[Federal Register Volume 77, Number 63 (Monday, April 2, 2012)]
[Notices]
[Pages 19635-19641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7839]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-523-802]


Circular Welded Carbon-Quality Steel Pipe From the Sultanate of 
Oman: Preliminary Negative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

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

SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are not being provided to producers and 
exporters of circular welded carbon-quality steel pipe (``circular 
welded pipe'') from the Sultanate of Oman (``Oman'').

DATES: Effective Date: April 2, 2012.

FOR FURTHER INFORMATION CONTACT: Sergio Balbontin or Susan Kuhbach, AD/
CVD Operations, Office 1, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-
6478 and (202) 482-0112, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The following events have occurred since the publication of the 
Department of Commerce's (``Department'') notice of initiation in the 
Federal Register. See Circular Welded Carbon-Quality Steel Pipe from 
India, the Sultanate of Oman, the United Arab Emirates, and the 
Socialist Republic of Vietnam: Initiation of Countervailing Duty 
Investigations, 76 FR 72173 (November 22, 2011) (``Initiation 
Notice''), and the accompanying Initiation Checklist.
    On November 22, 2011, the Department released the U.S. Customs and 
Border Protection (``CBP'') data on imports of subject merchandise 
during the period of investigation (``POI''), under administrative 
protective order (``APO'') to all parties with APO access. See 
Memorandum to the File from Joshua Morris, ``Release of Customs and 
Border Protection (``CBP'') Data,'' dated November 22, 2011. We 
received no comments. The CBP data showed two exporters of subject 
merchandise: Al Jazeera Tube Mills Company SAOG (``Al Jazeera'') and a 
second company with inconsequential exports because the quantity of 
exports was extremely small.
    On December 16, 2011, the U.S. International Trade Commission 
(``ITC'') published its affirmative preliminary determination that 
there is a reasonable indication that an industry in the United States 
is materially injured by reason of allegedly subsidized imports of 
circular welded pipe from India, Oman, the United Arab Emirates, and 
the Socialist Republic of Vietnam. See Circular Welded Carbon-Quality 
Steel Pipe from India, Oman, the United Arab Emirates, and Vietnam, 76 
FR 78313 (December 16, 2011).
    On December 19, 2011, the Department postponed the deadline for the 
preliminary determination in this investigation until March 26, 2012. 
See Circular Welded Carbon-Quality Steel Pipe from India, the Sultanate 
of Oman, the United Arab Emirates, and the Socialist Republic of 
Vietnam: Postponement of Preliminary Determinations in the 
Countervailing Duty Investigations, 76 FR 78615 (December 19, 2011). In 
conjunction with this postponement, the Department also postponed the 
deadline for the submission of new subsidy allegations until February 
15, 2012. See Memorandum to the File from Joshua S. Morris, ``New 
Subsidy Allegation Deadline: Circular Welded Carbon-Quality Steel Pipe 
from India, the Sultanate of Oman, the United Arab Emirates, and the 
Socialist Republic of Vietnam,'' dated December 15, 2011. This 
memorandum and others referenced in this determination are on file 
electronically in Import Administration's Antidumping and 
Countervailing Duty Centralized Electronic Service System (``IA 
ACCESS''), with access to IA ACCESS available in the Department's 
Central Records Unit (``CRU''), room 7046 of the main Department 
building.
    On December 22, 2011, we issued a countervailing duty questionnaire 
to the Government of the Sultanate of Oman (``GSO'') and to Al Jazeera. 
We received responses from the GSO and Al Jazeera on February 17, 2012. 
See February 17, 2012 Questionnaire Response of Al Jazeera Steel 
Products Co. SAOG (``AJ QR'') and February 17, 2012 Questionnaire 
Response of the Government of the Sultanate of Oman (``GSO QR''). 
Supplemental questionnaires were sent to the GSO on February 27 and 
March 1, 2012, and to Al Jazeera on February 27, 2012, and we received 
responses from Al Jazeera on March 7, 2012, and from the GSO on March 
16, 2012. See March 7, 2012 Supplemental Questionnaire Response of Al 
Jazeera Steel Products Co. SAOG (``AJ SQR'') and March 16, 2012 
Response of the Government of the Sultanate of Oman to Supplemental 
Questionnaire and New Subsidies Allegation Questionnaire (``GSO SQR'').
    One of the petitioning parties, Wheatland Tube, requested two 
extensions of the deadline for filing new subsidy allegations. As a 
result, this deadline was extended from February 15 to February 24, and 
then to February 28, 2012. See Memorandum to the File from Susan 
Kuhbach, ``New Subsidy Allegation Deadline: Circular Welded Carbon-
Quality Steel Pipe from India, the Sultanate of Oman, the United Arab 
Emirates, and the Socialist Republic of Vietnam,'' dated February 6, 
2012 and Letter to Interested Parties, dated February 24, 2012.
    A new subsidy allegation was received from Wheatland Tube on 
February 28, 2012. See Letter from Petitioner Wheatland Tube re New 
Subsidies Allegation and Additional Factual Information, dated February 
28, 2012. On March 5, 2012, the Department included the newly alleged 
subsidy in the investigation. See Memorandum: ``New Subsidy 
Allegations,'' dated March 5, 2012. On March 6, 2012, the Department 
sent new subsidy allegation questionnaires to Al Jazeera and the GSO 
and their responses were received on March 13, and 16, respectively. 
See ``Circular Welded Carbon-Quality Steel Pipe from the Sultanate of 
Oman: Al Jazeera New Subsidies Questionnaire Response,'' dated March 
15, 2012 (``AJ NSQR''), and GSO SQR.
    We received pre-preliminary comments from Wheatland Tube on March 
14, 2012.

