[Federal Register Volume 67, Number 27 (Friday, February 8, 2002)]
[Notices]
[Pages 5976-5984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3119]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-489-809]


Preliminary Negative Countervailing Duty Determination: Carbon 
and Certain Alloy Steel Wire Rod From Turkey

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

ACTION: Notice of preliminary negative countervailing duty 
determination.

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SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are not being provided to producers or 
exporters of carbon and certain alloy steel wire rod from Turkey.

EFFECTIVE DATE: February 8, 2002.

FOR FURTHER INFORMATION CONTACT: Jennifer D. Jones or S. Anthony 
Grasso, Office of Antidumping/Countervailing Duty Enforcement, Group 1, 
Import Administration, U.S. Department of Commerce, Room 3099, 14th 
Street and Constitution Avenue, N.W., Washington,D.C. 20230; telephone 
(202) 482-4194 and (202) 482-3853, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (``URAA'') effective January 1, 1995 
(``the Act''). In addition, unless otherwise indicated, all citations 
to the Department of Commerce's (``the Department's'') regulations are 
to 19 CFR Part 351 (April 2001).

Petitioners

    The petitioners in this investigation are Co-Steel Raritan, Inc., 
GS Industries, Keystone Consolidated Industries, Inc., and North Star 
Steel Texas, Inc. (collectively, ``petitioners'').

Case History

    The following events have occurred since the publication of the 
notice of initiation in the Federal Register. See Notice of Initiation 
of Countervailing Duty Investigations: Carbon and Certain Alloy Steel 
Wire Rod from Brazil, Canada, Germany, Trinidad and Tobago, and Turkey, 
66 FR 49931 (October 1, 2001) (``Initiation Notice'').
    On October 9, 2001, we issued countervailing duty (``CVD'') 
questionnaires to the Government of the Republic of Turkey (``GRT'') 
and the producers/exporters of the subject merchandise. Due to the 
large number of producers and exporters of carbon and certain alloy 
steel wire rod (``wire rod'' or ``subject merchandise'') in Turkey, we 
decided to limit the number of responding companies to the two 
producers/exporters with the largest volumes of exports to the United 
States during the period of investigation: Colakoglu Metalurji, A.S. 
(``Colakoglu'') and Habas Sinai ve Tibbi Gazlar Istihsal Endustrisi, 
A.S. (``Habas''). See October 5, 2001 memorandum to Susan Kuhbach, 
Respondent Selection, which is on file in the Department's Central 
Records Unit in Room B-099 of the main Department building (``CRU'').
    Also on October 9, we received a request from the petitioners to 
amend the scope of this investigation to exclude certain wire rod. The 
petitioners submitted further clarification with respect to their scope 
amendment request on November 28, 2001. Additionally on November 28, 
the five largest U.S. tire manufacturers and the industry trade 
association, the Rubber Manufacturers Association (``the tire 
manufacturers''), submitted comments on the proposed exclusion. Counsel 
for the GRT and the companies submitted comments on this scope 
amendment request also on November

[[Page 5977]]

28. On January 28, 2002, the tire manufacturers submitted a response to 
the petitioners' amendment request.
    On November 14, 2001, we postponed the preliminary determination of 
this investigation until February 1, 2002. See Carbon and Certain Alloy 
Steel Wire Rod From Brazil, Canada, Germany, Trinidad and Tobago, and 
Turkey: Postponement of Preliminary Determinations of Countervailing 
Duty Investigations, 66 FR 57036 (November 14, 2001).
    The Department received the GRT and company responses to the 
Department's questionnaires on November 30, 2001. On December 6, 2001, 
the petitioners submitted comments regarding these questionnaire 
responses. The Department issued supplemental questionnaires to the GRT 
and the companies on December 13, 2001, and received responses to those 
questionnaires on January 7, 2002. On January 14, 2002, the petitioners 
submitted comments regarding these questionnaire responses. The 
Department issued additional supplemental questionnaires to the 
companies on January 17, 2002, and received responses to those 
questionnaires on January 18, 2002. On January 24, 2002, the 
respondents submitted replies to the petitioners' January 14, 2002 
comments. Because of the lack of time between the Department's receipt 
of these replies and the date of our preliminary determination, we were 
unable to analyze these comments fully for the preliminary 
determination. However, we will consider them in their entirety for our 
final determination.
    On December 5, 2001, the petitioners filed a critical circumstances 
allegation with respect to Brazil, Germany, and Turkey. In a letter 
filed on December 21, 2001, the petitioners extended this allegation to 
include Trinidad and Tobago. On December 17, 2001, independently of 
each other, the American Wire Producers Association and Saarstahl AG 
submitted letters in opposition to the petitioners' critical 
circumstances allegation. The petitioners filed supplemental critical 
circumstances information and arguments relating to Turkey on December 
19, 2001.

Period of Investigation

    The period for which we are measuring subsidies is calendar year 
2000.

Scope of Investigation

    The merchandise covered by this investigation is certain hot-rolled 
products of carbon steel and alloy steel, in coils, of approximately 
round cross section, 5.00 mm or more, but less than 19.0 mm, in solid 
cross-sectional diameter.
    Specifically excluded are steel products possessing the above-noted 
physical characteristics and meeting the Harmonized Tariff Schedule of 
the United States (``HTSUS'') definitions for (a) stainless steel; (b) 
tool steel; (c) high nickel steel; (d) ball bearing steel; and (e) 
concrete reinforcing bars and rods. Also excluded are (f) free 
machining steel products (i.e., products that contain by weight one or 
more of the following elements: 0.03 percent or more of lead, 0.05 
percent or more of bismuth, 0.08 percent or more of sulfur, more than 
0.04 percent of phosphorus, more than 0.05 percent of selenium, or more 
than 0.01 percent of tellurium). All products meeting the physical 
description of subject merchandise that are not specifically excluded 
are included in this scope.
    The products under investigation are currently classifiable under 
subheadings 7213.91.3010, 7213.91.3090, 7213.91.4510, 7213.91.4590, 
7213.91.6010, 7213.91.6090, 7213.99.0031, 7213.99.0038, 7213.99.0090, 
7227.20.0010, 7227.20.0090, 7227.90.6051 and 7227.90.6058 of the HTSUS. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the scope of these investigations 
is dispositive.

