[Federal Register Volume 72, Number 128 (Thursday, July 5, 2007)]
[Notices]
[Pages 36668-36672]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-13014]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-911]


Notice of Initiation of Countervailing Duty Investigation: 
Circular Welded Carbon Quality Steel Pipe from the People's Republic of 
China

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

EFFECTIVE DATE: July 5, 2007.

FOR FURTHER INFORMATION CONTACT: Damian Felton, Yasmin Nair or Nancy 
Decker, AD/CVD Operations, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
0133, (202) 482-3813 and (202) 482-0196, respectively.

SUPPLEMENTARY INFORMATION:

Initiation Of Investigations:

The Petition

    On June 7, 2007, the Department of Commerce (``the Department'') 
received a petition filed in proper form by the Ad Hoc Coalition for 
Fair Pipe Imports from China and its individual members (Allied Tube & 
Conduit; IPSCO Tubulars, Inc.; Northwest Pipe Company; Sharon Tube 
Company; Western Tube & Conduit Corporation; Wheatland Tube Company; 
and the United Steelworkers) (collectively, ``petitioners''). The 
Department received timely information from petitioners supplementing 
the petition on June 15, June 20 and June 25, 2007.
    In accordance with section 702(b)(1) of the Tariff Act of 1930, as 
amended (``the Act''), petitioners allege that manufacturers, 
producers, or exporters of circular welded carbon quality steel pipe 
(``CWP'') in the People's Republic of China ( the ``PRC''), receive 
countervailable subsidies within the meaning of section 701 of the Act 
and that such imports are materially injuring, or threatening material 
injury to, an industry in the United States.
    The Department finds that petitioners filed the petition on behalf 
of the domestic industry because they are interested parties as defined 
in sections 771(9)(C) and (D) of the Act and petitioners have 
demonstrated sufficient industry support with respect to the 
countervailing duty investigation (see ``Determination of Industry 
Support for the Petition'' section below).

Scope of Investigation

    The scope of this investigation covers certain welded carbon 
quality steel pipes and tubes, of circular cross-section, and with an 
outside diameter of 0.372 inches (9.45 mm) or more, but not more than 
16 inches (406.4 mm), whether or not stenciled, regardless of wall 
thickness, surface finish (e.g., black, galvanized, or painted), end 
finish (e.g., plain end, beveled end, grooved, threaded, or threaded 
and coupled), or industry specification (e.g., ASTM, proprietary, or 
other), generally known as standard pipe and structural pipe (they may 
also be referred to as circular, structural, or mechanical tubing).
    Specifically, the term ``carbon quality'' includes products in 
which: (a) iron predominates, by weight, over each of the other 
contained elements; (b) the carbon content is 2 percent or less, by 
weight; and (c) none of the elements listed below exceeds the quantity, 
by weight, as indicated:
(i) 1.80 percent of manganese;
(ii) 2.25 percent of silicon;

[[Page 36669]]

(iii) 1.00 percent of copper;
(iv) 0.50 percent of aluminum;
(v) 1.25 percent of chromium;
(vi) 0.30 percent of cobalt;
(vii) 0.40 percent of lead;
(viii) 1.25 percent of nickel;
(ix) 0.30 percent of tungsten;
(x) 0.15 percent of molybdenum;
(xi) 0.10 percent of niobium;
(xii) 0.41 percent of titanium
(xiii) 0.15 percent of vanadium; or
(xiv) 0.15 percent of zirconium.
    All pipe meeting the physical description set forth above that is 
used in, or intended for use in, standard and structural pipe 
applications is covered by the scope of this investigation. Standard 
pipe applications include the low-pressure conveyance of water, steam, 
natural gas, air, and other liquids and gases in plumbing and heating 
systems, air conditioning units, automatic sprinkler systems, and other 
related uses. Standard pipe may also be used for light load-bearing and 
mechanical applications, such as for fence tubing, and as an 
intermediate product for protection of electrical wiring, such as 
conduit shells. Structural pipe is used in construction applications.
    Standard pipe is made primarily to American Society for Testing and 
Materials (ASTM) specifications, but can be made to other 
specifications. Standard pipe is made primarily to ASTM specifications 
A-53, A-135, and A-795. Structural pipe is made primarily to ASTM 
specifications A-252 and A-500. Standard and structural pipe may also 
be produced to proprietary specifications rather than to industry 
specifications. This is often the case, for example, with fence tubing. 
Pipe multiple-stenciled to an ASTM specification and to any other 
specification, such as the American Petroleum Institute (API) API-5L or 
5L X-42 specifications, is covered by the scope of this investigation 
when used in, or intended for use in, one of the standard applications 
listed above, regardless of the Harmonized Tariff Schedule of the 
United States (HTSUS) category under which it is entered. Pipe used for 
the production of scaffolding (but not finished scaffolding) and 
conduit shells (but not finished electrical conduit) are included 
within the scope of this investigation.
    The scope does not include: (a) pipe suitable for use in boilers, 
superheaters, heat exchangers, condensers, refining furnaces and 
feedwater heaters, whether or not cold drawn; (b) mechanical tubing, 
whether or not cold-drawn; (c) finished electrical conduit; (d) tube 
and pipe hollows for redrawing; (e) oil country tubular goods produced 
to API specifications; and (f) line pipe produced to API specifications 
for oil and gas applications.
    The pipe products that are the subject of these investigations are 
currently classifiable in HTSUS statistical reporting numbers 
7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 
7306.30.50.55, 7306.30.50.85, and 7306.30.50.90. However, the product 
description, and not the HTSUS classification, is dispositive of 
whether merchandise imported into the United States falls within the 
scope of the investigation.

