[Federal Register Volume 72, Number 241 (Monday, December 17, 2007)]
[Notices]
[Pages 71360-71377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-24397]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-913]


Certain New Pneumatic Off-the-Road Tires from the People's 
Republic of China: Preliminary Affirmative Countervailing Duty 
Determination

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are being provided to 
producers and exporters of certain new pneumatic off-the-road tires 
(OTR tires) from the People's Republic of China (PRC). For information 
on the estimated subsidy rates, see the ``Suspension of Liquidation'' 
section of this notice. Interested parties are invited to comment on 
this preliminary determination. See ``Disclosure and Public Comment'' 
section below for procedures on filing comments.

EFFECTIVE DATE: December 17, 2007.

FOR FURTHER INFORMATION CONTACT: Mark Hoadley, Jun Jack Zhao, or 
Nicholas Czajkowski, AD/CVD Operations, Office 6, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230; telephone: (202) 482-3148, (202) 482-1396, and (202) 482-1395, 
respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The following events have occurred since the publication of the 
Department's notice of initiation in the Federal Register. See Certain 
New Pneumatic Off-the-Road Tires From the People's Republic of China: 
Initiation of Countervailing Duty Investigation, 72 FR

[[Page 71361]]

44122 (August 7, 2007) (Initiation Notice).
    On August 17, 2007, the Department selected, as mandatory 
respondents, the three largest Chinese producers/exporters of OTR tires 
that could reasonably be examined: Guizhou Tire Co., Ltd. (Guizhou 
Tire), Hebei Starbright Tire Co., Ltd. (Starbright), and Tianjin United 
Tire & Rubber International Co., Ltd. (TUTRIC). See Memorandum to 
Stephen J. Claeys, Deputy Assistant Secretary for Import 
Administration, ``Respondent Selection'' (August 17, 2007). This 
memorandum is on file in the Department's Central Records Unit in Room 
B-099 of the main Department building (CRU). On that same day, we 
issued a countervailing duty (CVD) questionnaire to the Government of 
the People's Republic of China (GOC), requesting the GOC forward the 
company sections of the questionnaire to the mandatory respondents.
    On August 27, 2007, the International Trade Commission (ITC) issued 
its affirmative preliminary determination that there is a reasonable 
indication that an industry in the United States is materially injured 
by reason of allegedly subsidized imports of OTR tires from China. See 
Certain Off-the-Road Tires From China, Investigation Nos. 701-TA-448 
and 731-TA-1117 (Preliminary), 72 FR 50699 (September 4, 2007).
    On September 17, 2007, we published a postponement of the 
preliminary determination of this investigation until December 7, 2007. 
See Certain New Pneumatic Off-the-Road Tires from the People's Republic 
of China: Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 72 FR 52859 (September 17, 2007).
    On August 20, 2007, Aeolus Tyre Co., Ltd. (Aeolus) submitted a 
request to be a voluntary respondent in this investigation; on 
September 20, 2007, Aeolus renewed its request to be a conditional 
voluntary respondent. Aeolus' request was conditioned on certain 
eventualities, such as being selected as a respondent in the 
accompanying antidumping investigation, which it was not. On September 
24, 2007, petitioners submitted comments to the Department arguing we 
should reject Aeolus's request to be a voluntary respondent. On October 
3, Aeolus withdrew its request.
    On October 5, 2007, we initiated an investigation of several new 
subsidy allegations. See Memorandum to the File, ``Countervailing Duty 
Investigation on Certain New Pneumatic Off-the-Road Tires from the 
People's Republic of China: Initiation Analysis for New Subsidy 
Allegations'' (October 5, 2007). The allegations were submitted on 
August 24 by Titan Tire Corporation and United Steel, Paper and 
Forestry, Rubber, Manufacturing, Energy Allied Industrial and Service 
Workers International Union, AFL-CIO-CLC (collectively, petitioners) 
and on September 5 by Bridgestone Americas Holding, Inc. and its 
subsidiary, Bridgestone Firestone North America Tire, LLC 
(collectively, Bridgestone), a U.S. domestic producer of OTR tires.\1\ 
Petitioners submitted additional information supporting their new 
allegations on September 5; Bridgestone submitted additional 
information supporting its new allegation on September 19 and October 
1. On September 21 and September 26, the GOC, Starbright and TUTRIC 
submitted comments on these new subsidy allegations. On October 5, we 
issued questionnaires concerning these new allegations to the GOC and 
the mandatory respondents.
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    \1\ Since Bridgestone is a U.S. producer, it meets the 
definition of interested party as set forth in section 771(9) of the 
Tariff Act of 1930, as amended (the Act).
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    On October 15, 2007, we received responses to our initial 
questionnaire from the GOC, Guizhou Tire, Starbright, and TUTRIC. On 
October 19 and 22, Bridgestone submitted comments regarding the 
questionnaire responses from the GOC, Guizhou Tire, Starbright, and 
TUTRIC; also on October 22 and 23, petitioners submitted comments 
regarding the questionnaire responses from the GOC, Guizhou Tire, 
Starbright, and TUTRIC. On October 29, we received responses to our 
questionnaires concerning the new subsidy allegations from the GOC, 
Guizhou Tire, Starbright, and TUTRIC. On November 1, 2 and 5, 
Bridgestone submitted comments regarding the new subsidy allegation 
questionnaire responses from the GOC, Guizhou Tire, Starbright, and 
TUTRIC; and on November 2 and 5, petitioners submitted comments 
regarding the new subsidy allegation questionnaire responses from the 
GOC, Guizhou Tire, Starbright, and TUTRIC. Supplemental questionnaires 
regarding all these submissions were issued to Guizhou Tire, 
Starbright, and TUTRIC on November 9, and to the GOC on November 14. We 
received responses on November 27, 2007.
    In our initial questionnaire, we asked for information concerning 
alleged subsidies received during the period 1993 through the POI 
(based on our finding in accordance with section 351.524(d)(2) that the 
average useful life (AUL) of assets used in producing OTR Tires was 14 
years). In our supplemental questionnaires, we limited our inquiry to 
subsidies received during or after 2001, pursuant to a recent 
preliminary determination that December 11, 2001 (the date on which the 
PRC became a WTO member) was the uniform date from which the Department 
will identify and measure subsidies for purposes of the CVD law.\2\ 
However, given that the final determination regarding this uniform date 
will not be issued before March 18, 2008, the Department, on November 
21, informed the GOC and the three OTR tire respondents that 
information was required for all non-recurring subsidies received 
during the AUL. The deadline for submitting information concerning pre-
2001 subsidies is currently December 12, 2007.
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    \2\ Circular Welded Carbon Quality Steel Pipe from the People's 
Republic of China: Preliminary Affirmative Countervailing Duty 
Determination; Preliminary Affirmative Determination of Critical 
Circumstances; and Alignment of Final Countervailing Duty 
Determination with Final Antidumping Duty Determination, 72 FR 
63875, 63880 (November 13, 2007) (CWP Preliminary)
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    On November 14, 2007, the Department initiated an investigation of 
an additional new subsidy allegation pertaining only to Guizhou Tire, 
pursuant to information submitted by petitioners on October 23 and 
additional information on November 2. See Countervailing Duty 
Investigation of Certain New Pneumatic Off-the-Road Tires from the 
People's Republic of China: Initiation Analysis for New Subsidy 
Allegation (November 14, 2007). On that same day, November 14, we also 
issued a questionnaire concerning this allegation to the GOC and 
Guizhou Tire. The deadline for responding to this questionnaire is 
currently December 10, 2007. We intend to issue an interim analysis 
describing our preliminary findings with respect to this program before 
the final determination so that parties will have the opportunity to 
comment on our findings before the final determination.
    On November 9, 2007, petitioners submitted comments on loan 
benchmarks. On November 28, 29 and 30, respectively, Bridgestone, 
petitioners and the GOC submitted pre-preliminary comments. On December 
4, Starbright and TUTRIC submitted pre-preliminary comments. On 
December 5, Starbright submitted additional pre-preliminary comments.

Scope of the Investigation

    The products covered by the scope of this investigation are new 
pneumatic

[[Page 71362]]

tires designed for off-the-road (OTR) and off-highway use, subject to 
exceptions identified below. Certain OTR tires are generally designed, 
manufactured and offered for sale for use on off-road or off-highway 
surfaces, including but not limited to, agricultural fields, forests, 
construction sites, factory and warehouse interiors, airport tarmacs, 
ports and harbors, mines, quarries, gravel yards, and steel mills. The 
vehicles and equipment for which certain OTR tires are designed for use 
include, but are not limited to: (1) agricultural and forestry vehicles 
and equipment, including agricultural tractors,\3\ combine 
harvesters,\4\ agricultural high clearance sprayers,\5\ industrial 
tractors,\6\ log-skidders,\7\ agricultural implements, highway-towed 
implements, agricultural logging, and agricultural, industrial, skid-
steers/mini-loaders; \8\ (2) construction vehicles and equipment, 
including earthmover articulated dump products, rigid frame haul 
trucks,\9\ front endloaders,\10\ dozers,\11\ lift trucks, straddle 
carriers,\12\ graders,\13\ mobile cranes, compactors; and (3) 
industrial vehicles and equipment, including smooth floor, industrial, 
mining, counterbalanced lift trucks, industrial and mining vehicles 
other than smooth floor, skid-steers/mini-loaders, and smooth floor 
off-the-road counterbalanced lift trucks.\14\ The foregoing list of 
vehicles and equipment generally have in common that they are used for 
hauling, towing, lifting, and/or loading a wide variety of equipment 
and materials in agricultural, construction and industrial settings. 
The foregoing descriptions are illustrative of the types of vehicles 
and equipment that use certain OTR tires, but are not necessarily all-
inclusive. While the physical characteristics of certain OTR tires will 
vary depending on the specific applications and conditions for which 
the tires are designed (e.g., tread pattern and depth), all of the 
tires within the scope have in common that they are designed for off-
road and off-highway use. Except as discussed below, OTR tires included 
in the scope of the petitions range in size (rim diameter) generally 
but not exclusively from 8 inches to 54 inches. The tires may be either 
tube-type or tubeless, radial or non-radial, and intended for sale 
either to original equipment manufacturers or the replacement market. 
The subject merchandise is currently classifiable under Harmonized 
Tariff Schedule of the United States (HTSUS) subheadings: 
4011.20.10.25, 4011.20.10.35, 4011.20.50.30, 4011.20.50.50, 
4011.61.00.00, 4011.62.00.00, 4011.63.00.00, 4011.69.00.00, 
4011.92.00.00, 4011.93.40.00, 4011.93.80.00, 4011.94.40.00, and 
4011.94.80.00. While HTSUS subheadings are provided for convenience and 
Customs purposes, our written description of the scope is dispositive.
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    \3\ Agricultural tractors are four-wheeled vehicles usually with 
large rear tires and small front tires that are used to tow farming 
equipment.
    \4\ Combine harvesters are used to harvest crops such as corn or 
wheat.
    \5\ Agricultural sprayers are used to irrigate agricultural 
fields
    \6\ Industrial tractors are four-wheeled vehicles usually with 
large rear tires and small front tires that are used to tow 
industrial equipment.
    \7\ A log skidder has a grappling lift arm that is used to 
grasp, lift and move trees that have been cut down to a truck or 
trailer for transport to a mill or other destination.
    \8\ Skid-steer loaders are four-wheel drive vehicles with the 
left-side drive wheels independent of the right-side drive wheels 
and lift arms that lie alongside the driver with the major pivot 
points behind the driver's shoulders. Skid-steer loaders are used in 
agricultural, construction and industrial settings.
    \9\ Haul trucks, which may be either rigid frame or articulated 
(i.e., able to bend in the middle) are typically used in mines, 
quarries and construction sites to haul soil, aggregate, mined ore, 
or debris.
    \10\ Front loaders have lift arms in front of the vehicle. It 
can scrape material from one location to another, carry material in 
its bucket or load material into a truck or trailer.
    \11\ A dozer is a large four-wheeled vehicle with a dozer blade 
that is used to push large quantities of soil, sand, rubble, etc., 
typically around construction sites. They can also be used to 
perform ``rough grading'' in road construction.
    \12\ A straddle carrier is a rigid frame, engine-powered machine 
that is used to load and offload containers from container vessels 
and load them onto (or off of) tractor trailers.
    \13\ A grader is a vehicle with a large blade used to create a 
flat surface. Graders are typically used to perform ``finish 
grading.'' Graders are commonly used in maintenance of unpaved roads 
and road construction to prepare the base course onto which asphalt 
or other paving material will be laid.
    \14\ A counterbalanced lift truck is a rigid frame, engine-
powered machine with lift arms that has additional weight 
incorporated into the back of the machine to offset or 
counterbalance the weight of loads that it lifts so as to prevent 
the vehicle from overturning. An example of a counterbalanced lift 
truck is a counterbalanced fork lift truck. Counterbalanced lift 
trucks may be designed for use on smooth floor surfaces, such as a 
factory or warehouse, or other surfaces, such as construction sites, 
mines, etc.
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    Specifically excluded from the scope are new pneumatic tires 
designed, manufactured and offered for sale primarily for on-highway or 
on-road use, including passenger cars, race cars, station wagons, sport 
utility vehicles, minivans, mobile homes, motorcycles, bicycles, on-
road or on-highway trailers, light trucks, and trucks and buses. Such 
tires generally have in common that the symbol ``DOT'' must appear on 
the sidewall, certifying that the tire conforms to applicable motor 
vehicle safety standards. Such excluded tires may also have the 
following designations that are used by the Tire and Rim Association:

Prefix letter designations:

 P - Identifies a tire intended primarily for service on 
passenger cars;
 LT - Identifies a tire intended primarily for service on light 
trucks; and,
 ST - Identifies a special tire for trailers in highway 
service.