Scope Comments

    In the Initiation Notice, we invited comments on the scope of this 
proceeding. As noted above, on October 9, 2001, we received a request 
from the petitioners to amend the scope of this investigation and the 
companion CVD and antidumping duty (``AD'') wire rod investigations. 
Specifically, the petitioners requested that the scope be amended to 
exclude high carbon, high tensile 1080 grade tire cord and tire bead 
quality wire rod actually used in the production of tire cord and bead, 
as defined by specific dimensional characteristics and specifications.
    On November 28, 2001, the petitioners further clarified and 
modified their October 9 request. The petitioners suggested the 
following five modifications and clarifications: (1) Expand the end-use 
language of the scope exclusion request to exclude 1080 grade tire cord 
and tire bead quality that is used in the production of tire cord, tire 
bead, and rubber reinforcement applications; (2) clarify that the scope 
exclusion requires a carbon segregation per heat average of 3.0 or 
better to comport with recognized industry standards; (3) replace the 
surface quality requirement for tire cord and tire bead with simplified 
language specifying maximum surface defect length; (4) modify the 
maximum soluble aluminum from 0.03 to 0.01 for tire bead wire rod; and 
(5) reduce the maximum residual element requirements to 0.15 percent 
from 0.18 percent for both tire bead and tire cord wire rod and add an 
exception for chromium-added tire bead wire rod to allow a residual of 
0.10 percent for copper and nickel and a chromium content of 0.24 to 
0.30 percent.
    Also on November 28, 2001, the tire manufacturers submitted a 
letter to the Department in response to petitioners' October 9, 2001 
submission regarding the scope exclusion. In this letter, the tire 
manufacturers supported the petitioners' request to exclude certain 
1080 grade tire cord and tire bead wire rod used in the production of 
tire cord and bead.
    Additionally, the tire manufacturers requested that the Department 
clarify whether 1090 grade was covered by the petitioners' exclusion 
request. The tire manufacturers further requested an exclusion from the 
scope of this investigation for 1070 grade wire rod and related grades 
(0.69 percent or more of carbon) because, according to the tire 
manufacturers, domestic production cannot meet the requirements of the 
tire industry.
    The tire manufacturers stated their opposition to defining scope 
exclusions on the basis of actual end use of the product. Instead, the 
tire manufacturers support excluding the product if it is imported 
pursuant to a purchase order from a tire manufacturer or a tire cord 
wire manufacturer in the Untied States. Finally, the tire manufacturers 
urged the Department to adopt the following specifications to define 
the excluded product: A maximum nitrogen content of 0.0008 percent for 
tire cord and 0.0004 percent for tire bead; maximum weight for copper, 
nickel, and chromium, in the aggregate, of 0.0005 percent for both 
types of wire rod. In their view, there should be no additional 
specifications and tests, as proposed by the petitioners.
    On January 28, 2002, the tire manufacturers responded to the 
petitioners' November 28, 2001 letter. The tire manufacturers continue 
to have three major concerns about the product exclusion requested by 
the petitioners. First, the tire manufacturers urge that 1070 grade 
tire cord quality wire rod be excluded (as it was in the 1999 Section 
201 investigation). Second, they continue to object to defining the 
exclusion by actual end use. Finally, they reiterate their earlier 
position on

[[Page 5978]]

the chemical specifications for the excluded product.
    At this point in the proceeding, we recognize that the interested 
parties have both advocated excluding certain tire rod and tire core 
quality wire rod. However, the Department continues to examine this 
issue. Therefore, for this preliminary determination we have not 
amended the scope, and this preliminary determination applies to the 
scope as described in the Initiation Notice.
    We plan to reach a decision as early as possible in these 
proceedings. Interested parties will be advised of our intentions prior 
to the final determination and will have the opportunity to comment.

Injury Test

    Because Turkey 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 Turkey materially injure, or threaten material 
injury to, a U.S. industry. On October 15, 2001, the ITC transmitted to 
the Department its preliminary determination that there is a reasonable 
indication that an industry in the United States is being materially 
injured by reason of imports from Turkey of the subject merchandise. 
See Carbon and Certain Alloy Steel Wire Rod From Brazil, Canada, Egypt, 
Germany, Indonesia, Mexico, Moldova, South Africa, Trinidad and Tobago, 
Turkey, Ukraine, and Venezuela, Investigations Nos. 701-TA-417-421 and 
731-TA-953-963, Determinations and Views of the Commission, USITC 
Publication No. 3456, 66 FR 54539 (October 29, 2001).

Critical Circumstances

    The petitioners have alleged that critical circumstances within the 
meaning of section 703(e) of the Act exist with respect to the subject 
merchandise.
    We need not address the critical circumstances allegation at this 
time. Because our preliminary determination is negative, we are not 
ordering a suspension of liquidation pursuant to section 703(d) of the 
Act. Consequently, retroactive suspension of liquidation pursuant to 
section 703(e)(2) of the Act is not applicable.

Subsidies Valuation Information

Allocation Period

    Pursuant to 19 CFR 351.524(b), non-recurring subsidies are 
allocated over a period corresponding to the average useful life 
(``AUL'') of the renewable physical assets used to produce the subject 
merchandise. 19 CFR 351.524(d)(2) creates a rebuttable presumption that 
the AUL will be taken from the U.S. Internal Revenue Service's 1977 
Class Life Asset Depreciation Range System (the ``IRS Tables''). For 
wire rod, the IRS Tables prescribe an AUL of 15 years. None of the 
responding companies or interested parties disputed this allocation 
period. Therefore, we have used the 15-year allocation period for all 
respondents.

