[Federal Register Volume 74, Number 215 (Monday, November 9, 2009)]
[Notices]
[Pages 57629-57648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-26947]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-950]


Wire Decking From the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination and Alignment of Final 
Countervailing Duty Determination with Final Antidumping 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 wire decking from the People's Republic of 
China (the PRC). For information on the estimated subsidy rates, see 
the ``Suspension of Liquidation'' section of this notice.

EFFECTIVE DATE: November 9, 2009.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or John Conniff, AD/
CVD Operations, Office 3, Operations, Import Administration, U.S. 
Department of Commerce, Room 4014, 14th Street and Constitution Avenue, 
NW, Washington, DC 20230; telephone: (202) 482-4793 and (202) 482-1009, 
respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On June 5, 2009, the Department received the petition filed in 
proper form by the petitioners.\1\ This investigation was initiated on 
June 25, 2009. See Wire Decking From the People's Republic of China: 
Initiation of Countervailing Duty Investigation, 74 FR 31700 (July 2, 
2009) (Initiation Notice), and accompanying Initiation Checklist.\2\
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    \1\ Petitioners are AWP Industries, Inc., ITC Manufacturing, 
Inc., J&L Wire Cloth, Inc., Nashville Wire Products Mfg., Co., Inc., 
and Wireway Husky Corporation.
    \2\ A public version of this and all public Departmental 
memoranda are on file in the Central Records Unit (CRU), room 1117 
in the main building of the Commerce Department.
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    As explained in the Initiation Notice, the categories of the 
Harmonized Tariff Schedule of the United States (HTSUS) that include 
subject merchandise are very broad and include products other than 
those subject to this investigation. See 74 FR at 31704. Therefore, on 
June 26, 2009, the Department requested Quantity and Value (Q&V) 
information from the 83 companies that petitioners identified as 
potential producers/exporters of wire decking in the PRC. See Q&V 
Questionnaire (June 26, 2009); see also Petition for the Imposition of 
Antidumping and Countervailing Duties on Wire Decking from the People's 
Republic of China (June 5, 2009) (Petition) at Volume I, Exhibit 4, for 
the list of wire decking producers/exporters.\3\ We received Q&V 
questionnaire responses from 10 producers/exporters of wire decking.
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    \3\ The Petition is a proprietary document for which the public 
version is on file in the CRU.
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    On July 16, 2009, we selected two Chinese producers/exporters of 
wire decking as mandatory respondents: Dalian Huameilong Metal Products 
Co., Ltd. (DHMP) and Dalian Eastfound Metal Products Co., Ltd. 
(Eastfound Metal) and its affiliate Dalian Eastfound Material Handling 
Products Co., Ltd. (Eastfound Material) (collectively, Eastfound). See 
Memorandum from the Team through Melissa G. Skinner, Director, AD/CVD 
Operations, Office 3, to John M. Andersen, Acting Deputy Assistant 
Secretary for AD/CVD Operations, regarding ``Respondent Selection'' 
(July 16, 2009). Also on July 16, 2009, we issued the initial 
countervailing duty (CVD) questionnaire to the Government of the 
People's Republic of China (the GOC) and the

[[Page 57630]]

mandatory respondents. We received Eastfound Metal's, Eastfound 
Material's and DHMP's initial questionnaire responses on September 9, 
2009. On September 10, 2009, we received the GOC's initial 
questionnaire response.
    On August 13, 2009, the Department postponed the deadline for the 
preliminary determination by 65 days to no later than November 2, 2009. 
See Wire Decking From the People's Republic of China: Notice of 
Postponement of Preliminary Determination in the Countervailing Duty 
Investigation, 74 FR 40812 (August 13, 2009).
    Regarding supplemental questionnaires, we issued to the GOC 
supplemental questionnaires on September 16, 18, and 22, 2009, and 
October 1, 14, and 22, 2009,\4\ to which the GOC submitted responses on 
September 29, 2009, and October 5, 15, 21, and 26, 2009.
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    \4\ The GOC and Eastfound Metal coordinated with regard to the 
October 1, 2009, supplemental questionnaire. Eastfound Metal 
submitted a response to the questionnaire on October 19, 2009.
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    We issued supplemental questionnaires to Eastfound Metal on 
September 17, 2009, and October 14, 2009, and received responses on 
October 19, 2009, October 20, 2009,\5\ and October 23, 2009. On 
September 23, 2009, we issued a supplemental questionnaire to Eastfound 
Material and the company submitted its response on October 15, 2009.
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    \5\ On October 19, 2009, counsel for Eastfound Metal was 
instructed to re-file the company's supplemental questionnaire 
response dated October 13, 2009, because the submission contained a 
document not germane to this investigation. See Letter from Melissa 
G. Skinner, Director, AD/CVD Operations Office 3, to Gregory S. 
Menegaz of DeKieffer and Horgan, dated October 19, 2009. Mr. Menegaz 
re-filed Eastfound Metal's supplemental questionnaire response on 
October 20, 2009.
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    We issued supplemental questionnaires to DHMP on September 18, 2009 
and October 15, 2009 and received responses on October 2, 2009 and 
October 22, 2009. Additionally, DHMP made submissions on September 14, 
2009 and October 26, 2009.

Period of Investigation

    The period of investigation (the POI) for which we are measuring 
subsidies is January 1, 2008, through December 31, 2008, which 
corresponds to the most recently completed fiscal year. See 19 CFR 
351.204(b)(2).

Scope of the Investigation

    The scope of the investigation covers welded-wire rack decking, 
which is also known as, among other things, ``pallet rack decking,'' 
``wire rack decking,'' ``wire mesh decking,'' ``bulk storage 
shelving,'' or ``welded-wire decking.'' Wire decking consists of wire 
mesh that is reinforced with structural supports and designed to be 
load bearing. The structural supports include sheet metal support 
channels, or other structural supports, that reinforce the wire mesh 
and that are welded or otherwise affixed to the wire mesh, regardless 
of whether the wire mesh and supports are assembled or unassembled and 
whether shipped as a kit or packaged separately. Wire decking is 
produced from carbon or alloy steel wire that has been welded into a 
mesh pattern. The wire may be galvanized or plated (e.g., chrome, zinc, 
or nickel coated), coated (e.g., with paint, epoxy, or plastic), or 
uncoated (``raw''). The wire may be drawn or rolled and may have a 
round, square or other profile. Wire decking is sold in a variety of 
wire gauges. The wire diameters used in the decking mesh are 0.105 
inches or greater for round wire. For wire other than round wire, the 
distance between any two points on a cross-section of the wire is 0.105 
inches or greater. Wire decking reinforced with structural supports is 
designed generally for industrial and other commercial storage rack 
systems.
    Wire decking is produced to various profiles, including, but not 
limited to, a flat (``flush'') profile, an upward curved back edge 
profile (``backstop'') or downward curved edge profile 
(``waterfalls''), depending on the rack storage system. The wire 
decking may or may not be anchored to the rack storage system. The 
scope does not cover the metal rack storage system, comprised of metal 
uprights and cross beams, on which the wire decking is ultimately 
installed. Also excluded from the scope is wire mesh shelving that is 
not reinforced with structural supports and is designed for use without 
structural supports.
    Wire decking enters the United States through several basket 
categories in the HTSUS. U.S. Customs and Border Protection (CBP) has 
issued a ruling (NY F84777) that wire decking is to be classified under 
HTSUS 9403.90.8040. Wire decking has also been entered under HTSUS 
7217.10, 7217.20, 7326.20, 7326.90, 9403.20.0020, and 9403.20.0030. 
While HTSUS subheadings are provided for convenience and Customs 
purposes, the written description of the scope of the investigation is 
dispositive.

Scope Comments

    In accordance with the Preamble to the Department's regulations 
(see Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May 
19, 1997) (Preamble)), in the 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. The Department did not receive 
scope comments from any interested party.

Injury Test

    Because the PRC is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Tariff Act of 1930, as amended (the 
Act), the International Trade Commission (the ITC) is required to 
determine whether imports of the subject merchandise from the PRC 
materially injure, or threaten material injury to, a U.S. industry. On 
July 31, 2009, the ITC published its preliminary determination finding 
that there is a reasonable indication that an industry in the United 
States is materially injured by reason of imports of wire decking from 
the PRC. See Wire Decking From China, Investigation Nos. 701-TA-466 and 
731-TA-1162 (Preliminary), 74 FR 38229 (July 31, 2009).

Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

    On June 25, 2009, the Department initiated AD and CVD 
investigations of wire decking from the PRC. See Wire Decking From the 
People's Republic of China: Initiation of Antidumping Duty 
Investigation, 74 FR 31691 (July 2, 2009) and also Initiation Notice 
(for the PRC CVD investigation). The AD and CVD investigations have the 
same scope with regard to the merchandise covered.
    On October 28, 2009, the petitioners submitted a letter, in 
accordance with section 705(a)(1) of the Act, requesting alignment of 
the final CVD determination with the final determination in the 
companion AD investigation of wire decking from the PRC. Therefore, in 
accordance with section 705(a)(1) of the Act, and 19 CFR 351.210(b)(4), 
we are aligning the final CVD determination with the final 
determination in the companion AD investigation of wire decking from 
the PRC. The final CVD determination will be issued on the same date as 
the final AD determination, which is currently scheduled to be issued 
on or about March 20, 2010.

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

[[Page 57631]]

Determination, 72 FR 60645 (October 25, 2007) (CFS from the PRC), and 
accompanying Issues and Decision Memorandum (CFS Decision Memorandum). 
In CFS from the PRC, the Department found that
    . . . given the substantial differences between the Soviet-style 
economies and the China'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 Decision Memorandum at Comment 6. The Department has affirmed 
its decision to apply the CVD law to the PRC in subsequent final 
determinations. See, e.g., Circular Welded Carbon Quality Steel Pipe 
From the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Affirmative Determination of Critical 
Circumstances, 73 FR 31966 (June 5, 2008) (CWP from the PRC), and 
accompanying Issues and Decision Memorandum (CWP Decision Memorandum) 
at Comment 1.
    Additionally, for the reasons stated in the CWP Decision 
Memorandum, we are using the date of December 11, 2001, the date on 
which the PRC became a member of the World Trade Organization (WTO), as 
the date from which the Department will identify and measure subsidies 
in the PRC for purposes of this investigation. See CWP Decision 
Memorandum at Comment 2.

Use of Facts Otherwise Available and Adverse Inferences

    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.
    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.

Application of Facts Available: Provision of Zinc for Less Than 
Adequate Remuneration (LTAR)

    The Department is investigating the extent to which firms, acting 
as government authorities, sold zinc to the mandatory respondents for 
LTAR. As discussed in further detail below in the ``Provision of Zinc 
for LTAR'' section, the Department sought information from the 
mandatory respondents and the GOC concerning the identity of the firms 
that produced the zinc ultimately purchased by the mandatory 
respondents during the POI. The Department specifically sought 
information that would enable it to determine whether the input 
suppliers acted as producers of the input or as trading companies (or 
non-producing suppliers) that resold the input that was produced by 
other firms. In the case of DHMP, information from the company and the 
GOC identified the name of the supplier(s) that sold the zinc to DHMP 
during the POI. However, DHMP and the GOC did not identify the firm(s) 
that actually produced the zinc that was sold to DHMP during the 
POI.\6\ As explained below in the ``Provision of Zinc for LTAR'' 
program, the Department requires information concerning the producer(s) 
of the zinc purchased by DHMP in order to determine whether DHMP 
acquired zinc from a producer that acted as a government authority 
capable of providing a financial contribution as described under 
section 771(5)(D)(iv) of the Act. Thus, we find that the necessary 
information is not on the record.
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    \6\ Eastfound reported that it did not purchase zinc during the 
POI.
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    In prior CVD cases involving the PRC, in instances in which the 
mandatory respondent and the GOC have failed to identify the firm that 
produced the input sold to the mandatory respondent during the POI, the 
Department has resorted to the use of facts available as described 
under sections 776(a)(1) and (2)(b) of the Act. See, e.g., Circular 
Welded Austenitic Stainless Pressure Pipe From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 74 FR 4936 
(January 28, 2009) (CWASPP from the PRC), and accompanying Issues and 
Decision Memorandum (CWASPP Decision Memorandum) at ``Provision of SSC 
for LTAR.'' In such instances, the Department has utilized aggregate 
production data provided by the GOC to estimate the amount of the input 
that is produced by state-owned enterprises. Id. In keeping with this 
approach, we have resorted to the use of facts available under sections 
776(a)(1) and (2) of the Act in order to determine the extent to which 
the zinc purchased by DHMP during the POI was produced by firms acting 
as government authorities capable of providing a financial contribution 
within the meaning of section 771(5)(D)(iv) of the Act.
    The GOC provided the amount of zinc produced by state-owned 
enterprises (SOEs), collectives, private firms, and firms for which the 
ownership category was unknown. In the final determination of LWRP from 
the PRC, the Department affirmed its decision to treat collectives as 
government authorities. See Light-Walled Rectangular Pipe and Tube From 
the People's Republic of China: Final Affirmative Countervailing Duty 
Investigation Determination, 73 FR 35642 (June 24, 2008) (LWRP from the 
PRC), and accompanying Issues and Decision Memorandum (LWRP Decision 
Memorandum) at Comment 5. We have adopted the same approach with regard 
to collectives in the instant investigation. Using this data, we 
calculated the share of zinc produced by government authorities to be 
approximately 67 percent.\7\ Therefore, pursuant to sections 776(a)(1) 
and (2) of the Act, we are assuming that 67 percent of the zinc sold to 
DHMP during the POI was produced by government authorities capable of 
providing a financial contribution within the meaning of section 
771(5)(D)(iv) of the Act.
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    \7\ In deriving this ratio, we did not include in our 
calculations the quantity of zinc produced by firms that the GOC 
categorized as unknown.
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Application of Adverse Inferences: Provision of Electricity for LTAR

    On July 16, 2009, the Department issued its initial questionnaire 
to the GOC. In the questionnaire, the Department asked the GOC several 
questions regarding its alleged provision of electricity to the 
mandatory respondents for LTAR. See Department's Initial Questionnaire 
at Appendix 7 (July 16, 2009). The GOC failed to respond to those 
questions. See GOC's Initial Questionnaire Response at 27-30 (September 
10, 2009). The Department issued a supplemental questionnaire in which 
it asked the GOC once again to submit the requested information 
concerning the provision of electricity for LTAR program. See 
Department's Second Supplemental Questionnaire at 2 (September 18, 
2009). The GOC, however, again failed to provide the requested 
information with regard to several of the Department's questions on the 
provision

[[Page 57632]]

of electricity. See GOC's Second Supplemental Questionnaire Response at 
1-2 (October 15, 2009).
    Section 776(a)(2)(D) of the Act states that the Department shall 
use the facts otherwise available in reaching a determination if an 
interested party provides information that cannot be verified as 
provided by section 782(i) of the Act. In addition, section 
776(a)(2)(A) of the Act states that the Department shall use facts 
available when a party withholds information that has been requested by 
the Department. Further, section 776(b) of the Act states that if the 
Department finds that an interested party fails to cooperate by not 
acting to the best of its ability to comply with a request for 
information, the Department may use an inference that is adverse to the 
interests of that party in selecting from the facts otherwise 
available.
    As summarized above, the GOC did not provide the information 
requested by the Department as it pertains to the provision of 
electricity for LTAR program. We preliminarily find that, in failing to 
provide the requested information, the GOC did not act to the best of 
its ability. Accordingly, in selecting from among the facts available, 
we are drawing an adverse inference with respect to the provision of 
electricity in the PRC and preliminarily determine that the GOC is 
providing a financial contribution that is specific within the meaning 
of section 771(5A)(D)(iv) of the Act. See ``Provision of Electricity 
for LTAR'' section below for a discussion of the program benefit.

