[Federal Register Volume 62, Number 114 (Friday, June 13, 1997)]
[Notices]
[Pages 32307-32312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15607]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-357-403]
Oil Country Tubular Goods From Argentina; Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty
administrative review.
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SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty order on oil country
tubular goods (OCTG) from Argentina. For information on the net
subsidy, see the Preliminary Results of Review section of this notice.
If the final results remain the same as these preliminary results of
administrative review, we will instruct the U.S. Customs Service to
assess countervailing duties as indicated in the Preliminary Results of
Review section of this notice. Interested parties are invited to
comment on these preliminary results.
EFFECTIVE DATE: June 13, 1997.
FOR FURTHER INFORMATION CONTACT:
Richard Herring, Office of CVD/AD Enforcement VI, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.
20230; telephone: (202) 482-4149.
SUPPLEMENTARY INFORMATION:
Background
On November 27, 1984, the Department published in the Federal
Register (49 FR 46564) the countervailing duty order on oil country
tubular goods (OCTG) from Argentina. On November 5, 1992, the
Department published a notice of ``Opportunity to Request an
Administrative Review'' (57 FR 52758) of this countervailing duty
order. We received a timely request for review from the U.S. Steel
Group, a unit of USX Corporation.
We initiated the review, covering the period January 1, 1991
through December 31, 1991, on December 29, 1992 (57 FR 61873). The
review covers one producer/exporter, Siderca, which accounts for all
exports of the subject merchandise from Argentina, and 20 programs.
On September 17, 1993, the Department received allegations
regarding new subsidies from the petitioner in the concurrent 1991
administrative review of cold-rolled carbon steel flat-rolled products
from Argentina. After a careful review of the allegations, the
Department decided that sufficient information was provided regarding
alleged benefits provided under two new programs. These programs were
alleged tax concessions provided to the steel industry under the April
11, 1991 Steel Agreement signed between the Government of Argentina and
the Argentine steel industry, and preferential natural gas and
electricity rates also provided under the Steel Agreement. Although
these allegations were not made in this administrative review of OCTG,
the allegations did pertain to the steel industry in Argentina.
Therefore, the Department deemed it appropriate to seek information on
the two alleged programs in this administrative review of OCTG.
On January 1, 1995, the effective date of the Uruguay Round
Agreements Act of 1994 (the URAA), countervailing duty orders involving
World Trade Organization (WTO) signatories which had been issued
without an injury determination by the International Trade Commission
(ITC), became entitled to an ITC injury determination under section 753
of the URAA. The order on OCTG did not receive an ITC injury
investigation and Argentina was a member of the WTO. Therefore, we
determined that the countervailing duty order on the subject
merchandise was subject to section 753 of the URAA. See Countervailing
Duty Order; Opportunity to Request a Section 753 Injury Investigation,
60 FR 27963 (May 26, 1995). For the countervailing duty order on OCTG
from Argentina, the domestic interested parties exercised their right
under section 753(a) of the URAA to request an injury investigation.
The Ceramica Decision by the Court of Appeals for the Federal
Circuit
On September 6, 1995, the Court of Appeals for the Federal Circuit
in a case involving imports of Mexican ceramic tile, ruled that, absent
an injury determination by the ITC, the Department may not assess
countervailing duties under 19 U.S.C. 1303(a)(1) (1988, repealed 1994)
on entries of dutiable merchandise after April 23, 1985, the date
Mexico became ``a country under the Agreement.'' Ceramica Regiomontana
v. U.S., Court No. 95-1026 (Fed. Cir., Sept. 6, 1995) (Ceramica).
Argentina attained the status of ``a country under the Agreement''
on September 20, 1991. Therefore, in consideration of the Ceramica
decision, the Department, on April 2, 1996, initiated changed
circumstances administrative reviews of the countervailing duty orders
on Leather, Wool, OCTG, and Cold-Rolled Carbon Steel Flat-Rolled
Products (Cold-Rolled Steel) from Argentina, which were in effect when
Argentina became a country under the Agreement. See Initiation of
Changed Circumstances Countervailing Duty Administrative Reviews:
Leather from Argentina, Wool from Argentina, Oil Country Tubular Goods
from Argentina, and Cold Rolled Carbon Steel Flat Products from
Argentina (Changed Circumstances Reviews), 61 FR 14553 (April 2, 1996).