Attribution of Subsidies

    19 CFR 351.525(a)(6) directs that the Department will attribute 
subsidies received by certain affiliated companies to the combined 
sales of those companies. Based on our review of the responses, we find 
that ``cross ownership'' does not exist with respect to certain 
Colakoglu or Habas affiliates, as discussed below.
    Colakoglu: Colakoglu reports that it has numerous subsidiaries and 
affiliations with various companies. However, our analysis indicates no 
basis to attribute any subsidies received by these other subsidiaries 
or affiliates to the production of the subject merchandise. 
Specifically, although cross-ownership may exist with these other 
companies, they do not produce the subject merchandise as required in 
19 CFR 351.525(b)(6), nor do they meet any of the other criteria 
specified in 19 CFR 351.525(b)(6).
    Habas: Habas reports that it has numerous subsidiaries and 
affiliations with various companies. However, our analysis indicates no 
basis to attribute any subsidies received by these other subsidiaries 
or affiliates to the production of the subject merchandise. 
Specifically, although cross-ownership may exist with these other 
companies, they do not produce the subject merchandise as required in 
19 CFR 351.525(b)(6), nor do they meet any of the other criteria 
specified in 19 CFR 351.525(b)(6).

Benchmark Interest Rates for Short-term Loans

    The Department uses company-specific interest rates, where 
possible, to determine whether government-provided loans under 
investigation confer a benefit. (See 19 CFR 351.505(a)(2)). In this 
case, neither Colakoglu nor Habas submitted company-specific benchmark 
interest rates for lira denominated loans.
    Where no company-specific benchmark interest rates are available, 
19 CFR 351.505(a)(3)(ii) directs us to use a national average interest 
rate as the benchmark. The GRT does not maintain or publish data 
concerning the predominant national average short-term interest rates 
in Turkey. Therefore, we have calculated benchmark interest rates for 
lira denominated loans based on the short-term interest rates in Turkey 
for 2000 as reported weekly by The Economist. This methodology is 
consistent with Certain Welded Carbon Steel Pipes and Tubes and Welded 
Carbon Steel Line Pipe from Turkey; Final Results of Countervailing 
Duty Administrative Review, 65 FR 49230 (August 11, 2000) (``1998 Pipe 
Final'') and Certain Pasta From Turkey; Final Results of Countervailing 
Duty Administrative Review, 66 FR 64398 (December 13, 2001) (``1999 
Pasta Final'').
    We note that short-term interest rates in Turkey fluctuated 
significantly during the POI. Consequently, we have calculated monthly 
benchmark rates. Therefore, for example, the interest rate paid on a 
government loan obtained in January 2000 has been compared to the 
interest rate paid on a benchmark loan obtained the same month.
    With respect to US dollar denominated loans, Habas has provided the 
interest rates it paid on short-term US dollar denominated commercial 
loans. In accordance with 19 CFR 351.505(a)(2), we have used these 
interest rates as the benchmark rate for Habas.
    Pursuant to 771(5)(E)(ii) of the Act, the Department uses a 
``comparable commercial loan that the recipient could actually obtain 
on the market'' as the benchmark in determining whether a government 
provided loan confers a benefit. In the preamble of the Department's 
regulations, it states that it is the Department's practice to normally 
compare effective interest rates rather than nominal rates in making 
this comparison. However, where effective rates are not available, the 
preamble reads that we will compare nominal rates or, as a last resort, 
nominal to effective rates. See 63 CFR at 65362 (November 25, 1998).
    For our preliminary determination, the respondents argue that we 
should use the effective rates paid by the companies on the government 
loans being investigated. These effective rates include required 
commissions and fees paid to the intermediary banks that guarantee the 
loans (as required by the Turkish Eximbank). As noted above, we would 
normally use the effective rates paid on the government loan. However, 
our benchmark rates drawn from The Economist do not include these 
commissions or fees. At this time, we have insufficient information on 
the record to either adjust the rates reported

[[Page 5979]]

by the respondents or the benchmark rates drawn from The Economist to 
account for these commissions and fees. However, we will examine this 
issue for the final determination and make adjustments if appropriate.
    Regarding Pre-Shipment Loans from the Turkish Eximbank, Habas 
reported only effective rates, i.e., inclusive of the commissions and 
fees paid to intermediary banks. Thus, for these loans, we compared the 
effective rates to our nominal benchmark rates. However, in all other 
instances, we compared the benchmark rates to the companies' reported 
rates, exclusive of the commissions and fees paid to intermediary 
banks, i.e., we made our comparison on a nominal basis.

Adjusting for Inflation

    During the POI, the inflation rate in Turkey exceeded 25 percent, 
as shown in the International Monetary Fund's International Financial 
Statistics (``IFS''). Adjusting the subsidy benefits and the sales 
figures for inflation neutralizes any potential distortion in our 
subsidy calculations caused by high inflation and the timing of the 
receipt of the subsidy. Consistent with the methodology used in 1998 
Pipe Final and 1999 Pasta Final, we calculated the ad valorem subsidy 
rates for each program by multiplying the benefit in the month of 
receipt by the rate of inflation from the month of receipt until the 
end of the POI. Next, we adjusted the monthly sales values in the same 
way and added these adjusted values, thus obtaining total sales for the 
POI valued at December 2000 prices. In these calculations, we used the 
Wholesale Price Index Wholesale Price Index as reported in the IFS.

Analysis of Programs

    Based upon our analysis of the petition and the responses to our 
questionnaires, we determine the following:

