[Federal Register Volume 71, Number 66 (Thursday, April 6, 2006)]
[Notices]
[Pages 17445-17451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-5028]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-489-502]


Notice of Preliminary Results of Countervailing Duty 
Administrative Review: Certain Welded Carbon Steel Standard Pipe from 
Turkey

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce (``the Department'') is conducting 
an administrative review of the countervailing duty (``CVD'') order on 
certain welded carbon steel standard pipe from Turkey for the period 
January 1, 2004, through December 31, 2004. For information on the net 
subsidy rate for the reviewed company, see the ``Preliminary Results of 
Review'' section, infra. If the final results remain the same as the 
preliminary results of this review, we will instruct U.S. Customs and 
Border Protection (``CBP'') to assess countervailing duties as detailed 
in the ``Preliminary Results of Review'' section, infra. Interested 
parties are invited to comment on these preliminary results. (See the 
``Public Comment'' section, infra).

EFFECTIVE DATE: April 6, 2006.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson, AD/CVD Operations, 
Office 3, Import Administration, International Trade Administration, 
U.S. Department of Commerce, Room 4014, 14\th\ Street and Constitution 
Avenue, NW., Washington, DC 20230; telephone: (202) 482-4793.

SUPPLEMENTARY INFORMATION:

Background

    On March 7, 1986, the Department published in the Federal Register 
the CVD order on certain welded carbon steel pipe and tube products 
from Turkey. See Countervailing Duty Order: Certain Welded Carbon Steel 
Pipe and Tube Products from Turkey, 51 FR 7984 (March 7, 1986) 
(``Turkey Pipe Order''). On March 1, 2005, the Department published a 
notice of opportunity to request an administrative review of this CVD 
order. See Antidumping or Countervailing Duty Order, Finding, or 
Suspended Investigation; Opportunity to Request Administrative Review, 
70 FR 9918 (March 1, 2005). On March 31, 2005, we received a timely 
request for review from the Borusan Group (``Borusan''), a Turkish 
producer and exporter of subject merchandise. On April 22, 2005, the 
Department initiated an administrative review of the CVD order on 
certain welded carbon steel standard pipe from Turkey, covering the 
period January 1, 2004, through December 31, 2004. See Initiation of 
Antidumping and Countervailing Duty Administrative Reviews, 70 FR 20862 
(April 22, 2005).
    On June 13, 2005, the Department issued a questionnaire to Borusan 
and the Government of the Republic of Turkey (``GOT''); we received 
their questionnaire responses on August 22, 2005. On October 26, 2005, 
we issued supplemental questionnaires to Borusan and the GOT. We 
received the supplemental questionnaire response from Borusan on 
November 25, 2005,

[[Page 17446]]

and from the GOT on November 28, 2005.
    On November 7, 2005, the Department published in the Federal 
Register an extension of the deadline for the preliminary results. See 
Certain Welded Carbon Steel Standard Pipe from Turkey: Extension of 
Time Limit for Preliminary Results of Countervailing Duty 
Administrative Review, 70 FR 67455 (November 7, 2005).
    On February 15 through February 23, 2006, we conducted verification 
in Ankara, Turkey, of the questionnaire responses submitted by the GOT, 
and in Istanbul, Turkey, of the questionnaire responses submitted by 
Borusan.
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters of the subject merchandise for which a review 
was specifically requested. The only company subject to this review is 
Borusan. During the period of review (``the POR''), Borusan was 
comprised of Borusan Birlesik Boru Fabrikalari A.S. (``BBBF''), 
Mannesmann Boru Endustrisi T.A.S. (``MB''), Borusan Mannesmann Boru 
Sanayi ve Ticaret A.S. (``BMB''), and Istikbal Ticaret T.A.S. 
(``Istikbal''). This review covers fourteen programs.

Scope of the Order

    The products covered by this order are certain welded carbon steel 
pipe and tube with an outside diameter of 0.375 inch or more, but not 
over 16 inches, of any wall thickness (pipe and tube) from Turkey. 
These products are currently provided for under the Harmonized Tariff 
Schedule of the United States (``HTSUS'') as item numbers 7306.30.10, 
7306.30.50, and 7306.90.10. Although the HTSUS subheadings are provided 
for convenience and customs purposes, the written description of the 
merchandise is dispositive.

Period of Review

    The period for which we are measuring subsidies is January 1, 2004, 
through December 31, 2004.