These reviews focused on the legal effect, if any, of Argentina's
status as a ``country under the Agreement,'' and whether the Department
has the authority to assess countervailing duties on these orders.
Because we had ongoing administrative reviews of the orders on OCTG and
Cold-Rolled Steel that covered review periods on or after September 20,
1991, we had to determine whether the Department had the authority to
assess countervailing duties on unliquidated entries of subject
merchandise occurring on or after September 20, 1991, when Argentina
became a ``country under the Agreement'' and before January 1, 1995,
that date that Argentina became a ``subsidies Agreement country''
within the meaning of section 701(b) of the URAA.
On April 29, 1997, the Department determined that it lacked the
authority to assess countervailing duties on entries of OCTG and Cold-
Rolled Steel from Argentina made on or after September 20, 1991 and
before January 1, 1995 (62 FR 24639; May 6, 1997). As a result we
terminated the pending administrative reviews of the countervailing
duty order on OCTG covering 1992, 1993, and 1994, as well as the
pending administrative reviews of the countervailing duty order on
Cold-Rolled Steel covering 1992 and 1993.
However, because the 1991 review covers a period before Argentina
became a ``country under the Agreement,'' we must continue the 1991
administrative review to determine the amount of countervailing duties
to be assessed on entries made between January 1, 1991 and September
19, 1991 (i.e., up to the date Argentina became ``a country under the
Agreement.'') Pursuant to the
[[Page 32308]]
Ceramica decision, entries of subject merchandise made on or after
September 20, 1991 will be liquidated without regard to countervailing
duties.
Applicable Statute
The Department is conducting this administrative review in
accordance with section 751(a) of the Tariff Act of 1930, as amended
(the Act). Unless otherwise indicated, all citations to the statute are
in reference to the provisions as they existed on December 31, 1994.
Scope of Review
Imports covered by this review are shipments of Argentine oil
country tubular goods. These products include finished and unfinished
oil country tubular goods, which are hollow steel products of circular
cross section intended for use in the drilling of oil or gas, and oil
well casing, tubing and drill pipe of carbon or alloy steel, whether
welded or seamless, manufactured to either American Petroleum Institute
(API) or proprietary specifications. During the review period this
merchandise was classifiable under item numbers 7304.20.20, 7304.20.40,
7304.20.50, 7304.20.60, 7304.20.70, 7304.20.80, 7304.39.00, 7304.51.50,
7304.59.60, 7304.59.80, 7304.90.70, 7305.20.40, 7305.20.60, 7305.20.80,
7305.31.40, 7305.31.60, 7305.39.10, 7305.39.50, 7305.90.10, 7305.90.50,
7306.20.20, 7306.20.30, 7306.20.40, 7306.20.60, 7306.20.80, 7306.30.50,
7306.50.50, 7306.60.70, and 7306.90.10 of the Harmonized Tariff
Schedule (HTS). The HTS numbers are provided for convenience and
Customs purposes. The written description of the scope remains
dispositive.
Verification
As provided in section 776 of the Act, we verified information
submitted by the Government of Argentina (GOA) and Siderca. We followed
standard verification procedures, including meeting with government and
company officials, examining relevant accounting and financial records
and other original source documents. Our verification results are
outlined in the public versions of the verification reports which are
on file in the Central Records Unit (Room B-099 of the Main Commerce
Building).
Calculation Methodology for Assessment and Cash Deposit Purposes
Because Siderca accounts for virtually all exports of OCTG from
Argentina during the period of review, the subsidy rate calculated for
Siderca constitutes the country-wide rate.
