to one of the specifications listed above, whether or not also 
certified to a non-covered specification. Standard, line and pressure 
applications are defining characteristics of the scope of this 
investigation. Therefore, seamless pipes meeting the physical 
description above, but not produced to the A-106, A-53, or API 5L 
standards shall be covered if used in an A-106, A-335, A-53, or API 5L 
application.
    For example, there are certain other ASTM specifications of pipe 
which, because of overlapping characteristics, could potentially be 
used in A-106 applications. These specifications include A-162, A-192, 
A-210, A-333, and A-524. When such pipes are used in a standard, line 
or pressure pipe application, such products are covered by the scope of 
this investigation.
    Specifically excluded from this investigation are boiler tubing, 
mechanical tubing, and oil country tubular goods except when used in a 
standard, line or pressure pipe application. Also excluded from this 
investigation are redraw hollows for cold-drawing when used in the 
production of cold-drawn pipe or tube.
    Although the HTSUS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
investigation is dispositive.

Request for Comments From Interested Parties

    The scope contained in this investigation, which has been slightly 
clarified in the above ``Scope of the Investigation'' section, contains 
the clause that products used in standard, line or pressure pipe 
applications be included in the scope, regardless of whether they meet 
A-106, A-335, A-53 or API 5L standards. Implementing this clause would 
require some type of end-use certification. Given the burden on Customs 
and the difficulty involved in administering end-use certifications, 
the Department generally avoids end-use as a scope criterion. See Final 
Determination of Sales at Less Than Fair Value: Certain Alloy and 
Carbon Hot-Rolled Bars, Rods, and Semifinished Products of Special Bar 
Quality Engineered Steel from Brazil, 58 FR 31496 (June 3, 1993). 
However, because petitioner has alleged that circumvention may occur if 
end-use is not part of any order resulting from this investigation, we 
are requesting comments regarding end-use as a criterion for the scope 
of this investigation. Petitioner has based its allegation on 
circumstances that occurred in the investigations of Preliminary 
Affirmative Determination of Scope Inquiry on Antidumping Duty Orders 
on Certain Circular Welded Non-Alloy Steel Pipe from Brazil, the 
Republic of Korea, and Mexico, 59 FR 1929 (January 13, 1994). 
Petitioner has identified specific possible substitution products for 
the scope merchandise. Petitioner has also indicated that, while it is 
not aware at this time of substitution occurring, it may occur in the 
future should countervailing duties be assessed on seamless standard, 
line and pressure pipe. Therefore, we are including end-use in the 
scope for purposes of initiation; however, we intend to consider its 
appropriateness further and we invite comments from interested parties 
regarding the scope information presented above under the ``Scope of 
the Investigation'' section of this notice. Specifically, we will 
examine comments that address ``end-use'' as a scope criterion. 
Interested parties are invited to comment on the following: (1) Whether 
or not end-use is an appropriate criterion for the merchandise 
described in the ``Scope of the Investigation'' section of this notice; 
(2) how the Department would be informed when substitution is 
occurring, i.e., a trigger mechanism; (3) at what point the Department 
should implement suspension of liquidation and use of end-use 
certificates for products meeting the physical parameters described in 
the scope other than those stenciled A-106, A-335, A-53 and/or API 5L; 
(4) what specific characteristics or factors the Department should 
evaluate regarding end-use as a scope criterion; (5) what information 
should be provided on an end-use certificate; (6) precise details as to 
how the Department and Customs should administer any countervailing 
duty orders that result from this investigation given end-use as a 
scope criterion; and (7) the universe of products that could possibly 
be substituted for the subject merchandise.
    Finally, we invite comments from parties on whether the products 
within the scope of this investigation constitute more than one class 
or kind of merchandise. Parties should include an analysis using the 
following factors: (1) The physical characteristics of the merchandise; 
(2) the expectations of the ultimate purchaser; (3) the channels of 
trade; (4) the ultimate use of the product; and (5) the cost.
    Parties interested in commenting on the items mentioned above 
should submit their comments no later than close of business October 
21, 1994. Rebuttal comments will be accepted no later than close of 
business October 31, 1994.

