[Federal Register Volume 62, Number 159 (Monday, August 18, 1997)]
[Notices]
[Pages 43984-43993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21828]
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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; Final Results of Countervailing Duty
Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
reviews.
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SUMMARY: On April 8, 1997, the Department of Commerce (the Department)
published in the Federal Register its preliminary results of
administrative reviews of the countervailing duty orders on certain
welded carbon steel pipes and tubes and welded carbon steel line pipe
from Turkey for the period January 1, 1995 through December 31, 1995.
The Department has now completed these administrative reviews in
accordance with section 751(a) of the Tariff Act of 1930, as amended.
For information on the net subsidy for each reviewed company, and for
all non-reviewed companies, please see the Final Results of Reviews
section of this notice. We will instruct the U.S. Customs Service to
assess countervailing duties as detailed in the Final Results of
Reviews section of this notice.
EFFECTIVE DATE: August 18, 1997.
FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Kelly Parkhill,
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)
482-3692 or (202) 482-2786.
[[Page 43985]]
SUPPLEMENTARY INFORMATION:
Background
Pursuant to 19 C.F.R. Sec. 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.
Since the publication of the preliminary results on April 8, 1997
(62 FR 16782), the following events have occurred. We invited
interested parties to comment on the preliminary results. On May 8,
1997, a case brief was submitted by the Government of Turkey (GRT),
Mannesmann, which exported line pipe, and Erbosan, which exported pipe
and tube to the United States during the review period (respondents).
On May 15, 1997, rebuttal briefs were submitted by Mannesmann and by
Wheatland Tube Company (petitioner).
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). Citations to the Department's regulations are in reference to
those regulations codified at 19 CFR part 355, as they existed on April
1, 1996. The Department is conducting these administrative reviews in
accordance with section 751(a) of the Act.
Scope of the Reviews
Imports covered by these reviews are shipments from Turkey of two
classes or kinds of merchandise. The first class or kind is 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. The second class or kind is 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
We verified information provided by the GRT, Erbosan and
Mannesmann, as provided in section 782(i) of the Act. We followed
standard verification procedures, including meeting with government and
company officials, and examining relevant accounting 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).
Analysis of Programs
Based upon the responses to our questionnaire, the results of
verification, and written comments from the interested parties we
determine the following:
I. Programs Conferring Subsidies
A. Program Previously Determined To Confer Subsidies
Pre-Shipment Export Credit
In the preliminary results, we found that this program conferred a
countervailable subsidy on the subject merchandise. Our review of the
record and our analysis of the comments submitted by the interested
parties, summarized below, has not led us to change our findings from
the preliminary results. Accordingly, the net subsidies for this
program remain unchanged from the preliminary results and are as
follows:
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of pipe and tube rate
------------------------------------------------------------------------
Erbosan.................................................... 1.77%
------------------------------------------------------------------------
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of line pipe rate
------------------------------------------------------------------------
Mannesmann................................................. 0.73%
------------------------------------------------------------------------
B. New Programs Determined to Confer Subsidies
1. Investment Allowance
In the preliminary results, we found that this program conferred a
countervailable subsidy on the subject merchandise. Our analysis of the
comments submitted by the interested parties, summarized below, has not
led us to change our findings from the preliminary results.
Accordingly, the net subsidies for this program remain unchanged from
the preliminary results and are as follows:
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of pipe and tube rate
------------------------------------------------------------------------
Erbosan.................................................... 0.02%
------------------------------------------------------------------------
2. Freight Program
In the preliminary results, we found that this program conferred a
countervailable subsidy on the subject merchandise. Our analysis of the
comments submitted by the interested parties, summarized below, has not
led us to change our findings from the preliminary results.
Accordingly, the net subsidies for this program remain unchanged from
the preliminary results and are as follows:
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of pipe and tube rate
------------------------------------------------------------------------
Erbosan.................................................... 1.02%
------------------------------------------------------------------------
3. Resource Utilization Support Premium
In the preliminary results, we found that this program conferred a
countervailable subsidy on the subject merchandise. Our analysis of the
comments submitted by the interested parties, summarized below, has not
led us to change our findings from the preliminary results.
Accordingly, the net subsidies for this program remain unchanged from
the preliminary results and are as follows:
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of pipe and tube rate
------------------------------------------------------------------------
Erbosan.................................................... 0.05%
------------------------------------------------------------------------
4. Export Incentive Certificate Customs Duty and Other Tax Exemptions
In the preliminary results, we found that this program conferred a
countervailable subsidy on the subject merchandise. We did not receive
any comments on this program from the interested parties. Accordingly,
the net subsidies for this program remain unchanged from the
preliminary results and are as follows:
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of pipe and tube rate
------------------------------------------------------------------------
Erbosan.................................................... 0.06%
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------------------------------------------------------------------------
Assessment
Manufacturer/exporter of line pipe rate
------------------------------------------------------------------------
Mannesmann................................................. 0.02%
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[[Page 43986]]
5. Foreign Exchange Loan Assistance
In the preliminary results, we found that this program conferred a
countervailable subsidy on the subject merchandise. Our analysis of the
comments submitted by the interested parties, summarized below, has led
us to modify our findings from the preliminary results for this
program. Accordingly, the net subsidies for this program have changed
and are as follows:
------------------------------------------------------------------------
Assessment
Manufacturer/exporter of pipe and tube rate
------------------------------------------------------------------------
Erbosan.................................................... 1.10%
------------------------------------------------------------------------
II. Programs Found To Be Not Used
In the preliminary results, we found that the producers and/or
exporters of the subject merchandise did not apply for or receive
benefits under the following programs:
A. Resource Utilization Support Fund
B. State Aid for Exports
C. Advance Refunds of Tax Savings
D. Export Credit Through the Foreign Trade Corporate Companies
Rediscount Credit Facility (Eximbank)
E. Past Performance Related Foreign Currency Export Loans (Eximbank)
F. Export Credit Insurance (Eximbank)
G. Subsidized Turkish Lira Credit Facilities
H. Subsidized Credit for Proportion of Fixed Expenditures
I. Fund Based Credit
J. Regional Subsidies
1. Additional Refunds of VAT (VAT +10%)
2. Postponement of VAT on Imported Goods
3. Incentive Premium on domestically Obtained Goods (Rebate of VAT
on Domestically-Sourced Machinery and Equipment)
4. Land Allocation (GIP)
5. Taxes, Fees (Duties), Charge Exemption (GIP)
Our analysis of the comments submitted by the interested parties,
summarized below, has not led us to change our findings from the
preliminary results for the programs noted above.