Application of Adverse Inferences: Non-Cooperative Companies

    In this investigation, 74 companies did not provide a response to 
the Department's Q&V questionnaire issued during the respondent 
selection process. These non-cooperative Q&V companies are listed below 
in the ``Suspension of Liquidation'' section. We confirmed that each of 
these companies received the Q&V questionnaire which was sent via 
either Federal Express or DHL.\8\
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    \8\ See Memorandum to the File regarding ``Delivery of Quantity 
and Value Questionnaires via Federal Express and DHL'' (July 16, 
2009).
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    The 74 non-cooperative Q&V companies withheld requested information 
and significantly impeded this proceeding. Specifically, by not 
responding to requests for information concerning the quantity and 
value of their sales, they impeded the Department's ability to select 
the most appropriate respondents in this investigation. Thus, in 
reaching our preliminary determination, pursuant to sections 
776(a)(2)(A) and (C) of the Act, we are basing the CVD rate for the 
non-cooperative Q&V companies on facts otherwise available.
    We further preliminarily determine that an adverse inference is 
warranted, pursuant to section 776(b) of the Act. By failing to submit 
responses to the Department's Q&V questionnaires, these companies did 
not cooperate to the best of their ability in this investigation. 
Accordingly, we preliminarily find that an adverse inference is 
warranted to ensure that the non-cooperating Q&V companies will not 
obtain a more favorable result than had they fully complied with our 
request for information.
    In deciding which facts to use as adverse facts available (AFA), 
section 776(b) of the Act and 19 CFR 351.308(c)(1) and (2) authorize 
the Department to rely on information derived from: (1) the petition; 
(2) a final determination in the investigation; (3) any previous review 
or determination; or (4) any other information placed on the record. 
The Department's practice when selecting an adverse rate from among the 
possible sources of information is to ensure that the rate is 
sufficiently adverse ``as to effectuate the statutory purposes of the 
adverse facts available rule to induce respondents to provide the 
Department with complete and accurate information in a timely manner.'' 
See, e.g., Notice of Final Determination of Sales at Less Than Fair 
Value: Static Random Access Memory Semiconductors From Taiwan, 63 FR 
8909, 8932 (February 23, 1998). The Department's practice also ensures 
``that the party does not obtain a more favorable result by failing to 
cooperate than if it had cooperated fully.'' See Statement of 
Administrative Action (SAA) accompanying the Uruguay Round Agreements 
Act, H.R. Rep. No. 103-316, Vol. I, at 870 (1994), reprinted at 1994 
U.S.C.C.A.N. 4040, 4199.
    It is the Department's practice to select, as AFA, the highest 
calculated rate in any segment of the proceeding. See, e.g., Laminated 
Woven Sacks From the People's Republic of China: Final Affirmative 
Countervailing Duty Determination and Final Affirmative Determination, 
in Part, of Critical Circumstances, 73 FR 35639 (June 24, 2008) (LWS 
from the PRC), and accompanying Issues and Decision Memorandum (LWS 
Decision Memorandum) at ``Selection of the Adverse Facts Available.''
    In previous CVD investigations of products from the PRC, we adapted 
the practice to use the highest rate calculated for the same or similar 
program in other PRC CVD investigations. See id. and Certain Tow-Behind 
Lawn Groomers and Certain Parts Thereof From the People's Republic of 
China: Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination with Final 
Antidumping Duty Determination, 73 FR 70971, 70975 (November 24, 2008) 
(unchanged in the Certain Tow-Behind Lawn Groomers and Certain Parts 
Thereof From the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 74 FR 29180 (June 19, 2009), and 
accompanying Issues and Decision Memorandum (Lawn Groomers Decision 
Memorandum) at ``Application of Facts Available, Including the 
Application of Adverse Inferences''). For this preliminary 
determination, consistent with the Department's recent practice, we are 
computing a total AFA rate for the non-cooperating companies generally 
using program-specific rates calculated for the cooperating respondents 
in the instant investigation or calculated in prior PRC CVD cases. 
Specifically, for programs other than those involving income tax 
exemptions and reductions, we are applying the highest calculated rate 
for the identical program in this investigation if a responding company 
used the identical program, and the rate is not zero. If there is no 
identical program match within the investigation, we are using the 
highest non-de minimis rate calculated for the same or similar program 
in another PRC CVD investigation. Absent an above-de minimis subsidy 
rate calculated for the same or similar program, we are applying the 
highest calculated subsidy rate for any program otherwise listed that 
could conceivably be used by the non-cooperating companies. See, e.g., 
Lightweight Thermal Paper From the People's Republic of China: Final 
Affirmative Countervailing Duty Determination, 73 FR 57323 (October 2, 
2008) (LWTP from the PRC), and accompanying Issues and Decision 
Memorandum (LWTP Decision Memorandum) at ``Selection of the Adverse 
Facts Available Rate.''
    Further, where the GOC can demonstrate through complete, 
verifiable, positive evidence that non-cooperative Q&V companies 
(including all their facilities and cross-owned affiliates) are not 
located in particular provinces whose subsidies are being investigated, 
the Department will not include those provincial programs in 
determining the countervailable subsidy rate for the non-cooperative 
Q&V companies. See, e.g., Certain Kitchen

[[Page 57633]]

Shelving and Racks from the People's Republic of China: Final 
Affirmative Countervailing Duty Determination, 74 FR 37012 (July 27, 
2009) (Shelving from the PRC), and accompanying Issues and Decision 
Memorandum (Shelving Decision Memorandum) at ``Use of Facts Otherwise 
Available and Adverse Facts Available.'' In this investigation, the GOC 
has not provided any such information. Therefore, we are making the 
adverse inference that the non-cooperative Q&V companies had facilities 
and/or cross-owned affiliates that received subsidies under all of the 
sub-national programs on which the Department initiated.
    For the income tax rate reduction or exemption programs, we are 
applying an adverse inference that the non-cooperative Q&V companies 
paid no income taxes during the POI. The six programs are: (1) Two 
Free, Three Half Tax Exemptions for FIEs, (2) Income Tax Exemptions for 
Export-Oriented FIEs, (3) Local Income Tax Exemption and Reduction 
Program for Productive FIEs, (4) Preferential Tax Programs for FIEs 
Recognized as High or New Technology Enterprises, (5) Income Tax 
Benefits for FIEs Based on Geographical Location, and (6) Income Tax 
Exemption for Investors in Designated Geographical Regions within 
Liaoning.
    The standard income tax rate for corporations in the PRC is 30 
percent, plus a 3 percent provincial income tax rate.\9\ The highest 
possible benefit for all income tax reduction or exemption programs 
combined is 33 percent. Therefore, we are applying a CVD rate of 33 
percent on an overall basis for these six income tax programs (i.e., 
these six income tax programs combined provide a countervailable 
benefit of 33 percent). This 33 percent AFA rate does not apply to tax 
credit or tax refund programs. This approach is consistent with the 
Department's past practice. See, e.g., CWP Decision Memorandum at 2, 
and LWTP Decision Memorandum at ``Selection of the Adverse Facts 
Available Rate.''
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    \9\ See GOC's supplemental questionnaire response at 9 (October 
15, 2009).
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    The 33 percent AFA rate does not apply to the following four income 
tax credit and rebate or accelerated depreciation programs because such 
programs may not affect the tax rate and, hence, the subsidy conferred, 
in the current year: (1) Income Tax Credit for Domestically-owned 
Companies Purchasing Domestically-produced Equipment, (2) Income Tax 
Exemption for Investment in Domestic Technological Renovation,\10\ (3) 
Preferential Income Tax Policy for Enterprises in the Northeast 
Region,\11\ and (4) Forgiveness of Tax Arrears for Enterprises in the 
Old Industrial Bases of Northeast China.\12\ Neither mandatory 
respondent used these programs, nor have we found greater than de 
minimis benefits for these direct tax programs in other CVD PRC 
proceedings. Therefore, we preliminarily determine to use the highest 
non-de minimis rate for any indirect tax program from a China CVD 
investigation. The rate we select is 1.51 percent, calculated for the 
``Value-Added Tax and Tariff Exemptions on Imported Equipment'' program 
in CFS from the PRC. See CFS Decision Memorandum at 13-14.
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    \10\ Program provides a tax credit to enterprises for a certain 
portion of investment in any domestically-produced equipment that 
relates to technology updates. See Initiation Checklist at 15.
    \11\ Program reduces the depreciation life of fixed assets by up 
to 40 percent for tax purposes and shortens the period of 
amortization of intangible assets by up to 40 percent for tax 
purposes. See Initiation Checklist at 15.
    \12\ Petitioner alleged that this program forgives tax 
liabilities owed by companies in the northeast region of China. See 
Initiation Checklist at 16.
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    We are also investigating VAT and tariff reduction programs. 
Eastfound used the Import Tariff and VAT Exemptions for FIEs and 
Certain Domestic Enterprises Using Imported Equipment in Encouraged 
Industries program and VAT Refunds for FIEs Purchasing Domestically-
produced Equipment program and, therefore, we are using, as AFA, 
Eastfound's rates of 0.02 percent and 0.13 percent, respectively. For 
the other following VAT and tariff reduction programs, for which we do 
not have respondent program usage, we are applying the 1.51 percent 
rate calculated in CFS from the PRC: (1) VAT Deductions on Fixed Assets 
and (2) VAT Exemptions for Newly Purchased Equipment in Jinzhou 
District.
    Neither respondent used any of the loan programs on which the 
Department initiated. Therefore, for the following loan programs, we 
preliminarily determine to apply the highest non-de minimis subsidy 
rate for any loan program in a prior China CVD investigation: (1) 
Honorable Enterprise Program,\13\ (2) Preferential Loans for Key 
Projects and Technologies, (3) Preferential Loans as Part of the 
Northeast Revitalization Program, and (4) Policy Loans for Firms 
Located in Industrial Zones in the City of Dalian in Liaoning Province. 
The highest non-de minimis subsidy rate is 8.31 percent calculated for 
the ``Government Policy Lending Program,'' from LWTP from the PRC. See 
Lightweight Thermal Paper From the People's Republic of China: Notice 
of Amended Final Affirmative Countervailing Duty Determination and 
Notice of Countervailing Duty Order, 73 FR 70958 (November 24, 2008) 
(Amended LWTP from the PRC).
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    \13\ In its September 29, 2009, supplemental questionnaire 
response, the GOC reported that the Honorable Enterprise Program was 
terminated and provided termination legislation (see page 1 and 
Exhibit 1). The GOC also reported that it has not enacted a 
successor program. We require more information regarding the GOC's 
claim that the program has been terminated and will continue to 
examine the GOC's claim of program termination.
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    We also investigated on a number of grant programs. Neither 
respondent used the following grant programs: (1) Five Points, One Line 
Program, (2) Export Interest Subsidies, (3) State Key Technology Fund, 
(4) Subsidies for Development of Famous Export Brands and China Top 
Brands, (5) Sub-Central Government Programs to Promote Famous Export 
Brands and China World Top Brands, and (6) Exemption of Fees for Firms 
Located in Designated Geographical Areas in Dalian. In addition, the 
Department has not calculated an above de minimis rates for any of 
these programs in prior investigations, and, moreover, all previously 
calculated rates for grant programs from prior China CVD investigations 
have been de minimis. Therefore, for each of these grant programs, we 
preliminarily determine to use the highest calculated subsidy rate for 
any program otherwise listed, which could have been used by the non-
cooperative Q&V companies. We preliminarily determine that this rate is 
44.91 percent for the ``Provision of HRS for LTAR'' program from CWP 
from the PRC. See Circular Welded Carbon Quality Steel Pipe From the 
People's Republic of China: Notice of Amended Final Affirmative 
Countervailing Duty Determination and Notice of Countervailing Duty 
Order, 73 FR 42545 (July 22, 2008) (Amended CWP from the PRC).
    Finally, there are several provision of a good or service for LTAR 
programs, which we are investigating. For the Provision of Wire Rod for 
LTAR, we are using the rate of 1.21 percent calculated for Eastfound 
(see program section below). For the Provision of HRS for LTAR, we are 
using the rate of 0.26 percent calculated for Eastfound (see program 
section below). For the Provision of Zinc for LTAR, though we have 
respondent use of this program, DHMP's rate is 0.00 percent. Therefore, 
we are using, as the AFA rate, the 44.91 percent calculated for the 
``Provision of HRS for LTAR'' program from Amended CWP from the PRC.

