[Federal Register Volume 75, Number 112 (Friday, June 11, 2010)]
[Notices]
[Pages 33245-33262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14111]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-966]


Drill Pipe From the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination

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

SUMMARY: The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are being provided to 
producers and exporters of drill pipe 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.

DATES: Effective Date: June 11, 2010

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Eric Greynolds, AD/
CVD Operations, Office 3, Import Administration, U.S. Department of 
Commerce, Room 4014, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone: 202-482-4793 and 202-482-6071, 
respectively.

SUPPLEMENTARY INFORMATION:

[[Page 33246]]

Case History

    On December 31, 2009, the Department received the petition filed in 
proper form by the petitioners.\1\ This investigation was initiated on 
January 20, 2010. See Drill Pipe From the People's Republic of China: 
Initiation of Countervailing Duty Investigation, 75 FR 4345 (January 
27, 2010) (Initiation Notice), and accompanying Initiation 
Checklist.\2\
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    \1\ Petitioners are VAM Drilling USA, Inc., Texas Steel 
Conversions, Inc., Rotary Drilling Tools, TMK IPSCO, and United 
Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied 
Industrial and Service Workers International Union, AFL-CIO-CLC.
    \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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    On April 8, 2010, the Department postponed the deadline for the 
preliminary determination. See Drill Pipe From the People's Republic of 
China: Notice of Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 75 FR 17902 (April 8, 2010). 
Normally, under section 703(c)(1)(B) of the Tariff Act of 1930, as 
amended (the Act), the Department extends the due date of a preliminary 
determination to no later than 130 days after the day on which the 
investigation was initiated. However, as explained in the memorandum 
from the Deputy Assistant Secretary (DAS) for Import Administration, 
the Department exercised its discretion to toll deadlines for the 
duration of the closure of the Federal Government from February 5 
through February 12, 2010. Thus, all deadlines in this segment of the 
proceeding have been extended by seven days. See Memorandum to the File 
from Ronald K. Lorentzen, DAS for Import Administration, regarding 
``Tolling of Administrative Deadlines As a Result of the Government 
Closure During the Recent Snowstorm'' (February 12, 2010). As such, we 
extended the due date of the preliminary determination to no later than 
137 days after the day on which the Department initiated the 
investigation. Because that date falls on a weekend, the deadline for 
completion of this preliminary determination is the next business day, 
i.e., June 7, 2010.
    In the Initiation Notice, the Department stated that it intended to 
rely on data from U.S. Customs and Border Patrol (CBP) for purposes of 
selecting the mandatory respondents. See Initiation Notice, 75 FR at 
4347. On January 25, 2010, the Department released the results of a 
query performed on CBP's custom database for calendar year 2009. See 
Memorandum to the File from Eric B. Greynolds, Program Manager, AD/CVD 
Operations, Office 3, regarding ``Release of Initial Customs and Border 
Patrol Data'' (January 25, 2010). Due to the large number of producers 
and exporters of drill pipe in the PRC, we determined that it was not 
practicable to individually investigate each producer and/or exporter. 
We, therefore, selected two producers and/or exporters of drill pipe to 
be mandatory respondents: Giant Oil Technology and Service Co., Ltd. 
(Giant Oil) and Xigang Seamless Steel Tube Co., Ltd. (Xigang), the two 
largest publicly identifiable producers and/or exporters of the subject 
merchandise. See Memorandum to John M. Andersen, Acting DAS for AD/CVD 
Operations, from Eric B. Greynolds, Program Manager, AD/CVD Operations, 
Office 3, through Melissa G. Skinner, Director, AD/CVD Operations, 
Office 3, regarding ``Respondent Selection'' (February 23, 2010). Also 
on February 23, 2010, we issued the initial countervailing duty (CVD) 
questionnaire to the Government of the People's Republic of China (the 
GOC) and selected mandatory respondents, to whom we also issued a 
confirmation of shipment questionnaire on the same date.\3\
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    \3\ On February 25, 2010, the Department issued an addendum to 
the initial questionnaire to the GOC, Giant Oil, and Xigang. See 
Addendum to the Initial Questionnaire issued by the Department 
(February 25, 2010).
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    On March 5, 2010, Xigang submitted its response to the shipment 
questionnaire in which the company claimed that it did not export 
subject merchandise to the United States during the period of 
investigation (POI). See Xigang's Shipment Questionnaire Response at 1-
2 (March 5, 2010). Regarding Giant Oil, neither the GOC nor the 
Department was able to obtain a working address for the company. See 
GOC's Drill Pipe submission (March 8, 2010) and the Memorandum to the 
File from Eric B. Greynolds, Program Manager, AD/CVD Operations, Office 
3, regarding ``Inability to Find Working Address for Giant Oil 
Technology and Service Ltd.'' (March 19, 2010). Because the initial 
questionnaire and confirmation of shipment questionnaire could not be 
delivered to the company, Giant Oil did not submit a response to the 
Department.
    Therefore, on March 19, 2010, the Department selected two other 
producers and/or exporters to be mandatory respondents in this 
investigation: DP Master Manufacturing Co., Ltd. (DP Master) and Wuxi 
Seamless Pipe Co., Ltd. (WSP). See Memorandum to John M. Andersen, 
Acting DAS for AD/CVD Operations, from Eric B. Greynolds, Program 
Manager, AD/CVD Operations, Office 3, through Melissa G. Skinner, 
Director, AD/CVD Operations, Office 3, regarding ``Selection of 
Mandatory Respondents'' (March 19, 2010). DP Master, initially an 
interested party who requested to be a voluntary respondent,\4\ 
received a copy of the initial CVD questionnaire on February 23, 2010. 
On March 19, 2010, the Department also issued the initial CVD 
questionnaire to WSP, which later reported that it did not export 
subject merchandise to the United States during the POI. See Memorandum 
to the File from Eric B. Greynolds, Program Manager, AD/CVD Operations, 
Office 3, regarding ``WSP's Questionnaire Response'' (June 3, 2010).
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    \4\ See section 782(a) of the Act.
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    On April 16 and 23, 2010, we received DP Master's initial 
questionnaire response. DP Master responded to the questionnaire on 
behalf of itself and its four affiliated companies: Jiangyin Sanliang 
Petroleum Machinery Co., Ltd. (SPM); Jiangyin Liangda Drill Pipe Co., 
Ltd. (Liangda); Jiangyin Sanliang Steel Pipe Trading Co., Ltd. (SSP); 
and Jiangyin Chuangxin Oil Pipe Fittings Co., Ltd. (Chuangxin). 
Collectively, all companies are known as the DP Master Group. On April 
20, 2010, we received the GOC's initial questionnaire response.
    Regarding supplemental questionnaires, we issued to the DP Master 
Group a supplemental questionnaire and an addendum to that 
questionnaire on April 29, 2010, and May 4, 2010, respectively. We 
received the company's response on May 18, 2010. We issued to the GOC a 
supplemental questionnaire on May 12, 2010, and an addendum to that 
questionnaire on May 18, 2010. We received the GOC's response on May 
27, 2010.

Period of Investigation

    The POI for which we are measuring subsidies is January 1, 2009 
through December 31, 2009, which corresponds to the most recently 
completed fiscal year. See 19 CFR 351.204(b)(2).

Scope of the Investigation

    The products covered by this investigation are steel drill pipe, 
and steel drill collars, whether or not conforming to American 
Petroleum Institute (API) or non-API specifications, whether finished 
or unfinished (including green tubes suitable for drill pipe), without 
regard to the specific chemistry of the steel (i.e.,

[[Page 33247]]

carbon, stainless steel, or other alloy steel), and without regard to 
length or outer diameter. The scope does not include tool joints not 
attached to the drill pipe, nor does it include unfinished tubes for 
casing or tubing covered by any other antidumping (AD) or CVD order.
    The subject products are currently classified in the following 
Harmonized Tariff Schedule of the United States (HTSUS) categories: 
7304.22.0030, 7304.22.0045, 7304.22.0060, 7304.23.3000, 7304.23.6030, 
7304.23.6045, 7304.23.6060, 8431.43.8040 and may also enter under 
8431.43.8060, 8431.43.4000, 7304.39.0028, 7304.39.0032, 7304.39.0036, 
7304.39.0040, 7304.39.0044, 7304.39.0048, 7304.39.0052, 7304.39.0056, 
7304.49.0015, 7304.49.0060, 7304.59.8020, 7304.59.8025, 7304.59.8030, 
7304.59.8035, 7304.59.8040, 7304.59.8045, 7304.59.8050, and 
7304.59.8055.\5\
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    \5\ Prior to February 2, 2007, these imports entered under 
different tariff classifications, including 7304.21.3000, 
7304.21.6030, 7304.21.6045, and 7304.21.6060.
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    While HTSUS subheadings are provided for convenience and Customs 
purposes, the written description of the scope of this 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. On February 12, 2010, the 
Department received scope comments from petitioners and Downhole Pipe 
and Equipment, L.P. (Downhole Pipe) and Command Energy Services 
International, Ltd. (Command Energy), U.S. importers of drill pipe from 
the PRC. On February 22, 2010, Downhole Pipe and Command Energy 
submitted to the Department comments in response to petitioners' 
February 12, 2010 scope comments.
    The Department is evaluating the comments submitted by the parties 
and will issue its decision regarding the scope of the AD and CVD 
investigations in the preliminary determination of the companion AD 
investigation, which is due for signature on August 5, 2010.

Injury Test

    Because the PRC is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of 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 March 8, 2010, the ITC 
published its preliminary determination finding that there is a 
reasonable indication that an industry in the United States is 
threatened with material injury by reason of imports of drill pipe and 
drill collars from the PRC. See Drill Pipe and Drill Collars From 
China, Investigation Nos. 701-TA-474 and 731-TA-1176 (Preliminary), 75 
FR 10501 (March 8, 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 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 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.

GOC--Steel Rounds

    The Department is investigating the alleged provision of steel 
rounds for less than adequate remuneration (LTAR) by the GOC. We 
requested information from the GOC about the PRC's steel rounds 
industry in general and the specific companies that produced the steel 
rounds purchased by the respondents. In both respects, the GOC has 
failed to provide the requested information within the established 
deadlines.
    Regarding the PRC's steel rounds industry in general, the GOC 
responded at page 49 of its April 20, 2010 initial questionnaire 
response, that, for purposes of this investigation, it understands the 
term ``steel rounds'' to refer to billets in a round shape that may be 
an input used in the production of seamless pipe, including drill pipe. 
At page 50 of the initial questionnaire response, the GOC stated that, 
``there is no official statistics readily available regarding the 
production and consumption of steel rounds in China.'' The GOC added 
that there is no association in China that has responsibility for the 
production, exportation, or consumption of steel rounds.\6\ The GOC 
provided no further explanation on the following requested information:
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    \6\ See GOC Initial Questionnaire Response (IQR) (April 20, 
2010) at 50.
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     The number of producers of steel rounds;
     The total volume and value of domestic production of steel 
rounds that is accounted for by companies in which the GOC maintains an 
ownership or management interest either directly or through other 
government entities; \7\
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    \7\ Includes governments at all levels, including townships and 
villages, ministries, or agencies of those governments including 
state asset management bureaus, state-owned enterprises and labor 
unions.