I. Programs Preliminarily Determined To Be Countervailable

A. Deduction from Taxable Income for Export Revenue
    According to Article 40 of the Income Tax Law, documented 
expenditures made to earn business income are deductible from taxable 
income. On January 1, 1995, Article 19 of Law No. 4108 amended Article 
40 to allow taxpayers to deduct expenses related to export, 
construction, maintenance, assembly or transportation activities 
abroad, in an amount not to exceed 0.5 percent of the hard currency 
income resulting from these activities, in addition to other expenses 
specified in this article.
    Consistent with Certain Welded Carbon Steel Pipes and Tubes and 
Welded Carbon Steel Line Pipe from Turkey; Final Results and Partial 
Rescission of Countervailing Duty Administrative Reviews, 63 FR 18885, 
18886 (April 16, 1998) (``1996 Pipe Final''), we have preliminarily 
determined that this tax exemption is a countervailable subsidy. First, 
the exemption provides a financial contribution within the meaning of 
section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a) because it 
represents revenue forgone by the GRT. The exemption provides a benefit 
in the amount of the tax saving to the company pursuant to section 
771(5)(E) of the Act and 19 CFR 351.509(a). Also, the subsidy is 
specific under section 771(5A)(B) of the Act because its receipt is 
contingent upon export performance.
    Of the companies investigated, only Habas utilized this tax 
exemption on the tax return it filed in 2000. The Department typically 
treats tax exemptions as recurring grants in accordance with 19 CFR 
351.524(c)(1). To calculate the countervailable subsidy under this 
program, we divided the tax savings realized during the POI by the 
company's export sales during the POI, adjusting for inflation as 
described in the Subsidies Valuation Information section above. On this 
basis, we preliminarily determine the countervailable subsidy from this 
program to be 0.11 percent ad valorem for Habas.
B. Export Credit Bank of Turkey (``Turkish Eximbank'') Subsidies

1. Pre-Shipment Export Loans

    Through this program, the Turkish Eximbank extends short-term US 
dollar and Lira denominated loans to exporters through intermediary 
commercial banks. Turkish Eximbank allocates certain credit lines to 
these intermediary banks. The intermediary commercial banks, which take 
the risk that the borrower may default, can require additional fees to 
offset this risk and may also charge a commission. Exporters, 
manufacturers-exporters, and export-oriented manufacturers are eligible 
to participate in this program provided they exported a specified 
amount during the previous calendar year and they commit to future 
exports within a specified period of time. Like all other export-
related short-term loans, the pre-shipment export loans are exempted 
from the Resource Utilization Support Fund tax (``KKDF''), Banking and 
Insurance tax (``BIST''), and stamp tax (see Foreign Exchange Loan 
Assistance, infra).
    The Department has previously found that these loans confer a 
countervailable subsidy within the meaning of section 771(5) of the Act 
because the interest rate paid on these loans is less than the amount 
the recipient would pay on a comparable commercial loan. See, 1999 
Pasta Final, Decision Memorandum at p. 4 (December 13, 2001). The loans 
provide a financial contribution in the form of a direct transfer of 
funds from the GRT, pursuant to section 771(5)(D)(i) of the Act, that 
bestow a benefit in the amount of the difference between the benchmark 
interest rate (including the taxes listed above) and the interest rate 
and fees paid by the recipient companies. (See section 771(5)(E)(ii) of 
the Act). In 1999 Pasta Final, we found the pre-shipment export loans 
to be specific in accordance with section 771(5A)(B) of the Act because 
receipt of these loans is contingent upon export performance. We have 
also previously found that these loans are not tied to a particular 
export destination and have, therefore, treated this program as an 
untied export loan program which renders it countervailable regardless 
of whether or not the loans were used for exports to the United States. 
( See Certain Welded Carbon Steel Pipes and Tubes and Welded Carbon 
Steel Line Pipe from Turkey; Preliminary Results of Countervailing Duty 
Administrative Review, 65 FR 18070, 18072 (April 6, 2000)). In this 
investigation, no new information has been provided that would warrant 
reconsideration of these determinations.
    Pursuant to 19 CFR 351.505(a), we have calculated the benefit as 
the difference between the payments of interest and taxes that 
Colakoglu and Habas made on their pre-shipment export loans during the 
POI and the payments the companies would have made on comparable 
commercial loans. We divided the resulting benefit by the value of each 
company's exports during the POI, adjusting for inflation as described 
in the Subsidies Valuation Information section above. On this basis, we 
preliminarily determine the countervailable subsidy from this program 
to be 0.04 percent ad valorem for Colakoglu and 0.11 percent ad valorem 
for Habas.

2. Foreign Trade Corporate Companies Rediscount Credit Facility

    The Foreign Trade Corporate Companies Rediscount Credit Facility 
was implemented to assist large export trading companies in their 
export financing needs. This program is

[[Page 5980]]