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined to Confer Subsidies
1. Government Counterguarantees
In 1986, Siderca began to receive funds from an Inter-American
Development Bank (IADB) loan. This loan was guaranteed by the Banco
Nacional de Desarollo (BANADE). In order to satisfy the IADB's lending
requirements, the GOA provided a counterguarantee to BANADE's
guarantee, which assured the IADB that the government would reimburse
BANADE if Siderca defaulted on the loan and BANADE was required to make
the payments. This counterguarantee was provided under the authority of
Law 16,432/61 (Article 48), which allows the GOA to back loans to
public and private enterprises if the monies will be used for projects
the government deems fundamental for the economic development of the
country. Because Siderca was able to acquire the counterguarantee, it
was able to negotiate a 50 percent reduction in the rate charged by
BANADE for the primary loan guarantee. This program was found
countervailable in the 1989 administrative review of this order (see
Oil Country Tubular Goods From Argentina, Final Results of
Countervailing Duty Administrative Review, 56 FR 64493 (December 10,
1991) (1989 OCTG Review)). No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this program's countervailability.
As we stated in the 1989 OCTG Review, the Department does not
consider loans provided by international lending institutions, such as
the IADB, to be countervailable under the U.S. countervailing duty law.
However, we do consider that government action taken in connection with
such loans is within the purview of the U.S. countervailing duty law.
By not charging Siderca a fee for the counterguarantee, despite the
fact that a fee is usually charged for a loan guarantee in Argentina,
the government took an action that was inconsistent with commercial
considerations. The Department further stated that the benefit from the
counterguarantee is not the difference between the interest rate on the
IADB loan and a commercial benchmark loan because this type of
methodology would be tantamount to countervailing the IADB loan itself.
We concluded in the 1989 OCTG Review that the commercial alternative to
Siderca would have been to pay the full amount for the guarantee fee
charged by BANADE.
To calculate the benefit under this program, we compared the amount
of fees Siderca would have paid for the BANADE loan guarantee absent
the GOA counterguarantee and subtracted from the amount the actual
amount of fees it did pay during the period of review. We then divided
the resultant amount by Siderca's total sales during 1991. On this
basis, we preliminarily determine the ad valorem subsidy to be 0.05
percent for the period of review.
2. Pre-shipment Export Financing
The Central Bank of Argentina provided pre-export financing through
a program known as OPRAC-1, as amended by Central Bank Resolution A-
1205. Under Resolution A-1205, OPRAC pre-export financing provided 180-
day loans with an additional 60 days for repayment. Under this program,
two types of pre-shipment export financing were available: ``internal
lines'' from Central Bank resources and ``external lines'' from foreign
banks. For ``external lines'' pre-shipment export financing, the
Central Bank provided a portion of the interest rate, usually three
percent, to the private banks as an incentive to extend these lines of
credit to exporters. Exporters negotiated the terms of this financing
directly with the commercial banks and the Central Bank would then
provide the three percent incentive payment to the bank. We found pre-
shipment export financing under OPRAC-1 countervailing in the 1987
administrative review of Certain Cold-Rolled Carbon Steel Flat-Rolled
Products From Argentina; Final Results of Countervailing Duty
Administrative Review, 56 FR 28527 (June 21, 1991) (1987 Cold-Rolled
Steel Review). No new information or evidence of changed circumstances
has been submitted to warrant reconsideration of this program's
countervailability.
Under this program, Siderca received pre-shipment export loans
under ``external lines'' of financing provided by commercial banks.
Under this financing program, commercial banks could reduce their
lending rates to exporters and keep the three percent interest rebates,
or the banks could maintain the commercial interest rates and pass on
the rebate from the Central Bank to the exporter. Siderca received
loans under this program from January 1, 1991 through March 8, 1991,
when the OPRAC program was suspended under Central Bank Communication
A-1807.
Siderca struck deals with the commercial banks stipulating that the
[[Page 32309]]
intervening commercial bank would pass the three percent rebate to
Siderca, while at the same time raising the nominal interest rate
charged to Siderca for the pre-shipment loan. Siderca would receive the
three percent rebate, in australes, several months after the term of
the loan. We verified that Siderca received pre-shipment export
financing tied to shipments to specific markets, including exports of
OCTG to the United States. Therefore, to calculate the benefit under
this program during period of review, we calculated the difference
between the commercial interest rates charged by the commercial banks
and the net interest rates paid by Siderca after taking into account
the three percent interest rebates. We then took the interest savings
received by Siderca on its pre-shipment export loans for OCTG exports
to the United States and divided that amount by the company's export
sales of OCTG to the United States. On this basis, we preliminarily
determine the ad valorem subsidy to be 0.18 percent for this program
during the period of review.