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[[Page 33248]]

     The total volume and value of domestic consumption of 
steel rounds and the total volume and value of domestic production of 
steel rounds;
     The percentage of domestic consumption accounted for by 
domestic production;
     The names and addresses of the top ten steel rounds 
companies--in terms of sales and quantity produced--in which the GOC 
maintains an ownership or management interest, and identification of 
whether any of these companies have affiliated trading companies that 
sell imported or domestically produced steel rounds; and
     Trade publications which specify the prices of the good/
service within your country and on the world market. Provide a list of 
these publications, along with sample pages from these publications 
listing the prices of the good/service within your country and in world 
markets during the POI.
    On May 12, 2010, we issued a supplemental questionnaire noting that 
the GOC had failed to provide the information requested in the original 
questionnaire regarding the steel rounds industry in the PRC.\8\ At 
page 11 of its May 27, 2010 supplemental questionnaire response, the 
GOC reiterated that ``there are no official statistical data regarding 
these questions and would add that it is also unable to check, confirm 
the correctness of, let alone submit data concerning this market due to 
the nature of the products.''
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    \8\ See Department's First Supplemental Questionnaire Issued to 
the GOC (May 12, 2010) at 3.
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    With respect to the specific companies that produced the steel 
rounds purchased by the respondents, we asked the GOC to provide 
particular ownership information for these producers so that we could 
determine whether the producers are ``authorities'' within the meaning 
of section 771(5)(B) of the Act.\9\ Specifically, we stated in our 
questionnaire that the Department normally treats producers that are 
majority-owned by the government or a government entity as 
``authorities.'' \10\ Thus, for any steel rounds producers that were 
majority government-owned, the GOC needed to provide the following 
ownership information if it wished to argue that those producers were 
not authorities:
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    \9\ See Department's Initial Questionnaire (February 23, 2010) 
at Appendix 5.
    \10\ Id.
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     Translations of the most recent capital verification 
report predating the POI and, if applicable, any capital verification 
reports completed during the POI. Translation of the most recent 
articles of association, including amendments thereto.
     The names of the ten largest shareholders and the total 
number of shareholders, a statement of whether any of these 
shareholders have any government ownership (including the percentage of 
ownership), and an explanation of any other affiliation between these 
shareholders and the government.
     The total level (percentage) of state ownership, either 
direct or indirect, of the company's shares; the names of all 
government entities that own shares in the company; and the amount of 
shares held by each.
     Any relevant evidence to demonstrate that the company is 
not controlled by the government, e.g., that the private, minority 
shareholder(s) control the company.\11\
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    \11\ Id.
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    On page 54 of the initial questionnaire response, the GOC reported 
that all but one of the producers that supplied steel rounds to the DP 
Master Group were state-owned enterprises (SOEs). The GOC did not 
provide a response to the above questions, thereby conceding that those 
steel round producers are government authorities. The DP Master Group 
also identified the firms that produced the steel rounds that it 
acquired during the POI and, with the exception of a single producer, 
stated that all of the steel rounds acquired during the POI were 
produced by SOEs.\12\
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    \12\ See DP Master Group IQR (April 16, 2010) at Exhibit 13.
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    With regard to the remaining producer of steel rounds, the GOC 
stated that it ``does not have sufficient time to obtain the 
information requested at Appendix 5 for this response but will provide 
it in due course.\13\ Based on the name of the steel round producer 
that the GOC reported, the Department requested that the GOC provide 
specific documents regarding that supplier, which were submitted to the 
Department in the PC Strand From the PRC investigation.\14\ See Pre-
Stressed Concrete Steel Wire Strand From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 75 FR 28557 
(May 21, 2010) (PC Strand from the PRC), and accompanying Issues and 
Decision Memorandum (PC Strand Decision Memorandum). At page 11 of its 
May 27, 2010 supplemental questionnaire response, the GOC stated that 
the steel round producer is related to but different than the producer 
in PC Strand from the PRC. As such, the GOC stated that the documents 
requested by the Department are not applicable. The GOC, however, did 
not provide the information requested at Appendix 5 for this steel 
rounds producer.
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    \13\ See GOC IQR at 54.
    \14\ See Department's First Supplemental Questionnaire Issued to 
the GOC at 3.
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    Based on the above, we preliminarily determine that the GOC has 
withheld necessary information that was requested of it and, thus, that 
the Department must rely on ``facts available'' in making this 
preliminary determination. See sections 776(a)(1) and (a)(2)(A) of the 
Act. Moreover, we preliminarily determine that the GOC has failed to 
cooperate by not acting to the best of its ability to comply with our 
request for information. Consequently, an adverse inference is 
warranted in the application of facts available. See section 776(b) of 
the Act.
    With respect to the GOC's failure to provide requested information 
about the production and consumption of steel rounds, we are assuming 
adversely that the GOC's dominance of the market in the PRC for this 
input results in significant distortion of the prices and, hence, that 
use of an external benchmark is warranted. With respect to the GOC's 
failure to provide ownership information about a certain producer of 
the steel rounds, we are assuming adversely that this producer is a 
government authority.
    The Department's practice when selecting adverse information from 
among the possible sources of information is to ensure that the result 
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 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) (Semiconductors From Taiwan). 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. Doc. No. 103-316, vol. 1 at 870 (1994).
    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.

[[Page 33249]]

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. 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.
    To corroborate the Department's treatment of a certain company that 
produced the steel rounds purchased by the DP Master Group as an 
authority and our finding that the GOC dominates the domestic market 
for this input, we are relying on 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).\15\ In that case, the 
Department determined that the GOC owned or controlled the entire hot-
rolled steel industry in the PRC. See Line Pipe Decision Memorandum at 
Comment 1. Evidence on the record of this investigation shows that many 
steel producers in the PRC are integrated producers, manufacturing both 
long products (rounds and billets) and flat products (hot-rolled 
steel). See Memorandum to the File from Kristen Johnson, Trade Analyst, 
AD/CVD Operations, Office 3, regarding ``Additional Information on 
Steel Rounds'' (June 7, 2010).
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    \15\ This approach is consistent with the Department's approach 
to the steel rounds industry in the PRC in Certain Seamless Carbon 
and Alloy Steel Standard Line, and Pressure Pipe From the People's 
Republic of China: Preliminary Affirmative Countervailing Duty 
Determination, Preliminary Affirmative Critical Circumstances 
Determination, 75 FR 9163, 9165 (March 1, 2010).
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    Consequently, government ownership in the hot-rolled steel industry 
is a reasonable proxy for government ownership in the steel rounds and 
billets industry. As a result, we find that the use of an external 
benchmark is warranted for calculating the benefit that the DP Master 
Group received from purchasing steel rounds from an SOE during the POI. 
For details on the calculation of the subsidy rate, see below at 
``Provision of Steel Rounds for LTAR.''

GOC--Green Tubes

    The Department is investigating the alleged provision of green 
tubes for LTAR by the GOC. We requested information from the GOC about 
the PRC's green tubes industry in general and the specific companies 
that produced green tubes purchased by the respondents. Regarding 
producers of green tubes, both the GOC and the DP Master Group reported 
that the only supplier of green tubes to the companies during the POI 
is an SOE, thereby conceding that the green tube producer is a 
government authority.\16\ With respect to the production and 
consumption of green tubes in the PRC, the GOC has failed to provide 
the requested information within the established deadlines (see 
discussion below).
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    \16\ See GOC IQR at 59; and DP Master Group IQR at Exhibit 14.
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    At page 58 of the April 20, 2010 initial questionnaire response, 
the GOC stated that, ``there is no official statistics readily 
available regarding the production and consumption of green tubes in 
China.'' The GOC added that there is no association in China that has 
responsibility for the production, exportation, or consumption of green 
tubes.\17\ The GOC provided no further explanation on the following 
requested information:
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    \17\ See GOC IQR at 59.
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     The number of producers of green tubes;
     The total volume and value of domestic production of green 
tubes that is accounted for by companies in which the GOC maintains an 
ownership or management interest either directly or through other 
government entities; \18\
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    \18\ Includes governments at all levels, including townships and 
villages, ministries, or agencies of those governments including 
state asset management bureaus, state-owned enterprises and labor 
unions.
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     The total volume and value of domestic consumption of 
green tubes and the total volume and value of domestic production of 
green tubes;
     The percentage of domestic consumption accounted for by 
domestic production;
     The total volume and value of imports of green tubes;
     The names and addresses of the top ten green tubes 
companies--in terms of sales and quantity produced--in which the GOC 
maintains an ownership or management interest, and identification of 
whether any of these companies have affiliated trading companies that 
sell imported or domestically produced green tubes;
     A discussion of what laws or policies govern the pricing 
of green tubes, the levels of production of green tubes, or the 
development of green tubes capacity;
     Price controls on green tubes or any price floors or 
ceilings;
     The role of state-owned trading companies in the 
distribution of both domestic and imported green tubes and whether the 
state-owned trading companies are affiliated with the state-owned green 
tubes producers;
     VAT and import tariff rates in effect for green tubes;
     An explanation of any export tariff on green tubes;
     An explanation of any export licensing requirements on 
green tubes;
     A list of the industries in the PRC that purchase green 
tubes directly, using a consistent level of industrial classification; 
and
     Trade publications which specify the prices of the good/
service within your country and on the world market. Provide a list of 
these publications, along with sample pages from these publications 
listing the prices of the good/service within your country and in world 
markets during the period of investigation.
    On May 12, 2010, we issued a supplemental questionnaire noting that 
the GOC had failed to provide the information requested in the original 
questionnaire regarding the green tubes industry in the PRC.\19\ At 
page 13 of its May 27, 2010, supplemental questionnaire response, the 
GOC stated that ``there is no well-established definition for green 
tubes'' and reiterated that ``there are no official statistical data 
regarding these questions and that it is also unable to check, confirm 
the correctness of, let alone submit data concerning this market due to 
the nature of the products.'' The GOC explained that in past cases it 
has consulted the National Statistics Bureau (SSB) to ascertain the 
number of producers of a particular input and related information.\20\ 
Specifically, in past cases, the GOC explained that it has examined 
SSB, Major Industrial Output Statistics as the data source for 
information regarding the annual production of an input or the total 
production of an input accounted for by SOEs.\21\ However, for green 
tubes no such data are collected or reported.\22\ Insomuch as this 
source does not keep such data, the GOC explained that it has been 
unable to obtain any data from any

[[Page 33250]]

alternative source.\23\ The GOC further added that an adverse inference 
is not appropriate for selecting the benchmark for purchases of green 
tubes because even the petitioners concede that ``no price data are 
published for unfinished green tube for drill pipe production.'' \24\
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    \19\ See Department's First Supplemental Questionnaire Issued to 
the GOC at 4.
    \20\ See GOC First Supplemental Questionnaire Response (First 
SQR) (May 27, 2010) at 14.
    \21\ Id.
    \22\ Id.
    \23\ Id.
    \24\ Id. at 14, with reference to the Petition at Volume III, 
page III-26.
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    With respect to the GOC's failure to provide requested information 
about the production and consumption of green tubes in the PRC, we 
preliminarily find that the GOC acted to the best of its ability in 
responding to the Department's information request. Unlike its response 
with respect to steel rounds, the GOC provided details regarding the 
efforts it took to obtain information regarding green tubes. Therefore, 
the Department must rely on ``facts available'' in making the 
preliminary determination on the PRC green tubes industry. See section 
776(a)(1) of the Act. Because the record is void of any information on 
the production and consumption of green tubes in the PRC, we find that 
the use of an external benchmark is warranted for calculating the 
benefit that the DP Master Group received from purchasing green tubes 
from an SOE during the POI.
    For a discussion of the external benchmark used and details on the 
calculation of the subsidy rate, see below at ``Provision of Green 
Tubes for LTAR.''