III. Programs Found To Be Terminated
In the preliminary results, we found that the following programs
either never existed or were terminated and that no residual benefits
were being provided:
A. Export Performance Credits
B. Deduction from Taxable Income for Export Revenues
C. Preferential Export Financing Under Decree 84/8861
D. Interest Spread Return Program (GIP)
E. Export Credits Under Communique No. 1
F. Corporate Tax Deferral
G. Payment of Certain Obligations of Firms Undertaking Large
Investments
H. Subsidized Credit in Foreign Currency
We did not receive any comments on these programs from the
interested parties. Accordingly, the final results remain unchanged
from the preliminary results.
Analysis of Comments
Comment 1: Erbosan argues that the Department incorrectly found
that the pre-shipment loan program is an untied export loan program. In
Erbosan's view, the Department's decision was based on a finding that
the loans are not specifically tied to a particular destination at the
time the loans are approved. However, Erbosan maintains that the loans
can be tied to particular destinations because proof of export must be
provided in order to close out the loan. Once an export is used to
close a loan it cannot be used to satisfy any other loan commitments.
According to Erbosan, it is the Department's long-standing policy
to countervail pre-shipment loans obtained in connection with shipments
to the United States if the loan can be tied to specific shipments. For
example, in Final Affirmative Countervailing Duty Determination:
Certain Pasta from Turkey, 61 FR 30366 (June 14, 1996) (Turkish Pasta),
the Department found that these same pre-shipment loans could be linked
to particular destinations. Erbosan also alleges that the Department
took the same course regarding BANCOMEXT loans in Preliminary Results
of Administrative Review: Certain Textile Mill Products from Mexico, 60
FR 5166 (January 26, 1995) and Final Results of Administrative Review:
Certain Textile Mill Products from Mexico, 60 FR 20965 (April 28, 1995)
(Textile Mill Products from Mexico). In this case, however, Erbosan
argues that the Department departed from past practice and modified its
test in this review by looking to see whether the destination is known
at the time the loan is approved. Erbosan asserts that it makes no
sense to link the benefit to the approval date since the benefit does
not accrue from this program until the merchandise is shipped and the
loan, with interest, is repaid. Erbosan continues that parties must be
able to rely on the Department's past practice for purposes of being
able to plan for the future. The Department's departure in this case,
therefore, is not only unjustified, it is unreasonable.
Mannesmann does not agree with Erbosan's position and supports the
Department's determination that the loans under the pre-shipment
program are ``untied.'' Mannesmann points out that Erbosan does not
take issue with the factual basis of the Department's determination.
Namely, that the export destinations actually used to close the loans
may be different than the export destinations listed on the loan
application. Accordingly, Mannesmann maintains that the destinations
listed on the loan application are nothing more than ``place-holders''
since the actual destinations used to fulfill the export requirement
may differ. For this reason, the Department appropriately found the
pre-shipment loans ``untied.'' Mannesmann states that Erbosan is
correct to say that, when loans are tied to specific destinations, the
Department countervails only loans that are tied to U.S. shipments.
However, in this case, the Department specifically found that the loans
were not tied to specific destinations because they were not tied at
the time of application. Although the Department found these loans tied
in Turkish Pasta, Mannesmann asserts that nowhere in that case does the
Department discuss the fact that loans were not tied to destinations at
the time of application, presumably because the Department was unaware
of that fact.
Mannesmann also argues that the Department has not departed from
past practice; the Department's practice was and is to tie U.S. loans
to U.S. shipments where possible. In this case, the Department found
that it was not possible to make that link because the destination that
would ultimately be used to fulfill the export requirement was not
known at the time of the loan application. According to Mannesmann, the
Department has ``modified its test'' only to the extent that it
addressed a fact pattern that it had not encountered before (or not
been aware of before).
Finally, Mannesmann states that Erbosan is incorrect to assert that
the benefits of pre-shipment export loans do not accrue until the
merchandise is shipped and the loan repaid. These loans are designed to
assist companies during the manufacturing stage, prior to shipment--
hence the name, ``pre-shipment'' loans. Mannesmann asserts that during
the period that the manufacturer benefits from the loans, the
manufacturer does not need to specify the export destination and, thus,
the Department's determination that these loans are untied is logical
and reasonable and should be sustained in the final results.
The petitioner argues that the Department should reaffirm its
position
[[Page 43987]]
that pre-shipment export loans are untied. According to the petitioner,
the pre-shipment loans purportedly received in connection with exports
to the U.S. cannot validly be segregated by export destination. The
petitioner claims that Erbosan's own records demonstrate that pre-
shipment export loans are granted to cover exports to all countries,
and numerous exports to different destinations may be required to equal
the export loan commitment. Thus, by Erbosan's own admission, the loans
were not received in connection with exports to the United States as
opposed to other export destinations. Since Erbosan can use any exports
it chooses to close out a pre-shipment export loan, any identification
of loans by Erbosan as specifically tied to U.S. sales would be an
artificial construct subject to manipulation.
