[Federal Register Volume 66, Number 77 (Friday, April 20, 2001)]
[Notices]
[Pages 20236-20240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9859]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-560-813]


Notice of Preliminary Affirmative Countervailing Duty 
Determination and Alignment of Final Countervailing Duty Determination 
With Final Antidumping Duty Determination: Certain Hot-Rolled Carbon 
Steel Flat Products From Indonesia

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

ACTION: Notice of preliminary affirmative countervailing duty 
determination.

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EFFECTIVE DATE: April 20, 2001.

FOR FURTHER INFORMATION CONTACT: Stephanie Moore at (202) 482-3692 or 
Tipten Troidl at (202) 482-1767, Office of AD/CVD Enforcement VI, Group 
II, Import Administration, U.S. Department of Commerce, Room 4012, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230.

Preliminary Determination

    The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are being provided to certain 
producers and

[[Page 20237]]

exporters of certain hot-rolled carbon steel flat products (subject 
merchandise) from Indonesia. For information on the estimated 
countervailing duty rates, please see the ``Suspension of Liquidation'' 
section of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

    The petition in this investigation was filed by Bethlehem Steel 
Corporation, U.S. Steel Group, a unit of USX Corporation, Gallatin 
Steel Company, IPSCO Steel Inc., LTV Steel Company, Inc., National 
Steel Corporation, Nucor Corporation, Steel Dynamics, Inc., Weirton 
Steel Corporation, the Independent Steelworkers Union, and the United 
Steelworkers of America (the petitioners).

Case History

    Since the publication of the notice of initiation in the Federal 
Register (see Notice of Initiation of Countervailing Duty 
Investigations: Certain Hot-Rolled Carbon Steel Flat Products From 
Argentina, India, Indonesia, South Africa, and Thailand, 65 FR 77580 
(December 12, 2000) (Initiation Notice)), the following events have 
occurred. On December 5, 2000, we issued countervailing duty 
questionnaires to the Government of Indonesia (GOI) and to producers/
exporters of the subject merchandise. We received responses to our 
initial questionnaires from the GOI and PT. Krakatau Steel (Krakatau), 
the producer/exporter of the subject merchandise on January 31, 2001. 
We then issued supplemental questionnaires to the GOI and Krakatau. 
Beginning on March 7, 2001, we received supplemental questionnaire 
responses from the GOI and Krakatau.
    On January 18, 2001, we issued a partial extension of the due date 
for this preliminary determination from February 7, 2001 to March 26, 
2001. See Certain Hot-Rolled Carbon Steel Flat Products From India, 
Indonesia, South Africa, and Thailand: Extension of Time Limit for 
Preliminary Determinations in Countervailing Duty Investigations, 
(Extension Notice) 66 FR 8199 (January 30, 2001).
    On March 26, 2001, we amended the Extension Notice to take the full 
amount of time to issue this preliminary determination. The extended 
due date is April 13, 2001. See Certain Hot-Rolled Carbon Steel Flat 
Products From India, Indonesia, South Africa, and Thailand: Extension 
of Time Limit for Preliminary Determinations in Countervailing Duty 
Investigations, 66 FR 17525 (April 2, 2001).
    On April 10, 2001, we received comments from petitioners based on 
their partial translation of the respondent's untranslated financial 
statements. Petitioner's comments concerned the equityworthiness and 
creditworthiness of Cold Rolling Mill of Indonesia (CRMI), and the 
equityworthiness of Krakatau.