[[Page 57634]]

    Regarding the Provision of Electricity for LTAR,\14\ for reasons 
discussed in the program section below, we preliminarily determine to 
use, as AFA, the rate of 0.07 percent, which was calculated for the 
program ``Provision of Electricity for LTAR in Zhanjiang Zone'' in LWTP 
from the PRC.
---------------------------------------------------------------------------

    \14\ Our preliminary findings regarding the federal provision of 
electricity for LTAR encompasses the program ``Provision of 
Electricity for LTAR for Firms Located in Designated Geographical 
Areas in Dalian,'' which is listed in the Initiation Notice and 
accompanying Initiation Checklist.
---------------------------------------------------------------------------

    For the Provision of Land for LTAR for Firms Located in Designated 
Geographical Areas in Dalian, we are using the rate of 1.46 percent 
calculated for DHMP (see program section below). Regarding the 
Provision of Water for LTAR for Firms Located in Designated 
Geographical Areas in Dalian, which neither respondent used, the 
Department has not calculated a rate for this type of program in a 
prior CVD PRC investigation. Therefore, we have preliminarily 
determined to use the highest non-de minimis rate calculated for a 
provision of a good or service at LTAR program for which the non-
cooperative Q&V companies could have benefitted. We preliminarily 
determine that this rate is 44.91 percent for the ``Provision of HRS 
for LTAR'' program from Amended CWP from the PRC.
    For further explanation of the derivation of the AFA rates, see 
Memorandum to the File, regarding ``Preliminary Determination of 
Adverse Facts Available Rate'' (November 2, 2009) (AFA Memorandum). 
Section 776(c) of the Act provides that, when the Department relies on 
secondary information rather than on information obtained in the course 
of an investigation or review, it shall, to the extent practicable, 
corroborate that information from independent sources that are 
reasonably at its disposal. Secondary information is ``information 
derived from the petition that gave rise to the investigation or 
review, the final determination concerning the subject merchandise, or 
any previous review under section 751 concerning the subject 
merchandise.'' See, e.g., SAA, at 870, 1994 U.S.C.C.A.N. at 4199. The 
Department considers information to be corroborated if it has probative 
value. Id. To corroborate secondary information, the Department will, 
to the extent practicable, examine the reliability and relevance of the 
information to be used. The SAA emphasizes, however, that the 
Department need not prove that the selected facts available are the 
best alternative information. Id. at 869.
    With regard to the reliability aspect of corroboration, we note 
that these rates were calculated in recent final CVD determinations. 
Further, the calculated rates were based upon verified information 
about the same or similar programs. Moreover, no information has been 
presented that calls into question the reliability of these calculated 
rates that we are applying as AFA. Finally, unlike other types of 
information, such as publicly available data on the national inflation 
rate of a given country or national average interest rates, there 
typically are no independent sources for data on company-specific 
benefits resulting from countervailable subsidy programs.
    With respect to the relevance aspect of corroborating the rates 
selected, the Department will consider information reasonably at its 
disposal in considering the relevance of information used to calculate 
a countervailable subsidy benefit. Where circumstances indicate that 
the information is not appropriate as AFA, the Department will not use 
it. See Fresh Cut Flowers From Mexico; Final Results of Antidumping 
Duty Administrative Review, 61 FR 6812 (February 22, 1996).
    In the absence of record evidence concerning these programs due to 
the decision of the non-cooperative Q&V companies to not participate in 
the investigation, we have reviewed the information concerning PRC 
subsidy programs in this and other cases. For those programs for which 
the Department has found a program-type match, we find that, because 
these are the same or similar programs, they are relevant to the 
programs of this case. For the programs for which there is no program-
type match, we have selected the highest calculated subsidy rate for 
any PRC program from which the non-cooperative Q&V companies could 
receive a benefit to use as AFA. The relevance of these rates is that 
it is an actual calculated CVD rate for a PRC program from which the 
non-cooperative Q&V companies could actually receive a benefit. 
Further, these rates were calculated for periods close to the POI in 
the instant case. Moreover, the failure of these companies to respond 
to requests for information by the Department has ``resulted in an 
egregious lack of evidence on the record to suggest an alternative 
rate.'' See Shanghai Taoen Int'l Trading Co. v. United States, 360 F. 
supp. 2d 1339, 1348 (CIT 2005). Due to the lack of participation by the 
non-cooperative Q&V companies and the resulting lack of record 
information concerning their use of the programs under investigation, 
the Department has corroborated the rates it selected to use as AFA to 
the extent practicable.
    On this basis, we preliminarily determine the AFA countervailable 
subsidy rate for the non-cooperative Q&V companies to be 437.73 percent 
ad valorem. See AFA Memorandum.

Application of All Others Rate to Companies Not Selected as Mandatory 
Respondents

    In addition to DHMP and Eastfound, we received responses to the Q&V 
questionnaire from the following eight companies: Brynick Enterprises 
Limited;\15\ C-F Industries LLC; Dalian Xingbo Metal Products Co., 
Ltd.; Dandong Riqian Logistics Equipment Co., Ltd.; Globsea Co., Ltd.; 
Nanjing Topsun Racking Manufacturing Co., Ltd.; Ningbo Xinguang Rack 
Co., Ltd.; and Tianjin Jiali Machine Co., Ltd. See Memorandum to the 
File regarding ``Q&V Cooperative Companies'' (November 2, 2009). Though 
these eight companies were not chosen as mandatory respondents, they 
did cooperate fully with the Department's request for quantity and 
value information. We, therefore, are applying the all others rate to 
them.\16\
---------------------------------------------------------------------------

    \15\ Also known as, Ningbo Brynick Enterprises Limited.
    \16\ We are also applying the all others rate to Yangzhou Hynet 
Imp and Exp Corp. because the Department inadvertently failed to 
send to the company a Q&V questionnaire. See Memorandum to the File 
regarding ``Yangzhou Hynet Imp and Exp Corp.'' (November 2, 2009).
---------------------------------------------------------------------------

Subsidies Valuation Information

Allocation Period

    Under 19 CFR 351.524(b), non-recurring subsidies are allocated over 
a period corresponding to the average useful life (AUL) of the 
renewable physical assets used to produce the subject merchandise. 
Pursuant to 19 CFR 351.524(d)(2), there is a rebuttable presumption 
that the AUL will be taken from the U.S. Internal Revenue Service's 
1977 Class Life Asset Depreciation Range System (IRS Tables), as 
updated by the Department of Treasury. For the subject merchandise, the 
IRS Tables prescribe an AUL of 12 years. No interested party has 
claimed that the AUL of 12 years is unreasonable.
    Further, for non-recurring subsidies, we have applied the ``0.5 
percent expense test'' described in 19 CFR 351.524(b)(2). Under this 
test, we compare the amount of subsidies approved under a given program 
in a particular year to sales (total sales or total export sales, as 
appropriate) for the same year. If the amount of subsidies is less than 
0.5 percent of the relevant sales, then the benefits are allocated to

[[Page 57635]]

the year of receipt rather than allocated over the AUL period.

Attribution of Subsidies

    The Department's regulations at 19 CFR 351.525(b)(6)(i) state that 
the Department will normally attribute a subsidy to the products 
produced by the corporation that received the subsidy. However, 19 CFR 
351.525(b)(6)(ii)-(v) directs the Department to attribute subsidies 
received by certain other companies to the combined sales of those 
companies if (1) cross-ownership exists between the companies, and (2) 
the cross-owned companies produce the subject merchandise, are a 
holding or parent company of the subject company, produce an input that 
is primarily dedicated to the production of the downstream product, or 
transfer a subsidy to a cross-owned company.
    According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. This regulation 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. 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, 600-604 (CIT 2001).

Eastfound

    Eastfound Metal and Eastfound Material are affiliated companies 
that produce and export the subject merchandise. These companies are 
cross-owned within the meaning of 19 CFR 351.525(b)(6)(vi) by virtue of 
high levels of common ownership. Therefore, pursuant to 19 CFR 
351.525(b)(6)(ii), we are attributing the subsidies received by 
Eastfound Metal and Eastfound Material to the combined sales of the 
companies, excluding the sales between them.
    Eastfound Metal and Eastfound Material reported other affiliated 
parties; however, both companies reported that these other affiliates 
do not produce the subject merchandise and do not provide inputs. 
Therefore, because these other affiliates do not produce subject 
merchandise or otherwise fall within the situations outlined in 19 CFR 
351.525(b)(6)(iii)-(v), we are not including these companies in our 
subsidy calculations.

DHMP

    In its questionnaire response, DHMP indicated that is the sole 
producer of subject merchandise. It also indicated that it is owned by 
a parent company. We sent a CVD questionnaire to the parent company of 
DHMP. The parent company supplied its response on September 9, 2009. 
Based on the information in the response, we preliminarily determine 
that the parent company did not produce subject merchandise or supply 
DHMP with an input that is primarily dedicated to the production of 
subject merchandise during the POI. Furthermore, based on the 
questionnaire response of the parent company, we preliminarily 
determine that it had no sales revenue during the POI and did not use 
any of the alleged subsidy programs. Therefore, in accordance with 19 
CFR 351.525(b)(6)(i), we are attributing subsidies found to have been 
received by DHMP solely to the sales of DHMP.

Benchmarks and Discount Rates

    Although the Department is not calculating subsidy rates for any 
loans in this investigation, the benchmark interest rate is used to 
compute the discount rate that we are using to allocate benefits over 
time. Therefore, we discuss the derivation of the benchmark rates 
below.
    Benchmark for Short-Term RMB Denominated Loans: 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)(3)(i). 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).
    As noted above, section 771(5)(E)(ii) of the Act indicates that the 
benchmark should be a market-based rate. However, for the reasons 
explained in CFS from the PRC, loans provided by Chinese banks reflect 
significant government intervention in the banking sector and do not 
reflect rates that would be found in a functioning market. See CFS 
Decision Memorandum at Comment 10. Because of this, any loans received 
by respondents from private Chinese or foreign-owned banks would be 
unsuitable for use as benchmarks under 19 CFR 351.505(a)(2)(i). 
Similarly, we cannot use a national interest rate for commercial loans 
as envisaged by 19 CFR 351.505(a)(3)(ii). Therefore, because of the 
special difficulties inherent in using a Chinese benchmark for loans, 
the Department is selecting an external market-based benchmark interest 
rate. The use of an external benchmark is consistent with the 
Department's practice. For example, in Softwood Lumber from Canada, the 
Department used U.S. timber prices to measure the benefit for 
government-provided timber in Canada. See Notice of Final Affirmative 
Countervailing Duty Determination and Final Negative Critical 
Circumstances Determination: Certain Softwood Lumber Products From 
Canada, 67 FR 15545 (April 2, 2002) (Softwood Lumber from Canada), and 
accompanying Issues and Decision Memorandum (Softwood Lumber Decision 
Memorandum) at ``Analysis of Programs, Provincial Stumpage Programs 
Determined to Confer Subsidies, Benefit.''
    We are calculating the external benchmark using the regression-
based methodology first developed in CFS from the PRC and more recently 
updated in LWTP from the PRC. See CFS Decision Memorandum at Comment 
10; see also LWTP Decision Memorandum at ``Benchmarks and Discount 
Rates.'' This benchmark interest rate is based on the inflation-
adjusted interest rates of countries with per capita gross national 
incomes (GNIs) similar to the PRC, and 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 the state-imposed 
distortions in the banking sector discussed above.
    Following the methodology developed in CFS from the PRC, we first 
determined which countries are similar to the PRC in terms of 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. As explained in CFS from the PRC, this pool 
of countries captures the broad inverse relationship between income and 
interest rates.
    Many of these countries reported lending and inflation rates to the 
International Monetary Fund and are included in that agency's 
international financial statistics (IFS). With the exceptions noted 
below, we have used the interest and inflation rates reported

[[Page 57636]]

in the IFS for the countries identified as ``low middle income'' by the 
World Bank. First, we did not include those economies that the 
Department considered to be non-market economies for AD purposes for 
any part of the years in question, for example: Armenia, Azerbaijan, 
Belarus, Georgia, Moldova, and Turkmenistan. Second, the pool 
necessarily excludes any country that did not report both lending and 
inflation rates to IFS for those years. Third, we removed any country 
that reported a rate that was not a lending rate or that based its 
lending rate on foreign-currency denominated instruments. For example, 
Jordan reported a deposit rate, not a lending rate, and the rates 
reported by Ecuador and Timor L'Este are dollar-denominated rates; 
therefore, the rates for these three countries have been excluded. 
Finally, for each year the Department calculated an inflation-adjusted 
short-term benchmark rate, we have also excluded any countries with 
aberrational or negative real interest rates for the year in question.
    Benchmark for Long-Term RMB Denominated Loans: The lending rates 
reported in the IFS represent short- and medium-term lending, and there 
are no sufficient publicly available long-term interest rate data upon 
which to base a robust long-term benchmark. To address this problem, 
the Department has developed an adjustment to the short- and medium-
term rates to convert them to long-term rates using Bloomberg U.S. 
corporate BB-rated bond rates. See LWRP Decision Memorandum at 
``Discount Rates.'' In Citric Acid from the PRC, this methodology was 
revised by switching from a long-term mark-up based on the ratio of the 
rates of BB-rated bonds to applying a spread which is calculated as the 
difference between the two-year BB bond rate and the n-year BB bond 
rate, where n equals or approximates the number of years of the term of 
the loan in question. See Citric Acid and Certain Citrate Salts From 
the People's Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 16836 (April 13, 2009) (Citric Acid from the PRC), 
and accompanying Issues and Decision Memorandum (Citric Acid Decision 
Memorandum) at Comment 14.
    Discount Rates: Consistent with 19 CFR 351.524(d)(3)(i)(A), we have 
used, as our discount rate, the long-term interest rate calculated 
according to the methodology described above for the year in which the 
government provided the subsidy.