Comments on Scope of Investigation

    During our review of the petition, we discussed the scope with 
Petitioners to ensure that it accurately reflects the product for which 
the domestic industry is seeking relief. During this review, we noted 
that, while the Department typically prefers to rely upon physical 
characteristics to determine the scope of product coverage, the scope 
description proposed by Petitioners relied upon, in part, end-use 
applications as a method for determining scope coverage. On June 20, 
2007, we met with Petitioners to discuss the scope and its reliance 
upon end-use applications as a method for determining scope coverage. 
See Memorandum to The File, through Abdelali Elouaradia, Office 
Director, Office 4, from Maisha Cryor, Import Compliance Specialist, 
titled ``Circular Welded Carbon Quality Steel Pipe from the People's 
Republic of China: Scope of the Petition,'' dated June 22, 2007. As 
discussed in the preamble to the Department's regulations, we are 
setting aside a period for interested parties to raise issues regarding 
product coverage. See Antidumping Duties; Countervailing Duties; Final 
rule, 62 FR 27296, 27323 (May 19, 1997). The Department encourages all 
interested parties to submit such comments, including comments 
regarding the scope's definition of covered merchandise based upon end-
use application, and whether additional HTSUS numbers should be 
included in the scope description, 14 calendar days after publication 
of this initiation notice. Rebuttal comments are due 7 calendar days 
thereafter. Comments should be addressed to Import Administration's 
Central Records Unit in Room 1870, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230 - Attention: 
Maisha Cryor, Room 3057. The period of scope consultations is intended 
to provide the Department with ample opportunity to consider all 
comments and consult with interested parties prior to the issuance of 
the preliminary determination.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Government of the PRC for consultations 
with respect to the countervailing duty petition. The Department held 
these consultations in Beijing, China with representatives of the 
Government of the PRC on June 24, 2007. See the Memoranda to The File, 
entitled, ``Consultations with Officials from the Government of the 
People's Republic of China'' (June 24, 2007) (public documents on file 
in the CRU of the Department of Commerce, Room B-099).

Determination of Industry Support for the Petition

    Section 702(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 702(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for (1) at least 
25 percent of the total production of the domestic like product and (2) 
more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for or 
opposition to the petition. Moreover, section 702(c)(4)(D) of the Act 
provides that, if the petition does not establish support of domestic 
producers or workers accounting for more than 50 percent of the total 
production of the domestic like product, the Department shall: (i) poll 
the industry or rely on other information in order to determine if 
there is support for the petition, as required by subparagraph (A), or 
(ii) determine industry support using a statistically valid sampling 
method.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers as a whole of a domestic like product. Thus, to determine 
whether the petition has the requisite industry support, the statute 
directs the Department to look to producers and workers who produce the 
domestic like product. The International Trade Commission (``ITC'') is 
responsible for determining whether ``the domestic industry'' has been 
injured and must also determine what constitutes a domestic like 
product in order to define the industry. While the Department and the 
ITC must apply the same statutory definition regarding the domestic 
like product, they do so for different purposes and pursuant to 
separate and distinct authority. See Section 771(10) of the Act. In 
addition, the Department's determination is

