[Federal Register Volume 72, Number 141 (Tuesday, July 24, 2007)]
[Notices]
[Pages 40281-40284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14277]


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DEPARTMENT OF COMMERCE

International Trade Administration

(C-570-915)


Notice of Initiation of Countervailing Duty Investigation: Light-
Walled Rectangular Pipe and Tube from the People's Republic of China

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

EFFECTIVE DATE: July 24, 2007.

FOR FURTHER INFORMATION CONTACT: Damian Felton, Shane Subler or Brandon 
Farlander, 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) 482-0189 and (202) 482-0182, respectively.

SUPPLEMENTARY INFORMATION:

The Petition

    On June 27, 2007, the Department of Commerce (``the Department'') 
received a petition filed in proper form by Allied Tube & Conduit; 
Atlas Tube; Bull Moose Tube Company; California Steel and Tube; 
EXLTUBE; Hannibal Industries; Levitt Tube Company LLC, Maruichi 
American Corporation; Searing Industries; Southland Tube; Vest Inc.; 
Welded Tube; and Western Tube and Conduit (collectively, 
``petitioners''). The Department received timely information from 
petitioners supplementing the petition on July 6, July 9 and July 12, 
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 light-walled rectangular (``LWR'') pipe and 
tube 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 merchandise that is the subject of this investigation is 
certain welded carbon-quality light-walled steel pipe and tube, of 
rectangular (including square) cross section (LWR), having a wall 
thickness of less than 4mm.
    The term carbon-quality steel includes both carbon steel and alloy 
steel which contains only small amounts of alloying elements. 
Specifically, the term carbon-quality includes products in which none 
of the elements listed below exceeds the quantity by weight 
respectively indicated: 1.80 percent of manganese, or 2.25 percent of 
silicon, or 1.00 percent of copper, or 0.50 percent of aluminum, or 
1.25 percent of chromium, or 0.30 percent of cobalt, or 0.40 percent of 
lead, or 1.25 percent of nickel, or 0.30 percent of tungsten, or 0.10 
percent of molybdenum, or 0.10 percent of niobium, or 0.15 percent 
vanadium, or 0.15 percent of zirconium. The description of carbon-
quality is intended to identify carbon-quality products within the 
scope. The welded carbon-quality rectangular pipe and tube subject to 
this investigation is currently classified under the Harmonized Tariff 
Schedule of the United States (``HTSUS'') subheadings 7306.61.50.00 and 
7306.61.70.60. While HTSUS subheadings are provided for convenience and 
Customs purposes, our written description of the scope of these 
investigations is dispositive.

Comments on Scope of Investigation

    During our review of the petition, we discussed the scope with the 
petitioners to ensure that it is an accurate reflection of the products 
for which the domestic industry is seeking relief. Moreover, as 
discussed in the preamble to the regulations (Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), 
we are setting aside a period for interested parties to raise issues 
regarding product coverage. The Department encourages all interested 
parties to submit such comments within 20 calendar days of the 
publication of this notice. Comments should be addressed to Import 
Administration's Central Records Unit (``CRU''), Room 1870, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230. The period of scope consultations is intended to 
provide the Department with ample opportunity to consider all comments 
and to consult with parties prior to the issuance of the preliminary 
determinations.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Government of the

[[Page 40282]]