Allegation of Subsidies

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition, on behalf of an industry, that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a), and (2) is 
accompanied by information reasonably available to petitioner 
supporting the allegations.

Initiation of a Countervailing Duty Investigation

    The Department has examined the petition on seamless pipe from 
Italy and found that it complies with the requirements of section 
702(b) of the Act. Therefore, in accordance with section 702 of the 
Act, we are initiating a countervailing duty investigation to determine 
whether manufacturers, producers, or exporters of seamless pipe from 
Italy receive subsidies.
    We are including in our investigation the following programs 
alleged in the petition to have provided subsidies to producers of the 
subject merchandise in Italy:

1. 1988/89 Equity Infusion.
2. Subsidized Loans under Law 675/77.
3. Grants under Law 193/84.
4. Retraining Grants.
5. Preferential Export Financing under Law 227/77.
6. Exchange Rate Guarantee Program under Law 796/76.
7. European Coal and Steel Community (``ECSC'') Loans and Interest 
Rebates.

    We are not including the following programs alleged to be 
benefitting producers of the subject merchandise in Italy:

1. ``Indirect'' Equity Infusion

    Petitioner has named Dalmine S.p.A. (``Dalmine'') as the producer 
in Italy of the subject merchandise. Until 1989, Dalmine owned 51 
percent of a subsidiary, Tubificio Dalmine Italsider S.p.A. 
(``Tubificio''). The remaining 49 percent was owned by Dalmine's parent 
company ILVA S.p.A. (``ILVA''), which is a government-owned steel 
producer. In 1989, Dalmine sold its shares in Tubificio to ILVA. 
Petitioner alleges that in return, Dalmine received a cash payment from 
ILVA which should be treated as an ``indirect'' equity infusion. The 
reasons cited by petitioner are that (1) Tubificio was essentially a 
worthless company because it made losses in the three years immediately 
prior to the sale, and (2) the cash paid by ILVA served as an indirect 
pass-through of illegal subsidies received by ILVA.
    In previous cases involving the Italian steel industry, we have 
treated capital infusions into unequityworthy companies by government-
owned holding companies such as Finsider S.p.A. (``Finsider'') and the 
Istituto per la Ricostruzione Industriale (``IRI'') as countervailable 
equity infusions. However, in those cases, the recipient companies were 
offering their own shares in exchange for cash. (See, e.g., Final 
Affirmative Countervailing Duty Determination: Grain-Oriented 
Electrical Steel from Italy, (``Electrical Steel''), 59 FR 18357 (April 
18, 1994).)
    In the instant case, however, Dalmine sold shares in its 
subsidiary, Tubificio, to ILVA, Dalmine's parent and the other owner of 
Tubificio. ILVA's holding in Dalmine did not increase (absolutely or 
relatively) as a result of this transaction. Therefore, we do not view 
this as a direct or indirect equity infusion into Dalmine. Moreover, 
ILVA is not a holding company like IRI or Finsider, but an operating 
company. While the Department found in Electrical Steel and Final 
Affirmative Countervailing Duty Determinations: Certain Steel Products 
from Italy, (``Certain Steel from Italy''), 58 FR 37327 (July 9, 1993), 
that ILVA benefitted from subsidies, those subsidies were allocated to 
ILVA S.p.A.'s operations and not to its subsidiaries. Beyond its simple 
claim that the cash paid by ILVA served as an indirect pass-through of 
illegal subsidies received by ILVA, petitioner has provided no basis 
for believing that ILVA was channelling government funds to Dalmine.
    On this basis, we are not including the ``indirect'' equity 
infusion in the investigation.