[[Page 36670]]

subject to limitations of time and information. Although this may 
result in different definitions of the domestic like product, such 
differences do not render the decision of either agency contrary to 
law.\1\
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    \1\ See USEC, Inc. v. United States, 25 CIT 49, 55-56, 132 F. 
Supp. 2d 1, 7-8 (Jan. 24, 2001) (citing Algoma Steel Corp. v. United 
States, 12 CIT 518, 523, 688 F. Supp. 639, 642-44 (June 8, 1988)).
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    Section 771(10) of the Act defines the domestic like product as ``a 
product which is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this subtitle.'' Thus, the reference point from which the 
domestic like product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition.
    With regard to domestic like product, petitioners do not offer a 
definition of domestic like product distinct from the scope of the 
investigation. Based on our analysis of the information presented by 
petitioners, we have determined that there is a single domestic like 
product, CWP, which is defined in the ``Scope of Investigation'' 
section above, and we have analyzed industry support in terms of the 
domestic like product.
    Our review of the data provided in the petition, the supplemental 
submission and other information readily available to the Department 
indicates that petitioners have established industry support. First, 
the petition established support from domestic producers (or workers) 
accounting for more than 50 percent of the total production of the 
domestic like product and, as such, the Department is not required to 
take further action in order to evaluate industry support (e.g., 
polling). See Sec. 702(c)(4)(D) of the Act. Second, the domestic 
producers have met the statutory criteria for industry support under 
702(c)(4)(A)(i) because the domestic producers (or workers) who support 
the petition account for at least 25 percent of the total production of 
the domestic like product. Finally, the domestic producers have met the 
statutory criteria for industry support under 702(c)(4)(A)(ii) because 
the domestic producers (or workers) who support the petition account 
for more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition. Accordingly, the Department determines 
that the petition was filed on behalf of the domestic industry within 
the meaning of section 702(b)(1) of the Act. See Initiation Checklist 
at Attachment I (Analysis of Industry Support). See ``Office of AD/CVD 
Operations Initiation Checklist for the Countervaling Duty Petition on 
Circular Welded Carbon Quality Steel Pipe from China,'' at Attachment 
II (``CVD Initiation Checklist'').

Injury Test

    Because the PRC is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, section 701(a)(2) of the Act 
applies to this investigation. Accordingly, the ITC must determine 
whether imports of the subject merchandise from the PRC materially 
injure, or threaten material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causation

    Petitioners allege that imports of CWP from the PRC are benefitting 
from countervailable subsidies and that such imports are causing or 
threatening to cause, material injury to the domestic industry 
producing CWP. In addition, petitioners allege that subsidized imports 
exceed the negligibility threshold provided for under section 
771(24)(A) of the Act.
    Petitioners contend that the prices on imports from the PRC do not 
reflect recent increases in raw material costs, and that large margins 
of underselling exist, which are causing domestic producers to suffer. 
Petitioners assert that the industry's injury is evidenced by a decline 
in production, U.S. shipments, capacity utilization, market share, 
employment and profitability. The allegations of injury and causation 
are supported by relevant evidence including U.S. Customs and Border 
Protection import data, lost sales, employment and pricing information. 
We have assessed the allegations and supporting evidence regarding 
material injury and causation and have determined that these 
allegations are properly supported by adequate evidence and meet the 
statutory requirements for initiation. See CVD Initiation Checklist.

Initiation of Countervailing Duty Investigations

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition on behalf of an industry that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a) of the Act 
and (2) is accompanied by information reasonably available to the 
petitioners supporting the allegations. The Department has examined the 
countervailing duty petition on CWP from the PRC and found that it 
complies with the requirements of section 702(b) of the Act. Therefore, 
in accordance with section 702(b) of the Act, we are initiating a 
countervailing duty investigation to determine whether manufacturers, 
producers, or exporters of CWP in the PRC receive countervailable 
subsidies. For a discussion of evidence supporting our initiation 
determination, see CVD Initiation Checklist.
    We are including in our investigation the following programs 
alleged in the petition to have provided countervailable subsidies to 
producers and exporters of the subject merchandise in the PRC:

Preferential Lending

    1. Government Policy Lending Program
    2. Loans and interest subsidies provided pursuant to the Northeast 
Revitalization Program

Income Tax Programs

    3. ``Two Free, Three Half'' income tax program
    4. Income tax exemption for export-oriented foreign investment 
enterprises (``FIEs'')
    5. Corporate income tax refund program for reinvestment of FIE 
profits in export-oriented enterprises
    6. Local income tax exemption and reduction program for 
``productive'' FIEs
    7. Reduced income tax rates for FIEs based on location
    8. Reduced income tax rate for knowledge or technology intensive 
FIEs
    9. Reduced income tax rate for high or new technology FIEs
    10. Preferential tax policies for research and development at FIEs
    11. Income tax credits on purchases of domestically produced 
equipment by domestically-owned companies
    12. Income tax credits on purchases of domestically produced 
equipment by FIEs

