[Federal Register Volume 66, Number 77 (Friday, April 20, 2001)]
[Notices]
[Pages 20251-20261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9861]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-549-818]


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

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: Dana Mermelstein at (202) 482-1391 or 
Samantha Denenberg at (202) 482-1386, Office of AD/CVD Enforcement VII, 
Group III, Import Administration, International Trade Administration, 
U.S. Department of Commerce, Room 7866, 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 
producers and exporters of certain hot-rolled carbon steel flat 
products from Thailand. 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, on November 22, 2000, 
by Bethlehem Steel Corporation, Gallatin Steel Company, IPSCO Steel 
Inc., LTV Steel Company, Inc., National Steel Corporation, Nucor 
Corporation, Steel Dynamics, Inc., U.S. Steel Group, a unit of USX 
Corporation, Weirton Steel Corporation, Independent Steelworkers Union, 
and the United Steelworkers of America (the petitioners).

Case History

    We initiated this investigation on December 4, 2000. 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). Since the initiation, the following events have occurred. On 
December 20, 2000, we issued a countervailing duty questionnaire to the 
Royal Thai Government (RTG). On January 3, 2001, the RTG responded to 
Section I.D. of the Department's questionnaire, identifying Sahaviriya 
Steel Industries Public Company Limited (SSI) as the only producer/
exporter of the subject merchandise to the United States during the 
period of investigation. On January 17, 2001, petitioners renewed their 
allegation that SSI was uncreditworthy in 1996. On February 6, 2001, we 
received questionnaire responses from SSI and the RTG. On February 27, 
2001, we issued supplemental questionnaires to the RTG and SSI. On 
March 7 and March 13, 2001, we received the RTG's and SSI's responses 
to the Department's supplemental questionnaires. On March 16, 2001, the 
Department decided not to initiate an uncreditworthiness investigation 
of SSI for 1996. See Memorandum to the File Regarding 
Uncreditworthiness Allegation for SSI in 1996.
    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

[[Page 20252]]

Flat Products from India, Indonesia, South Africa and Thailand: 
Extension of Time Limit for Preliminary Determinations in 
Countervailing Duty Investigations, 66 FR 8199 (January 30, 
2001)(Extension Notice). 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).

Scope of the Investigation

    The merchandise subject to this investigation is certain hot-rolled 
carbon steel flat 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 (HTSUS), 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., 
American Society for Testing and Materials (ASTM) specifications A543, 
A387, A514, A517, A506).
     Society of Automotive Engineers (SAE)/American Iron & 
Steel Institute (AISI) grades of series 2300 and higher.
     Ball bearings steels, as defined in the HTSUS.
     Tool steels, as defined in the HTSUS.
     Silico-manganese (as defined in the HTSUS) 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 HTSUS.
    The merchandise subject to this investigation is classified in the 
HTSUS 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 carbon steel flat 
products 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, 
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 HTSUS 
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 these 
investigations to exclude a particular specialty steel product. We will 
issue our determination on this request prior to the final 
determination.

The 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, all citations to the 
Department's regulations are to the regulations codified at 19 CFR part 
351 (2000).

Injury Test

    Because Thailand 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 Thailand 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 Thailand of subject merchandise (66 FR 805). The views of 
the

[[Page 20253]]

Commission are contained in the USITC Publication 3381 (January 2001), 
Hot-Rolled Steel Products from Argentina, China, India, Indonesia, 
Kazakhstan, Netherlands, Romania, South Africa, Taiwan, Thailand, and 
Ukraine; Investigation Nos. 701-TA-404-408 (Preliminary) and 731-TA-
898-908 (Preliminary).

Alignment with Final Antidumping Duty Determinations

    On March 23, 2001, petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determinations of the antidumping duty investigations of certain 
hot-rolled carbon steel flat products from Argentina, India, Indonesia, 
Kazakhstan, the Netherlands, the People's Republic of China, Romania, 
South Africa, Taiwan, Thailand, and Ukraine. See Initiation Notice. 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 companion antidumping investigations of certain hot-rolled carbon 
steel flat products.

Period of Investigation

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

Use of Facts Available

    The RTG failed to respond to specific questions in the Department's 
original and supplemental questionnaires. Section 776(a)(2)(A) of the 
Act states the Department shall use facts otherwise available in 
reaching the applicable determination if any interested party 
``withholds information that has been requested by the administering 
authority.'' As described in more detail in the Debt Restructurings 
section below, the RTG withheld information explicitly requested by the 
Department; therefore, we must resort to the use of facts otherwise 
available.
    Furthermore, section 776(b) of the Act provides that in selecting 
from among the facts available, the Department may use an inference 
that is adverse to the interests of a party if it determines that a 
party has failed to cooperate to the best of its ability. In this 
investigation, the Department requested the RTG to submit information 
identifying which companies and industries had been targeted for debt 
restructuring. The Department also requested the CDRAC ``List of 351,'' 
a list which identifies the first 351 cases ``targeted'' by the RTG for 
debt restructuring. This information was requested in the initial and 
supplemental questionnaires, respectively. The Department finds that by 
not providing necessary information specifically requested by the 
Department the RTG has failed to cooperate to the best of its ability. 
Therefore, in selecting facts available, the Department determines that 
an adverse inference is warranted.
    When employing an adverse inference, the statute indicates that the 
Department may rely upon information derived from (1) the petition; (2) 
a final determination in a countervailing duty or an antidumping 
investigation; (3) any previous administrative review, new shipper 
review, expedited antidumping review, section 753 review, or section 
762 review; or (4) any other information placed on the record. See 
section 776(b)(1)-(b)(4) of the Act and 19 CFR Sec. 351.308(c). As 
adverse facts available in this preliminary determination, we have 
relied upon information in the record, including other information in 
the response and information submitted by the petitioners, in order to 
determine that the information the RTG has withheld may provide 
necessary insight into the specificity of SSI's and PPC's debt 
restructurings. The Department's selection of the information used as 
adverse facts available is discussed in more detail in the Debt 
Restructurings section below.

Subsidies Valuation Information

Allocation Period

    Section 351.524(d)(2) of the Department's regulations states that 
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.
    No party requested, or submitted information which yielded, an 
industry-wide AUL different from the AUL listed in the IRS tables. We 
are therefore using the 15-year AUL as reported in the IRS tables to 
allocate any non-recurring subsidies under investigation which were 
provided directly to SSI. Petitioners also alleged that Prachuab Port 
Co., Ltd. (PPC), which is 51 percent owned by SSI and which provides 
port facilities and services to SSI, received non-recurring subsidies 
under several programs. For non-recurring subsidies provided to PPC, we 
are using the AUL of 20 years, as reported in the IRS tables for port 
facilities.