Company History

    As noted above, Borusan is composed of BBBF, MB, BMB, and Istikbal. 
During the POR, BBBF produced the subject merchandise, which was first 
sold to Istikbal, an export sales company, and then resold to an 
unaffiliated customer in the United States. MB ceased production of the 
subject merchandise in November 2003, and a year later, was merged into 
BBBF on November 30, 2004. BBBF was subsequently renamed Borusan 
Mannesmann Boru Sanayi ve Ticaret A.S. (i.e., BMB) on December 13, 
2004, and continued to produce the subject merchandise and export the 
merchandise through Istikbal.
    Prior to the November 2004 merger, BBBF and MB were affiliated 
through their parent company, Borusan Mannesmann Boru Yatirim Holding 
A.S. (``BMBYH''). BMBYH, a holding company, is majority-owned by 
Borusan Holding A.S.\1\ Post merger and company name change, BMB 
continued to be owned by BMBYH. During the POR, Istikbal was majority-
owned by Borusan Holding A.S.\2\
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    \1\ Mannesmannrohren-Werke A.G., a publicly traded company in 
Germany, also has ownership in BMBYH.
    \2\ Borusan Holding A.S. is owned by the family of Asim 
Kocabiyik, the company's founder.
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Subsidies Valuation Information

Benchmark Interest Rates

    To determine whether government-provided loans under review 
conferred a benefit, the Department uses, where possible, company-
specific interest rates for comparable commercial loans. See 19 CFR 
351.505(a). Borusan provided the interest rates it paid on short-term 
Turkish Lira (``TL'')-denominated and foreign currency (``FX'')-
denominated commercial loans. We preliminarily find that the company-
specific FX-denominated short-term loans are comparable to the export 
credit FX-denominated loans against which Borusan paid interest during 
the POR. However, Borusan's short-term TL-denominated commercial loans, 
outstanding during the POR, were revolving, open account loans and not 
comparable to the maturity of the export financing loans that Borusan 
received from the Export Credit Bank of Turkey (``Export Bank'').
    Where no company-specific benchmark interest rates are available, 
the Department's regulations direct us to use a national average 
interest rate as the benchmark. See 19 CFR 351.505(a)(3)(ii). According 
to the GOT, however, there is no official national average short-term 
interest rate available. See the March 31, 2006, Memorandum to the File 
concerning the Verification of the Questionnaire Responses Submitted by 
the Government of the Republic of Turkey (``GOT Verification Report'') 
at 3.\3\ Therefore, we have calculated the benchmark interest rate for 
short-term TL-denominated loans based on short-term interest rate data 
for 2004, as reported by The Economist. Specifically, from issues of 
The Economist, we sourced a short-term interest rate for each quarter 
of 2004.\4\ We then simple averaged those quarterly rates to calculate 
an annual short-term interest rate for Turkey. See the March 31, 2006, 
Memorandum to the File concerning the Calculations for the Preliminary 
Results of the Review of the Countervailing Duty Order on Certain 
Welded Carbon Steel Standard Pipe from Turkey (``Preliminary 
Calculations''). This methodology is consistent with the Department's 
practice. See e.g., Certain Welded Carbon Steel Pipes and Tubes from 
Turkey; Final Results of Countervailing Duty Administrative Review, 65 
FR 49230 (August 11, 2000) (``1998 Pipe Final''); and Carbon and 
Certain Alloy Steel Wire Rod from Turkey; Final Negative Countervailing 
Duty Determination, 67 FR 55815 (August 30, 2002) (``Wire Rod''), and 
accompanying Issues and Decision Memorandum, at 3-4 (``Wire Rod 
Memorandum'').
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    \3\ A public version of the verification report is available on 
the public file in the Department's Central Records Unit (room B-
099).
    \4\ In each issue, The Economist reports short-term interest 
date on a percentage per annum basis for select countries.
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    Further, it is the Department's practice to normally compare 
effective interest rates rather than nominal rates in making the loan 
comparison. See Countervailing Duties; Final Rule, 63 FR 65348, 65362 
(November 25, 1998) (``Preamble''). ``Effective'' interest rates are 
intended to take account of the actual cost of the loan, including the 
amount of any fees, commissions, compensating balances, government 
charges, or penalties paid in addition to the ``nominal'' interest 
rate.
    The short-term TL interest rates sourced from The Economist do not 
include commissions or fees paid to commercial banks, i.e., they are 
nominal rates. See Wire Rod Memorandum at 4. For Pre-Shipment Export 
Credits, discussed infra, commercial banks, through which the loans are 
extended, can add a maximum 2.0 percent to the interest rate for TL-
denominated loan as their commission. See GOT Verification Report at 4. 
Therefore, for these preliminary results, we compared the benchmark TL 
interest rate, inclusive of the 2.0 percent commission, to the interest 
rate that Borusan was charged on the Pre-Shipment Export Credit TL-
denominated loans to make the comparison on an effective interest rate 
basis.\5\ Where a company-specific benchmark interest rate was used\6\ 
to