Provincial Subsidy Programs

    13. Program to rebate antidumping legal fees in Shenzen and 
Zhejiang provinces
    14. Funds for ``outward expansion'' of industries in Guangdong 
province
    15. Export interest subsidy funds for enterprises located in 
Shenzhen and Zhejiang province
    16. Loans pursuant to the Liaoning Province's five-year framework

[[Page 36671]]

Indirect Tax Programs and Import Tariff Program

    17. Export payments characterized as VAT rebates
    18. VAT and tariff exemptions on imported equipment
    19. VAT rebates on domestically produced equipment
    20. Exemption from payment of staff and worker benefits for export-
oriented enterprises

Grant Programs

    21. State Key Technology Renovation Program Fund
    22. Grants to loss-making state owned enterprises

Provision Of Goods Or Services For Less Than Adequate Remuneration

    23. Hot-rolled steel
    24. Electricity and natural gas
    25. Water
    26. Land

Government Restraints on Exports

    27. Zinc
    28. Hot-rolled steel
For further information explaining why the Department is investigating 
these programs, see CVD Initiation Checklist.
    We are postponing our investigation of the following program until 
such time as we select our respondents because the allegation is 
company-specific:
    1. Loans to uncreditworthy companies
For further information explaining why the Department is postponing 
investigation of this program, see CVD Initiation Checklist.
    We are not including in our investigation the following programs 
alleged to benefit producers and exporters of the subject merchandise 
in the PRC:
    1. Currency manipulation
    Petitioners allege that the GOC's policy of maintaining an 
undervalued RMB is an export subsidy that provides either a direct 
transfer of funds or the provision of a good or service at less than 
adequate remuneration. Petitioners have not sufficiently alleged the 
elements necessary for the imposition of a countervailing duty and did 
not support the allegation with reasonably available information. 
Therefore, we do not plan to investigate the currency manipulation 
program.
    2. Tax reduction for enterprises making little profit
    Petitioners allege that ``enterprises making little profit'' are a 
de jure specific group. Petitioners have not established with 
reasonably available evidence that ``enterprises making little profit'' 
are a de jure specific group pursuant to section 771(5A)(D)(i) of the 
Act. Therefore, we do not plan to investigate tax reduction for 
enterprises making little profit.
    3. Tax incentives for companies engaging in research and 
development
    Petitioners allege that ``domestic'' companies (i.e., companies 
that are not FIEs) are a de jure specific group. Petitioners have not 
established with reasonably available evidence that this program is de 
jure specific pursuant to section 771(5A)(D)(i) of the Act. Therefore, 
we do not plan to investigate tax incentives for ``domestic'' companies 
engaging in research and development.
    4. Exemption of CWP from export taxes
    Petitioners allege that CWP producers have been exempted from the 
export taxes that were imposed on 142 steel products effective June 1, 
2007. Petitioners have not sufficiently alleged, on the basis of 
reasonably available information, that CWP producers have been relieved 
from paying export taxes that would otherwise have been due. 
Consequently, we do not plan to investigation the exemption of CWP 
producers from export taxes.
    5. Funds for technology and research
    Petitioners allege that because the GOC did not provide the 
criteria for awarding funds under this program when they notified it to 
the Word Trade Organization, funds are awarded on a discretionary basis 
and, hence, specific. Petitioners have not adequately explained how 
this program is specific pursuant to section 771(5A)(D)(i) of the Act. 
Therefore, we do not plan to investigate funds for technology and 
research.
    6. Provision of goods or services for less than adequate 
remuneration - other companies
    Petitioners allege that the GOC's policy of combining steel 
companies results in the provision of productive assets to the combined 
companies at less than adequate remuneration. Petitioners have not 
sufficiently alleged the elements necessary for the imposition of a 
countervailing duty and did not support the allegation with reasonably 
available information. Consequently, we do not plan to investigate this 
program.
    7. Loan guarantees from government-owned banks
    As part of their Government Policy Lending allegation, petitioners 
include loan guarantees. To support this allegation, they point to a 
provincial guarantee program. However, the supporting evidence 
indicates that this program is for small and medium size enterprises, a 
non-specific group under our regulations. See 19 C.F.R. 351.502(e). 
Accordingly, we do not plan to investigate loan guarantees from 
government-owned banks.
    8. Loan to Huludao Economic Development Zone
    Petitioners identify a loan to the Huludao Economic Development 
Zone and suggest that some portion of the loan would likely have gone 
to a CWP producer in the zone. However, the supporting information 
indicates that the money was used to support infrastructure development 
within the zone. Therefore, we do not plan to investigate the loan to 
Huludao Economic Development Zone program.
    For further information explaining why the Department is not 
initiating an investigation of these programs, see CVD Initiation 
Checklist.