Department's Position: We disagree with Erbosan, and continue to
believe that the pre-shipment loan program is an untied export loan
program countervailable under section 771(5)(E)(ii). Erbosan asserts
that the Department has unfairly modified its ``test'' for tying
benefits to particular shipments by looking to see whether the
destination is known at the time the loan is approved, but as
Mannesmann correctly points out, the Department's practice is to
attribute benefits to specific merchandise or particular destinations
when the benefit is tied at the point of bestowal to that merchandise
or destination. See, e.g., Notice of Final Results of Countervailing
Duty Administrative Review: Roses and Other Cut Flowers from Colombia,
52 FR 48847, 48848 (December 28, 1987) (Roses). In this case, we
examined the export destinations listed on the application in order to
determine whether the loans were tied to particular shipments from
their inception through their closure. In this case, we examined the
export destinations listed on the application in order to determine
whether the loans were tied to particular shipments from their
inception through their closure. Based on the facts present in this
case, we found pre-shipment export loans to be untied because the
actual export destinations used to close out the loans were not always
the same as the export destinations listed on the loan applications and
exports to two or more different destinations were also used to close
out a single loan. A loan cannot be said to be tied to a particular
shipment when the recipient can pick and choose which export
destinations to use to close out each loan.
While Erbosan is correct to note that the Department has found
loans tied to specific shipments in Textile Mill Products from Mexico,
and that we found pre-shipment export loans to be tied to particular
shipments in Turkish Pasta, in those determinations, the Department did
not make a finding that the loans were not tied to destinations at the
time of application. Therefore, it is incorrect to point to these cases
as evidence for the proposition that benefits need not be tied at the
time of approval of the pre-shipment loans and, thus, that the
Department is departing from its past practice in Turkish Pasta and
Textile Mill Products from Mexico. Rather, we are consistent with our
past practice of tying benefits to particular shipments by ascertaining
whether the export destination was specified at the time that the pre-
shipment loan was approved. Roses at 48848. We are not linking per se,
as Erbosan alleges, the benefits from these loans to the application
date. On the contrary, we are merely utilizing the more extensive
information regarding this program in the instant review. We have
determined that pre-shipment export loans could not be tied to
particular shipments, but were available for exports in general.
Comment 2: The respondents argue that the Department improperly
deducted an amount referred to as the ``exchange difference'' from the
verified sales values used as the denominator to calculate the benefit
rates. According to the respondents, the amount improperly deducted
represents a portion of the proceeds recorded in a Turkish company's
books from a sale that is invoiced in a foreign currency. Because of
hyperinflation in Turkey, the respondents can calculate the precise
Turkish Lira (TL) value of foreign currency sales only after payment is
received and when the foreign currency is converted to TL. The
respondents first record in their books an estimated TL value for the
sale using the exchange rate in effect on the invoice date. When the
companies receive final payment, the foreign currency value when
converted to TL is higher than the amount that was recorded in the
books at the time of invoicing. This difference is recorded in a
separate exchange rate difference account--the kur farki account.
According to the respondents, consistent with Turkish GAAP, these two
accounts are added together to equal the total sales value reflected on
the companies' audited financial statements.
The respondents continue that the value in the kur farki account
reflects actual revenue earned from export sales. The values are not a
result of an exchange rate scheme or a hedging mechanism to generate
exchange rate gains. The respondents point out that the questionnaire
specifically asked for the ``total value'' of total sales, and defined
the term ``value'' as the ``actual value booked and recorded in your
accounting records.'' Accordingly, the respondents reported the total
sales value as recorded in their accounting records, i.e., the sum of
the values in the sales revenue accounts plus the sum of the values in
the kur farki account.
The petitioner argues that the Department correctly excluded the
portion of the respondents' sales values that resulted from changes in
the U.S. dollar/Turkish lira exchange rates. The petitioner states that
the sales price is recorded using the exchange rate on the date of
invoice and that subsequent changes in the exchange rate are not
related to the sales price. If the sales price were dependent on the
date of payment by the U.S. customer, the price would vary based on
when payment was actually received. It is true that the effect of
Turkey's hyperinflation is to create exchange rate gains on all sales
where payment occurs after the invoice date. However, according to the
petitioner, the gains are tied completely to the rate of change in the
exchange rate and, as such, the gains are part of non-operating
expenses and income, and are not properly recognized as sales revenue.
As a result, the petitioner states that it is appropriate for the
Department to correct the respondents' sales information for
inappropriate changes in the sales value that were based on exchange
rate gains.
Department's Position: We disagree with the respondents. Despite
Turkey's hyperinflation, Turkish companies do not index any of the
figures, other than fixed assets, in their financial statements to
account for inflation. (See Mannesmann verification report at page 2).
See also Final Affirmative Countervailing Duty Determinations: Certain
Steel Products from Brazil, 58 FR 37295, 37298 (July 9, 1993).
Accordingly, we did not index any of the program benefits received nor
the company-specific denominators (sales) in our calculations of the
subsidy benefits for Mannesmann and Erbosan in the Preliminary Results.
However, if we accepted the respondents' position and included exchange
differences in their sales figures, it would be tantamount to indexing
only half of the equation--the denominator for export subsidy programs.
