[Federal Register Volume 62, Number 67 (Tuesday, April 8, 1997)]
[Notices]
[Pages 16782-16788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8955]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-489-502]
Certain Welded Carbon Steel Pipes and Tubes and Welded Carbon
Steel Line Pipe From Turkey; Preliminary Results of Countervailing Duty
Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty
administrative reviews.
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SUMMARY: The Department of Commerce (``the Department'') is conducting
administrative reviews of the countervailing duty orders on certain
welded carbon steel pipes and tubes and welded carbon steel line pipe
from Turkey. For information on the net subsidy for each reviewed
company for each class or kind of merchandise, as well as for all non-
reviewed companies, see the Preliminary Results of Reviews section of
this notice. If the final results remain the same as these preliminary
results of administrative reviews, we will instruct the U.S. Customs
Service to access countervailing duties as detailed in the Preliminary
Results of Reviews section of this notice. Interested parties are
invited to comment on these preliminary results. (See Public Comment
section of this notice.)
EFFECTIVE DATE: April 8, 1997.
FOR FURTHER INFORMATION CONTACT:
Stephanie Moore or Cameron Cardozo, Office of Countervailing Duty/
Antidumping Enforcement VI, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
2849 or (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On March 7, 1986, the Department published in the Federal Register
(51 FR 7984) the countervailing duty orders on certain welded carbon
steel pipes and tubes (pipe and tube) and certain welded carbon steel
line pipe (line pipe) from Turkey. On March 4, 1996, the Department
published a notice of ``Opportunity to Request Administrative Review''
(61 FR 8238) of these countervailing duty orders. We received timely
requests for reviews, and we initiated the reviews, covering the period
January 1, 1995 through December 31, 1995, on April 25, 1996 (61 FR
18378).
[[Page 16783]]
In accordance with 19 CFR 355.22(a), the review on pipe and tube
covers Erciyas Boru Sanayii ve Ticaret A.S. (Erbosan), a pipe and tube
producer and exporter, who specifically requested the review. The
review on line pipe covers Mannesmann-Sumerbank Boru Endustrisi T.A.S.
(Mannesmann), a line pipe producer and exporter, who specifically
requested the review. These reviews also cover 28 programs.
On November 6, 1996, we extended the period for completion of the
preliminary results pursuant to section 751(a)(3) of the Tariff Act of
1930, as amended. We extended the preliminary results to no later than
March 31, 1997 (see 61 FR 57398). The final results will be issued no
later than 120 days from the date on which the preliminary results are
published.
Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (``URAA'') effective January 1, 1995
(the Act). The Department is conducting this administrative review in
accordance with section 751(a) of the Act.
Scope of Reviews
Imports covered by these reviews are shipments from Turkey of two
classes or kinds of merchandise: (1) Certain welded carbon steel pipe
and tube, having an outside diameter of 0.375 inch or more, but not
over 16 inches, of any wall thickness. These products, commonly
referred to in the industry as standard pipe and tube or structural
tubing, are produced to various American Society for Testing and
Materials (ASTM) specifications, most notably A-53, A-120, A-135, A-
500, or A-501; and (2) certain welded carbon steel line pipe with an
outside diameter of 0.375 inch or more, but not over 16 inches, and
with a wall thickness of not less than .065 inch. These products are
produced to various American Petroleum Institute (API) specifications
for line pipe, most notably API-L or API-LX. These products are
classifiable under the harmonized Tariff Schedule of the United States
(HTSUS) item numbers 7306.30.10 and 7306.30.50. The HTSUS item numbers
are provided for convenience and Customs purposes. The written
description remains dispositive.
Verification
As provided in section 782(i) of the Act, we verified information
submitted by the Government of Turkey (GOT), Erbosan, and Mannesmann,
We followed standard verification procedures, including meeting with
government and company officials and examination of relevant accounting
and financial records and other original source documents. Our
verification results dated March 17 and March 25, 1997, are outlined in
the public versions of the verification reports, which are on file in
the Central Records Unit (CRU) (Room B-099 of the Main Commerce
Building).
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined To Confer Subsidies
1. Pre-Shipment Export Credit. The Export Credit Bank of Turkey
(Turk Eximbank) provides short-term pre-shipment export loans to
exporters through intermediary commercial banks. The program is
designed to support export-related industries from the initial stage of
production. Loans are made to exporters who commit to export within a
specified period of time. Generally, loans are extended for 120 days
for industrial goods and cover 50 to 75 percent of the FOB export
value. During the period of review (POR), both companies under review
were eligible for pre-shipment export loans amounting to 50 percent of
the FOB value of exports, for a maximum of 120 days. These loans are
denominated in Turkish Lira (TL) and repaid in TL. The interest rate
charged on these pre-shipment loans is established by Turk Eximbank and
is tied to the Central Bank's rediscount rate.