Scope of the Investigation

    The merchandise subject to this investigation is certain hot-rolled 
flat-rolled carbon-quality steel products of a rectangular shape, of a 
width of 0.5 inch or greater, neither clad, plated, nor coated with 
metal and whether or not painted, varnished, or coated with plastics or 
other non-metallic substances, in coils (whether or not in successively 
superimposed layers), regardless of thickness, and in straight lengths, 
of a thickness of less than 4.75 mm and of a width measuring at least 
10 times the thickness. Universal mill plate (i.e., flat-rolled 
products rolled on four faces or in a closed box pass, of a width 
exceeding 150 mm, but not exceeding 1250 mm, and of a thickness of not 
less than 4 mm, not in coils and without patterns in relief) of a 
thickness not less than 4.0 mm is not included within the scope of this 
investigation.
    Specifically included within the scope of this investigation are 
vacuum degassed, fully stabilized (commonly referred to as 
interstitial-free (IF)) steels, high strength low alloy (HSLA) steels, 
and the substrate for motor lamination steels. IF steels are recognized 
as low carbon steels with micro-alloying levels of elements such as 
titanium or niobium (also commonly referred to as columbium), or both, 
added to stabilize carbon and nitrogen elements. HSLA steels are 
recognized as steels with micro-alloying levels of elements such as 
chromium, copper, niobium, vanadium, and molybdenum. The substrate for 
motor lamination steels contains micro-alloying levels of elements such 
as silicon and aluminum.
    Steel products to be included in the scope of this investigation, 
regardless of definitions in the Harmonized Tariff Schedule of the 
United States (HTS), are products in which: (i) Iron predominates, by 
weight, over each of the other contained elements; (ii) the carbon 
content is 2 percent or less, by weight; and (iii) none of the elements 
listed below exceeds the quantity, by weight, respectively indicated: 
1.80 percent of manganese, or 2.25 percent of silicon, or 1.00 percent 
of copper, or 0.50 percent of aluminum, or 1.25 percent of chromium, or 
0.30 percent of cobalt, or 0.40 percent of lead, or 1.25 percent of 
nickel, or 0.30 percent of tungsten, or 0.10 percent of molybdenum, or 
0.10 percent of niobium, or 0.15 percent of vanadium, or 0.15 percent 
of zirconium.
    All products that meet the physical and chemical description 
provided above are within the scope of this investigation unless 
otherwise excluded. The following products, by way of example, are 
outside or specifically excluded from the scope of this investigation:
     Alloy hot-rolled steel products in which at least one of 
the chemical elements exceeds those listed above (including, e.g., ASTM 
specifications A543, A387, A514, A517, A506).
     SAE/AISI grades of series 2300 and higher.
     Ball bearings steels, as defined in the HTS.
     Tool steels, as defined in the HTS.
     Silico-manganese (as defined in the HTS) or silicon 
electrical steel with a silicon level exceeding 2.25 percent.
     ASTM specifications A710 and A736.
     USS Abrasion-resistant steels (USS AR 400, USS AR 500).
     All products (proprietary or otherwise) based on an alloy 
ASTM specification (sample specifications: ASTM A506, A507).
     Non-rectangular shapes, not in coils, which are the result 
of having been processed by cutting or stamping and which have assumed 
the character of articles or products classified outside chapter 72 of 
the HTS.
    The merchandise subject to this investigation is classified in the 
HTS at subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 
7208.90.00.00, 7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 
7211.19.30.00, 7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 
7211.19.75.60, and 7211.19.75.90. Certain hot-rolled flat-rolled 
carbon-quality steel covered by this investigation, including: vacuum 
degassed fully stabilized; high strength low alloy; and the substrate 
for motor lamination steel may also enter under the following tariff 
numbers: 7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 
7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 
7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00,

[[Page 20238]]

7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. Subject merchandise 
may also enter under 7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 
7212.40.10.00, 7212.40.50.00, and 7212.50.00.00. Although the HTS 
subheadings are provided for convenience and U.S. Customs purposes, the 
Department's written description of the merchandise under investigation 
is dispositive.
    In the scope section of the Initiation Notice for this 
investigation, the Department encouraged all parties to submit comments 
regarding product coverage by December 26, 2000. The Department is 
presently considering a request to amend the scope of this 
investigation to exclude a particular specialty steel product. We will 
issue our determination on this request prior to the final 
determination.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are references 
to the provisions codified at 19 CFR Part 351 (2000).

