[Federal Register Volume 59, Number 142 (Tuesday, July 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18171]


[[Page Unknown]]

[Federal Register: July 26, 1994]


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DEPARTMENT OF COMMERCE
[C-433-806, C-475-817]

 

Notice of Initiation of Countervailing Duty Investigations: Oil 
Country Tubular Goods (``OCTG'') From Austria and Italy

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

EFFECTIVE DATE: July 26, 1994.

FOR FURTHER INFORMATION CONTACT: Gary Bettger (Austria) and Kristin 
Heim (Italy), Office of Countervailing Investigations, U.S. Department 
of Commerce, Room 3099, 14th Street and Constitution Avenue, N.W., 
Washington, DC 20230; telephone (202) 482-2239 and (202) 482-3798, 
respectively.

INITIATION:

The Austria Petition

    On June 30, 1994, Koppel Steel Corporation; U.S. Steel Group, a 
unit of USX Corporation; and USS/Kobe Steel (hereinafter, 
``petitioners'') filed with the Department of Commerce (``the 
Department'') a countervailing duty petition on behalf of the United 
States industry producing OCTG. Co-petitioners in this investigation 
are North Star Steel Company; IPSCO Steel, Inc.; and Maverick Tube 
Corporation. In accordance with section 702(b) of the Tariff Act of 
1930, as amended (``the Act''), petitioners allege that manufacturers, 
producers, or exporters of the subject merchandise in Austria receive 
countervailable subsidies.

The Italy Petition

    On June 30, 1994, Ipsco Steel, Inc. and Maverick Tube Corporation 
(herein after, ``petitioners'') filed with the Department of Commerce 
(``the Department'') a countervailing duty petition on behalf of the 
United States industry producing OCTG. Co-petitioners in this 
investigation are North Star Steel Company; Koppel Steel Corporation; 
U.S. Steel Group, a unit of USX Corporation; and USS/Kobe Steel 
Company. In accordance with section 702(b) of the Act, petitioners 
allege that manufacturers, producers, or exporters of the subject 
merchandise in Italy receive countervailable subsidies.

Injury Test

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

Standing

    Petitioners have stated that they have standing to file the 
petition because they are interested parties as defined in sections 
771(9) (C) and 771(9)(D) of the Act and that they have 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

    The products covered by these investigations are OCTG, which are 
hollow steel products of circular cross-section. These products include 
oil well casing, tubing, and drill pipe, of iron (other than cast iron) 
or steel (both carbon and alloy), whether or not conforming to American 
Petroleum Institute (``API'') or non-API specifications, whether 
finished or unfinished (including green tubes). These investigations do 
not cover casing, tubing, or drill pipe containing 10.5 percent or more 
of chromium. The OCTG subject to these investigations are currently 
classified in the Harmonized Tariff Schedule (``HTS'') under item 
numbers:

7304.20.10.00, 7304.20.10.10, 7304.20.10.20, 7304.20.30.80, 
7304.20.10.30, 7304.20.10.40, 7304.20.10.50, 7304.20.10.60, 
7304.20.10.80, 7304.20.20.00, 7304.20.20.10, 7304.20.20.20, 
7304.20.20.30, 7304.20.20.40, 7304.20.20.50, 7304.20.20.60, 
7304.20.20.80, 7304.20.30.00, 7304.20.30.50, 7304.20.30.60, 
7304.20.30.80, 7304.20.40.00, 7304.20.40.10, 7304.20.40.20, 
7304.20.40.30, 7304.20.40.40, 7304.20.40.50, 7304.20.40.60, 
7304.20.40.80, 7304.20.50.10, 7304.20.50.15, 7304.20.50.30, 
7304.20.50.45, 7304.20.50.50, 7304.20.50.60, 7304.20.50.75, 
7304.20.60.50, 7304.20.60.60, 7304.20.60.75, 7304.20.70.00, 
7304.20.80.00, 7304.20.80.30, 7304.20.80.45, 7304.20.80.60, 
7305.20.20.00, 7305.20.40.00, 7305.20.60.00, 7305.20.80.00, 
7306.20.10.30, 7306.20.10.90, 7306.20.20.00, 7306.20.30.00, 
7306.20.40.00, 7306.20.60.10, 7304.20.30.10, 7304.20.30.20, 
7304.20.30.30, 7304.20.30.40, 7304.20.60.10, 7304.20.60.15, 
7304.20.60.30, 7304.20.60.45, 7306.20.60.50, 7306.20.80.10, 
7306.20.80.50

    Although the HTS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding is dispositive.