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. Provision of Wire Rod for LTAR

    The Department is investigating whether producers and suppliers, 
acting as Chinese government authorities, sold wire rod to the 
mandatory respondents for LTAR. DHMP and Eastfound reported obtaining 
wire rod during the POI from trading companies as well as directly from 
wire rod producers.
    In Tires from the PRC, the Department determined that majority 
government ownership of an input producer is sufficient to qualify it 
as an ``authority.'' See Certain New Pneumatic Off-the-Road Tires From 
the People's Republic of China: Final Affirmative Countervailing Duty 
Determination and Final Negative Determination of Critical 
Circumstances, 73 FR 40480 (July 15, 2008) (Tires from the PRC), and 
accompanying Issues and Decision Memorandum (Tires Decision Memorandum) 
at ``Government Provision of Rubber for Less than Adequate 
Remuneration.'' Based on the record in the instant investigation, we 
preliminarily determine that wire rod producers, which supplied 
respondents, and that are majority-government owned are 
``authorities.'' See Memorandum to the File regarding ``Preliminary 
Calculations for Eastfound'' (November 2, 2009) (Eastfound Preliminary 
Calculations). As a result, we determine that wire rod supplied by 
companies deemed to be government authorities constitute(s) a financial 
contribution to Eastfound in the form of a governmental provision of a 
good and that the respondents received a benefit to the extent that the 
price they paid for wire rod produced by these suppliers was for LTAR. 
See sections 771(5)(D)(iv) and 771(5)(E)(iv) of the Act.\17\
---------------------------------------------------------------------------

    \17\ Regarding DHMP, we preliminarily determine that none of the 
wire rod it acquired during the POI was produced by government 
authorities.
---------------------------------------------------------------------------

    In prior CVD proceedings involving the PRC, the Department has 
determined that when a respondent purchases an input from a trading 
company or non-producing supplier, a subsidy is conferred if the 
producer of the input is an ``authority'' within the meaning of section 
771(5)(B) of the Act and the price paid by the respondent for the input 
was sold for LTAR. See CWP Decision Memorandum at ``Hot-Rolled Steel 
for Less Than Adequate Remuneration;'' Shelving Decision Memorandum at 
``Provision of Wire Rod for Less than Adequate Remuneration;'' and 
CWASPP Decision Memorandum at ``Provision of SSC for LTAR.'' Therefore, 
in our initial questionnaire, we requested that the respondent 
companies and the GOC together identify the producers from whom the 
trading companies acquired the wire rod that was subsequently sold to 
respondents during the POI and to provide information that would allow 
the Department to determine whether those producers were government 
authorities.
    In response to these requests, DHMP and Eastfound were able to 
identify the firms that produced the wire rod that was ultimately sold 
to them. We have used the information concerning the ownership status 
of the wire rod suppliers to determine whether DHMP and Eastfound 
purchased wire rod that was produced by government authorities. In the 
case of DHMP, we preliminarily determine that none of the wire rod it 
purchased was produced by firms acting as government authorities. 
Therefore, we have not conducted a subsidy analysis for DHMP's 
purchases of wire rod during the POI. Regarding Eastfound, we 
preliminarily determine that it purchased a certain quantity of wire 
rod that was produced by government authorities during the POI. 
Therefore, we preliminarily determine, with regard to wire rod produced 
by these firms, that Eastfound received a financial contribution within 
the meaning of section 771(5)(D)(iv) of the Act.
    Having addressed the issue of financial contribution, we must next 
analyze whether the sale of wire rod to Eastfound by suppliers 
designated as government authorities conferred a benefit within the 
meaning of section 771(5)(iv) of the Act. The Department's regulations 
at 19 CFR 351.511(a)(2) set forth the basis for identifying appropriate 
market-determined benchmarks for measuring the adequacy of remuneration 
for government-provided goods or services. These potential benchmarks 
are listed in hierarchical order by preference: (1) market prices from 
actual transactions within the country under investigation (e.g., 
actual sales, actual imports or competitively run government auctions) 
(tier one); (2) world market prices that would be available to 
purchasers in the country under investigation (tier two); or (3) an 
assessment of whether the government price is consistent with market 
principles (tier three). As we explained in Softwood Lumber from 
Canada, the preferred benchmark in the hierarchy is an observed market 
price from actual transactions within the country under investigation 
because such prices generally would be expected

[[Page 57637]]

to reflect most closely the prevailing market conditions of the 
purchaser under investigation. See Softwood Lumber Decision Memorandum 
at ``Market-Based Benchmark.''
    Beginning with tier-one, we must determine whether the prices from 
actual sales transactions involving Chinese buyers and sellers are 
significantly distorted. As explained in the CVD Preamble:
    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 {tier two{time}  
in the hierarchy.
See Preamble to Countervailing Duty Regulations, 63 FR 65377, (November 
25, 1998) (CVD Preamble). The CVD Preamble further recognizes that 
distortion can occur when the government provider constitutes a 
majority or, in certain circumstances, a substantial portion of the 
market.
    In the instant investigation, the GOC reported the total wire rod 
production by state-owned entities during the POI. The number of these 
state-owned entities (SOEs and COEs) accounted for approximately the 
same percentage of the wire rod production in the PRC as was recently 
found in Shelving and Racks from the PRC, in which the Department 
determined that the GOC had direct ownership or control of wire rod 
production. See Shelving and Racks Decision Memorandum, at Comment 4. 
Because the GOC has not provided any information that would lead the 
Department to reconsider the determination in Shelving and Racks from 
the PRC, we find that the substantial market share held by SOEs shows 
that the government plays a predominant role in the this market. See 
Shelving and Racks Decision Memorandum at 15. The government's 
predominant position is further demonstrated by the low level of 
imports, which accounted for only one percent of the volume of wire rod 
available in the Chinese market during the POI. See GOC's September 10, 
2009, questionnaire response at 11. Because the share of imports of 
wire rod into the PRC is small relative to Chinese domestic production 
of wire rod, it would be inappropriate to use import values to 
calculate a benchmark. This is consistent with the Department's 
approach discussed in LWRP Decision Memorandum, at Comment 7.
    In addition to the government's predominant role in the market, we 
found in Shelving and Racks from the PRC that the 10 percent export 
tariff and export licensing requirement instituted by the GOC 
contributed to the distortion of the domestic market in the PRC for 
wire rod. Such export restraints can discourage exports and increase 
the supply of wire rod in the domestic market, with the result that 
domestic prices are lower than they would otherwise be. See Shelving 
and Racks Decision Memorandum at 15. Consequently, we determine that 
there are no appropriate tier one benchmark prices available for wire 
rod.
    We examined whether the record contained data that could be used as 
a tier-two wire rod benchmark under 19 CFR 351.511(a)(2)(ii). The 
Department has on the record of the investigation prices for wire rod 
(industrial quality, low carbon), as sourced from the American Metals 
Market (AMA). See Petitioners' Benchmark Comments at Exhibit 1. The 
benchmark prices are reported on a monthly basis in U.S. dollars per 
metric ton (MT). No other interested party submitted tier-two wire rod 
prices on the record of this investigation.
    Therefore, for purposes of the preliminary determination, we find 
that the data from AMA should be used to derive a tier-two, world 
market price for wire rod that would be available to purchasers of wire 
rod in the PRC. We note that the Department has relied on pricing data 
from industry publications in recent CVD proceedings involving the PRC. 
See, e.g., CWP Decision Memorandum at ``Hot-Rolled Steel for Less Than 
Adequate Remuneration'' and LWRP Decision Memorandum at ``Hot-Rolled 
Steel for Less Than Adequate Remuneration.'' Further, we find that, for 
purposes of the preliminary determination, there is no basis to 
conclude that prices from the AMA are any less reliable or 
representative than data from other trade industry publications used by 
the Department in prior CVD proceedings involving the PRC.
    To determine whether wire rod suppliers, acting as government 
authorities, sold wire rod to respondents for LTAR, we compared the 
prices that Eastfound paid to the suppliers to our wire rod benchmark 
price. We conducted our comparison on a monthly basis. When conducting 
the price comparison, we converted the benchmark to the same currency 
and unit of measure as reported by Eastfound for its purchases of wire 
rod.
    Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of 
remuneration under tier one or tier two, the Department will adjust the 
benchmark price to reflect the price that a firm actually paid or would 
pay if it imported the product, including delivery charges and import 
duties. Regarding delivery charges, at this time we lack information 
concerning delivery charges and, therefore, have not adjusted the 
benchmark in this regard, but will continue to seek the relevant 
information. However, we have added import duties, as reported by the 
GOC, and the VAT applicable to imports of wire rod into the PRC. With 
respect to the three percent insurance charge on imports noted by the 
petitioner, consistent with Shelving from the PRC, while the Department 
will consider in future determinations the propriety of including 
insurance as a delivery charge, the existing record of this 
investigation does not support such an adjustment. See Shelving from 
the PRC Decision Memorandum at Comment 9.
    Comparing the benchmark unit prices to the unit prices paid by 
Eastfound for wire rod, we preliminarily determine that wire rod was 
provided for LTAR and that a benefit exists in the amount of the 
difference between the benchmark and what the respondent paid. See 
section 771(5)(E)(iv) of the Act and 19 CFR 351.511(a). We calculated 
the total benefit by multiplying the unit benefit by the quantity of 
wire rod purchased.
    Finally, with respect to specificity, the third subsidy element 
specified under the Act, the GOC has provided information on end uses 
for wire rod. See GOC's Initial Questionnaire Response at 14 (September 
10, 2009). The GOC stated that the consumption of wire rod occurs 
across a broad range of industries. Id. While numerous companies may 
comprise the listed industries, section 771(5A)(D)(iii)(I) of the Act 
clearly directs the Department to conduct its analysis on an industry 
or enterprise basis. Based on our review of the data and consistent 
with our past practice, we determine that the industries named by the 
GOC are limited in number and, hence, the subsidy is specific. See 
section 771(5A)(D)(iii)(I) of the Act; see also LWRP Decision 
Memorandum at Comment 7, and Shelving Decision Memorandum at 
``Provision of Wire Rod from Less Than Adequate Remuneration.''
    We preliminarily find that the GOC's provision of wire rod for LTAR 
to be a domestic subsidy as described under 19 CFR 351.525(b)(3). 
Therefore, to calculate the net subsidy rate, we divided the benefit by 
a denominator comprised of total sales. On this basis, we calculated a 
total net subsidy rate of 1.21 percent ad valorem for Eastfound.

[[Page 57638]]

B. Provision of Hot-Rolled Steel for LTAR

    The Department is investigating whether producers and suppliers, 
acting as Chinese government authorities, sold HRS to the mandatory 
respondents for LTAR. DHMP and Eastfound reported purchasing HRS during 
the POI from trading companies as well as directly from HRS producers.
    As explained above, in Tires from the PRC, the Department 
determined that majority government ownership of an input producer is 
sufficient to qualify the producer as an ``authority.'' See Tires 
Decision Memorandum at ``Government Provision of Rubber for Less than 
Adequate Remuneration.'' Based on the record of this investigation, we 
preliminarily determine that HRS producers that supply respondents and 
that are majority-government owned are ``authorities.'' See Eastfound 
Preliminary Calculations. As a result, we preliminarily determine that 
HRS supplied by companies deemed to be government authorities 
constitute a financial contribution to respondents in the form of a 
governmental provision of a good and that the respondents received a 
subsidy to the extent that the price they paid for HRS produced by 
these suppliers was sold for LTAR. See sections 771(5)(D)(iv) and 
771(5)(E)(iv) of the Act.
    In prior CVD proceedings involving the PRC, the Department has 
determined that when a respondent purchases an input from a trading 
company or non-producing supplier, a subsidy is conferred if the 
producer of the input is an ``authority'' within the meaning of section 
771(5)(B) of the Act and the price paid by the respondent for the input 
was sold for LTAR. See CWP Decision Memorandum at ``Hot-Rolled Steel 
for Less Than Adequate Remuneration,'' Shelving Decision Memorandum at 
``Provision of HRS for Less than Adequate Remuneration,'' and CWASPP 
Decision Memorandum at ``Provision of SSC for LTAR.'' Therefore, in our 
initial questionnaire, we requested that the respondent companies and 
the GOC together identify the producers from whom the trading companies 
acquired the HRS that was subsequently sold to respondents during the 
POI and to provide information that would allow the Department to 
determine whether those producers were government authorities.
    In response to these requests, DHMP and Eastfound were able to 
identify the firms that produced the HRS that was ultimately sold to 
them. We have used the information concerning the ownership status of 
the HRS suppliers to determine whether DHMP and Eastfound purchased HRS 
that was produced by government authorities. In the case of DHMP, we 
preliminarily determine that none of the HRS it purchased was produced 
by firms acting as government authorities. Therefore, we have not 
conducted a subsidy analysis for DHMP's purchases of HRS during the 
POI. Regarding Eastfound, we preliminarily determine that it purchased 
a certain quantity of HRS that was produced by government authorities 
during the POI. Therefore, we preliminarily determine, with regard to 
HRS produced by these firms, that Eastfound received a financial 
contribution within the meaning of section 771(5)(D)(iv) of the Act.
    Having addressed the issue of financial contribution, we must next 
analyze whether the sale of HRS to the mandatory respondents by 
suppliers designated as government authorities conferred a benefit 
within the meaning of section 771(5)(iv) of the Act. The Department's 
regulations at 19 CFR 351.511(a)(2) set forth the basis for identifying 
appropriate market-determined benchmarks for measuring the adequacy of 
remuneration for government-provided goods or services. These potential 
benchmarks are listed in hierarchical order by preference: (1) market 
prices from actual transactions within the country under investigation 
(e.g., actual sales, actual imports or competitively run government 
auctions) (tier one); (2) world market prices that would be available 
to purchasers in the country under investigation (tier two); or (3) an 
assessment of whether the government price is consistent with market 
principles (tier three). As we explained in Softwood Lumber from 
Canada, the preferred benchmark in the hierarchy is an observed market 
price from actual transactions within the country under investigation 
because such prices generally would be expected to reflect most closely 
the prevailing market conditions of the purchaser under investigation. 
See Softwood Lumber Decision Memorandum at ``Market-Based Benchmark.''
    Beginning with tier-one, we must determine whether the prices from 
actual sales transactions involving Chinese buyers and sellers are 
significantly distorted. As explained in the CVD Preamble:
    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 {tier two{time}  
in the hierarchy.
See 63 FR at 65377. The CVD Preamble further recognizes that distortion 
can occur when the government provider constitutes a majority or, in 
certain circumstances, a substantial portion of the market.
    As instructed, the GOC provided the percentage of HRS production 
accounted for by SOEs during the POI. The GOC further reported the 
portion of HRS produced by ``collectives.'' In the final determination 
of LWRP from the PRC, the Department affirmed its decision to treat 
collectives as government authorities. See LWRP Decision Memorandum at 
Comment 5. Based on this aggregate data, we preliminarily determine 
that government authorities accounted for a majority of the HRS 
produced during the POI. Based on these data, we preliminarily 
determine that domestic prices for HRS cannot serve as a viable tier-
one benchmark as described under 19 CFR 351.511(a)(2)(i). Consequently, 
as there are no other available tier-one benchmark prices, we have 
turned to tier-two, i.e., world market prices available to purchasers 
in the PRC.
    We examined whether the record contained data that could be used as 
a tier-two HRS benchmark under 19 CFR 351.511(a)(2)(ii). The Department 
has on the record of the investigation prices for HRS, as sourced from 
the Steel Benchmarker Report. See Petitioners' Benchmark Comments at 
Exhibit 2. The benchmark prices are reported on a monthly basis in U.S. 
dollars per metric ton (MT). No other interested party submitted tier-
two HRS prices on the record of this investigation.
    Therefore, for purposes of the preliminary determination, we find 
that the data from the Steel Benchmarker Report should be used to 
derive a tier-two, world market price for HRS that would be available 
to purchasers of HRS in the PRC. We note that the Department has relied 
on pricing data from industry publications in recent CVD proceedings 
involving the PRC. See, e.g., CWP Decision Memorandum at ``Hot-Rolled 
Steel for Less Than Adequate Remuneration,'' and LWRP Decision 
Memorandum at ``Hot-Rolled Steel for Less Than Adequate Remuneration.'' 
Further, we find that, for purposes of the preliminary determination, 
there is no basis to conclude that prices from the Steel Benchmarker 
Report are any less reliable or representative than data from other 
trade industry publications used by the Department in prior CVD 
proceedings involving the PRC.
    To determine whether HRS suppliers, acting as government 
authorities, sold HRS to Eastfound for LTAR, we