[[Page 17447]]

determine whether government-provided export loans under review 
conferred a benefit, that comparison of interest rates was also made on 
an effective basis.
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    \5\ Borusan also received TL-denominated export credit loans 
under the Foreign Trade Companies Short-Term Export Credit program 
and the Pre-Export Credit program (see infra). However, those loans 
are extended directly by Turkey's Export Bank and, therefore, not 
subject to a intermediary bank commission charge.
    \6\ For these preliminary results, we used a company-specific 
benchmark interest rate to conduct the loan comparison for loans 
denominated in a foreign currency.
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Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable
     A. Deduction from Taxable Income for Export Revenue
    Addendum 4108 of Article 40 of the Income Tax Law allows companies 
that operate internationally to claim, directly on their corporate 
income tax returns, a tax deduction equal to 0.5 percent of the foreign 
exchange revenue earned from exports and other international 
activities.\7\ The income tax deduction for export earnings may either 
be taken as a lump sum or be used to cover certain undocumented 
expenses, which were incurred through international activities, that 
would otherwise be non-deductible for tax purposes (e.g., expenses paid 
in cash, such as for lodging, gasoline, and food).
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    \7\ These actions include construction, repair, installation, 
and transportation activities that occur abroad.
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    Consistent with Wire Rod, we preliminarily find that this tax 
deduction is a countervailable subsidy. See Wire Rod Memorandum at 4; 
see also Certain Welded Carbon Steel Pipe and Tube and Welded Carbon 
Steel Line Pipe from Turkey; Final Results and Partial Rescission of 
Countervailing Duty Administrative Review, 63 FR 18885, 18886-87 (April 
16, 1998) (``1996 Pipe Final''). The deduction provides a financial 
contribution within the meaning of section 771(5)(D)(ii) of the Tariff 
Act of 1930, as amended (``the Act'') because it represents revenue 
forgone by the GOT. The deduction provides a benefit in the amount of 
the tax savings to the company pursuant to section 771(5)(E) of the 
Act. It is specific under section 771(5A)(B) of the Act because its 
receipt is contingent upon export performance. In this review, no new 
information or evidence of changed circumstances has been submitted to 
warrant reconsideration of the Department's prior findings.
    During the POR, BBBF, MB, and Istikbal filed separate corporate 
income tax returns for tax year 2003. However, only Istikbal utilized 
the deduction for export earnings on its 2003 tax return. BBBF and MB 
did not have direct exports of merchandise during 2003 and, therefore, 
could not claim the deduction for export earnings on their respective 
2003 tax returns.
    The Department typically treats a tax deduction as a recurring 
benefit in accordance with 19 CFR 351.524(c)(1). To calculate the 
countervailable subsidy rate for this program, we calculated the tax 
savings realized by Istikbal in 2004, as a result of the deduction for 
export earnings. We then divided that benefit by Borusan's total export 
sales for 2004. On this basis, we preliminarily determine the net 
countervailable subsidy for this program to be 0.09 percent ad valorem.
     B. Pre-Shipment Export Credits
    Turkey's Export Bank provides short-term pre-shipment export loans 
to exporters through intermediary commercial banks.\8\ This loan 
program is designed to support export-related firms. Loans are made to 
exporters who commit to export within a specified period of time. 
Generally, loans are extended for a period of up to 180 days, and cover 
up to 100 percent of the FOB export value. These loans are denominated 
in either TL or FX. The interest rates charged on these pre-shipment 
loans are set by the Export Bank. In several previous determinations, 