3. Rebate of Indirect Taxes (Reembolso/Reintegro)
The Reembolso program provides a cumulative tax rebate paid upon
export and is calculated as a percentage of the f.o.b. invoice price of
the exported merchandise. The Department will find that the entire
amount of any such rebate is countervailable unless the following
conditions are met: (1) The program operates for the purpose of
rebating prior stage cumulative indirect taxes and/or import charges;
(2) the government accurately ascertained the level of the rebate; and
(3) the government reexamines its schedules periodically to reflect the
amount of actual indirect taxes and/or import charges paid. In prior
investigations and administrative reviews of the Argentina Reembolso
program, the Department determined that these conditions have been met,
and, as such, the entire amount of the rebate has not been
countervailed (see, e.g., Cold Rolled Carbon Steel Flat-Rolled Products
from Argentina, Final Results of Countervailing Duty Administrative
Review (56 FR 28527; June 21, 1991); Oil Country Tubular Goods from
Argentina, Final results of Countervailing Duty Administrative Review
(56 FR 64493; December 10, 1991).
However, once a rebate program meets this threshold, the Department
must still determine in each case whether there is an overrebate; that
is, the Department must still analyze whether the rebate exceeds the
total amount of indirect taxes and import duties borne by inputs that
are physically incorporated into the exported product. If the rebate
exceeds the amount of allowable indirect taxes and import duties on
physically incorporated inputs, the Department will find a
countervailable benefit equal to the difference between the Reembolso
rebate rate and the allowable rate determined by the Department (i.e.,
the overrebate).
To determine whether there was an overrebate during the review
period, the Department requested the GOA to provide information on any
changes to the Reembolso program for OCTG. We verified that the
Reembolso program continue to be governed by Decree 1555/86, which
modified the program and set precise guidelines to implement the refund
of indirect taxes and import charges. This decree established three
broad rebate levels covering all products and industry sectors. The
rates for levels I, II, and III were 10 percent, 12.5 percent, and 15
percent respectively. The rebate rate for OCTG was at level II at 12.5
percent.
In April 1989, the GOA suspended cash payments of rebates under the
Reembolso program. Pursuant to the Emergency Economic Law dated
September 25, 1989 (Law 23,697), the suspension of cash payments was
continued for an additional 180 days. Rebates accrued during the
suspension period were paid in export credit bonds. On March 4, 1990,
the entire program was suspended for 90 days by Decree 435/90. Decree
1930/90 suspended payments of the reembolso for an additional 12-month
period. Decree 612/91 issued April 10, 1991, reinstated cash payments
under the program, but reduced the rates of reimbursement by 33 percent
for all products. Therefore, the rebate for OCTG was reduced from 12.5
to 8.3 percent.
In May 1991, Decree 1011/91 was issued. This decree changed the
legal structure of the program. Decree 1011/91 changed the rebate
system to cover only the reimbursements of indirect local taxes and
does not cover import duties, except reimbursement of duties paid on
imported products which are re-exported. Decree 1011/91 also set the
reembolso rate as that in Decree 612/91. Therefore, during the period
of review, rebates were suspended from January through April 10, 1991,
and the rebate rate applicable to OCTG exports was 8.3 percent for the
rest of the review period.
To determine whether there were overrebates under this program in
1991, we calculated the allowable tax incidence for the subject
merchandise for that period. This calculation of the allowable tax
incidence was based on a 1991 tax incidence study. We made adjustments
in our calculation of the allowable tax incidence for items we
determined not to be physically incorporated into the exported OCTG. We
then compared this calculation of the allowable tax incidence to the
Reembolso rebate of 8.3 percent received on OCTG exports. Based on this
comparison, we found that the rebate of taxes did not exceed the total
amount of allowable cumulative indirect taxes and/or import charges
paid on physically incorporated inputs, and prior stage indirect taxes
levied on the exported product at the final stage of production.
Therefore, we preliminarily determine that there was no benefit from
this program during the review period.