Creditworthiness and the Calculation of Loan Benchmark and Discount 
Rates

    Both SSI and PPC received exemptions from import duties on the 
importation of capital equipment (under IPA Section 28), which we have 
preliminarily determined to be non-recurring benefits. See Duty 
Exemptions on Imports of Machinery Under IPA Section 28 section below. 
SSI received IPA Section 28 exemptions in the years 1992 through 1997 
and PPC received IPA Section 28 benefits in 1994 through 1996.
    Section 351.524(d)(3) of the regulations directs us regarding the 
selection of a discount rate for the purposes of allocating non-
recurring benefits over time. The regulations provide several options 
in order of preference. The first among these is the cost of long-term 
fixed-rate loans of the firm in question, excluding any loans which 
have been determined to be countervailable, for each year in which non-
recurring subsidies have been received. Both SSI and PPC have 
calculated their annual average cost of long-term fixed-rate loans. SSI 
has done so for the years 1994 through 1997; PPC has done so for the 
years 1993 through 1997. Since we are not investigating the 
countervailability of SSI's or PPC's loans during this period, there is 
no reason to seek another source of appropriate discount rate 
information. However, for the years 1992 and 1993, in which SSI 
received IPA Section 28 benefits, and for which SSI has not provided 
its cost of long-term fixed-rate loans, we have used as our discount 
rate the cost of long-term fixed-rate loans reported by PPC for 1993. 
While the RTG did report the Thailand-wide average cost of fixed-rate 
debt for the years 1992 through 1999, we believe that PPC's own cost of 
long-term fixed rate debt more closely satisfies the Department's 
preference for a company-specific interest rate.
    We initiated an investigation of whether SSI was creditworthy for 
the years 1997 through 1999. However, except for 1999, we have not 
found benefits granted in those years that are allocable to the POI, 
under any of the non-recurring subsidy programs under investigation. 
See Duty Exemptions on Imports of Machinery Under IPA Section 28 
section below. Therefore we need not reach the issue of SSI's 
creditworthiness in 1997 or 1998.

[[Page 20254]]

Furthermore, we declined to initiate an investigation of SSI's 
creditworthiness for 1996. See Case History section above. Therefore, 
there is no basis for adjusting the discount rates to include an 
uncreditworthiness risk premium in any of the relevant years. However, 
both SSI and PPC received loans as part of their restructuring packages 
in 1999. Therefore, it is necessary to conduct a creditworthiness 
analysis for 1999, the year in which the terms of the debt 
restructurings under investigation were agreed to, as discussed in the 
Debt Restructurings section below.
    In determining whether SSI was uncreditworthy during 1999, we 
conducted: (1) an examination of SSI's ability to meet its costs and 
fixed financial obligations with its cash flow; (2) an analysis of 
SSI's financial ratios from 1996 to 1998; and, (3) an examination of 
whether new long-term commercial loans were provided by commercial 
lending institutions, other than the debt restructuring itself.
    In its questionnaire responses, SSI stated that it was unable to 
meet its principal and interest payment schedules and that defaults 
occurred on the loans which gave rise to the necessity for 
restructuring those loans. Information in the responses also shows that 
by 1999 SSI was unable to meet its financial obligations. Because SSI 
was a startup, we would expect to see that SSI's capital and other 
startup-related expenses would absorb revenue in the initial years and 
would cause the company to experience some difficulty in meeting its 
debt obligations in its initial years, in this case 1994 through 1995. 
However, even beyond the first two years, SSI was still having 
difficulty meeting its debt servicing requirements from 1996 through 
the first half of 1999.
    We also examined the company's financial statements for the three 
years prior to 1999. In this case, the questionnaire responses provide 
sufficient SSI financial statement information for 1996, 1997, and 1998 
to analyze whether a reasonable private lender would have extended 
credit to SSI in 1999. When we examined the relevant ratios (Current 
Ratio, Quick Ratio, Debt-to-Equity) for 1996 through 1998, we see that 
1996 starts with SSI below average financial health benchmarks. After 
1996, SSI experienced a marked decline in its financial performance in 
all three of these ratios: for example, the Current Ratio was below 
financial benchmark averages for 1996 and worsened until 1998; the 
Quick Ratio exhibited the same trend as the Current Ratio; and the 
Debt-to-Equity Ratio exhibited a marked increase from 1996 to 1998. 
This information shows that 1998 was the worst in terms of overall 
financial health. These ratios normally would be seen by a reasonable 
private lender as an indication of SSI's declining ability to meet its 
debt service obligations and thus an indication of its 
uncreditworthiness. For additional information, see Memorandum from 
Javier Barrientos through Dana Mermelstein to Barbara E. Tillman: 
Creditworthiness of SSI (April 13, 2001) (Creditworthiness Memo) 
(public version on file in the Department's Central Records Unit). 
Respondents have argued that the debt restructuring itself constitutes 
commercial long-term financing obtained in 1999, and therefore is 
indicative of SSI's creditworthiness. The Department, however, has 
examined the proprietary details of the debt restructuring transaction 
to determine whether it gives rise to countervailable benefits, and has 
found that the financing to which respondents refer was part of the 
debt restructuring package which was achieved on non-commercial terms. 
See section on Debt Restructurings below. Thus, we cannot consider this 
financing as indicative of SSI creditworthiness during the POI. In 
addition, respondents have not shown that they received other long-term 
commercial financing during 1999.
    Thus, based on the above information and in accordance with section 
351.505 (a)(4) of the Department's regulations, we preliminarily 
determine that SSI was uncreditworthy in 1999. There is no indication 
that SSI could have obtained long-term loans from conventional 
commercial sources.
    Because we have preliminarily determined that SSI was 
uncreditworthy in 1999, we adjusted the loan benchmark rate by adding a 
risk premium, calculated according to the methodology described in 
section 351.505(a)(3)(iii) of our regulations, for those subsidies 
conferred during the fiscal year 1999.

Equityworthiness

    We initiated an investigation of SSI's equityworthiness for 1999. 
The conversion to equity of SSI's convertible debentures which occurred 
in 1999 was one element of SSI's debt restructuring which was completed 
in 1999. As discussed in greater detail below, we are continuing to 
gather information necessary to determine whether the alleged RTG 
involvement in the debt-for-equity conversion gives rise to 
countervailable subsidies. Therefore, for purposes of this preliminary 
determination, we need not reach the issue of SSI's equityworthiness in 
1999.