Injury Test

    Because Indonesia is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from Indonesia materially injure, or threaten 
material injury to, a U.S. industry. On January 4, 2001, the ITC 
published its preliminary determination finding that there is a 
reasonable indication that an industry in the United States is being 
materially injured, or threatened with material injury, by reason of 
imports from Indonesia of the subject merchandise. See Hot-Rolled Steel 
Products from Argentina, China, India, Indonesia, Kazakhstan, 
Netherlands, Romania, South Africa, Taiwan, Thailand, and Ukraine, 66 
FR 805 (January 4, 2001).

Alignment With Final Antidumping Duty Determination

    On March 23, 2001, the petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determination in the companion antidumping duty investigation. 
Therefore, in accordance with section 705(a)(1) of the Act, we are 
aligning the final determination in this investigation with the final 
determinations in the antidumping duty investigations of hot-rolled 
carbon steel flat products.

Period of Investigation

    The period for which we are measuring subsidies (the POI) is 
calendar year 1999.

Allocation Period

    Under section 351.524(d)(2) of the CVD Regulations, we will presume 
the allocation period for non-recurring subsidies to be the average 
useful life (AUL) of renewable physical assets for the industry 
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class 
Life Asset Depreciation Range System, as updated by the Department of 
Treasury. The presumption will apply unless a party claims and 
establishes that these tables do not reasonably reflect the AUL of the 
renewable physical assets for the company or industry under 
investigation, and the party can establish that the difference between 
the company-specific or country-wide AUL for the industry under 
investigation is significant.
    In this investigation, no party to the proceeding has claimed that 
the AUL listed in the IRS tables does not reasonably reflect the AUL of 
the renewable physical assets for the firm or industry under 
investigation. Therefore, in accordance with section 351.524(d)(2) of 
the CVD Regulations, we will allocate non-recurring subsidies over 15 
years, the AUL listed in the IRS tables for the steel industry.

Creditworthiness

    Petitioners alleged that Krakatau was uncreditworthy in the years 
in which it received GOI loans and equity infusions. See Initiation 
Notice and Office of AD/CVD Enforcement VI, Initiation Checklist 
(Checklist), public versions are available in the Central Records Unit, 
Room B-099. In order to make a determination with respect to Krakatau's 
creditworthiness, we have determined that more information is needed. 
We have requested additional information from Krakatau and provided a 
deadline of April 27, 2001. Krakatau is in the process of providing 
translations of its financial statements for the years 1985 through 
1995. We anticipate that this information will be submitted to the 
Department prior to verification. After we collect additional 
information and conduct verification, we will prepare an analysis 
memorandum addressing the company's creditworthiness during this 
period. Before our final determination, we will provide all parties 
with an opportunity to comment on this memorandum. Comments on our 
creditworthy analysis, as well as our preliminary determination will be 
addressed in the final determination.

I. Programs Preliminarily Determined To Be Countervailable

A. Two-Step Loan Program

    Pursuant to Government Regulation number 12/1969, the Ministry of 
Finance through Bank Indonesia, which is Indonesia's Central Bank, can 
borrow money denominated in foreign currencies to lend to Indonesian 
companies. As stated in the Final Affirmative Countervailing Duty 
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from 
Indonesia, 64 FR 73155, 73161 (December 29, 1999) (CTL Plate), two-step 
loans are drawn from credit facilities (i.e., lines of credit) in the 
billing currencies of foreign equipment suppliers. These loans are 
converted into rupiah based on the exchange rate on the drawing date, 
and carry an established interest rate of four percent. In CTL Plate, 
we determined this program to be countervailable. Id. No new 
substantive information or evidence of changed circumstances has been 
submitted in this investigation to warrant reconsideration of this 
finding.
    In 1995, the year in which the credit facility was extended, a 
lending rate of four percent would have been inconsistent with an 
interest rate the company would have received on a comparable 
commercial loan, and would thus provide a countervailable benefit in 
accordance with section 771(5)(E)(ii) of the Act. Moreover, there is no 
information on the record of this investigation which would indicate 
that the two-step loan was provided to Krakatau pursuant to a program 
to which other companies ostensibly had access. Therefore, we 
preliminarily determine that the loan was specific to Krakatau under 
section 771(5A)(D)(i) of the Act.
    To calculate the benefit from this program, we compared the 
interest rate Krakatau paid on the two-step loan during the POI to the 
benchmark interest rate the company would have paid for a comparable 
commercial loan. For the benchmark interest rate, we used the average 
cost of long-term fixed-rate loans in Indonesia as the interest rates 
that would have been paid by a creditworthy company, specifically the 
rates offered by commercial banks in Indonesia as reported in the 
Indonesian Financial Statistics, submitted in the March 20, 2001, GOI 
questionnaire