specifically designed to benefit the Foreign Trade Corporate Companies 
(``FTCC'') and the Sectoral Foreign Trade Companies (``SFTC''). An FTCC 
is a company whose export performance equaled or exceeded US dollar 50 
million in the previous year. An SFTC is a company that includes at 
least ten small- and medium-scale enterprises operating in similar 
sectors together. The goal of the Foreign Trade Corporate Companies 
Rediscount Credit Facility is to promote exportation and diversify 
export products and markets while enabling the exporters to benefit 
from favorable borrowing rates which would increase the competitiveness 
of exporters in foreign markets.
    For the eligible companies, the Turkish Eximbank will provide 
short-term export credits based on their past export performance. 
Through this credit program, the Turkish Eximbank extends short-term 
export credit directly to exporters in lira and foreign currencies up 
to 100 percent of FOB export commitments with a repayment period up to 
180 days. Additionally, companies are exempt from taxes, duties, and 
related fees associated with the operations and processes of obtaining 
these credits under the provisions of the Export Encouragement Decree 
and Communiques. Of the companies investigated, only Colakoglu received 
Eximbank short-term export credits under this program.
    We have preliminarily determined that this program is a 
countervailable subsidy within the meaning of section 771(5) of the 
Act. The loans constitute a financial contribution in the form of a 
direct transfer of funds under section 771(5)(D)(i) of the Act. A 
benefit exists under section 771(E)(ii) of the act in the amount of 
difference between the payment of interest and taxes that Colakoglu 
made on its Foreign Trade Corporate Companies Rediscount loan during 
the POI and the payment the company would have made on a comparable 
commercial loan. The program is specific pursuant to section 771(5A)(B) 
of the Act because receipt of the loans is contingent upon export 
performance.
    Pursuant to 19 CFR 351.505(a), we have calculated the benefit as 
the difference between the payment of interest and taxes that Colakoglu 
made on its Foreign Trade Corporate Companies Rediscount loan during 
the POI and the payment the company would have made on a comparable 
commercial loan. This benefit was divided by Colakoglu's total exports 
to the United States during the POI, adjusting for inflation as 
described in the Subsidies Valuation Information section above. On this 
basis, we determine the countervailable subsidy from this program to be 
0.00 percent ad valorem for Colakoglu.
C. Foreign Exchange Loan Assistance
    The Turkish Undersecretariat of Foreign Trade Regulation 95/7, 
Article 14, allows the Turkish Central Bank, commercial banks, 
insurance companies, and other organizations to exempt certain fees on 
loans or credits used in export-related and foreign-exchange earning 
activities. Specifically, loans obtained for these activities are 
exempt from the KKDF tax, the BIST, and stamp tax. Both the KKDF and 
BIST taxes are calculated based on a certain percentage of the interest 
paid on the qualifying loan. The stamp tax is calculated based on a 
certain percentage of the principal amount.
    In prior proceedings, the Department has treated the KKDF, BIST, 
and stamp tax exemptions, collectively, under the ``Foreign Exchange 
Loan Assistance program'' when these exemptions were linked to 
underlying loans which were countervailable. (See, e.g., Certain Welded 
Carbon Steel Pipes and Tubes and Welded Carbon Steel Line Pipe from 
Turkey; Final Results of Countervailing Duty Administrative Review, 64 
FR 44496, 44497 (August 16, 1999) (``1997 Pipe Final'')). 
Alternatively, the Department has treated these exemptions under the 
name of the countervailable loan on which these fees are calculated, 
such as ``pre-shipment export loans.'' More recently, in 1999 Pasta 
Final, the Department treated these exemptions separately, under 
``KKDF,'' ``BIST,'' and ``stamp tax'' exemptions. Furthermore, in 1999 
Pasta Final, because these exemptions are allowed both on loans at 
preferential interest rates (see Pre-Shipment Export Loans, supra) and 
on loans at non-preferential interest rates, we included the 
countervailable benefit from these exemptions in the benefit on the 
underlying countervailable loan, when applicable, and as separate 
benefits when linked to non-countervailable loans. We continue to 
follow this methodology in the instant investigation. Therefore, tax 
exemptions on preferential rate, pre-shipment export loans, foreign 
trade corporate rediscount facilities, and export-related guarantees 
(see taxes, duties and credit charges exemption, infra) have been 
included in the calculation of the countervailable benefit for those 
programs. This discussion, therefore, addresses only KKDF tax 
exemptions and BIST tax exemptions on non-preferential export-related 
loans. For a discussion of the stamp tax exemption, see ``Programs 
Preliminarily Determined to be not Countervailable,'' infra.

1. KKDF Tax Exemptions

    In prior proceedings, the Department has found that KKDF tax 
exemptions confer a countervailable subsidy within the meaning of 
section 771(5) of the Act. (See, e.g., 1999 Pasta Final; Certain Welded 
Carbon Steel Pipes and Tubes and Welded Carbon Steel Line Pipe from 
Turkey; Preliminary Results and Partial Recission Administrative 
Review, 62 FR 64808, 64810 (December 9, 1997) (``1996 Pipe Prelim''); 
and Certain Welded Carbon Steel Pipes and Tubes and Welded Carbon Steel 
Line Pipe from Turkey; Preliminary Results of Countervailing Duty 
Administrative Review, 62 FR 16782, 16785 (April 8, 1997) (``1995 Pipe 
Prelim'')). Nothing on the record of the instant investigation directs 
us to reexamine our prior decisions.
    Therefore, we preliminarily determine, according to section 
771(5)(D)(ii) of the Act, that the KKDF tax exemptions provide a 
financial contribution in the form of revenue forgone by the GRT. We 
further preliminarily determine, according to section 771(5)(E)(ii)of 
the Act, that they provide a benefit in the amount of the tax 
exemptions. Finally, because the tax exemptions are contingent upon 
export performance, we preliminarily determine that they are specific 
in accordance with section 771(5A)(B) of the Act. Thus, we 
preliminarily determine that KKDF tax exemptions are countervailable.
    During the POI, Colakoglu received and paid interest on US dollar 
export-related loans from various commercial banks; Habas received and 
paid interest on both Lira and US dollar export-related loans from 
various commercial banks. The Department treats tax exemptions as 
recurring grants in accordance with 19 CFR 351.524(c)(1). To calculate 
the countervailable subsidy on KKDF tax exemptions, we divided the 
total amount of the exemptions received by each respondent on export-
related loans outstanding during the POI by the value of each 
respondent's exports during the POI, adjusting for inflation as 
described in the Subsidies Valuation Information section, supra. On 
this basis, we preliminarily determine the countervailable subsidy from 
this program to be 0.05 percent ad valorem for Colakoglu and 0.01 
percent ad valorem for Habas.

2. BIST Exemption

    In prior proceedings, the Department has found that BIST exemptions 
confer a countervailable subsidy within the

[[Page 5981]]

meaning of section 771(5) of the Act. (See, e.g., 1999 Pasta Final; 
1996 Pipe Prelim, 62 FR 64808, 64810; and 1995 Pipe Prelim, 62 FR 
16782, 16785). Nothing on the record of the instant investigation 
directs us to reexamine our prior decisions. We therefore preliminarily 
determine, according to section 771(5)(D)(ii) of the Act, that the BIST 
exemptions provide a financial contribution in the form of revenue 
forgone by the GRT. We also preliminarily determine, according to 
section 771(5)(E)(ii)of the Act, that they provide a benefit in the 
amount of the tax exemptions. Finally, because the tax exemptions are 
contingent upon export performance, we preliminarily determine that 
they are specific in accordance with section 771(5A)(B) of the Act. 
Therefore, we preliminarily determine that BIST exemptions are 
countervailable.
    During the POI, Colakoglu received and paid interest on US dollar 
export-related loans from various commercial banks; Habas received and 
paid interest on both Lira and US dollar export-related loans from 
various commercial banks. The Department treats tax exemptions as 
recurring grants in accordance with 19 CFR 351.524(c)(1). To calculate 
the countervailable subsidy on BIST tax exemptions, we divided the 
total amount of the exemptions received by each respondent on export-
related loans outstanding during the POI by the value of each 
respondent's exports during the POI, adjusting for inflation as 
described in the Subsidies Valuation Information section, supra. On 
this basis, we preliminarily determine the countervailable subsidy from 
this program to be 0.08 percent ad valorem for Colakoglu and 0.03 
percent ad valorem for Habas.