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 July 16, 2007. See the 
Memoranda to The File, entitled, ``Consultations with Officials from 
the Government of the People's Republic of China'' (July 16, 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: (i) at least 
25 percent of the total production of the domestic like product; and 
(ii) 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 a 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''), 
which is responsible for determining whether ``the domestic industry'' 
has been injured, must also determine what constitutes a domestic like 
product in order to define the industry. While both the Department and 
the ITC must apply the same statutory definition regarding the domestic 
like product (section 771(10) of the Act), they do so for different 
purposes and pursuant to a separate and distinct authority. In 
addition, the Department's determination is subject to limitations of 
time and information. Although this may result in different definitions 
of the like product, such differences do not render the decision of 
either agency contrary to law. See USEC, Inc. v. United States, 132 F. 
Supp. 2d 1, 8 (CIT 2001), citing Algoma Steel Corp. Ltd. v. United 
States, 688 F. Supp. 639, 644 (1988), aff'd 865 F.2d 240 (Fed. Cir. 
1989), cert. denied 492 U.S. 919 (1989).
    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 the 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 submitted on 
the record, we have determined that LWR pipe and tube constitutes a 
single domestic like product and we have analyzed industry support in 
terms of that domestic like product. For a discussion of the domestic 
like product analysis in this case, see Countervailing Duty 
Investigation Initiation Checklist: Light-Walled Rectangular Pipe and 
Tube from the People's Republic of China, (China Initiation Checklist) 
at Attachment II, (Analysis of Industry Support), on file in the 
Central Records Unit, Room B-099 of the main Department of Commerce 
building.
    In determining whether petitioners have standing (i.e., those 
domestic workers and producers supporting 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), we considered the 
industry support data contained in the petition with reference to the 
domestic like product as defined in Attachment I, (Scope of the 
Petition), to the China Initiation Checklist. To establish industry 
support, petitioners provided their production of the domestic like 
product for the year 2006, and compared that to production of the 
domestic like product for the industry. For further discussion see the 
China Initiation Checklist at Attachment II (Analysis of Industry 
Support).
    Our review of the data provided in the petition, supplemental 
submissions, and other information readily available to the Department 
indicates that petitioners have established industry support. First, 
the domestic producers have met the statutory criteria for industry 
support under section 702(c)(4)(A)(i) of the Act 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. Second, 
the domestic producers have met the statutory criteria for industry 
support under section 702(c)(4)(A)(ii) of the Act 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. Because the petition established support from domestic 
producers (or workers) accounting for more than 50 percent of the total 
production of the domestic like product, the Department is not required 
to take further action in order to evaluate industry support (e.g., 
polling). See section 702(c)(4)(D) of the Act. 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 the China Initiation Checklist at Attachment II (Analysis of 
Industry Support).
    The Department finds that petitioners filed the petition on behalf 
of the domestic industry because they are an interested party as 
defined in sections 771(9)(C) and (D) of the Act and they have 
demonstrated sufficient industry support with respect to the 
countervailing duty investigation that they are requesting the 
Department initiate. See China Initiation Checklist at Attachment II 
(Analysis of Industry Support).

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 LWR pipe and tube 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 LWR pipe and tube. 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 industry's injured condition is 
illustrated by

[[Page 40283]]

reduced market share, lost sales, reduced production, reduced capacity 
and capacity utilization rate, reduced shipments and increased 
inventories, underselling and price depression or suppression, lost 
revenue, reduced employment, decline in financial performance and 
increase in import penetration. We have assessed the allegations and 
supporting evidence regarding material injury and causation, and we 
have determined that these allegations are properly supported by 
adequate evidence and meet the statutory requirements for initiation. 
See China Initiation Checklist at Attachment III (Injury).

Initiation of Countervailing Duty Investigation

    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 LWR pipe and tube 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 LWR pipe and tube in the PRC 
receive countervailable subsidies. For a discussion of evidence 
supporting our initiation determination, see China 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'' program
    4. Income tax exemption program 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 Zhejiang province
    14. Export interest subsidy funds for enterprises located in 
Zhejiang province
    15. Loans pursuant to the Liaoning Province's five-year framework
    Indirect Tax Programs and Import Tariff Program
    16. Export payments characterized as VAT rebates
    17. VAT and tariff exemptions on imported equipment
    18. VAT rebates on domestically produced equipment
    19. Exemption from payment of staff and worker benefits for export-
oriented enterprises
    Grant Programs
    20. State Key Technology Renovation Program Fund
    21. Grants to loss-making state owned enterprises
    Provision Of Goods Or Services For Less Than Adequate Remuneration
    22. Hot-rolled steel
    23. Electricity and natural gas
    24. Water
    25. Land
    Government Restraints on Exports
    26. Zinc
    27. Hot-rolled steel
    For further information explaining why the Department is 
investigating these programs, see China 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 China 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 Government of China's (``GOC'') 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 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.
    3. Exemption of LWR pipe and tube from export taxes
    Petitioners allege that LWR pipe and tube 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 LWR pipe and tube 
producers have been relieved from paying export taxes that would 
otherwise have been due. Consequently, we do not plan to investigation 
the exemption of LWR pipe and tube producers from export taxes.
    4. 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 World 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.
    5. 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.
    6. Loan guarantees from government-