In the Final Affirmative Countervailing Duty Determination: Certain
Pasta from Turkey 61 FR 30366 (June 14, 1996) (Pasta), the Department
found this program specific and, therefore, countervailable because
receipt of the loans is contingent upon export performance and the
interest rate paid on these loans is less than the amount the recipient
would pay on a comparable commercial loan. In Pasta, we found that
these loans were tied to specific destinations; however, in these
reviews, we find these loans to be untied. Although an exporter files a
loan application in which the export destination is listed, we verified
that the actual destination of the shipments may be different from the
one(s) stated in the loan application. The exporter has to only show
that an export has taken place, and provide the foreign currency
exchange receipts from the commercial bank to close out the loan with
Turk Eximbank. Because the loans are not specifically tied to a
particular destination at the time of approval, we preliminarily
determine that the pre-shipment loan program is an untied export loan
program. For further discussion, see the GOT and the company
Verification Reports (Public Versions) dated March 17 and March 25,
1997, which are on file in the CRU.
Section 771(5)(E)(ii) of the Act states that, in the case of a
loan, if there is a difference between the amount the recipient of the
loan pays on the loan and the amount the recipient would pay on a
comparable commercial loan that the recipient could actually obtain on
the market, then a countervailable benefit is bestowed. In this case,
as the benchmark interest rates, we are using company-specific interest
rates on comparable commercial loans to calculate the benefit for any
pre-shipment loans that were taken out by Erbosan or Mannesmann in 1994
and repaid in 1995, and any pre-shipment loans that were taken out in
1995 and repaid in 1995. (See company Verification Reports). Because
the Department considers Turkey to be hyper-inflationary based on a
Consumer Price Index rate of approximately 67 percent during the POR.
(see Pasta at page 30367; see, also, Preliminary Results of Antidumping
Duty Administrative Review: Gray Portland Cement and Clinker from
Mexico, 61 FR 51676, 51681 (October 3, 1996)), we also preliminarily
determine that it is appropriate to use monthly average short-term
interest rates. Where monthly company-specific interest rates for
Erbosan or Mannesmann are unavailable, we have used the monthly average
interest rates charged by a commercial bank in Turkey on domestic TL
loans. See commercial bank Verification Report (Public Version) on file
in CRU. Using these benchmarks, we continue to find these pre-shipment
export loans countervailable because the interest rate charged is less
than the rate for comparable commercial loans that the company could
actually obtain in the market.
Government Resolution Number: 94/5782, Article 4, effective June
13, 1994, allows for the exemption of certain fees that are normally
charged on loans provided that the loans are used in financing
exportation and other foreign exchange earning activities. For pre-
shipment loans, which are denominated in TL, the fees that are exempted
are the Bank and Insurance and Services Tax (BIST) of 5 percent of the
interest rate, and the Resource Utilization Support Fund (RUSF) fee of
6 percent of the interest rate. The Department's current practice is
normally to compare effective interest rates rather than nominal rates.
The ``effective'' interest
[[Page 16784]]
rates are intended to take account of the actual cost of the loan,
including the amount of any fees, commissions, compensating balances,
government charges or penalties paid in addition to the ``nominal''
interest rate. Therefore, we have added the exempted customary banking
fees to the commercial bank's benchmark interest rates. See e.g.,
Certain Iron-Metal Castings from India: Final Results of Countervailing
Duty Administrative Review, 60 FR 44843 (August 29, 1995) (Castings).
To determine the benefit, we calculated the countervailable subsidy
as the difference between actual interest paid on pre-shipment loans
during the POR and the interest that would have been paid using the
benchmark interest rates plus the customary banking fees. This
difference was divided by the company's total export sales during the
POR. On this basis, we preliminarily determine the countervailable
subsidy to be 1.77 percent ad valorem for Erbosan, the pipe and tube
producer, and 0.73 percent ad valorem for Mannesmann, the line pipe
producer.
B. Other Programs Preliminarily Determined To Confer Subsidies
1. Investment Allowance. The General Incentives Program (GIP) is
designed to increase investment in Turkey and to expand the Turkish
economy. Under the GIP, companies may apply to the Undersecretariat of
Treasury (UT) for investment incentive certificates. The investment
incentive certificates entitle the holders to a number of specified
benefits, such as investment allowances, related to an investment
project. The investment allowance provides companies with a corporate
tax exemption of between 30 percent and 100 percent of their total
fixed investment depending upon the geographical location, sector and
the value of the investment. During the POR, for purposes of GIP,
Turkey was divided into four types of geographic regions: (1)
Developed; (2) normal; (3) priority two; and (4) priority one.