[[Page 20239]]

response. This difference was then divided by Krakatau's total sales 
during the POI. On this basis, we preliminarily determine the 
countervailable subsidy from this program to be 1.01 percent ad valorem 
for Krakatau.

B. Equity Infusions to Krakatau From the Government of Indonesia

    Petitioners alleged that the GOI provided various equity infusions 
into Krakatau and its subsidiary, the CRMI. Petitioners alleged that in 
1995, the GOI converted approximately 1.298 trillion rupiah of debt 
into equity. In addition, petitioners alleged that the GOI provided 
Krakatau with equity infusions totaling 1.6 trillion rupiah in the five 
years prior to December 31, 1992. Petitioners also alleged two equity 
infusions into CRMI. We initiated on these two allegations under the 
following programs: ``1989 Equity Infusion to CRMI'' and ``Three-Step 
Equity Infusion to CRMI.'' See the Initiation Notice and Checklist.
    According to the response of the GOI and Krakatau, equity infusions 
or debt-to-equity conversions were provided to Krakatau in various 
years. In addition, all of the alleged equity infusions were provided 
to Krakatau. The details of the equity infusions and conversions are 
proprietary, and are discussed in the Business Proprietary Calculations 
Memorandum.
    Section 771(5)(E)(i) of the Act and section 351.507(a)(1) of the 
CVD Regulations state that, in the case of government-provided equity 
infusion, a benefit is conferred if an equity investment decision is 
inconsistent with the usual investment practice of private investors.
    Consistent with the methodology discussed in section 351.507(a)(2) 
of the CVD Regulations, the first question in analyzing a benefit with 
respect to an equity infusion is whether, at the time of the infusion, 
there was a market price for similar newly-issued equity. If so, the 
Department will consider an equity infusion to be inconsistent with the 
usual investment practice of private investors if the price paid by the 
government for newly-issued shares is greater than the price paid by 
private investors for the same, or similar, newly-issued shares.
    If actual private investor prices are not available, then the 
Department will determine whether the firm funded by the government-
provided infusion was equityworthy or unequityworthy at the time of the 
equity infusion. (See section 351.507(a)(3)(i) of the CVD Regulations.) 
Section 351.507(a)(4)(ii) of the CVD Regulations further stipulates 
that the Department will ``normally require from the respondents the 
information and analysis completed prior to the infusion upon which the 
government based its decision to provide the equity infusion.'' Absent 
the existence or provision of an analysis or study, containing 
information typically examined by potential private investors 
considering an equity investment, on which the government based its 
decision to invest, the Department will normally determine that the 
equity infusion provides a countervailable benefit. This is because, 
before making a significant equity infusion, it is the usual investment 
practice of private investors to evaluate the potential risk versus the 
expected return, using the most objective criteria and information 
available to the investor.
    In this instance, Krakatau reported that there was no market price 
for a similarly newly-issued equity at the time of the GOI equity 
infusions and debt-to-equity conversions into Krakatau. Therefore, we 
must determine whether Krakatau was equityworthy or unequityworthy at 
the time of the equity infusions and conversions.
    The first criterion examined by the Department to determine 
whether, from the perspective of a reasonable private investor, 
Krakatau showed an ability to generate a reasonable rate of return 
within a reasonable period of time, is an objective analysis of 
Krakatau prepared prior to the government-provided equity infusions and 
conversions which the government based its decisions to invest. Based 
on our examination of the responses of the GOI and Krakatau, we have 
preliminarily determined that no objective studies of Krakatau had been 
prepared prior to the GOI's investment decisions on which the GOI could 
have based its investment decisions for the equity infusions and debt-
to-equity conversions.
    Therefore, we preliminarily determine that the GOI's equity 
infusions and conversions into Krakatau constitute countervailable 
subsidies within the meaning of section 771(5) of the Act. These 
investments provide a financial contribution, as described in section 
771(5)(D)(i) of the Act. Also, we preliminarily determine that this 
program is specific under section 771(5A)(D)(i) of the Act because the 
equity infusions/conversions were limited to Krakatau. Finally, because 
no objective analysis was performed containing information typically 
examined by potential private investors considering an equity 
investment prior to the GOI's decisions to invest in Krakatau, the 
investment decisions were inconsistent with the usual investment 
practice of private investors. Therefore, a benefit exists according to 
section 771(5)(E)(i) of the Act in the amount of the equity infusions 
and the amount of the debt-to-equity conversions.
    To calculate the benefit applicable to the POI, we applied the 
Department's standard grant methodology. We divided the total benefits 
attributable to the equity infusions and conversions by Krakatau's 
total sales during the POI. On this basis, we preliminarily determine 
the countervailable subsidy from this program to be 15.52 percent ad 
valorem for Krakatau.