[[Page 40284]]

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.
    7. Program to rebate antidumping legal fees in Shenzhen province
    Petitioners allege that the GOC is reimbursing legal fees to local 
companies located in the Shenzhen province that are facing antidumping 
duty investigations abroad. However, petitioners did not demonstrate 
that producers of LWR pipe and tube are located in the Shenzhen 
Province or explain why such information is unavailable. Therefore, we 
do not recommend investigating the program to rebate antidumping legal 
fees in the Shenzhen province.
    8. Export interest subsidy funds for enterprises located in 
Shenzhen province
    Petitioners allege that producers of LWR pipe and tube with 
specific export volumes are eligible for export interest subsidies for 
merchandise produced in the Shenzhen province. However, petitioners did 
not demonstrate that producers of LWR pipe and tube are located in the 
Shenzhen province, or explain why such information is unavailable. 
Therefore, we do not recommend investigating the program for export 
interest subsidy funds for enterprises located in Shenzhen province.
    9. Funds for ``outward expansion'' of industries in Guangdong 
province
    Petitioners allege that eligible LWR pipe and tube producers in the 
Guangdong province may apply for special funding for the development of 
export activities. However, Petitioners did not demonstrate that 
producers of LWR pipe and tube are located in the Guangdong province or 
explain why such information is unavailable. Therefore, we do not 
recommend investigating the program of the funds for outward expansion 
of industries in Guangdong province.
    10. Domestic VAT refunds for companies located in the Hainan 
economic development zone
    This program was found to be preliminarily countervailable in CFS 
Investigation. See Coated Free Sheet Paper from the People's Republic 
of China; Amended Preliminary Affirmative Countervailing Duty 
Determination, 72 FR 17484, 17496 (April 9, 2007) (``CFS 
Investigation''). However, petitioners did not demonstrate that 
producers of LWR pipe and tube are located in the Hainan economic 
development zone or explain why such information is unavailable. 
Therefore, we do not recommend investigating the program on domestic 
VAT refunds for companies located in the Hainan economic development 
zone.
    For further information explaining why the Department is not 
initiating an investigation of these programs, see China Initiation 
Checklist.

Application of the Countervailing Duty Law to the PRC

    Petitioners argue that the Department recently concluded that CVD 
law may be applied to the present-day Chinese economy and, thus, the 
Department should continue to find that the countervailing duty law 
applies to the PRC in this investigation. See Petition, Volume III, at 
page 2 (citing CFS Investigation, 72 FR 17484, 17486; 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 Present-Day 
Economy,'' (March 29, 2007) (citing Georgetown Steel Corp. v. United 
States, 801 F.2d 1308 (Fed. Cir. 1986) (``Georgetown Steel'') 
(``Georgetown Steel Memorandum'')).
    The Department has treated the PRC as a non-market economy 
(``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 for their allegations to meet the statutory criteria for 
initiating a countervailing duty investigation of LWR pipe and tube 
from the PRC, we continue to find that Georgetown Steel does not 
preclude us from initiating this investigation. For further 
information, see China 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 LWR pipe and tube 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: July 17, 2007.
Joseph A. Spetrini,
Deputy Assistant Secretary for Import Administration.
[FR Doc. E7-14277 Filed 7-19-07; 8:45 am]
BILLING CODE 3510-DS-S