[[Page 57639]]

compared the prices the respondents paid to the suppliers to our HRS 
benchmark price. We conducted our comparison on a monthly basis. The 
Steel Benchmarker Report provides multiple prices for each month of the 
POI. Therefore, to arrive at a single monthly benchmark HRS price, we 
simple averaged the prices for each month. When conducting the price 
comparison, we converted the benchmark to the same currency and unit of 
measure as reported by Eastfound for its purchases of HRS.
    Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of 
remuneration under tier one or tier two, the Department will adjust the 
benchmark price to reflect the price that a firm actually paid or would 
pay if it imported the product, including delivery charges and import 
duties. Regarding delivery charges, at this time we lack information 
concerning delivery charges and, therefore, have not adjusted the 
benchmark in this regard, but will continue to seek the relevant 
information. With respect to the three percent insurance charge on 
imports noted by the petitioner, consistent with Shelving from the PRC, 
while the Department will consider in future determinations the 
propriety of including insurance as a delivery charge, the existing 
record of this investigation does not support such an adjustment. See 
Shelving from the PRC Decision Memorandum at Comment 9.
    Comparing the benchmark unit prices to the unit prices paid by 
Eastfound for HRS, we preliminarily determine that HRS was provided for 
LTAR and that a benefit exists in the amount of the difference between 
the benchmark and what the respondent paid. See section 771(5)(E)(iv) 
of the Act and 19 CFR 351.511(a). We calculated the total benefit by 
multiplying the unit benefit by the quantity of HRS purchased.
    Finally, with respect to specificity, in prior cases involving the 
provision of HRS for LTAR, the Department has found that the program is 
specific under section 771(5A)(D)(iii)(I) of the Act because the 
industries that utilize HRS are limited. See LWRP Decision Memorandum 
at Comment 7, and Shelving Decision Memorandum at ``Provision of HRS 
from Less Than Adequate Remuneration.'' We preliminarily determine that 
there is no information on the record at this time to warrant 
reconsideration of the Department's prior findings in this regard.
    We preliminarily find that the GOC's provision of HRS for LTAR to 
be a domestic subsidy as described under 19 CFR 351.525(b)(3). 
Therefore, to calculate the net subsidy rate, we divided the benefit by 
a denominator comprised of total sales. On this basis, we calculated a 
total net subsidy rate of 0.26 percent ad valorem for Eastfound.
C. Provision of Land for LTAR
    As explained in the Initiation Checklist,\18\ the Department is 
investigating whether the City of Dalian sells land for LTAR to firms 
located in the municipality's Huayuankou Industrial Zone. In the 
initial questionnaire, the Department asked the respondents to report 
their purchase of land located in Dalian's designated industrial zones.
---------------------------------------------------------------------------

    \18\ See Initiation Checklist at 13.
---------------------------------------------------------------------------

    Though Eastfound Metal and Eastfound Material reported that they 
are not located at any development zone or special area in Dalian,\19\ 
each company responded to the Department's questions on the ``Provision 
of Land for LTAR for Firms Located in Designated Geographical Areas in 
the City of Dalian in Liaoning Province.'' Therefore, for purposes of 
this preliminary determination, we find that the respondents are 
located in a designated zone.
---------------------------------------------------------------------------

    \19\ See Eastfound Metal's supplemental questionnaire response 
at1 (October 20, 2009) and Eastfound Material's supplemental 
questionnaire response at 1 (October 15, 2009).
---------------------------------------------------------------------------

    Eastfound Metal reported that it obtained its land-use rights in 
May 2000,\20\ which is prior to the date (i.e., December 11, 2001) from 
which the Department will identify and measure subsidies in the PRC for 
purposes of this investigation. Eastfound Material reported that it 
acquired two parcels of land (Land A and Land B) located in Jinzhou 
District within the City of Dalian from local government authorities. 
There is conflicting information on the record as to whether Eastfound 
Material had an additional land transaction. We will seek additional 
information regarding a possible third land purchase.
---------------------------------------------------------------------------

    \20\ See Eastfound Metal's initial questionnaire response at 
III-17 (September 9, 2009).
---------------------------------------------------------------------------

    Eastfound Material's purchase of Land A occurred in 2008 and the 
purchase of Land B in 2006. Regarding Land B, Eastfound Material 
reported that it purchased this land from Beihai Village in Jinzhou 
District, and paid a price determined through a mutual agreement with 
Beihai Village.\21\
---------------------------------------------------------------------------

    \21\ See Eastfound Material's supplemental response at 22-23 
(October 15, 2009 Response).
---------------------------------------------------------------------------

    Regarding Land A, Eastfound Material stated that it purchased Land 
A from Dalian Municipal Bureau of Land Resource and Housing Management 
(Dalian Municipal Bureau). Unlike Land B, however, Eastfound Material 
reported that it purchased Land A through a ``public listing'' process 
which has elements of an auction where the land authorities issue a 
``notice of public listing'' and all parties who are interested in the 
land use right of this land are free to participate in the public 
listing competition.\22\ We note that the notice for public listing 
includes 10 serial numbers of land (Land A included) for sale, and all 
of the land are designated for construction purposes and are designated 
to be used for ``storage'' or used by ``industry.''\23\ With respect to 
Land A, the ``Public Listing Notice'' further designates that ``the 
nature of the land use'' for Land A is ``metal products industry.''\24\ 
Moreover, information supplied by the Eastfound Material indicates that 
while there were multiple companies participating in the public listing 
process in the notice which includes 10 parcels of land, Eastfound 
Material was the only company participating in the public listing for 
Land A. As a result, Eastfound Material was the sole bidder of Land A.
---------------------------------------------------------------------------

    \22\ Id. at page 17 and Exhibits 8 and 9.
    \23\ See ``Listing Transfer Announcement on the Use Right of the 
State-owned Land for Construction Purposes of Dalian Municipal Land 
and Resources Bureau and Housing Bureau Jinzhou Land and Resources 
Branch'' No.4 Da Jin Guo Tu Gao Zi (2008) in Exhibit 8.
    \24\ See Eastfound Material's supplemental response at Exhibit 9 
(October 15, 2009) for the ``Notice of Competitive Buying Of Land-
Use Right Under Public Listing (Public Listing Notice).''
---------------------------------------------------------------------------

    The Department has previously determined that the provision of 
land-use rights constitutes the provision of a good within the meaning 
of section 771(5)(D)(iii) of the Act. See LWS Decision Memorandum at 
Comment 8; see also Citric Acid Decision Memorandum at ``Provision of 
Land in the AEDZ for LTAR.''
    The Department also found that when the land is in an industrial 
park located within the seller's (e.g., county's or municipality's) 
jurisdiction, the provision of the land-use rights is regionally 
specific under section 771(5A)(D)(iv) of the Act. See, e.g., LWS 
Decision Memorandum at Comment 9. In the instant investigation, both 
Land A and Land B are designated areas within the area under the 
jurisdiction of the City of Dalian as described under section 
771(5A)(D)(iv) of the Act. Further, in the case of Eastfound Material's 
purchase of Land A, as noted above, the GOC limited firms that could 
respond to the public listing notice to those in the metal products 
industry. Thus, with regard to Land A, we preliminarily determine this 
program also meets the specificity criteria

[[Page 57640]]

described under 771(5A)(D)(i) of the Act. Therefore, consistent with 
LWS from the PRC, we preliminarily determine that Eastfound Material's 
purchase of granted land-use rights located within the Jinzhou District 
in 2006 and 2008 gives rise to countervailable subsidies to the extent 
that the purchases conferred a benefit.
    To determine whether the Eastfound Material received a benefit, we 
have analyzed potential benchmarks in accordance with 19 CFR 
351.511(a). First, we looked to whether there are market-determined 
prices (referred to as tier-one prices in the LTAR regulation) within 
the country. See 19 CFR 351.511(a)(2)(i). In LWS from the PRC, the 
Department determined that ``Chinese land prices are distorted by the 
significant government role in the market'' and, hence, tier-one 
benchmarks do not exist. See LWS Decision Memorandum at Comment 10. The 
Department also found that tier-two benchmarks (world market prices 
that would be available to purchasers in China) are not appropriate. 
Id. at ``Analysis of Programs - Government Provision of Land for Less 
Than Adequate Remuneration;'' see also 19 CFR 351.511(a)(2)(ii). 
Therefore, the Department determined the adequacy of remuneration by 
reference to tier-three and found that the sale of land-use rights in 
China was not consistent with market principles because of the 
overwhelming presence of the government in the land-use rights market 
and the widespread and documented deviation from the authorized methods 
of pricing and allocating land. See LWS Decision Memorandum at Comment 
10; see also 19 CFR 351.511(a)(2)(iii). We preliminarily determine that 
there is insufficient new information on the record of this 
investigation to warrant a change from the findings in LWS from the 
PRC.
    With respect to Eastfound Material's claim that it purchased Land A 
through a public listing process that contains auction elements, we 
resort to the Department's regulations and past practice. Section 
351.511(a)(2)(i) of the regulations states that the Department can use 
sales from a government-run auction in certain circumstances to 
determine whether a government-provided good or service is provided for 
LTAR, but only if the government sells a significant portion of the 
good or service through competitive bid procedures that are open to 
everyone. These circumstances are not present here. The Public Listing 
Notice clearly states that Land A can only be used for ``metal products 
industry.''\25\ Therefore, the public listing process is only open to 
metal products industry. Thus, the overwhelming majority of the 
purchasers of this government good or service are explicitly excluded 
from this auction. As a result, Eastfound Material was the only bidder 
for Land A. Therefore, the bidding price set by the Land Authority in 
Jinzhou District cannot be used as benchmark prices under section 
351.511(a)(2)(i) of the regulations. See Notice of Preliminary 
Affirmative Countervailing Duty Determination, Preliminary Affirmative 
Critical Circumstances Determination, and Alignment of Final 
Countervailing Duty Determination With Final Antidumping Duty 
Determination: Certain Softwood Lumber Products From Canada (Lumber 
from Canada), 66 FR 43186 (August 17, 2001),\26\ (unchanged in the 
final determination, see Softwood Lumber from Canada).
---------------------------------------------------------------------------

    \25\ See Eastfound Material's supplemental questionnaire 
response at Exhibit 9, pages 1-2 (October 15, 2009).
    \26\ In Softwood Lumber from Canada, British Columbia provided 
stumpage prices set by government auction. The Department determined 
that the auction is only open to small businesses that are 
registered as small business forest enterprises. Thus, the 
overwhelming majority of the purchasers of this government good or 
service are explicitly excluded from this auction. Therefore, the 
auction prices submitted by British Columbia cannot be used as 
benchmark prices under section 351.511(a)(2)(i) of the CVD 
Regulations. Furthermore, the Department found that the provincial 
government provider constitutes a majority or substantial portion of 
the market, thus, there is a significant distortion in the private 
transaction prices for the good or service with that country's 
market. Thus, the Department determined that it cannot use the 
private transaction prices provided by the provincial governments. 
The Department determined that stumpage prices from the United 
States qualify as commercially available world market prices because 
it is reasonable to conclude that U.S. stumpage would be available 
to softwood lumber producers in Canada at the same prices available 
to U.S. lumber producers.
---------------------------------------------------------------------------

    For these reasons, we are not able to use Chinese or world market 
prices as a benchmark. Therefore, we are preliminarily comparing the 
price that the Eastfound Material paid for its granted land-use rights 
with comparable market-based prices for land purchases in a country at 
a comparable level of economic development that is reasonably proximate 
to, but outside of, China. Specifically, we are preliminarily comparing 
the prices Eastfound Material paid to Beihai Village in 2006, and to 
Dalian Municipal Bureau in 2008, to the respective Thailand prices in 
2006 and 2008 for Thailand's certain industrial land in industrial 
estates, parks, and zones, consistent with LWS from the PRC. See LWS 
Decision Memorandum at ``Analysis of Programs - Government Provision of 
Land for Less Than Adequate Remuneration.''
    To calculate the benefit, we computed the amounts that Eastfound 
Material would have paid for both of its granted land-use rights and 
subtracted the amounts Eastfound Material actually paid for both of its 
purchases, Land B in 2006 and Land A in 2008. Our comparison indicates 
that the prices Eastfound Material paid to the government authority in 
2006 for Land B, and the price it paid for Land A in 2008 were less 
than our land benchmark prices for each respective year and, thus, 
Eastfound Material received a benefit under section 771(5)(E)(iv) of 
the Act. Next, in accordance with 19 CFR 351.524(b)(2), we examined 
whether the subsidy amount exceeded 0.5 percent of Eastfound's total 
consolidated sales in the years of purchase. Our analysis indicates 
that the subsidy amount exceeded the 0.5 percent threshold for both 
land purchases. Therefore, we used the discount rate described under 
the ``Benchmarks and Discount Rates'' section of this preliminary 
determination to allocate the benefit over the life of the land-use 
rights contracts, which is 50 years.
    On this basis, we preliminarily determine the total net subsidy 
rate to be 0.56 percent for Eastfound.
    DHMP reported that it is not located in the industrial zones 
designated by Dalian Municipality and did not benefit from this subsidy 
program. According to DHMP, it acquired the land rights in 2005 from 
Dalian Shagangzi village and does not own the land use rights, but 
rents the land. See DHMP's September 9, 2009, submission at 18-20.
    Petitioners contested DHMP's statement on the location of its 
facility. In a submission to the Department petitioners stated that 
based on the company's website information that it is located within 
one of the designated preferential areas in Dalian that was alleged in 
the countervailing duty petition. See petitioners' October 22, 2009, 
submission at 2 and Exhibit 1. Furthermore, it advocated that because 
DHMP failed to act to the best of its ability to the Department's 
questionnaires, and because other publicly available information 
indicates that DHMP's facilities are located in a designated 
preferential area of Dalian, the Department should countervail the 
parcel of land, pursuant to sections 776(a)(2)(D) and 776(b) of the 
Act.
    In an October 26, 2009, submission to the Department, DHMP argued 
that petitioners' submission did not contain a factual certification in 
addition to misstating the facts of the issue. See DHMP's October 26, 
2009, submission.