GOC--Electricity

    The GOC also did not provide a complete response to the 
Department's February 23, 2010 initial questionnaire regarding its 
alleged provision of electricity for LTAR. Specifically, the Department 
requested that the GOC explain how electricity cost increases are 
reflected in retail price increases.\25\ In its April 20, 2010 
questionnaire response, the GOC responded that it was unable to provide 
provincial price proposals for 2006 and 2008.\26\ The GOC's response 
also explained theoretically how the national price increases should be 
formulated; however, the response did not explain the actual process 
that led to the price increases.\27\ Therefore, on May 12, 2010, the 
Department issued a supplemental questionnaire reiterating its request 
for this information.\28\ However, the GOC's subsequent supplemental 
questionnaire response did not address the missing information.\29\ The 
GOC also did not provide sufficient answers to the Department's 
questions. For example, we asked the GOC to explain how the NDRC 
developed the national price increase. In response, the GOC provided 
the Interim Rules on Sales Price of Electricity, but did not provide an 
explanation on how the NDRC developed the national price increase.\30\ 
Similarly, we asked the GOC to explain the methodology used to 
calculate each of the cost element increases; however, in response, the 
GOC stated ``the methodology used to calculate each of these cost 
element increases are mainly common practices of costing.'' \31\ We 
also asked the GOC to explain how all significant cost elements are 
accounted for within the province's price proposal. To which, the GOC 
simply stated ``significant cost elements will normally be accounted 
for within the province's price proposal in a manner consistent with 
the relevant rules on costing and pricing of electricity.'' \32\
---------------------------------------------------------------------------

    \25\ See Department's Initial Questionnaire at Appendix 6.
    \26\ See GOC IQR at 62.
    \27\ Id. at 61-67.
    \28\ See Department's First Supplemental Questionnaire Issued to 
the GOC at 5-9.
    \29\ See GOC First SQR at 17-24.
    \30\ Id. at 18.
    \31\ Id. at 22.
    \32\ Id.
---------------------------------------------------------------------------

    Consequently, we preliminarily determine that the GOC has withheld 
necessary information that was requested of it and, thus, that the 
Department must rely on ``facts available'' in making our preliminary 
determination. See section 776(a)(1), section 776(a)(2)(A), and section 
776(a)(2)(B) of the Act. Moreover, we preliminarily determine that the 
GOC has failed to cooperate by not acting to the best of its ability to 
comply with our request for information as it did not explain why it 
was unable to provide the requested information. Therefore, an adverse 
inference is warranted in the application of facts available. See 
section 776(b) of the Act. In drawing an adverse inference, we find 
that the GOC's provision of electricity constitutes a financial 
contribution within the meaning of section 771(5)(D) of the Act and is 
specific within the meaning of section 771(5A) of the Act. We have also 
relied on an adverse inference in selecting the benchmark for 
determining the existence and amount of the benefit. See section 
776(b)(2) of the Act and section 776(b)(4) of the Act. As such, we have 
placed on the record of this investigation, the July 1, 2008 
electricity rate schedules, which were submitted to the Department by 
the GOC in the CVD investigation on PC Strand from the PRC, and which 
reflect the highest rates that the respondents would have paid in the 
PRC during the POI. See PC Strand Decision Memorandum at ``Federal 
Provision of Electricity for LTAR.'' Specifically, we have selected the 
highest rates for ``large industrial users'' for the peak, valley, and 
normal ranges. See Memorandum to File from Kristen Johnson, Trade 
Analyst, AD/CVD Operations, Office 3, regarding ``Electricity Rate 
Data'' (June 7, 2010).
    For details on the calculation of the subsidy rate for the DP 
Master Group, see below at ``Provision of Electricity for LTAR.''

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 15 years. No interested party has 
claimed that the AUL of 15 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 
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) provides that the Department will attribute 
subsidies received by certain other companies to the combined sales of 
those companies when: (1) Two or more corporations with cross-ownership 
produce the subject merchandise; (2) a firm that received a subsidy is 
a holding or parent company of the subject company; (3) a firm that 
produces an input that is primarily dedicated to the production of the 
downstream product; or (4) a corporation producing non-subject 
merchandise received a subsidy and transferred the subsidy to a

[[Page 33251]]

corporation with cross-ownership with the subject 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).

DP Master Group

    As discussed above, the DP Master Group companies are: DP Master, 
SPM, Liangda, SSP, and Chuangxin. DP Master, SPM, and Liangda are 
involved in the production of drill pipe.\33\ Neither DP Master nor its 
affiliates are integrated producers; they purchase green tubes and 
steel rounds for their various pipe production facilities.\34\
---------------------------------------------------------------------------

    \33\ See DP Master Group IQR at 8.
    \34\ Id. at 12.
---------------------------------------------------------------------------

    Specifically, DP Master produces and exports drill pipe, drill 
collar, and heavy weight drill pipe.\35\ SPM provides machining and 
threading services for the drill pipes produced by DP Master.\36\ 
Liangda manufactures drill collars for DP Master and provides heat 
treatment services for the drill pipe produced by DP Master.\37\ SSP 
purchases and supplies green tubes to DP Master and Liangda for the 
production of drill pipe.\38\ Chuangxin, a holding company, is the 
parent company of the other four companies; it is not involved in the 
production and/or sale of drill pipe.\39\
---------------------------------------------------------------------------

    \35\ Id. at 12. Also, DP Master is the only company within the 
DP Master Group that exports subject merchandise. Id. at 8.
    \36\ Id. at 13.
    \37\ Id.
    \38\ Id. at 12.
    \39\ Id. at 8.
---------------------------------------------------------------------------

    DP Master, SPM, Liangda, SSP, and Chuangxin are managed and/or 
controlled by the same individuals.\40\ In accordance with 19 CFR 
351.525(b)(6)(vi), we preliminarily determine that DP Master, SPM, 
Liangda, SSP, and Chuangxin are cross-owned companies. For subsidies 
received by DP Master, SPM, and Liangda, the companies involved in the 
production of subject merchandise, we have attributed those subsidies 
to the consolidated sales of DP Master, SPM, and Liangda, exclusive of 
intra-company sales. For subsidies received by SSP, the trading 
company, we have attributed those subsidies to the consolidated sales 
of SSP, DP Master, SPM, and Liangda, exclusive of intra-company sales. 
For subsidies received by DP Master, SPM, Liangda, SSP, and Chuangxin, 
we have attributed those subsidies to the consolidated sales of DP 
Master, SPM, Liangda, SSP, and Chuangxin, exclusive of intra-company 
sales.
---------------------------------------------------------------------------

    \40\ Id. at 12.
---------------------------------------------------------------------------

Benchmarks and Discount Rates

    The Department is investigating loans received by the DP Master 
Group from Chinese policy banks and state-owned commercial banks 
(SOCBs), which are alleged to have been granted on a preferential, non-
commercial basis. The Department is also investigating various grants 
received by the DP Master Group. Therefore, the derivation of the 
Department's benchmark and discount rates is discussed 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, because Chinese banks reflect significant government 
intervention in the banking sector, 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 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 ``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. The benchmark interest rate 
takes into account a key factor involved in interest rate formation 
(i.e., the quality of a country's institutions), which is not directly 
tied to the state-imposed distortions in the banking sector discussed 
above.
    This methodology relies on data published by the World Bank and 
International Monetary Fund (see further discussion below). For the 
year 2009, the World Bank, however, has not yet published all the 
necessary data relied on by the Department to compute a short-term 
benchmark interest rate for the PRC. Specifically, the following data 
are not yet available: World Governance Indicators and World Bank 
classifications of lower-middle income countries based on GNI per 
capita in U.S. dollars. Therefore, for purposes of this preliminary 
determination, where the use of a short-term benchmark rate for 2009 is 
required, we have applied the 2008 short-term benchmark rate for the 
PRC, as calculated by the Department (see discussion below). The

[[Page 33252]]

Department notes that the current 2008 loan benchmark may be updated, 
pending the release of all the necessary 2009 data, by the final 
determination.
    The 2008 short-term benchmark was computed 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 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 the 
calculation of the inflation-adjusted short-term benchmark rate, we 
also excluded any countries with aberrational or negative real interest 
rates for the year in question.
    For the resulting inflation-adjusted benchmark lending rate, see 
Memorandum to the File from Kristen Johnson, Trade Analyst, AD/CVD 
Operations, Office 3, regarding ``2008 Short-Term Interest Rate 
Benchmark'' (June 7, 2010). Because these are inflation-adjusted 
benchmarks, it is necessary to adjust the respondent's interest 
payments for inflation. This was done using the PRC inflation rate as 
reported in the IFS.
    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 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 ``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. Policy Loans to Chinese Drill Pipe Producers

    The Department is examining whether drill pipe producers receive 
preferential lending through SOCBs or policy banks. According to the 
allegation, preferential lending to the drill pipe industry is 
supported by the GOC through the issuance of national and provincial 
five-year plans, industrial plans for the steel sector, catalogues of 
encouraged industries, and other government laws and regulations. Based 
on our review of the responses and documents provided by the GOC, we 
preliminarily determine that loans received by the drill pipe industry 
from SOCBs and policy banks were made pursuant to government 
directives.
    Record evidence demonstrates that the GOC, through its directives, 
has highlighted and advocated the development of the drill pipe 
industry. At the national level, the GOC has placed an emphasis on the 
development of high-end, value-added steel products through foreign 
investment as well as through technological research, development, and 
innovation. In laying out this strategy, the GOC has identified the 
specific products it has in mind. For example, an ``objective'' of the 
10th Five-Year Plan for the Metallurgical Industry (the Plan) was to 
develop key steel types that were mainly imported; high strength, 
anticrushing, corrosion resistant petroleum pipe, high pressure boiler 
pipe, and welded pipe used in oil and gas transmission pipelines were 
among the listed products.\41\ Moreover, among the ``Policy Measures'' 
set out in the Plan for achieving its objectives was the encouragement 
of enterprises to cooperate with foreign enterprises, particularly in 
the production and development of high value-added products and high-
tech products.\42\
---------------------------------------------------------------------------