Companies located in first or second priority regions for development
within Turkey, which are lesser-developed regions, are entitled to
higher rates of deduction than companies located in the developed or
normal regions.
Both companies were approved in 1994 for GIP investment
certificates. They claimed an investment allowance on their corporate
income tax returns filed during the POR. Erbosan, because it is located
in a normal region, is eligible for an investment allowance of 40
percent, while Mannesmann, because it is located in a development
region, is only eligible for the minimum investment allowance of 30
percent, which is the minimum investment allowance provided to all
companies under GIP regardless of location or type of industry. See
e.g., Certain Welded Carbon Steel Pipe and Tube Products from Turkey;
Preliminary Results of Countervailing Duty Administrative Review, 52 FR
47621, 47622 (December 15, 1987) and Certain Welded Carbon Steel Pipe
and Tube Products from Turkey; Final Results of Countervailing Duty
Administrative Review, 53 FR 9791 (March 25, 1988), Because the 30
percent investment tax is not limited to a specific enterprise or
industry or group thereof, nor limited to companies located in specific
regions, pursuant to section 771(5A)(D) we preliminarily determine that
the 30 percent minimum investment allowance under GIP is not
countervailable.
However, because the investment allowance of 40 percent received by
Erbosan (designated for companies located in a normal region) is 10
percent higher than the minimum 30 percent allowance provided to all
sectors and geographic regions within Turkey, the difference results in
a higher tax savings to the company due to its geographic location.
Therefore, we preliminarily determine that the provision of a higher
investment allowance of 40 percent to certain regions is specific and,
therefore, countervailable within the meaning of section 771(5A)D)(iv)
of the Act. See also Industrial Phosphoric Acid from Israel;
Preliminary Results of Countervailing Duty Administrative Reviews, 61
FR 8255, 8257 (March 4, 1996) and Industrial Phosphoric Acid from
Israel; Final Results of Countervailing Duty Administrative Reviews, 61
FR 28841 (June 6, 1996).
We preliminarily determine that the benefits under the investment
allowance program are ``recurring'' because once a company has a fixed
asset investment project approved, it becomes eligible to deduct an
investment allowance from its corporate income tax returns; therefore,
the receipt of the benefit is automatic and continues year to year. To
calculate the benefit for Erbosan, we first multiplied its total fixed
investment by 10 percent, the amount Erbosan receives about the 30
percent allowance available throughout the country. We then computed
the company's tax rate. The company paid four separate corporate taxes.
These included a 25 percent corporate tax, an interim tax in the amount
of 10 percent of the corporate tax, a ``stopaj'' tax equal to 10
percent of 75 percent of its net taxable income and a fund tax equal to
10 percent of the ``stopaj'' tax. The sum of these taxes equals a total
corporate tax rate of 35.75 percent. We the multiplied the
countervailable portion of the investment allowance deduction by the
tax rate of 35.75 percent, and obtained the tax savings for the
company. Next, we divided the tax savings by the company's total sales.
On this basis, we preliminarily determine the countervailable subsidy
to be 0.02 percent ad valorem for Erbosan, for pipe and tube.
2. Export Incentive Certificate Customs Duty and Other Tax
Exemptions. Under Turkey's duty drawback program, companies are
permitted to import spare parts free of customs duties and other taxes
levied on imports used in the manufacture of goods to be exported. To
obtain these benefits, companies must file a project application with
the Undersecretariat for Foreign Trade (UFT) that describes the spare
parts to be imported and the FOB value of the exports that they will be
used to produce. The CIF value of the imported spare parts cannot
exceed two percent of the FOB export commitment. On July 17, 1995, the
program was changed to permit spare parts to be imported provided that
the CIF value of the spare parts did not exceed 5 percent of the FOB
export commitment. The UFT subsequently issues duty drawback
certificates to the companies that describe the spare parts and
instructed Customs that these items are to be free of duties. However,
the companies must pay value added tax on the imports.
We preliminarily determine that this program is a subsidy and is
specific within the meaning of section 771(5A)(B) of the Act, because
eligibility for the program is contingent upon export performance and
the spare parts imported under this program were utilized in machinery
that produces, among other things, the subject merchandise. See e.g.,
Ball Bearings and Parts Thereof from Thailand: Final Results of
Countervailing Duty Administrative Review, 62 FR 728, 731 (January 6,
1997).