Period of Investigation

    The period for which we are measuring subsidies, i.e., the POI, is 
January 1, 2010, through December 31, 2010.

[[Page 19636]]

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. 
See Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May 
19, 1997), and Initiation Notice, 76 FR 72173. On December 5, 2011, 
SeAH Steel VINA Corp. (``SeAH VINA''), a mandatory respondent in the 
concurrent countervailing duty (``CVD'') circular welded pipe from 
Vietnam investigation, filed comments arguing that the treatment of 
double and triple stenciled pipe in the scope of these investigations 
differs from previous treatment of these products under other orders on 
circular welded pipe. Specifically, SeAH VINA claims that the 
Brazilian, Korean, and Mexican orders on these products exclude 
``Standard pipe that is dual or triple certified/stenciled that enters 
the U.S. as line pipe of a kind used for oil and gas pipelines *-*-* 
.'' See, e.g., Certain Circular Welded Non-Alloy Steel Pipe from 
Brazil, the Republic of Korea, and Taiwan; and Certain Circular Welded 
Carbon Steel Pipes and Tubes From Taiwan: Final Results of the 
Expedited Third Sunset Reviews of the Antidumping Duty Order, 76 FR 
66899, 66900 (Oct. 28, 2011). According to SeAH VINA: (i) If the term 
``class or kind of merchandise'' has meaning, it cannot have a 
different meaning when applied to the same products in two different 
cases; and (ii) the distinction between standard and line pipe 
reflected in the Brazil, Korean and Mexican orders derives from customs 
classifications administered by CBP and, thus, is more administrable.
    On December 14, 2011, Allied Tube and Conduit, JMC Steel Group, and 
Wheatland Tube (collectively, ``certain Petitioners'') responded to 
SeAH VINA's comments stating that the scope as it appeared in the 
Initiation Notice reflected Petitioners'' intended coverage. Certain 
Petitioners contend that pipe that is multi-stenciled to both line pipe 
and standard pipe specifications and meets the physical characteristics 
listed in the scope (i.e., is 32 feet in length or less; is less than 
2.0 inches (50mm) in outside diameter; has a galvanized and/or painted 
(e.g., polyester coated) surface finish; or has a threaded and/or 
coupled end finish) is ordinarily used in standard pipe applications. 
In recent years, certain Petitioners state, the Department has rejected 
end-use scope classifications, preferring instead to rely on physical 
characteristics to define coverage, and the scope of these 
investigations has been written accordingly. Therefore, certain 
Petitioners ask the Department to reject SeAH VINA's proposed scope 
modification.
    We agree with certain Petitioners that the Department seeks to 
define the scopes of its proceedings based on the physical 
characteristics of the merchandise. See Notice of Final Determination 
of Sales at Less Than Fair Value and Affirmative Final Determination of 
Critical Circumstances: Circular Welded Carbon Quality Steel Pipe from 
the People's Republic of China, 73 FR 31970 (June 5, 2008) and 
accompanying Issues and Decision Memorandum at Comment 1. Moreover, we 
disagree with SeAH VINA's contention that once a ``class or kind of 
merchandise'' has been established that the same scope description must 
apply across all proceedings involving the product. For example, as the 
Department has gained experience in administering antidumping duty 
(``AD'') and CVD orders, it has shifted away from end use 
classifications to scopes defined by the physical characteristics. Id. 
Thus, proceedings initiated on a given product many years ago may have 
end use classifications while more recent proceedings on the product 
would not. Compare Countervailing Duty Order: Oil Country Tubular Goods 
from Canada, 51 FR 21783 (June 16, 1986) (describing subject 
merchandise as being ``intended for use in drilling for oil and gas'') 
with Certain Oil Country Tubular Goods From the People's Republic of 
China: Amended Final Affirmative Countervailing Duty Determination and 
Countervailing Duty Order, 75 FR 3203 (January 20, 2010) (describing 
the subject merchandise in terms of physical characteristics without 
regard to use or intended use). Finally, certain Petitioners have 
indicated the domestic industry's intent to include multi-stenciled 
products that otherwise meet the physical characteristics set out in 
the scope. Therefore, the Department is not adopting SeAH VINA's 
proposed modification of the scope.