Programs Preliminarily Determined To Be Countervailable

1. Investment Incentives Under the Investment Promotion Act
    According to the questionnaire responses, the Investment Promotion 
Act of 1977 (IPA) is administered by the Board of Investment (BOI) and 
is designed to provide incentives to invest in Thailand. In order to 
receive IPA benefits, each company must apply to the BOI for a 
Certificate of Promotion (license), which specifies goods to be 
produced, production and export requirements, and benefits approved. 
These licenses are granted at the discretion of the BOI and are 
periodically amended or reissued to change benefits or requirements. 
IPA benefits include VAT exemptions, import duty exemptions, income tax 
exemptions, and other tax benefits for promoted companies under various 
sections of the IPA. Each IPA benefit for which a company is eligible 
must be specifically stated in the license.
    According to the responses, Thailand had been considering the 
establishment of a private domestic steel industry since the 1960's. It 
was not until the late 1980's, however, that developing market factors 
made a Thai flat-rolled steel industry feasible. In an effort to 
encourage private investment into this industry, the BOI solicited bids 
and offered a package of tax and duty incentives under IPA that it 
would make available for the creation of a hot-rolled steel sheet 
facility. The August 2, 1988 Announcement of the Office of the Board of 
Investment No. Por. 1/1988, Re: Promotion of Steel Sheet Production 
outlined the criteria for application to this program. Six applications 
were submitted, and two of these were found to meet the requirements 
outlined in the above announcement, one of them being SSI's. SSI was 
then chosen to receive the benefits package because it was considered 
by the BOI to have a greater likelihood of success than the other 
applicant. After the BOI approved the benefits package for SSI, the 
Ministry of Industry (MOI) issued SSI a factory license. The MOI then 
announced on November 24, 1989, in Ministry of Industry Announcement, 
Re: Policy on Steel Sheet Industry, that it would ``suspend its 
consideration for the establishment or the expansion of factories 
producing hot-rolled, cold-rolled, and surface treatment sheet (plate 
mill excluded), for a period of ten years.''
    When determining whether a program is countervailable, we must 
examine whether it is an export subsidy or whether it provides benefits 
to a specific

[[Page 20255]]

enterprise, industry, or group thereof, either in law (de jure 
specificity) or in fact (de facto specificity). See Section 771(5A) of 
the Act. There are no export requirements in the general legislation of 
the IPA, although some specific sections of the IPA contain export 
requirements. There is also no element of the law explicitly limiting 
eligibility for IPA program benefits from the BOI, to an enterprise, 
industry, or group thereof. Thus, this program is not de jure specific, 
and we must analyze whether the program meets the de facto criteria 
defined under section 771(5A)(D)(iii) of the Act. Because a specific 
package of IPA benefits was tailored to meet SSI's requirements and 
because the MOI announced it would not issue a license to any other 
companies in the hot-rolled industry for a period of ten years, we 
preliminarily find SSI's IPA benefits to be de facto specific to an 
enterprise within the meaning of section 771(5A)(D)(iii)(I) of the Act.
    In addition to IPA benefits to SSI, petitioners alleged that PPC, 
the 51 percent-owned subsidiary of SSI, also received a package of 
benefits under IPA. PPC, which owns and operates the port facility 
where SSI is located, was established in 1991, after SSI was 
established and approved for its package of IPA benefits. Although the 
BOI did not expressly solicit applicants to establish a port facility, 
the fact that PPC was created after SSI to develop a port facility in 
the same location as SSI's plant; is owned 51 percent by SSI; and, 
services SSI's import and export needs, leads us to conclude that the 
BOI's approval of a package of incentives to PPC was part of its effort 
to develop a hot-rolled steel industry, and therefore, that PPC's 
package of incentives is specific in accordance with section 
771(5A)(D)(iii)(I) of the Act.
    Because the packages of benefits were composed of different types 
of incentives under different sections of the IPA, we are analyzing the 
issues of financial contribution and benefit under each relevant 
section.
    a. Duty Exemptions on Imports of Machinery Under IPA Section 28. 
IPA Section 28 allows companies to import machinery and equipment 
(fixed assets) with an exemption of import duties and VAT (VAT 
exemptions under IPA Section 28 are provided by section 21(4) of the 
VAT Act, which is discussed separately below in the section titled 
Programs Preliminarily Determined to be Not Countervailable). According 
to the questionnaire responses, SSI and PPC received import duty 
exemptions under IPA Section 28 during the years since the initial BOI 
Section 28 certificates were issued.
    Import duty exemptions provide a financial contribution under 
section 771(5)(D)(ii) of the Act in the form of foregone revenue that 
is otherwise due to the RTG. The benefit is the amount of the revenue 
foregone by the RTG.
    Although import duty exemptions are identified as recurring in the 
illustrative list of recurring benefits in section 351.524(c)(1) of the 
regulations, petitioners alleged that, since these import duty 
exemptions were for the purchase of capital equipment, they should be 
treated as non-recurring in accordance with section 351.524(c)(2)(iii) 
of the regulations. In the preamble to our regulations, we stated that 
if a government provides an import duty exemption tied to major 
equipment purchases, it may be reasonable to conclude that, because 
these duty exemptions are tied to capital assets, the benefits from 
such duty exemptions should be considered non-recurring. See 
Countervailing Duties; Final Rule, 63 FR 65348, 65393 (November 25, 
1998) (Preamble). The benefit received from the exemption of import 
duties under IPA Section 28 is tied to the capital assets of SSI and 
PPC. Additionally, proprietary information provided by SSI supports our 
treatment of Section 28 benefits as non-recurring. Our analysis of this 
information is contained in the Memorandum from Case Analysts to 
Barbara E. Tillman, Certain Hot-Rolled Carbon Steel Flat Products from 
Thailand: Analysis of Business Proprietary Information related to IPA 
Section 28 (April 13, 2001) (Business Proprietary Memo). Accordingly, 
we preliminarily determine that it is appropriate to treat the 
exemption of duties on capital equipment as a non-recurring benefit.
    To measure the benefit allocable to the POI, we first conducted the 
``0.5 percent test'' for the total Section 28 import duty exemptions. 
See section 351.524(b)(2) of the Department's regulations. For each 
year in which there were section 28 import duty exemptions, we summed 
the exemptions provided in that year and divided that sum by the 
relevant total sales for that year. We thus determined that for certain 
years Section 28 import duty exemptions should be allocated over time. 
For those years, we allocated the annual total exemptions, in 
accordance with section 351.524(d) of the Department's regulations, to 
determine the Section 28 benefits attributable to the POI (see 
Allocation Period section above). We summed the portions of each year's 
benefits attributable to the POI and divided that amount by the 
appropriate total sales during the POI to preliminarily determine a 
countervailable subsidy of 0.84 percent ad valorem.
    b. Duty Exemptions on Imports of Raw and Essential Materials Under 
IPA Section 30 and Section 36. IPA Section 30 allows companies 
reductions of import duties on raw and essential materials that are 
consumed in production. Under section 30, SSI was originally approved 
for a 90 percent reduction of duties on imported raw and essential 
materials; the rate of duty reduction was later changed to 75 percent, 
which was in effect during the POI. During the POI, SSI used Section 30 
on imports of steel slab. Pursuant to section 771(5)(D)(ii) of the Act, 
Section 30 provides a financial contribution in the form of revenue 
forgone by the RTG, i.e., the duties which would otherwise be assessed 
on the imported raw and essential materials. There is a benefit to SSI 
in the amount of the duties they would otherwise have to pay. According 
to SSI, the duty rate on steel slab was one percent, and thus SSI paid 
duties on slab imports at the rate of 0.25 percent. However, the tariff 
schedule provided by the RTG shows that the ``normal rate'' of duties 
on steel slab imports was ten percent, while one percent is the 
``discount rate.'' Neither the RTG nor SSI explained the difference 
between the ``normal rate'' and the ``discount rate,'' nor did they 
explain how or when such discount rates are applied. They also did not 
explain why SSI would have been entitled to import steel slab at the 
``discount rate.'' Because the normal rate of duty that SSI should have 
paid on steel slab during the POI was ten percent, we are using that 
rate to calculate the benefit from Section 30 import duty reductions. 
To measure the benefit, we have calculated the difference between the 
duties SSI actually paid and the duties that they should have paid 
absent the Section 30 reduction and access to the discount rate. We 
divided that difference by the value of SSI's total sales during the 
POI and we preliminarily determine the countervailable subsidy to be 
0.91 percent ad valorem.
    SSI's benefits under Section 30 expired at the beginning of the 
POI. However, this expiration does not constitute a program-wide change 
in accordance with section 351.526(b) of the regulations because the 
program itself was not terminated and SSI reported that it started 
receiving duty exemptions under another element of the IPA, Section 36. 
Section 36 provides companies with export-specific import duty and tax 
exemptions. Section 36(1) allows companies to import raw and