Suffix letter designations:

 TR - Identifies a tire for service on trucks, buses, and other 
vehicles with rims having specified rim diameter of nominal plus 
0.156'' or plus 0.250'';
 MH - Identifies tires for Mobile Homes;
 HC - Identifies a heavy duty tire designated for use on ``HC'' 
15'' tapered rims used on trucks, buses, and other vehicles. This 
suffix is intended to differentiate among tires for light trucks, and 
other vehicles or other services, which use a similar designation. 
Example: 8R17.5 LT, 8R17.5 HC;
 LT - Identifies light truck tires for service on trucks, 
buses, trailers, and multipurpose passenger vehicles used in nominal 
highway service; and
 MC - Identifies tires and rims for motorcycles.
    The following types of tires are also excluded from the scope: 
pneumatic tires that are not new, including recycled or retreaded tires 
and used tires; non-pneumatic tires, including solid rubber tires; 
tires of a kind used on aircraft, all-terrain vehicles, and vehicles 
for turf, lawn and garden, golf and trailer applications; and, tires of 
a kind used for mining and construction vehicles and equipment that 
have a rim diameter equal to or exceeding 39 inches. Such tires may be 
distinguished from other tires of similar size by the number of plies 
that the construction and mining tires contain (minimum of 16) and the 
weight of such tires (minimum 1500 pounds).

Scope Comments

    In accordance with the preamble to the Department's regulations, in 
our Initiation Notice we set aside a period of time for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of the 
Initiation Notice. See Antidumping Duties; Countervailing Duties, 62 FR 
27296, 27323 (May 19, 1997) (Preamble) and Initiation Notice, 72 FR at 
41222. On August 20, 2007, the following parties submitted comments 
concerning both the scope of this investigation and the identical scope 
of the companion antidumping duty

[[Page 71363]]

investigation: Petitioners, Bridgestone, Carlisle Tire and Wheel 
Company, Guizhou Tire, and Valmont Industries, Inc. On August 21, 
comments on the scope were submitted to both records by Agri-Fab, Inc. 
On August 27, rebuttal comments were filed on both records by 
petitioners, Bridgestone, and Guizhou Tire. The Department will address 
the issues raised by these parties with regard to both investigations 
in the preliminary determination of the antidumping duty investigation 
currently scheduled for February 5, 2008.

Application of the Countervailing Duty Law to Imports from the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) and 
the accompanying Issues and Decision Memorandum (CFS Final). In that 
determination, the Department found that ``given the substantial 
differences between the Soviet-style economies and the PRC's economy in 
recent years, the Department's previous decision not to apply the CVD 
law to these Soviet-style economies does not act as a bar to proceeding 
with a CVD investigation involving products from China.'' See CFS Final 
at Comment 6. This decision was also affirmed in three recent 
preliminary determinations. See CWP Preliminary, 72 FR at 63880, 
Laminated Woven Sacks from the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination; Preliminary Affirmative 
Determination of Critical Circumstances; and Alignment of Final 
Countervailing Duty Determination with Final Antidumping Duty 
Determination, 72 FR 67893 (December 3, 2007) (LWS Preliminary), and 
Light-walled Rectangular Pipe and Tube from the People's Republic of 
China: Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination with Final 
Antidumping Duty Determination, 72 FR 67703 (November 30, 2007).
    For the reasons stated in CWP Preliminary, we are using the date of 
December 11, 2001, the date on which the PRC became a member of the 
WTO, as the date from which the Department will identify and measure 
subsidies in the PRC for purposes of this preliminary determination. 
Id. As explained in CWP Preliminary, prior to December 11, 2001, there 
were many changes in the PRC's economy. Many of the obligations 
undertaken by the PRC pursuant to its accession to the WTO were in line 
with the PRC's objective of economic reform. See, e.g., Report of the 
Working Party on the Accession of China, WT/ACC/CHN/49 (October 1, 
2001) at paragraph 4 (found at www.wto.org). Taken together, these 
changes permit the Department to determine whether the GOC has bestowed 
a countervailable subsidy on Chinese producers. See CFS Final at 
Comments 1 and 6. Finally, the GOC acknowledged the changing nature of 
its economy insofar as its accession protocol contemplates the 
application of the CVD law to the PRC, even while it remains a non-
market economy (NME). See Protocol of Accession of the People's 
Republic of China, WT/L/432 (November 23, 2001) at section 15(b) (found 
at www.wto.org); see, also, CFS Final at Comment 1. Therefore, for this 
preliminary determination, we have selected the date of December 11, 
2001, as the date from which we will measure countervailable subsidies 
in the PRC.

Period of Investigation

    The period for which we are measuring subsidies, or the POI, is 
calendar year 2006.

Subsidies Valuation Information

Allocation Period

    The allocation period for non-recurring subsidies is normally the 
AUL as described in 19 CFR 351.524(d)(2). The AUL applicable to the OTR 
tire industry is 14 years according to the U.S. Internal Revenue 
Service's 1977 Class Life Asset Depreciation Range System. No party in 
this proceeding has disputed this allocation period.

Cross-Ownership

    The Department's regulations at section 351.525(b)(6)(vi) state 
that cross-ownership exists between corporations if one corporation can 
use or direct the individual assets of the other corporation(s) in 
essentially the same way it uses its own. This section of the 
Department's regulations states that this standard will normally be met 
where there is a majority voting interest between two corporations or 
through common ownership of two (or more) corporations. Section 
351.525(b)(6)(iii) of the Department's regulations states that ``if the 
firm that received the subsidy is a holding company, including a parent 
company with its own operations, the Secretary will attribute the 
subsidy to the consolidated sales of the holding company and its 
subsidiaries.'' The Court of International Trade (CIT) has upheld the 
Department's authority to attribute subsidies based on whether a 
company could use or direct the subsidy benefits of another company in 
essentially the same way it could use its own subsidy benefits. See 
Fabrique de Fer de Charleroi v. United States, 166 F. Supp. 2d. 593, 
604 (CIT 2001).
    Guizhou Tire reported that it is affiliated with numerous 
companies. Of these, according to Guizhou Tire, two are involved in the 
production or sale of subject merchandise: Guizhou Advance Rubber Co., 
Ltd. (Guizhou Rubber), a producer of subject merchandise, and Guizhou 
Tire I&E Corp. (GTCIE), which serves as Guizhou Tire's export 
department for OTR tires.\15\ Guizhou Tire owns 98.75 percent of 
Guizhou Rubber and 100 percent of GTCIE. Therefore, pursuant to 19 CFR 
351.525(b)(6)(vi), we preliminarily determine that Guizhou Tire is 
cross-owned with Guizhou Rubber, and, pursuant to 19 CFR 
351.525(b)(6)(ii), we are attributing the subsidies received by Guizhou 
Tire and Guizhou Rubber to the combined sales of Guizhou Tire and 
Guizhou Rubber. Pursuant to 19 CFR 351.525(c), we are cumulating the 
benefits from subsidies provided to GTCIE with benefits from subsidies 
provided to Guizhou Tire. Both Guizhou Rubber and GTCIE have provided 
responses to the Department's questionnaires.
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    \15\ A third company is involved in domestic distribution.
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    TUTRIC also reported numerous affiliations. Of these, one is a 
state-owned parent company, described by TUTRIC as a ``holding 
company,'' and another is a supplier of carbon black, Dolphin Carbon 
Black (DCB), an input consumed in the production of tires. TUTRIC 
reports that the input supplier is also a subsidiary of the holding 
company. The others are either located outside the PRC or not involved 
in the production or sale of subject merchandise.\16\ Our analysis 
indicates that the holding company and the input supplier are 
essentially the same entity and that this entity controls TUTRIC. (The 
details of this analysis are business proprietary and are discussed in 
the Memorandum to Thomas Gilgunn, Program Manager, AD/CVD Operations,

[[Page 71364]]

Office 6, from Mark Hoadley, Case Analyst, ``TUTRIC's Cross-Ownership'' 
(December 7, 2007).) As such, pursuant to 19 CFR 351.525(b)(6)(vi), we 
preliminarily determine that TUTRIC is cross-owned with its parent/
holding company, and, pursuant to 19 CFR 351.525(b)(6)(iii), we are 
attributing the subsidies received by its parent/holding company to the 
combined sales of TUTRIC and the parent/holding company (hereinafter, 
DCB).
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    \16\ TUTRIC also claims affiliation with Starbright, one of the 
other two respondents in this case, based on both companies having a 
relationship with GPX International Tire Co. (GPX). Starbright also 
makes this claim. GPX is the sole owner of Starbright, and the 
nature of its relationship with TUTRIC is business proprietary. The 
Department, however, preliminarily determines that neither TUTRIC's 
relationship with GPX or Starbright rises to the level of cross-
ownership. TUTRIC does not share board members or officers with 
these companies, for example, and the facts otherwise do not 
demonstrate that TUTRIC and either of these companies could ``use or 
direct the individual assets of the other corporation(s) in 
essentially the same ways it can use its own assets.'' 19 CFR 
351.525(b)(6)(vi).
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Denominator

    When selecting an appropriate denominator for use in calculating 
the ad valorem subsidy rate, the Department considered the basis for 
respondents' receipt of benefits under each program at issue. We have 
preliminarily found that TUTRIC's, Guizhou Tire's, and Starbright's 
receipt of benefits under the programs found countervailable was not 
tied to export performance or to the production of a particular 
product. As such, for subsidies received by TUTRIC, Guizhou Tire, or 
Starbright, we are using that company's sales (and those of its cross-
owned affiliates where applicable) of all products as the denominator 
in our calculations. See 19 CFR 351.525(b)(3).
    As discussed in the ``Cross-Ownership'' section above, Guizhou Tire 
is cross-owned with Guizhou Rubber, a producer of subject merchandise 
that received benefits that were not tied to export performance or to 
the production of a particular product. As such, for benefits received 
by Guizhou Rubber, we are using total sales of all products by Guizhou 
Tire and its cross-owned producer of subject merchandise (less any 
internal sales between Guizhou Tire and its cross-owned producer) as 
the denominator in our calculations. See 19 CFR 351.525(b)(6)(iv).
    Also as discussed in the ``Cross-Ownership'' section above, we have 
preliminarily found that TUTRIC is cross-owned with a parent company 
that received subsidies that were not tied to export performance or to 
the production of a particular product. As such, for benefits received 
by TUTRIC's cross-owned parent company, we are using total sales of all 
products by TUTRIC and its cross-owned parent company (less any 
internal sales between TUTRIC and its cross-owned parent company) as 
the denominators in our calculations. See 19 CFR 351.525(b)(6)(iii).

Change In Ownership

    Starbright states that it was created in 2006 when it purchased 
substantially all the assets of Hebei Tire Co., Ltd. (Hebei Tire). 
Starbright claims that it is unable to provide information concerning 
subsidies received by Hebei Tire before the purchase, but that Hebei 
Tire had never been a (foreign invested enterprise) (FIE) and had not 
been an SOE since 2000. Starbright also claims it purchased Hebei Tire 
at arm's length and for fair market value, and responded to the 
Department's standard change-in-ownership appendix. In doing so, it 
claims the sale was at arm's length, as it had no relationship with 
Hebei Tire and no relationship with the GOC. It also provides a 
reconciliation between the assets it purchased and their assessed 
value, thus, according to Starbright, demonstrating they were purchased 
at fair market value. Starbright also provides a reconciliation between 
the debt it paid off on behalf of Hebei Tire and the lending section of 
Hebei Tire's balance sheet at the approximate time of sale.
    Petitioners and Bridgestone have stated their concerns with the 
failure of Starbright and the GOC to provide information concerning 
past non-recurring subsidies received by Hebei Tire that might continue 
to be benefitting Starbright. In particular, these parties are 
concerned that Hebei Tire may have benefitted from debt forgiveness 
provided by Hebei Province prior to the sale of the company to 
Starbright, one of the new subsidy allegations on which the Department 
initiated an investigation on October 5. In addition, according to 
petitioners and Bridgestone, it is clear from the record that Hebei 
Tire had loans from state-owned commercial banks and acquired land-use 
rights from the GOC, two more potential sources of non-recurring 
subsidies.
    The Department determines that additional information is needed 
before a full evaluation of this change in ownership can be made. Among 
other things, further information is required to determine whether 
Hebei Tire was an SOE or was otherwise related to or controlled by the 
GOC at the time of sale, as this impacts the application of our change 
in ownership methodology. This determination involves examining 
particular PRC entities and their relationship to the government that 
the Department has not yet examined within the context of a CVD 
investigation. Furthermore, regardless of Hebei Tire's relationship to 
the GOC, the Department needs additional information on exactly what 
happened before the transaction with respect to Hebei Tire and what 
role the GOC played in this transaction, and all of its elements. As 
such, the Department intends, following this preliminary determination, 
to issue additional questionnaires to provide Starbright and the GOC an 
additional opportunity to provide that information. We intend to issue 
an interim analysis describing our preliminary findings with respect to 
this program before the final determination so that parties will have 
the opportunity to comment on our findings before the final 
determination.