Scope of the Investigation

    This investigation covers welded carbon-quality steel pipes and 
tube, of circular cross-section, with an outside diameter (``O.D.'') 
not more than 16 inches (406.4 mm), regardless of wall thickness, 
surface finish (e.g., black, galvanized, or painted), end finish (plain 
end, beveled end, grooved, threaded, or threaded and coupled), or 
industry specification (e.g., American Society for Testing and 
Materials International (``ASTM''), proprietary, or other) generally 
known as standard pipe, fence pipe and tube, sprinkler pipe, and 
structural pipe (although subject product may also be referred to as 
mechanical tubing). Specifically, the term ``carbon quality'' includes 
products in which: (a) Iron predominates, by weight, over each of the 
other contained elements; (b) the carbon content is 2 percent or less, 
by weight; and (c) none of the elements listed below exceeds the 
quantity, by weight, as indicated:

    (i) 1.80 percent of manganese;
    (ii) 2.25 percent of silicon;
    (iii) 1.00 percent of copper;
    (iv) 0.50 percent of aluminum;
    (v) 1.25 percent of chromium;
    (vi) 0.30 percent of cobalt;
    (vii) 0.40 percent of lead;
    (viii) 1.25 percent of nickel;
    (ix) 0.30 percent of tungsten;
    (x) 0.15 percent of molybdenum;
    (xi) 0.10 percent of niobium;
    (xii) 0.41 percent of titanium;
    (xiii) 0.15 percent of vanadium;
    (xiv) 0.15 percent of zirconium.

    Subject pipe is ordinarily made to ASTM specifications A53, A135, 
and A795, but can also be made to other specifications. Structural pipe 
is made primarily to ASTM specifications A252 and A500. Standard and 
structural pipe may also be produced to proprietary specifications 
rather than to industry specifications. Fence tubing is included in the 
scope regardless of certification to a specification listed in the 
exclusions below, and can also be made to the ASTM A513 specification. 
Sprinkler pipe is designed for sprinkler fire suppression systems and 
may be made to industry specifications such as ASTM A53 or to 
proprietary specifications. These products are generally made to 
standard O.D. and wall thickness combinations. Pipe multi-stenciled to 
a standard and/or structural specification and to other specifications, 
such as American Petroleum Institute (``API'') API-5L specification, is 
also covered by the scope of this investigation when it meets the 
physical description set forth above, and also has one or more of the 
following characteristics: is 32 feet in length or less; is less than 
2.0 inches (50mm) in outside diameter; has a galvanized and/or painted 
(e.g., polyester coated) surface finish; or has a threaded and/or 
coupled end finish.
    The scope of this investigation does not include: (a) Pipe suitable 
for use in boilers, superheaters, heat exchangers, refining furnaces 
and feedwater heaters, whether or not cold drawn; (b) finished 
electrical conduit; (c) finished

[[Page 19637]]

scaffolding; \1\ (d) tube and pipe hollows for redrawing; (e) oil 
country tubular goods produced to API specifications; (f) line pipe 
produced to only API specifications; and (g) mechanical tubing, whether 
or not cold-drawn. However, products certified to ASTM mechanical 
tubing specifications are not excluded as mechanical tubing if they 
otherwise meet the standard sizes (e.g., outside diameter and wall 
thickness) of standard, structural, fence and sprinkler pipe. Also, 
products made to the following outside diameter and wall thickness 
combinations, which are recognized by the industry as typical for fence 
tubing, would not be excluded from the scope based solely on their 
being certified to ASTM mechanical tubing specifications:
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    \1\ Finished scaffolding is defined as component parts of a 
final, finished scaffolding that enters the United States 
unassembled as a ``kit.'' A ``kit'' is understood to mean a packaged 
combination of component parts that contain, at the time of 
importation, all the necessary component parts to fully assemble a 
final, finished scaffolding.