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 petitioners 
supporting the allegations.

Initiation of Countervailing Duty Investigations

    The Department has examined the petitions on OCTG from Austria and 
Italy and found that they comply with the requirements of section 
702(b) of the Act. Therefore, in accordance with section 702 of the 
Act, we are initiating countervailing duty investigations to determine 
whether manufacturers, producers, or exporters of OCTG from Austria and 
Italy receive subsidies.

A. Austria

    We are including in our investigation the following programs which 
we believe, based on the petition and the record in the Countervailing 
Duty Investigation of Certain Steel Products from Austria (Certain 
Steel), to have provided subsidies to producers of the subject 
merchandise in Austria:

1 Equity (Capital) Infusions to Voest-Alpine AG (VAAG): 1983, 1984, and 
1986
2 Pre-Restructuring Grants to VAAG
3 Assumption of Losses at Restructuring by VAAG
4 Equity Infusions to certain VAAG subsidiaries under Law 298/1987
5 Post-Restructuring Equity Infusions to VAAG
6 Post-Restructuring Grants to VAAG
7 Post-Restructuring Grants to Voest-Alpine Stahl AG (VAS)

Allegation of Upstream Subsidies

    Petitioners have alleged that Kindberg, the producer of OCTG, 
receives upstream subsidies through its purchase of steel blooms from a 
related company, Voest-Alpine Donawitz GmbH (Donawitz). In order to 
initiate on an upstream subsidy allegation, the Department's 
regulations require that petitioners submit ``factual information 
reasonably available'' regarding the following: 1) domestic subsidies 
that the government provides to the upstream supplier; 2) the 
competitive benefit the subsidies bestow upon the subject merchandise; 
and, 3) the significant effect the subsidies have on the cost of 
producing the subject merchandise (19 CFR 355.12(b)(8)). Petitioners 
have met the three criteria set forth above as described below.
1. Domestic Subsidies
    In order to satisfy the first criterion, petitioners have alleged 
that Donawitz benefitted from the programs outlined above. We have 
analyzed these programs in accordance with section 702(b) of the Act 
and found that all programs meet the requirements stated therein.
2. Competitive Benefit
    For the purposes of initiation, in determining whether petitioners 
have provided sufficient evidence of competitive benefit, the 
Department will determine whether a petitioner has provided a 
reasonable basis to believe or suspect that:
    ``(i) The supplier of the input product controls the producer of 
the merchandise, the producer controls the supplier, or the supplier 
and the producer are both controlled by a third person;
    (ii) The price for the input product is lower than the price that 
the producer otherwise would pay for the input product in obtaining it 
from an unsubsidized seller in an arm's length transaction; or
    (iii) The government sets the price of the input product so as to 
guarantee that the benefit provided with respect to the input product 
is passed through to producers of the merchandise'' (See, Section 
355.45(b) of the Department's proposed regulations (54 FR 23366, 23383 
(May 31, 1989) (Proposed Regulations)).
    It is clear from the petition and the record in Certain Steel that 
the condition expressed in (i) has been met. Since 1987, Kindberg and 
Donawitz have been separately incorporated and, during this time, they 
have been either both controlled by the same third party or Donawitz 
controlled Kindberg.
3. Significant Effect
    The Department considers that subsidies to the upstream supplier 
may have a significant effect if the ad valorem subsidy rate on the 
input product multiplied by the proportion of the total production 
costs of the merchandise accounted for by the input product is equal 
to, or greater than, one percent (see, Proposed Regulations Section 
355.45(b)).
    Petitioners have provided calculations with respect to subsidies 
received by Donawitz for the programs listed above. The alleged 
benefits are 10.64 percent. Petitioners additionally provided 
information regarding the percentage that steel blooms account for in 
the cost of producing OCTG. The alleged benefit to Donawitz multiplied 
by the percentage of the cost of production accounted for by the input 
exceeds one percent. Therefore, petitioners have provided information 
sufficient to support a claim of significant effect.
    Therefore, we are initiating an upstream subsidy investigation with 
respect to any subsidies received by Donawitz.
    We invite interested parties to provide comments with respect to 
the methodological approach that the Department plans to follow in its 
investigation of subsidies provided on the production of OCTG in 
Austria.