[[Page 20256]]

essential materials that are incorporated into goods for export with 
exemptions on import duties. After SSI's benefits under Section 30 
expired, SSI began receiving duty exemptions on imports of raw and 
essential materials under Section 36(1). SSI reported that it only 
received exemptions under Section 36(1) on its imports of goods that 
were consumed in the production of merchandise for export. The RTG 
reported that Section 36(1) essentially operates as a duty drawback 
scheme and as such, is not countervailable, as the exemptions on 
imported raw and essential materials can only be received for imported 
goods consumed in the production of exports. However, in order to 
determine whether this program meets the standards for non-
countervailability set forth in section 351.519(a)(4) of the 
regulations, we need additional information to confirm that the Thai 
customs authority has a system in place to monitor and track the 
consumption and/or re-export of goods imported under section 36(1) and 
that there are provisions related to the normal allowance for waste.
    c. Corporate Income Tax Exemptions Under IPA Section 31. IPA 
Section 31 provides a three- to eight-year exemption for payment of 
corporate income tax on profits derived from promoted activities, as 
well as deductions from net profits for losses incurred during the tax 
exemption period. SSI and PPC were eligible for Section 31 benefits, 
but both were in a tax loss position during the POI, and thus, were 
prevented from claiming these exemptions on the tax returns each filed 
during the POI. As such, we preliminarily determine that IPA Section 31 
was not used by producers or exporters of the subject merchandise to 
the United States during the POI.
    d. Additional Tax Deductions Under IPA Section 35. IPA Section 35 
provides various income tax deductions and exemptions for promoted 
firms. During the POI, SSI through Section 35(3), claimed benefits 
under this program on the tax return filed during the POI. IPA Section 
35(3) allows promoted companies to deduct double the cost of 
transportation, electricity, and water for ten years after the promoted 
company first derives income. Income tax deductions provide a financial 
contribution under section 771(5)(D)(ii) of the Act in the form of 
foregone revenue that is otherwise due to the RTG. The benefit is the 
amount of the revenue foregone by the RTG. Under the provisions of 
section 351.509(a)(1) of the Department's regulations, we preliminarily 
determine that SSI received a benefit under IPA Section 35 during the 
POI.
    To measure the benefit, we assumed, consistent with Final 
Affirmative Countervailing Duty Determination and Countervailing Duty 
Order; Extruded Rubber Thread from Malaysia, 57 FR 38475 (August 25, 
1992), that SSI first used its pool of countervailable tax deductions 
under IPA section 35, earned in 1998, to reduce its tax liability on 
its income tax return for 1998, filed during the POI. See Id., 
Department's Position at Comment 13. See also Extruded Rubber Thread 
From Malaysia; Final Results of Countervailing Duty Administrative 
Review, 60 FR 17516 (April 6, 1995), Department's Position at Comment 
7. We then determined the extent to which that countervailable tax 
deduction reduced SSI's taxable income. We calculated the benefit by 
multiplying the amount of taxable income which SSI was able to offset 
with its Section 35 tax deduction by the income tax rate. We then 
divided this benefit by SSI's total sales during the POI. We 
preliminarily determine the countervailable subsidy to be 0.13 percent 
ad valorem.
2. Debt Restructurings
    Petitioners' allegations with respect to SSI's and PPC's debt 
restructurings indicated that, in light of SSI's and PPC's financial 
condition, and as a result of direct or indirect actions of the RTG, 
the companies' creditors restructured their debt on terms that were not 
comparable to those which would be offered by commercial lenders or 
reasonable private investors. The favorable terms included reductions 
in interest rates, forgiveness of interest and principal, and 
lengthening of loan terms. Petitioners allege that these actions were 
specific because the RTG exercised discretion and disproportionately 
targeted large industries such as the steel industry for debt 
restructuring.
    According to the questionnaire responses, SSI and PPC each 
underwent comprehensive financial debt restructurings, beginning in 
1998 and concluding during the POI, which resulted in all of their 
debts being restructured, and included the conversion to equity of 
previously issued converted debentures. We have examined information 
provided by the RTG and SSI with respect to the operation of the Thai 
financial sector and the RTG's role therein, including actions of the 
RTG in response to the financial crisis caused by the collapse of the 
baht, the RTG's role in corporate debt restructuring in general, and 
the corporate debt restructurings of SSI and PPC in particular, to 
determine whether the RTG played a role which would give rise to 
countervailable subsidies.
    a. Collapse of the Baht and the Thai Economic Crisis. In July 1997, 
the RTG floated the baht against other currencies, causing the baht to 
depreciate by as much as 56 percent against the U.S. dollar by the end 
of the year and resulting in the general contraction of the Thai 
economy. The Thai economy subsequently experienced massive failures 
both of companies and their creditors. The RTG implemented programs to 
prevent further failure and to get the economy back on its feet. These 
included implementing the August 14, 1998 Announcement for 
Comprehensive Financial Restructuring, the RTG's intervention in 
financial institutions unable to achieve sufficient recapitalization 
because of their large non-performing loan portfolios, and the 
injection of new capital into several banks.
    b. Corporate Debt Restructuring Following the Baht's Collapse. 
After the collapse of the baht, the RTG implemented plans to facilitate 
corporate debt restructurings, as part of its broad effort at financial 
reforms. To do so, the RTG established the Corporate Debt Restructuring 
Advisory Committee (CDRAC) in 1998. The CDRAC is chaired by the Bank of 
Thailand (BOT) Governor, and the CDRAC framework (the so-called 
``Bangkok Approach'') is set forth in the August 25, 1998 agreement 
among CDRAC members, the Board of Trade of Thailand, the Federation of 
Thai Industries, the Thai Bankers' Association, the Association of 
Finance Companies, and the Foreign Bankers' Association. The record 
indicates that many, but not all, major corporate debt restructurings 
were undertaken within the context of the framework established through 
the CDRAC.
    According to the RTG, CDRAC initially focused its attention on the 
largest and most complicated debts in the economy, without respect to 
specific industries or regions, and regardless of whether the debtors 
or creditors were public or private sector entities. In late 1998, 
CDRAC created a list of the first 351 firms, in 200 groups, as priority 
cases targeted for debt restructuring and selected to participate in 
the CDRAC process. According to the questionnaire response, the 
selection criteria used in developing the list of 351 companies were: 
(1) Debtors with sizable credit outstanding; (2) debtors proposed by 
the Thai Bankers' Association, the Foreign Bankers' Association, the 
Association of Finance Companies, the Federation of Thai Industries and 
the Board of Trade