1.315 inch O.D. and 0.035 inch wall thickness (gage 20)
1.315 inch O.D. and 0.047 inch wall thickness (gage 18)
1.315 inch O.D. and 0.055 inch wall thickness (gage 17)
1.315 inch O.D. and 0.065 inch wall thickness (gage 16)
1.315 inch O.D. and 0.072 inch wall thickness (gage 15)
1.315 inch O.D. and 0.083 inch wall thickness (gage 14)
1.315 inch O.D. and 0.095 inch wall thickness (gage 13)
1.660 inch O.D. and 0.047 inch wall thickness (gage 18)
1.660 inch O.D. and 0.055 inch wall thickness (gage 17)
1.660 inch O.D. and 0.065 inch wall thickness (gage 16)
1.660 inch O.D. and 0.072 inch wall thickness (gage 15)
1.660 inch O.D. and 0.083 inch wall thickness (gage 14)
1.660 inch O.D. and 0.095 inch wall thickness (gage 13)
1.660 inch O.D. and 0.109 inch wall thickness (gage 12)
1.900 inch O.D. and 0.047 inch wall thickness (gage 18)
1.900 inch O.D. and 0.055 inch wall thickness (gage 17)
1.900 inch O.D. and 0.065 inch wall thickness (gage 16)
1.900 inch O.D. and 0.072 inch wall thickness (gage 15)
1.900 inch O.D. and 0.095 inch wall thickness (gage 13)
1.900 inch O.D. and 0.109 inch wall thickness (gage 12)
2.375 inch O.D. and 0.047 inch wall thickness (gage 18)
2.375 inch O.D. and 0.055 inch wall thickness (gage 17)
2.375 inch O.D. and 0.065 inch wall thickness (gage 16)
2.375 inch O.D. and 0.072 inch wall thickness (gage 15)
2.375 inch O.D. and 0.095 inch wall thickness (gage 13)
2.375 inch O.D. and 0.109 inch wall thickness (gage 12)
2.375 inch O.D. and 0.120 inch wall thickness (gage 11)
2.875 inch O.D. and 0.109 inch wall thickness (gage 12)
2.875 inch O.D. and 0.134 inch wall thickness (gage 10)
2.875 inch O.D. and 0.165 inch wall thickness (gage 8)
3.500 inch O.D. and 0.109 inch wall thickness (gage 12)
3.500 inch O.D. and 0.148 inch wall thickness (gage 9)
3.500 inch O.D. and 0.165 inch wall thickness (gage 8)
4.000 inch O.D. and 0.148 inch wall thickness (gage 9)
4.000 inch O.D. and 0.165 inch wall thickness (gage 8)
4.500 inch O.D. and 0.203 inch wall thickness (gage 7)
    The pipe subject to this investigation is currently classifiable in 
Harmonized Tariff Schedule of the United States (``HTSUS'') statistical 
reporting numbers 7306.19.1010, 7306.19.1050, 7306.19.5110, 
7306.19.5150, 7306.30.1000, 7306.30.5025, 7306.30.5032, 7306.30.5040, 
7306.30.5055, 7306.30.5085, 7306.30.5090, 7306.50.1000, 7306.50.5050, 
and 7306.50.5070. Although the HTSUS subheadings are provided for 
convenience and customs purposes, the written description of the 
merchandise under the investigation is dispositive.

Alignment of Final Determination

    On November 22, 2011, the Department initiated an AD investigation 
concurrent with this CVD investigation of circular welded pipe from 
Oman. See Circular Welded Carbon-Quality Steel Pipe from India, the 
Sultanate of Oman, the United Arab Emirates, and the Socialist Republic 
of Vietnam: Initiation of Antidumping Duty Investigations, 76 FR 72164 
(November 22, 2011). The scope of the merchandise being covered is the 
same for both the AD and CVD investigations. On March 23, 2012, 
Petitioners submitted a letter, in accordance with section 705(a)(1) of 
the Tariff Act of 1930, as amended (``Act''), requesting alignment of 
the final CVD determination with the final determination in the 
companion AD investigation. Therefore, in accordance with section 
705(a)(1) of the Act and 19 CFR 351.210(b)(4), the final CVD 
determination will be issued on the same date as the final AD 
determination, which is currently scheduled to be issued on August 6, 
2012.

Subsidies Valuation Information

Allocation Period

    The average useful life (``AUL'') period in this proceeding, as 
described in 19 CFR 351.524(d)(2), is 15 years according to the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System. See U.S. Internal Revenue Service Publication 946 (2008), How 
to Depreciate Property, at Table B-2: Table of Class Lives and Recovery 
Periods. No party in this proceeding has disputed this allocation 
period.