2. Secured and Unsecured Loans From Italian Banks

    Petitioner maintains that Dalmine was uncreditworthy from 1978 
through 1992. According to petitioner, all secured and unsecured loans 
obtained by Dalmine from Italian banks during these years are, 
therefore, countervailable. Petitioner states that, while it cannot 
outline the terms of the financing provided, the loans are 
countervailable because they were provided at interest rates lower than 
the rates that should have been charged to an uncreditworthy company.
    Petitioner has not specified under which laws or programs the 
secured and unsecured loans are being provided, nor has petitioner 
provided information as to how this funding is specific to the steel 
industry (see the petition requirements in Sec. 355.12(b)(7) of the 
Department's regulations). On this basis, we are not including the 
secured and unsecured loans in our investigation.

3. Debt Forgiveness in Connection With the 1981 and 1988 Restructuring 
Plans

    Petitioner claims that in Certain Steel from Italy, the Department 
found that Finsider (the government-owned holding company for the steel 
industry until 1989) benefitted from government assumption of debt in 
connection with the 1981 and 1988 restructurings of the state-owned 
steel industry. Because Dalmine was a subsidiary of Finsider in those 
years, petitioner alleges that Dalmine benefitted from the debt 
forgiveness provided to Finsider in connection with these 
restructurings.
    Regarding the 1981 debt forgiveness, the Department established in 
Certain Steel from Italy that Finsider assumed the debts of its 
subsidiary Italsider which we treated as a countervailable subsidy to 
Italsider. In the present case, however, petitioner has not provided 
any evidence that Dalmine benefitted from this debt forgiveness or that 
Finsider forgave Dalmine's debts.
    With respect to the 1988 debt forgiveness, we found in Certain 
Steel from Italy that a portion of Finsider's liabilities was forgiven 
in connection with another restructuring of the state-owned steel 
industry undertaken from 1988-1990. We treated this forgiveness as a 
countervailable subsidy to ILVA, which was the respondent company in 
that investigation. However, in Electrical Steel, we focused our 
investigation on subsidies provided directly to the producer of the 
subject merchandise, rather than subsidies received by its parent 
company. Therefore, we did not treat the debt forgiveness provided to 
Finsider as a countervailable benefit in Electrical Steel.
    In this case, petitioner has not shown that any debt forgiveness 
was provided directly to Dalmine or that a portion of the debt forgiven 
to Finsider in 1988 can be attributed to Dalmine. On this basis, we are 
not including the 1981 or 1988 instances of debt forgiveness provided 
to Finsider in our investigation.

4. European Investment Bank (``EIB'') Loans

    Petitioner claims that Dalmine received loans from the EIB in the 
early 1980s. While petitioner has not alleged that the EIB loan program 
itself represents a countervailable subsidy, petitioner contends that 
Dalmine received EIB loans at interest rates below the rates that 
should have been applied to an uncreditworthy company.
    The Department has previously found EIB loans to be not 
countervailable (see, e.g., Certain Steel Products from Belgium, 58 FR 
37273 at 37285 (July 9, 1993)). Because petitioner has not provided any 
new information that would cause us to change our earlier 
determination, we are not including the EIB loans in our investigation.

5. European Regional Development Fund (``ERDF'') Subsidies

    Petitioner claims that some loans obtained by Dalmine from the EIB 
and ECSC may have been subsidized by the ERDF, but has not presented 
any evidence in support of this allegation.
    At verification of the responses submitted by the European 
Community (``EC'') in Certain Steel from Italy, we found that ERDF 
grants are provided to regions whose development is lagging behind and 
to regions seriously affected by industrial decline. In addition, we 
found that rural regions with certain development problems are eligible 
for ERDF aid. In the instant case, however, petitioner has not 
demonstrated that Dalmine has production facilities in the regions that 
are eligible for ERDF assistance. Moreover, there is no evidence in the 
petition or in previous investigations that ERDF grants are used to 
subsidize ECSC or EIB loans. For these reasons, we are not including 
the ERDF grants in our investigation.