the Department found this program to be countervailable because receipt 
of the loans is contingent upon export performance and the interest 
rates paid on these loans are less than the amount the recipient would 
pay on comparable commercial loans. See 1998 Pipe Final, 65 FR 49231; 
and Certain Pasta from Turkey: Final Results of Countervailing Duty 
Administrative Review, 66 FR 64398 (December 13, 2001) (``1999 Pasta 
from Turkey''), and accompanying Issues and Decision Memorandum, at 3-4 
(``1999 Pasta Memorandum'').
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    \8\ As discussed in the ``Benchmark Interest Rates'' section, 
supra, the intermediary bank can add a commission fee rate to the 
loan program's interest rate, which is set by the Export Bank.
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    We also found that the pre-shipment loan program is an untied 
export loan program because the loans are not specifically tied to a 
particular destination at the time of approval and the borrower only 
has to show that the export commitment was satisfied (i.e., exports 
amounting to the FOB value of the credit) during the credit period to 
close out the loan with the bank. See e.g., Wire Rod Memorandum at 5. 
In this review, no new information or evidence of changed circumstances 
has been submitted to warrant reconsideration of the Department's prior 
findings. See GOT Verification Report at 3.
    During the POR, BBBF paid interest against pre-shipment export 
loans denominated in both TL and FX. MB paid interest against pre-
shipment TL-denominated loans.
    Pursuant to section 771(5)(E)(ii) of the Act, a benefit shall be 
treated as conferred ``in the case of a loan, if there is a difference 
between the amount the recipient of the loan pays on the loan and the 
amount the recipient would pay on a comparable commercial loan that the 
recipient could actually obtain on the market.'' To calculate the 
amount of interest the recipient would pay on a comparable TL-
denominated commercial loan, in absence of a company-specific interest 
rate on comparable TL-denominated commercial loans, we have used, as 
the benchmark rate, a simple average of the 2004 quarterly short-term 
interest rates for Turkey as reported by The Economist. See ``Benchmark 
Interest Rates'' section, supra, for more information. To calculate the 
amount of interest the recipient would pay on a comparable FX-
denominated commercial loan, we have used a company-specific interest 
rate as the benchmark rate. See Id.
    Using these benchmark rates, we continue to find the pre-shipment 
export loans countervailable because the interest rate charged is less 
than the rate for comparable commercial loans that the company could 
actually obtain on the market. Therefore, the loans constitute a 
financial contribution in the form of a direct transfer of funds from 
the GOT, under section 771(5)(D)(i) of the Act. A benefit exists under 
section 771(5)(E)(ii) of the Act in the amount of the difference 
between the payments of interest that BBBF and MB made on their loans 
during the POR and the payments the each company would have made on 
comparable commercial loans. The program is also specific in accordance 
with section 771(5A)(B) of the Act because receipt of the loans is 
contingent upon export performance.
    To determine the benefit, we calculated the countervailable subsidy 
as the difference between the actual interest paid on the pre-shipment 
loans during the POR and the interest that would have been paid using 
the benchmark interest rates. We then added the benefits and divided 
the sum by Borusan's total export sales for 2004. On this basis, we 
preliminarily determine the countervailable subsidy under this program 
to be 0.07 percent ad valorem.
    C. Foreign Trade Companies Short-Term Export Credits\9\
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    \9\ This program was previously known as ``Export Credit Through 
the Foreign Trade Corporate Companies Rediscount Credit Facility'' 
or ``Foreign Trade Corporate Companies Credit Facility.''