Attribution of Subsidies

    The Department's regulations at 19 CFR 351.525(b)(6)(i) state that 
the Department will normally attribute a subsidy to the products 
produced by the corporation that received the subsidy. However, 19 CFR 
351.525(b)(6)(ii) through (v) directs that the Department will 
attribute subsidies received by certain other companies to the combined 
sales of those companies if (1) cross-ownership exists between the 
companies, and (2) the cross-owned companies produce the subject 
merchandise, are a holding or parent company of the subject company, 
produce an input that is primarily dedicated to the production of the 
downstream product, or transfer a subsidy to a cross-owned company.
    According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. This regulation states that 
this standard will normally be met where there is a majority voting 
interest between two corporations or through common ownership of two 
(or more) corporations. The Court of International Trade (``CIT'') has 
upheld the Department's authority to attribute subsidies based on 
whether a company could use or direct the subsidy benefits of another 
company in essentially the same way it could use its own subsidy 
benefits. See Fabrique de Fer de Charleroi, SA v. United States, 166 F. 
Supp. 2d 593, 600-604 (CIT 2001).
    Al Jazeera reported no affiliates in Oman and, consequently, has 
responded on behalf of itself. (AJ QR at 2-3.) Thus, the subsidies 
received by Al Jazeera have been attributed to its total sales, its 
sales of subject merchandise, or its export sales, in accordance with 
19 CFR 351.525(b)(1)-(5).

[[Page 19638]]

Benchmarks and Discount Rates

    Section 771(5)(E)(ii) of the Act states that the benefit for loans 
is the ``difference between the amount the recipient of the loan pays 
on the loan and the amount the recipient would pay on a comparable 
commercial loan that the recipient could actually obtain on the 
market.'' In addition, 19 CFR 351.505(a)(3)(i) stipulates that when 
selecting a comparable commercial loan that the recipient ``could 
actually obtain on the market'' the Department will normally rely on 
actual loans obtained by the firm. However, when there are no 
comparable commercial loans, the Department ``may use a national 
average interest rate for comparable commercial loans,'' pursuant to 19 
CFR 351.505(a)(3)(ii). According to 19 CFR 351.505(a)(2)(i), a 
``comparable'' loan is similar in structure (fixed versus variable 
interest rate), maturity and currency denomination.
    In allocating benefits over time, the Department normally uses as 
the discount rate the company's cost of long-term fixed rate debt at 
the time the government approves the subsidy. If such rates are not 
available, the Department will use the average cost of long-term fixed 
rate loans in the country in question. See 19 CFR 351.524(d)(3).
    Al Jazeera had government-provided loans outstanding during the POI 
for which benchmarks are needed. However, none of Al Jazeera's non-
government loans provides a suitable rate because none was taken out in 
the years the government loans were approved. Therefore, we are relying 
on the national average cost of long-term fixed-rate loans as reported 
by the World Bank and submitted by the GSO. (GSO QR at Appendices 
B.1.I-1 and B.1.I-2.) We have included in the average cost of fixed-
rate long-term loans, the additional fees that would be incurred in 
obtaining loans from commercial banks, as reported by the GSO. (GSO QR 
at 25.)