Loan Benchmarks

    Summary: The Department is investigating loans received by 
respondents from Chinese banks, including state-owned commercial banks 
(SOCBs), which are alleged to have been granted on a preferential, non-
commercial basis. Section 771(5)(E)(ii) of the Act explains that the 
benefit for loans is the ``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.'' Normally, the Department uses comparable commercial 
loans reported by the company for benchmarking purposes. See 19 CFR 
351.505(a)(2)(i). However, the Department does not treat loans from 
government banks as commercial if they were provided pursuant to a 
government program. See 19 CFR 351.505(a)(2)(ii). Because the loans 
provided to the respondents by SOCBs are under the Government Policy 
Lending program, as explained below, these loans are the very loans for 
which we require a suitable benchmark. Additionally, if respondents 
received any loans from foreign banks, these would be unsuitable for 
use as benchmarks because, as explained in detail in CFS Final, the 
GOC's intervention in the banking sector creates significant 
distortions, restricting and influencing even foreign banks within the 
PRC. See CFS Final at Comments 8 and 10.
    If the firm did not have any comparable commercial loans during the 
period, the Department's regulations provide that we ``may use a 
national interest rate for comparable commercial loans.'' See 19 CFR 
351.505(a)(3)(ii). However, the Chinese national interest rates are not 
reliable as benchmarks for these loans because of the pervasiveness of 
the GOC's intervention in the banking sector. Loans provided by Chinese 
banks reflect significant government intervention and do not reflect 
the rates that would be found in a functioning market. See CFS Final at 
Comment 10.
    The statute directs that the benefit is normally measured by 
comparison to a ``loan that the recipient could actually obtain on the 
market.'' See section

[[Page 71365]]

771(5)(E)(ii) of the Act. Thus, the benchmark should be a market-based 
benchmark, yet, there is not a functioning market for loans within the 
PRC. Therefore, because of the special difficulties inherent in using a 
Chinese benchmark for loans, the Department is selecting a market-based 
benchmark interest rate based on the inflation-adjusted interest rates 
of countries with similar per capita gross income (GNI) to the PRC, 
using the same regression-based methodology that we employed in CFS 
Final. See CFS Final at Comment 10.
    The use of an external benchmark is consistent with the 
Department's practice. For example, in Softwood Lumber, the Department 
used U.S. timber prices to measure the benefit for government provided 
timber in Canada. See Final Results of the Countervailing Duty 
Investigation of Certain Softwood Lumber Products from Canada, 67 FR 
15545 (April 2, 2002), and accompanying Issues and Decision Memorandum, 
34 (Softwood Lumber). In the current proceeding, the Department 
preliminarily finds that the GOC's predominant role in the banking 
sector results in significant distortions that render the lending rates 
in the PRC unsuitable as market benchmarks. Therefore, as in Softwood 
Lumber, where domestic prices are not reliable, we have resorted to 
prices outside the PRC.
    Discussion: In our analysis of the PRC as a non-market economy in 
the antidumping duty investigation of Certain Lined Paper Products from 
the PRC, the Department found that the PRC's banking sector does not 
operate on a commercial basis and is subject to significant 
distortions, primarily arising out of the continued dominant role of 
the government in the sector. See ``The People's Republic of China 
(PRC) Status as a Non-Market Economy,'' May 15, 2006 (May 15 
Memorandum); and ``China's Status as a Non-Market Economy,'' August 30, 
2006 (August 30 Memorandum), both of which are referenced in the Notice 
of Final Determination of Sales at Less Than Fair Value, and 
Affirmative Critical Circumstances, In Part: Certain Lined Paper 
Products From the People's Republic of China, 71 FR 53079 (September 8, 
2006), and as placed on the record of this investigation in a 
memorandum to the file titled ``Loan Benchmark Information'' (December 
7, 2007) (Loan Benchmark Information Memorandum) on file in the 
Department's CRU. This finding was further elaborated in CFS Final. See 
CFS Final at Comment 10. In that case, the Department found that the 
GOC still dominates the domestic Chinese banking sector and prevents 
banks from operating on a fully commercial basis. We continue to find 
that these distortions are present in the PRC banking sector and, 
therefore, preliminarily determine that the interest rates of the 
domestic Chinese banking sector do not provide a suitable basis for 
benchmarking the loans provided to respondents in this proceeding.
    Moreover, while foreign-owned banks do operate in the PRC, they are 
subject to the same restrictions as the SOCBs. Further, their share of 
assets and lending is negligible compared with the SOCBs. Therefore, as 
discussed in greater detail in CFS Final, because of the market-
distorting effects of the GOC in the PRC banking sector, foreign bank 
lending does not provide a suitable benchmark. See CFS Final at Comment 
10.
    We now turn to the issue of choosing an external benchmark. 
Selecting an appropriate external interest rate benchmark is 
particularly important in this case because, unlike prices for certain 
commodities and traded goods, lending rates vary significantly across 
the world. Nevertheless, as discussed in CFS Final, there is a broad 
inverse relationship between income levels and lending rates. In other 
words, countries with lower per capita GNI tend to have higher interest 
rates than countries with higher per capita GNI, a fact demonstrated by 
the lending rates across countries reported in International Financial 
Statistics (IFS). See www.imfstatistics.org, placed on the record of 
this investigation in Loan Benchmark Information Memorandum. The 
Department has therefore preliminarily determined that it is 
appropriate to compute a benchmark interest rate based on the 
inflation-adjusted interest rates of countries with similar per capita 
GNI to the PRC, using the same regression-based methodology that we 
employed in CFS Final. As explained in CFS Final at Comment 10, this 
pool of countries captures the broad inverse relationship between 
income and interest rates. We determined which countries are similar to 
the PRC in terms of per capita GNI, based on the World Bank's 
classification of countries as: low income; lower-middle income; upper-
middle income; and high income. The PRC falls in the lower-middle 
income category, a group that includes 55 countries as of July 2007. 
See www.worldbank.org, search engine term ``lower middle income,'' 
placed on the record of this investigation in Loan Benchmark 
Information Memorandum.
    Many of these countries reported short-term lending and inflation 
rates to IFS. With the exceptions noted below, we used this data set to 
develop an inflation-adjusted market benchmark lending rate for short-
term RMB loans. See http://www.imfstatistics.org, placed on the record 
of this investigation in Loan Benchmark Information Memorandum. We did 
not include those economies that the Department considered to be non-
market economies for AD purposes for any part of 2006: the PRC, 
Armenia, Azerbaijan, Belarus, Georgia, Moldova, Turkmenistan, and 
Ukraine. The benchmark necessarily also excludes any economy that did 
not report lending and inflation rates to IFS for 2005 or 2006. 
Finally, the Department also excluded three aberrational countries: 
Angola, with an inflation-adjusted 2005 rate of 44.72 percent; the 
Dominican Republic, with an inflation-adjusted 2004 rate of -18.83 
percent; and Samoa, with an inflation-adjusted 2004 rate of -5.11 
percent. As also discussed in CFS Final, this regression provides the 
most suitable market-based benchmark to measure the benefit from the 
Government Policy Lending program, because it takes into account a key 
factor involved in interest rate formation, that of the quality of a 
country's institutions, that is not directly tied to state-imposed 
distortions in the banking sector discussed above. See 
www.worldbank.org/wbi/governance, placed on the record of this 
investigation in Loan Benchmark Information Memorandum. Consistent with 
the regression model employed in CFS Final, the Department calculated 
an inflation-adjusted benchmark rate of 7.42 percent for 2006, 8.76 
percent for 2005, 8.53 percent for 2004, and 9.96 percent for 2003. 
Because these are inflation-adjusted benchmarks, it is also necessary 
to adjust the interest paid by respondents on its RMB loans for 
inflation. This was done using the PRC inflation figure as reported to 
IFS. See http://www.imfstatistics.org, placed on the record of this 
investigation in Loan Benchmark Information Memorandum. The Department 
then compared its benchmarks with respondents' inflation-adjusted 
interest rate to determine whether a benefit existed for the loans 
received by respondents on which principal was outstanding or interest 
was paid during the POI.
    The lending rates reported in IFS represent short-term lending, and 
there is not sufficient publicly available long-term interest rate data 
upon which to base a robust benchmark for long-term loans. To identify 
and measure any benefit from long-term loans, the Department developed 
a ratio of short-term and long-term lending. The

[[Page 71366]]

Department then applied this ratio to the benchmark short-term lending 
figure (discussed above) to impute a long-term lending rate. 
Specifically, the Department computed a ratio of the average one-year 
and five-year interest rates on interest rate swaps reported by the 
Federal Reserve for 2005. That is, if the long-term swap rate were 25 
percent higher than the short-term swap rate, the Department would 
inflate the average short-term lending rate by 25 percent to arrive at 
a long-term interest rate benchmark. This methodology is appropriate 
because the ratio between short-term and long-term interest rate swap 
rates offers an estimate of the market consensus premium that borrowers 
would pay on a long-term loan over a short-term loan. See CFS Final at 
Comment 11.
    Benchmarks for Foreign Currency-Denominated Loans: For foreign 
currency-denominated loans, the Department was unable to locate 
sufficient data on short-term lending rates for the countries in the 
basket of ``lower middle-income countries'' used for its benchmark for 
RMB loans. As a result, for purposes of this preliminary determination, 
to determine the benefit from countervailable foreign currency-
denominated loans, the Department used as a benchmark the one-year 
dollar interest rates for the London Interbank Offering Rate (LIBOR), 
plus the average spread between LIBOR and the one-year corporate bond 
rates for companies with a BB rating. Bloomberg provides data on 
average corporate bond rates for companies with a range from A-rated to 
B-rated. See Bloomberg data, placed on the record of this investigation 
in Loan Benchmark Information Memorandum. For this preliminary 
determination, we have determined that BB-rated bonds, which are the 
highest non-investment-grade and near the middle of the overall range, 
are the most appropriate basis for calculating the spread over LIBOR. 
Several of the countries in the basket report bond rates, but not all 
of these countries report corporate bond rates and none report 
corporate bond rates for firms in the industrial sector. The Department 
therefore relied on corporate bond rates for the industrial sector in 
the United States and the eurozone, because the market for dollars and 
euros is international in scope.
    On November 9, 2007, petitioners filed comments on the calculation 
of the loan benchmark. They suggested two changes to the methodology. 
First, they argue that the use of a GDP deflator would be a more 
appropriate adjustment for inflation than the use of the CPI. Second, 
they argue that there is more appropriate information than the ratio 
between one- and five-year interest rate swap rates to use in 
converting short-term interest rates to long-term interest rates. For 
purposes of this preliminary determination, we have decided not to make 
any adjustments to our benchmark rate methodology; however, we invite 
interested parties to comment on these proposals and will consider all 
comments on the benchmark in our final determination.

SOE Status of Guizhou Tire and TUTRIC

    Guizhou Tire has repeatedly noted what it perceives as the 
Department's failure to provide a definition of an SOE, implying that 
its SOE status is in doubt. However, as it states on page 5 of its 
October 15 questionnaire response, 33.39 percent of its total shares 
outstanding are ``state-owned.'' Not only are 33.39 percent of its 
shares state-owned by Guiyang State Asset Investment Management Company 
(GAMC), but the next largest shareholder owns only one percent. Thus, 
no other shareholder is in a position to challenge GAMC's dominance. In 
addition, public information indicates GAMC's self-described purpose is 
to play the role of an owner of SOEs. See November 28 Bridgestone 
comments, Exhibit 6. Finally, we note Guizhou Tire received benefits 
under the State Key Technologies Renovation Project Fund. According to 
the GOC, only SOEs were eligible for this program. See September 24, 
2007 GOC questionnaire response in the CVD investigation of laminated 
woven sacks, page 29 (``only state-owned enterprises and state-holding 
enterprises are eligible for this program''), a public version of which 
has been placed on the record of this investigation. Thus, the GOC 
considers Guizhou Tire to be an SOE. With regard to TUTRIC, based on 
the information on the record, the Department is treating TUTRIC as 
both an SOE and FIE. See, e.g., October 15 TUTRIC questionnaire 
response, page 9.