3. Foreign Currency Expenditure Tax Exemption (``FCET'')

    Although we received no information from the GRT regarding this 
program, Colakoglu reported having received this exemption as a 
countervailable benefit during the POI. We will be requesting 
additional information on this program from the GRT. Based solely on 
Colakoglu's response, we preliminarily determine that it received a 
countervailable benefit in the amount of the exemption granted under 
this program. We preliminarily determine that this program provides a 
financial contribution in the form of foregone revenue under section 
771(D)(ii) of the Act. Furthermore, we preliminarily determine that 
this program is specific under section 771(5A)(B) of the Act because it 
is an export subsidy.
    The Department treats tax exemptions as recurring grants in 
accordance with 19 CFR 351.524(c)(1). To calculate the countervailable 
subsidy on Colakoglu's FCET exemptions, we divided the total amount of 
the exemptions received by Colakoglu on export-related loans 
outstanding during the POI by the value of Colakoglu's exports during 
the POI, adjusting for inflation as described in the Subsidies 
Valuation Information section, supra. On this basis, we preliminarily 
determine the countervailable subsidy from this program to be 0.00% 
percent ad valorem for Colakoglu.
D. Taxes, Duties, and Credit Charges Exemptions
    The GRT states that in order to benefit from the Taxes, Duties, and 
Credit Charges Exemption program, a company must hold an ``investment 
incentive certificate'' and demonstrate that it can achieve U.S. 
$10,000 of exports within two years upon the completion of the physical 
investment. According to the GRT, during the investment stage, there 
are certain taxes, such as for operations and processes of obtaining 
standard credits through banks, and other official dues, such as land 
registration and company registration. Under this program, a company 
that holds an investment incentive certificate and commits to export 
U.S. $10,000, is exempt from paying these taxes otherwise due. These 
exemptions are conferred under Temporary Article 2 of the Law No. 3505 
(December 31, 1988).
    Colakoglu, in its January 24, 2002, submission, and the GRT, in its 
January 7, 2002, response, state that this program falls under the 
umbrella of the General Incentive Program (``GIP''). Moreover, 
Colakoglu and the GRT argue that the petitioners and the Department are 
confusing this program with the Investment Allowance program also under 
the GIP. We agree with Colakoglu and the GRT that this program is part 
of the GIP. However, we do not agree that this program is actually part 
of the Investment Allowance program. In the ``Verification Report of 
the Government of Turkey,'' dated March 25, 1996, on the record of 
Certain Welded Carbon Steel Pipes and Tubes and Welded Carbon Steel 
Line Pipe From Turkey; Final Results of Countervailing Duty 
Administrative Reviews, 62 FR 43984 (August 18, 1997), under the 
section ``Taxes, Fees (Duties), Charge Exemption,'' it states that 
companies that obtain financing for their investment projects are 
exempted from paying taxes, duties, and charges that they would 
otherwise have to pay if they make an export commitment. Moreover, it 
quotes government officials as stating that this is the only GIP 
program with an export requirement. This position coincides with the 
GRT's statements in the instant investigation that in order to benefit 
from this program a company must make an export commitment. See GRT's 
November 30, 2001 Questionnaire Response at 36, 39. This export 
commitment is what distinguishes this program from the Investment 
Allowance program.
    During the POI, Habas obtained a loan from a foreign bank for 
investment in a power plant. Habas posted bank guarantees issued by a 
Turkish bank on this loan. The letters of guarantee, in accordance with 
this program, were exempt from the stamp tax, the KKDF, and the BIST.
    As discussed below, we preliminarily determine the stamp tax 
exemption to be non-countervailable. See Stamp Tax, infra. As 
previously discussed under the Foreign Exchange Loan Assistance 
program, we preliminarily are determining that exemptions from paying 
the KKDF and the BIST are countervailable subsidies within the meaning 
of section 771(5) of the Act. These exemptions, according to section 
771(5)(D)(ii) of the Act, represent revenue forgone by the GRT and 
provide a benefit, according to 771(5)(E)(ii) of the Act, in the amount 
of the tax savings to the company. Also, this subsidy program is 
specific in accordance with 771(5A)(B) of the Act because its receipt 
is contingent upon export performance.
    The Department typically treats tax exemptions as recurring grants 
in accordance with 19 CFR 351.524(c)(1). Thus, to calculate the 
countervailable subsidy, we divided the tax savings realized during the 
POI by the company's export sales during the POI. On this basis, we 
determine the countervailable subsidy from this program to be 0.36 
percent ad valorem for Habas.
    Colakoglu reported certain tax exemption in response to our 
questions about this program. Based on our analysis of Colakoglu's 
response, the reported exemptions related to the company's export 
financing. Therefore, we have calculated the benefit for Colakoglu 
under export loan programs described above.

II. Programs Preliminarily Determined To Be Not Countervailable

A. General Incentives Encouragement Program (``GIEP'')
    Under the GIEP, which is the successor to GIP examined in Certain 
Pasta from Turkey; Final Affirmative

[[Page 5982]]

Countervailing Duty Determination, 61 FR 30366 (June 14, 1996) (``Pasta 
Investigation Final'') and the 1998 Pipe Final, companies engaging in a 
wide variety of investment projects, including the expansion or 
modernization of production facilities, infrastructure improvement, and 
research and development, can obtain an investment incentive 
certificate for the project from the GRT. This certificate makes the 
company eligible for certain benefit programs as specified on each 
certificate. These certificates are granted on a project basis; 
therefore, a company may have more than one certificate. The 
application for a certificate includes a description of the investment 
project, a feasibility study, and a list of the machinery and equipment 
that the company plans to buy in connection with the project. The 
Department has previously found that some parts of the GIP/GIEP 
programs are not countervailable while other parts of the program are 
countervailable. (See Pasta Investigation Final, 63 FR 30366, 30369-
30372).