Analysis of Programs

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

I. Programs Preliminarily Determined To Be Countervailable

A. Soft Loans for Industrial Projects Under Royal Decree 17/97

    Royal Decree (``RD'') 17/97 made soft loans available to the 
private sector with the goals of diversifying the economy of Oman and 
developing industry, agriculture, fisheries, tourism, education, health 
services, and traditional crafts in Oman. Under this program, 
applicants approved by the Ministry of Commerce and Industry received 
loans at three percent interest from commercial banks in Oman, with the 
difference between the three percent rate and the commercial interest 
rate covered by the GSO. (GSO QR at 15.) The soft loan program under RD 
17/97 originated in 1997 and terminated in 2006. (GSO SQR at 12 and 
Appendix SQ-20.) Beginning in 2007, soft loans were made by the Oman 
Development Bank. (GSO QR at 16.) The GSO reported that Al Jazeera had 
soft loans under the earlier RD 17/97 program outstanding during the 
POI, but has not received any loans from the Oman Development Bank. 
(GSO QR at 15.) The two loans outstanding were granted in 1998 and 
2004, respectively. (GSO QR at 24.) According to the GSO, both loans 
have now been repaid in full. (GSO SQR at 12.)
    According to the GSO, firms operating the agriculture, fisheries, 
industry, tourism, education, health and traditional crafts sectors 
could apply for loans to set up, support or expand a project. (GSO QR 
at 17.) After review by the relevant ministries, a ministerial 
committee would approve or disapprove of the loan. (GSO QR at 18.) 
According to Article 12 of RD 17/97, the maximum amounts that could be 
approved varied by region (150 percent of paid up capital if the 
applicant was located in the Governorate of Muscat and 250 percent of 
paid up capital elsewhere) and by corporate form (a maximum of 500,000 
Omani Rial (``OR'') or up to 5,000,000 OR if the applicant was a public 
joint-stock company which covered at least 40 percent of its capital by 
public subscription). (GSO QR at 20.)
    In response to the Department's request to provide information 
about the amounts of assistance provided under the program to the 
different recipients, the GSO provided the aggregate amount of loans 
approved during the pendency of the program broken out between 
industry, tourism, education, health, and agriculture/fishing. (GSO QR 
at Appendix B.1.G-3.) In response to the Department's request for a 
breakdown of the information among different sectors under the 
``industry'' heading, by year, the GSO responded that it does not 
maintain the information in that manner. Moreover, because there were 
no sectoral criteria that affect eligibility, the GSO stated there was 
no requirement to include that information in the applications. (GSO 
SQR at 15.) The GSO did provide the amounts of individual loans 
disbursed to recipients in the industrial category. (GSO SQR at 
Appendix SQ-24.)
    We preliminarily determine that the soft loans received by Al 
Jazeera under RD 17/97 confer a countervailable subsidy. The loans are 
a financial contribution in the form of a direct transfer of funds and 
they confer a benefit in the amount of the difference between the 
interest Al Jazeera paid on the loans and the amount the company would 
have paid on a comparable commercial loan. See sections 771(5)(d)(i) 
and (e)(ii) of the Act. Additionally, we preliminarily determine that 
the subsidy was specific, under section 771(5A)(D)(iii)(II) of the Act, 
because Al Jazeera was a predominant user of the program.
    To calculate the benefit, we computed the difference between the 
amounts Al Jazeera would have paid under the benchmark interest rates 
described above and the amounts it actually paid during the POI. 
Because the loans were given to finance Al Jazeera's pipe mills, we 
divided the subsidy during the POI by Al Jazeera's sales of circular 
welded pipe during the POI.
    On this basis, we preliminarily determine that Al Jazeera received 
a countervailable subsidy of 0.12 percent ad valorem under this 
program. See Memorandum to the File from Sergio Balbontin, 
``Preliminary Affirmative Countervailing Duty Determination: 
Calculation Memorandum for Al Jazeera Steel Products Co. SAOG,'' dated 
March 26, 2012.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Tariff Exemptions on Imported Equipment, Machinery, Raw Materials, 
and Packaging Materials

    Under RD 61/2008, industrial enterprises in Oman are able to import 
machinery, equipment, parts, raw materials, semi-manufactured materials 
and packing material duty free. According to the GSO, the purpose of RD 
61/2008 is to encourage and develop all industrial projects, to raise 
the contribution of the industrial sector in the gross domestic 
product, and to expand the bases of economic linkage in the Arab States 
of the Gulf. RD 61/2008 supersedes similar earlier schemes under the 
Organization and Promotion of Industry Law (RD 1/79) and the Foreign 
Business Investment Law (102/94). (GSO QR at 4 and Appendix A.1.D-1.)
    RD 1/79 entered into force on January 4, 1979. According to the 
GSO, the purpose of this law was to encourage diversification of the 
Omani economy and to stimulate industrial development. (GSO SQR at 1.) 
Under Article 19 of RD 1/79, licensed or

[[Page 19639]]