Analysis of Programs

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

I. Programs Preliminarily Determined To Be Countervailable

A. Government Policy Lending

    We initiated an investigation of policy loans\17\ to the tire 
industry based on references in the current (i.e., the eleventh) five-
year plan of Guiyang municipality to a radial tire project for Guizhou 
Tire, and references to the auto parts and tire industries in the five-
year plans, and similar or related planning documents (e.g., 
``catalogues'' of industries designated for development), of Hebei 
Province, Tianjin, and the central government. In response to our 
questionnaires, additional information was placed on the record of this 
investigation by the GOC and Guizhou Tire indicating that the tire 
industry has been targeted by the GOC, provincial, and/or municipal 
governments for preferential lending.
---------------------------------------------------------------------------

    \17\ The Department initiated on Policy Lending to the Chinese 
Tire Industry and Preferential Loans to SOEs.
---------------------------------------------------------------------------

    Of particular importance, this information indicates the targeting 
of tire producers by the provinces and certain municipalities relevant 
to this investigation: Guizhou, Hebei, and Tianjin. As the GOC has 
explained, provincial and municipality goals and objectives are in 
conformity with the central policy goals and objectives. Specifically, 
the central-level plans set goals regarding macroeconomic policies and 
``provide a vision for economic development, market and regulatory 
activities, social administration, and the provision of public 
services.'' See October 29 GOC questionnaire response, pages 13 and 19. 
The GOC explained that the provincial and municipal five-year plans are 
drafted based on the goals and objectives of the central-level plans. 
Id. at 21-22. In other words, local governments (i.e., provinces and 
municipalities) must align their policies with stated central 
government policies and carry out those polices to the extent that such 
measures affect their locality. As such, central-level plans should be 
considered a central government policy or program that local 
governments adopt and implement through their own five-year plans. See, 
also, CFS Amended Preliminary, 72 FR at 17492.
    For example, the tenth Guizhou five-year plan (2001-2005) provided 
by the GOC singled out Guizhou Tire for technology renovation for two 
meridian (i.e., radial) tire lines (OTR tires can be radial tires, as 
well as ``bias ply'' tires). See October 29 GOC questionnaire response, 
Exhibit GOC-NEW-4-6. The tenth five-year plan also states that ``policy 
bank loans and loans from abroad should continue to be allocated 
according to the plans.'' Id. In addition, business proprietary 
information provided in Guizhou Tire's supplemental response indicates 
Guizhou Tire's importance in earlier five-year plans. See Memorandum to 
Thomas Gilgunn, Program Manager, AD/CVD Operations, Office 6, from 
Nicholas Czajkowski, Case Analyst,

[[Page 71367]]

``Calculation Memorandum for Guizhou Tire'' (December 7, 2007) (Guizhou 
Tire Calculation Memorandum).
    Regarding Hebei Province, the Hebei Province Science and Technology 
11\th\ Five-year Plan & 2020 Long-Term Target, lists automobile parts 
and the rubber industry as ``key projects,'' and the Guidelines for the 
Implementation of Hebei Province Science and Technology 11\th\ Five-
year Plan directs commercial banks to support ``key projects.'' See 
Bridgestone's September 19 new subsidy allegations, Exhibits 18 and 17, 
respectively. The ninth Hebei five-year plan also mentions that the 
``automobile and components'' industry will, among other industries, be 
``developed greatly and stronger,'' see October 29 GOC questionnaire 
response, Exhibit GOC-NEW-4-8, and the tenth five-year plan states that 
``auto parts,'' among other industries, ``shall be supported,'' id. at 
Exhibit GOC-NEW-4-9.
    Regarding Tianjin, the eleventh five-year plan states that the 
``fine chemical industry {of{time}  tyre . . . will be actively 
developed,'' among other industries. Id. at Exhibit GOC-NEW-4-11. 
Moreover, the Tianjin Municipal Directory Catalogue for the Priority 
Development of High- and New Tech Industries, published in 2002, which 
claims that its purpose is to ``guide social funds,'' states, at 
paragraph 67, that ``the recent industrialization focuses include: 
Manufacturing Equipment for heavy-duty, light truck and car radial 
tires.'' See Bridgestone's September 5 New Subsidy Allegations at 
Exhibit 38. The Department noted in our investigation of CFS from the 
PRC that the NDRC equates ``social funds'' with loans, among other 
things. See Memorandum to Susan H. Kuhbach, Director, AD/CVD 
Operations, Office 1, from Lawrence Norton, Senior International 
Economist, ``Government of the People's Republic of China Verification 
Report: Policy Lending'' (August 20, 2007), a public version of which 
has been placed on the record of this investigation.
    Therefore, the Department preliminarily determines that the loans 
received by all three respondents and their cross-owned affiliates from 
SOCBs were made pursuant to a GOC policy to provide loans to the tire 
industry. The record indicates Guizhou Tire has been a key target for 
economic development by Guizhou province and Guiyang municipality since 
at least the eighth five-year plan. Furthermore, according to the 
translated excerpts provided by the GOC, the number of such 
specifically targeted enterprises is limited. For example, the GOC 
translated section 6 of the tenth Guizhou five-year plan, ``Traditional 
industry shall be improved through high technology.'' This section 
mentions only three other companies besides Guizhou Tire. In addition 
to making clear the importance of Guizhou Tire in the economic 
development of the province, the plan also is clear that loans are one 
means of development. Furthermore, the tenth Guizhou plan states 
explicitly, as noted above, the general directive that ``policy loans'' 
should be allocated according to the plans.
    In contrast to the Guizhou province and Guiyang municipalities 
plans, the plans for Hebei Province and Tianjin do not mention, insofar 
as the GOC provided translations, particular enterprises or particular 
projects. They do, however, refer to particular industries targeted for 
development. As discussed above, Hebei Province refers to the auto 
parts and rubber industries,\18\ and Tianjin refers to the tire 
industry (and, at least in one case, to heavy duty tires). Also as 
discussed above, each of these provinces provides direction in 
documents implementing their five-year plans for the use of loans to 
``guide'' and ``assist'' targeted industries.
---------------------------------------------------------------------------

    \18\ The radial tire project discussed in the Guiyang 
municipality plan is discussed within the context of identifying 
automobile parts as a key industry. See the Bridgestone October 1 
submission. Thus, given the parallels among the central and 
provincial five-year plans, it appears the GOC and provincial and 
municipal governments consider radial tires, which include OTR 
tires, to be part of the automobile parts industry.
---------------------------------------------------------------------------

    Thus, for the reasons discussed above, we preliminarily determine 
that this loan program is de jure specific pursuant to section 
771(5A)(D)(i) of the Act. We also determine the program provides direct 
financial contributions by the GOC (i.e., government policy banks and 
SOCBs) pursuant to section 771(5)(D)(i) the Act. See CFS Final at 
Comment 8. Finally, this program provides benefits to the recipients 
equal to the difference between what the recipients paid on loans from 
government-owned banks and the amount they would have paid on 
comparable commercial loans, pursuant to section 771(5)(E)(ii) of the 
Act.
    Two of the respondents, as well as their cross-owned affiliates, 
report long-term loans from state-owned banks outstanding during the 
POI. Except for TUTRIC and DCB, the reported loans were all disbursed 
after December 11, 2001, the date the Department has preliminarily 
determined to be the date from which the Department will identify and 
measure subsidies in the PRC. TUTRIC's and DCB's long-term loans ``date 
back to the 1980s and 1990s,'' before December 11, 2001. It is 
apparent, however, that the original terms and conditions of these 
loans have altered over time. Based on the Department's analysis of the 
information provided by TUTRIC and the GOC, we preliminarily determine 
that TUTRIC's treatment of these loans, and the GOC's ongoing 
acceptance of this treatment, has created new and recurring subsidies 
conferring benefits since 2001 and during the POI. Most of the details 
about these loans are business proprietary; for a more complete 
discussion see Memorandum to Thomas Gilgunn, Program Manager, AD/CVD 
Operations, Office 6, from Jack Zhao, Case Analyst, ``Calculation 
Analysis for TUTRIC'' (December 7, 2007) (TUTRIC Calculation 
Memorandum). For purposes of this preliminary determination, we are 
treating these as new loans received during the POI. We intend to 
continue seeking additional documentation regarding these loans which 
we will consider for the final determination. In addition to these 
long-term loans, two of the respondents and their cross-owned 
affiliates had short-term loans, disbursed in 2005 and 2006 with 
balances outstanding during the POI.
    To calculate the benefit, for all companies including TUTRIC, we 
used the interest rates described in the ``Loan Benchmark'' section 
above and the methodology described in 19 CFR 351.505(c)(1) and (2). We 
divided the benefit to each company by the appropriate sales 
denominator to calculate subsidy rates of 1.49, 0.45, 3.40 percent ad 
valorem for Guizhou Tire, Starbright, and TUTRIC, respectively.

B. Provision of Land for Less Than Adequate Remuneration to SOEs

    Petitioners allege that the GOC offers free land to SOEs in key 
strategic sectors. Petitioners also note that the Department concluded 
in the August 30 Memorandum (referred to above in our discussion of 
loan benchmarking) that SOEs own a significant amount of land-use 
rights that they receive free of charge. As explained above, both 
Guizhou Tire and TUTRIC are SOEs.
    Petitioners also allege that the GOC has a policy of providing 
land-use rights to certain FIEs on a preferential basis. According to 
petitioners, FIEs that are either product export enterprises or 
technologically advanced enterprises are entitled to caps on the land-
use fees that can be charged to them, and in some cases are exempt from 
such fees altogether.
    Guizhou Tire and its cross-owned affiliates (throughout this 
section

[[Page 71368]]

collectively referred to as Guizhou Tire) reported details concerning 
three tracts of land used in the production and sale of subject 
merchandise. Among many other questions the Department asked concerning 
these three tracts of land, we asked whether the relevant land-use 
rights are considered either granted land-use rights or allocated land-
use rights. See November 27 Guizhou Tire supplemental questionnaire 
response, page 29. Guizhou Tire did not answer this question. Based on 
the information the Department has collected in other cases concerning 
PRC land-use rights (e.g., the August 30 Memorandum), answers given in 
response to this question by the two other respondents, and the 
business-proprietary details given by Guizhou Tire regarding its three 
land-use agreements, we conclude that Guizhou Tire was likely provided 
with allocated land-use rights for one of its three tracts (``tract 
number 3''). Business proprietary information also indicates that these 
rights were essentially conferred after December 11, 2001. See 
Memorandum to Thomas Gilgunn, Program Manager, Office of AD/CVD 
Enforcement 6, from Mark Hoadley, Case Analyst, ``Analysis of Land-Use 
Rights for OTR Tires Respondents,'' December 7, 2007 (Land Analysis 
Memorandum).
    As discussed in the LWS Preliminary, there are two main types of 
land-use rights in China: ``granted'' (sometimes referred to as 
``conveyed'') and ``allocated.'' The GOC transfers allocated land-use 
rights to state entities for a nominal one-time charge and annual fee. 
These allocated land-use rights do not expire, may not be leased or 
mortgaged, and can be transferred (or shared for commercial purposes) 
legally only if they are first converted to granted land-use rights, 
i.e., those rights transferred to private entities as described below. 
See August 30 Memorandum at 43, citing to Ho, Samuel P.S., and Lin, 
George C.S., ``Emerging Land Markets in Rural and Urban China: Policies 
and Practices'' (The China Quarterly, 2003), 687-8, stating that 
``(a)llocation is used to dispense land use right to state-owned or non 
profit users without time limits and conveyance is used to transfer 
land-use rights to commercial users for a fixed period . . . state 
units are able to obtain land use rights at costs that are much lower 
than those paid by commercial users and with no time limit.'' Allocated 
land-use rights are substantially different from granted land-use 
rights, which were the type of land-use rights at issue in the LWS 
Preliminary. Granted land-use rights can be purchased by private 
entities directly from the government on the ``primary market'' or from 
other granted land-use rights holders on the ``secondary'' market. 
Granted land-use rights can be transferred or mortgaged and require a 
large up-front fee, but carry no annual fees aside from taxes. See 
August 30 Memorandum at 43-44. Therefore, the information on the record 
indicates that allocated land-use rights, which can only be transferred 
to state entities and which are subject to significantly different 
terms than granted land-use rights, are specific to SOEs pursuant to 
section 771(5A)(D)(i) of the Act.
    Accordingly, the Department preliminarily determines that certain 
land-use rights of Guizhou Tire, provided after December 11, 2001, are 
countervailable. The allocated land rights provided to Guizhou Tire are 
available only to SOEs and thus are specific under section 
771(5A)(D)(i) of the Act. We further determine that the GOC's provision 
of land rights is a financial contribution within the meaning of 
section 771(5)(D)(iii).
    Finally, the Department has determined that the provision of these 
rights provided a benefit pursuant to 19 CFR 351.511(a). Pursuant to 
section 771(5)(E)(iv) of the Act, a benefit is conferred when the 
government provides a good or service for less than adequate 
remuneration. Section 771(5)(E) of the Act further states that ``the 
adequacy of remuneration shall be determined in relation to prevailing 
market conditions for the good or service being provided in the country 
which is subject to the investigation or review. Prevailing market 
conditions include price, quality, availability, marketability, 
transportation, and other conditions of sale.'' Section 351.511(a)(2) 
of the Department's regulations sets forth the basis for identifying 
comparative benchmarks for determining whether a government good or 
service is provided for less than adequate remuneration. These 
potential benchmarks are listed in hierarchical order by preference: 
(1) market prices from actual transactions within the country under 
investigation; (2) world market prices that would be available to 
purchasers in the country under investigation; or (3) an assessment of 
whether the government price is consistent with market principles.