For example, a domestic sale will generate the same amount of TL
between the date of sale and the date of payment. On the other hand, an
export sale will generate more TL on the date of payment due to the
effects of hyperinflation on the
[[Page 43988]]
exchange rate between that date and the date of sale. The result of
including kur farki in the sales figures would be equivalent to
indexing export sales for inflation and, thus, would inflate the
denominator while the program benefits (the numerator) would remain
unindexed. Such a result would unfairly distort the Department's
calculation. We also disagree with the respondents' argument that,
alternatively, the Department should adjust the calculations to
determine the subsidy benefit to reflect the exchange rate in effect on
the date of export and not the date of payment to ensure that the
benefit is not overstated, as it is similarly designed to take
advantage of the impact of hyperinflation on the TL/U.S. dollar
exchange rate. Because, as described, both of the methods articulated
by the respondents would inaccurately decrease the subsidy rate for
export programs, we are maintaining our position in the Preliminary
Results of not including exchange rate differences in the respondents'
sales figures.
Comment 3: The respondents argue for the first time in their case
brief that the Investment Allowance program should be deemed non-
countervailable under section 771(5B)(C) of the Act, because the
benefits are permissible ``green light'' subsidies provided only to
companies located in disadvantaged regions. According to the
respondents, the Investment Allowance program, to the extent that it
provided greater benefits to disadvantaged regions than to developed
regions, was specifically designed to promote development in
disadvantaged regions. As a result, the Department should consider it a
permissible ``green light'' benefit and find it not countervailable in
the final results of this review.
Department's Position: A green light claim submitted for the first
time in a case brief cannot be considered by the Department at this
late stage in the proceeding. See 19 CFR 355.31. The respondents had
ample opportunity to submit a green light claim and to provide
supporting documentation regarding the Investment Allowance program
within the time requirements of 19 CFR 355.31 for submitting factual
information. This would have provided the Department with time to
request and verify data, and provide the petitioner with an adequate
opportunity to comment on the green light claim. Indeed, the GRT
claimed green light status for the Resource Utilization Support Premium
program (RUSP) in its November 25, 1996, supplemental questionnaire
response. Subsequently, the Department issued three additional
supplemental questionnaires regarding this green light claim in order
to collect the information necessary for our analysis. We then examined
this information with respect to RUSP during our verification in
February 1997. However, the Department does not have the necessary
information regarding the Investment Allowance program, such as a
breakdown of Investment Allowance benefits by industry and region, to
conduct an analysis of the green light claim for this program. As a
result, we have not considered the claim of green light status for the
Investment Allowance program in this proceeding.
Comment 4: The respondents disagree with the Department's decision
in the Preliminary Results that the Resource Utilization Support
Premium program (RUSP) does not meet the green light criteria set forth
in Section 771(5B)(C) of the Act. They claim that the RUSP was
specifically designed to promote the development of disadvantaged
regions. Section 771(5B)(C) of the Act provides that, if certain
conditions are met, the Department shall treat a subsidy to
disadvantaged regions as non-countervailable if the subsidy is provided
``pursuant to a general framework of regional development, to a person
located in a disadvantaged region and if it is not specific within
eligible regions * * * '' In addition, the statute enumerates four
conditions for making such a determination: (1) The disadvantaged
region must be a clearly designated contiguous geographical area with a
defined economic and administrative identity; (2) the designation of
the region must be based on neutral and objective criteria indicating
that the region is disadvantaged because of more than temporary
circumstances; (3) the criteria must include a measure of economic
development; and (4) the subsidy program to disadvantaged regions must
include ceilings on the amount of benefits provided.
The respondents argue that the GRT's regional development plan met
the first, third and fourth criteria, and that the Department wrongly
rejected the GRT's ``green light'' claim based on the third criterion.
Regarding the second criterion, the respondents argue that the GRT's
regional development program was based on neutral and objective
criteria as defined by the statute. Turkey's regional designations were
based on various neutral and objective economic data that was analyzed
using a statistical model of development known as Principal Component
Analysis (PCA). The respondents claim that the Department seems to have
accepted that the designations based on the PCA are neutral and
objective, but that the few changes made by the Council of Ministers
tainted the GRT's overall regional development plan. The respondents
argue that the Council uses its judgment to modify a regional
designation made by the PCA only in those cases that are necessary to
eliminate certain regional disparities. The respondents conclude that
the fact that the Council of Ministers may have some input into the
regional designation process does not negate the neutral and objective
criteria that are used to establish regional designations, but,
according to the respondents, only reinforces their conclusion that the
designations modified by the Council of Ministers are still based on
neutral and objective criteria.
The petitioner replies that the Department correctly found that the
respondents did not establish that the regional designations made by
the GRT were based on neutral and objective criteria. The petitioner
points out that the supporting documentation for the PCA during the
period reviewed for green light status, 1989-1991, was no longer
available. Thus, the validity of the green light claim was not subject
to verification. Also, the petitioner states that the designation of
provinces into development regions did not track closely the PCA
rankings. Rather, the changes in rankings resulted from decisions made
by the Council, which were based on factors not enumerated in the PCA.
As a result, because the neutral and objective criterion has not been
met, a green light finding is not appropriate.
Department's Position: We disagree with the respondents. The
statute requires the Department to make a finding that all four
specifically enumerated conditions of section 771(5B)(C)(i) have been
met before a green light finding is made. Moreover, 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. 934 (1994)) (SAA).
In the Preliminary Results, the Department did not state or imply that
the GRT's regional development plan met all green light criteria except
for the criterion requiring regions to be designated based on ``neutral
and objective'' criteria. Rather, the Department indicated that because
regions were not designated based solely on neutral and objective
criteria, the Department did not need to reach
[[Page 43989]]
the three other listed criteria to determine whether GRT's regional
development plan was a green light subsidy. The Department stated that
``[s]ince the SAA states that all of the green light criteria must be
met, we do not intend to analyze the GRT's compliance with the
remaining criteria [beyond that concerning ``neutral and
objective''].'' See Preliminary Results at 16787.