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[[Page 17448]]

    The Foreign Trade Company (``FTC'') loan program was implemented to 
assist large export trading companies with their export financing 
needs. This program is specifically designed to benefit Foreign Trade 
Corporate Companies (``FTCC'') and Sectoral Foreign Trade Companies 
(``SFTC'').\10\ An FTCC is a company whose export performance was at 
least U.S. $75 million in the previous year. For eligible companies, 
the Export Bank will provide short-term export credits based on their 
past export performance. Under this credit program, the Export Bank 
extends short-term export credits directly to exporters in TL and FX, 
up to 100 percent of FOB export commitment. The program's interest 
rates are set by the Export Bank and the maturity of the loans is 
usually 180 days. To qualify for a FTC loan, in addition to submitting 
the necessary application documents, a company must provide a bank 
letter of guarantee, equivalent to the loan's principal and interest 
amount.
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    \10\ A grouping of small- and medium-sized companies that 
operate together in a similar sector.
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    Istikbal acquired FTCC status in April 2003 and was the only 
Borusan company to receive FTC credits. During the POR, Istikbal paid 
interest against FTC loans denominated in both TL and FX.
    Consistent with previous determinations, we preliminarily find that 
these loans confer a countervailable subsidy within the meaning of 
section 771(5) of the Act. See e.g., Wire Rod Memorandum at 6-7. The 
loans constitute a financial contribution in the form of a direct 
transfer of funds from the GOT, under section 771(5)(D)(i) of the Act. 
A benefit exists under section 771(5)(E)(ii) of the Act in the amount 
of the difference between the payments of interest that Istikbal made 
on its loans during the POR and the payments the company would have 
made on comparable commercial loans. The program is also specific in 
accordance with section 771(5A)(B) of the Act because receipt of the 
loans is contingent upon export performance.
    Further, like the pre-shipment loans, the FTC loans are not tied to 
a particular export destination. See GOT Verification Report at 3. 
Therefore, we have treated this program as an untied export loan 
program which renders it countervailable regardless of whether the 
loans were used for exports to the United States. See Wire Rod 
Memorandum at 6-7.
    Pursuant to 19 CFR 351.505(a)(1), we have calculated the benefit as 
the difference between the payments of interest that Istikbal made on 
its FTC loans during the POR and the payments the company would have 
made on comparable commercial loans. In accordance with section 
771(6)(A) of the Act, we subtracted from the benefit amount the fees 
which Istikbal paid to commercial banks for the required letters of 
guarantee. We then divided the resulting benefit by Borusan's total 
export value for 2004. On this basis, we preliminarily find that the 
countervailable subsidy for this program is 0.09 percent ad 
valorem.\11\
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    \11\ See ``Benchmark Interest Rates,'' supra, (discussing the 
benchmark rates used in these preliminary results).
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    D. Pre-Export Credits\12\
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    \12\ This loan program was formerly known as ''Past Performance 
Related Export Credits.``
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    This program is similar to the FTC credit program described above; 
however, companies classified as either FTC or SFTC are not eligible 
for pre-export loans. Under the pre-export credit program, a company's 
past export performance is considered in evaluating a company's 
eligibility and establishing the company's credit limit. Like FTC 
loans, the Export Bank directly extends to companies pre-export loans, 
which are denominated in either TL or FX and have a maturity of 180 
days.\13\ To quality for a pre-export loan, in addition to submitting 
the necessary application documents, a company must provide a bank 
letter of guarantee, equivalent to the loan's principal and interest 
amount. During the POR, BBBF paid interest against pre-export loans 
that were denominated in both TL and FX.
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    \13\ The Export Bank also sets the interest rates for this 
export loan program.
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    Consistent with previous determinations, we preliminarily find that 
these loans confer a countervailable subsidy within the meaning of 
section 771(5) of the Act. See e.g., Wire Rod Memorandum at 7-8. The 
loans constitute a financial contribution in the form of a direct 
transfer of funds from the GOT, under section 771(5)(D)(i) of the Act. 
A benefit exists under section 771(5)(E)(ii) of the Act in the amount 
of the difference between the payments of interest that BBBF made on 
its loans during the POR and the payments the company would have made 
on comparable commercial loans. The program is also specific in 
accordance with section 771(5A)(B) of the Act because receipt of the 
loans is contingent upon export performance.
    Further, these loans are not tied to a particular export 
destination. See GOT Verification Report at 3. Therefore, we have 
treated this program as an untied export loan program which renders it 
countervailable regardless of whether the loans were used for exports 
to the United States.
    Pursuant to 19 CFR 351.505(a)(1), we have calculated the benefit as 
the difference between the payments of interest that BBBF made on its 
pre-export loans during the POR and the payments the company would have 
made on comparable commercial loans.\14\ In accordance with section 
771(6)(A) of the Act, we subtracted from the benefit amount the fees 
which BBBF paid to commercial banks for the required letters of 
guarantee. We then divided the resulting benefit by Borusan's total 
export value for 2004. On this basis, we preliminarily find that the 
countervailable subsidy for this program is 0.02 percent ad valorem.
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    \14\ See ``Benchmark Interest Rates,'' supra (discussing the 
benchmark rates used in these preliminary results).
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II. Program Preliminarily Determined To Be Not Countervailable
     A. Investment Allowance Under Article 19 of Law 4842
    In Wire Rod, the Department investigated investment allowances 
provided for under Investment Incentive Certificates, which were 
granted under the General Incentives Encouragement Program (``GIEP''), 
and found certain investment allowances to be countervailable and 
others to be non-countervailable.\15\
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    \15\ Specifically, in Wire Rod, we determined that because the 
criteria governing the minimum investment allowance (i.e., 40 
percent) were identical to those of the GIEP itself, our analysis of 
the minimum investment allowance was identical to that for the GIEP, 
which we found to be non-countervailable. Therefore, because we 
found that the GIEP is not countervailable, we also found that the 
minimum investment allowance is not countervailable. See Wire Rod 
Memorandum at 14-16. Investment allowances greater than 40 percent 
were found to be countervailable. See Id. at 8-11.
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    During the POR of the instant review, investment allowances were no 
longer provided for under the GIEP via an Investment Incentive 
Certificate. With Article 19 of Law 4842, published on April 24, 2003, 
the obligation to have an Investment Incentive Certificate to benefit 
from an investment allowance was abolished and the ability to claim an 
investment allowance on a corporate income tax return was made 
available to all taxpayers at a uniform rate.\16\ Specifically, by the 
provisions of Article 19, taxpayers without regard to region or sector, 
and without any requirement of an Investment Incentive Certificate, are 
eligible to claim an investment