To calculate the benefit, we divided the total amount of duties and
taxes exempted on spare parts imported during the POR for each company
under review, by the total value of exports during the POR. On this
basis, we preliminarily determine the benefit from this program to be
0.06 percent ad valorem for Erbosan for pipe and tube, and 0.02 percent
ad valorem for Mannesmann for line pipe.
3. Foreign Exchange Loan Assistance. The GOT Resolution Number: 94/
5782, Article 4, effective June 13, 1994 concerning the encouragement
of exportation, allows commercial banks to exempt certain fees provided
that the
[[Page 16785]]
loans are used in the financing of exportation and other foreign
exchange earning activities. We preliminarily determine that this
program is specific and, therefore, countervailable within the meaning
of section 771(5A)(B) because the exemption of the fees is contingent
upon export performance.
Both companies received and paid interest on foreign currency loans
from commercial banks and were exempted from paying the customary BIST
of 5 percent of the interest rate and the RUSF fee of 6 percent of the
principal. Unlike pre-shipment loans that are denominated in TL where
the RUSF fee is 6 percent of the interest rate, the RUSF fee for
foreign currency loans is calculated as 6 percent of the principal. At
verification, we found that Mannesmann's foreign currency loans were
tied to destinations other than to the United States. We found that
Erbosan's foreign currency loans were provided for both U.S. and non-
U.S. shipments, and were not tied to a particular destination. For
further discussion, see the companies' Verification Reports.
We preliminarily determine that these fee exemptions are a direct
transfer of funds from the GOT providing a benefit in the amount of the
exemption. (See discussion of the ``Pre-shipment Loans'' program
above). See also, Castings at 44843. We also preliminarily determine
that the benefits are recurring because once the company obtains a
foreign currency loan it is automatically exempted from paying the
fees. To calculate the benefit for this program, we computed the
exempted fees on the interest or principal of Erbosan's foreign
currency loans. These loans are dollar denominated. Therefore, we
converted these exempted fee amounts to TL using the exchange rate in
effect during the month in which the loans were repaid or interest
paid, and divided the result by the company's total exports. On this
basis, we preliminarily determine the net subsidy to be 1.14 percent ad
valorem for Erbosan for pipe and tube.
4. Freight Program. The GOT Decree number 93/43, effective October
13, 1993, provided freight rebate payments to exporters in the amount
of $50 per ton for merchandise exported on Turkish vessels, and $30 per
ton for merchandise exported on non-Turkish vessels, capped at 10
percent of the FOB value of the goods. In February 1994, Decree number
94/4 raised the cap to 15 percent of the FOB value of the goods.
Benefits under this program were provided in the form of 30 percent
cash and 70 percent treasury bonds with a two-year maturity. Companies
were eligible to receive interest on bonds on the one-year anniversary
date of the issuance of the bonds and on the date of the maturity of
the bonds. The program was terminated on December 31, 1994, and there
will be no payments on shipments made after January 1, 1995.
We preliminarily determine that these export grants and bonds are
countervailable export subsidies within the meaning of section
771(5A)(B) of the Act. The grants and bonds are a direct transfer of
funds from the GOT providing a benefit in the amount of the cash grants
and bonds. We further preliminarily determine that the benefits under
the Freight Program are ``recurring.'' Once a company has exported and
submitted documentation to the Central Bank it becomes eligible for the
cash grants or bonds. The receipt of benefits is automatic and
continued throughout the life of the program. (Pasta at page 30369).
See also Allocation Section of the General Issues Appendix in Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Austria (58 FR 37217, 37268-69, July 9, 1993) (``General Issues
Appendix'').
During the POR, Erbosan received cash and bonds under the freight
rebate program based on exports made in 1994. The bonds were received
by Erbosan on May 1, 1995 and mature on May 1, 1997; interest was
payable on May 1, 1996 and on the date of maturity. During the POR,
Mannesmann received cash and bonds for exports made in 1994, but we
verified that the company did not receive any payments under the
freight program during the POR for exports to the United States.
The Department's practice has been to deem the benefit to be
received at the time of export countervailable if the benefit is
calculated as a percentage of the FOB value and the amount of the
benefit is known at the time of export. See e.g., Castings at 44843.
Although the benefit under the freight program is calculated based on
tonnage and not the percent of exports, we note that a benefit
determined by the amount of the tonnage may also be known at the time
of export.