registered industrial enterprises were exempted from customs duties on 
equipment, tools, spare parts, raw materials, and semi-manufactured 
goods. (GSO SQR at Appendix SQ-3.)
    Both RD 61/2008 and RD 1/79 provide similar definitions of the 
``industrial enterprises'' that are eligible to receive the tariff 
exemptions: establishments whose basic objective is to convert raw 
materials or semi-manufactured goods into manufactured goods. (GSO QR 
at Appendices A.1.D-1 and GSO SQR at Appendix SQ-3.) Also, both decrees 
outline the process for receiving an industrial license. Under RD 61/
2008, the procedure for obtaining an industrial license is 
``automatic,'' according to the GSO, upon submission of the required 
documentation (commercial registration, business plan and approval from 
the Ministry of Environment). Further, the GSO states that there is no 
discretion in the procedure, as the application process has been fully 
automated through a ``one stop shop'' IT system. (GSO QR at 8.)
    Al Jazeera's industrial license was obtained under RD 1/79, as well 
as its initial tariff exemption. According to Article 5 of RD 1/79, 
industrial enterprises could not be established or change their 
capacity, size, purpose or site without obtaining an industrial license 
from the Ministry of Commerce and Industry. To obtain an industrial 
license, companies would submit an application to the Ministry. This 
application requested a wide range of information including: a list of 
shareholders, estimated investment, a description of the products to be 
produced, annual output, a description of the manufacturing process, 
the numbers and types of labor required, market and marketing 
information (imports of the product, domestic production of the 
product, exports, and proposed distribution channels), details of plant 
and machinery, raw materials requirements, and utilities requirements. 
(GSO QR at Appendix A.1.G-6.) The decision of whether to grant the 
industrial license rested with the Directorate General of Industry 
(Ministry of Commerce and Industry). (GSO SQR at Appendix SQ-3.) 
According to the GSO, the Ministry relied upon non-binding guidelines 
for granting these licenses. (GSO SQR at 2.)
    To obtain the tariff exemption under RD 1/79, the industrial 
enterprise would submit to the Ministry of Commerce and Industry its 
industrial license along with a list of the materials and equipment it 
intended to import and the annual amounts. (GSO SQR at 2 and Appendix 
SQ-4.) The procedure under RD 61/2008 is similar except that final 
approval of the Ministry of Finance is also required in order to ensure 
that the application conforms with the uniform customs law of the Arab 
Gulf Cooperation Council. (GSO SQR at 3 and Appendix SQ-6.) RD 61/2008 
also provides at Article 16 that priority in granting the tariff 
exemptions will be given, inter alia, to enterprises producing goods 
for exports. (GSO QR at Appendix A.1.D-1.)
    As noted above, Al Jazeera received its industrial license and 
initial tariff exemption under RD 1/79. According to the GSO, if a 
company needs to import raw materials in excess of the amount for which 
the exemption was granted, it must file a new request with the Ministry 
of Commerce and Industry. (GSO QR at 6.) Al Jazeera received a new 
approval under RD 61/2008. (GSO QR at 11.)
    The GSO states that processes for granting industrial licenses in 
Oman are ``automatic.'' Regarding the former, companies apply though an 
online system administered by the Ministry of Commerce and Industry. 
According to the Ministry of Commerce and Industry, no firm that met 
the legal and regulatory requirements for an industrial license has 
been denied a license. (GSO QR at Appendix A.1.G-4 and GSO SQR at 6.) 
Specifically, rejections of license applications occur only when the 
applicant does not constitute an ``industrial enterprise,'' or when the 
applicant cancels its plans and does not complete the steps for 
registration. (GSO QR at 8.)
    In its pre-preliminary comments, Wheatland Tube points to Al 
Jazeera's application for its industrial license and, in particular, 
the section of the application that requests information about exports. 
Citing 19 CFR 351.514 and prior findings by the Department,\2\ 
Wheatland Tube argues that the application by its terms renders the 
tariff exemptions an export subsidy. We preliminarily disagree. The 
application cited by Wheatland Tube is the application for an 
industrial license which, while necessary for the tariff exemption, is 
not in itself a subsidy program. Instead, as explained above, an 
industrial license is required to start, expand, or relocate any 
enterprise that converts raw materials or semi-manufactured goods into 
manufactured goods. Thus, while we acknowledge our regulation, which 
looks to whether exportation or anticipated exportation is a condition 
for receipt of benefits under a program, and our past determinations in 
which we have found export contingency when an application for a 
subsidy required information on the firm's exports, we do not agree 
that such questions on an application for something as fundamental as 
an industrial license necessarily means that a separate subsidy program 
is specific as an export subsidy. Therefore, we have focused our 
analysis on the procedures for obtaining the tariff exemptions.
---------------------------------------------------------------------------

    \2\ See, e.g., Aluminum Extrusions From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 76 FR 
18521, 18524 (April 4, 2011), and Drill Pipe From the People's 
Republic of China: Final Affirmative Countervailing Duty 
Determination, Final Affirmative Critical Circumstances 
Determination, 76 FR 1971 (January 11, 2011).
---------------------------------------------------------------------------