The Department Cannot Apply a First Tier Benchmark

    As a general matter, the most direct means of determining whether a 
government obtained adequate remuneration is normally through a 
comparison with private transactions for a comparable good or service, 
in this case, the sale of land-use rights, in the country. Thus, the 
preferred benchmark in the hierarchy is an observed market price for 
the good, in the country under investigation, from a private supplier 
(or, in some cases, from a competitive government auction) located 
either within the country, or outside the country (the latter 
transaction would be in the form of an import, and therefore not 
applicable to provision of land-use rights). This is because such 
prices generally would be expected to reflect most closely the 
commercial environment of the purchaser under investigation. However, a 
particular problem can arise in applying this standard when the 
government is the sole supplier of the good or service in the country 
or within the area where the respondent is located. In these 
situations, there may be no alternative market prices available in the 
country (e.g., private prices, competitively-bid prices, import prices, 
or other types of market reference prices). Moreover, a first tier 
benchmark is not appropriate where the government accounts for a 
significant or overwhelming portion of the sales of the good in 
question or where the government's presence in the market is likely to 
have produced significant distortions in the price formation of the 
good. See Countervailing Duties, Final Rule, Preamble, 63 FR 65347, 
65378 (November 25, 1998) (``Where it is reasonable to conclude that 
actual transaction prices are significantly distorted as a result of 
the government's involvement in the market, we will resort to the next 
alternative in the hierarchy''). In such cases, the ``commercial 
environment of the purchaser'' is distorted by the overwhelming 
presence of the government and cannot give rise to a price that is 
sufficiently free from the effects of government actions. The use of 
such an internal benchmark would be akin to comparing the benchmark to 
itself, i.e., such a benchmark would reflect the distortions of the 
government presence. See Softwood Lumber, 67 FR 15545 and accompanying 
Issues and Decision Memorandum, at 34.
    In our analysis of the PRC as a non-market economy in the recent 
investigation of Certain Lined Paper Products from the PRC, we found 
that real property rights in China remain poorly defined and weakly 
enforced, with a great divergence between de jure reforms and de facto 
implementation of these reforms. See August 30 Memorandum at 46. In 
arriving at this conclusion, the Department also

[[Page 71369]]

discussed the extent of government involvement in the PRC land market. 
This was also the focus of our preliminary determination with regard to 
a benchmark for land-use rights provided for less than adequate 
remuneration in the LWS Preliminary. In that case, we noted that the 
government, either at the national or local level, is the ultimate 
owner of all land in China, and we examined whether the GOC exercises 
control over the supply side of the land market in China as a whole so 
as to distort prices in the primary and secondary markets. We 
preliminarily determined that, given the pervasive intervention of the 
GOC in the land market in China, the Department cannot rely on prices, 
private or otherwise, from this market for purposes of a first tier 
benchmark. See LWS Preliminary. Given this recent preliminary 
determination that covers the same POI as this proceeding and on the 
basis of the evidence on this record, we continue to find in this 
proceeding that there are no usable first tier in-country benchmarks to 
measure the benefit from the transfer of land-use rights during the 
POI. Our preliminary determination with respect to internal prices for 
industrial land-use rights necessarily reflects the evidence on the 
record at this time. We will carefully review and consider all 
additional information timely submitted on the record during the course 
of this proceeding regarding the primary and secondary markets, 
including auctions, tenders and listings, as well as agricultural land 
conversions and other land assessment, pricing and transfer procedures.

The Department Cannot Apply a Second Tier Benchmark

    The second tier benchmark, according to the regulations, relies on 
world market prices that would be available to the purchasers in the 
country in question, though not necessarily reflecting prices of actual 
transactions involving that particular producer. See 19 CFR 
351(a)(2)(iii). In selecting a world market price under this second 
approach, the Department will examine the facts on the record regarding 
the nature and scope of the market for that good to determine if that 
market price would be available to an in-country purchaser. As 
discussed in the Preamble, the Department will consider whether the 
market conditions in the country are such that it is reasonable to 
conclude that a purchaser in the country could obtain the good or 
service on the world market. See Preamble, 63 FR at 65378. As with the 
use of import prices discussed above under the first tier benchmark 
analysis and as discussed in the LWS Preliminary, we preliminarily 
conclude that land, an in situ property, does not lend itself to be 
considered under this tier.

The Department Is Using a Benchmark from Outside China

    Since we are not able to conduct our analysis under the second tier 
of the regulations, consistent with the hierarchy, we next consider 
whether the government pricing of land-use rights is consistent with 
market principles. This approach is also set forth in section 
351.511(a)(2)(iii) of the Department's regulations and is explained 
further in the Preamble:
    {W{time} here the government is the sole provider of a good or 
service, and there are no world market prices available or 
accessible to the purchaser, we will assess whether the government 
price was set in accordance with market principles through an 
analysis of such factors as the government's price-setting 
philosophy, costs (including rates of return sufficient to ensure 
future operations), or possible price discrimination. In our 
experience, these types of analysis may be necessary for such goods 
or services as electricity, land leases or water, and the 
circumstances of each may vary widely.
See Preamble, 63 FR at 65378. The regulations do not specify how the 
Department is to conduct such a market principle analysis. By its very 
nature, this analysis depends upon available information concerning the 
market sector at issue and, therefore, must be developed on a case-by-
case basis. Consistent with the LWS Preliminary, we preliminarily 
determine in the instant case that due to the weak definitions and 
protection of property rights, the overwhelming presence of government 
involvement in the land-use rights market, as well as the documented 
deviation from the authorized methods of pricing and allocating land, 
the purchase of land-use rights in China is not conducted in accordance 
with market principles.
    Given this finding, we looked for an appropriate basis to determine 
the extent to which land-use rights are provided for less than adequate 
remuneration. Consistent with the LWS Preliminary, we have 
preliminarily determined that this analysis is best achieved by 
comparing the prices for land-use rights in China with comparable 
market-based prices in a country at a comparable level of economic 
development that is in a reasonably proximate region to China. In the 
LWS Preliminary, we concluded that the most appropriate benchmark for 
respondents' land-use rights was the sales of certain industrial land 
plots in industrial estates, parks and zones in Thailand. In that 
recent case, we relied on prices from a real estate market report on 
Asian industrial property that was prepared outside the context of any 
Department proceeding by an independent and internationally recognized 
real estate agency with a long-established presence in Asia. See 
attachments 5, at 3, and 3, at 3, of the Land Benchmark Memorandum 
(collectively, the Asian Industrial Property Reports). In relying on a 
land benchmark from Thailand, we noted that China and Thailand have 
similar levels of per capita GNI, namely, $2010 and $2990, 
respectively; see attachment 6 of the Land Benchmark Memo, and that 
population density in China and Thailand are roughly comparable, with 
141 persons per square kilometer (k\2\) in China and 127/k\2\ in 
Thailand, id. at attachment 6. Additionally, we noted that producers 
consider a number of markets, including Thailand, as an option for 
diversifying production bases in Asia beyond China. Therefore, the same 
producers may compare prices across borders when deciding what land to 
buy. In that case, we cited to a number of sources which named Thailand 
as an alternative production base to China. See Asian Industrial 
Property Reports; see, also, ``Japan firms rate Vietnam best 
alternative to China,'' Nikkei Weekly, April 10, 2006, ``FY2005 Survey 
of Japanese Firms' International Operations,'' Japan External Trade 
Organization, March 2006 at 1, and ``JETRO Releases its Latest Survey 
of Japanese Manufacturers in ASEAN and India.''
    Given the recent LWS Preliminary that covers the same POI as in 
this proceeding and on the basis of the evidence on this record, we 
continue to preliminarily determine that the ``indicative land values'' 
for land in Thai industrial zones, estates and parks outlined in the 
Asian Industrial Property Reports present a reasonable and comparable 
benchmark for the value of the land at issue in this investigation. 
However, as discussed above, there are two main types of land-use 
rights in China: ``granted'' and ``allocated.'' Granted land-use 
rights, which were the types of land-use right at issue in LWS 
Preliminary, require a large up-front fee, but carry no annual fees 
aside from taxes. Such land-use rights can be transferred or mortgaged, 
and are akin to an outright purchase of land. In contrast, allocated 
land-use rights are transferred to state entities, do not expire, may 
not be leased or mortgaged and are subject to an annual fee. Allocated 
land-use, therefore, more

[[Page 71370]]

closely resembles a lease or rental arrangement than a one-time 
purchase.
    Because the land-use rights at issue in the instant investigation 
are allocated land-use rights, we looked for an appropriate basis to 
determine a benchmark for the market-value annual rent on industrial 
land. As stated above, we continue to find that the ``indicative land 
values'' outlined in the Asian Industrial Property Reports present a 
reasonable and comparable benchmark for the value, i.e., an outright 
purchase price, of the land at issue in this investigation. In order to 
assess the appropriate rental value of such land, we looked for an 
appropriate ``property yield'' for commercial land in Thailand, i.e., 
the annual cash flow from rent that a land owner in Thailand should 
expect to earn. We found that the same source that compiled the Asian 
Industrial Property Reports, also prepares market reports on ``property 
yields'' and real estate investment trusts (REITs) in Asia and 
Thailand. The reported property yields in Thailand range from 3 to 11 
percent, and are related to a variety of real estate holdings from 
housing to factories. However, none is specific to industrial land. See 
Thailand Investment MarketView, Q3 2007 at 3, a public version of which 
has been placed on the record of this investigation. REITs are trusts 
that are dedicated to owning and/or operating income-producing real 
estate. Dividends from REITs are based on the income, often rent, 
generated from the real estate holdings. REITs in Thailand hold a 
variety of commercial real estate, including real estate dedicated to 
industrial production and manufacturing. Id. at 2. Although these REITs 
portfolios also hold non-industrial real estate, we note that there is 
a wide range of returns and, furthermore, there is nothing on the 
record to indicate that industrial land would yield a higher or lower 
income than other types of real estate property in Thailand. We 
therefore preliminarily determine that the dividend yields from such 
REITs provide a reasonable basis to estimate property yields for 
industrial land in Thailand. The average dividend yield of REITs in 
Thailand in the period contemporaneous with the one-time purchase 
benchmark established in the LWS preliminary is 7.4 percent, which is 
also consistent with the spread in property yields discussed above. See 
REITs Around Asia at 2, a public version of which has been placed on 
the record of this investigation.
    In order to calculate an annual rent, we multiplied this annual 
yield percentage by the up-front purchase price per square foot (psf) 
established in the LWS Preliminary to arrive at an annual psf rental 
rate. In order to calculate the benefit, we first multiplied the 
benchmark rental rate (adjusted to the POI) by the total area of the 
countervailable land. We then made adjustments for fees paid by Guizhou 
Tire to derive the total POI benefit. We divided the 2006 benefit by 
the appropriate sales denominator to calculate a subsidy rate of 0.11 
percent ad valorem for Guizhou Tire.
    As discussed above, we have considered certain economic and 
demographic factors in arriving at this conclusion. However, we also 
note that other factors may inform this decision, including the 
availability of data on prices, investment flows, availability of land, 
and industry density in a certain region. We intend to continue to 
explore this issue and invite comments from the parties.
    While TUTRIC reported that it received granted land-use rights, the 
details of its narrative and supporting documentation indicate it 
received the benefits of allocated rights. In particular, it pays a 
yearly fee not typically associated with granted rights. In fact, 
according to the August 30 Memorandum at 43, granted rights ``require a 
large up-front fee but carry no annual fees aside from taxes.'' 
According to TUTRIC's November 27 supplemental response (bottom of page 
17), the annual fee paid by TUTRIC is not a tax, but a ``price'' which 
is periodically changed by the local administration (e.g., according to 
TUTRIC, the land authority increased the price in 2007). It also states 
in Exhibit 11 of its October 15 questionnaire response that it records 
its yearly fee in its financial records as ``land-use fees.'' While 
TUTRIC also reported paying an up-front fee in the mid-1980s, which is 
not inconsistent with either allocated or granted rights, the business 
proprietary breakdown of this fee indicates it might be more accurately 
characterized as an ``expropriation'' fee (as TUTRIC explains in its 
November 27 supplemental response, its land was originally farm land, 
which the city agreed to ``zone'' for industrial use on TUTRIC's 
behalf). See Land Analysis Memorandum.
    DCB also acquired land-use rights fitting the description of 
allocated rights (DCB did not state whether its rights were allocated 
or granted). According to DCB, its land was originally provided free of 
charge, but today it pays an annual fee. Moreover, the business 
proprietary details of the land-use documents provided in Exhibit 14 of 
its November 27 questionnaire response closely fit the description 
given in the August 30 Memorandum of allocated rights. See Land 
Analysis Memorandum.
    While Starbright is not an SOE, its response indicates that it may 
have been awarded allocated land. These land transactions appear to be 
part of Starbright's 2006 CIO. We also note that business proprietary 
information indicates local authorities may have based their approval 
of Hebei Tire's asset sale in part on the export performance of 
Starbright. See Land Analysis Memorandum.
    The Department preliminarily determines that additional information 
is needed to evaluate the land-use rights of both TUTRIC and 
Starbright. Specifically, for TUTRIC and DCB, further information is 
required regarding the details of their transactions (for example, 
TUTRIC provided summaries of several land-use documents, instead of the 
documents themselves). For Starbright, as discussed in the ``Change in 
Ownership'' section above, further information is required regarding 
Hebei Tire and its asset sale to Starbright. We intend to issue an 
interim analysis describing our preliminary findings with respect to 
this program before the final determination so that parties will have 
the opportunity to comment on our findings before the final 
determination.