In any case, we cannot conclude that the GRT's regional development
plan, ``strictly construed,'' is based on neutral and objective
criteria. First, the supporting documentation for the PCA covering the
1989-1991 period, the relevant period of our inquiry, was not available
for verification. Second, as we stated in the Preliminary Results, the
information on the record indicates that the designations of
disadvantaged regions do not correspond to the purportedly neutral and
objective criteria of the PCA. The provinces were rank ordered from
first, most developed, to 67th, least developed. The record clearly
shows that the designation of provinces into development regions did
not track closely to the PCA rankings. For example, some provinces
which received PCA rankings of 52 and 58 (out of a possible 67) were
listed as normal development regions, while other provinces with higher
PCA rankings were designated priority development regions. The GRT
accounted for these discrepancies by explaining that the PCA is not the
only basis for determining a province's regional designation. The PCA
is only one step (albeit a primary one) toward determining the regional
designations. The final determination is made by the Council of
Ministers, taking into account factors that cannot be accounted for by
the PCA, including the promotion of other development policies and
goals, 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 Preliminary Results at page 16787 and the GRT
verification report at page 11).
The statute requires the neutral and objective criteria to be
clearly stated in a relevant statute, regulation, or other official
document so as to be capable of verification. As we learned at
verification, the final regional development plan designations
purportedly arrived at using the econometric model of the PCA, were
subject to change by the Council of Ministers. However, the GRT
provided no evidence regarding (1) the specific criteria used by the
Ministers; (2) whether the criteria are neutral and objective; and (3)
whether these criteria were clearly stated in the statute, regulation,
or another official document. In addition, the documentation regarding
additional factors that the Council considered when making these
decisions was not available for verification (GRT verification report
at page 12). Therefore, we determine that the RUSP assistance is not
entitled to green light treatment.
Comment 5: The respondents argue that because the vast majority of
provincial designations were not changed from the designations
suggested by the PCA, the Department must find that RUSP subsidies are
non-countervailable. Erbosan is located in the Kayseri province which,
the respondents argue, clearly falls within the ``normal'' region
grouping in the PCA. The respondents also argue that the Council of
Ministers played no role in Kayseri's designation, and that Kayseri
meets all the tests established in the statute for classification as
``disadvantaged,'' including the economic tests of per capita income
and unemployment outlined in Section 771(5B)(C)(ii) of the Act.
According to the respondents, because Kayseri's regional
designation was based on the ``objective and neutral'' criteria of the
PCA, any designations made to provinces outside of the region in
question is irrelevant to the Department's inquiry. The Department must
therefore look only at the region where the recipient of the benefit is
located. The respondents state that if the Department continues to
follow its practice of analyzing every single regional designation made
under a country's regional development plan, the Department would never
find that the statutory requirements are met.
The petitioner replies that the statute does not contemplate
looking beyond an entire designation process in order to make an
independent determination of whether an individual region could have
been properly designated. According to the petitioner, the
disqualification of the overall designation process for green light
purposes renders every individual provincial designation unqualified
for green light treatment. As a result, the Department should maintain
its position of denying green light treatment to the RUSP program.
Department's Position: We disagree with the respondents. In order
to conclude that a subsidy to a disadvantaged region is entitled to
green light status and thus not countervailable, the subsidy must be
provided pursuant to a general framework of regional development.
Section 771(5B)(C)(iii) defines the term ``general framework of
regional development'' to mean that regional subsidy programs are part
of an internally consistent and generally applicable regional
development policy, and that regional development subsidies are not
granted in isolated geographical points having no, or virtually no,
influence on the development of a region. Moreover, the statute directs
the Department to apply the four main criteria, listed in Comment 4
above, to ``each region'' in the country when conducting a green light
examination. See section 771(5B)(C)(i). Additionally, the SAA states
that ``to be non-countervailable, the government assistance must be
directed both by law and in practice toward the development of the
region as a whole.'' SAA at 934. Accordingly, the Department evaluated
the GRT's green light claim for the RUSP program in light of the
statute, as is appropriate when making a determination on the
countervailability of a nationally available subsidy program. As a
result, as fully explained in the Preliminary Results, our green light
analysis was conducted in compliance with the statute, which precludes
us conducting a separate green light analysis solely with respect to
the Kayseri province.
Comment 6: The respondents argue that the Department failed to
request the f.o.b. sales information, except for the sales to the
United States, and, in order to compensate for this shortcoming, the
Department incorrectly increased the subsidy for each program by
multiplying the benefit by the ratio of the company's U.S. c&f and U.S.
f.o.b. sales of the subject merchandise. The respondents argue that
this methodology is inaccurate for two reasons: (1) The freight
component of a particular sale will vary, sometimes significantly,
depending on the destination, and (2) it overstates the benefit when
the denominator is total sales, because domestic sales are made on an
f.o.b. basis. Thus, they argue that using the ratio of U.S. c&f and
U.S. f.o.b. sales to determine the f.o.b. value for total export sales
inaccurately overstates the actual benefit.
The respondents also argue that they should not be penalized for
the Department's failure to request information. They argue that,
because they complied with the Department's requests for information,
the Department should not use adverse information. The Department may
use adverse information only when there has been noncompliance with a
request
[[Page 43990]]
for information. According to the respondents, the Court of
International Trade has stated that when the Department neglects to
request information that it later finds necessary to its determination,
the appropriate remedy is to request supplemental information from the
parties. However, the respondents argue that because of time
constraints, the Department should simply use the total sales and total
export sales provided in the questionnaire responses that were verified
by the Department, without making any adjustments to compensate for
freight.