B. New Program Preliminarily Found to Confer Subsidies Preferential
Electricity Tariff Rates
Until April 1991, the tariff rates for electricity were set by the
government. On April 17, 1991, the GOA published Decree 634/91 which
provided for the deregulation of the electricity industry in Argentina.
This Decree created two market levels for electricity in Argentina, the
wholesale market and the retail market. The wholesale market was
comprised of the producers, generators, and distributors of electricity
as well as the large individual consumers of electricity. Under Decree
634, the producers and generators would sell electricity through a
central dispatch agency. The distributors would then purchase the
electricity from this central dispatch agency for delivery to the
individual consumer. In order to encourage competition within the
wholesale market, a large individual consumer could negotiate a
contract with any utility company within the country.
Although large consumers could negotiate contracts for electricity
in the wholesale market, the tariff rates charged to individual
consumers in the retail market were still set by the government.
However, the GOA also took steps to reduce tariff rates in the retail
market. On March 27, 1991, the Ministry of Economy published Resolution
194/91 which set new reduced tariff rates for electricity in the retail
market in Argentina. These rates applied to residential, commercial and
industrial consumers in the retail market for electricity purchased
from nationally-owned utility companies.
During the review period, Siderca's price for electricity was set
by two different contracts. From January 1, 1991 through March 31,
1991, Siderca's electricity rates were set in a contract
[[Page 32310]]
signed with Direccion de Energia de Buenos Aires (DEBA), a branch of
the Ministry of Works and Public Utilities of the Province of Buenos
Aires. After this contract was signed in 1990, DEBA was split into two
entities, Empresa Social de Energia de Buenos Aires (ESEBA), which was
responsible for providing electricity to the Province of Buenos Aires
and for setting the tariff rates, and DEBA, which was responsible for
approving ESEBA's tariff rates.
In April 1991, because of the amount of electricity consumed by
Siderca, it qualified as a ``large consumer'' in the wholesale market
under Decree 634/91. Therefore, Siderca was eligible to have its tariff
rate for electricity determined by negotiations with utility companies.
Siderca negotiated and signed an individual contract with ESEBA for the
provision of electricity. The effective date of this contract was April
1, 1991. The rates set by the ESEBA contract applied for the rest of
the period of review. Because Siderca's electricity rate during the
period of review was not set by a published tariff schedule but by
individual contracts signed with each utility company, we must
determine whether the electricity rates paid by Siderca under the DEBA
and ESEBA contracts were preferential.
Prior to the effective date of April 1, 1991 for the ESEBA
contract, Siderca's price for electricity was determined by a contract
which was signed between Siderca and DEBA. Under the DEBA contract, the
price of 70 percent of Siderca's monthly electricity consumption was
set by the published tariff rates, while the remaining portion was set
by the price in the contract. This pricing scheme was provided by DEBA
to other companies in the Province of Buenos Aires in contracts
identical to the one signed with Siderca. The DEBA contract was signed
on July 12, 1990, and remained in effect until March 31, 1991.
Although individually tailored company contracts with government-
owned utility companies are, by definition, specific under section
771(5)(A) of the Act, we must examine the issue of specificity with
respect to the DEBA contract because the DEBA contract did not provide
an individually-tailored company-specific rate like the rate provided
in the ESEBA contract. Instead, the DEBA contract provided the same
electricity rate to all the companies which signed a contract identical
to the one signed between Siderca and DEBA. Therefore, we must examine
the group of companies which signed identical contracts to determine
whether the DEBA contract is specific under section 771(5)(A) of the
Act.
During our examination of the DEBA contracts at verification, we
found that only a very small number of companies had a contract
identical to the one signed between Siderca and DEBA (see verification
report (public version) at page 17). Therefore, we preliminarily
determine that the DEBA contract is specific under section 771(5)(A) of
the Act. To determine whether the rates under the DEBA contract were
preferential, we compared the rates of electricity in the DEBA contract
to the rates in the published tariff schedule for large users. Based
upon this comparison, we find that the rates in the DEBA contract are
preferential. Therefore, we preliminarily determine that the
electricity rates provided to Siderca under the DEBA contract are
countervailable.