C. Tax Subsidies to FIEs in Specially Designated Geographic Areas

    Petitioners allege that FIEs located in special designated 
locations (e.g., new-technology and high-technology zones, special 
economic zones, and economic and technological development zones) pay 
income tax at reduced rates. Under this program, such zones have 
reduced income tax rates for FIEs (e.g., from 30 to 24 percent) 
pursuant to Article 7 of the FIE Tax Law. According to the GOC, for 
FIEs established in a coastal economic development zone, a special 
economic zone, or an economic technology development zone, the 
applicable corporate income tax rate is 15 percent or 24 percent, 
depending on the zone.
    The GOC reports on page 46 of its October 15 questionnaire response 
that TUTRIC is located in a coastal economic development zone, and the 
applicable tax rate for TUTRIC during the POI was 24 percent. TUTRIC's 
2006 tax return shows that the income tax rate was reduced from 30 
percent to 24 percent. TUTRIC's parent company, as well as Guizhou Tire 
and its cross-owned affiliates, reported that they did not use this 
program. Starbright is an FIE, but did not benefit under this program 
during the POI. The 2005 income tax

[[Page 71371]]

returns (filed in 2006) submitted by these companies confirm that these 
companies did not claim a lower tax rate during the POI.
    We preliminarily determine that the exemption or reduction in the 
income tax paid by FIEs in specially designated geographic areas under 
this program confers a countervailable subsidy. The exemption/reduction 
is a financial contribution in the form of revenue forgone by the GOC 
and it provides a benefit to the recipients in the amount of the tax 
savings. See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). 
We also preliminarily determine that the exemption/reduction is limited 
to enterprises located in designated geographical regions and, hence, 
is specific under section 771(5A)(D)(iv) of the Act. The Department 
also found this program to be countervailable in the CFS and LWS 
investigations. See CFS Amended Preliminary, 72 FR at 17494 (and 
confirmed in CFS Final, 72 FR 60645), and LWS Preliminary, 72 FR 67893.
    To calculate the benefit from this program to TUTRIC, we treated 
the income tax exemption claimed by TUTRIC as a recurring benefit, 
consistent with 19 CFR 351.524(c)(1). To compute the amount of tax 
savings, we compared the tax rate paid to the rate that would have been 
paid by TUTRIC otherwise (24 versus 30 percent) and multiplied the 
difference by TUTRIC's taxable income. In accordance with 19 CFR 
351.525(b)(6)(i), we attributed the benefit received to the total sales 
of TUTRIC. Additional information on this calculation is provided in 
the calculation analysis memorandum for TUTRIC. See TUTRIC Calculation 
Memorandum. On this basis, we preliminarily determine a countervailable 
subsidy of 0.13 percent ad valorem for TUTRIC for this program.

D. Local Income Tax Exemption and Reduction Programs for ``Productive'' 
FIEs

    Petitioners allege that pursuant to Article 9 of the FIE Tax Law 
and Article 71 of Decree 85 of the Council of 1991, local provinces can 
establish eligibility criteria and administer the application process 
for local income tax reductions or exemptions for FIEs, effectively 
extending the tax exemptions or reductions that are allowed to FIEs by 
the national Two Free, Three Half program.
    In its questionnaire response, TUTRIC stated it received benefits 
under this program and its tax return filed during the POI confirms it 
benefitted from this program. In addition, the GOC reports on page 75 
of its October 15 questionnaire response that TUTRIC participated in 
this program during the POI. TUTRIC's parent company, as well as 
Guizhou Tire and its cross-owned affiliates, reported that they did not 
use this program. Starbright is an FIE, but did not claim a benefit 
under the program on the tax return it filed in 2006. The income tax 
returns submitted by these companies confirm they did not benefit from 
this program.
    We preliminarily determine that the exemption or reduction in the 
local income tax paid by ``productive'' FIEs under this program confers 
a countervailable subsidy. The exemption/reduction is a financial 
contribution in the form of revenue forgone by the government and it 
provides a benefit to the recipients in the amount of the tax savings. 
See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also 
preliminarily determine that the exemption/reduction afforded by this 
program is limited as a matter of law to certain enterprises, 
``productive'' FIEs, and, hence, is specific under section 
771(5A)(D)(i) of the Act. The Department has also found this program to 
be countervailable in the CFS and LWS investigations. See CFS Amended 
Preliminary, 72 FR at 17494 (and confirmed in the CFS Final, 72 FR 
60645), and LWS Preliminary, 72 FR at 67893.
    To calculate the benefit from this program to TUTRIC, we treated 
the income tax exemption claimed by TUTRIC as a recurring benefit, 
consistent with 19 CFR 351.524(c)(1). To compute the amount of tax 
savings, we compared the tax rate paid to the rate that would have been 
paid by TUTRIC otherwise (the standard local rate is 3 percent) and 
multiplied the difference by TUTRIC's taxable income. In accordance 
with 19 CFR 351.525(b)(6)(i), we attributed the benefit received to the 
total sales of TUTRIC. Additional information on this calculation is 
provided in the calculation analysis memorandum for TUTRIC. See TUTRIC 
Calculation Memorandum. On this basis, we preliminarily determine a 
countervailable subsidy of 0.06 percent ad valorem for TUTRIC.

E. VAT and Tariff Exemptions for FIEs and Certain Domestic Enterprises 
Using Imported Equipment in Encouraged Industries

    Petitioners allege that the State Councils's Circular on Adjusting 
Tax Policies on Imported Equipment (Guofa No. 37) (Circular No. 37) 
exempts both FIEs and certain domestic enterprises from paying import 
tariffs and VAT on imported equipment provided that these goods are not 
for resale. Enacted in 1997, Circular No. 37 exempts both FIEs and 
certain domestic enterprises from the VAT and tariffs on imported 
equipment used in their production. The National Development and Reform 
Commission (NDRC) and the General Administration of Customs are the 
government agencies responsible for administering this program. The 
objective of the program is to encourage foreign investment and to 
introduce foreign advanced technology equipment and industry technology 
upgrades. Domestic industries may be exempted from tariffs and VAT on 
certain imported equipment as long as the equipment being imported does 
not fall under the Directory of Imported Commodities of Non-Tax 
Exemption to be Used in Domestic Invested Projects. FIEs may be 
exempted from tariffs and VAT of certain imported equipment as long as 
the equipment being imported does not fall under the Directory of 
Imported Commodities of Non-Tax Exemption to be Used in Foreign 
Invested Projects.
    Both Guizhou Tire and TUTRIC reported in their October 15 
questionnaire responses that they applied for, and received, VAT and 
tariff exemptions for imports of equipment during the POI. Guizhou Tire 
reported that it was entitled to these exemptions because of its status 
as an ``encouraged project'' (i.e., a domestic enterprise that engaged 
in activities listed in the Catalogue of Key Industries, Products and 
Technologies the Development of Which is Encouraged by the State) and 
because it imported equipment during the POI which was not listed in 
the Directory of Imported Commodities of Non-tax Exemption to be Used 
in Domestic Invested Projects. TUTRIC reported that it was entitled to 
these exemptions because of its status as an FIE which imported 
equipment during the POI which did not fall into the Directory of 
Imported Commodities of Non-tax Exemption to be Used in Foreign 
Invested Projects.
    We preliminarily determine that the exemptions on VAT and tariffs 
on purchases of imported equipment during the POI confer a 
countervailable subsidy. These exemptions provide a financial 
contribution in the form of revenue forgone by the GOC. They provide a 
benefit to the recipients in the amount of the VAT and tariffs saved. 
See section 771(5)(D)(ii) of the Act and 19 CFR 351.510(a)(1). As 
described above, certain domestic enterprises are eligible to receive 
VAT and tariff

[[Page 71372]]

exemptions under this program as well as FIEs. Based on the information 
provided by the GOC, it does not appear that the addition of these 
domestic enterprises broadens the reach or variety of users 
sufficiently to render the program non-specific. See CFS Final at 
Comment 16, discussing and affirming the preliminary determination that 
this program is specific under section 771(5A)(D)(iii)(I) of the Act 
despite the fact that the ``pool of companies eligible for benefits is 
larger than FIEs.'' For example, to be eligible, Guizhou Tire (not a 
FIE) had to qualify as an ``encouraged project'' (i.e., a domestic 
enterprise that engaged in activities listed in the Catalogue of Key 
Industries, Products and Technologies the Development of Which is 
Encouraged by the State). Therefore, we preliminarily find the VAT and 
tariff exemptions to be specific under section 771(5A)(D)(iii)(I) of 
the Act.
    Since these VAT and tariff exemptions were for the purchase of 
capital equipment, we are treating these exemptions as non-recurring 
benefits in accordance with 19 CFR 351.524(c)(2)(iii). See, also, LWS 
Preliminary (countervailing a rebate for the purchase of capital 
equipment as a non-recurring benefit under a similar VAT program). 
Guizhou Tire and TUTRIC reported that they received these exemptions 
during the POI. To determine the benefit, we first conducted the ``0.5 
percent test.'' See 19 CFR 351.524(b)(2). We summed the VAT and tariff 
exemptions Guizhou Tire and TUTRIC received and divided that sum by 
each company's sales during the POI in accordance with the attribution 
rules described in 19 CFR 351.525(b)(6). As a result, we found that the 
benefits were less than 0.5 percent of relevant sales during the POI 
for both Guizhou Tire and TUTRIC. Thus, Guizhou Tire's and TUTRIC's VAT 
and tariff exemptions should be allocated to the year of receipt (i.e., 
2006, the POI). On this basis, we preliminarily determine a 
countervailable subsidy of 0.03 and 0.17 percent ad valorem for Guizhou 
Tire and TUTRIC, respectively.

F. The State Key Technologies Renovation Project Fund

    Petitioners state that the State Key Technology Renovation Project 
Fund (Key Technology Program) was created pursuant to state circular 
Guojingmaotouzi No. 886 (Circular No. 886) in 1999 to promote 
technologies in targeted sectors, and operates under the regulatory 
guidelines provided in the circular. The circular was issued by the 
former State Economic and Trade Commission (SETC), the former State 
Planning Commission (SPC), the Ministry of Finance (MOF) and the 
People's Bank of China (PBC). The purpose of this program is to 
promote: 1) technological renovation in key industries, key 
enterprises, and key products; 2) facilitation of technology upgrade; 
3) improvement of product structure; 4) improvement of quality; 5) 
promotion of domestic production; 6) increase of supply; 7) expansion 
of domestic demand; and 8) promotion of continuous and healthy 
development of the state economy.
    Under the Key Technology Program, companies can apply for funds to 
cover the cost of financing specific technological renovation projects. 
Pursuant to Article 4 of Circular No. 886, the recipients of these 
funds will mainly be selected from large-sized state-owned enterprises 
and large-sized state holding enterprises among the 512 key 
enterprises, 120 pilot enterprise groups and the leading enterprises in 
industries. To be considered for funding, the enterprise files an 
application that is reviewed at various levels of government, with 
final approval given by the State Council.
    The GOC has further reported that the Key Technology Program has 
not operated since 2003, although the implementing regulations remain 
in effect. This is due to institutional reform in the government. The 
implementing agency, the SETC, was dissolved and the program was not 
taken over by another agency. The GOC and Guizhou Tire have reported 
that Guizhou Tire received benefits under the Key Technology Program to 
assist in Guizhou Tire's development of a production line before the 
program ceased operation in 2003. This production line was involved in 
the production of both subject and non-subject merchandise.
    We preliminarily determine that the Key Technology Program provides 
countervailable subsidies to Guizhou Tire within the meaning of section 
771(5) of the Act. Guizhou Tire notes that only a certain portion of 
the merchandise produced from the production line was subject 
merchandise. However, Guizhou Tire has provided insufficient evidence 
to demonstrate that these subsidies were tied to non-subject 
merchandise, pursuant to19 CFR 351.525(b)(5). See Guizhou Tire 
Calculation Memorandum for details. We find that these grants are a 
direct transfer of funds within the meaning of section 771(5)(D)(i) of 
the Act, providing a benefit in the amount of the grant. See 19 CFR 
351.504(a). We further preliminarily determine that the grants provided 
under this program are limited as a matter of law to certain 
enterprises, i.e., large-sized state-owned enterprises and large-sized 
state holding enterprises among the 512 key enterprises, 120 pilot 
enterprise groups and the leading enterprises in industries, and, 
hence, are specific under section 771(5A)(D)(i) of the Act.
    According to the GOC, the program supports state key technological 
renovation projects through project investment or loan interest grants. 
Therefore, consistent with 19 CFR 351.524(c)(1), we are treating the 
grants received under this program as ``non-recurring.'' To measure the 
benefits of each grant that are allocable to the POI, we first 
conducted the ``0.5 percent test'' for each grant. See 19 CFR 
351.524(b)(2). We divided the total amounts approved in each year by 
the relevant sales for those years. As a result, we found that a grant 
provided in one year was greater than 0.5 percent of relevant sales and 
was properly allocated over the AUL.
    To calculate the countervailable subsidy rate, we divided the 
benefits attributable to the POI by the total value of Guizhou Tire's 
total sales during the POI. On this basis, we preliminarily determine 
the countervailable subsidy rate to be 0.12 percent ad valorem for 
Guizhou Tire.