The petitioner counters that the Department should not change its
methodology for approximating f.o.b. sales values. The petitioner
contends that since the respondents state that they were able to
provide the f.o.b. values they should have proffered them earlier. The
petitioner also counters that because the respondents did not provide
the f.o.b. values, which surely their experienced trade counsel knew
were necessary to the Department calculations, the Department should
not reward the respondents for withholding information by changing its
calculation methodology.
Department's Position: We disagree with the respondents. It has
been the Department's practice to request companies to provide sales
information as actually recorded in their accounting records along with
an explanation as to whether the sales were recorded on c.i.f., f.o.b.
or some other basis. See Questionnaire dated April 15, 1996. In cases
where the company's sales are not recorded on an f.o.b. basis, the
Department adjusts the sales value to conform with the Department's
longstanding practice to calculate an f.o.b.-based ad valorem subsidy
rate, which is consistent with the assessment of the countervailing
duties. (The Department instructs the Customs Service to collect cash
deposits and assess countervailing duties on an f.o.b. invoice price
basis.) See, Denominator Section of the General Issues Appendix in
Final Affirmative Countervailing Duty Determination: Certain Steel
Products from Austria, 58 FR 37217, 37236 (July 9, 1993) (General
Issues Appendix).
We also disagree with the respondents that the Department is making
an adverse inference by adjusting the c&f values to compensate for
freight. Erbosan's questionnaire response states that export invoices
are recorded on actual invoice value converted to TL whether it is an
f.o.b. or c&f sale, and that domestic sales are recorded on gross
value. (See questionnaire response dated June 13, 1996 at page 4).
Mannesmann's questionnaire response did not state the basis for the
sales information, except for the export sales of the subject
merchandise to the United States, which were provided on a c&f and
f.o.b. basis. (See questionnaire response dated June 13, 1996 at
appendix 10). Because one respondent recorded and reported its sales on
a combined f.o.b. and c&f basis and the other respondent recorded on a
c&f basis, it is necessary to adjust the calculated subsidy rate,
according to the methodology outlined in the General Issues Appendix,
to ensure that the Customs Service collects the correct amount of
subsidy based on the f.o.b. invoice price of the imported merchandise.
The adjustment made by the Department is not adverse. It merely
converts the respondents' information to a basis that allows the
Department to correctly calculate an f.o.b. based ad valorem subsidy
rate. Therefore, based on the information in the record, the Department
has calculated a reasonable estimate of the f.o.b. value.
Comment 7: The respondents argue that the Department erroneously
determined that exporters did not know the amount of benefits under the
Freight Program on the date of export, and therefore incorrectly
countervailed the benefits on the date the cash was received or, in the
case of bonds, on the date of maturity. The respondents state that it
is the Department's long-standing practice to measure countervailable
benefits on the date of export in those cases in which the export
benefit is earned on a shipment-by-shipment basis, and the exporter
knows the amount of the benefit at the time of export. Therefore, they
argue that because Turkish companies knew at the time of export that
they were entitled to receive a rebate in the amount of $50 per ton for
merchandise exported on Turkish vessels, and $30 per ton for
merchandise exported on non-Turkish vessels on a shipment-by-shipment
basis upon exportation, they knew the benefit at the time of export,
and such benefits should be measured on an ``earned'' basis.
The respondents further argue that, because the shipments are
invoiced in U.S. dollars and the benefit is expressed in U.S. dollars
on the date of shipment, it is irrelevant that companies did not know
the precise amount of TL that they would eventually receive. If the
benefit had been denominated in TL, the value of the ultimate benefit
received, as measured in constant TL, would not have been known at the
time of export due to the high inflation in Turkey at the time.
However, by contrast, U.S. dollars hold their value over time because
the rates of TL inflation and TL devaluation against the dollar are
about the same. Therefore, they argue that the long-term value of a
benefit denominated in dollars was certain at the time of export.
The respondents also argue that policy considerations dictate that
the benefits under the Freight Program should be countervailable on the
date the benefit was earned. They state that the countervailing duty
law is intended to offset export subsidies, and that the benefit should
be countervailed when they will have the greatest effect on a country's
exports to the United States, which they claim is why the Department
established its ``earned versus receipt'' test. Therefore, the
respondents argue that since the Freight Program terminated at the end
of 1994, and there is no longer any incentive to motivate companies to
export under this program, as a matter of policy, the Department should
countervail benefits received during the period that the subsidies were
actually used to encourage shipments to the United States.
The petitioner counters that, even if the respondents' argument
that U.S. dollars hold their value better than TL given the
hyperinflation in Turkey is valid, it does not lead to the conclusion
that ``the long-term value of a benefit denominated in dollars was
certain at the time of export.'' Further, although the value may be
``far more certain'' when denominated in dollars, it is not true that
the respondents knew the precise value of the benefit at the time of
export.
The petitioner also counters that while the freight payments may be
denominated in dollars, the benefit was paid in TL, and given the high
inflation rate in Turkey there was no way for the exporter to predict
at the time of export what the TL payment amount would be. Finally, the
petitioner counters that the respondents argument that the benefit
conferred should not be countervailed because the program has been
terminated would inappropriately permit countervailable benefits to be
ignored and should be rejected.
Department's Position: We agree with the respondents that it has
been the Department's practice to countervail an export subsidy on the
date of export on an ``earned basis'' rather than the date it is
received where it is provided as a percentage of the value of the
exported merchandise on a shipment-by-shipment basis, and the exact
amount of the countervailable export subsidy is known at the time of
export. See e.g., Certain Iron-Metal Castings from India; Final Results
of Countervailing Duty
[[Page 43991]]
Administrative Review, 60 FR 44843 (August 29, 1995). For example, in
these Final Results, we have found the benefits under the Export
Performance Credits Program were bestowed on the date of export because
the exporters received the TL equivalent of a fixed percentage of the
value 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.