II. Program Preliminarily Determined Not Used

A. Bank of Indonesia Rediscount Loans

Verification

    In accordance with section 782(i)(1) of the Act, we will verify the 
information submitted by respondents prior to making our final 
determination.

Suspension of Liquidation

    In accordance with 703(d)(1)(A)(i) of the Act, we have calculated 
an individual rate for Krakatau, the only company under investigation. 
We preliminarily determine that the total estimated net countervailable 
subsidy rate is 16.53 percent ad valorem. The All Others rate is 16.53 
percent ad valorem, which is the rate calculated for Krakatau.
    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of the 
subject merchandise from Indonesia, which are entered or withdrawn from 
warehouse, for consumption on or after the date of the publication of 
this notice in the Federal Register, and to require a cash deposit or 
bond for such entries of the merchandise in the amount indicated above. 
This suspension will remain in effect until further notice.

ITC Notification

    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all non-privileged and nonproprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    In accordance with section 705(b)(2) of the Act, if our final 
determination is affirmative, the ITC will make its final

[[Page 20240]]

determination within 45 days after the Department makes its final 
determination.

Public Comment

    In accordance with 19 CFR 351.310, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
this preliminary determination. The hearing is tentatively scheduled to 
be held 57 days from the date of publication of the preliminary 
determination, at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to 
request a hearing must submit a written request within 30 days of the 
publication of this notice in the Federal Register to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number of participants; and, (3) 
to the extent practicable, an identification of the arguments to be 
raised at the hearing. In addition, six copies of the business 
proprietary version and six copies of the non-proprietary version of 
the case briefs must be submitted to the Assistant Secretary no later 
than 50 days from the date of publication of the preliminary 
determination. As part of the case brief, parties are encouraged to 
provide a summary of the arguments not to exceed five pages and a table 
of statutes, regulations, and cases cited. Six copies of the business 
proprietary version and six copies of the non-proprietary version of 
the rebuttal briefs must be submitted to the Assistant Secretary no 
later than 5 days from the date of filing of the case briefs. An 
interested party may make an affirmative presentation only on arguments 
included in that party's case or rebuttal briefs. Written arguments 
should be submitted in accordance with 19 CFR 351.309 and will be 
considered if received within the time limits specified above.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act. Effective January 20, 2001, Bernard T. Carreau is 
fulfilling the duties of the Assistant Secretary for Import 
Administration.

    Dated: April 13, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 01-9859 Filed 4-19-01; 8:45 am]
BILLING CODE 3510-05-P