However, the facts in this case establish that the exporter did not
know the amount of benefit at the time of export. Although the freight
payments were stated in U.S. dollars per ton, the exporter received the
benefit in TL. The exporter did not know at the time of export what
exchange rate would be used to convert the dollar equivalent payments
into TL. Given the high inflation rate in Turkey (based on a CPI rate
of approximately 65 percent in 1993, and 114 percent in 1994), there
was no way for the exporter to predict at the time of export what the
dollar equivalent in TL would be. In February 1995, the GOT announced
that it would convert the dollar amount of the freight payments using
the exchange rate that was in effect on December 31, 1994. Thus, the
exporter did not know the amount of the benefit at the time of export.
See the GOT Verification Report (page 12). This position is consistent
with the Department's analysis of a similar program in Pasta where we
determined that the benefit should be treated as having been bestowed
when the cash was received rather than earned. (See discussion of
Payments for Exports on Turkish Ships program in Pasta at 30369). As
such, we preliminarily determine that the benefits under this program
are bestowed when the cash is received with respect to the cash
payments, and not when the benefit is earned.
With regard to the bonds portion of the rebate, we preliminarily
determine that the benefits from the bonds are bestowed on the date of
maturity. This is due to the fact that, even though there were not
restrictions on the sale or transfer of the bonds, because of the rate
of inflation, there was no secondary market to allow exporters to
convert their bonds to cash (see GOT, company, and commercial bank
Verification Reports). Therefore, the exporters have no choice but to
hold the bonds until maturity. (Pasta at page 30368).
The benefits under the freight program are made on a shipment-by-
shipment basis. Because the benefits are shipment-specific, and we are
able to segregate the shipments according to the country of
destination, we preliminarily determine that they are tied to a
particular destination. Therefore, where a benefit is tied or can be
tied to exports to the United States, we calculate the ad valorem
subsidy rate by dividing the benefit by the firm's total exports to the
United States. See, e.g., Notice of Final Results of Countervailing
Duty Administrative Review: Roses and Other Cut Flowers from Columbia,
52 FR 48847, 48848 (December 28, 1987). We have preliminarily
calculated Erbosan's benefit from this program by dividing the total
amount of grants received for exports to the United States during the
POR by Erbosan's total exports to the United States during the POR. On
this basis, we preliminarily determine the net subsidy to be 1.02
percent ad valorem for Erbosan for pipe and tube.
5. Resource Utilization Support Premium. a. Program Description.
Under the Resource Utilization Support Premium program (RUSP), a
company can request benefits for a proposed
[[Page 16786]]
investment project, as well as other General Incentives Program (GIP)
benefits, at the time it submits an application to the General
Directorate of Incentive and Applications (GDIA) for an investment
incentive certificate (see discussion of the ``Investment Allowance''
program above). If the GDIA approves the investment project described
in the application, it will issue to the company an investment
incentive certificate which lists the GIP benefits bestowed. During the
POR, Erbosan received RUSP payments for an investment project related
to the production of standard pipe and tube.
RUSP payments were given to companies to encourage them to use
their own equity, rather than loans or credit, to finance their GIP
investment project. The amount of the benefit is applied to that
portion of the fixed investment which is financed by the investor's own
resources. Erbosan is located in a region designated as a normal region
by the GDIA. All companies located in normal regions are eligible for
RUSP payments of 15 percent of their investment. Companies located in
developed regions are not eligible for RUSP payments. Mannesmann is
located in a developed region and is not eligible for RUSP payments,
and we also verified that Mannesmann never received RUSP payments.
The RUSP was terminated in 1991, and GIP investment incentive
certificates issued after 1991 were no longer eligible to receive RUSP
payments. Erbosan's investment incentive certificate was issued in 1990
and expired on December 31, 1994. Erbosan received its RUSP benefits in
1994 in the form of treasury bonds with a maturity date in 1995. During
the POR, Erbosan received the full amount of the face value of the
bonds, plus interest.
Because RUSP assistance is provided by the GOT only to industries
located within specifically designated geographical regions of Turkey--
i.e., in this case, the normal region--we preliminarily determine that
this program provides a countervailable regional subsidy within the
meaning of section 771(5A)(D)(iv).
b. Claim for ``Green Light'' Subsidy Treatment of RUSP. Section
771(5B) of the Act describes subsidies that are non-countervailable
(``green light'' subsidies). Among these green light subsidies are
subsidies to disadvantaged regions. The GOT requested that the RUSP
program be considered non-countervailable under section 771(5B)(C) of
the Act because the benefit is provided only to disadvantaged regions.