In the Preliminary Results, we stated that although the benefit
under the Freight Program is calculated based on tonnage and not on the
percentage of exports, we noted that a benefit determined by the amount
of the tonnage may also be known and therefore ``earned'' at the time
of export. However, even though the benefit was based on tonnage per
shipment, it does not automatically follow that respondents knew the
amount of the export subsidy at the time of shipment. In this case the
facts indicate that respondents could not have known at the time of
shipment the actual amount of TL that they would ultimately receive
because the GRT arbitrarily chose an exchange rate based on a later
date in time. Here, when the respondents ultimately received payment
under this program, whether or not they would receive the U.S. dollar
equivalent of TL was dependent upon the exchange rate chosen by the
GRT, and was not determined by the amount of tonnage per shipment. (See
GRT's verification report at page 17). Therefore, we cannot conclude
that countervailable benefits bestowed on respondents under the Freight
Program were ``earned'' on the date of export.
We also disagree with respondents' argument that the long-term
value of a benefit denominated in dollars was certain at the time of
export because the U.S. dollar holds its value over time since the rate
of TL inflation and the TL devaluation against the dollar are about the
same. Again, because the GRT arbitrarily chose the exchange rate to
convert the benefit to TL, there was no way of knowing at the time of
export, whether, at the time respondents received the TL equivalent, it
would equal $50/$30 per ton. Therefore, as stated in the Preliminary
Results, we have determined that the benefits under the Freight Program
are bestowed when the cash is received, with respect to the cash
payments, and not at the time of export. With regard to the portion of
the rebate provided in bonds, we have determined that the benefits from
the bonds are bestowed on the date of maturity. This is due to the fact
that, even though there were no 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 prior to
maturity. See, e.g., Turkish Pasta at 30368.
Finally, we disagree with the respondents' argument that the
Department should countervail the benefit from this program on an
earned basis because it makes no sense for the Department to
countervail a benefit once a program has been terminated and therefore
are no more subsidies to provide an incentive for companies to export.
It is the Department's long-standing practice to countervail residual
benefits from a terminated program. See, e.g., Live Swine from Canada;
Notice of Preliminary Results of Countervailing Duty Administrative
Reviews; Initiation and Preliminary Results of Changed Circumstances
Review and Intent to Revoke Order in Part, 61 FR 26879, 26889 (May 29,
1996) and Live Swine from Canada; Final Results of Countervailing Duty
Administrative Reviews, 61 FR 52408 (October 7, 1996). (Live Swine from
Canada).
Comment 8: Erbosan argues that the Department's use of the average
monthly exchange rates published by the Central Bank, rather than the
actual exchange rates recorded in Erbosan's documentation of foreign
exchange loans to calculate the benefit distorts the subsidy because
the TL was devaluing rapidly against the U.S. dollar. Erbosan argues
that the Department should use the actual daily exchange rate recorded
in its loan documents reviewed by the Department at verification
because these rates were used to convert the TL amount into U.S.
dollars on the date the interest was repaid on the company's foreign
currency loans and more accurately reflects the effect of
hyperinflation on TL.
The petitioner counters that the loan fees were established when
the loan was granted and not when the interest on the loan was paid.
Therefore, the benefit from the exemption of the fees should be
calculated from the date the fees would have otherwise applied, i.e.,
the date the loan was granted. The petitioner further counters that the
Department's use of the monthly exchange rates understates rather than
overstates the benefit provided.
Department's Position: We agree with the respondents that the
actual exchange rates on the foreign exchange loan documentation are
the appropriate rates to use in converting the benefit to U.S. dollars.
The actual exchange rates represent the conversion rates that would
have been applicable to the exempt fees had they been paid. Therefore,
for these final results we have recalculated the benefit from the
exemption of the foreign currency loan fees using the actual exchange
rates on Erbosan's loan documentation in exhibit E-13. On this basis,
we determine the countervailable subsidy to be 1.10 percent ad valorem
for Erbosan for pipe and tube.
Comment 9: The respondents argue that in order for the Department
and the GRT to avoid spending valuable resources reviewing terminated
or non-existent programs in future countervailing duty investigations
or reviews, the Department should announce in its final results that
the following programs have either been terminated or do not exist: (1)
State Aid for Exports, (2) Resource Utilization Support Fund (RUSF),
(3) Advance Refunds of Tax Savings, (4) Support and Price Stability
Fund, and (5) Land Allocation (General Incentives Program).
The respondents state that the State Aid for Exports program, which
was established in 1995 to provide certain benefits to producers of
certain agriculture products, was terminated on December 31, 1995, as
noted in the Department's verification report. Therefore, they argue
that since this program was limited to the agriculture sector, and no
other sector could receive any residual benefits from this terminated
program, the Department should find that this program has been
terminated for companies not in the agricultural sector.
The respondents also state that the RUSF is a fund that was
established by the GRT to pay for certain government-sponsored programs
and not a program in itself. However, they argue that because of
problems arising from translation of Turkish to English there has been
a great deal of confusion in this and previous reviews concerning the
RUSF. The respondents further state that, as noted in the government's
verification report at page 20, the RUSF program found countervailable
in Turkish Pasta at 30369 was the same as the Incentive Premium on
Domestically Obtained Goods Program. They argue that because the GRT
has demonstrated that the RUSF program terminated effective January 1,
1987, the Department should list the ``RUSF program'' as terminated.
The respondents further argue that the Department should state in
the final results that the Advance Refund of Tax Savings program does
not exist because there has never been such a program. They state that
the reference to a program known as the Advance Refund
[[Page 43992]]
of Tax Savings in Turkish Pasta is apparently a misinterpretation or
mistranslation of certain provisions contained in Turkey's budget laws.