To calculate the benefit under this program, we calculated the
difference between the price of electricity Siderca would have paid
based on the published tariff schedule and the price of electricity the
company actually paid under the DEBA contract. We then divided the
difference by Siderca's total sales in 1991 and calculated an ad
valorem subsidy rate of 0.26 percent for the period of review. We next
had to examine whether the ESEBA contract was countervailable.
An individually tailored contract with a government-owned utility
company is by definition specific under section 771(5)(A) of the Act;
however, in order for the contract to be countervailable, the rates
provided under the contract must be preferential. The preferentiality
of individual electricity contracts was an issue in the Final
Affirmative Countervailing Duty Determinations: Pure Magnesium and
Alloy Magnesium from Canada, 57 FR 30946 (July 13, 1992), and in the
Final Results of Changed Circumstances Administrative Reviews: Pure
Magnesium and Alloy Magnesium from Canada). Magnesium from Canada
described the Department's approach to evaluating whether electricity
is being provided on preferential terms.
The first step the Department takes in analyzing the potential
preferential provision of electricity is to compare the price charged
in the contract with the applicable rate on the utility company's non-
specific rate schedule. If the amount of electricity purchased by the
company is so great that the rate schedule is not applicable, the
Department will examine whether the price charged in the contract is
consistent with the utility company's standard pricing mechanism. If
the rate charged is consistent with the utility company's standard
pricing mechanism, and the company under investigation or review is, in
all other respects, treated no differently than other industries which
purchase comparable amounts of electricity, then there would be no
apparent basis to find the contract preferential.
In Magnesium from Canada, the utility company's published tariff
schedule did not provide rates for electricity consumers the size of
Norsk Hydro Canada Inc. (NHCI), the respondent in that investigation.
Therefore, in determining whether NHCI's contract was preferential, the
Department had to examine the utility company's standard pricing
mechanism. However, in the instant review, we do not need to examine
the utility company's standard pricing mechanism because the published
tariff rates are applicable to all large users regardless of the amount
of electricity consumed by the individual large user. Therefore, we
have analyzed the Siderca contract with ESEBA by comparing the price
charged with an applicable tariff rate schedule.
As previously stated, Decree 634/91 started the deregulation of the
electricity market in Argentina. Under this decree, large consumers,
such as Siderca, were free to negotiate individual electricity
contracts with any utility company in the country. While the GOA was
allowing large consumers to negotiate contracts in the wholesale
electricity market, the GOA also reduced the published tariff rates for
electricity with the publication of the Ministry of Economy's
Resolution 194/91. Resolution 194/91 set the tariff rates for all
nationally-owned utility companies in the country. However, these new
rates were not applicable to ESEBA because ESEBA was a provincially-
owned utility company.
Although Resolution 194/91 for national tariff rates did not apply
to ESEBA, these rates were available to Siderca because under Decree
634/91 it could sign a contract for electricity with any nationally-
owned utility company in Argentina. Therefore, to determine whether the
Siderca contract with ESEBA provided a preferential rate for
electricity to Siderca, we compared the electricity rate provided in
the ESEBA contract to the published tariff rates in Resolution 194/91
which were in effect during the same time as the ESEBA contract. Based
on this comparison, we find that the rates in the ESEBA contract are
equal to or higher than the published national tariff rates in
Resolution 194/91. Therefore, we preliminarily determine that the
contract Siderca signed with ESEBA did not provide electricity at
preferential
[[Page 32311]]
rates to Siderca and, thus, is not counterviable.
However, we note that this contract expired in 1992, and another
contract between Siderca and ESEBA was subsequently negotiated and
signed in September 1992, outside the period of review. Because the
rates negotiated in the 1992 contract were lower than the rates in the
contract in effect during 1991, we will have to reexamine this program
in any subsequent administrative review of this order.
II. Program Preliminarily Found Not to Confer Subsidies
Preferential Natural Gas Tariffs
According to the GOA, at the end of 1990, Argentina was emerging
from an extended period of hyperinflation. The GOA believed that
deregulating and privatizing the large, state-owned utility companies
would lead to price stability by introducing competition in the market.
The beginning of this deregulation can be found with the passage of
Decree 633. Also, within this context, the GOA entered into sectoral
agreements with Argentine industries in order to secure commitments
from industries that they would hold down prices charged to their
customers in order to stabilize the inflation rate within the economy.