G. Provision of Natural and Synthetic Rubber by SOEs for Less than 
Adequate Remuneration

    Bridgestone alleges that the GOC, through state-owned rubber 
producers, provides domestic tire producers with natural and synthetic 
rubber at prices that do not reflect adequate remuneration. In its 
questionnaire response, the GOC states that the production and purchase 
price of both natural and synthetic rubber in the PRC are driven by 
market forces. See October 29 GOC questionnaire response at 11. The GOC 
also states that it does not regulate the price of rubber products, nor 
does it interfere with the decision making or day-to-day operations of 
natural and synthetic rubber producers or consumers. Id. The GOC 
reported that the users of rubber in the PRC included the following 
industries: tires; rubber bands and tubes; shoes; machinery components; 
and commodity products. The GOC claims not to be aware of any 
particular industries that receive preferential prices for rubber. In 
our initial new subsidy allegation questionnaire, we asked the GOC to 
explain the nature of its relationship with rubber suppliers and to 
state whether they are owned by the government. The GOC did not answer 
our question regarding state ownership of rubber suppliers. Id. at 10. 
In our

[[Page 71373]]

supplemental questionnaire dated November 14, 2007, we asked the GOC to 
provide a complete list of producers and sellers of rubber in China and 
to indicate the state's ownership interest in each producer. The GOC 
did not provide a complete list of rubber producers and sellers and did 
not indicate the state's ownership interest in any producer. See 
November 27 GOC supplemental questionnaire response at 30.
    All three respondents reported purchases of natural and synthetic 
rubber during the POI, and provided a breakdown of purchases from each 
supplier. Although the Department requested respondents to identify 
which suppliers were SOEs, Guizhou Tire did not provide this 
information. Instead, Guizhou Tire stated that the Department had not 
defined the term SOE in its questionnaires and that it is unable to 
``discern accurately all of the shareholders of its rubber suppliers.'' 
See October 29 Guizhou Tire questionnaire response at 8; see, also, 
November 27 Guizhou Tire supplemental questionnaire response at 42.
    Based on the record evidence, we preliminarily determine that the 
provision of natural and synthetic rubber by SOEs to OTR tire producers 
in the PRC is countervailable. In its response, the GOC listed the 
industries that use natural and synthetic rubbers: ``tires, rubber 
bands and tubes, shoes, machinery components and commodity products.'' 
See October 29 GOC questionnaire response at 10. We preliminarily find 
that these industries are ``limited in number'' and, hence, that the 
provision of natural and synthetic rubber is specific under section 
771(5A)(D)(iii)(I) of the Act. We further determine preliminarily that 
the GOC's provision of natural and synthetic rubber through SOEs is a 
financial contribution within the meaning of section 771(5)(D)(iii) and 
that it confers a benefit under section 771(5)(E)(iv) of the Act to the 
extent that it is provided for less than adequate remuneration.
    To determine whether a benefit has been conferred by the provision 
of goods, the Department follows the hierarchy set forth in 19 CFR 
351.511(a)(2). The potential benchmarks provided in 19 CFR 
351.511(a)(2) are listed in hierarchical order by preference: (1) 
market prices from actual transactions within the country under 
investigation; (2) world market prices that would be available to 
purchasers in the country under investigation; or (3) an assessment of 
whether the government price is consistent with market principles.
    Under 19 CFR 351.511(a)(2)(1), the first choice of a benchmark is 
``market prices from actual transactions within the country under 
investigation.'' Because the GOC did not provide the requested 
information that is necessary for the Department to determine whether 
we can use domestic prices as a benchmark, we find that we must apply 
facts available in accordance with sections 776(a)(1) and (2) of the 
Act.
    Sections 776(a)(1) and (2) of the Act provide that the Department 
shall apply ``facts otherwise available'' if, inter alia, necessary 
information is not on the record or an interested party or any other 
person: (A) withholds information that has been requested; (B) fails to 
provide information within the deadlines established, or in the form 
and manner requested by the Department, subject to subsections (c)(1) 
and (e) of section 782 of the Act; (C) significantly impedes a 
proceeding; or (D) provides information that cannot be verified as 
provided by section 782(i) of the Act.
    Where the Department determines that a response to a request for 
information does not comply with the request, section 782(d) of the Act 
provides that the Department will so inform the party submitting the 
response and will, to the extent practicable, provide that party the 
opportunity to remedy or explain the deficiency. If the party fails to 
remedy the deficiency within the applicable time limits then, subject 
to section 782(e) of the Act, the Department may disregard all or part 
of the original and subsequent responses, as appropriate. Section 
782(e) of the Act provides that the Department ``shall not decline to 
consider information that is submitted by an interested party and is 
necessary to the determination but does not meet all applicable 
requirements established by the administering authority'' if the 
information is timely, can be verified, is not so incomplete that it 
cannot be used, and if the interested party acted to the best of its 
ability in providing the information. Where all of these conditions are 
met, the statute requires the Department to use the information if it 
can do so without undue difficulties.
    We asked the GOC to provide information about the natural rubber 
and synthetic rubber industries in the PRC including a description of 
the industry, users of natural rubber and synthetic rubber in the PRC, 
and whether natural rubber and synthetic rubber producers are SOEs. 
Only limited information was provided in the GOC's questionnaire 
response dated October 29, 2007 and its supplemental questionnaire 
response dated November 27, 2007. In particular, in its October 29, 
2007 supplemental questionnaire response, the GOC did not provide a 
complete list of rubber suppliers or indicate the level of its 
ownership interest in any rubber producer. Thus, we are not able to 
gauge the extent of government involvement in the PRC natural rubber 
and synthetic rubber industries, determine the extent to which the 
domestic rubber market are dominated by SOEs, or ascertain the extent 
to which government involvement distorts the prices for these products 
in the PRC. Accordingly, pursuant to sections 776(a)(2)(A) and 
776(a)(2)(C) of the Act, we are relying on facts otherwise available.
    Section 776(b) of the Act further provides that the Department may 
use an adverse inference in applying the facts otherwise available when 
a party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information. Section 776(b) of the 
Act also authorizes the Department to use as adverse facts available 
(AFA) information derived from the petition, the final determination, a 
previous administrative review, or other information placed on the 
record.
    In selecting from among the facts available for the GOC, the 
Department has determined that an adverse inference is warranted, 
pursuant to section 776(b) of the Act. We find that the GOC did not act 
to the best of its ability in complying with our requests for 
information because it should have information pertaining to state 
ownership and control over the rubber industry within its control, but 
did not provide this information, as described above.
    As an adverse inference, we have rejected internal prices in the 
PRC because we do not know the share of natural rubber or synthetic 
rubber produced and sold by SOEs in the PRC. As explained in the 
preambular language addressing 19 CFR 351.511(a), ``While we recognize 
that government involvement in a market may have some impact on the 
price of the good or service in that market, such distortion will 
normally be minimal unless the government provider constitutes a 
majority, or in certain circumstances, a substantial portion of the 
market.'' See Countervailing Duties; Final Rule, 63 FR 65348, 65377 
(November 25, 1998) (CVD Preamble).
    Because we have preliminarily determined that we cannot consider 
domestic prices as a potential benchmark, we turn to the next level of

[[Page 71374]]

the hierarchy in section 351.511(a)(2) of the Department's regulations 
(i.e, world market prices that would be available to purchasers in the 
country under investigation). We have calculated annual 2006 benchmarks 
for natural rubber and synthetic rubber based on 2006 world market 
prices for natural rubber and synthetic rubber as reported by the 
International Rubber Study Group (IRSG).\19\ See Memorandum to the 
File, ``Countervailing Duty Investigation on Certain New Pneumatic Off-
the-Road Tires from the People's Republic of China: Natural Rubber and 
Synthetic Rubber Benchmarks'' (December 7, 2007) (Rubber Benchmarks 
Memorandum).
---------------------------------------------------------------------------

    \19\ The IRSG is comprised of a number of countries including 
several Asian countries, European countries and the United States. 
The IRSG provides price data for natural rubber from the commodity 
exchanges in New York, Singapore, and Europe. The IRSG also provides 
export price data for synthetic rubber from the USA, Japan, and 
France.
---------------------------------------------------------------------------

    We note that the IRSG's natural rubber prices are FOB Singapore and 
synthetic rubber prices are FAS. Therefore, pursuant to 19 CFR 
351.511(a)(2)(iv), we have added freight charges and import charges 
including VAT to calculate a price for natural rubber and synthetic 
rubber that Starbright, Guizhou Tire, and TUTRIC would have paid on the 
world market for these products. We obtained June 2006 freight rates 
from Maersk Lines. See Rubber Benchmarks Memorandum. We obtained the 
PRC import duties for natural rubber and synthetic rubber from Asia 
Pacific Economic Cooperation (APEC) Tariff Database at http://www.apectariff.org/. Imports of natural rubber into the PRC are subject 
to an import duty of 20 percent and imports of synthetic rubber into 
the PRC are subject to an import duty of 7.5 percent. See Rubber 
Benchmarks Memorandum. Finally, we obtained PRC VAT rates from the 
Decree 134 of the State Council, 1993. See Rubber Benchmarks 
Memorandum.
    We also note that Guizhou Tire also did not provide certain 
requested information. Specifically, in our supplemental questionnaire, 
we asked Guizhou Tire to identify which of its natural rubber and 
synthetic rubber suppliers were SOEs. As noted above, Guizhou Tire did 
not provide this information. Thus, in reaching our preliminary 
determination, pursuant to sections 776(a)(2)(A) and (C) of the Act, we 
are relying on facts otherwise available to determine Guizhou Tire's 
benefit under the government's provision of natural rubber and 
synthetic rubber for less than adequate remuneration. For the 
preliminary determination, we have relied on neutral facts available 
and treated a portion of Guizhou Tire's natural rubber and synthetic 
rubber as having been purchased from SOEs. Specifically, we have 
identified certain suppliers of natural rubber and synthetic rubber to 
Guizhou Tire as SOEs. See Rubber Benchmarks Memorandum and Guizhou 
Tire's Calculation Memorandum. We are treating purchases from these 
suppliers as purchases from SOEs. We calculated the respective percent 
of the quantity of total natural rubber and synthetic rubber purchases 
that Guizhou Tire purchased from known SOEs during the POI. We then 
applied these percentages to the quantity and value of Guizhou Tire's 
natural rubber and synthetic rubber purchases from unknown suppliers. 
See Rubber Benchmarks Memorandum and Guizhou Tire's Calculation 
Memorandum.
    To calculate the natural rubber benefit, we compared the domestic 
prices paid by Starbright, Guizhou Tire, and TUTRIC during the POI for 
natural rubber from SOEs to the 2006 C&F, duty-paid IRSG-based price 
for natural rubber. We treated the difference in the amounts that 
Starbright, Guizhou Tire, and TUTRIC would have paid by comparing our 
calculated benchmark to the amounts actually paid by these companies as 
the benefit. To calculate the synthetic rubber benefit, we compared the 
domestic prices paid by Starbright, Guizhou Tire, and TUTRIC for 
synthetic rubber from SOEs to the 2006 C&F duty-paid IRSG-based price 
for synthetic rubber. We treated the difference in the amounts that 
Starbright, Guizhou Tire, and TUTRIC would have paid by comparing our 
calculated benchmark to the amounts actually paid by these companies as 
the benefit.
    We then summed these two benefits for each company and divided this 
benefit by that company's respective sales. On this basis, we 
preliminarily determine a countervailable subsidy of 1.38, 1.92, and 
2.82 percent ad valorem for Guizhou Tire, Starbright, and TUTRIC, 
respectively.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Provision of Electricity for Less than Adequate Remuneration