[[Page 17449]]

allowance at the rate of 40 percent. There is no special application or 
approval process to claim and receive the investment allowance. The 
amount of the investment allowance is indicated on a company's tax 
return. The amount of the deduction is 40 percent of the costs of 
depreciable economic assets that are purchased or produced for use in 
the company's operations. See GOT Verification Report at 8.
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    \16\ Expenses for investments covered by an Investment Incentive 
Certificate continued to be subject to the previous investment 
allowance rules if the application for the certificate was made 
before the effective date of Law 4842.
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    BBBF and MB both took an Article 19 investment allowance deduction 
on their respective 2003 tax returns that were filed during the POR. We 
analyzed whether this investment allowance is de jure specific, within 
the meaning of section 771(5A)(D) of the Act. As discussed above, 
Article 19 of Law 4842 does not limit access to the investment 
allowance deduction to an enterprise, industry, group of industries, or 
region. Eligibility for the investment allowance is automatic as a 
company calculates the 40 percent deduction of its depreciable economic 
assets and reports that amount on its income tax return. A company's 
annual income tax return is subject to a statutory tax audit. The 
conditions under which a company can enjoy the investment allowance are 
delineated in the law and use of the investment allowance is clearly 
indicated in the income tax return and tax audit report.
    At verification, we confirmed BBBF's and MB's usage of the 
investment allowance provided for under Article 19, through an 
examination of each company's 2003 annual income tax return and 
accompanied 2003 tax audit report. See the March 31, 2006, Memorandum 
to the File concerning the Verification of the Questionnaire Responses 
Submitted by the Borusan Group (``Borusan Verification Report'') at 11-
12.\17\
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    \17\ A public version of the verification report is available on 
the public file in the Department's Central Records Unit (room B-
099).
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    Based on our analysis of Article 19 of Law 4842 and the process by 
which companies realize the investment allowance, we preliminarily 
determine that the investment allowance under Article 19 of Law 4842 is 
not specific under section 771(5A)(D) of the Act and, therefore, is not 
countervailable.
    B. Investment Allowance Under Investment Incentive Certificate
    In Wire Rod, the Department determined that the threshold 
requirement for eligibility of any GIEP benefit is the receipt of an 
Investment Incentive Certificate, which specifies the benefit programs 
(e.g., investment allowance and customs duty exemption) a certificate 
holder can receive. The Department further determined that particular 
investment allowances extended under the GIEP are countervailable and 
others are non-countervailable. See Wire Rod Memorandum at 8-11 and 14-
16. During the POR, MB had an Investment Incentive Certificate, 
received prior to the effective date of Article 19 of Law 4842, that 
provided for a 40 percent investment allowance, which the company 
claimed on its 2003 income tax return filed during the POR. MB was 
eligible for a 40 percent investment allowance because of its location 
in a developed region.\18\
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    \18\ Companies located in a normal region received a 60 percent 
allowance and those in a priority region received a 100 percent 
allowance. The different regions were determined by the GOT.
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    In Wire Rod, we determined that because the criteria governing the 
minimum investment allowance (i.e., 40 percent for a developed region) 
were identical to those of the GIEP itself, our analysis of the minimum 
investment allowance was identical to that for the GIEP, which we found 
to be non-countervailable. Therefore, because we found that the GIEP 
was not countervailable, we also found the minimum investment allowance 
to be not countervailable. See Id. at 14-16. In this review, no new 
information or evidence of changed circumstances has been submitted to 
warrant reconsideration of the Department's prior findings.
III. Programs Preliminary Determined To Not Confer Countervailable 
Benefits
     A. Export Credit Insurance
    Through this program, exporters can obtain export credit insurance 
from Turkey's Export Bank. These are one-year blanket insurance 
policies that cover up to 90 percent of losses incurred due to 
political risk (e.g., loss resulting from a war) and commercial risk 
(e.g., the insolvency of the buyer). The insurance provided under this 
program is post-shipment insurance because the Export Bank becomes 
liable only if the loss occurs on or after the date of shipment. 
Beginning in February 1997, use of the export credit insurance program 
became voluntary for borrowers under the pre-shipment export financing 
programs.
    During the POR, Istikbal had in place an export credit insurance 
program. We verified that the company did not submit an insurance claim 
or receive a reimbursement under the program in 2004. We also verified 
with the Export Bank that for 2002, 2003, and 2004, the premiums paid 
for the export credit insurance and other income generated by the 
program exceeded the insurance claims paid to participating companies 
and operating costs of the program. See GOT Verification Report at 5. 
On this basis, consistent with Wire Rod and 1999 Pasta Final, and in 
accordance with 19 CFR 351.520(a)(1), we preliminarily find that the 
export credit insurance program did not confer countervailable benefits 
during the POR. See Wire Rod Memorandum at 18; and 1999 Pasta 
Memorandum at 7.
    B. Inward Processing Certificate Exemption
    Under the Inward Processing Certificate (``IPC'')\19\ 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. Companies may choose whether to be exempted from the 
applicable duties and taxes or have them refunded upon export. Under 
the exemption system, companies provide a letter of guarantee that is 
returned to the companies upon fulfillment of the committed export.
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    \19\ The IPC program is governed by the following GOT 
provisions: Customs Code No. 4458 (Articles 80, 108, 111, 115, and 
121), IPC Council of Ministers' Decree No. 2005/8391, and Communique 
of IPR No. Export 2005/1.
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    To participate in this program, a company must hold an IPC, which 
lists the amount of raw materials to be imported and the amount of 
product to be exported. The input/output usage rates listed on the IPC 
are set by the GOT working in conjunction with Turkey's Exporter 
Associations, which are quasi-governmental organizations whose 
leadership are subject to GOT approval. The input/output usage rates 
vary by product and industry and are determined using data from 
capacity reports submitted by companies that apply for IPCs. The input/
output usage rates are subject to periodic review and verification by 
the GOT. In the case of the pipe and tube industry, the input/output 
usage rates were last modified in June 2001. See Borusan Verification 
Report at 12-13. The GOT uses the input/output usage rates to ensure 
that a company's expected export quantities are sufficient to cover the 
quantity of inputs imported duty-free under the program. An IPC 
specifies the maximum quantity of inputs that can be imported under the 
program. Further, under the IPC program, the value of imported inputs 
may not exceed the value of the exported products.
    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