Investment Allowances

    In 1963, the Turkish Income Tax Law, Articles 1-5, initiated the 
investment allowance which allows a company who has qualified for an 
``Investment Incentive Certificate'' to deduct certain investment 
expenditures from its taxable income. These allowances fall under the 
umbrella of GIEP. An investment must meet certain qualifications to be 
deductible: for example, investments which generally qualify under this 
program are those related to buildings, machinery, equipment, and 
vehicles related to the main activity of the business. Furthermore, 
varying levels of deduction are granted depending upon the location, 
type of investment, or amount of investment: (1) a 40 percent allowance 
is available in developed regions; (2) a 100 percent allowance is 
available in Priority Development Regions and Organized Industrial 
Regions; and (3) an allowance of up to 200 percent for certain 
industrial investments of at least US $250 million. Investments 
qualifying for the maximum 200 percent allowance must meet two of the 
following criteria: provide international competitiveness, necessitate 
high technology, produce a high amount of value added, increase tax 
revenues, or increase employment.
    We note that the investigation of the 200 percent investment 
allowance is limited to those companies who have qualified for the 
allowance based on the ``international competitiveness'' criterion. 
(See September 24, 2001 Initiation Checklist). Neither Colakoglu nor 
Habas reported receiving the entire 200 percent investment allowance 
during the POI.
    During the POI, both Colakoglu and Habas used certain GIEP 
Investment Allowance benefits. Colakoglu reports receiving an 
Investment Allowance based on its investment providing international 
competitiveness, increasing tax revenues and increasing employment. 
Habas reports receiving Investment Allowances based on its investments 
providing international competitiveness, necessitating high technology 
and increasing employment. The tax deduction which Colakoglu used 
during the POI resulted from an investment incentive certificate 
approved in 1998. The tax deduction which Habas used during the POI 
resulted from multiple investment incentive certificates approved in 
the following years: 1994 -1997, 1999, and 2000. In both 1998 Pipe 
Final and 1999 Pasta Final, we analyzed the specificity of the 
Investment Allowances by examining the specificity of the investment 
incentive certificates. We have applied the same type of analysis to 
the Investment Allowances used by Habas and Colakoglu in this 
investigation.
    In order to determine whether the Investment Allowance benefits are 
specific, in law or in fact, to an enterprise or industry, according to 
section 771(5A)(D) of the Act, as we did in the 1998 Pipe Final and 
1999 Pasta Final, we examined the following factors as applicable to 
the investment incentive certificates: (1) whether the enabling 
legislation expressly limits access to the subsidy to an enterprise or 
industry; (2) whether the actual recipients of the subsidy, whether 
considered on an enterprise or industry basis, are limited in number; 
(3) whether an enterprise or industry is a predominant user of the 
subsidy; (4) whether an enterprise or industry receives a 
disproportionately large amount of the subsidy; and (5) whether the 
manner in which the authority providing the subsidy has exercised 
discretion in the decision to grant the subsidy indicates that an 
enterprise or industry is favored over others.
    Consistent with the Department's treatment of de jure specificity 
in 1998 Pipe Final and 1999 Pasta Final, we find that this program's 
enabling legislation does not expressly limit access to an enterprise 
or industry; therefore, the subsidy is not de jure specific.
    In determining whether this program is de facto specific, we 
examined information supplied by the GRT, including a breakdown of the 
number of companies within each industry and region that received 
investment incentive certificates for 1998 - 2000. This data shows that 
more than 10,000 certificates were issued to different companies in 
numerous and varied industries and regions throughout Turkey. 
Similarly, when compared to the number of certificates issued to other 
sectors, including agriculture, mining, and services, e.g., there is no 
record evidence which indicates that either respondent, or the steel 
industry as a whole, received a disproportionate number of 
certificates. Instead, we find the record evidence in this 
investigation indicates that investment incentive certificates were 
widely and evenly distributed with no one sector, enterprise, or region 
receiving a disproportionate amount.
    Therefore, we preliminarily determine that the steel industry did 
not receive a disproportionate number of investment incentive 
certificates during the time period 1998-2000 when compared to the 
overall number of certificates issued. On this basis, we preliminarily 
determine that the Investment Allowances received under investment 
incentive certificates issued between 1998-2000 are not specific 
pursuant to section 771(5A) of the Act and, therefore, not 
countervailable.
    Although the GRT has not provided in the instant investigation 
distribution information for investment incentive certificates granted 
prior to 1998, we note that in the 1998 Pipe Final, we confirmed that 
the iron and steel industry did not disproportionately benefit from 
investment incentive certificates for the year 1996. Based on our 
finding in 1998 Pipe Final, we preliminarily determine that the steel 
industry did not receive a disproportionate number of investment 
incentive certificates during 1996. On this basis, we preliminarily 
determine that the Investment Allowances received under investment 
incentive certificates issued in 1996 are not specific under section 
771(5A) of the Act and, therefore, are not countervailable.
    Finally, we note that Habas received certain Investment Allowances 
based on investment incentive certificates issued in 1994, 1995, and 
1997. Because we do not have distribution information for these 
investment incentive certificates, we are unable to analyze the 
specificity of this program in 1994, 1995, and 1997. However, we are 
issuing a request for this information which we will analyze for the 
final determination.

[[Page 5983]]

B. Export Credit Bank of Turkey Subsidies

Export Credit Insurance Program

    Through this program, exporters can obtain short-term export credit 
insurance from the Turkish Eximbank. These are one-year blanket 
insurance policies which cover up to 90 percent of losses incurred due 
to political risks (e.g., cancellation of the buyer's import permit or 
license and losses resulting from war, revolution, etc.) and commercial 
risks (e.g., the insolvency of the buyer or the refusal or failure of 
the buyer to take delivery of the goods). The insurance provided under 
this program is a post-shipment insurance because the Turkish Eximbank 
becomes liable only if the loss occurs on or after the date of 
shipment.
    The premium rates differ depending on the following factors: (1) 
whether the buyer is a public or a private entity, (2) the risk 
classification of the buyer's country, (3) the payment terms, and (4) 
the length of the credit period. Previously, it was obligatory for 
companies taking pre-shipment export loans (see above) to use the 
export credit insurance program. However, since February 1997, use of 
the export credit insurance program is voluntary for borrowers under 
the pre-shipment export loan programs.
    In the 1999 Pasta Final, the Department found that for the calendar 
year 1999 the premiums paid for the export credit insurance and other 
income generated by the program exceeded the insurance claims paid to 
participating companies. Upon review of information provided by the GRT 
in the current investigation, we preliminarily find that for the year 
2000 the premiums paid for the export credit insurance and other income 
generated by the program also exceeded the insurance claims paid to 
participating companies. On this basis, consistent with the 1999 Pasta 
Final, and in accordance with 19 CFR 351.520(a)(1), we preliminarily 
find the export credit insurance program to be not countervailable.
C. Foreign Exchange Loan Assistance