    \41\ See GOC IQR at Exhibit 12 for the Plan at ``(III) 
Implementation Main Points; 2. Production Structure Readjustment.''
    \42\ Id. at ``(V) Policy Measures.''
---------------------------------------------------------------------------

    Similarly, in the Development Policies for the Iron and Steel 
Industry (July 2005) at Article 16, the GOC states that it will 
``enhance the research and development as well as designing and 
manufacture levels of major technical equipment of our iron and steel 
industry.'' \43\ To accomplish this, the GOC states it will provide 
support to key steel projects relying on domestically produced and 
newly developed equipment and facilities, through tax and interest 
assistance, and scientific research expenditures.\44\
---------------------------------------------------------------------------

    \43\ Id. at Exhibit 10.
    \44\ Id. at Article 16.
---------------------------------------------------------------------------

    Later in 2005, the GOC implemented the Decision of the State 
Council on Promulgating the ``Interim Provisions on Promoting 
Industrial Structure Adjustment'' for Implementation (No. 40 (2005)) 
(Decision 40) in order to achieve the objectives of the Eleventh Five-
Year Plan.\45\ Decision 40 references the Directory Catalogue on 
Readjustment of Industrial Structure (Industrial Catalogue), which 
outlines the projects which the GOC deems ``encouraged,'' 
``restricted,'' and ``eliminated,'' and describes how these projects 
will be considered under government policies.\46\ Steel tube for oil 
well pipe, high-pressure boiler pipe, and long-distance transportation 
pipe for oil and gas were named in the Industrial

[[Page 33253]]

Catalogue as an ``encouraged project.'' \47\ For the ``encouraged'' 
projects, Decision 40 outlines several support options available from 
the government, including financing.\48\
---------------------------------------------------------------------------

    \45\ Id. at Exhibit 13.
    \46\ Id. at ``Chapter III Catalogue for the Guidance of 
Industrial Structural Adjustment.''
    \47\ Id. at Exhibit 14 for Industrial Catalogue at ``VII Iron 
and Steel.''
    \48\ Id. at Exhibit 13 at Article 17.
---------------------------------------------------------------------------

    Turning to the provincial and municipal plans, the Department has 
described the inter-relatedness of national level plans and directives 
with those at the sub-national level. See LWTP Decision Memorandum at 
Comment 6. Based on our review of the sub-national plans, we find that 
they mirror the national government's objective of supporting and 
promoting the production of innovative and high-value added products, 
including drill pipe.
    Examples from the five-year plans of the Jiangsu province where the 
DP Master Group companies are located are as follows:

    Outline of the 11th Five-Year Program for Industrial Structural 
Adjustment and Development in Jiangsu: ``Emphasize on the 
development of high-quality steel products with high added value and 
high technological content such as motor plates, shipbuilding steel 
plates, * * * pinion steel, oil well billet, special pipes and 
sticks, and highly qualified high-carbon hard wires.'' \49\
---------------------------------------------------------------------------

    \49\ Id. at Exhibit 15 at ``6. Development Priority.''
---------------------------------------------------------------------------

    The 10th Five-Year Program for Industrial and Commercial 
Restructuring of Jiangsu: ``We should develop functional metallic 
materials, stainless steel cold-rolled sheet, high-speed railway 
steel, oil well and pipeline steel, * * * hard alloy products and 
etc.'' \50\
---------------------------------------------------------------------------

    \50\ Id. at Exhibit 17 at ``Section 1. Optimizing the Industrial 
Structure; 1. Prioritizing the Development of High Technologies; New 
Materials Industry.''
---------------------------------------------------------------------------

    Special Program (Guihua) on Adjustment & Development of Iron and 
Steel Industries during the Eleventh Five-year Period in Jiangsu: 
``We shall strengthen the guidance of industrial policies, the 
support from credit policy and the regulation by fiscal and taxation 
policies to guide the direction of investments.''

See Memorandum to the File from Kristen Johnson, Trade Analyst, AD/CVD 
Operations, Office 3, regarding ``Additional Document for Jiangsu 
Province--Development of Iron and Steel Industries'' (June 7, 2010).

    As noted in Citric Acid from the PRC: \51\

    In general, the Department looks to whether government plans or 
other policy directives lay out objectives or goals for developing 
the industry and call for lending to support those objectives or 
goals. Where such plans or policy directives exist, then we will 
find a policy lending program that is specific to the named industry 
(or producers that fall under that industry).\52\ Once that finding 
is made, the Department relies upon the analysis undertaken in CFS 
from the PRC \53\ to further conclude that national and local 
government control over the SOCBs results in the loans being a 
financial contribution by the GOC.\54\
---------------------------------------------------------------------------

    \51\ See Citric Acid Decision Memorandum at Comment 5.
    \52\ See CFS Decision Memorandum at 49, and LWTP Decision 
Memorandum at 98.
    \53\ See CFS Decision Memorandum at Comment 8.
    \54\ See Certain New Pneumatic Off-The-Road Tires from the 
People's Republic of China: Final Affirmative Determination of Sales 
at Less Than Fair Value and Partial Affirmative Determination of 
Critical Circumstances, 73 FR 40485 (July 15, 2008) (OTR Tires from 
the PRC), and the accompanying Issues and Decision Memorandum OTR 
Tires Decision Memorandum) at 15; and LWTP Decision Memorandum at 
11.

Therefore, on the basis of the record information described above, we 
preliminarily determine that the GOC has a policy in place to encourage 
the development of production of drill pipe through policy lending.
    The DP Master Group reported that DP Master and SPM had outstanding 
loans during the POI.\55\ In its April 20, 2010 questionnaire response, 
the GOC provided information on the banks that provided lending to the 
companies and reported that there is government ownership in each 
bank.\56\ Consistent with our determination in prior proceedings, we 
preliminarily find these banks to be SOCBs. See, e.g., Certain Oil 
Country Tubular Goods From the People's Republic of China: Final 
Affirmative Countervailing Duty Determination, Final Negative Critical 
Circumstances Determination, 74 FR 64045 (December 7, 2009) (OCTG from 
the PRC), and accompanying Issues and Decision Memorandum (OCTG 
Decision Memorandum) at Comment 20.
---------------------------------------------------------------------------

    \55\ See DP Master Group IQR at 22.
    \56\ See GOC IQR at 10-11.
---------------------------------------------------------------------------

    The loans to drill pipe producers from SOCBs in the PRC constitute 
a direct financial contribution from the government, pursuant to 
section 771(5)(D)(i) of the Act, and they provide a benefit equal to 
the difference between what the recipients paid on their loans and the 
amount they would have paid on comparable commercial loans (see section 
771(5)(E)(ii) of the Act). Finally, we preliminarily determine that the 
loans are de jure specific within the meaning of section 771 of the Act 
because of the GOC's policy, as illustrated in the government plans and 
directives, to encourage and support the growth and development of the 
drill pipe industry.
    To calculate the benefit, we compared the amount of interest DP 
Master and SPM paid on their outstanding loans to the amount they would 
have paid on comparable commercial loans. See 19 CFR 351.505(a). In 
conducting this comparison, we used the interest rates described in the 
``Benchmarks and Discount Rates'' section above. We have attributed 
benefits under this program to total consolidated sales of DP Master, 
SPM, and Liangda (exclusive of intra-company sales), as discussed in 
the ``Attribution of Subsidies'' section above. On this basis, we 
preliminarily determine a countervailable subsidy of 0.87 percent ad 
valorem for the DP Master Group.

B. Two Free, Three Half Tax Exemption for FIEs

    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. The Department has previously found this program 
countervailable. See, e.g., CFS Decision Memorandum at 10-11.
    DP Master and Liangda are ``productive'' FIEs and received benefits 
under this program during the POI.\57\ SPM, SSP, and Chuangxin are 
domestically-owned companies.\58\
---------------------------------------------------------------------------

    \57\ See DP Master Group IQR at 29-30.
    \58\ Id. at 15-16.
---------------------------------------------------------------------------

    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. See CFS Decision Memorandum at 
Comment 14.
    For the 2008 tax year (for which tax returns were filed during the 
POI), DP Master was in its third year of

[[Page 33254]]

profitability and was eligible for 50 percent reduction in its income 
tax liability.\59\ Liangda was in its first year of eligibility and 
received a 100 percent reduction in its income tax liability for tax 
year 2008.\60\
---------------------------------------------------------------------------

    \59\ Id. at 30.
    \60\ Id. at 30.
---------------------------------------------------------------------------

    To calculate the benefit, we treated the income tax savings enjoyed 
by DP Master and Liangda as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the companies' tax savings received during 
the POI by the total consolidated sales of DP Master, SPM, and Liangda 
(exclusive of intra-company sales), as discussed in the ``Attribution 
of Subsidies'' section above. To compute the amount of the tax savings, 
we compared the income tax amount that each respondent would have paid 
in absence of the program. On this basis, we preliminarily determine a 
countervailable subsidy of 9.05 percent ad valorem for the DP Master 
Group.
    Further, the respondents reported that the GOC terminated the Two 
Free, Three Half Tax Exemption for FIEs on January 1, 2008, under the 
2008 Enterprise Income Tax Law (EITL).\61\ We find that respondents' 
claims of termination do not meet the requirements specified under 19 
CFR 351.526(d)(1), which provide that the Department will not find a 
program to be terminated and a program-wide change warranted if it 
finds that the administering authority continues to provide residual 
benefits under the program. As indicated in the EITL and the Notice of 
the State Council on the Implementation of the Transitional 
Preferential Policies in Respect of the Enterprise Income Tax 
(Transitional Period Notice),\62\ from January 1, 2008, enterprises 
that previously enjoyed this program may continue to enjoy any 
preferential treatment previously enjoyed until the expiration of the 
transitional time period. For enterprises that previously had not 
enjoyed preferential treatment, the preferential time period shall be 
calculated from 2008. The GOC reported that this program will be 
terminated at the expiration of the transitional period in 2012.
---------------------------------------------------------------------------

    \61\ See GOC IQR at Exhibit 25 for the EITL.
    \62\ Id. at Exhibit 26 for the Transitional Period Notice.
---------------------------------------------------------------------------

C. Exemption From City Construction Tax and Education Tax for FIEs

    Pursuant to the Circular Concerning Temporary Exemption from Urban 
Maintenance and Construction Tax and Additional Education Fees for 
Foreign-Funded and Foreign Enterprises (GUOSHUIFA {1994{time}  No. 38), 
the local tax authorities exempt all FIEs and foreign enterprises from 
the city maintenance and construction tax and education fee 
surcharge.\63\ The GOC explained that the construction tax is based on 
the amount of product tax, value added tax, and/or business tax 
actually paid by the taxpayer.\64\ For tax payers located in urban 
areas, the rate is seven percent; for taxpayers located in counties or 
townships, the rate is five percent; and for taxpayers located in areas 
other than urban areas, counties, and townships, the rate is one 
percent.\65\ Regarding the education fee surcharge, the DP Master Group 
reported that FIEs pay only one percent of the actual amount of the 
product tax, value-added tax, and business tax paid, whereas other 
entities pay four percent of that amount.\66\ DP Master and Liangda are 
FIEs and, therefore, received exemptions under this program.
---------------------------------------------------------------------------

    \63\ See GOC First SQR at Exhibit 3.
    \64\ Id. at 9.
    \65\ Id.
    \66\ See DP Master Group First Supplemental Questionnaire 
Response (May 18, 2010) at 33.
---------------------------------------------------------------------------

    Consistent with our finding in Racks from the PRC, we preliminarily 
determine that the exemptions from the city construction tax and 
education surcharge under this program confer a countervailable 
subsidy. See Certain Kitchen Shelving and Racks from the People's 
Republic of China: Final Affirmative Countervailing Duty Determination, 
74 FR 37012 (July 27, 2009) (Racks from the PRC), and accompanying 
Issues and Decision Memorandum (Racks from the PRC Decision Memorandum) 
at ``Exemption from City Construction Tax and Education Tax for FIEs in 
Guangdong Province.'' The exemptions are financial contributions in the 
form of revenue forgone by the government and provide a benefit to the 
recipient in the amount of the savings. See section 771(5)(D)(ii) of 
the Act and 19 CFR 351.509(a)(1). We also preliminarily determine that 
the exemptions afforded by this program are limited as a matter of law 
to certain enterprises, i.e., FIEs, and, hence, specific under section 
771(5A)(D)(i) of the Act. To calculate the benefit, we treated DP 
Master's and Liangda's tax savings and exemptions as a recurring 
benefit, consistent with 19 CFR 351.524(c)(1).
    To compute the amount of city construction tax savings, we first 
determined the rate the companies would have paid in the absence of the 
program. At page 36 of the May 18, 2010, supplemental questionnaire 
response, SPM, not an FIE, reported that it paid a five percent ``Urban 
Maintenance and Construction Tax.'' SPM, DP Master, and Liangda are all 
located in Chuangxin Village, Jiangyin City.\67\ Therefore, we 
preliminarily determine that DP Master and Liangda should have paid a 
construction tax of five percent.\68\ Next, we compared the rate the 
companies would have paid in the absence of the program (five percent 
during the POI) with the rate the companies paid (zero), because they 
are FIEs.
---------------------------------------------------------------------------

    \67\ See DP Master Group IQR at 9.
    \68\ After issuance of this determination, we will issue a 
supplemental questionnaire to the GOC and the DP Master Group 
requesting confirmation on the rate that should have been paid by DP 
Master and Liangda.
---------------------------------------------------------------------------

    To compute the amount of the savings from the education fee 
exemption, we compared the rate the companies would have paid in the 
absence of the program (four percent during the POI) with the rate the 
companies paid (one percent).
    To calculate the total benefit under the program, we summed the 
construction tax savings and the education fee exemptions. To calculate 
the net subsidy rate, we divided the companies' tax savings received 
during the POI by the total consolidated sales of DP Master, SPM, and 
Liangda (exclusive of intra-company sales), as discussed in the 
``Attribution of Subsidies'' section above. On this basis, we 
preliminarily determine the countervailable subsidy to be 0.57 percent 
ad valorem for the DP Master Group.

D. 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

[[Page 33255]]

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.'' DP Master, an FIE, reported receiving VAT and 
tariff exemptions under this program for imported equipment.
    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 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. As noted above under the ``Two Free/Three Half Tax 
Exemption for FIEs'' 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 do 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 OTR 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 DP Master 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., 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 certain years, 
DP Master's total amount of VAT and tariff exemptions was more than 0.5 
percent of total sales for the respective year. Therefore, for these 
exemptions, we had to determine whether DP Master's VAT and tariff 
exemptions were tied to the capital structure or capital assets of the 
firm. Based on the description of the items imported in those years, we 
preliminarily find that the exemptions were for capital equipment.\69\ 
As such, for these exemptions, we have allocated the benefit over the 
15-year AUL using discount rates described under the ``Benchmarks and 
Discount Rates'' section above.
---------------------------------------------------------------------------

    \69\ See DP Master Group First SQR at Exhibit 39.
---------------------------------------------------------------------------

    For the other years, DP Master's total amount of the VAT and tariff 
exemptions was less than 0.5 percent of the total consolidated sales of 
DP Master, SPM, and Liangda (exclusive of intra-company sales). 
Therefore, for those exemptions, we expensed the benefit to the year in 
which the benefit was received, consistent with 19 CFR 351.524(a). On 
this basis, we preliminarily determine the countervailable subsidy to 
be 0.14 percent ad valorem for the DP Master Group.
    Further, the GOC reported that pursuant to the Announcement of 
Ministry of Finance, China Customs, and State Administration of 
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.\70\ 
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.
---------------------------------------------------------------------------

    \70\ See GOC IQR at 28 and Exhibit 29.
---------------------------------------------------------------------------

    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 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. However, this 
program still provides for residual benefits up through and including 
the POI.

E. Provision of Green Tubes for LTAR

    The Department is investigating whether producers, acting as 
Chinese government authorities, sold green tubes to the DP Master Group 
for LTAR. The DP Master Group (specifically, SSP) reported purchasing 
green tubes during the POI directly from a green tube producer. Both 
the DP Master Group and the GOC reported that the producer from which 
the respondents obtained green tubes is an SOE.\71\ As a result, we 
determine that the producer, which supplied the DP Master Group with 
green tubes during the POI, is a government authority and provided to 
the DP Master Group a financial contribution, in the form of a 
governmental provision of a good. See section 771(5)(D)(iv) of the Act.
---------------------------------------------------------------------------

    \71\ See DP Master Group IQR at Exhibit 14, and GOC IQR at 59.
---------------------------------------------------------------------------

    Having addressed the issue of financial contribution, we must next 
analyze whether the sale of green tubes to the DP Master Group by a 
producer designated as a government authority conferred a benefit 
within the meaning of section 771(5)(E)(iv) of the Act. The 
Department's regulations at 19 CFR

[[Page 33256]]

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 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 65348, 65377 
(November 25, 1998) (Preamble). The 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 our February 23, 2010 initial questionnaire and May 12, 2010 
supplemental questionnaire, we instructed the GOC to provide the 
percentage of green tubes production accounted for by SOEs during the 
POI. In its initial and supplemental questionnaire responses, the GOC 
indicated that there were no official statistics readily available 
regarding the production and consumption of green tubes in the PRC and, 
therefore, did not provide the requested information.\72\
---------------------------------------------------------------------------

    \72\ See GOC IQR at 58, and GOC First SQR at 13-15.
---------------------------------------------------------------------------

    Section 776(a)(1) of the Act states that if the necessary 
information is not available on the record, then the Department shall 
use the facts otherwise available (FA) in reaching the applicable 
determination. In this investigation, the GOC has stated for the 
various reasons noted above that the data requested by the Department 
does not exist and, therefore it is unable to obtain the percentage of 
green tube production accounted for by SOEs during the POI. As a 
result, we lack the necessary information to determine whether the GOC 
has a predominant role in the domestic market for this input that 
results in significant distortion of the prices. Moreover, at this 
stage of the investigation neither the GOC nor the DP Master Group has 
submitted data that could be used as a tier-one green tube benchmark. 
Furthermore, we note that the Department has determined that various 
steel inputs cannot serve as viable tier-one benchmarks in several CVD 
investigations involving the PRC. See, e.g., Line Pipe Decision 
Memorandum at Comment 5, see also PC Strand Decision Memorandum at 
``Provision of Wire Rod for LTAR.'' The Department finds no evidence 
that the GOC is not cooperating to the best of its ability and, thus, 
we preliminarily determine that the application of FA is warranted. 
Specifically, pursuant to section 776(a)(1) of the Act, we 
preliminarily determine that there is no suitable data on domestic 
prices for green tubes that are available which could 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 green tubes benchmark under 19 CFR 351.511(a)(2)(ii). The 
Department has on the record of the investigation CIF import prices 
from various countries into the PRC of HTS category 7304.23, ``seamless 
drill pipe, other than stainless, for use in drilling for oil or gas,'' 
as sourced from Global Trade Atlas.\73\ Petitioners argue that these 
data constitute actual import prices for green tubes and, thus, may 
serve as the basis for a tier-two benchmark under 19 CFR 
351.511(a)(2)(ii). We have reviewed the pricing data sourced from 
Global Trade Atlas and preliminarily determine that they are not 
appropriate for use as a tier-two benchmark. Petitioners' green tube 
prices are not broken out by month but are instead reported on an 
annual basis.\74\ Given that SSP reported its green tube purchases on a 
monthly basis, the preferred benchmark would be monthly purchases. 
Therefore, we preliminarily determine that annual green tube prices 
sourced from Global Trade Atlas are not suitable.
---------------------------------------------------------------------------

    \73\ See Petitioners' CVD Benchmark Data Submission (Benchmark 
Submission) (May 24, 2010) at Exhibit 1.
    \74\ Id.
---------------------------------------------------------------------------

    In addition, petitioners have placed on the record of the 
investigation monthly pricing data for the POI of seamless pipe and 
tube from various countries, as sourced from the Metal Bulletin 
Research (MBR).\75\ The DP Master Group placed the same seamless pipe 
and tube pricing data from the MBR on the record of the investigation 
as well as seamless pipe and tube pricing data from the Steel Business 
Briefing (SBB) and SteelOrbis (SO).\76\ In its May 28, 2010 and June 1, 
2010 submissions, the DP Master Group argues that the seamless pipe and 
tube pricing data from the MBR, SBB, and SO represent pipe and tube 
products that are at a slightly more advanced stage of finishing than 
green tube products.\77\ The DP Master Group therefore argues that, in 
order to derive a benchmark that is comparable to green tubes, the 
Department should average the seamless pipe and tube prices from the 
MBR, SBB, and SO with the steel rounds pricing data that it supplied in 
its questionnaire responses.\78\ For the steel rounds pricing data 
supplied by the DP Master Group, see the DP Master Group's April 16, 
2010 questionnaire response at Exhibit 13 and May 18, 2010 supplemental 
questionnaire response at Exhibit 44.
---------------------------------------------------------------------------

    \75\ See January through June pricing data in petitioners' 
December 31, 2009 petition, Volume I at Exhibit 15; see July through 
December pricing data in petitioners' May 28, 2010 submission at 
Exhibit 1.
    \76\ See DP Master Group's Benchmark Rebuttal and Supplemental 
Factual Information Submission (Benchmark Rebuttal) (May 28, 2010) 
submission at 15 and Exhibits 52 through 54.
    \77\ See DP Master Group Benchmark Rebuttal 14.
    \78\ Id. at 15.
---------------------------------------------------------------------------

    Alternatively, the DP Master Group argues that, in order to more 
closely approximate green tube pricing, the Department could discount 
the prices for seamless pipe and tube, as sourced from MBR, SBB, and 
SO, by the value added during the production process, namely heat 
treating, upsetting, and other processes performed on green tube to 
produce seamless pipe and tube. The DP Master Group contends that green 
tubes represent only 60 percent of the value of the seamless pipe and 
tube products under consideration as a green tube benchmark and, thus, 
to the extent the Department uses the seamless pipe and tube prices as 
a proxy for green tube prices, the Department should reduce the 
seamless pipe and tube prices by 40

[[Page 33257]]

percent. The DP Master Group supports its argument in this regard with 
an affidavit from an engineer.\79\
---------------------------------------------------------------------------

    \79\ See DP Master Group's Additional Comments Submission 
(Additional Comments) (June 1, 2010) at Exhibit 57.
---------------------------------------------------------------------------

    In their May 28, 2010 and June 1, 2010 submissions, petitioners 
argue against calculating the green tubes benchmark as the average of 
steel rounds and seamless pipe and tube prices. Petitioners contend 
that producing green tubes, drill pipe, and drill collars is a 
complicated and exacting process, and that such products must be 
manufactured to withstand severe conditions during the drilling 
process.\80\ In contrast, argue petitioners, steel rounds (also known 
as billets) are merely pieces of steel that are not comparable to green 
tubes.
---------------------------------------------------------------------------

    \80\ See Petitioners' Comments Regarding Preliminary 
Determination Submission (Prelim Comments) (May 28, 2010) at 3, and 
petitioners' Response to DP Master's Rebuttal Comments Submission 
(Response Submission) (June 1, 2010).
---------------------------------------------------------------------------

    In this preliminary determination, we agree with petitioners that 
it is not appropriate to construct a green tube benchmark that is equal 
to the average of seamless pipe and tube prices and steel rounds 
prices. In light of the extensive further manufacturing required to 
produce seamless pipe and tube, we preliminarily determine that 
seamless pipe and tubes are more similar to green tubes than steel 
rounds.
    Therefore, we have used the seamless pipe and tube pricing data, as 
sourced from MBR, SBB, and SO to construct our green tubes benchmark. 
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 LTAR,'' and LWRP 
Decision Memorandum at ``Hot-Rolled Steel for LTAR.'' Concerning the 
comparability of seamless pipe and tube, we note that the Department 
has acknowledged the ``overlap'' between green tubes and other types of 
seamless pipe and tube (e.g., casing and tubing) ``with respect to 
diameter, wall thickness, and length'' as well as an overlap with 
regard to strength and alloy requirements. See Oil Country Tubular 
Goods from Austria: Initiation of Countervailing Duty Investigation, 67 
FR 20739, 20740 (April 26, 2002), and accompanying Initiation Checklist 
at 15.
    In this preliminary determination, we have determined not to reduce 
the seamless pipe and tube prices by 40 percent as advocated by the DP 
Master Group. In its June 1, 2010 submission, the DP Master Group 
relies on an affidavit from an engineer.
    The affidavit states:

    In my experience in the industry (as detailed in the attached 
bio), tool joints and their connection to a standard 30 foot drill 
pipe represent about half of the cost of finished drill pipe, with 
the upset and heat-treated tube the other half of the value. With 
the upset and heat-treated tube (which could be called unfinished or 
semi-finished drill pipe), the green tube represents approximately 
60 percent of the cost before attaching the tool joint, and the 
upsetting and heat treating process presents about 40 percent of the 
cost before attaching tool joints.\81\
---------------------------------------------------------------------------

    \81\ See DP Master Group Additional Comments at Exhibit 57.

Aside from the engineer's assertions in the narrative of the affidavit, 
there is no discussion, description, or documentation to support the 
engineer's cost estimates. As a result, we find that the DP Master 
Group has not sufficiently supported its argument in this regard.
    Furthermore, we have preliminarily determined not to use certain 
price series for seamless pipe and tube, as supplied by the DP Master 
Group in its May 28, 2010 submission. Specifically, we preliminarily 
determine not to use prices for seamless pipe and tube exported from 
Ukraine to Turkey; Italy to the United Arab Emirates (UAE); and Japan 
to the UAE; as sourced from SO, on the grounds that it is not 
reasonable to conclude that these prices would be available to 
purchasers of seamless pipe and tube in the PRC, as described under 19 
CFR 351.511(a)(2)(ii).
    To determine whether the green tubes supplier, acting as a 
government authority, sold green tubes to the DP Master Group for LTAR, 
we compared the prices SSP paid to the supplier to the green tubes 
benchmark price. We conducted our comparison on a monthly basis. To 
arrive at a single monthly benchmark green tubes 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 SSP for its purchases of green tubes.
    As explained in 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. Accordingly, we have added import 
duties and the VAT applicable to imports of green tubes into the PRC, 
as reported by the GOC. See 19 CFR 351.511(a)(2)(iv). In addition, in 
accordance with 19 CFR 351.511(a)(2)(iv), we have added ocean freight 
costs to our green tubes benchmark price. Because our green tube 
benchmark consists of prices from North America, Europe, the Middle 
East, and Asia, we have added to the benchmark ocean freight costs from 
around the world. Specifically, for green tubes benchmark prices from 
the United States, we used ocean freight rates for shipments from the 
United States to the PRC.\82\ For green tubes benchmark prices from 
Europe, Japan, and the Middle East, we used the ocean freight utilized 
in OCTG from the PRC and submitted on the record of the investigation 
by the DP Master Group. Specifically, we utilized an ocean freight rate 
corresponding to exports from Turkey, Black/Baltic Seas, Mediterranean, 
and London Metal Exchange (Far East) (LME).\83\ In addition, in 
accordance with 19 CFR 351.511(a)(2)(iv), we have added inland freight 
costs to the green tubes benchmark as well as to SSP's domestic 
purchases of green tubes. Our inclusion of inland freight costs in LTAR 
benefit calculation is consistent with the Department's practice. See, 
e.g., PC Strand Decision Memorandum at Comment 13.
---------------------------------------------------------------------------

    \82\ These publicly available ocean rate data were originally 
submitted on the record of PC Strand from the PRC and placed on the 
record of the instant investigation. See the Preliminary Calculation 
Memorandum.
    \83\ See DP Master Group IQR at Exhibit 13; see also Preliminary 
Calculations Memorandum.
---------------------------------------------------------------------------

    Comparing the benchmark unit prices to the unit prices paid by SSP 
for green tubes, we determine that green tubes were 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 green tubes purchased.
    Finally, with respect to specificity, we determine that the program 
is specific under section 771(5A)(D)(iii)(I) of the Act because the 
industries that utilize green tubes are limited. This finding is in 
keeping with the Department's determination in other China CVD 
investigations where we found the industries that used a particular 
steel input to be limited. See e.g., OCTG Decision Memorandum at 
``Provision of Steel Rounds for LTAR.''
    We find that the GOC's provision of green tubes 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

[[Page 33258]]

consolidated sales of DP Master, SSP, SPM, and Liangda (exclusive of 
intra-company sales), as discussion in the ``Attribution of Subsidies'' 
section above. On this basis, we preliminarily determine a 
countervailable subsidy of 4.96 percent ad valorem for the DP Master 
Group.

F. Provision of Electricity for LTAR

    For the reasons explained in the ``Use of Facts Otherwise Available 
and Adverse Inferences'' section above, we are basing our determination 
regarding the government's provision of electricity in part on AFA.
    In a CVD case, the Department requires information from both the 
government of the country whose merchandise is under investigation 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. 
However, 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. The DP Master Group provided data on the electricity 
the companies consumed and the electricity rates paid during the POI.
    Consistent with this practice, the Department finds that the GOC's 
provision of electricity confers a financial contribution, under 
section 771(5)(D)(iii) of the Act, and is specific, under section 
771(5A) of the Act. To determine the existence and amount of any 
benefit from this program, we relied on the DP Master Group's reported 
information on the amounts of electricity all group companies purchased 
and the amounts they paid for electricity during the POI. We compared 
the rates paid by the DP Master Group for their electricity to the 
highest rates that they would have paid in the PRC during the POI.
    In its May 27, 2010 supplemental questionnaire response, the GOC 
reported that the rate schedules that went into effect on July 1, 2008, 
were replaced with new provincial electricity rate schedules on 
November 20, 2009.\84\ The GOC added that the electricity rate schedule 
for Jiangsu Province went into effect on December 18, 2009.\85\ The GOC 
provided 2009 provincial electricity rate schedules in its May 27, 2010 
submission at Exhibit 17. However, given that these 2009 electricity 
rate schedules were submitted to the Department on the eve of the 
preliminary determination of this investigation, we are unable to 
thoroughly review those provincial rates schedules for use in this 
determination.\86\
---------------------------------------------------------------------------

    \84\ See GOC First SQR at 24.
    \85\ Id.
    \86\ For the final determination, we intend to examine the 2009 
provincial electricity rate schedules, which were submitted by the 
GOC.
---------------------------------------------------------------------------

    Therefore, for this preliminary determination, we are using the 
electricity rates schedules dated July 1, 2008 as the source of our 
benchmark electricity rates for use in the benefit calculations. As 
such, we have placed on the record of this investigation, the July 1, 
2008, electricity rate schedules, which were submitted to the 
Department by the GOC in the CVD investigation on PC Strand from the 
PRC, and which reflect the highest rates that the respondents would 
have paid in the PRC during the POI. Specifically, we have selected the 
highest rates for ``large industrial users'' for the peak, valley, and 
normal ranges. The normal and peak rates were selected from the 
Electricity Sale Rate Schedule of Shanghai. The valley rate was 
selected from the Electricity Sale Rate Schedule of Beijing. For those 
electricity rate schedules and electricity rate benchmark chart, see 
Memorandum to File from Kristen Johnson, Trade Analyst, AD/CVD 
Operations, Office 3, regarding ``Electricity Rate Benchmark Data'' 
(June 7, 2010). This benchmark reflects an adverse inference, which we 
have drawn as a result of the GOC's failure to act to the best of its 
ability in providing requested information about its provision of 
electricity in this investigation.
    Consistent with our approach in PC Strand from the PRC, to measure 
whether the DP Master Group received a benefit under this program, we 
first calculated the variable electricity cost the respondents paid by 
multiplying the monthly kilowatt hours (KWH) consumed at each price 
category (e.g., peak, normal, and valley) by the corresponding 
electricity rates charged at each price category in Jiangsu Province. 
Next, we calculated the benchmark variable electricity cost by 
multiplying the monthly KWH respondents consumed at each price category 
(e.g., peak, normal, and valley) by the highest electricity rate 
charged at each price category, as reflected in the electricity rate 
benchmark chart. To calculate the benefit for each month, we subtracted 
the variable electricity cost paid by respondents during the POI from 
the monthly benchmark variable electricity cost.
    To measure whether the DP Master Group received a benefit with 
regard to their transmitter capacity charge, we first multiplied the 
monthly transmitter capacity charged to respondents by the 
corresponding consumption quantity. Next, we calculated the benchmark 
transmitter capacity cost by multiplying respondents' consumption 
quantities by the highest transmitter capacity rate reflected in the 
electricity rate benchmark chart. To calculate the benefit, we 
subtracted the transmitter costs paid by respondents during the POI 
from the benchmark transmitter costs.
    We then calculated the total benefit received during the POI under 
this program by summing the benefits stemming from the DP Master 
Group's variable rate payments and transmitter capacity payments.
    To calculate the net subsidy rate pertaining to electricity 
payments made by the DP Master Group, we divided the benefit amount by 
the total consolidated sales of DP Master, SPM, SSP, Liangda, and 
Chuangxin (exclusive of intra-company sales), as discussion in the 
``Attribution of Subsidies'' section above. On this basis, we 
preliminarily determine a countervailable subsidy of 0.13 percent ad 
valorem for the DP Master Group.

II. Programs Preliminarily Determined Not To Provide Countervailable 
Benefits During the POI

A. Provision of Steel Rounds for LTAR

    The Department is investigating whether producers and suppliers, 
acting as Chinese government authorities, sold steel rounds to the DP 
Master Group for LTAR. The DP Master Group (specifically, DP Master and 
Liangda) reported purchasing steel rounds during the POI from trading 
companies as well as directly from steel round producers. In all 
instances, the DP Master Group was able to identify the firm that 
produced the steel rounds that the companies acquired during the POI. 
In their questionnaire responses,\87\ both the DP Master Group and the 
GOC indicated that, with the exception of a single producer 
(hereinafter referred to as Producer A), all of the steel rounds 
acquired by the respondents during the POI were produced by SOEs.\88\ 
As a result, for those producers that the DP Master Group identified as 
SOEs, we determine that the producers are

[[Page 33259]]

government authorities that provided to the respondent a financial 
contribution, in the form of a governmental provision of a good. See 
section 771(5)(D)(iv) of the Act.
---------------------------------------------------------------------------

    \87\ See DP Master Group First SQR at Exhibit 41, and GOC IQR at 
53-54.
    \88\ The identity of Producer A is business proprietary.
---------------------------------------------------------------------------

    Regarding Producer A, in the initial questionnaire, the Department 
instructed the GOC to provide ownership information for all input 
suppliers/producers that the GOC claimed were not GOC authorities.\89\ 
In its questionnaire response, the GOC stated that, with regard to 
Producer A, the GOC did `` * * * not have sufficient time to obtain the 
information requested in Appendix 5 for this response but will provide 
it in due course.'' \90\ In its May 12, 2010 supplemental questionnaire 
response, the Department stated, ``to the extent that the GOC has 
provided information on Producer A in another investigation before the 
Department, please submit that information for Producer A on the record 
of this investigation.'' \91\ The Department then referenced several 
exhibits from PC Strand from the PRC in which the GOC had supplied 
ownership information for an input producer with the same name as 
Producer A.\92\ In its supplemental questionnaire response, the GOC 
claimed that, though the firms were related and had similar names, 
Producer A was not the same input producer as the one examined in the 
context of the PC Strand from the PRC.\93\ The GOC further stated that, 
to the best of its knowledge, one shareholder of Producer A is a 
company based in Hong Kong and publicly listed on the Hong Kong and 
Clearing Limited stock exchanges.\94\ The GOC did not, however, provide 
ownership information for Producer A as originally requested by the 
Department in the initial questionnaire.
---------------------------------------------------------------------------

    \89\ See Department's Initial Questionnaire at II-12, II-13, and 
Appendix 5.
    \90\ See GOC IQR at page 54.
    \91\ See Department SQR Issued to the GOC at 3.
    \92\ Id.
    \93\ See GOC First SQR at 11.
    \94\ Id.
---------------------------------------------------------------------------

    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.
    We preliminarily determine that the GOC did not provide the 
information requested by the Department as it pertains to Producer A. 
First, the GOC failed to respond to the ownership questions contained 
in the Department's initial questionnaire. Second, when given a second 
opportunity to supply ownership information regarding Producer A, as 
requested in the supplemental questionnaire, the GOC, instead merely 
stated that the input producer examined in PC Strand from the PRC was 
not the same as Producer A. We 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 Producer A and determine 
that Producer A is a GOC authority whose sales of steel rounds to the 
DP Master Group during the POI constitutes a financial contribution, in 
the form of the provision of a good, 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 steel rounds to the DP Master Group by 
producers designated as government authorities conferred a benefit 
within the meaning of section 771(5)(E)(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 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, 63 FR 65377. The 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 our February 23, 2010 initial questionnaire and May 12, 2010 
supplemental questionnaire, we instructed the GOC to provide the 
percentage of steel rounds production accounted for by SOEs during the 
POI. In its initial and supplemental questionnaire responses, the GOC 
indicated that there were no official statistics readily available 
regarding the production and consumption of steel rounds in the PRC 
and, therefore, did not provide the requested information.\95\
---------------------------------------------------------------------------

    \95\ See GOC IQR at 58, and GOC First SQR at 11-12.
---------------------------------------------------------------------------

    We preliminarily determine that the GOC did not provide the 
information requested by the Department as it pertains to the share of 
steel rounds accounted for by SOEs during the POI despite having been 
given more than one opportunity to do so. We preliminarily determine 
that, in failing to provide the requested information, the GOC did not 
act to the best of its ability. Therefore, in accordance with section 
776(b) of the Act, we are drawing an adverse inference with respect to 
the percentage of steel rounds produced by SOEs during the POI. 
Specifically, we determine that SOEs accounted for a dominant share of 
the steel rounds market in the PRC during the POI and that domestic 
prices for steel rounds 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 steel rounds benchmark under 19 CFR 351.511(a)(2)(ii). The 
Department has on the record of the investigation prices for steel 
rounds, as

[[Page 33260]]

sourced from the SBB.\96\ No other interested party submitted tier-two 
steel rounds prices on the record of this investigation. Therefore, we 
find that the data from the SBB should be used to derive a tier-two, 
world market price for steel rounds that would be available to 
purchasers of steel rounds in the PRC. We note that the Department has 
relied on pricing data from SBB in recent CVD proceedings involving the 
provision of steel rounds for LTAR. See OCTG Decision Memorandum at 
``Provision of Steel Rounds for LTAR.''
---------------------------------------------------------------------------

    \96\ See DP Master Group IQR at Exhibit 13, and DP Master Group 
First SQR at Exhibit 44.
---------------------------------------------------------------------------

    To determine whether steel rounds suppliers, acting as government 
authorities, sold steel rounds to the DP Master Group for LTAR, we 
compared the prices that DP Master and Liangda paid to the suppliers to 
the steel rounds benchmark price. We conducted our comparison on a 
monthly basis. SBB provides multiple prices for each month of the POI. 
Specifically, the SBB data contain steel rounds export prices for Latin 
America, Turkey, the Black Sea/Baltic regions, and East Asia as well as 
steel rounds price data from the London Metal Exchange (LME) cash bid 
settlement prices series. The Department used these same price series 
from SBB to derive the steel rounds benchmark in OCTG from the PRC. See 
OCTG Decision Memorandum at ``Provision of Steel Rounds for LTAR'' and 
Comment 13A. Our regulations, at 19 CFR 351.511(a)(2)(ii), state that 
where there is more than one commercially available world market price, 
the Department will average the prices to the extent practicable. 
Therefore, consistent with 351.511(a)(2)(ii), we averaged the price 
series noted above. When conducting the price comparison, we converted 
the benchmark to the same currency and unit of measure as reported by 
DP Master and Liangda for their purchases of steel rounds.
    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. Accordingly, we have added import duties and the VAT applicable 
to imports of steel rounds into the PRC, as reported by the GOC. In 
addition, in accordance with 19 CFR 351.511(a)(2)(iv), we have added 
ocean freight costs to our steel rounds benchmark price. Specifically, 
we have added to the steel rounds benchmark the same ocean freight 
rates added to the steel rounds benchmark calculated in OCTG from the 
PRC. In addition, in accordance with 19 CFR 351.511(a)(2)(iv), we have 
added inland freight costs to the steel rounds benchmark as well as to 
DP Master's and Liangda's domestic purchases of steel rounds. Our 
inclusion of inland freight costs in the LTAR benefit calculation is 
consistent with the Department's practice. See, e.g., PC Strand 
Decision Memorandum at Comment 13.
    Finally, with respect to specificity, the GOC stated that steel 
rounds are used by producers of various types of seamless pipe 
(including the drill pipe industry).\97\ Therefore, we preliminarily 
determine that this subsidy is specific because the recipients are 
limited in number. See section 771(5A)(D)(iii)(I) of the Act. See OCTG 
Decision Memorandum at Comment 12. We further find the GOC's provision 
of steel rounds for LTAR to be a domestic subsidy as described under 19 
CFR 351.525(b)(3).
---------------------------------------------------------------------------

    \97\ See GOC IQR at 52.
---------------------------------------------------------------------------

    Comparing the benchmark unit prices to the unit prices paid by the 
respondents for steel rounds, we preliminarily determine that steel 
rounds were 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(a)(28) (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 drill 
pipe sales in the domestic market is 17 percent and that the VAT 
exemption upon the export of drill pipe is 13 percent. Thus, we have 
preliminarily determined that the VAT exempted upon the export of drill 
pipe 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.

C. GOC and Sub-Central Government Grants, Loans, and Other Incentives 
for Development of Famous Brands and China World Top Brands

    DP Master reported that it received a one-time award in 2008 for 
being a Jiangsu Province Famous Brand.\98\ We preliminarily find that 
the award represents less than 0.5 percent of total consolidated sales, 
as well as total consolidated export sales, for DP Master, SPM, and 
Liangda for 2008. As such, this grant is expensed in 2008, the year of 
receipt, under 19 CFR 351.524(b)(2), and not allocable to the POI. See 
Memorandum to the File from Kristen Johnson, Trade Analyst, AD/CVD 
Operations, Office 3, regarding ``DP Master Group Grants'' (June 7, 
2010) (Grant Memorandum).
---------------------------------------------------------------------------

    \98\ See DP Master Group IQR at 54, First SQR at 12-13.
---------------------------------------------------------------------------

    Consistent with our past practice, we therefore have not included 
this program in our preliminary net countervailing duty rate 
calculations. See, e.g., CFS Decision Memorandum at ``Analysis of 
Programs, Programs Determined Not To Have Been Used or Not To Have 
Provided Benefits During the POI for GE,'' and Final Results of 
Countervailing Duty Administrative Review: Low Enriched Uranium from 
France, 70 FR 39998 (July 12, 2005) (Uranium from France), and 
accompanying Issues and Decision Memorandum (Uranium Decision 
Memorandum) at ``Purchases at Prices that Constitute More than Adequate 
Remuneration,'' (citing Notice of Final Results of Countervailing Duty 
Administrative Review and Rescission of Certain Company-Specific 
Reviews: Certain Softwood Lumber Products From Canada, 69 FR 75917 
(December 20, 2004), and accompanying Issues and Decision Memorandum at 
``Other Programs Determined to Confer Subsidies'').

D. Scientific Innovation Award

    In its May 18, 2010 submission, in response to a financial 
statement item, DP Master reported that it received a one-time 
scientific innovation award in 2008.\99\ We preliminarily find that the 
award represents less than 0.5 percent of total consolidated sales, as 
well as total consolidated export sales, for DP Master, SPM, and 
Liangda for 2008. As such, this grant is expensed in 2008, the year of 
receipt, under 19 CFR 351.524(b)(2), and not allocable to the POI. See 
Grants Memorandum.
---------------------------------------------------------------------------

    \99\ See DP Master Group First SQR at 9-10.
---------------------------------------------------------------------------

    Consistent with our past practice, we therefore have not included 
this program in our preliminary net

[[Page 33261]]

countervailing duty rate calculations. See, e.g., CFS Decision 
Memorandum at ``Analysis of Programs, Programs Determined Not To Have 
Been Used or Not To Have Provided Benefits During the POI for GE,'' and 
Uranium Decision Memorandum at ``Purchases at Prices that Constitute 
More than Adequate Remuneration.''

E. Development Fund Grant

    In the May 18, 2010 submission, SPM reported that it received a 
development fund grant in 2008.\100\ We preliminarily find that the 
award represents less than 0.5 percent of total consolidated sales, as 
well as total consolidated export sales, for DP Master, SPM, and 
Liangda for 2008. As such, this grant is expensed in 2008, the year of 
receipt, under 19 CFR 351.524(b)(2), and not allocable to the POI. See 
Grant Memorandum.
---------------------------------------------------------------------------

    \100\ Id. at 19-20.
---------------------------------------------------------------------------

    Consistent with our past practice, we therefore have not included 
this program in our preliminary net countervailing duty rate 
calculations. See, e.g., CFS Decision Memorandum at ``Analysis of 
Programs, Programs Determined Not To Have Been Used or Not To Have 
Provided Benefits During the POI for GE,'' and Uranium Decision 
Memorandum at ``Purchases at Prices that Constitute More than Adequate 
Remuneration.''

F. VAT Rebates to Welfare Enterprises

    In its May 18, 2010 submission, in response to a financial 
statement item, SPM reported that it received VAT rebates in 2007 and 
2008.\101\ SPM explained that the rebates date back to when it was 
``Yinhui Plastic Steel Factory,'' which was a ``welfare'' enterprise 
and, thus, entitled to a refund of output VAT paid to the tax bureau in 
the prior year. SPM stated that a ``welfare'' enterprise is an 
enterprise which hires a certain number of handicapped persons up to 50 
percent or more of total production personnel of the enterprise.\102\ 
We preliminarily find that, to the extent any recurring tax benefit was 
received in the form of a tax rebate, which may have been excessive, it 
would be expensed in the year of receipt, i.e., 2007 and 2008, under 19 
CFR 351.524(a) and (c), and not allocable to the POI.
---------------------------------------------------------------------------

    \101\ Id.
    \102\ See ``Circular of the State Administration of Taxation on 
the Question Concerning Tax Exemption and Reduction for Social 
Welfare Production Units Run by Civil Affairs Departments,'' (Guo 
Shui Fa (1990) No. 127), provided at Exhibit 31 of DP Master Group's 
SQR (public version).
---------------------------------------------------------------------------

    Consistent with our past practice, we therefore have not included 
this program in our preliminary net countervailing duty rate 
calculations. See, e.g., CFS Decision Memorandum at ``Analysis of 
Programs, Programs Determined Not To Have Been Used or Not To Have 
Provided Benefits During the POI for GE,'' and Uranium Decision 
Memorandum at ``Purchases at Prices that Constitute More than Adequate 
Remuneration.''

III. Programs for Which More Information Is Necessary

A. Technology To Improve Trade R&D Fund

    DP Master reported that it received a one-time award in 2009 from 
the Jiangsu Treasury Department under the Technology to Improve Trade 
R&D Fund program, which benefitted the company's research and 
development efforts.\103\ Because we lack complete information on this 
program, we intend to seek additional information from the GOC and the 
DP Master Group after the preliminary determination. Specifically, we 
intend to request information on the program's purpose, the laws/
regulations related to the program, government agencies that administer 
the program, the application process, eligibility criteria, and 
specificity data.
---------------------------------------------------------------------------

    \103\ See DP Master Group First SQR at 5-6, 8.
---------------------------------------------------------------------------

B. Grant Received by Chuangxin

    In its May 18, 2010 submission, in response to a question regarding 
a financial statement item, Chuangxin reported that it received a one-
time award in 2009.\104\ Because we lack complete information on this 
program, we intend to seek additional information from the GOC and the 
DP Master Group after the preliminary determination. Specifically, we 
intend to request information on the program's purpose, the laws/
regulations related to the program, government agencies that administer 
the program, the application process, eligibility criteria, and 
specificity data.
---------------------------------------------------------------------------

    \104\ Id. at 17.
---------------------------------------------------------------------------

C. Provision of Land-Use Rights Within Designated Geographical Areas 
for LTAR

    In the questionnaire responses, the DP Master Group certified that 
none of the companies are located in a special, economic, development, 
or trade zone, in Jiangyin City.\105\ Additionally, the DP Master Group 
certified that none of the companies acquired land-use rights based 
upon being located within a special, economic, development, or trade 
zone during the period December 11, 2001 through December 31, 
2009.\106\ We, however, recognize that there is conflicting information 
on the record as to whether the DP Master Group companies are or are 
not located in a special, economic, development, or trade zone. 
Specifically, we note that the business licenses for DP Master, 
Liangda, and Chuangxin state that these companies are located in the 
Shengang Industrial Zone, Jiangyin City.\107\ Also, according to DP 
Master's financial statement for the year ending December 31, 2007, the 
company is registered in a coastal economic open zone.\108\
---------------------------------------------------------------------------

    \105\ Id. at 40.
    \106\ Id. at 41.
    \107\ See DP Master Group IQR at Exhibit 9, page 632, 638, and 
640.
    \108\ Id. at Exhibit 3, page 236.
---------------------------------------------------------------------------

    Given this conflicting information on the record, we intend to seek 
additional information regarding the location of the companies from the 
GOC and the DP Master Group after the issuance of this preliminary 
determination.

IV. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the DP Master Group did not apply 
for or receive benefits during the POI under the programs listed below:
1. Export Loans from Policy Banks and SOCBs
2. Treasury Bond Loans
3. Preferential Loans for SOEs
4. Preferential Loans for Key Projects and Technologies
5. Preferential Lending to Drill Pipe Producers and Exporters 
Classified as Honorable Enterprises
6. Debt-to-Equity (D/E) Swaps
7. Loans and Interest Forgiveness for SOEs
8. Income Tax Credits for Domestically-Owned Companies Purchasing 
Domestically-Produced Equipment
9. Reduction In or Exemption From Fixed Assets Investment Orientation 
Regulatory Tax
10. Local Income Tax Exemption and Reduction Programs for Productive 
FIEs
11. Preferential Tax Programs for FIEs Recognized as High or New 
Technology Enterprises
12. Income Tax Reductions for Export-Oriented FIEs
13. Deed Tax Exemption for SOEs Undergoing Mergers or Restructuring
14. Provision of Land to SOEs for LTAR
15. Provision of Hot-Rolled Steel for LTAR
16. Provision of Coking Coal for LTAR
17. Provision of Electricity at LTAR to Drill Pipe Producers Located in 
Jiangsu Province

[[Page 33262]]

18. Provision of Water at LTAR to Drill Pipe Producers Located in 
Jiangsu Province
19. State Key Technology Project Fund
20. Export Assistance Grants
21. Programs to Rebate Antidumping Legal Fees
22. Grants and Tax Benefits to Loss-Making SOEs at National and Local 
Level
23. Subsidies Provided to Drill Pipe Producers Located in Economic and 
Technological Development Zones (ETDZs) in Tianjin Binhai New Area
24. Subsidies Provided to Drill Pipe Producers Located in ETDZs in 
Tianjin Economic and Technological Development Areas
25. Subsidies Provided to Drill Pipe Producers Located in High-Tech 
Industrial Development Zones.

Verification

    In accordance with section 782(i)(1) of the Act, we intend to 
verify the information submitted by the DP Master Group, WSP, Xigang, 
and the GOC prior to making our final determination.\109\
---------------------------------------------------------------------------

    \109\ With regard to WSP and Xigang, we will verify each 
company's claim that it did not export subject merchandise to the 
United States during the POI.
---------------------------------------------------------------------------

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 DP Master Group. We preliminarily determine the total 
estimated net countervailable subsidy rate to be:

------------------------------------------------------------------------
                                                           Net  subsidy
                    Producer/Exporter                       ad valorem
                                                             rate (%)
------------------------------------------------------------------------
DP Master Manufacturing Co., Ltd. (DP Master), Jiangyin            15.72
 Sanliang Petroleum Machinery Co., Ltd. (SPM); Jiangyin
 Liangda Drill Pipe Co., Ltd. (Liangda); Jiangyin
 Sanliang Steel Pipe Trading Co., Ltd. (SSP), and
 Jiangyin Chuangxin Oil Pipe Fittings Co., Ltd.
 (Chuangxin) (collectively, DP Master Group)............
All Others..............................................           15.72
------------------------------------------------------------------------

    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. Because we have calculated a rate for only the DP Master 
Group, the rate for the DP Master Group is the all others rate.
    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.

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, 14th 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.

    Dated: June 7, 2010.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration
[FR Doc. 2010-14111 Filed 6-10-10; 8:45 am]
BILLING CODE 3510-DS-P