[[Page 17450]]

allowances for waste, or if the exemption covers charges other than 
imported charges that are imposed on the input. In regard to the VAT 
exemption granted under this program, pursuant to 19 CFR 351.517(a), in 
the case of the exemption upon export of indirect taxes, a benefit 
exists to the extent that the Department determines that the amount 
exempted exceeds the amount levied with respect to the production and 
distribution of like products when sold for domestic consumption.
    During the POR, Borusan used IPCs to receive duty and VAT 
exemptions on certain imported inputs used in the production of steel 
pipes and tubes. Borusan did not receive any duty or VAT refunds under 
the program during the POR. There is no indication that Borusan used 
the imported inputs for any other product besides those exported or 
that the amount of exempted inputs imported under the program were 
excessive.
    At verification, we learned that the GOT sets the waste/usage rate 
for each imported raw material.\20\ The usage ratios are developed on 
an industry and product basis. These rates are used to determine the 
amount of each raw material input required to produce a given unit of 
exported product. In setting the rates, the GOT relies on company 
capacity reports and conducts on-site inspections of production 
facilities. The GOT periodically reviews the waste/usage rates. A 
company may request that a raw material ratio be modified if there have 
been improvements in productivity and efficiency of the company's 
facilities. At verification, we confirmed, through examination of the 
company's production records, that the waste rate established by the 
GOT, in June 2001, reflects Borusan's actual production experience. See 
Borusan Verification Report at 12-14 and GOT Verification Report at 10-
11.
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    \20\ Specifically, the Undersecretariat for Foreign Trade 
(``UFT'') works in conjunction with various exporter associations 
(quasi-governmental organizations comprised of industry officials) 
and the Chamber of Industries (independent non-governmental 
organization) to set the waste/loss ratios. For example, the Chamber 
of Industries issues the company-specific capacity reports, which a 
company must submit to the UFT for consideration of a certificate. 
To obtain a capacity report, a company first establishes a 
production plan and then requests an inspection of its production 
facilities to confirm production capability, efficiency, annual 
consumption and production capacity, etc. Each capacity report has 
an expiration date and an updated capacity report is generated every 
three or four years.
---------------------------------------------------------------------------