6. Early Retirement Under Law 193/84

    Petitioner alleges that Dalmine has used the early retirement 
provisions under Law 193/84 and that this program provided a 
countervailable subsidy to Dalmine. Petitioner requests that the 
Department treats benefits under Law 193/84 as non-recurring grants.
    Dalmine's Annual Reports show that the company used early 
retirement pursuant to Law 193/84 in 1984 through 1987. In Certain 
Steel from Italy, the Department found early retirement, including the 
program provided under Law 193/84, to be countervailable. Because early 
retirement is a program we typically consider to be recurring (see the 
General Issues Appendix to Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from Austria, 58 FR 37217 at 
37226 (July 9, 1993), we countervailed the program as a recurring grant 
in Certain Steel from Italy.
    At verification in Electrical Steel, Italian government officials 
explained that there were two laws providing for early retirement in 
1992: Law 223/91 and Law 406/92. We found early retirement under Law 
223/91 to be not countervailable in our final determination. We did not 
make a determination with respect to any other early retirement laws, 
including Law 193/84, because these laws were not used by the 
Electrical Steel respondent in the period of investigation. Petitioner 
has requested that, because the Department did not make a determination 
with respect to Law 193/84 in Electrical Steel, we should investigate 
whether Dalmine used early retirement under Law 193/84. However, 
information collected in Electrical Steel suggests that Law 193/84 has 
been superseded and petitioner has not presented any evidence to the 
contrary. There is no evidence in the petition that Dalmine used early 
retirement under Law 193/84 after 1987. Rather, petitioner apparently 
believe that we should change our practice and treat early retirement 
as a non-recurring benefit.
    The last year for which we have been able to establish that Dalmine 
used early retirement is 1991. The Annual Report for that year shows 
that Dalmine used the early retirement program under Law 223/91, which 
we found to be not countervailable in Electrical Steel. Moreover, 
petitioner has not presented any information that would cause us to 
change our earlier determination that early retirement, if found 
countervailable, should be treated as a recurring grant. For these 
reasons, we are not including early retirement in our investigation.

7. Grants From the Cassa per il Mezzogiorno

    Petitioner alleges that Dalmine has received grants from the Cassa 
per il Mezzogiorno (``Cazmez'') which are directed to southern Italy. 
In Certain Steel, we found such grants to be countervailable because 
they were provided on a regional basis. Petitioner is not aware of any 
Dalmine plants outside of Bergamo, which is in the North, but points to 
Dalmine's Annual Reports which show that the company received Cazmez 
grants in the early and mid-1980s. Based on this finding, petitioner 
states that Dalmine must have a plant located in the South. Therefore, 
petitioner requests that the Department, in addition to the Cazmez 
grants, investigate a large number of other subsidy programs directed 
to the South, should we find that Dalmine maintains production 
facilities there.
    From Dalmine's Annual Reports, we have found that the company 
formerly had two production facilities in the South, both of which 
produced welded pipe. Apart from these two plants, which were spun off 
in 1989, we have not found any other production facilities in the 
South. Because both the plants in the South produced welded pipe, which 
is not included in the scope of this investigation, we are not 
including the Cazmez grants or any other programs directed to the South 
in our investigation.

ITC Notification

    Pursuant to section 702(d) of the Act, we have notified the ITC of 
this initiation.

Preliminary Determination by the ITC

    The ITC will determine by August 8, 1994, whether there is a 
reasonable indication that an industry in the United States is being 
materially injured, or is threatened with material injury, by reason of 
imports from Italy of seamless pipe. Any ITC determination which is 
negative will result in the investigation being terminated; otherwise, 
the investigation will proceed according to statutory and regulatory 
time limits.
    This notice is published pursuant to 702(c)(2) of the Act and 19 
CFR 355.13(b).

    Dated: July 13, 1994.
Barbara R. Stafford,
Deputy Assistant Secretary for Investigations.
[FR Doc. 94-17681 Filed 7-19-94; 8:45 am]
BILLING CODE 3510-DS-P