[[Page 20257]]

of Thailand; (3) debtors who expressed their intention to participate 
in the restructuring process; and, (4) debt restructurings involving 
multiple creditors. Despite the Department's express request, the RTG, 
citing confidentiality reasons, has declined to provide this list for 
the record.
    c. SSI, PPC and Their Restructuring. SSI's debt restructuring was 
accomplished pursuant to an agreement, concluded during the POI, which 
was the final of four amendments to the original Credit Facilities 
Agreement (CFA) of February 18, 1994. The original CFA, an agreement 
between SSI and its private creditors, provided for all of SSI's 
financing needs, baht- and foreign currency-denominated short- and 
long-term financing from both secured and unsecured lenders as provided 
by a syndicate of lending institutions, following SSI's initial startup 
in 1992. PPC's debt restructuring was also accomplished pursuant to an 
agreement with its creditors during the POI and also involved both 
short- and long-term financing.
    According to the responses, SSI, PPC, and their creditors were 
prompted to pursue debt restructuring by factors internal and external 
to the companies and their creditors, including the economic climate 
following the collapse of the baht in July 1997, and the financial 
management strategy these companies pursued before and after this 
collapse. All parties involved had incentives to achieve a loan 
arrangement that would enable SSI and PPC to continue their operations 
and repay their debts. The secured loans and unsecured bonds were 
restructured at the same time to assure all creditors that the 
restructuring was viable. According to the questionnaire responses, 
none of the original loans or the restructured loans were provided 
through, or insured pursuant to, any RTG program.
    While the details of the debt restructuring are proprietary, it is 
sufficient for the purposes of this preliminary determination to 
characterize the restructurings as having involved the reorganization 
of SSI's and PPC's short-term and long-term debts to provide repayment 
terms under which SSI and PPC could service their debt obligations in 
the coming years, based on general economic and company-specific 
forecasts. The unsecured bonds, which had been issued on the bond 
market in 1995 as debentures convertible to equity, were converted to 
equity on terms under which the private bondholders (some of which were 
foreign) and SSI agreed would enable SSI to meet its obligations.
    The respondents have reported that neither SSI nor PPC was involved 
with, or participated in, the CDRAC process. Although both SSI and PPC 
were invited to participate in this process, both restructurings were 
almost complete by the time CDRAC was operational. SSI and PPC contend 
that the restructurings were achieved without CDRAC or adherence to the 
CDRAC procedures, and the companies and the RTG claim that the 
restructurings did not involve the RTG. SSI and PPC also contend that 
they were not required to comply with any CDRAC application or 
reporting requirements to proceed with their restructurings.
    d. Analysis of SSI's and PPC's Debt Restructurings. In order to 
find a countervailable subsidy under the Act, the Department must 
determine that the program is specific (section 771(5A) of the Act), 
that a financial contribution is provided (section 771(5)(D) of the 
Act), and that there is a benefit to the recipient (section 771(5)(E) 
of the Act).
    Based on information on the record of this proceeding, we believe 
that the list of the first 351 firms identified for debt restructuring 
is critical to our analysis of specificity. In the Department's 
original questionnaire to the RTG (see Department Questionnaire, 
December 20, 2000, pg. II-17), we requested any federal or regional 
legislation targeted at large industries, including the steel industry, 
that was passed dealing with the debt restructurings. Additionally, we 
requested the RTG to identify which companies had their debt 
restructured and in which industries they belonged. The RTG responded 
by providing information regarding the establishment of CDRAC. The RTG 
also discussed a list of 351 companies that CDRAC had targeted for 
restructuring. However, neither this list of 351, nor any other 
identification of companies that had undergone debt restructuring, was 
provided, despite our requests. Additionally, in the Department's 
supplemental questionnaire, we again requested the RTG to identify 
companies that had undergone debt restructuring, and specifically 
requested the list of 351 companies that CDRAC had targeted for debt 
restructuring (see Department Supplemental Questionnaire, February 27, 
2001, pg. 7). The RTG declined to provide the list, stating that they 
were prohibited from providing the list under Thai law because of 
confidentiality constraints. The Department's questionnaire details the 
protections afforded respondents for this type of information. Both the 
statute and the regulations provide protection for business proprietary 
and confidential information requested by the Department. See section 
777(b) of the Act, and 19 CFR 351.304-306. The RTG did not explain why 
it was unable to provide the requested information in accordance with 
the Department's procedures. In addition, the RTG did not argue that 
there was a clear and compelling need to withhold this information 
pursuant to 19 CFR 351.304(a)(1)(ii) and 351.304(b)(2)(i). Without full 
disclosure of the list of 351 companies, it is not possible for the 
Department to determine whether the debt restructurings of SSI and PPC 
were specific.
    A 1999 report issued by the BOT, and submitted by petitioners, 
indicates that the steel industry may have received special 
consideration prior to the CDRAC process. The report also indicates 
that the steel industry was identified by the RTG for debt 
restructuring (see Steel Industry in Crisis, Bank of Thailand, December 
1999). The Steel Industry in Crisis report indicates that 32 of the 351 
companies found on the list were from the primary metal production 
sector. It is also not clear whether the RTG's stated qualifications 
for being placed on the list of 351 firms were applied consistently to 
all those firms placed on the list or even whether all of the firms on 
the list were restructured. Additionally, another publicly available 
report indicates that the RTG, through the Board of Investment, 
identified five major industries whose survival was vital to economic 
recovery. The steel industry was included on this list of major 
industries. See Support for Structural Reform in Five Industries 
Including Steel--Industrial Revitalization with BOI as the Driving 
Force, Shukan Tai Keizai (August 9, 1999) (submitted by petitioners). 
On the record of this investigation, there is certain other information 
that illustrates the importance of the list of 351 companies in 
analyzing whether SSI's and PPC's debt restructurings were specific. 
However, this information is proprietary and cannot be summarized for 
purposes of this notice. This proprietary information is discussed in 
the Memorandum from Case Analysts to Barbara E. Tillman, Certain Hot-
Rolled Carbon Steel Flat Products from Thailand: Analysis of Business 
Proprietary Information on SSI and PPC Debt Restructuring (April 13, 
2001) (Debt Restructuring Memo). The Department is not able to address 
these important issues without access to the list of 351 companies that 
the RTG developed. Because the RTG has not provided this list to the 
Department, we are applying adverse facts available,