    On this basis, we preliminarily determine that the tax and duty 
exemptions that Borusan received on imported inputs under the IPC 
program did not confer countervailable benefits as Borusan consumed the 
imported inputs in the production of the exported product, making 
normal allowance for waste. We further preliminarily find that the VAT 
exemption did not confer countervailable benefits on Borusan because 
the exemption does not exceed the amount levied with respect to the 
production and distribution of like products when sold for domestic 
consumption.
    During our verification meeting with the GOT, we learned of a 
previously unreported form of IPC, i.e., a D3 license, in which the GOT 
provides exemptions and refunds on quantities of imported inputs that 
are incorporated into products sold on the domestic market. Using 
records available at the GOT's UFT, we identified Borusan's D3 licenses 
that were open during the POR. See GOT Verification Report at 12. 
During Borusan's verification, we examined each of the D3 licenses. We 
confirmed that Borusan did not use the licenses to import any raw 
materials during the POR. We also confirmed that, under the D3 
certificates, Borusan was exempt from paying import duties and VAT by 
providing a bank letter of guarantee. See Borusan Verification Report 
at 13-14.
    As the issuance of a D3 license is not based on exportation, we 
preliminarily find that this aspect of the IPC program is not an export 
program but rather falls under 19 CFR 351.510. Pursuant to 19 CFR 
351.510(a)(1), in the case of a program, other than an export program, 
that provides for the full or partial exemption or remission of an 
indirect tax or an import charge, a benefit exists to the extent that 
the taxes or import charges paid by a firm are less than the taxes the 
firm would have paid in the absence of the program. Further, under 19 
CFR 351.510(b)(1), the Department normally will consider the benefit as 
having been received at the time the recipient firm otherwise would be 
required to pay the indirect tax or import charge. Because Borusan did 
not import any goods under a D3 certificate during the POR, we 
preliminarily determine that this aspect of the IPC program was not 
used. We will, however, continue to examine the use of D3 licenses 
under the IPC program in future CVD proceedings involving Turkish 
producers/exporters.
IV. Programs Preliminarily Determined To Not Be Used
    We examined the following programs and preliminarily determine that 
Borusan did not apply for or receive benefits under these programs 
during the POR:
    A. VAT Support Program (Incentive Premium on Domestically Obtained 
Goods)\21\
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    \21\ Although we found this program to be terminated in Wire 
Rod, residual payments for purchases made prior to the program's 
termination were permitted. See Wire Rod Memorandum at 11.
---------------------------------------------------------------------------

    B. Post-Shipment Export Loans
    C. Pre-Shipment Rediscount Loans
    D. Subsidized Turkish Lira Credit Facilities
    E. Subsidized Credit for Proportion of Fixed Expenditures
    F. Regional Subsidies.

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we have calculated a 
subsidy rate for Borusan for calendar year 2004. We preliminarily 
determine that the total estimated net countervailable subsidy rate is 
0.27 percent ad valorem, which is de minimis, pursuant to 19 CFR 
351.106(c).
    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct CBP within 15 
days of publication of the final results of this review, to liquidate 
without regard to countervailing duties all shipments of subject 
merchandise produced by Borusan entered, or withdrawn from warehouse, 
for consumption from January 1, 2004, through December 31, 2004. The 
Department will also instruct CBP not to collect cash deposits of 
estimated countervailing duties on all shipments of the subject 
merchandise produced by Borusan, entered, or withdrawn from warehouse, 
for consumption on or after the date of publication of the final 
results of this review.
    We will also instruct CBP to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to non-reviewed companies covered by this 
order are those established in the most recently completed 
administrative proceeding conducted under the URAA. If such a review 
has not been conducted, the rate established in the most recently 
completed administrative proceeding conducted pursuant to the statutory 
provisions that were in effect prior to the URAA amendments is 
applicable. See Certain Welded Carbon Steel Pipe and Tube Products from 
Turkey; Final Results of Countervailing Duty Administrative Review, 53 
FR 9791

[[Page 17451]]

(March 25, 1988). These rates shall apply to all non-reviewed companies 
until a review of a company assigned these rates is requested.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of the public 
announcement of this notice. Pursuant to 19 CFR 351.309, interested 
parties may submit written comments in response to these preliminary 
results. Unless otherwise indicated by the Department, case briefs must 
be submitted within 30 days after the date of publication of this 
notice. Rebuttal briefs, limited to arguments raised in case briefs, 
must be submitted no later than five days after the time limit for 
filing case briefs, unless otherwise specified by the Department. 
Parties who submit argument in this proceeding are requested to submit 
with the argument: (1) A statement of the issues, and (2) a brief 
summary of the argument. Parties submitting case and/or rebuttal briefs 
are requested to provide the Department copies of the public version on 
disk. Case and rebuttal briefs must be served on interested parties in 
accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, 
within 30 days of the date of publication of this notice, interested 
parties may request a public hearing on arguments to be raised in the 
case and rebuttal briefs. Unless the Secretary specifies otherwise, the 
hearing, if requested, will be held two days after the date for 
submission of rebuttal briefs, that is, 37 days after the date of 
publication of these preliminary results.
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under 19 CFR 351.309(c)(ii), are due. See 19 CFR 
351.305(b)(3). The Department will publish the final results of this 
administrative review, including the results of its analysis of 
arguments made in any case or rebuttal briefs.
    This administrative review is issued and published in accordance 
with section 751(a)(1), 777(i)(1) of the Act, and 19 CFR 351.221(b)(4).

    Dated: March 31, 2006.
David M. Spooner,
Assistant Secretaryfor Import Administration.
[FR Doc. E6-5028 Filed 4-5-06; 8:45 am]
BILLING CODE 3510-DS-S