The RUSP program is one of many programs that distribute benefits
on a regional basis under the umbrella of the General Incentives
Program (GIP). Under GIP, provinces were categorized by the GOT into
one of the following four types of development regions: developed;
normal; priority two; and priority one according to their level of
development. By offering an increasing level of benefits to lesser
developed regions, regional assistance programs under GIP were designed
not only to further development, particularly in the two priority
regions, but also to reduce the disparities among the four regions. As
stated in the Fifth Five Year Development Plan (1984-1989), the GOT's
goal was to ``develop the Priority Development areas * * * and reduce
and, in time, eradicate, the difference of development existing between
these and other regions.'' (See Attachment 1 of January 21, 1997 GOT
response.) The various economic incentive programs would complement
other development activities such as housing and infrastructure
projects.
According to the questionnaire responses, Turkish provinces are
classified into these development regions based on the results of the
Principal Component Analysis, an econometric model that generates a
development coefficient based on the selected socioeconomic development
variables. The State Planning Organization (SPO) conducts a Principal
Component Analysis for every province and creates an index that ranks
the provinces from most to least developed according to the development
coefficients generated by the Principal Component Analysis.
Section 771(5B)(C) of the Act specifies the conditions that must be
met for a program to qualify for green light status: it is part of a
general regional development policy and each region is a clearly
designated contiguous geographical area with a definable economic and
administrative identity; the assistance is generally available; the
assistance is not for regions suffering only temporary disadvantage;
the eligibility criteria are clearly stated in law or an official
document and capable of verification; and the eligibility criteria are
neutral and objective, and include a measurement of economic
development. The SAA states that the green light provision governing
assistance for disadvantaged regions must be strictly construed and
that the Department must determine that all of these statutory criteria
have been satisfied. (See Statement of Administrative Action
accompanying the URAA, reprinted in H.R. Doc. No. 316, 103d Cong., 2d
Sess. 919 (1994)) (SAA).
In order to examine the criteria regarding economic development,
section 771(5B)(C)(ii) of the Act instructs the Department to examine
the respondent's measurement of economic development over a three-year
period. Although it received benefits under this program during the
POR, Erbosan was approved for receipt of these benefits in 1991. The
Department's standard practice when analyzing the countervailability of
programs is to examine data from the time period when the subsidy was
approved. In this case, the RUSP was in effect from 1989-1991, and this
time period serves as our three-year period for analysis.
In their January 29, 1997 questionnaire response, the GOT provided
an excerpt from a 1991 SPO publication which listed the 53 economic and
social variables used in the Principal Component Analysis to generate
the socioeconomic development index that is the basis for the SPO's
ranking of the provinces from most to least developed. The excerpt also
included a list of 67 provinces ranked by the SPO from most to least
developed. Respondents claimed that this list, originally published in
a 1973 SPO publication, was still valid for the 1989-1991 period.
At verification, we requested to see documentation, such as the
index generated by the Principal Component Analysis, the Principal
Component Analysis for that period, or SPO publications or reports that
supported the ranked list of 67 provinces described above and the
classification of provinces into the four development regions during
the relevant 1989-1991 period. Although respondents had supporting
documentation for a 1996 Principal Component Analysis used to reexamine
the regional designations, no supporting documentation was available
for the Principal Component Analysis used to designate provinces into
development regions during the applicable 1989-1991 period. According
to respondents, the supporting documentation for that period was no
longer available. For further discussion, see the GOT Verification
Report (pages 10-11).
Using the limited information provided in the response and at
verification, the team sought to examine whether the 1989-1991
Principal Component Analysis rankings (based on the list from the
January 29, 1997 submission) corresponded with the provinces' regional
designations for 1989-1991. The provinces were rank
[[Page 16787]]
ordered from first, most developed, to 67th, least developed.
Presumably, the actual designations of the provinces--developed,
normal, first priority, and second priority--should have closely
followed the Principal Component Analysis index of economic
development. However, the designation of provinces into development
regions did not track closely to the Principal Component Analysis
rankings. For example, Bilecik and Ordu provinces, respectively ranked
at 52 and 58 (out of a possible 67) were listed as normal regions,
while Zonguldak, ranked at 13, was listed as Priority One in 1990 and
1991. In addition, four provinces, Zonguldak, Erzincan, Artvin and
Sanliurfa, were reclassified between 1989 and 1991 without any
Principal Component Analysis being undertaken.