[[Page 20258]]

and, pursuant to section 771(5A)(D)(iii)(III) and (IV) of the Act, we 
preliminarily determine the debt restructuring of SSI and PPC to be 
specific.
    With respect to financial contribution, several of SSI's and PPC's 
creditors were owned or controlled by the RTG at the time the 
restructurings were completed. The details of this RTG ownership and 
control are proprietary, and are discussed more fully in the Debt 
Restructuring Memo; however, the levels of ownership and control are 
sufficient to support a conclusion that the provision of restructured 
loans by government-owned or -controlled creditors constitutes a 
financial contribution within the meaning of section 771(5)(D)(i). At 
this time, we have insufficient information regarding the privately-
owned creditors which provided restructured loans or converted 
debentures to equity to address whether those creditors have been 
``entrusted or directed'' by the government to make a financial 
contribution to SSI and PPC within the meaning of 771(5)(B)(iii) of the 
Act.
    In determining whether there is a benefit to SSI and PPC from these 
restructured loans, we compared the interest rates on the loans 
provided by government-owned or -controlled creditors to a benchmark 
interest rate which reflects an interest rate on comparable commercial 
loans which the companies could actually obtain on the market. See 
section 351.505(a) of the regulations. We do not consider the interest 
rates on the portion of the restructured loans provided by private 
creditors to be representative of interest rates that the companies 
could actually obtain on the market. Since these loans were provided as 
part of the companies' restructuring packages, which included 
government financial contributions, they cannot be seen as commercial 
market loans. Furthermore, the interest rates on these loans are below 
the Minimum Lending Rate (MLR) for commercial loans reported by the 
BOT. See e.g., Preamble, 63 FR at 65363-64. Therefore, pursuant to 
section 771(5)(E)(ii) of the Act, the benefit conferred to SSI and PPC 
is the difference between what SSI and PPC paid on restructured loans 
versus what they would pay on comparable commercial loans obtained in 
the commercial market.
    All of the restructured loans are variable-rate long-term loans. 
The RTG did not provide information relating to a national average 
variable long-term interest rate. Therefore, we are using as our 
benchmark the annual average Minimum Lending Rate (``MLR'') which is 
reported as BOT data through the following internet address: 
www.scb.co.th/~scbri/ecogrp.htm. We are adding to the MLR a spread that 
is typical of that offered to commercial borrowers (and was reported by 
SSI to have been a feature of the debt SSI obtained prior to 
restructuring). Since we have only made specificity and financial 
contribution determinations with respect to government-owned or -
controlled creditors, we have only measured the benefits from that 
portion of each restructured loan provided by the government-owned or -
controlled creditor. For purposes of calculating the benefits from the 
restructurings during the POI, we are following section 351.505(c)(4) 
for long-term variable interest rate loans. We have determined the 
difference between the amount paid by the SSI on the government-
provided loan and the comparison loan. We determined the difference 
between the restructured loan interest rate and the benchmark interest 
rate (which for SSI includes an uncreditworthy risk premium as 
discussed in the Creditworthiness and the Calculation of Loan Benchmark 
and Discount Rates section above). We accounted for the number of days 
the loans were outstanding during the POI, and then multiplied the 
entire principal amount for each loan by this rate (the entire 
principal amounts were outstanding during the POI). We summed the 
resulting loan benefits and divided them by the relevant sales value to 
preliminarily determine a countervailable subsidy of 4.01 percent ad 
valorem.
3. Provision of Electricity for Less Than Adequate Remuneration
    Petitioners have alleged that SSI is receiving countervailable 
benefits under the electricity system that exists in Thailand: 
electricity is largely supplied by state-owned agencies, and a uniform 
electricity tariff policy exists which is supported by a central 
electricity agency which prices electricity differently to the two 
state-owned distribution agencies. Petitioners alleged that this system 
results in countervailable subsidies to the extent that the RTG is 
providing electricity for less than adequate remuneration.
    According to the questionnaire responses, the RTG owns and controls 
most of the generation and transmission of electricity in Thailand. The 
ministry responsible for Thailand's electricity policy is the Prime 
Minister's Office. More specifically, rate-setting policy is developed 
by the National Energy Policy Council (NEPC). This policy addresses 
both the rates charged by the generating agency, as well as the 
distribution agencies. The generating agency is the Electricity 
Generating Authority of Thailand (EGAT) and the two distributing 
authorities are the Metropolitan Electricity Authority (MEA), which 
serves Bangkok and the immediate surrounding areas, and the Provincial 
Electricity Authority (PEA), which serves the remainder of the country. 
The RTG maintains a ``uniform tariff policy'' that aims to provide the 
same rates to all consumers in the same customer category regardless of 
whether they are in MEA's distribution area or PEA's distribution area.
    Other than EGAT, which supplies approximately 73 percent of the 
electricity used in Thailand, there are Independent Power Providers 
(IPP) and Small Power Providers (SPP). IPPs generate approximately 15.4 
percent of Thailand's electricity, and SPPs generate approximately 9 
percent. Thailand also imports approximately 2.4 percent of its 
electricity from Laos and Malaysia. IPPs sell electricity only to EGAT. 
SPPs sell electricity to EGAT, as well as to end users in industrial 
estates. IPPs and SPPs are privately owned. The SPPs that sell to end 
users are prohibited from selling electricity at rates higher than 
those charged by the agencies owned by the RTG. The RTG provided to the 
Department a document entitled Concession of Electricity Business, 
which was issued by the Ministry of Interior and states that the rates 
charged by SPPs shall not exceed those charged by PEA.
    The questionnaire responses state that PEA's cost of delivery to 
some of its customers in the region it serves is higher than MEA's cost 
of delivery. In order to implement the uniform tariff policy that the 
RTG had in place during the POI, EGAT provided a discount to PEA and 
charged MEA a surcharge on the electricity generated by EGAT.
    According to the RTG National Energy Policy Office (NEPO) 
Recommendations to Cabinet Report (the NEPO Report), dated September 
26, 2000, the original objectives of the RTG's uniform tariff policy, 
which has been in place since 1991, were to establish a tariff that 
reflects the economic costs and secures the financial status of the 
three power utilities, and to promote efficiency of electricity usage 
and equity for all power consumer categories. The RTG's tariff policy 
consists of the base tariff, plus an automatic adjustment mechanism 
which ensures that the electricity charges cover fluctuations in 
marginal costs. There are four criteria the RTG used in determining the 
electricity tariff structure: (1) marginal costs; (2) load pattern; (3) 
revenue