[[Page 57641]]

    However, DHMP's response did not refute the central theme of 
petitioners' October 22, 2009, submission, that it is located in one of 
the designated preferential areas that was not reported in its 
questionnaire response. Because petitioners were able to document their 
assertion from DHMP's home page as opposed to DHMP's narrative 
description, the Department is preliminarily determining that DHMP's 
production facility is located within one of the designated 
preferential areas in Dalian that was alleged in the countervailing 
duty petition. See January 5, 2009, Countervailing Duty Petition, at 
Exhibit CVD-12.
    To calculate the benefit, we computed the amounts that DHMP would 
have paid for its granted land-use rights and subtracted the amounts 
DHMP actually paid for its purchase in 2005. Our comparison indicates 
that the prices DHMP paid to the government authority in 2005 were less 
than our land benchmark prices for the year and, thus, that DHMP 
received a benefit under section 771(5)(E)(iv) of the Act. Next, in 
accordance with 19 CFR 351.524(b)(2), we examined whether the subsidy 
amount exceeded 0.5 percent of DHMP total consolidated sales in the 
year of purchase. Our analysis indicates that the subsidy amount 
exceeded the 0.5 percent threshold for the land purchase. Therefore, we 
used the discount rate described under the ``Benchmarks and Discount 
Rates'' section of this preliminary determination to allocate the 
benefit over the life of the land-use rights contract, which is 50 
years.
    On this basis, we preliminarily determine the total net subsidy 
rate to be 1.46 percent for the DHMP.

D. Provision of Electricity for LTAR \27\
---------------------------------------------------------------------------

    \27\ Our preliminary findings regarding the federal provision of 
electricity for LTAR encompasses the program ``Provision of 
Electricity for LTAR for Firms Located in Designated Geographical 
Areas in Dalian,'' which is listed in the Initiation Notice and 
accompanying Initiation Checklist.
---------------------------------------------------------------------------

    For the reasons explained, supra, at ``Adverse Facts Available,'' 
we are basing our determination regarding the government's provision of 
electricity programs on AFA. Section 776(b) of the Act authorizes the 
Department to use as AFA information derived from the petition, the 
final determination, a previous administrative review, or other 
information placed on the record. In a CVD case, the Department 
requires information from both the government of the country whose 
merchandise is under the order and the foreign producers and exporters. 
When the government fails to provide requested information concerning 
alleged subsidy programs, the Department, as AFA, typically finds that 
a financial contribution exists under the alleged program and that the 
program is specific. For example in CTL Plate from Korea, the 
Department, relying on adverse inferences, determined that the 
Government of Korea directed credit to the steel industry in a manner 
that constituted a financial contribution and was specific to the steel 
industry within the meaning of sections 771(5)(D)(i) and 
771(5A)(D)(iii) of the Act, respectively. See Notice of Preliminary 
Results of Countervailing Duty Administrative Review: Certain Cut-to-
Length Carbon-Quality Steel Plate from the Republic of Korea, 71 FR 
11397, 11399 (March 7, 2006) (Preliminary Results of CTL Plate from 
Korea) (unchanged in the Notice of Final Results of Countervailing Duty 
Administrative Review: Certain Cut-to-Length Carbon-Quality Steel Plate 
from the Republic of Korea, 71 FR 38861 (July 10, 2006) (CTL Plate from 
Korea). Similarly, in this instance, because the GOC failed to provide 
certain information concerning the Provision of Electricity for Less 
than Adequate Remuneration program, the Department, as AFA, determines 
that the program confers a financial contribution and is specific 
pursuant to sections 771(5)(D) and 771(5A) of the Act, respectively.
    Where possible, the Department will normally rely on the responsive 
producer's or exporter's records to determine the existence and amount 
of the benefit to the extent that those records are useable and 
verifiable. For example, in prior investigations including LWTP from 
the PRC and Racks from the PRC, the Department determined the existence 
and amount of the benefit attributable to the provision of electricity 
for LTAR by comparing the rates paid by the mandatory respondents for 
electricity to the higher, benchmark electricity rates. In this 
investigation, however, while respondents provided some information 
with respect to their electricity usage and payments, we do not have on 
the record information that could be meaningfully compared to the 
appropriate benchmarks. Therefore, we have determined that, for the 
purposes of this preliminary determination, the rate found for the 
provision of electricity for LTAR in the LWTP from the PRC of 0.07 
percent ad valorem is appropriate. We find that this rate is both 
reliable and relevant as it was calculated in prior final CVD 
determination for a program of the same type.
    On this basis, we calculated a net subsidy rate of 0.07 percent ad 
valorem for Eastfound Metal and Eastfound Material and a net subsidy 
rate of 0.07 percent ad valorem for DHMP.

E. Two Free, Three Half Program

    The Foreign Invested Enterprise and Foreign Enterprise Income Tax 
Law (FIE Tax Law), enacted in 1991, established the tax guidelines and 
regulations for FIEs in the PRC. The intent of this law is to attract 
foreign businesses to the PRC. According to Article 8 of the FIE Tax 
Law, FIEs which are ``productive'' and scheduled to operate not less 
than 10 years are exempt from income tax in their first two profitable 
years and pay half of their applicable tax rate for the following three 
years. FIEs are deemed ``productive'' if they qualify under Article 72 
of the Detailed Implementation Rules of the Income Tax Law of the 
People's Republic of China of Foreign Investment Enterprises and 
Foreign Enterprises.
    DHMP and Eastfound Material are ``productive'' FIEs and received 
benefits under this program during the POI. Eastfound Metal did not use 
this program during the POI.
    We preliminarily determine that the exemption or reduction in the 
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 GOC and it provides 
a benefit to the recipients in the amount of the tax savings. See 
sections 771(5)(D)(ii) and 771(5)(E) of the Act and 19 CFR 
351.509(a)(1). We further preliminarily determine that the exemption/
reduction afforded by this program is limited as a matter of law to 
certain enterprises, i.e., ``productive'' FIEs, and, hence, is specific 
under section 771(5A)(D)(i) of the Act. Our approach in this regard is 
consistent with the Department's practice. See CFS from the PRC and 
Citric Acid from the PRC.
    To calculate the benefit, we treated the income tax savings enjoyed 
by DHMP and Eastfound Material as a recurring benefit, consistent with 
19 CFR 351.524(c)(1) and divided the company's tax savings received 
during the POI by each company's total sales during that period.\28\ To 
compute the amount of the tax savings, we compared the income tax rate 
that each respondent would have paid in absence of the program (for 
Eastfound Material, 24 percent, as described under ``Income Tax 
Benefits for FIEs Based on Geographical Location''), with the income 
rate that each respondent

[[Page 57642]]

actually paid (for Eastfound Material, 0 percent). On this basis, we 
preliminarily determine a countervailable subsidy of 0.63 percent ad 
valorem for Eastfound Material, and a countervailable subsidy of 0.49 
percent ad valorem for DHMP.
---------------------------------------------------------------------------

    \28\ For Eastfound Material, we used as the denominator the 
combined total sales for Eastfound Material and Eastfound Metal.
---------------------------------------------------------------------------

    Further, the respondents reported that the GOC terminated the Two 
Free, Three Half Tax Exemption for FIEs on January 1, 2008. We will 
continue to examine their claims that this program has been terminated.

F. Income Tax Benefits for FIEs Based on Geographical Location

    To promote economic development and attract foreign investment, 
``productive'' FIEs located in coastal economic zones, special economic 
zones, or economic and technical development zones in the PRC receive 
preferential tax rates depending on the zone. This program was first 
enacted on June 15, 1988, pursuant to the Provisional Rules on 
Exemption and Reduction of Corporate Income Tax and Business Tax of 
FIEs in Coastal Economic Zones, as issued by the Ministry of Finance. 
The program was continued on July 1, 1991, pursuant to Article 30 of 
the FIE Tax Law. Pursuant to Article 7 of the FIE Tax Law, productive 
FIEs established in a coastal economic development zone, special 
economic zone, or economic technology development zone, receive 
preferential income tax rates of 15 or 24 percent, depending on the 
zones in which the companies are located, as opposed to the standard 30 
percent income tax rate. The Department has previously found this 
program to be countervailable. See, e.g., Citric Acid Decision 
Memorandum at ``Reduced Income Tax Rates to FIEs Based on Location.''
    Eastfound Material reported that it received an income tax 
reduction under this program with respect to the tax return it filed 
during the POI. Neither DHMP nor Eastfound Metal used this program 
during the POI.
    We preliminarily determine that the reduced income tax rate paid by 
``productive'' FIEs under this program confers a countervailable 
subsidy. The reduced rate is a financial contribution in the form of 
revenue foregone by the GOC and provides a benefit to the recipient in 
the amount of the tax savings within the meaning of sections 
771(5)(D)(ii) and 771(5)(E) of the Act. We further preliminarily 
determine that the reduction afforded by this program is limited to 
enterprises located in designated geographical regions and, hence, is 
specific under section 771(5A)(D)(iv) of the Act.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Eastfound Material as a recurring benefit, consistent with 19 CFR 
351.524(c)(1) and divided the company's tax savings received during the 
POI by the total consolidated sales for Eastfound. To compute the 
amount of the tax savings, we compared the income tax rate that 
Eastfound Material would have paid in absence of the program (30 
percent) with the preferential tax rate (24 percent). On this basis, we 
preliminarily calculated a total net subsidy rate of 0.16 percent ad 
valorem for Eastfound.
    Further, respondents reported that the GOC terminated the Tax 
Benefits for FIEs Based on Geographic Location program on January 1, 
2008. We will continue to examine their claims that this program has 
been terminated.

G. Income Tax Exemption for Investors in Designated Geographical 
Regions within Liaoning

    Under Article 9 of the FIE Tax Law, the provincial governments, the 
autonomous regions, and the centrally governed municipalities have been 
delegated the authority to provide exemptions and reductions of local 
income tax for industries and projects for which foreign investment is 
encouraged. As such, the local governments establish the eligibility 
criteria and administer the application process for any local tax 
reductions or exemptions.
    To promote economic development and attract foreign investment, the 
Jinzhou District of the City of Dalian, Liaoning Province exempts 
industries in the Jinzhou District from local income tax for seven 
years from the first profit-making year and extends that exemption for 
three more years for enterprises with projects encouraged by the Dalian 
Government. The Department has previously found income tax exemption 
programs that are limited to certain geographical regions to be 
countervailable. See, e.g., Citric Acid Decision Memorandum at 
``Reduced Income Tax Rates to FIEs Based on Location.''
    Eastfound Material is located in Jinzhou District and enjoyed the 
exemption of local income tax rate of three percent during the POI. 
Eastfound Metal and DHMP did not use this program during the POI.
    We preliminarily determine that the exempted income tax rate 
offered to FIEs in Jinzhou District under this program confers a 
countervailable subsidy. The exempted rate is a financial contribution 
in the form of revenue forgone by the GOC and it provides a benefit to 
the recipient in the amount of the tax savings. See section 
771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further determine 
preliminarily that the exemption afforded by this program is limited to 
enterprises located in designated geographic regions and, hence, is 
specific under section 771(5A)(D)(iv) of the Act.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Eastfound Material as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the company's tax savings received during 
the POI by the combined total sales of Eastfound during that period. To 
compute the amount of the tax savings, we compared the income tax rate 
Eastfound Material would have paid in the absence of the program (3 
percent) with the rate it paid (0 percent).
    On this basis, we preliminarily determine that Eastfound received a 
countervailable subsidy of 0.08 percent ad valorem under this program.

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

    Enacted in 1997, the Circular of the State Council on Adjusting Tax 
Policies on Imported Equipment (Guofa No. 37) (Circular 37) exempts 
both FIEs and certain domestic enterprises from the VAT and tariffs on 
imported equipment used in their production so long as the equipment 
does not fall into prescribed lists of non-eligible items. The National 
Development and Reform Commission (NDRC) and the General Administration 
of Customs are the government agencies responsible for administering 
this program. Qualified enterprises receive a certificate either from 
the NDRC or one of its provincial branches. To receive the exemptions, 
a qualified enterprise only has to present the certificate to the 
customs officials upon importation of the equipment. The objective of 
the program is to encourage foreign investment and to introduce foreign 
advanced technology equipment and industry technology upgrades. The 
Department has previously found this program to be countervailable. 
See, e.g., Citric Acid Decision Memorandum at ``VAT Rebate on Purchases 
by FIEs of Domestically Produced Equipment.''
    Eastfound Metal, an FIE, reported receiving VAT and tariff 
exemptions under this program for imported equipment. DHMP and 
Eastfound Material did not use this program.
    We preliminarily determine that the VAT and tariff exemptions on 
imported equipment confer a countervailable subsidy. The exemptions are 
a financial contribution in the form of revenue

[[Page 57643]]