Stamp Tax

    In the 1999 Pasta Final, we found this program to be non-
countervailable. Specifically, in the 1999 Pasta Final, we found that 
the stamp tax exemption is an indirect tax as defined in 19 CFR 
351.102(b). In accordance with 19 CFR 351.517(a), the non-excessive 
exemption of indirect taxes upon exports is not countervailable. 
Nothing on the record of the current investigation indicates that the 
stamp tax exemptions on export-related loans were excessive. Therefore, 
consistent with the 1999 Pasta Final, we preliminarily determine that 
the stamp tax exemption on pre-shipment and other export-related loans 
is not countervailable.
D. Customs Duty Exemption
    A Customs Duty Exemption program was first established in Turkey on 
January 24, 1980, by the Export Promotion Decree numbered 8/82. On 
December 23, 1999, the GRT issued ``Resolution Concerning Domestic 
Processing Regime,'' Resolution Number 99/13819, with the intent of 
increasing Turkish exports by allowing procurement of raw materials at 
world market prices. Under this program, companies are exempt from 
paying customs duties and value added taxes (``VAT'') on raw material 
imports to be used in the production of exported goods. In place of 
payments, a company will provide a letter of guarantee worth twice the 
value of the imported raw material. The guarantee letter is returned to 
the company upon fulfillment of the committed export.
    To participate in this program a company must hold an ``Inward 
Processing Certificate,'' which lists the amount of raw materials to be 
imported and the amount of product to be exported. The key issues 
determining eligibility for this exemption are whether a company has 
fulfilled its commitments made in previous inward processing 
certificates granted to the company and whether the kind and amount of 
the good to be exported is appropriate to the kind and amount of raw 
material to be imported. In cases where excess raw materials are 
requested, an appropriate amount of raw material will be calculated and 
approved. Additionally, according to the import processing system, the 
value of imported raw material cannot exceed the value of the committed 
export.
    In regard to the customs duty exemption granted under this program, 
pursuant to 19 CFR 351.519(a)(1)(ii), a benefit exists to the extent 
that the exemption extends to inputs that are not consumed in the 
production of the exported product, making normal allowances for waste, 
or if the exemption covers charges other than import charges that are 
imposed on the input. In regard to the VAT exemption granted under this 
program, pursuant to 19 CFR 351.518(a)(1), a benefit exists to the 
extent that the exemption extends to inputs that are not consumed in 
the production of the exported product, making normal allowance for 
waste, or if the exemption covers taxes other than indirect taxes that 
are imposed on the input.
    Colakoglu and Habas imported raw materials used in the production 
of wire rod under Inward Processing Certificates. However, there is no 
indication that either company used these raw material inputs for any 
other product besides those exported or that the amount received under 
these exemptions was otherwise excessive. On this basis, we 
preliminarily determine that the tax and duty exemption on raw material 
imports under the Inward Processing Certificates are not 
countervailable.

III. Programs Preliminarily Determined Not To Have Been Used

    Based on the information provided in the responses, we determine no 
responding companies applied for or received benefits under the 
following programs during the POI:
A. General Incentives Encouragement Program

1. Incentive Program on Domestically Obtained Goods

2. 200% Investment Allowances

3. Subsidized Credit Facility

4. Incentives Granted to Less Developed and Industrial Belt Regions

a. Law 4325 Land Allocation

b. Electricity Discounts

c. Special Incentives for East and Southeast Turkey

B. Export Credit Bank of Turkey Subsidies

1. Past Performance Related Foreign Currency Loans

2. Revolving Export Credits

3. Buyers Credits

C. Payments for Exports on Turkish Ships/State Aid for Exports Program
D. Energy Incentive

IV. Program Preliminarily Determined to Have Been Terminated

    Based on the information provided in the responses, we 
preliminarily determine that the following program has been terminated:

[[Page 5984]]

General Incentives Encouragement ProgramRUSF

a. RUSF Vat Rebates of 15% for Domestically Sourced Machinery & 
Equipment

b. RUSF Payments of 15% of a Company's Investment

c. Payments to Exporters in the amount of 4% of FOB Value of Certain 
Export Receipts

V. Program Preliminarily Determined to Not Exist

    Based on the information provided in the responses, we 
preliminarily determine that the following program does not exist:
Advanced Refunds of Tax Savings

Verification

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

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 nonprivileged 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)(3) of the Act, if our preliminary 
determination is negative, the ITC will make its final determination 
within 75 days after the Department makes its final determination.

Public Comment

    Case briefs for this investigation must be submitted no later than 
one week after the issuance of the last verification report. Rebuttal 
briefs must be filed within five days after the deadline for submission 
of case briefs. A list of authorities relied upon, a table of contents, 
and an executive summary of issues should accompany any briefs 
submitted to the Department. Executive summaries should be limited to 
five pages total, including footnotes. Section 774 of the Act provides 
that the Department will hold a public hearing to afford interested 
parties an opportunity to comment on arguments raised in case or 
rebuttal briefs, provided that such a hearing is requested by an 
interested party. If a request for a hearing is made in this 
investigation, the hearing will tentatively be held two days after the 
deadline for submission of the rebuttal briefs at the U.S. Department 
of Commerce, 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.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) the party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
Oral presentations will be limited to issues raised in the briefs.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    February 2, 2002
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-3119 Filed 2-7-02; 8:45 am]
BILLING CODE 3510-DS-S