[[Page 20259]]

requirements of the power utilities and financial criteria; and, (4) 
social criteria for the electricity tariff determination. The social 
criteria require that uniform tariffs be applied across the country for 
each customer category. Also, the social criteria call for 
subsidization of small, residential customers with low usage. Finally, 
the social criteria maintain that the structure of the electricity 
tariffs for customer groups other than small residential customers 
should reflect marginal costs as closely as possible.
    According to the NEPO Report, prior to 1997, the electricity tariff 
was established on a flat-rate basis. Under this system, EGAT sold 
electricity at a lower rate to PEA than it did to MEA. This bulk supply 
tariff afforded a cross-subsidization of PEA via the higher rates 
charged to MEA because the distribution cost for PEA was higher than 
for MEA. In November of 1996, the NEPC approved a modification of the 
bulk supply tariff to go into effect in January 1997. This modification 
altered the bulk supply tariff from the initial flat rate to a time-of-
use rate. The time-of-use rates were based on usage during peak and 
off-peak hours. The modification also created a cross-subsidization of 
PEA in the form of a surcharge added to the bulk supply tariff EGAT 
charged to MEA and a deduction from the bulk supply tariff that EGAT 
charged PEA. The NEPC has altered the surcharge and deductions charged 
to PEA and MEA on three separate occasions thus far. On May 22, 1997, 
an adjustment was made so the surcharge and deduction would correspond 
with the former average bulk supply tariff. This change was retroactive 
to January 1997. On October 8, 1997, the surcharge and deduction were 
altered again as a result of the economic crisis in Thailand, and the 
changes were retroactive to July 1997. On March 20, 2000, the third 
alteration of the surcharge and deduction was made, retroactive to 
October 1998, in order to keep the power utilities in line with the 
financial criteria established when the electricity tariff structure 
was created.
    The retail tariff structure used by MEA and PEA varies depending 
upon the category of consumer. The following are the categories of 
consumers: Residential; Small General Services; Medium and Large 
General Services, and Specific Business Services; Government 
Institutions and Non-Profit Organizations; and, Agricultural Pumping 
Service. SSI is considered to be a Large General Services customer. SSI 
and PPC purchased all of the electricity consumed during the POI from 
PEA.
    In order to find a countervailable subsidy under the Act, the 
Department must determine that a financial contribution is provided 
(section 771(5)(D) of the Act), that there is a benefit to the 
recipient (section 771(5)(E) of the Act), and that the program is 
specific (section 771(5A) of the Act ). The government's provision of 
electricity constitutes a financial contribution as defined in 
771(5)(D)(iii).
    To determine whether there is a benefit from the provision of a 
good, the Act specifies that the Department must examine whether the 
good was provided for less than adequate remuneration. According to 
section 771(5)(E) of the Act, the adequacy of remuneration with respect 
to a government's provision of a good or service, ``* * * shall be 
determined in relation to prevailing market conditions for the good or 
service being provided or the goods being purchased in the country 
which is subject to the investigation or review. Prevailing market 
conditions include price, quality, availability, marketability, 
transportation, and other conditions of purchase or sale.'' In the 
regulations, we set forth, in order of preference, the benchmarks that 
we will examine in determining the adequacy of remuneration (see 
section 351.511). Under the regulations, the first preference is to 
compare the government price to a market-determined price stemming from 
actual transactions within the country. However, in the preamble, we 
made clear that if the government provider constitutes a majority of 
the market, we would have to resort to other alternatives, including 
world market prices, and if no such market-determined prices were 
available, we would examine whether the government applied market 
principles in setting its price. See 19 CFR 351.511(a)(2)(iii) and 
Preamble, 63 FR 65378.
    In this instance, EGAT is the major generator of electricity and 
MEA and PEA are the major distributors of electricity. Of the two types 
of private electricity producers, IPPs sell their product to EGAT and 
not to end users, and SPPs are prohibited by the RTG from charging 
prices higher than PEA's. Regarding import prices or other types of 
market reference prices, while Thailand does import a small percentage 
of electricity (2.4 percent), this electricity is purchased by EGAT and 
sold through the same tariff structure that is described above. 
Additionally, any exports of electricity are sold through the 
government agencies. Therefore, any in-country, market-determined 
prices we might use as a point of comparison would ultimately be 
distorted by the involvement of a government agency or the government's 
ceiling on market prices. In the preamble to section 351.511, we 
discuss the fact that the nature of the provision of electricity would 
normally prevent us from examining a ``world market price.'' See 
Preamble, 63 FR at 65377-65378.
    Therefore, based on the situation in Thailand, it becomes necessary 
to examine whether the price charged for electricity is consistent with 
market principles, in accordance with section 351.511(a)(2)(iii) of the 
regulations. As discussed in the preamble, in assessing whether the 
government price was set in accordance with market principles, we will 
analyze such factors as the government's price-setting philosophy, 
costs (including rates of return sufficient to ensure future 
operations), or possible price discrimination. The preamble further 
explains that these factors are not listed in any hierarchy, and that 
we may rely on one or more of these factors in any particular case. See 
Preamble, 63 FR at 65378. Based on our analysis of the RTG's price-
setting (i.e., rate-setting) policy for electricity, as described 
above, the NEPC takes into account marginal costs, usage, financial and 
revenue criteria, and maintains an adjustment mechanism which accounts 
for inflation and changing fuel prices in creating Thailand's 
electricity tariff structure.
    However, in this case, the evidence indicates that there is also 
price discrimination in the provision of electricity by the RTG. As is 
stated in the NEPO Report, a cross-subsidization is required in order 
to maintain the uniform tariff structure (see NEPO Report at 8), hence 
the surcharge MEA pays to EGAT and the deduction PEA receives from 
EGAT. Absent the uniform tariff policy, MEA would be incurring costs 
much lower for its distribution of electricity than would PEA and 
therefore, in accordance with market principles, MEA's retail prices to 
its customers would be lower than PEA's. Absent the policy, PEA would 
be incurring much higher costs for its distribution of electricity, and 
hence, its customers would be paying higher prices because PEA's cost 
of distribution would be higher.
    A report commissioned by the RTG to conduct a review of the tariff 
structure in Thailand also illustrates that price discrimination 
currently exists. The PriceWaterhouseCoopers' report, Review of 
Electric Power Tariffs Final Report (PWC Report), issued in January, 
2000, notes that the ultimate goal is privatization of the utility, a 
component of which is the necessary phase-out of