Application of the Countervailing Duty Law to the PRC

    Petitioners contend that there is no statutory bar to applying 
countervailing duties to imports from the PRC or any other non-market 
economy country. Citing Georgetown Steel, petitioners assert that the 
court deferred to the Department's conclusion that it did not have the 
authority to conduct a CVD investigation, but did not affirm the notion 
that the statute prohibits the Department from applying countervailing 
duties to NME countries. See Petition, Volume I, at 38 (citing 
Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986) 
(``Georgetown Steel'')). Petitioners further argue that Georgetown 
Steel is not applicable as the countervailing duty law (section 303 of 
the Tariff Act of 1930) involved in the court's decision has since been 
repealed and the statute has been amended to provide an explicit 
definition of a subsidy. See Petition, Volume I, at 39 (citing 777(5) 
of the Act). In addition, petitioners argue that the Chinese economy is 
entirely different from the economies investigated in Georgetown Steel 
and noted that the Department recently recognized in the CFS 
Investigation that the economic conditions of Georgetown Steel are not 
applicable to present-day China. See Petition, Volume I, at 41 (citing 
Coated Free Sheet Paper from the People's Republic of China; Amended 
Preliminary Affirmative Countervailing Duty Determination, 72 FR 17484, 
17486 (April 9, 2007) (``CFS Investigation''); and Memorandum for David 
M. Spooner, Assistant Secretary for Import Administration, entitled 
``Countervailing Duty Investigation of Coated Free Sheet Paper from The 
People's Republic of China Whether the Analytic Elements of the 
Georgetown Steel Opinion are Applicable to China's

[[Page 36672]]

Present-day Economy,'' (March 29, 2007) (``Georgetown Steel 
Memorandum'')). Petitioners argue that the conditions of the CWP sector 
of the PRC economy are substantially the same as the Department found 
them to be in the CFS Investigation. Consequently, the countervailing 
duty law should be applied to the PRC in this investigation.
    The Department has treated the PRC as an NME country in all past 
antidumping duty investigations and administrative reviews. In 
accordance with section 771(18)(C)(i) of the Act, any determination 
that a country is an NME country shall remain in effect until revoked 
by the administering authority. See Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, (``TRBs'') From the People's Republic 
of China: Preliminary Results of 2001-2002 Administrative Review and 
Partial Rescission of Review, 68 FR 7500, 7500-1 (February 14, 2003), 
unchanged in TRBs from the People's Republic of China: Final Results of 
2001-2002 Administrative Review, 68 FR 70488, 70488-89 (December 18, 
2003). In the CFS Investigation, the Department preliminarily 
determined that the current nature of China's economy does not create 
obstacles to applying the necessary criteria in the CVD law. As such, 
the Department determined that the policy that gave rise to the 
Georgetown Steel litigation does not prevent us from concluding that 
the PRC government has bestowed a countervailable subsidy upon a 
Chinese producer. See Georgetown Steel Memorandum. Therefore, because 
petitioners have provided sufficient allegations and support of their 
allegations to meet the statutory criteria for initiating a 
countervailing duty investigation of CWP paper from the PRC, we 
continue to find that Georgetown Steel does not preclude us from 
initiating this investigation. For further information, see CVD 
Initiation Checklist.

Distribution of Copies of the Petition

    In accordance with section 702(b)(4)(A)(i) of the Act, a copy of 
the public version of the petition has been provided to the Government 
of the PRC. As soon as and to the extent practicable, we will attempt 
to provide a copy of the public version of the petition to each 
exporter named in the petition, consistent with 19 CFR 351.203(c)(2).

ITC Notification

    We have notified the ITC of our initiation, as required by section 
702(d) of the Act.

Preliminary Determination by the ITC

    The ITC will preliminarily determine, within 25 days after the date 
on which it receives notice of the initiation, whether there is a 
reasonable indication that imports of subsidized CWP from the PRC are 
causing material injury, or threatening to cause material injury, to a 
U.S. industry. See section 703(a)(2) of the Act. A negative ITC 
determination will result in the investigation being terminated; 
otherwise, the investigation will proceed according to statutory and 
regulatory time limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    Dated: June 27, 2007.
Joseph A. Spetrini,
Deputy Assistant Secretary for Import Administration.
[FR Doc. E7-13014 Filed 7-3-07; 8:45 am]
BILLING CODE 3510-DS-S