B. Italy

    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 Into Dalmine
    Petitioners have named Dalmine S.p.A. (``Dalmine'') and Acciaierie 
Tubificio Arvedi S.p.A. (``Arvedi'') as the producers in Italy of the 
subject merchandise. The alleged receipt of an ``indirect'' infusion 
concerns only Dalmine; petitioners do not allege that Arvedi received 
any such infusion.
    Petitioners claim that Dalmine owned 51 percent of a subsidiary, 
Tubificio Dalmine Italsider S.p.A. (``Tubificio''), until 1989. 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. Petitioners allege that 
in return, Dalmine received a cash payment from ILVA which should be 
treated as an ``indirect'' equity infusion. The reasons cited by 
petitioners 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 those of its subsidiaries. Beyond 
their simple claim that the cash paid by ILVA served as an indirect 
pass-through of illegal subsidies received by ILVA, petitioners have 
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 to Dalmine
    Petitioners maintain that Dalmine was uncreditworthy from 1978 
through 1992. According to petitioners, all secured and unsecured loans 
obtained by Dalmine from Italian banks during these years are, 
therefore, countervailable. Petitioners state that, while they 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.
    Petitioners have not specified under which laws or programs the 
secured and unsecured loans are being provided, nor have petitioners 
provided information as to how this funding is specific to the steel 
industry (see the petition requirements in section 355.12(b)(7) of the 
Department's regulations).
    Regarding Arvedi, petitioners have not alleged that the company 
received countervailable benefits from secured and unsecured loans, nor 
have petitioners alleged that Arvedi was uncreditworthy.
    For these reasons, we are not including the secured and unsecured 
loans in our investigation.
3. Debt Forgiveness to Dalmine in Connection With the 1981 and 1988 
Restructuring Plans
    Petitioners claim 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, petitioners allege that Dalmine benefitted from the debt 
forgiveness granted to Finsider in connection with these 
restructurings. Petitioners have not alleged that Arvedi benefitted 
from either instance of debt forgiveness provided to Finsider.
    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, petitioners have not provided 
any evidence that Dalmine or Arvedi benefitted from this debt 
forgiveness, or that Finsider forgave Dalmine's or Arvedi'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, petitioners have not shown that any debt forgiveness 
was provided directly to Dalmine or Arvedi, or that a portion of the 
debt forgiven to Finsider in 1988 can be attributed to Dalmine or 
Arvedi. 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 to Dalmine
    Petitioners maintain that Dalmine received loans from the EIB in 
the early 1980s. Petitioners do not claim that Arvedi received EIB 
loans. While petitioners do not allege that the EIB loan program itself 
represents a countervailable subsidy, they contend 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 petitioners have 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
    Petitioners claim that some loans obtained by Dalmine from the EIB 
and ECSC may have been subsidized by the ERDF, but have not presented 
any evidence in support of this allegation. Petitioners do not allege 
that Arvedi received ERDF subsidies.
    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, petitioners have not 
demonstrated that Dalmine or Arvedi have 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 Benefits for Dalmine Under Law 193/84
    Petitioners allege that Dalmine has used the early retirement 
provisions under Law 193/84 and that this program provided a 
countervailable subsidy to Dalmine. Petitioners request that the 
Department treat benefits under Law 193/84 as non-recurring grants. 
Petitioners have not provided any details regarding Arvedi's use of 
early retirement.
    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. Petitioners 
have 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 petitioners have 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, 
petitioners want us to 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, 
petitioners have 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 to Dalmine From the Cassa per il Mezzogiorno
    Petitioners allege 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. Petitioners are not aware of 
any Dalmine plants outside of Bergamo, which is in the North, but point 
to Dalmine's Annual Reports which show that the company received Cazmez 
grants in the early and mid-1980s. Based on this finding, petitioners 
state that Dalmine must have a plant located in the South. Therefore, 
petitioners request 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.
    Regarding Arvedi, petitioners have not alleged that the company 
received Cazmez grants or that it benefitted from any other subsidy 
programs directed to the South. On the contrary, petitioners maintain 
that Arvedi is located in Cremona which is in the north of Italy.
    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 
these initiations.

Preliminary Determination by the ITC

    The ITC will determine by August 15, 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 Austria and Italy of OCTG. Any ITC determination which is 
negative will result in the investigations being terminated; otherwise, 
the investigations 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 20, 1994.
Barbara R. Stafford,
Acting Assistant Secretary for Import Administration.
[FR Doc. 94-18171 Filed 7-25-94; 8:45 am]
BILLING CODE 3510-DS-P