They also state that Article 44 of the 1987 Budget Law is the legal
authority that permits the GRT to obtain reimbursement from individuals
or companies that have received an overpayment of public funds, for
example, tax refunds.
The respondents argue that because the Support and Price Stability
Fund is a government fund used to finance programs such as freight
rebate and export credit programs that may provide benefits to
companies and is not a separate program in and of itself, the
Department should announce in the final results that the program does
not exist. They argue that such a statement will clarify this issue and
eliminate any confusion on this subject in future investigations or
reviews involving Turkish cases.
Finally, the respondents argue that the Land Allocation program was
never implemented, therefore, as they informed Department verifiers, no
company in Turkey has been or could ever be eligible to receive any
benefits under this program. Therefore, they argue that the Department
should find this program to be terminated in its final results.
The petitioner counters that any findings that a program has been
terminated or does not exist is limited to the review at hand, because
in future reviews the Department should investigate whether a
terminated program has been reinstated or a program found not to exist
has been created. Further, the petitioner counters that merely because
a finding is made in this review does not exempt the programs involved
from inquiry in the future.
Department's Position: The Department's practice is to continue to
countervail programs previously found countervailable, and to examine
programs for which we have not made a final determination regarding
whether the program is non-countervailable or whether terminated
programs have residual benefits. See e.g., Live Swine from Canada at
52420 citing to Industrial Phosphoric Acid from Israel; Final Results
of Countervailing Duty Administrative Reviews, 61 FR 28841 (June 6,
1996).
Regarding the State Aid for Exports program, at verification we
examined a Communique that listed eligible products, and we did not
find any steel products listed. Therefore, none of the steel companies
under review could have received any benefits from this program.
However, it is uncertain whether the eligible products are subject to
change. Therefore, we are unable to conclude that steel products will
never be covered under this program.
In Turkish Pasta at 30369, the Department found a countervailable
benefit for RUSF and for the Incentive Premium on Domestically Obtained
Goods programs. Therefore, although at the verification of these
reviews, the government official said that based on the description of
the RUSF program in Turkish Pasta, the so-called ``RUSF program'' is
really a misnomer for the Incentive Premium on Domestically Obtained
Goods, we were unable to substantiate that claim. However, in the
instant proceeding, we found that none of the companies subject to
review received benefits under either RUSF or Incentive Premium on
Domestically Obtained Goods programs during the period.
Regarding the Advance Refunds of Tax Savings, as noted in the GRT's
verification report at page 20, the government official said that
Article 44 of the 1987 Budget Law pertains to general reimbursement to
the GRT of public money. However, the Department's interpreter examined
Article 44, and said that the Article did not appear to have any
connection to tax savings, but was somewhat vague. (See GRT
verification report at page 20). In addition, the GRT officials were
unable to fully explain why they thought the Department was incorrect
in finding this to be a program in Turkish Pasta. Further, we verified
that none of the companies under review applied for, or used the
Advance Refunds of Tax Savings during the period of review.
The Department did not include the Support and Price Stability Fund
as a program in the Preliminary Results. We verified that this is a
fund that is used to finance programs, and not a program in itself (GRT
verification report at page 19). Because we have not included it in
these final results, there is no need to list it as a terminated or
non-existent program.
We agree with the respondents that, at verification, the officials
said that the Land Allocation program was never implemented. However,
we listed this program as not used because it was not terminated, and
it is uncertain whether the program might be implemented and used in
the future.
Final Results of Review
In accordance with 19 C.F.R. Sec. 355.22(c)(4)(ii), we calculated
an individual subsidy rate for each producer/exporter subject to these
administrative reviews. For the period January 1, 1995 through December
31, 1995, we determine the net subsidy to be as follows:
------------------------------------------------------------------------
Net
Manufacturer/exporter of pipe and tube subsidy
rate
------------------------------------------------------------------------
Erbosan.................................................... 4.02%
------------------------------------------------------------------------
------------------------------------------------------------------------
Net
Manufacturer/exporter of line pipe and tube subsidy
rate
------------------------------------------------------------------------
Mannesmann................................................. 0.75%
------------------------------------------------------------------------
We will instruct the U.S. Customs Service (``Customs'') to assess
countervailing duties as indicated above. The Department will also
instruct Customs to collect cash deposits of estimated countervailing
duties in the percentages detailed 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
Manufacturer/exporter of pipe and tube deposit
rate
------------------------------------------------------------------------
Erbosan.................................................... 3.97%
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash
Manufacturer/exporter of line pipe deposit
rate
------------------------------------------------------------------------
Mannesmann................................................. 0.75%
------------------------------------------------------------------------
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 Sec. 777A(e)(2)(B) of the Act. The requested review
will normally cover only those companies specifically named. See 19 CFR
Sec. 355.22(a). Pursuant to 19 CFR Sec. 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
[[Page 43993]]
1993) (interpreting 19 CFR Sec. 353.22(e), the antidumping regulation
on automatic assessment, which is identical to 19 CFR Sec. 355.22(g)).
Therefore, the cash deposit rates for all companies except those
covered by this review will be unchanged by the results of this review.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit
rates that will be applied to non-reviewed companies covered by this
order are those established in the most recently completed
administrative proceeding, conducted pursuant to the statutory
provisions that were in effect prior to the URAA amendments. 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 this order are the
cash deposit rates in effect at the time of entry.
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR Sec. 355.34(d). Timely written
notification of return/destruction of APO materials or conversion to
judicial protective order is hereby requested. Failure to comply with
the regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: August 6, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-21828 Filed 8-15-97; 8:45 am]
BILLING CODE 3510-DS-P