forgone by the GOC and the exemptions provide a benefit to the 
recipients in the amount of the VAT and tariff savings. See section 
771(5)(D)(ii) of the Act and 19 CFR 351.510(a)(1). We further 
preliminarily determine that the VAT and tariff exemptions under this 
program are specific under section 771(5A)(D)(iii)(I) of the Act 
because the program is limited to certain enterprises. As described 
above, only FIEs and certain domestic enterprises are eligible to 
receive VAT and tariff exemptions under this program. No information 
has been provided to demonstrate that the beneficiary companies are a 
non-specific group. As noted above under ``Two Free/Three Half'' 
program, the Department finds FIEs to be a specific group under section 
771(5A)(D)(i) of the Act. The additional certain enterprises requiring 
approval by the NDRC does not render the program to be non-specific. 
This analysis is consistent with the Department's approach in prior CVD 
proceedings. See, e.g., CFS Decision Memorandum at Comment 16, and 
Tires Decision Memorandum at ``VAT and Tariff Exemptions for FIEs and 
Certain Domestic Enterprises Using Imported Equipment on Encouraged 
Industries.''
    Normally, we treat exemptions from indirect taxes and import 
charges, such as the VAT and tariff exemptions, as recurring benefits, 
consistent with 19 CFR 351.524(c)(1) and allocate these benefits only 
in the year that they were received. However, when an indirect tax or 
import charge exemption is provided for, or tied to, the capital 
structure or capital assets of a firm, the Department may treat it as a 
non-recurring benefit and allocate the benefit to the firm over the 
AUL. See 19 CFR 351.524(c)(2)(iii) and 19 CFR 351.524(d)(2). Therefore, 
we are examining the VAT and tariff exemptions that Eastfound Metal 
received under the program during the POI and prior years.
    To calculate the amount of import duties exempted under the 
program, we multiplied the value of the imported equipment by the 
import duty rate that would have been levied absent the program. To 
calculate the amount of VAT exempted under the program, we multiplied 
the value of the imported equipment (inclusive of import duties) by the 
VAT rate that would have been levied absent the program. Our derivation 
of VAT in this calculation is consistent with the Department's approach 
in prior cases. See, e.g., Circular Welded Carbon Quality Steel Line 
Pipe from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 73 FR 70961 (November 24, 2008) 
(Line Pipe from the PRC), and accompanying Issues and Decision 
Memorandum (Line Pipe Decision Memorandum) at Comment 8 (``. . . we 
agree with petitioners that VAT is levied on the value of the product 
inclusive of delivery charges and import duties''). Next, we summed the 
amount of duty and VAT exemptions received in each year. For each year, 
we then divided the total grant amount by the corresponding total sales 
for the year in question. For Eastfound Metal, the total amount of the 
VAT and tariff exemptions for each year approved was less than 0.5 
percent for Eastfound's total sales for the respective year. Therefore, 
we do not reach the issue of whether Eastfound Metal's VAT and tariff 
exemptions were tied to the capital structure of capital assets of the 
firm. Instead, we expense the benefit to the year in which the benefit 
is received, consistent with 19 CFR 351.524(a). On this basis, we 
preliminarily determine the countervailable subsidy to be 0.02 percent 
ad valorem for Eastfound.
    The GOC reported that pursuant to the Notice of Ministry of 
Finance, General Administration of Customs and General Bureau of State 
Taxation, No. 43 (2008) (Notice 43), dated December 25, 2008, the VAT 
exemption linked to imported equipment under this program has been 
terminated but the import tariff exemption has not been terminated. See 
GOC's Initial Questionnaire Response at 59-60 and Exhibit 29 (September 
10, 2009). Article 1 of Notice 43 states that as of January 1, 2009, 
VAT on imported equipment for self-use in domestic and foreign 
investment projects as encouraged and stipulated in Circular 37 will be 
resumed and the custom duty exemption will remain in effect. Article 4 
of Notice 43 provides for a transition period for the termination of 
the VAT exemption. Under Article 4, for a project which has a letter of 
confirmation prior to November 10, 2008, and the imported equipment has 
been declared with customs before June 30, 2009, VAT and tariff can be 
exempted. However, for imported equipment for which the import customs 
declaration is made on or after July 1, 2009, VAT will be collected. As 
such, the GOC stated the latest possible date for companies to claim or 
apply for a VAT exemption under this program was June 30, 2009. The GOC 
reported that there is no replacement VAT exemption program.
    Under 19 CFR 351.526(a)(1) and (2), the Department may take a 
program-wide change to a subsidy program into account in establishing 
the cash deposit rate if it determines that subsequent to the POI, but 
before the preliminary determination, a program-wide change occurred 
and the Department is able to measure the change in the amount of 
countervailable subsidies provided under the program in question. With 
regard to this program, we preliminarily determine that a program-wide 
change has not occurred and have not adjusted the cash deposit rate. 
Under 351.526(d)(1), the Department will only adjust the cash deposit 
rate of a terminated program if there are no residual benefits. This 
program provides benefits that may be allocated over the AUL and, 
therefore, residual benefits may continue to be bestowed under this 
program after the termination date. We will, however, continue to 
examine the GOC's claim of termination of the VAT exemption portion of 
this program.

I. VAT Refunds for FIEs Purchasing Domestically-produced Equipment

    As outlined in GUOSHUIFA (1999) No. 171, Notice of the State 
Administration of Taxation Concerning the Trial Administrative Measures 
on Purchase of Domestically Produced Equipment by FIEs, the GOC refunds 
the VAT on purchases of certain domestic equipment to FIEs if the 
purchases are within the enterprise's investment amount and if the 
equipment falls under a tax-free category. Article 3 specifies that 
this program is limited to FIEs with completed tax registrations and 
with foreign investment in excess of 25 percent of the total investment 
in the enterprise. Article 4 defines the type of equipment eligible for 
the VAT exemption, which includes equipment falling under the 
Encouraged and Restricted B categories listed in the Notice of the 
State Council Concerning the Adjustment of Taxation Policies for 
Imported Equipment (No. 37 (1997)) and equipment for projects listed in 
the Catalogue of Key Industries, Products and Technologies Encouraged 
for Development by the State. To receive the rebate, an FIE must meet 
the requirements above and, prior to the equipment purchase, bring its 
Registration Handbook for Purchase of Domestically Produced Equipment 
by FIEs as well as additional registration documents to the taxation 
administration for registration. After purchasing the equipment, FIEs 
must complete a Declaration Form for Tax Refund (or Exemption) of 
Exported Goods, and submit it with the registration documents to the 
tax administration. The Department has previously found this program to 
be countervailable. See, e.g., Citric Acid Decision Memorandum at ``VAT 
Rebate on Purchases by FIEs of Domestically Produced Equipment.''
    Eastfound Metal and Eastfound Material reported receiving VAT

[[Page 57644]]

refunds on its purchases of domestically-produced equipment under this 
program. DHMP has not received VAT refunds under this program.
    We preliminarily determine that the refund of the VAT paid on 
purchases of domestically-produced equipment by FIEs confers a 
countervailable subsidy. The rebates are a financial contribution in 
the form of revenue forgone by the GOC and they provide a benefit to 
the recipients in the amount of the tax savings. See section 
771(5)(D)(ii) of the Act and 19 CFR 351.510(a)(1). We further 
preliminarily determine that the VAT rebates are contingent upon the 
use of domestic over imported goods and, hence, specific under section 
771(5A)(C) of the Act.
    Normally, we treat exemptions from indirect taxes and import 
charges, such as VAT refunds, as recurring benefits, consistent with 19 
CFR 351.524(c)(1), and allocate these benefits only in the year that 
they were received. However, when an indirect tax or import charge 
exemption is provided for, or tied to, the capital structure or capital 
assets of a firm, the Department may treat it as a non-recurring 
benefit and allocate the benefit to the firm over the AUL. See 19 CFR 
351.524(c)(2)(iii) and 19 CFR 351.524(d)(2).
    We requested that Eastfound Metal and Eastfound Material identify 
the equipment for which it received VAT rebates from 2001 through the 
POI. For 2005 and 2008, the total amount of the VAT rebates approved 
was less than 0.5 percent of Eastfound's total sales for each year. 
Therefore, we have expensed the benefit to the year in which it is 
received, i.e., 2005 and 2008, respectively, which is consistent with 
19 CFR 351.524(a).
    For 2007, however, the total amount of VAT rebates exceeded 0.5 
percent of Eastfound's total sales for that year. Based on the reported 
information, the VAT rebates were for capital equipment. Accordingly, 
we are treating the VAT refunds for this year as a non-recurring 
benefit consistent with 19 CFR 351.524(c)(2)(iii). To calculate the 
countervailable subsidy for Eastfound, we used our standard methodology 
for non-recurring benefits. See 19 CFR 351.524(b) and the ``Allocation 
Period'' section of this notice. Specifically, we used the discount 
rate described above in the ``Benchmarks and Discount Rates'' section 
to calculate the amount of the benefit for the POI.
    We then summed the benefits allocated and expensed to the POI and 
divided that amount by Eastfound's total consolidated sales for 2008. 
On this basis, we preliminarily determine the countervailable subsidy 
to be 0.13 percent ad valorem for Eastfound.
    As discussed above, pursuant to 19 CFR 351.526(a)(1) and (2), the 
Department may take a program-wide change to a subsidy program into 
account in establishing the cash deposit rate if it determines that 
subsequent to the POI, but before the preliminary determination, a 
program-wide change occurred and the Department is able to measure the 
change in the amount of countervailable subsidies provided under the 
program in question.
    The GOC reported that, pursuant to the Notice for Termination of 
Tax Refund for FIE Purchasing Domestically Produced Equipment, No. 176 
(CS 2008), this program has been terminated. See GOC's Initial 
Questionnaire Response at 87 (September 10, 2009). The GOC stated that 
Article 1 of the regulation provides that since January 1, 2009, the 
policy of VAT refund for purchase of domestically-produced equipment by 
FIEs is terminated. Id. at Exhibit 35. Article II(2) provides for a 
transition period, provided that (1) the investment project received a 
letter of confirmation that the FIE project is in conformity with state 
industry policy before November 9, 2008, and it was registered with the 
tax authorities, and (2) the domestically-produced equipment was 
purchased and VAT invoice was issued and claims for VAT refund were 
filed with the tax authorities prior to June 30, 2009.
    As such, the GOC stated that the last day for companies to apply 
for or claim benefits under the program is June 30, 2009, provided that 
the ratification and purchase of the equipment were made prior to that 
date. Id. at 87. The GOC, however, did not report the last date that a 
company could receive VAT refunds under this program. Under section 
351.526(d), the Department will not adjust the cash deposit rate for a 
terminated program if residual benefits may continue to be bestowed 
under the program. Because benefits from this program may be allocated 
over the AUL, we preliminarily determine that residual benefits may 
continue to be bestowed under the program. Therefore, we have not 
adjusted the cash deposit rate.

J. International Market Exploration Fund (SME Fund)

    The SME Fund, established under CQ(2000) No. 467, encourages the 
development of small and medium-sized enterprises (SMEs) by reducing 
the risk of operation for these enterprises in the international 
market. To qualify for the program, a company needs to satisfy the 
criteria in CQ (2000), which provides that the SME should have export 
and import rights, exports of less than $15,000,000, an accounting 
system, personnel with foreign trade skills, and a plan for exploring 
the international market.\29\ The GOC reported that, for the mandatory 
respondents, the Dalian Foreign Economic and Trade Bureau and the 
Financial Bureau of Dalian are the authorities responsible for this 
program that provides one-time assistance for each approved 
application. Eastfound Metal and Eastfound Material reported receiving 
assistance under this program.
---------------------------------------------------------------------------

    \29\ See GOC's fourth supplemental questionnaire response at 4 
(October 5, 2009).
---------------------------------------------------------------------------

    We preliminarily determine that the SME Fund provides 
countervailable subsidies within the meaning of section 771(5) of the 
Act. We preliminarily find that the grants constitute a financial 
contribution and benefit under sections 771(5)(D)(i) and 771(5)(E) of 
the Act, respectively. We also preliminarily determine that this 
program is an export subsidy, under section 771(5A)(B) of the Act, 
because the program supports the international market activities of 
SMEs and is limited to enterprises that have exports of less than 
$15,000,000.
    According to the GOC, the SME Fund provides one-time assistance. 
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 all 
grants for Eastfound are less than 0.5 percent and expensed in the year 
of receipt. Therefore, for the POI, we have preliminarily calculated a 
total net subsidy rate of 0.01 percent ad valorem for Eastfound.

II. Programs Preliminarily Determined To Not Confer Benefits During the 
POI

A. Provision of Zinc for LTAR

    The Department is investigating whether producers and suppliers, 
acting as Chinese government authorities, sold zinc to the mandatory 
respondents for LTAR. Eastfound reported that it did not purchase zinc 
during the POI. DHMP reported purchasing zinc during the POI from a 
trading company. In prior CVD proceedings involving the PRC, the 
Department has determined that when a respondent purchases an input 
from a trading company or non-producing supplier, a subsidy is 
conferred if the

[[Page 57645]]

producer of the input is an ``authority'' within the meaning of section 
771(5)(B) of the Act and the input was sold to the respondent for LTAR. 
See CWP Decision Memorandum at ``Hot-Rolled Steel for Less Than 
Adequate Remuneration,'' Shelving Decision Memorandum at ``Provision of 
Wire Rod for Less than Adequate Remuneration,'' and CWASPP Decision 
Memorandum at ``Provision of SSC for LTAR.'' Therefore, in our initial 
questionnaire, we requested that the respondent companies and the GOC 
together identify the producers from whom the trading companies 
acquired the zinc that was subsequently sold to DHMP during the POI and 
to provide information that would allow the Department to determine 
whether those producers were government authorities.
    As explained above in the ``Application of Facts Available: 
Provision of Zinc for LTAR'' section, DHMP and the GOC did not identify 
the producer(s) of the zinc that was purchased by DHMP during the POI. 
Because DHMP and the GOC have not supplied the requested information, 
we find that the necessary information is not on the record and, as a 
result, we are resorting to the use of facts available within the 
meaning of sections 776(a)(1) and (2) of the Act.
    In its response, the GOC provided information on the amount of zinc 
produced by SOEs and private producers in the PRC. Using these data, we 
derived the ratio of zinc produced by government authorities during the 
POI. Thus, pursuant to sections 776(a)(1) and (2) of the Act, we have 
resorted to the use of facts available with regard to zinc sold to 
DHMP. Specifically, we assumed that the percentage of zinc produced by 
government authorities is equal to the ratio of zinc produced by 
government authorities during the POI. On this basis, we find that a 
financial contribution, as described under section 771(5)(D)(iv) of the 
Act, was provided with regard to DHMP's purchases of zinc during the 
POI.
    With respect to specificity, one of the three subsidy elements 
specified under the Act, the GOC has provided information on end uses 
for zinc. See GOC's Initial Questionnaire Response at 25 (September 10, 
2009). The GOC further stated that the consumption of zinc occurs 
across a broad range of industries (e.g., galvanized steel products, 
alkaline batteries, various metal alloys, etc.). Id. While numerous 
companies may comprise the listed industries, section 
771(5A)(D)(iii)(I) of the Act clearly directs the Department to conduct 
its analysis on an industry or enterprise basis. Based on our review of 
the data and consistent with our past practice, we determine that the 
industries named by the GOC are limited in number and, hence, the 
subsidy is specific. See section 771(5A)(D)(iii)(I) of the Act; see 
also LWRP Decision Memorandum at Comment 7, and Shelving Decision 
Memorandum at ``Provision of Wire Rod from Less Than Adequate 
Remuneration.''
    Having addressed the issue of financial contribution and 
specificity, we must next analyze whether the sale of zinc to DHMP by 
government authorities conferred a benefit within the meaning of 
section 771(5)(iv) of the Act. The Department's regulations at 19 CFR 
351.511(a)(2) set forth the basis for identifying appropriate market-
determined benchmarks for measuring the adequacy of remuneration for 
government-provided goods or services. These potential benchmarks are 
listed in hierarchical order by preference: (1) market prices from 
actual transactions within the country under investigation (e.g., 
actual sales, actual imports or competitively run government auctions) 
(tier one); (2) world market prices that would be available to 
purchasers in the country under investigation (tier two); or (3) an 
assessment of whether the government price is consistent with market 
principles (tier three). As we explained in Softwood Lumber from 
Canada, the preferred benchmark in the hierarchy is an observed market 
price from actual transactions within the country under investigation 
because such prices generally would be expected to reflect most closely 
the prevailing market conditions of the purchaser under investigation. 
See Softwood Lumber Decision Memorandum at ``Market-Based Benchmark.''
    Beginning with tier-one, we must determine whether the prices from 
actual sales transactions involving Chinese buyers and sellers are 
significantly distorted. As explained in the CVD Preamble:
    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 {tier two{time}  
in the hierarchy.
See CVD Preamble, 63 FR at 65377. The CVD Preamble further recognizes 
that distortion can occur when the government provider constitutes a 
majority or, in certain circumstances, a substantial portion of the 
market. As explained above in the ``Application of Facts Available: 
Provision of Zinc for LTAR'' section, based on the aggregate data 
supplied by the GOC, we find for purposes of the preliminary 
determination that government authorities accounted for approximately 
67 percent of zinc production during the POI. Therefore, we 
preliminarily determine that domestic zinc prices are not viable tier-
one prices as described under 19 CFR 351.511(a)(2)(i).
    We next examined whether the record contained data that could be 
used as a tier-two zinc benchmark under 19 CFR 351.511(a)(2)(ii). The 
Department has on the record of the investigation prices for zinc, as 
sourced from the American Metals Market (AMA). See Petitioners' Pre-
Preliminary Determination Comments on Benchmarks at Exhibit 3 (October 
19, 2009) (Petitioners' Benchmark Comments). The benchmark prices are 
reported on a monthly basis in U.S. dollars per metric ton (MT). No 
other interested party submitted tier-two zinc prices on the record of 
this investigation.
    Therefore, for purposes of the preliminary determination, we find 
that the data from AMA should be used to derive a tier-two, world 
market price for zinc that would be available to purchasers of zinc in 
the PRC. We note that the Department has relied on pricing data from 
industry publications in recent CVD proceedings involving the PRC. See, 
e.g., CWP Decision Memorandum at ``Hot-Rolled Steel for Less Than 
Adequate Remuneration,'' and LWRP Decision Memorandum at ``Hot-Rolled 
Steel for Less Than Adequate Remuneration.'' Further, we find that, for 
purposes of this preliminary determination, there is no basis to 
conclude that prices from the AMA are any less reliable or 
representative than data from other trade industry publications used by 
the Department in prior CVD proceedings involving the PRC.
    To determine whether zinc suppliers, acting as government 
authorities, sold zinc to DHMP for LTAR, we compared the prices DHMP 
paid to its suppliers to our zinc benchmark price. We conducted our 
comparison on a monthly basis. When conducting the price comparison, we 
converted the benchmark to the same currency and unit of measure as 
reported by the DHMP for its purchases of zinc.
    Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of 
remuneration under tier-one or tier-two, the Department will adjust the 
benchmark price to reflect the price that a firm actually paid or would 
pay if it imported the product, including delivery charges and import 
duties. Regarding delivery charges, at this time we lack information 
concerning delivery charges and, therefore, have not