In exchange for this commitment, the GOA committed itself to broad-
based economic reforms, including the maintenance of stable energy
prices.
In early 1991, the GOA began the first steps towards deregulating
the natural gas market in Argentina. Until April 1991, the GOA set and
regulated the tariff rates for natural gas in the country. Prices for
natural gas could not deviate from those prices set by the Economy
Minister. In April 1991, with the enactment of Decree 633, two separate
markets for natural gas were created. The first market was the
wholesale market which covered transactions between producers and
distributors as well as between producers and large users of natural
gas. The other market created by Decree 633 was the retail market which
covered sales to residential and commercial consumers. Under Decree
633, companies in the wholesale market were permitted to engage in
negotiations and to enter into individual contracts for natural gas.
For the period January 1, 1991 through March 31, 1991, the rates
for natural gas paid by Siderca were set through the issuance of tariff
schedules. Gas del Estado (GdE) was the sole provider of natural gas
through this period. After March 31, 1991, Siderca no longer had its
natural gas rates set by tariff resolutions. With the deregulation of
the natural gas market under Decree 633, large consumers in the
wholesale market could negotiate contracts for natural gas. Siderca,
being one of the largest consumers of natural gas in the country, was
one of the first industrial consumers to negotiate a separate contract
for natural gas.
Because Siderca was a large consumer for natural gas, it qualified
as a consumer in the wholesale market. On June 28, 1991, Siderca
entered into a requirements contract with GdE, which was made
retroactive to April 1, 1991, and remained in effect throughout 1991,
the period of review. Under the contract arrangement, Siderca would
purchase natural as from a privately-owned company, TECPETROL, and then
Siderca would pay GdE for transportation of the natural gas from
TECPETROL. Under the contract, there were two different rates for
transportation, one rate for the winter and another rate for the rest
of the year. If TECPETROL could not supply enough gas to meet all of
Siderca's requirements, then, under GdE contract, Siderca would
purchase natural gas from GdE to make up the shortfall, at a specified
contract rate plus a commission.
The GdE contract provided rates for both the transportation of
natural gas and for the supply of natural gas. Therefore, we must
determine whether a countervailable benefit was provided to Siderca
either in the form of preferential transportation rates or preferential
natural gas rates. In order for a non-export program to be
countervailable it must meet both the test for specificity and
preferentiality. Specificity requires that the program be limited to an
enterprise or industry or group of enterprises or industries under
section 771(5)(b) of the Act. Because an individually negotiated
contract price with a government-owned utility is, by definition,
specific to the individual negotiating the contract, we must examine
whether the transportation and tariff rate for natural gas provided to
Siderca under the GdE contract are preferential to determine whether
this program is countervailable. If these rates are not preferential,
then the program is not countervailable. If the rates are preferential,
then the program is countervailable.
To determine whether a government has provided a good or service,
such as natural gas, at preferential rates, the Department generally
measures that rate against a nonspecific tariff rate against a
nonspecific tariff rate charged to other users of that good or service
by the government, or to rates charged for an identical good or service
from a private provider. However, in prior cases involving the
provision of natural gas or electricity, we have stated that the tariff
schedule rate is not necessarily the appropriate benchmark to determine
whether a contracted rate is preferential. See, e.g., Magnesium from
Canada. We stated in Magnesium from Canada that if the amount of
electricity purchased by a company is so great that the rate schedule
is not applicable, we will examine whether the rate charged in a
contract is preferential by determining whether the rate is consistent
with the utility company's standard pricing mechanism. If the rate
charged in a contract is consistent with the standard pricing mechanism
used by the utility company to set its tariff rates, then the contract
rate is not preferential. Therefore, under the practice set forth in
Magnesium from Canada, if the contract price is set in a manner
consistent with the utility company's standard pricing mechanism for
setting tariffs, then the contract rate does not provide a
countervailable benefit.