[[Page 20260]]

the uniform tariff policy. Notably, the report states that the 
transition from public to private sector ownership, which will 
introduce new suppliers of electricity, may create instances where some 
customers will begin to purchase their electricity from the new, 
independent suppliers in order to avoid paying for the cross-subsidy to 
other customers.
    Without the cross-subsidization mandated by the RTG to ensure that 
PEA's prices are no higher than MEA's prices, PEA's customers would, 
based on market principles, be charged a higher price, and as such, we 
preliminarily determine that electricity is provided by the RTG for 
less than adequate remuneration in accordance with section 
771(5)(E)(iv) of the Act.
    Since this tariff structure only benefits PEA's customers, we find 
this provision of electricity to be specific in accordance with section 
771(5A)(D)(iv) of the Act (see also The Statement of Administrative 
Action Accompanying the Uruguay Round Agreements Act (SAA), H.Doc. 103-
316, Vol. 1 (1994) at 262) because it is limited to users who are 
located in a specific geographical region within Thailand (i.e., all 
customers outside the Bangkok metropolitan area).
    To determine the benefit from this provision of electricity, we 
calculated the difference, on a per kilowatt hour basis, between the 
rate paid by MEA during the POI (bulk supply tariff plus surcharge) and 
the rate paid by PEA during the POI (bulk supply tariff minus 
deduction). We then multiplied that difference by kilowatt hours 
consumed. We then divided that figure by the relevant total sales value 
during the POI to determine a countervailable subsidy of 0.66 percent 
ad valorem.

Programs Preliminarily Determined To Be Not Countervailable

1. Exemptions From VAT Under Section 21(4) of the VAT Act
    According to the questionnaire responses, under provisions of 
Section 21(4) of the VAT Act, companies that were granted Section 28 
benefits under the IPA before January 1, 1992, are not required to pay 
VAT on imports of fixed assets. SSI received its IPA Section 28 
certificate prior to this date, and is therefore eligible for this 
program. The respondents have argued that this exemption from VAT on 
imports of fixed assets did not constitute a benefit to SSI because all 
companies, promoted and non-promoted alike, are effectively exempted 
from VAT on their imports of fixed assets. According to Section 82 of 
the VAT Act, the VAT liability is computed by subtracting the ``input 
tax'' (the VAT paid) from the ``output tax'' (the VAT collected). 
Consequently, companies that pay VAT on imports of fixed assets are 
effectively exempted from this VAT payment as they receive a credit for 
the VAT they paid on purchases of inputs, including imports of fixed 
assets, when their monthly VAT liability is computed. According to the 
questionnaire responses, under the VAT system, companies receive credit 
for the VAT paid on the purchases of inputs and, as a result, no VAT is 
effectively paid by companies on these purchases.
    SSI has not been granted any VAT exemptions under Section 21(4) on 
imports of capital equipment since early 1997. VAT liability is 
computed on a monthly basis, and the RTG has reported the estimated 
shortest, average, and longest periods of time for which a company 
might wait to receive a VAT refund. Even when applying the longest 
estimated period of time a company might wait to receive a VAT refund, 
any time-value-of-money benefit received by SSI under Section 21(4) of 
the VAT Act would either fall short of the POI or be insignificant. On 
this basis, we preliminarily determine that with regard to SSI, the 
exemption from the VAT on imports of fixed assets under Section 21(4) 
of the VAT Act does not constitute a countervailable benefit.
    In addition, we note that SSI also received VAT exemptions on its 
imports of inputs under section 36(1) of the IPA. Since we have not 
reached a decision on Section 36(1), we need not address the VAT 
exemptions for purposes of this preliminary determination. We will 
examine the VAT exemptions for the final determination.

Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the producer/exporter of subject 
merchandise did not apply for or receive benefits attributable to 
subject merchandise under the following programs during the POI.

1. Loans From the Industrial Finance Corporation of Thailand (IFCT) and 
the Thai Export-Import Bank
2. Other Loans and Loan Guarantees From Banks Owned, Controlled, or 
Influenced by the RTG
3. Export Packing Credits
4. Pre-shipment Finance Facilities
5. Export Insurance Program
6. Trust Receipt Financing for Raw Materials
7. Tax Certificates for Export
8. Duty Exemptions to PPC Under IPA Section 29
9. Import Duty Exemptions for Industrial Estates
10. Export Processing Zone Incentives
11. LPN Debt Restructuring

    LPN did not produce or export subject merchandise to the United 
States during the POI. Therefore, we have not examined LPN's debt 
restructuring, its equityworthiness, or its creditworthiness.

Programs Preliminarily Determined Not To Exist

1. IPA Subsidies for Construction of SSI's On-Site Power Plant
    SSI reported that a power plant was never constructed on-site. 
Therefore, IPA incentives were not used for construction of such a 
power plant.
2. Provision of Water Infrastructure for Less Than Adequate 
Remuneration
    The water pipeline and reservoir which were allegedly built 
specifically for SSI were not built.

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 section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for the company under investigation, SSI. 
We have preliminarily determined that the total estimated 
countervailable subsidy rate is 6.55 percent ad valorem for SSI. With 
respect to the ``all others'' rate, section 705(c)(5)(A)(i) of the Act 
requires that the ``all others'' rate equal the weighted average 
countervailable subsidy rates established for exporters and producers 
individually investigated, excluding any zero and de minimis 
countervailable subsidy rates. Since SSI was the sole producer/exporter 
during the POI, we are using SSI's rate as the ``all others'' rate.

------------------------------------------------------------------------
                                              Countervailable  subsidy
             Producer/exporter                    rate (in percent)
------------------------------------------------------------------------
SSI.......................................  6.55 ad valorem.
All others................................  6.55 ad valorem.
------------------------------------------------------------------------

    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 Thailand produced or exported by SSI or any 
other company, 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 amounts indicated

[[Page 20261]]

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 non-proprietary 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 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, N.W., Washington, D.C. 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, unless otherwise informed by the 
Department, 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 five 
days from the date of filing of the case briefs. An interested party 
may make an oral 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, Import Administration.
[FR Doc. 01-9861 Filed 4-19-01; 8:45 am]
BILLING CODE 3510-DS-P