[[Page 57646]]

adjusted the benchmark in this regard, but will continue to seek the 
relevant information. However, we have added import duties, as reported 
by the GOC, and the VAT applicable to imports of zinc into the PRC. 
With respect to the three percent insurance charge on imports noted by 
the petitioner, consistent with Shelving from the PRC, while the 
Department will consider in future determinations the propriety of 
including insurance as a delivery charge, the existing record of this 
investigation does not support such an adjustment. See Shelving from 
the PRC Decision Memorandum at Comment 9.
    Comparing the benchmark unit prices to the unit prices paid by DHMP 
for zinc, we determine that zinc was not provided for LTAR and that a 
benefit does not exist. See section 771(5)(E)(iv) of the Act and 19 CFR 
351.511(a).

B. Export Incentive Payments Characterized as ``VAT Rebates''

    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.'' See 19 CFR 351.517(a); see also 
19 CFR 351.102 (for a definition of ``indirect tax''). To determine 
whether the GOC provided a benefit under this program, we compared the 
VAT exemption upon export to the VAT levied with respect to the 
production and distribution of like products when sold for domestic 
consumption. The GOC reported that the VAT levied on wire decking sales 
in the domestic market is 17 percent and that the VAT exempted upon the 
export of wire decking is 5 percent. Thus, we have preliminarily 
determined that the VAT exempted upon the export of wire decking did 
not confer a countervailable benefit because the amount of the VAT 
rebated on export is lower than the amount paid in the domestic market.

III. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that DHMP and Eastfound did not apply 
for or receive benefits during the POI under the programs listed below:

A. Loan Programs

    1. Honorable Enterprise Program
    2. Preferential Loans for Key Projects and Technologies
    3. Preferential Loans as Part of the Northeast Revitalization 
Program
    4. Policy Loans for Firms Located in Industrial Zones in the City 
of Dalian in Liaoning Province

B. Provision of Goods and Services for LTAR

    1. Provision of Water for LTAR for Firms Located in Designated 
Geographical Areas in the City of Dalian in Liaoning Province

C. Income and Other Direct Taxes

    1. Income Tax Credits for Domestically-Owned Companies Purchasing 
Domestically Produced Equipment
    2. Income Tax Exemption for Investment in Domestic Technological 
Renovation
    3. Preferential Income Tax Policy for Enterprises in the Northeast 
Region
    4. Forgiveness of Tax Arrears for Enterprises in the Old Industrial 
Bases of Northeast China

D. Indirect Tax and Tariff Exemptions

    1. VAT Deductions on Fixed Assets
    2. VAT Exemptions for Newly Purchased Equipment in the Jinzhou 
District

E. Grant Programs

    1. Five Points, One Line
    2. Export Interest Subsidies
    3. State Key Technology Project Fund
    4. Subsidies for Development of Famous Export Brands and China 
World Top Brands
    5. Sub-Central Government Programs to Promote Famous Export Brands 
and China World Top Brands
    6. Exemption of Fees for Firms Located in Designated Geographical 
Areas in the City of Dalian in Liaoning Province

F. Preferential Income Tax Subsidies for FIEs

    1. Income Tax Exemption Program for Export-Oriented FIEs
    2. Local Income Tax Exemption and Reduction Programs for Productive 
FIEs
    3. Preferential Tax Programs for FIEs Recognized as High or New 
Technology Enterprises

Verification

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

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for subject merchandise produced and 
exported by the entities listed below. We preliminarily determine the 
total estimated net countervailable subsidy rates to be:

------------------------------------------------------------------------
            Producer/Exporter               Net Subsidy Ad Valorem Rate
------------------------------------------------------------------------
Dalian Eastfound Metal Products Co., Ltd.                   3.13[percnt]
 (Eastfound Metal) and its affiliate
 Dalian Eastfound Material Handling
 Products Co., Ltd. (Eastfound Material)
 (collectively, Eastfound)...............
Dalian Huameilong Metal Products Co.,                       2.02[percnt]
 Ltd. (DHMP).............................
Aceally (Xiamen) Technology Co., Ltd.....                 437.73[percnt]
Alida Wire Mesh & Wire Cloth Mfg.........                 437.73[percnt]
Anping Ankai Hardware & Mesh Products                     437.73[percnt]
 Co., Ltd................................
Anping County Jincheng Metal Products                     437.73[percnt]
 Co., Ltd................................
Anping County Yuantong Hardware Net                       437.73[percnt]
 Industry Co., Ltd.......................
Anping Ruiqilong Wire Mesh Co., Ltd......                 437.73[percnt]
Anping Web Wire Mesh Co., Ltd............                 437.73[percnt]
Anping Yilian Metal Products Co., Ltd....                 437.73[percnt]
Aplus Industrial (HK) Ltd................                 437.73[percnt]
Beijing Jiuwei Storage Equipment Co.,                     437.73[percnt]
 Ltd.....................................
Dalian Aipute Industry & Trade Co., Ltd..                 437.73[percnt]
Dalian Best Metal Products Co., Ltd......                 437.73[percnt]
Dalian Jianda Metal Products Co., Ltd....                 437.73[percnt]
Dalian Litainer Logistic Equipment Co.,                   437.73[percnt]
 Ltd.....................................
Dalian Litainer Metal Products Co., Ltd..                 437.73[percnt]
Dalian Pro Metal Co., Ltd................                 437.73[percnt]
Dalian Traction Motor Co., Ltd...........                 437.73[percnt]
Dalian Yutiein Storage Manufacture Co.,                   437.73[percnt]
 Ltd.....................................

[[Page 57647]]

 
Dalian Zengtian Metal-Net Production Co.,                 437.73[percnt]
 Ltd.....................................
Dandong Riqian Equipment Co., Ltd........                 437.73[percnt]
Deyoma Wire Decking Factory..............                 437.73[percnt]
Global Storage Equipment Manufacturer                     437.73[percnt]
 Ltd. (Huade Industries).................
Hebei Dongshengyuan Trading Co., Ltd.....                 437.73[percnt]
Hebei Tengyue Trading Co., Ltd...........                 437.73[percnt]
High Hope Int'l Group Jiangsu Native                      437.73[percnt]
 Produce Imp & Exp Corp. Ltd.............
Imex China Ltd...........................                 437.73[percnt]
Jiangdong Xinguang Metal Product Co......                 437.73[percnt]
Jiangsu Nova Logistics System Co., Ltd...                 437.73[percnt]
Jiangsu Sainty Shengtong Imp & Exp Co....                 437.73[percnt]
JP Metal Works Processing Factory........                 437.73[percnt]
Kule (Dalian) Co., Ltd...................                 437.73[percnt]
Kunshan Maxshow Industry Trade Co., Ltd..                 437.73[percnt]
Lanxuan Metal Product Co., Ltd...........                 437.73[percnt]
Longkou Forever Developed Metal Product                   437.73[percnt]
 Co., Ltd................................
Nanjing Better Metallic Products Co.,                     437.73[percnt]
 Ltd.....................................
Nanjing Better Storage Equipment                          437.73[percnt]
 Manufacturing Co., Ltd..................
Nanjing Dongtuo Logistics Equipment Co.,                  437.73[percnt]
 Ltd.....................................
Nanjing Ebil Metal Products Co., Ltd.....                 437.73[percnt]
Nanjing Huade Storage Equipment                           437.73[percnt]
 Manufacture Co., Ltd....................
Nanjing Jiangrui International Logistics                  437.73[percnt]
 Co......................................
Nanjing Jiangrui Metal Products Co., Ltd.                 437.73[percnt]
Nanjing Jiangrui Racking Manufacture Co.,                 437.73[percnt]
 Ltd.....................................
Nanjing Youerda Logistic Equipment                        437.73[percnt]
 Engineering Co. Ltd.....................
Nanjing Youerda Metallic Products Co.,                    437.73[percnt]
 Ltd.....................................
National Sourcing Co., Ltd...............                 437.73[percnt]
Ningbo Beilun Songyi Storage Equipment                    437.73[percnt]
 Manufacturer Co., Ltd...................
Ningbo Huixing Metal Product, Co., Ltd...                 437.73[percnt]
Ningbo Telingtong Metal Products Co.,                     437.73[percnt]
 Ltd.....................................
Ningbo United Group Imp & Exp Co. Ltd....                 437.73[percnt]
Pinghu Dong Zhi Metal Products...........                 437.73[percnt]
Schenker International China Ltd. (Dalian                 437.73[percnt]
 Branch).................................
Shanghai Boracs Logistics Equipment                       437.73[percnt]
 Manufacturing Co., Ltd..................
Shanghai Bright Imp & Exp Co., Ltd.......                 437.73[percnt]
Shanghai Flory Industries Co., Ltd.......                 437.73[percnt]
Shanghai Hesheng Hardware Products Co....                 437.73[percnt]
Shanghai Jingxing Storage Equipment                       437.73[percnt]
 Engineering Co., Ltd. (formerly Shanghai
 Jinxing Rack Factory)...................
Shanghai Yibai Int'l Trading Co..........                 437.73[percnt]
Summit Storage Systems Ltd...............                 437.73[percnt]
Suzhou (China) Sunshine Hardware                          437.73[percnt]
 Equipment Imp & Exp Co., Ltd............
Suzhou Jinta Metal Working Co., Ltd......                 437.73[percnt]
Suzhou Z-TAK Metal and Technology Co.,                    437.73[percnt]
 Ltd.....................................
Tianjin Dingxing Furniture Company.......                 437.73[percnt]
Tianjin Machinery Imp & Exp Corp.........                 437.73[percnt]
Tianjin Mandarin Import & Export Co.,                     437.73[percnt]
 Ltd.....................................
Tianjin Zhonglian Metals Ware Co., Ltd...                 437.73[percnt]
TMC Logistic Products....................                 437.73[percnt]
Vida Logistics System Co., Ltd...........                 437.73[percnt]
Wuxi Puhui Metal Products Co., Ltd.......                 437.73[percnt]
Wuyi Tianchi Mechanical & Electrical                      437.73[percnt]
 Manufacture Co., Ltd....................
Xiamen E-Soon Machinery Co., Ltd.........                 437.73[percnt]
Xiamen GaoPing Co., Ltd..................                 437.73[percnt]
Xiamen Luckyroc Industry Co., Ltd........                 437.73[percnt]
Xiangshan Ningbo General Steel Metal                      437.73[percnt]
 Structure Co., Ltd......................
Yuyao Sanlian Goods Shelves Manufacture                   437.73[percnt]
 Co., Ltd................................
All Others...............................                   2.58[percnt]
------------------------------------------------------------------------

    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. The all others rate may not include zero and de 
minimis net subsidy rates, or any rates based solely on the facts 
available.
    Notwithstanding the language of section 705(c)(5)(A)(i) of the Act, 
we have not calculated the ``all others'' rate by weight averaging the 
rates of DHMP and Eastfound because doing so risks disclosure of 
proprietary information. Therefore, for the all others rate, we have 
calculated a simple average of the two responding firms' rates.
    In accordance with sections 703(d)(1)(B) and (2) of the Act, we are 
directing CBP to suspend liquidation of all entries of the subject 
merchandise 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 the merchandise in the amounts indicated above.

[[Page 57648]]

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) 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), the Department 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, which must be 
limited to issues raised in the case briefs, must be filed within five 
days after the deadline for submission of case briefs. See 19 CFR 
351.309(d). 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.
    In accordance with 19 CFR 351.310(c), we will hold a public 
hearing, if requested, to afford interested parties an opportunity to 
comment on this preliminary determination. Individuals who wish to 
request a hearing must submit a written request within 30 days of the 
publication of this notice in the Federal Register to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, 14\th\ Street and Constitution Avenue, NW, Washington, DC 20230. 
Parties will be notified of the schedule for the hearing and parties 
should confirm the time, date, and place of the hearing 48 hours before 
the scheduled time. Requests for a public hearing should contain: (1) 
party's name, address, and telephone number; (2) the number of 
participants; and (3) to the extent practicable, an identification of 
the arguments to be raised at the hearing.
    This determination is issued and published pursuant to sections 
703(f) and 777(i) of the Act and 19 CFR 351.221(b)(4).

    Dated: November 2, 2009.
Ronald K. Lorentzen,
Acting Assistant Secretary for Import Administration.
[FR Doc. E9-26947 Filed 11-6-09; 8:45 am]
BILLING CODE 3510-DS-S