GOT officials accounted for these discrepancies by explaining that
the Principal Component Analysis is not the only basis for determining
a province's regional designation. The Principal Component Analysis is
only one step (albeit the primary one) toward determining the regional
designations. The final determination is made by the Council of
Ministers, taking into account factors that cannot be enumerated by the
Principal Component Analysis, including the promotion of other
development policies and goals (e.g., privatization,), the impacts
upon, and relationships with, other regional and non-regional
development policies and programs, and the Ministers experience in
development issues and programs. (For a further discussion, see the GOT
Verification Report (page 11).)
In order for a subsidy to be considered non-countervailable because
it is provided in a disadvantaged region, section 771(5B)(C)(i)(II) of
the Act states that ``[e]ach region is considered a disadvantaged
region on the basis of neutral and objective criteria indicating that
the region is disadvantaged * * *.'' On this basis, the RUSP assistance
is not entitled to green light treatment. The information on the record
indicates that the designations of disadvantaged regions do not
correspond with an analysis based on neutral and objective criteria,
purportedly the Principal Component Analysis. Rather, the GOT can make
the final decisions regarding the designation of economic development
regions based on criteria that are neither neutral nor objective. Since
the SAA states that all of the green light criteria, listed above, must
be met, we do not intend to analyze the GOT's compliance with the
remaining criteria. As a result, benefits provided under the RUSP
program do not qualify as non-countervailable green light subsidies.
See e.g., Preliminary Affirmative Countervailing Duty Determination;
Certain Pasta from Italy, 60 FR 53739, 53742 (October 17, 1995) and
Final Affirmative Countervailing Duty Determination: Certain Pasta from
Italy, 61 FR 30288 (June 14, 1996).
c. Subsidy Calculation. Although Erbosan received the RUSP bonds in
1994, the cash flow was realized in 1995 when the principal and
interest from the bonds were paid. We verified that there is no
secondary market for the resale of treasury bonds in Turkey and,
therefore, Erbosan could not realize a cash flow until 1995 (the POR)
when the bonds reached maturity. See Erbosan Verification Report (page
7). We also preliminarily determine that the RUSP benefits are non-
recurring because they are exceptional and the recipient cannot expect
to receive benefits on an ongoing basis. However, because the amount
received under this program is less than 0.50 percent of Erbosan's
total sales, we are allocating the total benefit to the POR. See e.g.,
Industrial Phosphoric Acid from Israel; Preliminary Results of
Countervailing Duty Administrative Review, 61 FR 28845, 28847 (June 6,
1996) and Industrial Phosphoric Acid from Israel; Final Results of
Countervailing Duty Administrative Review, 61 FR 53351 (October 11,
1996). We calculated the benefit for the POR by dividing the RUSP
payments by Erbosan's total sales of subject merchandise during the
POR. On this basis, we preliminarily determine the benefit from this
program to be 0.05 percent ad valorem for the POR.
The GOT terminated the RUSP program in 1991 and GIP investment
incentive certificates issued after 1991 were no longer eligible to
receive RUSP payments. We verified that Erbosan has no investment
incentive certificates that were issued before 1991 that are still
valid. Therefore, we consider this program terminated with no residual
benefits. The termination of RUSP constitutes a program-wide change;
and because there are no residual benefits, the cash deposit rate for
Erbosan will be adjusted to zero for this program. See e.g., Pasta, 61
FR 30370.
II. Programs Preliminarily Determined To Be Not Used
We examined the following programs and preliminarily determine that
the producers and/or exporters of the subject merchandise did not apply
for or receive benefits under these programs during the period of
review:
1. Resource Utilization Support Fund
2. State Aid for Exports Program
3. Advance Refunds of Tax Savings
4. Export Credit Through the Foreign Trade Corporate Companies
Rediscount Credit Facility (Eximbank)
5. Past Performance Related Foreign Currency Export Loans (Eximbank)
6. Export Credit Insurance (Eximbank)
7. Subsidized Turkish Lira Credit Facilities
8. Subsidized Credit for Proportion of Fixed Expenditures
9. Fund Based Credit
10. Regional Subsidies
a. Additional Refunds of VAT (VAT+10%)
b. Postponement of VAT on Imported Goods
c. Incentive Premium on Domestically Obtained Goods (Rebate of
VAT on Domestically-Sourced Machinery and Equipment)
d. Land Allocation (GIP)
e. Taxes, Fees (Duties), Charge Exemption (GIP)
III. Programs Preliminarily Determined To Be Terminated
We preliminarily determine that the following programs have been
terminated and there are no residual benefits:
1. Export Performance Credits
The Export Performance Credit program, which was administered by
the Central Bank of Turkey, provided credits to manufacturers and
exporters based on a percentage of the FOB value of their exports.