    Petitioners allege that the GOC provides electricity to certain 
FIEs and SOEs on a preferential basis. According to the GOC, 
electricity in the PRC is produced by numerous power plants and it is 
transmitted for local distribution by two state-owned transmission 
companies, State Grid and China South Power Grid. Generally, prices for 
uploading electricity to the grid and transmitting it are regulated by 
the GOC, as are the final sales prices. See Circular on Implementation 
Measures Regarding Reform of Electricity Prices (Fagaijiage (2005) No. 
514) at Appendix 3 of the Provisional Measures on Prices for Sales of 
Electricity at Article 29 (``Government departments in charge of 
pricing at various levels shall be responsible for the administration 
and supervision of electricity sales prices''), provided in the October 
15 GOC questionnaire response, Exhibit GOC-G-2.
    Electricity consumers are divided into broad categories such as 
residential, commercial, large-scale industry, and agriculture. The 
rates charged vary across customer categories and within customer 
categories based on the amount of electricity consumed. Moreover, among 
industrial users, certain industries are specifically broken out and 
these industries receive special, discounted rates. Specifically, 
Article 8 of the Provisional Measures on Prices for Sales of 
Electricity provides that certain small and medium-sized chemical 
fertilizer producers shall be provided a separate electricity sales 
price. All other end users are charged the standard electricity price 
for industrial and commercial users. Thus, according to the GOC, there 
is no program to provide electricity at a discounted rate to SOEs or 
FIEs. The GOC provided a list of benchmark rates by province. We tied 
the rates reported by respondents to the GOC-provided schedule and to 
respondents supplier-specific schedules. See GOC and respondents' 
October 15 questionnaire responses and November 27 supplemental 
questionnaire responses. We saw no indication of discounted rates.\20\
---------------------------------------------------------------------------

    \20\ Guizhou Tire's consolidated financial statements indicate 
numerous energy subsidies, provided in the form of grants and 
rebates. We did not have sufficient time to collect information on 
these potential subsidies; however, in accordance to section 351.501 
of the Act, we intend to examine these subsidies further during the 
course of this investigation and will issue an interim analysis on 
them prior to the final determination.
---------------------------------------------------------------------------

    Thus, based on the information on the record there is no indication 
of provision of electricity to the respondents at less than adequate 
remuneration pursuant to their status as SOEs or FIEs. On this basis, 
we preliminarily determine that the GOC's provision of electricity does 
not confer a countervailable subsidy. See, also, CWP Preliminary, 72 FR 
at 63883.

[[Page 71375]]

B. VAT Export Rebates

    Petitioners allege that OTR tire exporters may apply to the tax 
authorities for a refund up to 13 percent for taxes paid for inputs in 
exported goods, and that the amount is in excess of the indirect tax 
levied on the production and distribution of the same product sold in 
the domestic market. According to the GOC, the ``exemption, deduction 
and refund'' of VAT applies if a manufacturer exports its self-produced 
goods by itself or via a trading company. See Article 1 of the Circular 
on Further Promotion of Methodology of ``Exemption, Deduction, and 
Refund'' of Tax for Exported Goods (CAISHUI (2002) No. 7) provided in 
the GOC October 15 response at Exhibit GOC-P-4. The GOC reported the 
VAT levied on domestic sales of OTR tires during the POI was 17 percent 
and the VAT rebated for export sales of OTR tires during the POI was 13 
percent.
    The Department's regulations state that in the case of an exemption 
upon export of indirect taxes, a benefit exists only 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.'' 19 CFR 351.517(a) and 19 CFR 
351.102 (for a definition of ``indirect tax''). Because the VAT rebate 
applicable to exported OTR tires during the POI (13 percent) was less 
than the VAT levied on domestic sales of OTR tires during the POI (17 
percent), the Department preliminarily determines that, for the 
purposes of this investigation, the VAT refund received upon the export 
of OTR tires does not confer a countervailable benefit. See, also, CWP 
Prelim, 72 FR at 63884.

III. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that Guizhou Tire, Starbright, and 
TUTRIC did not apply for or receive benefits during the POI under the 
programs listed below.

A. Discounted Loans for Export-Oriented Enterprises

B. Loan Forgiveness for SOEs

C. Foreign Currency Retention Scheme

D. Provision of Land for Less Than Adequate Remuneration to FIEs

E. Preferential Tax Policies for Enterprises with Foreign Investment 
(Two Free, Three Half Income Program)

F. Preferential Tax Policies for Export-Oriented FIEs

G. Corporate Income Tax Refund Program for Reinvestment of FIE Profits 
in Export-Oriented Enterprises

H. Tax Benefits for FIEs in Encouraged Industries that Purchase 
Domestic Origin Machinery

I. VAT Rebate for FIE Purchases of Domestically Produced Equipment

J. Funds for Outward Expansion of Industries in Guangdong Province

K. Export Interest Subsidy Funds for Enterprises Located in Guangdong 
and Zhejiang Provinces

L. Grants to Loss-Making SOEs

M. Exemption for SOEs from Distributing Dividends to the State

N. Preferential Tax Policies for Advanced Technology Foreign Invested 
Enterprises

O. Preferential Tax Policies for Knowledge or Technology Intensive FIEs

P. Preferential Tax Policies for High or New Technology FIEs

Q. Preferential Tax Policies for Research and Development by FIEs

R. Provincial Support in Antidumping Proceedings

    For purposes of this preliminary determination, we have relied on 
respondents' submissions to preliminarily determine non-use of the 
programs listed above. During the course of verification, the 
Department will further examine whether these programs were used by 
respondents during the POI.

IV. Programs Preliminarily Determined To Be Terminated

Exemption from Payment of Staff and Worker Benefits for Export Oriented 
Industries

    The Department determined that this program was terminated on 
January 1, 2002, with no residual benefits. See CFS Final, 72 FR 60645.

V. Programs For Which More Information Is Required

A. Grants to the Tire Industry for Electricity

    Petitioners allege that the GOC has provided grants to cover a 
portion of electricity expenses for OTR tire producers. Petitioners 
also allege that the GOC authorizes local governments to offer grants 
to tire producers in order to cover the producers electricity costs. 
Guizhou Tire, Starbright, and TUTRIC stated that they did not receive 
benefits under this program during the POI. However, according to its 
financial statements, Guizhou Tire appears to receive subsidies for 
energy. See October 15 Guizhou Tire questionnaire response, Exhibit 
GTC-5.
    At this time, we do not have sufficient information from the GOC or 
Guizhou Tire to determine whether this assistance received by Guizhou 
Tire is a countervailable subsidy. We intend to seek further 
information and issue an interim analysis describing our preliminary 
findings with respect to this program before the final determination so 
that parties will have the opportunity to comment on our findings 
before the final determination.

B. Provision of Water to FIEs for Less than Adequate Remuneration

    Petitioners allege that the GOC provides water to certain FIEs on a 
preferential basis. According to the GOC, water supply is localized in 
the PRC. Generally, water prices are regulated by local governments 
pursuant to Article 26.2 of the Regulation on Administration of City 
Water Supply (Decree 158 of the State Council, 1994) provided within 
the October 15 GOC response at Exhibit GOC-H-1. The GOC states that 
water prices vary depending on the end user to which the water is 
provided. The GOC also states that local authorities establish their 
own categories of end users. End users in each of these categories are 
charged the same water price.
    Guizhou Tire is not an FIE and as such has reported that it is not 
eligible for this program. See October 15 Guizhou Tire questionnaire 
response at 26. Starbright states it pumps water from its own wells, 
and therefore the company is not provided water by the GOC. See October 
15 Starbright questionnaire response at 19. TUTRIC has provided its 
water bills; however, the company states that it does not have access 
to any water pricing schedules or tariffs. See October 15 TUTRIC 
questionnaire response at Exhibit 13. The GOC did not provide water 
pricing

[[Page 71376]]

schedules as requested in our supplemental questionnaire. It responded 
that the Department's investigation ``pertains to an alleged `program' 
pertaining to the provision of land and electricity and does not 
involve the alleged provision of water.'' See November 27 GOC 
supplemental questionnaire at 19. This was the result of a mislabled 
section heading in our questionnaire, which referred to SOEs, instead 
of FIEs.
    At this time, we do not have sufficient information from the GOC to 
determine whether TUTRIC received water on a preferential basis. 
Specifically, we will ask the GOC again for the relevant water pricing 
schedule and issue an interim analysis describing our preliminary 
findings with respect to this program before the final determination so 
that parties will have the opportunity to comment on our findings 
before the final determination.

C. Debt Forgiveness from State-Owned Banks to Hebei Tire

    Bridgestone alleges that, in approving the acquisition of Hebei 
Tire by Starbright, the Hebei provincial government authorized the 
transfer of Hebei Tire's SOCB debt at a discount to Starbright (or its 
parent, GPX) in exchange for equity, thereby forgiving part of the 
debt. Bridgestone and petitioners also allude to the possibility that 
Hebei Tire's SOCB debt was forgiven before the transaction, essentially 
to make it a more attractive buy.
    As explained in the ``Change In Ownership'' section above, at this 
time we do not have sufficient information from the GOC or Starbright 
regarding the role played by the GOC in the Hebei Tire sale. We intend 
to seek further information on this question and to issue an interim 
analysis describing our preliminary findings with respect to this 
program before the final determination so that parties will have the 
opportunity to comment on our findings before the final determination.

D. Non-Tradable Share Reform

    As mentioned under the ``Case History'' section of this notice, the 
Department determined to investigate the Non-Tradable Share Reform 
program on November 14, 2007. Given that the questionnaire responses 
are due on December 10, 2007 (extended in response to the respondents' 
request), the Department does not have the information needed to and 
analyze this program for this preliminary determination. We will 
therefore analyze the responses to this allegation and address all 
arguments fully in a post-preliminary analysis memorandum.

Verification

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

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we 
calculated an individual rate for each producer/exporter of the subject 
merchandise. We preliminarily determine the total estimated net 
countervailable subsidy rates to be:

------------------------------------------------------------------------
                                                            Net Subsidy
                  Exporter/Manufacturer                        Rate
------------------------------------------------------------------------
Guizhou Tire Co., Ltd...................................            3.13
Hebei Starbright Tire Co., Ltd..........................            2.38
Tianjin United Tire & Rubber International Co., Ltd.....            6.59
All-Others..............................................            4.44
------------------------------------------------------------------------

    Sections 703(d) and 705(c)(5)(A) of the Act state that for 
companies not investigated, we will determine an all-others rate by 
weighting the individual company subsidy rate of each of the companies 
investigated by each company's exports of the subject merchandise to 
the United States. However, the all-others rate may not include zero 
and de minimis rates or any rates based solely on the facts available. 
In this investigation, all three individual rates can be used to 
calculate the all-others rate. Therefore, we have assigned the 
weighted-average of these three individual rates to all-other 
producers/exporters of OTR tires from the PRC.
    In accordance with sections 703(d)(1)(B) and (2) of the Act, we are 
directing U.S. Customs and Border Patrol (CBP) to suspend liquidation 
of all entries of OTR tires from the PRC that are entered, or withdrawn 
from warehouse, for consumption on or after the date of the publication 
of this notice in the Federal Register, and to require a cash deposit 
or bond for such entries of merchandise in the amounts indicated above.

ITC Notification

    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all non-privileged and non-proprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    In accordance with section 705(b)(2)(B) of the Act, if our final 
determination is affirmative, the ITC will make its final determination 
within 45 days after the Department makes its final determination.

Disclosure and Public Comment

    In accordance with 19 CFR 351.224(b), we will disclose to the 
parties the calculations for this preliminary determination within five 
days of its announcement. Case briefs for this investigation must be 
submitted no later than one week after the issuance of the last 
verification report. See 19 CFR 351.309(c) (for a further discussion of 
case briefs). Rebuttal briefs must be filed within five days after the 
deadline for submission of case briefs, pursuant to 19 CFR 
351.309(d)(1). A list of authorities relied upon, a table of contents, 
and an executive summary of issues should accompany any briefs 
submitted to the Department. Executive summaries should be limited to 
five pages total, including footnotes.
    Section 774 of the Act provides that the Department will hold a 
public hearing to afford interested parties an opportunity to comment 
on arguments raised in case or rebuttal briefs, provided that such a 
hearing is requested by an interested party. If a request for a hearing 
is made in this investigation, the hearing will tentatively be held two 
days after the deadline for submission of the rebuttal briefs, pursuant 
to 19 CFR 351.310(d), at the U.S. Department of Commerce, 14th Street 
and Constitution Avenue, N.W., Washington, D.C. 20230. Parties should 
confirm by telephone the time, date, and place of the hearing 48 hours 
before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice, pursuant to 19 
CFR 351.310(c). Requests should contain: (1) the party's name, address, 
and telephone numbers; (2) the number of participants; and, (3) a list 
of the issues to be discussed. Oral presentations will be limited to 
issues raised in the briefs.
    This determination is issued and published pursuant to sections 
703(f) and 777(i) of the Act.


[[Page 71377]]


    Dated: December 7, 2007.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E7-24397 Filed 12-14-07; 8:45 am]
BILLING CODE 3510-DS-S