    As explained above, applications for tariff exemptions are filed 
with the Ministry of Commerce and Industry. According to the GSO, the 
approval process for duty exemptions is automatic and does not take 
into account the export performance or potential of the applicant, the 
use of domestic over imported goods, the industry or sector in which 
the applicant operated, or the location of the applicant. (GSO QR at 9-
10 and GSO SQR at 4-5.) More recently, the tariff exemptions 
application has also been referred to the Ministry of Finance, which 
carries out a formal check of whether the applicant corresponds to the 
company named in the industrial license, whether the capital goods 
pertain to the activity of the company, and whether the quantity the 
applicant seeks to import is consistent with its output. (GSO QR at 6.) 
The GSO states that there is no discretion in deciding whether to grant 
the duty exemption when the regulations are met (GSO QR at 6-7) and 
that no qualifying companies have been denied tariff exemptions. (GSO 
QR at Appendix A.F.1-2 and GSO SQR at 6.) The submitted data shows that 
hundreds of approvals are made per year. (GSO SQR at Appendix SQ-5.) 
The GSO further explains that the ``priority'' described in Article 16 
of RD 61/2008 for granting tariff exemptions to certain enumerated 
sectors means that if two or more applications were filed 
contemporaneously, the enterprise in the designated sector would 
receive the tariff exemption prior to the other applicants. (GSO QR at 
7-8.)
    In response to the Department's request to provide information 
about the amounts of assistance provided under the program to the 
different industries in Oman, the GSO explained that it does not 
maintain this data. Specifically, recipients of the import duty 
exemptions are not classified by the International Standard Industrial 
Classification. (GSO SQR at 6.) Nor does the GSO maintain information 
on the

[[Page 19640]]

duties it would have collected but for the exemption. (GSO SQR at 7.)
    In summary, based on information submitted by the GSO, the tariff 
exemptions are granted automatically and without regard to the firm's 
export performance or potential, use of domestic over imported goods, 
industry sector or location. Moreover, hundreds of applications are 
approved in a year and no applications have been rejected. The GSO has 
explained that it is not able to provide information regarding the 
distribution of duty exemptions because of the nature of the benefit 
(exemptions) and the manner in which the recipients submit their data.
    On this basis, we preliminarily determine that the GSO's program 
providing tariff exemptions on imported raw materials and equipment 
does not confer a countervailable subsidy because it is not specific 
within the meaning of section 771(5A) of the Act. At verification, we 
intend to examine the applications and the approval process to confirm 
that the tariff exemptions are, in fact, used by industries producing a 
wide variety of products. Also, we invite the parties to comment on the 
distinction we have made in this preliminary determination to focus on 
the application process for benefits under the tariff exemption program 
rather than on the application for the company's industrial license.

Provision of Electricity for Less Than Adequate Remuneration (``LTAR'')

    The provision of electricity to consumers in Oman is heavily 
regulated. (GSO QR at Appendix C.1-5 at 15.) In particular, in 
accordance with Article 10 of RD78/2004, the rates that are charged for 
electricity are approved by the Council of Ministers. (GSO QR at 
Appendix C.1-1.) During the POI, all industrial users in all regions of 
Oman paid uniform rates. (GSO QR at 37.) To be eligible for the 
industrial user rate, a company must have a letter of recommendation 
from the Ministry of Commerce and Industry and meet a stipulated power 
factor. (GSO QR at Appendix C.1-3 at 37.) According to the GSO, letters 
of recommendation are given to all companies with an industrial 
license. (GSO QR at 39.) During the POI, there were over 1.5 million 
industrial users of electricity in Oman. (GSO QR at Appendix C.1-3 at 
10.)
    The electricity bills submitted by Al Jazeera show that it paid the 
established rates. (AJ QR at Exhibit 13.)
    Because all industrial users pay the same rates for electricity, we 
preliminarily determine that any potential subsidy related to the GSO's 
provision of electricity is not specific within the meaning of section 
771(5A) of the Act.

C. Provision of Water for LTAR

    Ministerial Decision 11/2000 establishes a uniform water tariff for 
all commercial users in Oman. (GSO QR at Appendix C.2-1.) The water 
bills submitted by Al Jazeera show that it paid the established rates. 
(AJ QR at Exhibit 14.)
    Because all commercial users pay the same tariff for water, we 
preliminarily determine that any potential subsidy related to the GSO's 
provision of water is not specific within the meaning of section 
771(5A) of the Act.

D. Provision of Natural Gas for LTAR

    According to the GSO, the Ministry of Oil and Gas is the central 
buyer and seller of gas in the Sultanate. The Ministry buys gas from 
producers and resells it to power plants, industrial estates, and LNG 
producers. Further, according to the GSO, the natural gas network 
delivers gas for industrial purposes only and companies using gas for 
industrial purposes must be located in or close to an industrial 
estate. (GSO QR at 43.)
    The GSO states that virtually all industries in Oman are located in 
industrial estates or free trade zones. (GSO QR at 33.) This is due in 
part to infrastructural constraints, such as the fact that natural gas 
is not readily available outside of these areas. Additionally, 
according to the GSO, the zoning in the Sultanate is very strict: an 
industry seeking to locate outside an industrial estate or free trade 
zone would have to apply to have the land reclassified as industrial 
land. Id. Finally, industrial estates serve as ``one-stop-shops'' where 
all the applications for an industrial installation can be made, rather 
than having to apply to many different agencies. