[Federal Register Volume 76, Number 172 (Tuesday, September 6, 2011)]
[Notices]
[Pages 55031-55044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22715]



[[Page 55031]]

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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-976]


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

DATES: Effective Date: September 6, 2011.

FOR FURTHER INFORMATION CONTACT: Nicholas Czajkowski or David Lindgren, 
AD/CVD Operations, Office 6, Import Administration, U.S. Department of 
Commerce, Room 7866, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone: 202-482-1395 or 202-482-3870, 
respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On March 31, 2011, the Department received a countervailing duty 
(CVD) petition, filed in proper form, concerning imports of galvanized 
wire from the PRC.\1\ The Department initiated a CVD investigation on 
April 20, 2011.\2\
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    \1\ The petitioners are Davis Wire Corporation, Johnstown Wire 
Technologies, Inc., Mid-South Wire Company, Inc., National Standard, 
LLC, and Oklahoma Steel & Wire Company, Inc. (Petitioners).
    \2\ See Galvanized Steel Wire From the People's Republic of 
China: Initiation of Countervailing Duty Investigation, 76 FR 23564 
(April 27, 2011) (Initiation Notice), and accompanying Initiation 
Checklist. Public documents and public versions of proprietary 
Departmental memoranda referenced in this notice are on file in the 
Central Records Unit (CRU), Room 7046 in the main building of the 
Commerce Department.
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    As stated in the Initiation Notice, the Department released U.S. 
Customs and Border Protection (CBP) entry data for U.S. imports of 
galvanized wire from the PRC between January 1, 2010, and December 31, 
2010, to be used as the basis for respondent selection.\3\ The CBP 
entry data covered products included in this investigation which 
entered under Harmonized Tariff Schedule of the United States (HTSUS) 
numbers: 7217.20.3000; 7217.20.4510; 7217.20.4520; 7217.20.4530; 
7217.20.4540; 7217.20.4550; 7217.20.4560; 7217.20.4570; and 
7217.20.4580. In the Entry Data Memorandum, the Department noted that 
the scope also indicated that subject merchandise might also enter 
under HTSUS numbers: 7229.20.0015; 7229.90.5008; 7229.90.5016; 
7229.90.5031; and 7229.90.5051. Parties were given seven days from the 
publication of the Initiation Notice to submit comments on the CBP data 
and respondent selection.
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    \3\ See Memorandum regarding ``Countervailing Duty Investigation 
of Galvanized Steel Wire from the People's Republic of China: Entry 
Data'' (Entry Data Memorandum), dated April 21, 2011.
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    On May 3, 2011, Shanghai Bao Zhang Industry Co. Ltd. (SBZ) 
requested to be selected as a mandatory respondent in the CVD 
investigation.\4\ Alternatively, SBZ requested that, if it were not 
selected as a mandatory respondent, the Department consider it as a 
voluntary respondent should a mandatory respondent fail to participate. 
Additionally, on May 4, 2011, SBZ, Anhui Bao Zhang Metal Products Co., 
Ltd. (ABZ) and B&Z Galvanized Wire Industry filed comments on 
respondent selection, arguing that the Department should treat all Bao 
Zhang companies as a single entity for respondent selection and should 
ensure that trading companies are not selected as mandatory 
respondents.\5\ On May 18, 2011, the Department completed its 
respondent selection analysis. Specifically, the Department selected 
the following companies, in alphabetical order, as mandatory 
respondents in this CVD investigation: M&M Industries Co. Ltd. (M&M); 
Shandong Hualing Hardware and Tool Co., Ltd. (Shandong Hualing); and 
Tianjin Huayuan Metal Wire Products Co., Ltd. (HYW).\6\ These companies 
accounted for the largest volume of exports of merchandise under 
consideration to the United States that the Department determined could 
be reasonably examined. The Department issued a CVD questionnaire to 
the Government of the PRC (GOC) and the mandatory respondents on May 
19, 2011. Responses to this questionnaire were originally due on June 
27, 2011.
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    \4\ See Letter from SBZ to the Department, ``Antidumping Duty 
Investigation of Galvanized Wire from the People's Republic of 
China: Request for Mandatory Status or Alternatively for Voluntary 
Status,'' dated May 3, 2011.
    \5\ See Letter from SBZ, et al. to the Department, ``Comments on 
Respondent Selection: Investigation of the Galvanized Steel Wire 
from the People's Republic of China,'' dated May 4, 2011.
    \6\ See Memorandum to Christian Marsh, Deputy Assistant 
Secretary for Antidumping and Countervailing Duty Operations, from 
Mark Hoadley, Program Manager, Office 6, ``Galvanized Steel Wire 
from the People's Republic of China Countervailing Duty 
Investigation: Respondent Selection,'' dated May 18, 2011.
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    On June 27, 2011, SBZ and its reported cross-owned affiliates (ABZ) 
and Shanghai Li Chao Industry Co., Ltd. (Li Chao) (collectively, the 
Bao Zhang Companies) submitted a questionnaire response.\7\ The 
questionnaire response provided information that the Bao Zhang 
Companies were involved in the production and exportation of subject 
merchandise during the period of investigation (POI).
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    \7\ Bao Zhang Companies June 27, 2011 Questionnaire Response. As 
discussed in more detail in the ``Cross-Ownership'' section below, 
we preliminarily determine that these three companies are cross-
owned.
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    The GOC, HYW and M&M submitted requests on June 20, 2011, June 22, 
2011, and June 24, 2011, respectively, for extensions to the deadline 
for their questionnaire responses. The Department extended the deadline 
for submission of these responses until July 5, 2011. On June 29, 2011, 
the GOC requested a second extension to the deadline for filing its 
questionnaire response. On July 1, 2011, HYW and M&M also requested a 
second extension to the deadline for filing questionnaire responses. 
The Department extended the deadline for submission of the 
questionnaire responses, a second time, until July 7, 2011. On July 7, 
2011, questionnaire responses were filed by the GOC, HYW,\8\ and 
M&M.\9\ On July 7, 2011, the GOC requested an extension for submitting 
ownership information related to the producers from which the Huayuan 
Companies and the Bao Zhang Companies purchased wire rod and zinc 
inputs. On July 14, 2011, the Department granted the GOC an extension 
until July 19, 2011. On July 19, 2011, the GOC filed additional 
information pertaining to the ownership of some producers of wire rod 
inputs purchased by the respondents.\10\
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    \8\ HYW filed its responses as Attachment 1 and then included 
responses for its reported cross-owned affiliates Tianjin Tianxin 
Metal Products Co., Ltd. (Tianxin) as Attachment 2, Tianjin Huayuan 
Times Metal Products Co., Ltd. (Times) as Attachment 3 and Tianjin 
Mei Jia Hua Trade Co., Ltd. (MJH) as Attachment 4. As discussed in 
more detail in the ``Cross-Ownership'' section below, we 
preliminarily determine that HYW, Tianxin and MJH (collectively, the 
Huayuan Companies), are cross-owned. We also preliminarily determine 
that Times is not cross-owned with the Huayuan Companies.
    \9\ GOC July 7, 2011 Questionnaire Response; Huayuan Companies 
July 7, 2011 Questionnaire Response; and M&M July 7, 2011 
Questionnaire Response.
    \10\ See Letter from the GOC to the Department, ``Countervailing 
Duty Investigation of Galvanized Steel Wire from the People's 
Republic of China, Inv. No. C-570-976; Questionnaire Response,'' 
dated July 19, 2011.

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[[Page 55032]]

    Shandong Hualing, one of the mandatory respondents, did not submit 
a questionnaire response by the original June 27, 2011 deadline, nor 
did it request an extension to file its questionnaire response. In 
fact, the GOC, in its questionnaire response, stated that Shandong 
Hualing informed the GOC that the company did not plan to cooperate 
with the Department's investigation.\11\ Because Shandong Hualing chose 
not to participate in this investigation, on July 22, 2011, the 
Department selected SBZ as an additional mandatory respondent in this 
investigation.\12\ On June 8, 2011, the Department postponed the 
deadline for the preliminary determination until August 29, 2011.\13\
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    \11\ See GOC July 7, 2011 Questionnaire Response at 1.
    \12\ See Memorandum to Christian Marsh, Deputy Assistant 
Secretary for Antidumping and Countervailing Duty Operations, from 
Barbara E. Tillman, Director, Antidumping and Countervailing Duty 
Operations, Office 6, ``Countervailing Duty Investigation of 
Galvanized Steel Wire from the People's Republic of China: Selection 
of an Additional Mandatory Respondent,'' dated July 22, 2011.
    \13\ See Galvanized Steel Wire From the People's Republic of 
China: Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 76 FR 33242 (June 8, 2011).
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    On July 26, 2011, the Department issued supplemental questionnaires 
to the Huayuan Companies, M&M and the Bao Zhang Companies. On July 28, 
2011, the Department also issued a supplemental questionnaire to the 
GOC. The Bao Zhang Companies submitted an extension request on August 
1, 2011, and the GOC, the Huayuan Companies and M&M submitted extension 
requests on August 2, 2011.
    On August 4, 2011, Department officials met with counsel for the 
GOC and the Huayuan Companies, regarding the Department's July 26, 2011 
supplemental questionnaire issued to the Huayuan Companies.\14\ The GOC 
and the Huayuan Companies expressed concern about the potential burden 
of obtaining information from trading companies that are the Huayuan 
Companies' customers. The Department noted the language in the 
questionnaire regarding trading companies and indicated that when a 
company is aware that its sales to trading companies were exported to 
the United States, it should provide the information requested in the 
questionnaire for exports of subject merchandise to the United States.
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    \14\ See Memorandum regarding ``Ex-Parte Meeting with Counsel 
for the Government of China and for Tianjin Huayuan Wire Metal 
Products Co., Ltd.: Countervailing Duty Investigation of Galvanized 
Steel Wire from the People's Republic of China,'' dated August 5, 
2011.
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    On August 4, 2011, the Department extended the deadline for 
submission of the supplemental questionnaire responses, granting the 
Huayuan Companies, M&M, and the Bao Zhang Companies an extension for 
part of their questionnaire response until August 9, 2011, with the 
remainder due on August 19, 2011. On August 5, 2011, the Department 
also extended the deadline for the GOC's response, with one portion due 
on August 11, 2011, and the remainder due on August 22, 2011. The 
Huayuan Companies, M&M, and the Bao Zhang Companies each filed their 
supplemental questionnaire responses on August 9, 2011, and August 19, 
2011.\15\
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    \15\ Bao Zhang Companies August 9, 2011 Supplemental 
Questionnaire Response; Huayuan Companies August 9, 2011 
Supplemental Questionnaire Response; M&M August 9, 2011 Supplemental 
Questionnaire Response; Bao Zhang Companies August 19, 2011 
Supplemental Questionnaire Response; HYW August 19, 2011 
Supplemental Questionnaire Response; Tianxin August 19, 2011 
Supplemental Questionnaire Response; Times August 19, 2011 
Supplemental Questionnaire Response; MJH August 19, 2011 
Supplemental Questionnaire Response; and M&M August 19, 2011 
Supplemental Questionnaire Response.
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    The GOC filed its supplemental questionnaire response on August 11, 
2011, and August 22, 2011.\16\ On August 12, 2011, the Department 
issued a second supplemental questionnaire to the Huayuan Companies and 
M&M. The Huayuan Companies and M&M filed responses to these second 
supplemental questionnaires on August 17, 2011.\17\ Finally, on August 
25, 2011, the Petitioners filed pre-preliminary determination 
comments.\18\
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    \16\ GOC August 11, 2011 Supplemental Questionnaire Response and 
GOC August 22, 2011 Supplemental Questionnaire Response.
    \17\ MJH August 17, 2011 Supplemental Questionnaire Response and 
M&M August 17, 2011 Supplemental Questionnaire Response.
    \18\ See Letter from Petitioners to the Department, 
``Countervailing Duty Investigation of Galvanized Steel Wire from 
the People 's Republic of China: Petitioners' Pre-Preliminary 
Determination Comments,'' dated August 25, 2011.
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Alignment of Final CVD Determination With Final Antidumping Duty 
Determination

    In addition to the CVD investigation on galvanized wire, the 
Department also initiated antidumping duty (AD) investigations of 
galvanized wire from the PRC and Mexico.\19\ The CVD and AD 
investigations have the same scope with regard to the merchandise 
covered.
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    \19\ See Galvanized Steel Wire From the People's Republic of 
China and Mexico: Initiation of Antidumping Duty Investigations, 76 
FR 23548 (April 27, 2011).
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    On August 19, 2011, Petitioners submitted a letter, in accordance 
with section 705(a)(1) of the Tariff Act of 1930, as amended (the Act), 
requesting alignment of the final CVD determination with the final AD 
determination of galvanized wire from the PRC.\20\ Therefore, in 
accordance with section 705(a)(1) of the Act and 19 CFR 351.210(b)(4), 
we are aligning the final CVD determination with the final AD 
determination. Consequently, the final CVD determination will be issued 
on the same date as the final AD determination, which is currently 
scheduled to be issued no later than January 10, 2012, unless 
postponed.
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    \20\ See Letter from Petitioners to the Department 
``Countervailing Duty Investigation of Galvanized Steel Wire from 
the People's Republic of China-- Request to Align Final 
Determination with Antidumping Investigation,'' dated August 19, 
2011.
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Scope of the Investigation

    The scope of the investigation covers galvanized steel wire which 
is a cold-drawn carbon quality steel product in coils, of solid, 
circular cross section with an actual diameter of 0.5842 mm (0.0230 
inch) or more, plated or coated with zinc (whether by hot-dipping or 
electroplating).
    Steel products to be included in the scope of the investigation, 
regardless of Harmonized Tariff Schedule of the United States 
(``HTSUS'') definitions, are products in which: (1) Iron predominates, 
by weight, over each of the other contained elements; (2) the carbon 
content is two percent or less, by weight; and (3) none of the elements 
listed below exceeds the quantity, by weight, respectively indicated:
     1.80 percent of manganese, or
     1.50 percent of silicon, or
     1.00 percent of copper, or
     0.50 percent of aluminum, or
     1.25 percent of chromium, or
     0.30 percent of cobalt, or
     0.40 percent of lead, or
     1.25 percent of nickel, or
     0.30 percent of tungsten, or
     0.02 percent of boron, or
     0.10 percent of molybdenum, or
     0.10 percent of niobium, or
     0.41 percent of titanium, or
     0.15 percent of vanadium, or
     0.15 percent of zirconium.

The products subject to the investigation are currently classified in 
subheadings 7217.20.30 and 7217.20.45 of the HTSUS which cover 
galvanized wire of all diameters and all carbon content. Galvanized 
wire is reported under statistical reporting numbers 7217.20.3000, 
7217.20.4510, 7217.20.4520, 7217.20.4530, 7217.20.4540, 7217.20.4550, 
7217.20.4560, 7217.20.4570, and 7217.20.4580. These products may also 
enter under HTSUS subheadings 7229.20.0015, 7229.90.5008, 7229.90.5016, 
7229.90.5031, and

[[Page 55033]]

7229.90.5051. Although the HTSUS subheadings are provided for 
convenience and customs purposes, the written description of the 
merchandise is dispositive.

Scope Comments

    In accordance with the preamble to the Department's regulations, we 
set aside a period of time in our Initiation Notice for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of that 
notice.\21\ Between May 5, 2011, and May 19, 2011, we received numerous 
comments concerning the scope of the AD investigations of galvanized 
wire from the PRC and Mexico and the CVD investigation of galvanized 
wire from the PRC.
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    \21\ See Antidumping Duties; Countervailing Duties, 62 FR 27296, 
27323 (May 19, 1997); see also Initiation Notice, 75 FR at 70719.
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    Because of the timing of the scope comments and Petitioners' 
response to the comments, we did not have time to analyze the issues 
raised by parties prior to this preliminary determination. The 
Department is currently evaluating these scope comments, and will issue 
its decision regarding the scope of the investigation no later than the 
date of the preliminary determination in the companion AD 
investigation. That decision will be placed on the record of this CVD 
investigation, and all parties will have the opportunity to comment.

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 May 20, 2011, the ITC published 
its preliminary determination finding that there is a reasonable 
indication that an industry in the United States is materially injured 
by reason of imports of galvanized wire from the PRC.\22\
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    \22\ See Galvanized Steel Wire From China and Mexico, 76 FR 
29266 (May 20, 2011).
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Application of the Countervailing Duty Law to Imports From the PRC

    On October 25, 2007, the Department published its final 
determination on coated free sheet paper from the PRC.\23\ In CFS from 
the PRC, the Department found that

    \23\ See 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 from the PRC Decision Memorandum).

    * * * 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 
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investigation involving products from China. \24\

    \24\ See CFS from the PRC Decision Memorandum at Comment 6.
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The Department has affirmed its decision to apply the CVD law to the 
PRC in subsequent final determinations.\25\
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    \25\ 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), and accompanying Issues 
and Decision Memorandum (CWP from the PRC Decision Memorandum) at 
Comment 1.

    Additionally, for the reasons stated in the CWP from the PRC 
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.\26\
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    \26\ See CWP from the PRC Decision Memorandum at Comment 2.
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Period of Investigation

    The POI for which we are measuring subsidies is January 1, 2010, 
through December 31, 2010.\27\
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    \27\ See 19 CFR 351.204(b)(2).
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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. For purposes of this 
preliminary determination, we find it necessary to apply adverse facts 
available (AFA) in the following circumstances.

Application of AFA: Non-Cooperative Respondent

    As explained above in the ``Case History'' section, the Department 
selected Shandong Hualing as a mandatory respondent. As a result of 
Shandong Hualing's failure to submit responses to the Department's 
initial questionnaire, we find the company to be a non-cooperative, 
mandatory respondent. By not responding to the Department's initial 
questionnaire, Shandong Hualing withheld requested information and 
significantly impeded this proceeding. Thus, in reaching our 
preliminary determination, pursuant to sections 776(a)(1), (2)(A) and 
(C) of the Act, we are basing the CVD rate for Shandong Hualing on 
facts otherwise available.
    We further preliminarily determine that an adverse inference is 
warranted, pursuant to section 776(b) of the Act. By failing to submit 
a response to the Department's initial questionnaire, Shandong Hualing 
did not cooperate to the best of its ability in this investigation. 
Accordingly, we preliminarily find that AFA is warranted to ensure that 
the company does not obtain a more favorable result than had it fully 
complied with our request for information.
    In deciding which facts to use as AFA, section 776(b) of the Act 
and 19 CFR 351.308(c)(1) and (2) authorize the Department to rely on 
information derived from: (1) The petition; (2) a final determination 
in the investigation; (3) any previous review or determination; or (4) 
any other information placed on the record. The Department's practice 
when selecting an adverse rate from among the possible sources of 
information is to ensure that the rate is sufficiently adverse ``as to 
effectuate the statutory purposes of the adverse facts available rule 
to induce respondents to provide the Department with complete and 
accurate information in a timely manner.'' \28\ 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.'' \29\
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    \28\ See, e.g., Notice of Final Determination of Sales at Less 
Than Fair Value: Static Random Access Memory Semiconductors From 
Taiwan, 63 FR 8909, 8932 (February 23, 1998).
    \29\ See Statement of Administrative Action accompanying the 
Uruguay Round Agreements Act, H.R. Rep. No. 103-316, Vol. I, at 870 
(1994), reprinted at 1994 U.S.C.C.A.N. 4040, 4199.
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    It is the Department's practice in CVD proceedings to select, as 
AFA, the highest calculated rate in any segment

[[Page 55034]]

of the proceeding.\30\ In previous CVD investigations of products from 
the PRC, we adapted the practice to use the highest rate calculated for 
the same or similar program in the instant proceeding or, if not 
available, in other PRC CVD proceedings.\31\ Thus, under this practice, 
for investigations involving the PRC, the Department computes the total 
AFA rate for non-cooperating companies generally using program-specific 
rates calculated for the cooperating respondents in the instant 
investigation or calculated in prior PRC CVD cases. Specifically, for 
programs other than those involving income tax exemptions and 
reductions, the Department applies the highest calculated rate for the 
identical program in the investigation if a responding company used the 
identical program, and the rate is not zero. If there is no identical 
program match within the investigation, the Department uses the highest 
non-de minimis rate calculated for the same or similar program (based 
on treatment of the benefit) in another PRC CVD proceeding. Absent an 
above-de minimis subsidy rate calculated for the same or similar 
program, the Department applies the highest calculated subsidy rate for 
any program otherwise listed that could conceivably be used by the non-
cooperating companies.\32\
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    \30\ See, e.g., Laminated Woven Sacks From the People's Republic 
of China: Final Affirmative Countervailing Duty Determination and 
Final Affirmative Determination, in Part, of Critical Circumstances, 
73 FR 35639 (June 24, 2008) (LWS from the PRC), and accompanying 
Issues and Decision Memorandum at ``Selection of the Adverse Facts 
Available''; see also Aluminum Extrusions From the People's Republic 
of China: Final Affirmative Countervailing Duty Determination, 76 FR 
18521 (April 4, 2011) (Aluminum Extrusions From the PRC), and 
accompanying Issues and Decision Memorandum (Aluminum Extrusions 
from the PRC Decision Memorandum) at ``Application of Adverse 
Inferences: Non-Cooperative Companies.''
    \31\ See supra, note 28; see also LWS From the PRC; see also 
Certain Tow-Behind Lawn Groomers and Certain Parts Thereof From the 
People's Republic of China: Preliminary Affirmative Countervailing 
Duty Determination and Alignment of Final Countervailing Duty 
Determination With Final Antidumping Duty Determination, 73 FR 
70971, 70975 (November 24, 2008) (unchanged in the Certain Tow-
Behind Lawn Groomers and Certain Parts Thereof From the People's 
Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 29180 (June 19, 2009), and accompanying Issues 
and Decision Memorandum at ``Application of Facts Available, 
Including the Application of Adverse Inferences'').
    \32\ See Aluminum Extrusions from the PRC Decision Memorandum at 
``Application of Adverse Inferences: Non-Cooperative Companies''; 
see also, e.g., Lightweight Thermal Paper From the People's Republic 
of China: Final Affirmative Countervailing Duty Determination, 73 FR 
57323 (October 2, 2008) (LWTP from the PRC), and accompanying Issues 
and Decision Memorandum (LWTP from the PRC Decision Memorandum) at 
``Selection of the Adverse Facts Available Rate.''
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    On this basis, we preliminarily determine the AFA subsidy rate for 
Shandong Hualing to be 253.07 percent ad valorem. For a detailed 
discussion of the AFA rates selected for each program under 
investigation, see Application of Adverse Facts Memorandum.\33\
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    \33\ See Memorandum regarding, ``Application of Adverse Facts 
Available Rates for Preliminary Determination,'' dated August 29, 
2011 (Application of Adverse Facts Memorandum).
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Application of AFA: Finding Wire Rod and Zinc Input Producers To Be 
Government Authorities Under the Provision of Wire Rod and Zinc for 
Less Than Adequate Remuneration Program

    The Department is investigating the alleged provision of wire rod 
and zinc for less than adequate remuneration (LTAR) by the GOC. We 
requested information from the GOC regarding the specific companies 
that produced these input products that the Huayuan Companies and the 
Bao Zhang Companies purchased during the POI.
    With respect to the specific companies that produced the input 
products purchased by the Huayuan Companies and the Bao Zhang 
Companies, we were seeking information that would allow us to determine 
whether the producers are ``authorities'' within the meaning of section 
771(5)(B) of the Act. In our original and supplemental questionnaires, 
we requested detailed information from the GOC that would be needed for 
this analysis. We informed the GOC that, if it disputed that producers 
that are majority-owned by the government are ``authorities,'' the GOC 
needed to provide the requested information on those disputed producers 
as well. Thus, for any producers of wire rod or zinc that were 
identified by the Huayuan Companies and the Bao Zhang Companies as 
majority government-owned, the GOC needed to provide the requested 
information only if it wished to argue that those producers were not 
authorities. For any of these input producers that the GOC claimed were 
privately owned by individuals and/or companies during the POI, we 
requested the following:
     Translated copies of source documents that demonstrate the 
producer's ownership during the POI, such as capital verification 
reports, articles of association, share transfer agreements, or 
financial statements.
     Identification of the owners, members of the board of 
directors, or managers of the producers who were also government or 
Chinese Communist Party (CCP) officials or representatives during the 
POI.
     A discussion of whether and how operational or strategic 
decisions made by the management or board of directors are subject to 
government review or approval.
    Finally, for input producers owned by other corporations (whether 
in whole or in part) or with less-than-majority state ownership during 
the POI, we requested information in order to trace back the ownership 
to the ultimate individual or state owners. For these suppliers, we 
requested the following:
     The identification of any state ownership of the company's 
shares; the names of all government entities that own shares, either 
directly or indirectly, in the company; whether any of the owners are 
considered ``state-owned enterprises'' by the government; and the 
amount of shares held by each government owner.
     For each level of ownership, a translated copy of the 
section(s) of the articles of association showing the rights and 
responsibilities of the shareholders and, where appropriate, the board 
of directors, including all decision making (voting) rules for the 
operation of the company.
     For each level of ownership, identification of the owners, 
members of the board of directors, or managers of the producers who 
were also government or CCP officials during the POI.
     A discussion of whether and how operational or strategic 
decisions made by the management or board of directors are subject to 
government review or approval.
     A statement of whether any of the shares held by 
government entities have any special rights, priorities, or privileges, 
e.g., with regard to voting rights or other management or decision-
making for the company; a statement of whether there are any 
restrictions on conducting, or acting through, extraordinary meetings 
of shareholders; whether there are any restrictions on the shares held 
by private shareholders; and the nature of the private shareholders' 
interest in the company, e.g., operational, strategic, or investment-
related, etc.
    In its questionnaire response on July 7, 2011, the GOC provided 
some ownership information but reported that it was unable to obtain 
the complete ownership information for all of the companies that 
produced wire rod and zinc purchased by the Huayuan Companies and the 
Bao Zhang Companies. The GOC further stated that it expected to provide 
such information to the Department as soon as it received it from the 
local industry and commerce

[[Page 55035]]

administration bureaus.\34\ On July 19, 2011, the GOC submitted 
additional ownership information pertaining to certain wire rod 
producers, but reported that it was still not able to complete the 
ownership information for all wire rod and zinc producers named by 
respondents.
---------------------------------------------------------------------------

    \34\ See GOC July 7, 2011 Questionnaire Response at 16.
---------------------------------------------------------------------------

    On July 28, 2011, we issued a supplemental questionnaire to the GOC 
requesting that it complete the remaining ownership information for the 
wire rod and zinc producers, as well as respond to questions regarding 
the role, if any, of GOC and CCP officials in the input producers 
(e.g., through management or the board of directors) and in their 
owners, including any corporate owners.\35\ In response to the GOC's 
request for an extension, the Department allowed the GOC to file part 
of its response on August 11, 2011, and the remainder on August 22, 
2011.
---------------------------------------------------------------------------

    \35\ See Letter from the Department to the GOC ``Countervailing 
Duty Investigation of Galvanized Steel Wire from the People's 
Republic of China: Supplemental Questionnaire,'' dated July 28, 
2011.
---------------------------------------------------------------------------

    In the August 11, 2011 response, the GOC provided some additional 
ownership information; it also stated that certain companies that own 
some portion of wire rod producers did not have any GOC or CCP 
officials or representatives involved in their ownership, boards of 
directors or management.\36\ However, the GOC did not provide complete 
information requested with respect to whether GOC or CCP officials were 
involved in the ownership, board of directors or management of all of 
these wire rod producers. The GOC also explained that it was unable to 
obtain some of the company-specific ownership information for zinc 
producers and that it was not able to collect information on whether 
companies holding some share of zinc producers have any GOC or CCP 
officials involved in their ownership, boards of directors or 
management.\37\
---------------------------------------------------------------------------

    \36\ See GOC August 11, 2011 Supplemental Questionnaire Response 
at I-13-14, I-16.
    \37\ See id. at I-23.
---------------------------------------------------------------------------

    In addition to not providing all of the requested information 
regarding whether government and CCP officials were owners, members of 
the boards of directors, or managers of the input producers who 
produced the wire rod and zinc purchased by the respondents during the 
POI, the GOC also declined to answer questions about the CCP's 
structure and functions that are relevant to our determination of 
whether the producers of wire rod and zinc are government authorities 
within the meaning of section 771(5)(B) of the Act. On August 22, 2011, 
the GOC filed the remainder of its supplemental questionnaire response 
but it did not include any additional information regarding whether 
there were GOC or CCP officials involved in the management, board of 
directors or ownership of the wire rod or zinc input producers. Rather, 
the GOC stated that the CCP, along with other organizations, is not a 
government organization and that CCP officials' involvement in input 
producer companies ``does not lead to interference by the Chinese 
government in the management and operation of the input suppliers.'' 
\38\ Additionally, the GOC explained that Chinese law prohibits GOC 
officials from taking positions in private companies.\39\ Furthermore, 
the GOC explained that ``there is no central database to search the 
requested information and the industry and commerce administration does 
not require the companies to provide such information.'' \40\ As such, 
the GOC stated it was unable to respond to the questions regarding GOC 
and CCP officials' involvement in the wire rod and zinc input producers 
themselves and in the input producers' ownership and management.\41\
---------------------------------------------------------------------------

    \38\ See GOC August 22, 2011 Supplemental Questionnaire Response 
at I-7-10.
    \39\ See id.
    \40\ See id.
    \41\ See id.
---------------------------------------------------------------------------

    Regarding the GOC's objection to the Department's questions about 
the role of CCP officials in the management and operations of the wire 
rod and zinc input producers, we have explained our understanding of 
the CCP's involvement in the PRC's economic and political structure in 
a past proceeding.\42\ The Department considers the information 
regarding the CCP's involvement in the PRC's economic and political 
structure to be important because public information suggests that the 
CCP exerts significant control over activities in the PRC.\43\ This is 
supported by, among other documents, a publicly available background 
report from the U.S. Department of State.\44\ With regard to the GOC's 
claim that Chinese law prohibits GOC officials from taking positions in 
private companies, we have previously found that this particular law 
does not pertain to CCP officials.\45\
---------------------------------------------------------------------------

    \42\ See Memorandum regarding ``Galvanized Steel Wire from the 
People's Republic of China: Preliminary Countervailing Duty 
Determination: Additional Documents,'' dated August 29, 2011 at 
Attachment 1.
    \43\ See id. at Attachment 2.
    \44\ See id.; see also Certain Seamless Carbon and Alloy Steel 
Standard, Line, and Pressure Pipe from the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, Final 
Affirmative Critical Circumstances Determination, 75 FR 57444 
(September 21, 2010), and accompanying Issues and Decision 
Memorandum (Seamless Pipe from the PRC Decision Memorandum) at 
Comment 7.
    \45\ See Seamless Pipe from the PRC Decision Memorandum at 16.
---------------------------------------------------------------------------

    Because the GOC did not respond to our requests for information on 
this issue, we have no further basis for evaluating the GOC's claim 
that the role of the CCP is irrelevant. Thus, we continue to find that 
the information on the role of CCP officials in the management and 
operations of the wire rod and zinc input producers, and in the 
management and operations of the input producers' owners is necessary 
to our determination of whether these input producers are authorities 
within the meaning of section 771(5)(B) of the Act. Furthermore, we 
find that this is information that could be obtained by the GOC and 
further, the GOC did not provide any information regarding what 
attempts it undertook to obtain this information. Therefore, we 
determine that the GOC's statement that it is unable to provide this 
information is insufficient to find that the GOC has cooperated to the 
best of its ability.
    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 otherwise available'' in making our 
preliminary determination.\46\ 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.\47\ Therefore, based on AFA, we are finding that that all of 
the input producers of the wire rod and zinc purchased by the 
respondents during the POI are ``authorities'' within the meaning of 
section 771(5)(B) of the Act.
---------------------------------------------------------------------------

    \46\ See sections 776(a)(1) and (a)(2)(A) of the Act.
    \47\ See section 776(b) of the Act.
---------------------------------------------------------------------------

Application of AFA: Provision of Electricity for Less Than Adequate 
Remuneration

    The GOC did not provide complete responses to the Department's 
questions regarding the alleged provision of electricity for LTAR. 
These questions requested information to determine whether the 
provision of electricity constituted a financial contribution within 
the meaning of Section 771(5)(D) of the Act, whether such a provision 
provided a benefit within the meaning of Section 771(5)(E) of the Act 
and whether such a provision was specific with the meaning of Section 
771(5A) of the Act. In the both the Department's

[[Page 55036]]

May 19, 2011 original questionnaire and the July 28, 2011 supplemental 
questionnaire, for each province in which a respondent is located, the 
Department asked the GOC to provide a detailed explanation of: (1) How 
increases in the cost elements in the price proposals led to retail 
price increases for electricity; (2) how increases in labor costs, 
capital expenses and transmission, and distribution costs are factored 
into the price proposals for increases in electricity rates; and (3) 
how the cost element increases in the price proposals and the final 
price increases were allocated across the province and across tariff 
end-user categories. The GOC provided no provincial-specific data in 
its August 11, 2011 supplemental response.
    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.\48\ 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. In this regard, the GOC did 
not explain why it was unable to provide the requested information, nor 
did the GOC ask for additional time to gather and provide such 
information. Consequently, an adverse inference is warranted in the 
application of facts available.\49\ 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.\50\ The benchmark 
rates we have selected are derived from information from the record of 
the instant investigation and are the highest electricity rates on this 
record for the applicable rate and user categories.
---------------------------------------------------------------------------

    \48\ See sections 776(a)(1)-(a)(2)(A) of the Act.
    \49\ See section 776(b) of the Act.
    \50\ See id. at 776(b)(4).
---------------------------------------------------------------------------

    For details on the calculation of the subsidy rate for the 
respondents, see the ``Provision of Electricity for LTAR'' section 
below.

Subsidy Valuation Information

Allocation Period

    Under 19 CFR 351.524(d)(2), we presume the allocation period for 
non-recurring subsidies to be the average useful life (AUL) prescribed 
by the Internal Revenue Service (IRS) for renewable physical assets of 
the industry under consideration (as listed in the IRS's 1977 Class 
Life Asset Depreciation Range System, and as updated by the U.S. 
Department of the Treasury). This presumption will apply unless a party 
claims and establishes that these tables do not reasonably reflect the 
AUL of the renewable physical assets of the company or industry under 
investigation. According to the IRS' 1977 Class Life Asset Depreciation 
Range System, the AUL period for assets for galvanized wire is 12 
years. No party in this proceeding has disputed this allocation period.
    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 divide the amount of subsidies approved under a given program 
in a particular year by the 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.
    As discussed above, in accordance with the Department's practice, 
we identify and measure subsidies in the PRC beginning on the date of 
the country's accession to the WTO, i.e. December 11, 2001.\51\
---------------------------------------------------------------------------

    \51\ See, e.g., Certain Magnesia Carbon Bricks From the People's 
Republic of China: Final Affirmative Countervailing Duty 
Determination, 75 FR 45472 (August 2, 2010), and accompanying Issues 
and Decision Memorandum at ``Subsidies Valuation Information.''
---------------------------------------------------------------------------

Attribution of Subsidies

    In accordance with 19 CFR 351.525(b)(6)(i), the Department normally 
attributes a subsidy to the products produced by the corporation that 
received the subsidy. However, 19 CFR 351.525(b)(6)(ii)-(v) sets forth 
additional attribution rules for corporations with cross-ownership. The 
following types of cross-ownership are covered in these additional 
attribution rules: (ii) Two or more corporations with cross-ownership 
produce the subject merchandise; (iii) a firm that received a subsidy 
is a holding or parent company of the subject company; (iv) a firm that 
produces an input that is primarily dedicated to the production of the 
downstream product; or (v) a corporation producing non-subject 
merchandise received a subsidy and transferred the subsidy to a 
corporation with cross-ownership with the subject company.
1. Cross-Ownership
    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.\52\
---------------------------------------------------------------------------

    \52\ See Fabrique de Fer de Charleroi v. United States, 166 F. 
Supp. 2d 593, 600-604 (CIT 2001).
---------------------------------------------------------------------------

    Based on information on the record, we preliminarily determine that 
cross-ownership exists, in accordance with 19 CFR 351.525(b)(6)(vi), 
among and across the following companies involved in the production and 
sale of the subject merchandise.
The Huayuan Companies
    We preliminarily determine that cross-ownership exists within the 
Huayuan Companies among and across the following companies involved in 
the production and sale of the subject merchandise: HYW, Tianxin and 
MJH. Further, we preliminarily determine that cross-ownership does not 
exist between Times and the other companies in the Huayuan Companies. 
Because much of the information upon which this decision is based is 
business proprietary, a full discussion is set forth in the Huayuan 
Companies Preliminary Cross-Ownership Memorandum.\53\
---------------------------------------------------------------------------

    \53\ See Memorandum to Barbara E. Tillman, Director, AD/CVD 
Operations, Office 6, from Nicholas Czajkowski and David Lindgren, 
International Trade Compliance Analysts regarding ``Galvanized Steel 
Wire from the People's Republic of China: Preliminary Countervailing 
Duty Determination, Cross-Ownership: Huayuan Companies,'' dated 
August 29, 2011 (Huayuan Companies Preliminary Cross-Ownership 
Memorandum).
---------------------------------------------------------------------------

The Bao Zhang Companies
    We preliminarily determine that cross-ownership exists within the 
Bao Zhang Companies, in accordance with 19 CFR 351.525(b)(6)(vi), among 
and across the following companies involved in the production and sale 
of the subject merchandise: SBZ, ABZ and Li Chao. Because much of the 
information upon which this decision is based is business proprietary, 
a full discussion is set forth in the Bao Zhang

[[Page 55037]]

Companies Preliminary Cross-Ownership Memorandum.\54\
---------------------------------------------------------------------------

    \54\ See Memorandum to Barbara E. Tillman, Director, AD/CVD 
Operations, Office 6, from Nicholas Czajkowski and David Lindgren, 
International Trade Compliance Analysts regarding ``Galvanized Steel 
Wire from the People's Republic of China: Preliminary Countervailing 
Duty Determination, Cross-Ownership: Bao Zhang Companies,'' dated 
August 29, 2011(Bao Zhang Companies Preliminary Cross-Ownership 
Memorandum).
---------------------------------------------------------------------------

2. Trading Company Attribution
    Under 19 CFR 351.525(c), benefits from subsidies provided to a 
trading company which exports subject merchandise shall be cumulated 
with benefits from subsidies provided to the firm producing subject 
merchandise that is sold through the trading company, regardless of 
whether the trading company and the producing company are affiliated. 
M&M reported that it is a trading company and that it purchased 
galvanized wire to the United States during the POI from various 
producers,\55\ including the cross-owned producers of galvanized wire 
within the Huayuan Companies (HYW and Tianxin).\56\ M&M reported that 
it is not cross-owned with any of the producers from which it purchased 
galvanized wire, and there is no information on the record on the 
record that would cause the Department to conclude that M&M is cross-
owned with any of its suppliers.
---------------------------------------------------------------------------

    \55\ See M&M July 7, 2011 Questionnaire Response at III-2.
    \56\ See ``Cross-Ownership'' section above.
---------------------------------------------------------------------------

    When investigating or reviewing trading companies, the Department, 
has, in some instances, limited the number of producers it examines 
under 19 CFR 351.525(c).\57\ In determining a subsidy rate for M&M, we 
preliminarily determine that it is appropriate to limit our examination 
of the producers, which supplied M&M during the POI, to the cross-owned 
producers within the Huayuan Companies.\58\ Since this decision is 
based on business proprietary information, our analysis is set forth in 
M&M's preliminary calculation memorandum.\59\
---------------------------------------------------------------------------

    \57\ See Certain Pasta From Italy: Final Results of the Fourth 
Countervailing Duty Administrative Review, 66 FR 64214 (December 12, 
2001),and accompanying Issues and Decision Memorandum (Pasta from 
Italy Decision Memorandum) at ``Attribution''; see also Pre-Stressed 
Concrete Steel Wire Strand from the People's Republic of China: 
Preliminary Affirmative Countervailing Duty Determination, 74 FR 
56576, 56577-79 (November 2, 2009) (PC Strand from the PRC) 
(unchanged in the Pre-Stressed Concrete Steel Wire Strand from the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination, 75 FR 28557 (May 21, 2010), and accompanying Issues 
and Decision Memorandum (PC Strand from the PRC Decision Memorandum) 
at ``Attribution of Subsidies'').
    \58\ See Pasta from Italy Decision Memorandum at 
``Attribution''; see also PC Strand from the PRC Decision Memorandum 
at ``Attribution of Subsidies.''
    \59\ See Memorandum to Thomas Gilgunn, Program Manager, AD/CVD 
Operations, Office 6, from Nicholas Czajkowski and David Lindgren, 
International Trade Compliance Analysts regarding ``Countervailing 
Duty Investigation of Galvanized Steel Wire from the People's 
Republic of China: M&M Preliminary Calculation Memorandum,'' dated 
August 29, 2011 (M&M Preliminary Calculation Memorandum).
---------------------------------------------------------------------------

    Pursuant to the Department's trading company regulation at 19 CFR 
351.525(c), we find that any subsidies provided to the cross-owned 
producers within the Huayuan Companies are attributable to the subject 
merchandise exported by M&M. In accordance with 19 CFR 351.525(c), we 
cumulated the subsidies received by the cross-owned producers within 
the Huayuan Companies with the subsidies received by M&M. Specifically, 
for each countervailable subsidy received by the cross-owned producers 
within the Huayuan Companies, we derived the benefit and calculated a 
program subsidy rate, and cumulated those rates with the rates 
calculated for subsidies received directly by M&M.

Denominators

    When selecting an appropriate denominator for use in calculating 
the ad valorem subsidy rate, the Department considers the basis for the 
respondent's receipt of benefits under each program at issue. As 
discussed in further detail below in the ``Programs Preliminarily 
Determined To Be Countervailable'' section, where the program has been 
found to be an export subsidy, we used the recipient's total exports as 
the denominator. For cross-owned producers, we used total exports net 
of sales between the cross-owned producers, and where appropriate and 
possible, made adjustments for the value of the producers' sales sold 
through a cross-owned trading company.\60\
---------------------------------------------------------------------------

    \60\ See 19 CFR 351.525(b)(2), (b)(6), and (c).
---------------------------------------------------------------------------

    Where the program has been found to be countervailable as a 
domestic subsidy, we used the following denominators. If the subsidy 
was provided to one or more of the cross-owned producers of subject 
merchandise, we used the total sales of those producers net of any 
sales between the cross-owned producers. Where appropriate and 
possible, we made adjustments for the value of the cross-owned 
producers' sales sold through a cross-owned trading company. Where the 
subsidy was provided to a cross-owned input supplier, we used the total 
sales of the cross-owned producers of subject merchandise plus the 
sales of the cross-owned input supplier net of any sales between these 
companies (i.e., we used only external sales as the denominator). Where 
the subsidy was provided directly to a trading company, we used the 
trading company's total sales as the denominator.\61\ For a further 
discussion of the denominators used, see the Preliminary Calculation 
Memoranda.\62\
---------------------------------------------------------------------------

    \61\ See generally, 19 CFR 351.525(b).
    \62\ See Memorandum to Thomas Gilgunn, Program Manager, AD/CVD 
Operations, Office 6, from Nicholas Czajkowski and David Lindgren, 
International Trade Compliance Analysts regarding ``Countervailing 
Duty Investigation of Galvanized Steel Wire from the People's 
Republic of China: Bao Zhang Companies Preliminary Calculation 
Memorandum,'' dated August 29, 2011; see also Memorandum to Thomas 
Gilgunn, Program Manager, AD/CVD Operations, Office 6, from Nicholas 
Czajkowski and David Lindgren, International Trade Compliance 
Analysts regarding ``Countervailing Duty Investigation of Galvanized 
Steel Wire from the People's Republic of China: Huayuan Companies 
Preliminary Calculation Memorandum,'' dated August 29, 2011; see 
also M&M Preliminary Calculation Memorandum (collectively, 
Preliminary Calculation Memoranda).
---------------------------------------------------------------------------

Discount Rates for Allocating Non-Recurring Subsidies

    Consistent with 19 CFR 351.524(d)(3)(i)(C), we have used, as our 
discount rate, the long-term interest rate calculated according to the 
methodology described below for the year in which the government agreed 
to provide the subsidy.
1. Short-Term Interest Rate
    The Department's regulations at 19 CFR 351.524(d)(3) state that 
Department will use as a discount rate the following, in order of 
preference: (A) The cost of long-term, fixed-rate loans of the firm in 
question, excluding any loans that the Department has determined to be 
countervailable subsidies; (B) the average cost of long-term, fixed-
rate loans in the country in question; or (C) a rate that the 
Department considers to be most appropriate. 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.\63\ Because 
of this, any loans received by respondents from private Chinese or 
foreign-owned banks would be unsuitable for use as a discount rate 
under 19 CFR 351.524(d)(3)(i)(A). Similarly, we cannot use a national 
interest rate for commercial loans as envisaged by 19 CFR 
351.524(d)(3)(i)(A).
---------------------------------------------------------------------------

    \63\ See CFS from the PRC Decision Memorandum at Comment 10.
---------------------------------------------------------------------------

    Therefore, because of the special difficulties inherent in using a 
Chinese benchmark for loans, the Department is selecting an external 
market-based

[[Page 55038]]

benchmark interest rate. The use of an external benchmark is consistent 
with the Department's practice. For example, in lumber from Canada, the 
Department used U.S. timber prices to measure the benefit for 
government-provided timber in Canada.\64\
---------------------------------------------------------------------------

    \64\ 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) and accompanying Issues and Decision 
Memorandum (Softwood Lumber from Canada 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 updated in 
LWTP from the PRC.\65\ This benchmark interest rate is based on the 
inflation-adjusted interest rates of countries with per capita gross 
national incomes (GNIs) similar to the PRC, and takes into account a 
key factor involved in interest rate formation, that of the quality of 
a country's institutions, that is not directly tied to the state-
imposed distortions in the banking sector discussed above.
---------------------------------------------------------------------------

    \65\ See CFS Decision Memorandum at Comment 10; see also LWTP 
from the PRC Decision Memorandum at 8-10.
---------------------------------------------------------------------------

    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.\66\ As explained in CFS from the PRC, this pool of countries 
captures the broad inverse relationship between income and interest 
rates.
---------------------------------------------------------------------------

    \66\ See The World Bank Country Classification, http://econ.worldbank.org/.
---------------------------------------------------------------------------

    Many of these countries reported lending and inflation rates to the 
International Monetary Fund, and they 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 each 
year the Department calculated an inflation-adjusted short-term 
benchmark rate, we have also excluded any countries with aberrational 
or negative real interest rates for the year in question.\67\
---------------------------------------------------------------------------

    \67\ See Memorandum regarding ``Preliminary Affirmative 
Countervailing Duty Determination: Galvanized Steel Wire form the 
People's Republic of China, Benchmark Memorandum,'' dated August 29, 
2011 (Preliminary Benchmark Memorandum).
---------------------------------------------------------------------------

2. Long-Term Interest Rate
    The lending rates reported in the IFS represent short- and medium-
term lending, and there are not sufficient publicly available long-term 
interest rate data upon which to base a robust benchmark for long-term 
loans. To address this problem, the Department 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.\68\ In subsequent 
investigations, 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.\69\
---------------------------------------------------------------------------

    \68\ See, e.g., Light-Walled Rectangular Pipe and Tube From 
People's Republic of China: Final Affirmative Countervailing Duty 
Investigation Determination, 73 FR 35642 (June 24, 2008) and 
accompanying Issues and Decision Memorandum at 8.
    \69\  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) and accompanying Issues 
and Decision Memorandum at Comment 14.
---------------------------------------------------------------------------

    The resulting inflation-adjusted lending rates that we are using as 
discount rates are provided in the Preliminary Benchmark 
Memorandum.\70\ Based on this methodology, we calculated the discount 
rates to use in allocating non-recurring subsidies for this preliminary 
determination.
---------------------------------------------------------------------------

    \70\  See Preliminary Benchmark Memorandum at Attachment 8.
---------------------------------------------------------------------------

Analysis of Programs

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

Programs Preliminarily Determined To Be Countervailable

1. Provision of Wire Rod for LTAR
    The Department is investigating whether input producers, acting as 
Chinese government authorities, sold wire rod to the respondents for 
LTAR. Both the Huayuan Companies and the Bao Zhang Companies reported 
purchasing wire rod during the POI.\71\
---------------------------------------------------------------------------

    \71\  See Bao Zhang Companies June 27, 2011 Questionnaire 
Response at III-14; see also Huayuan Companies July 7, 2011 
Questionnaire Response at I-16, II-16.
---------------------------------------------------------------------------

    As discussed in detail above in the section ``Use of Facts 
Otherwise Available and Adverse Inferences,'' we are finding all of the 
wire rod input producers, which produced the wire rod purchased during 
the POI by both the Huayuan Companies and the Bao Zhang Companies, to 
be government authorities based on AFA. As a result, we preliminarily 
determine that the wire rod sold by these input producers that was 
purchased by the respondents during the POI constitutes a financial 
contribution in the form of a governmental provision of a good.\72\
---------------------------------------------------------------------------

    \72\ See section 771(5)(D)(iii) of the Act.
---------------------------------------------------------------------------

    Having dealt with financial contribution, we now turn to 
specificity, one of the three required subsidy elements under the 
Act.\73\ In our initial questionnaire, we asked the GOC to provide a 
list of industries in the PRC that purchase wire rod directly, using a 
consistent level of industrial classification.\74\ In response, the GOC 
simply stated that wire rod is used by a wide variety of steel-
consuming industries.\75\ In our supplemental questionnaire, we again 
asked the GOC to provide the information in the form requested, but the 
GOC provided the same response.\76\ While the GOC did not provide the 
information in the form requested, we have considered the GOC's 
response in light of the statutory standard for de facto specificity 
and, based on our review, we find the information is sufficient to 
reach a finding of specificity pursuant to section 771(5A)(D)(iii)(I) 
of the Act. This determination is consistent with wire decking from the 
PRC and PC Strand from the PRC in which the Department found the 
provision of wire rod to be specific, based on virtually the same 
facts.\77\
---------------------------------------------------------------------------

    \73\ See section 771(5A) of the Act.
    \74\ See May 19, 2011 Original Questionnaire at II-7.
    \75\ See GOC July 7, 2011 Questionnaire Response at 34.
    \76\ See GOC August 22, 2011 Supplemental Questionnaire Response 
at I-14.
    \77\ See Wire Decking from the People's Republic of China: Final 
Affirmative Countervailing Duty Determination, 75 FR 32902 (June 10, 
2010) (Wire Decking from the PRC), and accompanying Issues and 
Decision Memorandum (Wire Decking from the PRC Decision Memorandum) 
at ``Provision of Wire Rod for LTAR''; see also PC Strand from the 
PRC Decision Memorandum at Comment 12.

---------------------------------------------------------------------------

[[Page 55039]]

    With regard to benefit, the third required subsidy element, we 
preliminarily determine that the respondents received a benefit to the 
extent that the purchased wire rod was provided for LTAR.\78\ The 
criteria for identifying appropriate market-determined benchmarks for 
measuring whether the government-provided goods were provided for LTAR 
are set forth at 19 CFR 351.511(a)(2). 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 the Department has previously explained, 
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.\79\
---------------------------------------------------------------------------

    \78\ See section 771(5)(E)(iv) of the Act.
    \79\ See Softwood Lumber from Canada Decision Memorandum at 
``Market-Based Benchmark.''
---------------------------------------------------------------------------

    In evaluating whether there are market prices for actual 
transactions within the country under investigation (i.e., tier one 
prices), we must first determine whether the prices from actual sales 
transactions involving PRC buyers and sellers are significantly 
distorted. As explained in the preamble to the regulations:
    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.\80\
---------------------------------------------------------------------------

    \80\ See Countervailing Duties, 63 FR 65348, 65377 (November 25, 
1998).
---------------------------------------------------------------------------

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.\81\
---------------------------------------------------------------------------

    \81\ See id.
---------------------------------------------------------------------------

    In the original questionnaire, we asked the GOC to provide 
production figures of wire rod by state-owned enterprises (SOEs) during 
2008, 2009 and 2010. The GOC provided information regarding government 
ownership of wire rod producers during 2008 only. The GOC stated that 
gathering such information for 2009 and 2010 would ``take months to 
achieve'' and, thus, it did not provide these figures.\82\ We note that 
the only information relevant to the POI that the GOC provided were 
statements to the effect that certain pre-existing export restraints 
(i.e., export licenses and export taxes) for wire rod were not present 
during the POI. Therefore, the GOC has not provided the necessary or 
requested information for the Department to undertake a complete 
analysis regarding the government's role in the market for wire rod 
during the POI, and it is necessary to resort to the facts otherwise 
available pursuant to section 776(a) of the Act. As facts become 
available, we find that PRC prices of wire rod are significantly 
distorted as a result of the GOC's involvement in the market.\83\
---------------------------------------------------------------------------

    \82\ See GOC July 7, 2011 Questionnaire Response at 29.
    \83\ 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 ``Provision of Wire Rod for Less than 
Adequate Remuneration''; see also Wire Decking from the PRC at 
``Provision of Wire Rod for LTAR.'' The POI for Wire Decking from 
the PRC was 2008. The ownership/production for wire rod which the 
GOC submitted in the instant case is consistent with what it 
submitted in Wire Decking from the PRC. Because the GOC submitted 
ownership/production information from 2008 in this investigation and 
statements about wire rod exports during 2010, the Department was 
prevented from being able to conduct a full analysis.
---------------------------------------------------------------------------

    Consequently, we determine that there are no appropriate tier one 
benchmark prices available for wire rod. Because we determine that 
there are no available tier one benchmark prices, we have turned to 
tier two (i.e., world market prices) available to purchasers in the 
PRC. For purposes of the preliminary determination, we find that the 
Japanese and Black Sea FOB export price data from the World Bank and 
Steel Business Briefing (SBB), respectively, should be used to derive a 
tier two, world market price for wire rod that would be available to 
purchasers of wire rod in the PRC.\84\ We find that, for purposes of 
the preliminary determination, prices from the World Bank and SBB to be 
sufficiently reliable and representative. Both sources identify that 
the prices reported are export prices and that they are on an FOB 
basis. Such prices would be available to purchasers in the PRC. We 
adjusted these FOB export prices to reflect, as closely as possible, 
the price that the respondent firm would pay if it imported the 
product, including import duties and valued added tax (VAT), ocean 
freight and domestic inland freight as stipulated in 19 CFR 
351.511(a)(2)(iv). Where necessary, we converted the variables in the 
benchmark calculation to the same currency and unit of measure as 
reported by the mandatory respondents for their purchases of wire rod.
---------------------------------------------------------------------------

    \84\ See Preliminary Benchmark Memorandum.
---------------------------------------------------------------------------

    Some of the respondents have reported acquiring wire rod from 
trading companies or non-producing suppliers with which they were not 
cross-owned. In prior CVD proceedings involving the PRC, the Department 
has determined that when a respondent purchases an input from a trading 
company or non-producing supplier, but the producer of the input is an 
``authority'' within the meaning of section 771(5)(B) of the Act, we 
must evaluate whether the input has been provided for LTAR by comparing 
the price paid by the respondent to the trading company to the 
benchmark price.\85\ Therefore, in our initial questionnaire, we 
requested that the respondent companies and the GOC work together in 
order to identify the producers from whom the trading companies 
acquired the wire rod that was subsequently sold to the respondents 
during the POI and to provide information that would allow the 
Department to determine whether those producers were government 
authorities. As stated previously, the Department has preliminarily 
determined all input producers of wire rod purchased by the respondents 
during the POI are authorities.
---------------------------------------------------------------------------

    \85\ See Racks from the PRC Decision Memorandum at ``Provision 
of Wire Rod for Less than Adequate Remuneration'' section; see also 
Circular Welded Austenitic Stainless Pressure Pipe from the People's 
Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 4936 (January 28, 2009), and accompanying 
Issues and Decision Memorandum (CWASPP from the PRC Decision 
Memorandum) at ``Provision of SSC for LTAR.''
---------------------------------------------------------------------------

    To determine whether the respondent producers purchased wire rod 
for LTAR, we compared the unit prices each respondent paid for its wire 
rod to our wire rod benchmark price. Where the purchase was made from a 
non-producing cross-owned supplier, we used the price paid by the 
cross-owned supplier for comparison purposes. We conducted our 
comparison on a monthly basis. Based on this comparison, we 
preliminarily determine that wire rod was provided for LTAR and that a 
benefit exists in the total amount of the difference between the 
benchmark and the price paid.\86\
---------------------------------------------------------------------------

    \86\ See section 771(5)(E)(iv) of the Act and 19 CFR 351.511(a).

---------------------------------------------------------------------------

[[Page 55040]]

    To calculate the subsidy rate, we divided the total benefit to each 
respondent by the appropriate denominator discussed above in the 
``Subsidy Valuation Information'' section, and in the Preliminary 
Calculation Memoranda. On this basis, we calculated a subsidy of 45.94 
percent ad valorem for the Huayuan Companies, 19.04 percent ad valorem 
for the Bao Zhang Companies, and 45.94 percent ad valorem for M&M.
2. Provision of Zinc for LTAR
    The Department is investigating whether input producers, acting as 
Chinese government authorities, sold zinc to the respondents for LTAR. 
Both the Huayuan Companies and the Bao Zhang Companies reported 
purchasing zinc during the POI.\87\
---------------------------------------------------------------------------

    \87\ See Bao Zhang Companies June 27, 2011 Questionnaire 
Response at III-15; see also Huayuan Companies July 7, 2011 
Questionnaire Response at I-17.
---------------------------------------------------------------------------

    As discussed in detail above in the section ``Use of Facts 
Otherwise Available and Adverse Inferences,'' we are finding all of the 
zinc input producers that produced the zinc the Huayuan Companies and 
the Bao Zhang Companies purchased during the POI to be government 
authorities based on AFA. As a result, we preliminarily determine that 
the zinc sold by these input producers that was purchased by the 
respondents during the POI constitutes a financial contribution in the 
form of a governmental provision of a good.\88\
---------------------------------------------------------------------------

    \88\ See section 771(5)(D)(iii) of the Act.
---------------------------------------------------------------------------

    Having dealt with financial contribution, we now turn to 
specificity, one of the three required subsidy elements under the 
Act.\89\ In our initial questionnaire, we asked the GOC to provide a 
list of industries in the PRC that purchase zinc directly, using a 
consistent level of industrial classification.\90\ In response, the GOC 
stated that zinc had a wide range of uses (e.g., galvanized steel 
products, alkaline batteries, various metal alloys, etc.) and that ``a 
comprehensive list of industries that purchase zinc directly is not 
available to be provided.'' \91\ While the GOC did not provide the 
information in the form requested, we have considered the GOC's 
response in light of the statutory standard for de facto specificity 
and, based on our review, we find the information is sufficient to 
reach a finding of specificity pursuant to section 771(5A)(D)(iii)(I) 
of the Act. This determination is consistent with Wire Decking from the 
PRC, in which the Department found the provision of zinc to be 
specific, based on virtually the same facts.\92\
---------------------------------------------------------------------------

    \89\ See section 771(5A) of the Act.
    \90\ See May 19, 2011 Original Questionnaire at II-7.
    \91\ See GOC July 7, 2011 Questionnaire Response at 43.
    \92\ See Wire Decking from the PRC Decision Memorandum at 
``Provision of Zinc for LTAR.''
---------------------------------------------------------------------------

    With regard to benefit, the third required subsidy element, we 
preliminarily determine that the respondents received a benefit to the 
extent that the zinc purchased was provided for LTAR.\93\ The criteria 
for identifying appropriate market-determined benchmarks for measuring 
whether the government-provided goods were provided for LTAR are set 
forth at 19 CFR 351.511(a)(2) and discussed above in the ``Provision of 
Wire Rod for LTAR'' section.
---------------------------------------------------------------------------

    \93\ See section 771(5)(E)(iv) of the Act.
---------------------------------------------------------------------------

    In the original questionnaire, we asked the GOC to provide 
production figures of zinc by SOEs during 2008, 2009 and 2010. The GOC 
provided information regarding government ownership of zinc producers 
during 2008 only. The GOC stated that gathering such information for 
2009 and 2010 would ``take months to achieve'' and, thus, it did not 
provide these figures. We note that the only information relevant to 
the POI that the GOC provided were statements to the effect that 
exports of zinc were subject to export licenses and that there is no 
``quantitative restriction.'' \94\ Therefore, the GOC has not provided 
the necessary or requested information for the Department to undertake 
a complete analysis, regarding the government's role in the market for 
zinc during the POI, and it is necessary to resort to the facts 
otherwise available pursuant to section 776(a) of the Act. As facts 
become available, we find that the zinc industry is significantly 
distorted as a result of the GOC's involvement in the market.\95\
---------------------------------------------------------------------------

    \94\ See GOC July 7, 2011 Questionnaire Response at 41.
    \95\ See Wire Decking from the PRC at ``Provision of Zinc for 
LTAR.'' The POI for Wire Decking from the PRC was 2008. The 
ownership/production for zinc which the GOC submitted in the instant 
case is consistent with what it submitted in Wire Decking from the 
PRC. The Department is unable to undertake a complete analysis based 
on ownership/production information from 2008 and the GOC's 
statements about zinc exports during 2010.
---------------------------------------------------------------------------

    Consequently, we determine that there are no appropriate tier one 
benchmark prices available for zinc. Because we determine that there 
are no available tier one benchmark prices, we have turned to tier two 
(i.e., world market prices) available to purchasers in the PRC. For 
purposes of the preliminary determination, we find that the data from 
the World Bank, the International Monetary Fund (IMF) and SBB should be 
used to derive a tier two world market price for zinc that would be 
available to purchasers of zinc in the PRC.\96\ We find that, for 
purposes of the preliminary determination, prices from the World Bank, 
IMF and SBB to be sufficiently reliable and representative. All three 
sources report London Metal Exchange world market zinc prices. Such 
prices would be available to purchasers in the PRC. We adjusted these 
prices to reflect, as closely as possible, the price that the 
respondent firm would pay if it imported the product, including import 
duties and VAT, ocean freight and domestic inland freight as stipulated 
in 19 CFR 351.511(a)(2)(iv). Where necessary, we converted the 
variables in the benchmark calculation to the same currency and unit of 
measure as reported by the mandatory respondents for their purchases of 
zinc.
---------------------------------------------------------------------------

    \96\ See Preliminary Benchmark Memorandum.
---------------------------------------------------------------------------

    Some of the respondents have reported acquiring zinc from trading 
companies or non-producing suppliers with which they were not cross-
owned. In prior CVD proceedings involving the PRC, the Department has 
determined that when a respondent purchases an input from a trading 
company or non-producing supplier, but the producer of the input is an 
``authority'' within the meaning of section 771(5)(B) of the Act, we 
must evaluate whether the input has been provided for LTAR by comparing 
the price paid by the respondent to the trading company to the 
benchmark price.\97\ Therefore, in our initial questionnaire, we 
requested that the respondent companies and the GOC work together in 
order to identify the producers from whom the trading companies 
acquired the zinc that was subsequently sold to the respondents during 
the POI and to provide information that would allow the Department to 
determine whether those producers were government authorities. As 
stated previously, the Department has preliminarily determined all zinc 
producers to be government authorities.
---------------------------------------------------------------------------

    \97\ See Racks from the PRC Decision Memorandum at ``Provision 
of Wire Rod for LTAR'' section; see also CWASPP from the PRC 
Decision Memorandum at ``Provision of SSC for LTAR.''
---------------------------------------------------------------------------

    To determine whether the respondent producers purchased zinc for 
LTAR, we compared the unit prices each respondent paid for its zinc to 
our zinc benchmark price. We conducted our comparison on a monthly 
basis. Based on this comparison, we preliminarily determine that zinc 
was provided for LTAR and that a benefit exists in the

[[Page 55041]]

total amount of the difference between the benchmark and the price 
paid.\98\
---------------------------------------------------------------------------

    \98\ See section 771(5)(E)(iv) of the Act and 19 CFR 351.511(a).
---------------------------------------------------------------------------

    To calculate the subsidy rate, we divided the total benefit to each 
respondent by the appropriate denominator discussed above in the 
``Subsidy Valuation Information'' section, and in the Preliminary 
Calculation Memoranda. On this basis, we calculated a subsidy of 1.68 
percent ad valorem for the Huayuan Companies, 0.08 percent ad valorem 
for the Bao Zhang Companies, and 1.68 percent ad valorem for M&M.
3. 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 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 Huayuan Companies, M&M, and the Bao Zhang Companies 
provided data on the electricity the companies consumed and the 
electricity rates paid during the POI.\99\
---------------------------------------------------------------------------

    \99\ See Bao Zhang Companies August 9, 2011 Supplemental 
Questionnaire Response at Exhibit 14; see also Huayuan Companies 
August 9, 2011 Supplemental Questionnaire Response at Exhibit I-S-
10, II-S-7; see also MJH August 17, 2011 Supplemental Questionnaire 
Response at 2; see also M&M August 17, 2011 Supplemental 
Questionnaire Response at Exhibit 1.
---------------------------------------------------------------------------

    As noted above, the GOC did not provide the information requested 
by the Department as it pertains to the provision of electricity for 
LTAR program. We find that in deciding not to provide the requested 
information the GOC did not act to the best of its ability. 
Accordingly, in selecting from among the facts available, we are 
drawing an adverse inference with respect to the provision of 
electricity in the PRC and determine that the GOC is providing a 
financial contribution that is specific within the meaning of sections 
771(5)(D)(iii) and 771(5A)(D) of the Act. To determine the existence 
and amount of any benefit from this program, we relied on the 
respondents' reported information on the amounts of electricity used 
during the POI. We compared the rates paid by the respondents for their 
electricity to the highest rates that they could have paid in the PRC 
during the POI.
    To calculate the benchmark, we selected the highest rates in the 
PRC for the type of user (e.g., ``large industrial users'') for the 
general or peak, normal, and valley ranges, as provided by the 
GOC.\100\ The electricity rate benchmark chart is included in the 
Preliminary Benchmark Memorandum. 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.
---------------------------------------------------------------------------

    \100\ See GOC July 7, 2011 Questionnaire Response at Exhibit 17.
---------------------------------------------------------------------------

    To measure whether the respondents received a benefit under this 
program, we first calculated the electricity prices the respondents 
paid by multiplying the monthly kilowatt hours or kilovolt amperes 
consumed for each price category (e.g., great industry peak, basic 
electricity, etc.) by the corresponding electricity rates charged for 
each price category. Next, we calculated the benchmark electricity cost 
by multiplying the monthly consumption reported by the respondents for 
each price category (e.g., great industry peak, basic electricity) by 
the highest electricity rate charged for each price category, as 
reflected in the electricity rate benchmark chart. To calculate the 
benefit for each month, we subtracted the amount paid by the 
respondents for electricity during each month of the POI from the 
monthly benchmark electricity price. We then calculated the total 
benefit for each company during the POI by summing the monthly benefits 
for each company.
    Certain respondents also reported receiving electricity 
adjustments, but did not provide any explanation for these adjustments. 
Absent an explanation, the Department has no basis to consider 
including these adjustments in our preliminary calculations. The 
Department will request additional information from respondents 
regarding these adjustments and, for the final determination, will 
evaluate whether and how they should be allocated to electricity 
consumption.
    To calculate the subsidy rate pertaining to electricity payments 
made by the respondents, we divided the benefit amount by the 
appropriate total sales denominator, as discussed in the ``Subsidy 
Valuation Information'' section above, and in the Preliminary 
Calculation Memoranda. On this basis, we preliminarily determine a 
countervailable subsidy of 1.04 percent ad valorem for the Huayuan 
Companies, 2.37 percent ad valorem for the Bao Zhang Companies, and 
1.04 percent ad valorem for M&M.
4. Export Grants From Local Governments
    We initiated on a program entitled ``Export Assistance Grants.'' 
\101\ In their questionnaire responses, two of the respondents reported 
that they had received export assistance grants from local governments, 
and another reported that it had received grants provided by the local 
government to assist in the development of export markets or to 
recognize export performance. Specifically, the Bao Zhang Companies 
reported that ABZ received: 1) an ``Export Award;'' 2) a ``Foreign 
Trade Promotion Award;'' and 3) financial assistance for an overseas 
market survey visit, all from the local Commerce Bureau.\102\ The 
Huayuan Companies reported that MJH received ``international market 
development'' export assistance grants from the Tianjin Treasure Bureau 
prior to and during the POI.\103\ M&M also reported receiving 
``international market development'' export assistance grants from the 
Beijing Municipal Commission of Commerce during the POI.\104\
---------------------------------------------------------------------------

    \101\ See Initiation Notice.
    \102\ See Bao Zhang August 19, 2011 Supplemental Questionnaire 
Response at I-7.
    \103\ See Huayuan Companies July 7, 2011 Questionnaire Response 
at IV-III-22-25; see also Huayuan Companies August 9, 2011 
Supplemental Questionnaire Response at IV-12.
    \104\ See M&M July 7, 2011 Questionnaire Response at III-23 to 
III-26.
---------------------------------------------------------------------------

    All three of ABZ's grants were reported to have been received for 
activities related to exporting. Regarding MJH's and M&M's grants, both 
reported that a company that is legally entitled to export may apply 
for the international market development grant for expenses incurred 
for visiting overseas clients or participating in overseas 
exhibitions.\105\ Based on information on the record, we find that 
these grants constitute a financial contribution within the meaning of 
section 771(5)(D)(i) of the Act. A benefit is received equal to the 
amount of the grants, in accordance with 19 CFR 351.504(a). Because the 
grants were reportedly provided for promoting exports or were otherwise 
export-related, we preliminarily

[[Page 55042]]

determine that the grants are specific as export subsidies within the 
meaning of section 771(5A)(B) of the Act. We intend to further 
investigate these programs during the remainder of the investigation.
---------------------------------------------------------------------------

    \105\ See Huayuan Companies July 7, 2011 Questionnaire Response 
at IV-III-23; see also M&M July 7, 2011 Questionnaire Response at 
III-24.
---------------------------------------------------------------------------

    In accordance with 19 CFR 351.504(c) and 19 CFR 351.524(b)(2), we 
have performed the ``0.5 percent test,'' for each year in which a grant 
was provided to ABZ, MJH and M&M. Specifically, for each year in which 
a grant was received, we divided the total amount of the grants 
received by each company by the relevant sales values. For those years 
in which the total amount of the grants exceeded 0.5 percent of the 
relevant sales in that year, we allocated the grants over time in 
accordance with 19 CFR 351.524. Otherwise, they were expensed in the 
year of receipt. To allocate the grants over time, we applied the 
calculation methodology set forth in 19 CFR 351.524(d), and used the 
AUL and the discount rates described above in the ``Subsidies Valuation 
Information'' section. To determine each company's total benefit, we 
summed the amount of the benefits from each of these grants 
attributable to the POI.
    To calculate the subsidy rate pertaining to these export grants, we 
divided the total benefit amount by the appropriate export sales 
denominator, as discussed in the ``Subsidy Valuation Information'' 
section above, and in the Preliminary Calculation Memoranda. On this 
basis, we preliminarily determine a countervailable subsidy of 0.15 
percent ad valorem for the Huayuan Companies, 0.09 percent ad valorem 
for the Bao Zhang Companies, and 0.24 percent ad valorem for M&M.
5. Exemption From City Construction Tax and Education Tax for Foreign 
Invested Enterprises
    The Bao Zhang Companies reported that ABZ received benefits under 
the ``Exemption from City Construction Tax and Education Tax for 
Foreign Invested Enterprises (FIEs)'' program. According to the Bao 
Zhang Companies, ABZ received an exemption from paying the Urban 
Maintenance and Construction Tax and Additional Education Fees which 
are based on the VAT payable by a company every month. The Bao Zhang 
Companies stated that ABZ qualified for this benefit because it is an 
FIE. Consistent with our findings in Aluminum Extrusions from the PRC 
and 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.\106\ The tax 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 
tax savings.\107\ 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, are specific under section 
771(5A)(D)(i) of the Act. To calculate the benefit, we treated ABZ's 
tax exemptions as recurring benefits, consistent with 19 CFR 
351.524(c)(1), as the exemptions are based on the VAT payable by 
companies every year.
---------------------------------------------------------------------------

    \106\ See Aluminum Extrusions from the PRC Decision Memorandum 
at ``Exemption from City Construction Tax and Education Tax for 
FIEs;'' see also Racks from the PRC Decision Memorandum at 
``Exemption from City Construction Tax and Education Tax for FIEs in 
Guangdong Province.''
    \107\ See section 771(5)(D)(ii) of the Act and 19 CFR 
351.509(a)(1).
---------------------------------------------------------------------------

    To compute the amount of the benefit under these exemptions, we 
first determined the rate the companies would have paid in the absence 
of the program. According to the Bao Zhang Companies, non-FIEs would 
have to pay one percent of their VAT payable every year for the Urban 
Maintenance and Construction Tax and three percent of their VAT payable 
every year for Additional Education Fees.\108\ Therefore, we 
preliminarily determine that, absent these exemptions, ABZ should have 
paid four percent of its VAT payable for these taxes. Next, we compared 
the amount the companies would have paid in the absence of the program 
(four percent of VAT payable during the POI) with the rate the 
companies paid (zero), because they are FIEs.
---------------------------------------------------------------------------

    \108\ See Bao Zhang Companies August 9, 2011 Supplemental 
Questionnaire Response at I-17-18.
---------------------------------------------------------------------------

    To calculate the subsidy rate, we divided the sum of all tax 
savings, during the POI, by the appropriate sales denominator as 
discussed above in the ``Subsidy Valuation Information'' section and 
the Preliminary Calculation Memoranda. On this basis, we preliminarily 
determine the countervailable subsidy to be 0.01 percent ad valorem for 
the Bao Zhang Companies.
    According to the GOC, this program was terminated effective 
December 1, 2010.\109\ While there is sufficient evidence on the record 
demonstrating that a countervailable subsidy was conferred during the 
POI, we are unable to determine whether a program-wide change, in 
accordance with 19 CFR 351.526, with respect to this program has 
occurred. Specifically, the GOC has not provided information clarifying 
whether a substitute program has been established to replace this 
program in accordance with 19 CFR 351.526(d)(2). Therefore, we will 
request from the GOC additional information necessary to determine 
whether this program has been terminated. If we find that this program 
was terminated in accordance with the provisions of 19 CFR 351.526(d), 
we will adjust the cash deposit rate accordingly for the final 
determination.
---------------------------------------------------------------------------

    \109\ See GOC July 7, 2011 Questionnaire Response at 74.
---------------------------------------------------------------------------

Program Preliminarily Determined Not To Confer a Countervailable 
Benefit During the POI

Export Subsidies 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.'' \110\ To determine whether the 
GOC provided a benefit under this program, we compared the VAT rebate 
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, during the POI, the VAT levied on both wire rod and 
zinc sales in the domestic market was 17 percent and that the VAT 
exemption upon the export of galvanized wire was nine percent.\111\ 
Therefore, we find that the VAT exempted upon the export of galvanized 
wire did not confer a countervailable benefit during the POI because 
the amount of the VAT rebated on export is lower than the amount paid 
in the domestic market.
---------------------------------------------------------------------------

    \110\ See 19 CFR 351.517(a); see also 19 CFR 351.102(a)(28).
    \111\ See, e.g., GOC August 22, 2011 Supplemental Questionnaire 
Response at I-22.
---------------------------------------------------------------------------

Programs Preliminarily Determined To Be Not Used By Respondents \112\
---------------------------------------------------------------------------

    \112\ In this section we refer to programs preliminarily 
determined to be not used by the three participating respondent 
companies.
---------------------------------------------------------------------------

    We preliminarily determine that the participating respondents did 
not apply for or receive any benefits during the POI under the 
following programs:
    1. Provision of Land Use Rights for LTAR within the Jinzhou 
District within the City of Dalian.
    2. Provision of Land Use Rights for LTAR to Enterprises within the 
Zhaoqing High-Tech Industry Development Zone in Guangdong Province.

[[Page 55043]]

    3. Provision of Land Use Rights for LTAR to Enterprises within the 
South Sanshui Science and Technology Industrial Park of Foshan City.
    4. Income Tax Credits for Domestically-Owned Companies Purchasing 
Domestically-Produced Equipment.
    5. Income Tax Exemption for Investment in Domestic Technological 
Renovation.
    6. Accelerated Depreciation for Enterprises Located in the 
Northeast Region.
    7. Forgiveness of Tax Arrears for Enterprises in the Old Industrial 
Bases of Northeast China.
    8. Income Tax Exemption for Investors in Designated Geographical 
Regions within Liaoning Province.
    9. VAT Deduction on Fixed Assets.
    10. Import Tariff and VAT Exemptions for FIEs and Certain Domestic 
Enterprises Using Imported Equipment in Encouraged Industries.
    11. Reduction in or Exemption from Fixed Assets Investment 
Orientation Regulatory Tax.
    12. ``Five Points, One Line'' Program of Liaoning Province.
    13. Provincial Export Interest Subsidies.
    14. State Key Technology Project Fund.
    15. Subsidies for Development of Famous Export Brands and China 
World Top Brands.
    16. Sub-Central Government Programs to Promote Famous Export Brands 
and China World Top Brands.
    17. Zhejiang Province Program to Rebate Antidumping Legal Fees.
    18. Technology to Improve Trade Research and Development Fund of 
Jiangsu Province.
    19. Outstanding Growth Private Enterprise and Small and Medium-
Sized Enterprises Development in Jiangyin Fund of Jiangyin City.
    20. Grants for Programs Under the 2007 Science and Technology 
Development Plan in Shandong Province.
    21. Special Funds for Encouraging Foreign Economic and Trade 
Development and for Drawing Significant Foreign Investment Projects in 
Shandong Province.
    22. ``Two Free, Three Half'' Tax Exemptions for ``Productive'' 
FIEs.
    23. Income Tax Exemption Program for Export-Oriented FIEs.
    24. Local Income Tax Exemption and Reduction Programs for 
``Productive'' FIEs.
    25. Preferential Tax Programs for FIEs Recognized as High or New 
Technology Enterprises.
    26. Income Tax Subsidies for FIEs Based on Geographic Location.
    27. VAT Refunds for FIEs Purchasing Domestically-Produced 
Equipment.
    28. Income Tax Credits for FIEs Purchasing Domestically-Produced 
Equipment.

Programs for Which Additional Information Is Needed

    The Department finds that additional information is needed in order 
to determine whether the following programs are countervailable. After 
gathering and analyzing the additional information, the Department 
intends to issue a post-preliminary analysis regarding whether these 
programs are countervailable.
1. Policy Loans to the Galvanized Wire Industry
    The Department initiated on five ``preferential loans and interest 
rates'' programs: (1) Policy Loans to the Galvanized Steel Wire 
Industry; (2) Preferential Loans for Key Projects and Technologies; (3) 
Preferential Loans and Directed Credit; (4) Preferential Lending to 
galvanized wire Producers and Exporters Classified as ``Honorable 
Enterprises;'' and (5) Loans and Interest Subsidies Provided Pursuant 
to the Northeast Revitalization Program.\113\ Only the Bao Zhang 
Companies reported outstanding loans from banks during the POI. The Bao 
Zhang Companies reported that SBZ received loans from banks that were 
outstanding during the POI, but that neither of these banks are state-
owned commercial banks.\114\ In the supplemental questionnaire, we 
requested that the GOC provide information regarding the ownership of 
these two banks. In its August 22, 2011 supplemental questionnaire 
response, the GOC states that, for one of the banks, state ownership 
accounted for less than one percent of the total shares of the bank. 
For the other bank, the GOC states that a ``state-owned legal person'' 
accounted for over 70 percent of the ownership of the bank during the 
POI.\115\ Because the fact that these loans may be from government-
owned or controlled banks was provided only in the August 22, 2011 
supplemental questionnaire response, the Department has not had 
sufficient time to request additional information about the nature of 
these loans nor to assess whether these loans are countervailable. 
Therefore, the Department needs additional information to determine 
whether the loans received by SBZ constitute a countervailable subsidy.
---------------------------------------------------------------------------

    \113\ See Initiation Notice, 76 FR at 23567.
    \114\ See Bao Zhang Companies July 7, 2011 Questionnaire 
Response at III-10.
    \115\ See GOC August 22, 2011 Supplemental Questionnaire 
Response at I-3.
---------------------------------------------------------------------------

2. Zhabei District ``Save Energy Reduce Emission Team'' Award
    In response to questions in our supplemental questionnaires to the 
respondent companies regarding income items listed in their financial 
statements, the Bao Zhang Companies reported, in their August 19, 2011 
supplemental questionnaire response, that SBZ received a ``Save Energy 
Reduce Emission Team'' award in 2010.\116\ The Bao Zhang Companies 
stated that the financial award was given by the Zhabei District to SBZ 
for successfully renovating its coal burning oven into a vacant 
(vacuum) oven, saving energy and reducing emissions.\117\ This 
information was provided too late for the Department to issue questions 
to both the GOC and the Bao Zhang Companies concerning this program. As 
such, we are unable to reach a preliminary determination regarding the 
countervailability of this program for the preliminary determination.
---------------------------------------------------------------------------

    \116\ See Bao Zhang Companies August 19, 2011 Supplemental 
Questionnaire Response at I-10.
    \117\ See id.
---------------------------------------------------------------------------

Verification

    In accordance with section 782(i)(1) of the Act, the Department 
will verify the information submitted by the Huayuan Companies, M&M, 
the Bao Zhang Companies, and the GOC prior to making our final 
determination.

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for subject merchandise produced and 
exported by the entities individually investigated. We have also 
calculated an all-others rate. Sections 703(d) and 705(c)(5)(A) of the 
Act state that for companies not investigated, we will determine an 
all-others rate by weighting the individual company subsidy rate of 
each of the companies investigated by each company's exports of the 
subject merchandise to the United States. However, the all-others rate 
may not include zero and de minimis rates or any rates based solely on 
the facts available. In this investigation, the three calculated rates 
can be used to calculate the all-others rate. Therefore, we have 
assigned the weighted-average of these three calculated rates as the 
all-others rate. We preliminarily determine the

[[Page 55044]]

total estimated countervailable subsidy rates to be:

------------------------------------------------------------------------
           Company                            Subsidy rate
------------------------------------------------------------------------
Tianjin Huayuan Metal Wire     48.81 percent ad valorem.
 Products Co., Ltd.; Tianjin
 Tianxin Metal Products Co.,
 Ltd.; and Tianjin Mei Jia
 Hua Trade Co., Ltd.
 (collectively, the Huayuan
 Companies).
M&M Industries Co., Ltd......  48.90 percent ad valorem.
Shanghai Bao Zhang Industry    21.59 percent ad valorem.
 Co., Ltd.; Anhui Bao Zhang
 Metal Products Co., Ltd.;
 and Shanghai Li Chao
 Industry Co., Ltd.
 (collectively, the Bao Zhang
 Companies).
Shandong Hualing Hardware and  253.07 percent ad valorem.
 Tool Co., Ltd..
All Others Rate..............  44.46 percent ad valorem.
------------------------------------------------------------------------

    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), we will disclose to the 
parties the calculations for this preliminary determination within five 
days of its announcement. We will notify parties of the schedule for 
submitting case briefs and rebuttal briefs, in accordance with 19 CFR 
351.309(c) and 19 CFR 351.309(d)(1), respectively. A list of 
authorities relied upon, a table of contents, and an executive summary 
of issues should accompany any briefs submitted to the Department. 
Executive summaries should be limited to five pages total, including 
footnotes. Section 774 of the Act provides that the Department will 
hold a public hearing to afford interested parties an opportunity to 
comment on arguments raised in case or rebuttal briefs, provided that 
such a hearing is requested by an interested party. If a request for a 
hearing is made in this investigation, we intend to hold the hearing 
two days after the deadline for submission of the rebuttal briefs, 
pursuant to 19 CFR 351.310(d). Any such hearing will be held at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. Parties should confirm, by telephone, the date, 
time, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice, pursuant to 19 
CFR 351.310(c). Requests should contain: (1) The party's name, address, 
and telephone number; (2) the number of participants; and (3) a list of 
the issues to be discussed. Oral presentations will be limited to 
issues raised in the briefs.
    This determination is issued and published pursuant to sections 
703(f) and 777(i) of the Act.

    Dated: August 29, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-22715 Filed 9-2-11; 8:45 am]
BILLING CODE 3510-DS-P