Two years prior to our verification, GdE was privatized. In 1992,
two private transporters and eight private distributors purchased the
assets of GdE. After its privatization, the cost structure studies used
by GdE to propose its tariff rate schedules were destroyed or thrown
away. Therefore, we are unable to determine whether GdE used its
standard pricing methodology to negotiate its rates and tariffs with
companies in the wholesale market. However, the Department may
determine whether the provision of a good or service is preferential by
comparing the price charged by the government to a price charged by
private sellers to buyers in the market for an identical good or
service.
Therefore, in order to determine whether the price charged to
Siderca for natural gas under the GdE contract is preferential, we
compared that price to the price of natural gas charged to Siderca from
private companies. In 1991, after the enactment of Decree 633, Siderca
also entered into a contract to purchase natural gas from a private
producer, TECPETROL. We compared the price of natural gas charged to
Siderca from TECPETROL to the price of natural gas charged to Siderca
by GdE. Based on this comparison, we determine that the price of
natural gas charged by GdE was not preferential and, thus, not
countervailable during the review period.
We next had to determine whether the transportation rates for
natural gas specified in the GdE contract were preferential. During
1991, there were no
[[Page 32312]]
private transporters of natural gas in Argentina. GdE was the sole
transporter of natural gas in the country. In addition, there were no
separate transportation rates for natural gas in the country until
after 1992. During our review period, the published tariff rates for
natural gas included the cost for the natural gas, its transportation,
and its distribution.
Therefore, because there were no separate rates for transportation
in Argentina during the period of review, to determine whether the
transportation rates for natural gas charged to Siderca under the GdE
contract were preferential, we compared those prices to the
transportation cost study conducted by an independent consulting firm,
Stone & Webster. Stone & Webster were technical advisors to the GOA in
the privatization of GdE.
This Stone & Webster cost study detailed the cost of transporting
natural gas from the gas fields to Siderca's plant. We compared the
transportation cost detailed in the Stone & Webster study to the price
negotiated in the GdE contract. Based upon this comparison, we
determined that the price charged to Siderca for transportation of
natural gas under the GdE contract was much higher than the gas
company's costs and provided a large profit for GdE. Therefore, we
preliminarily determine that the transportation rates charged to
Siderca in the GdE contract were not preferential, and thus not
countervailable, during the review period.
III. Programs Preliminary Found Not To Be Used
We examined the following programs and preliminary find 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:
Medium- and Long-Term Loans
Capital Grants
Income and Capital Tax Exemptions
Government Trade Promotion Programs
Exemption from Stamp Taxes Under Decree 186/74
Incentives for Trade (Stamp Tax Exemption Under Decree
716)
Incentive for Export
Export Financing Under OPRAC 1, Circular RF-21
Pre-Financing of Exports Under Circular RF-153
Loan Guarantees
Post-Export Financing Under OPRAC 1-9
Debt Forgiveness
Tax Deduction Under Decree 173/85
IV. Program Preliminarily Found Not to Exist
Tax Concessions for the Steel Industry
Petitioners alleged that under Paragraph 8 of the April 11, 1991
Steel Agreement between the GOA and Argentine steel producers that the
GOA provides the steel industry with tax concessions. According to the
response of the GOA, Paragraph 8 of the Steel Agreement does not
provide tax concessions to the steel industry but merely states that
the industry's Reembolso level will be studied taking into account the
tax incidence of steel producers. For information on the Reembolso/
Reintegro program, see the program ``Rebate of Indirect Taxes,'' above.
Therefore, we preliminarily determine that there were no new tax
concessions provided to the steel industry under the Steel Agreement.
Preliminary Results of Review
For the period January 1, 1991 through December 31, 1991, we
preliminarily determine the net subsidy to be 0.49 percent ad valorem.
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct the U.S.
Customs Service to assess countervailing duties of 0.49 percent ad
valorem on entries of the subject merchandise covered by this
administrative review for the period January 1, 1991 through September
19, 1991, and to liquidate all entries made on or after September 20,
1991 through December 31, 1991, without regard to countervailing
duties.
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(e).
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 section 355.38(c), are due.
The Department will publish the final results of this
administrative review including the results of its analysis of issues
raised in any case or rebuttal brief or at a hearing.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: June 4, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-15607 Filed 6-12-97; 8:45 am]
BILLING CODE 3510-DS-M