[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]


-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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