The certificates were issued for shipments made between March 7,
1994 and December 31, 1994. It is the Department's practice in the
case of an export benefit provided as a percentage of the value of
the exported merchandise that the benefit is bestowed on the date of
the export. See e.g., Castings at 44843. Under this program, the
exporters received the TL equivalent of a fixed percentage of their
U.S. dollar exports. Although at the time of receipt, the exporters
received more TL than at the time of export, the value of the TL
amount remained the same in U.S. dollar terms. Therefore, we
preliminarily determine that the benefit occurred at the time of
export in 1994.
2. Deduction from Taxable Income for Export Revenues
3. Preferential Export Financing Under Decree 84/8861
4. Interest Spread Return Program (GIP)
5. Export Credits Under Communique No. 1
6. Corporate Tax Deferral
7. Payment of Certain Obligations of Firms Undertaking Large
Investments
8. Subsidized Credit in Foreign Currency
Preliminary Results of Review
In accordance with 19 C.F.R. 355.22(c)(4)(ii), we calculated an
individual subsidy rate for each producer/exporter subject to each
administrative review. For the period January 1, 1995 through December
31, 1995, we preliminarily determine the net subsidy to be as follows:
[[Page 16788]]
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of line pipe rate
(percent)
------------------------------------------------------------------------
Mannesmann.................................................. 0.75
------------------------------------------------------------------------
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of line pipe and tube rate
(percent)
------------------------------------------------------------------------
Erbosan..................................................... 4.06
------------------------------------------------------------------------
If the final results of these reviews remain the same as these
preliminary results, the Department intends to instruct the U.S.
Customs Service (``Customs'') to assess countervailing duties as
indicated above.
The Department also intends to instruct Customs to collect cash
deposits of estimated countervailing duties as indicated below of the
f.o.b. invoice price on all shipments of each class or kind of
merchandise from reviewed companies, entered, or withdrawn from
warehouse, for consumption on or after the date of publication of the
final results of these reviews.
------------------------------------------------------------------------
Cash
deposit
Manufacturer/exporter of line pipe rate
(percent)
------------------------------------------------------------------------
Mannesmann................................................... 0.75
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash
deposit
Manufacturer/exporter of pipe and tube rate
(percent)
------------------------------------------------------------------------
Erbosan...................................................... 4.01
------------------------------------------------------------------------
Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for
investigated and reviewed companies, the procedures for establishing
countervailing duty rates, including those for non-reviewed companies,
are now essentially the same as those in antidumping cases, except as
provided for in section 777A(e)(2)(B) of the Act. The requested review
will normally cover only those companies specifically named. See 19 CFR
section 355.22(a). Pursuant to 19 CFR 355.22(g), for all companies for
which a review was not requested, duties must be assessed at the cash
deposit rate, and cash deposits must continue to be collected, at the
rate previously ordered. As such, the countervailing duty cash deposit
rate applicable to a company can no longer change, except pursuant to a
request for a review of that company. See Federal-Mogul Corporation and
The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993)
and Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic
assessment, which is identical to 19 CFR section 355.22(g)). Therefore,
the cash deposit rates for all companies except those covered by these
reviews will be unchanged by the results of these reviews.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies under each order at the most recent company-
specific or country-wide rate applicable to the company under that
order. Accordingly, the cash deposit rates that will be applied to non-
reviewed companies covered by these orders are those established in the
most recently completed administrative proceeding. See Certain Welded
Carbon Steel Pipe and Tube Products from Turkey; Final Results of
Countervailing Duty Administrative Review, 53 FR 9791. These rates
shall apply to all non-reviewed companies until a review of a company
assigned these rates is requested. In addition, for the period January
1, 1995 through December 31, 1995, the assessment rates applicable to
all non-reviewed companies covered by these orders are the cash deposit
rates in effect at the time of entry.
Public Comments
Parties to the proceeding may request disclosure of the calculation
methodology and interested parties may request a hearing not later than
10 days after the date of publication of this notice. Interested
parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
seven days after the time limit for filing the case brief. Parties who
submit argument in this proceeding are requested to submit with the
argument (1) a statement of the issue and (2) a brief summary of the
argument. Any hearing, if requested, will be held seven days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 355.38.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 355.38, are due. The Department will
publish the final results of these administrative reviews, including
the results of its analysis of issues raised in any case or rebuttal
brief or at a hearing.
These administrative reviews and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: March 31, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-8955 Filed 4-7-97; 8:45 am]
BILLING CODE 3510-DS-M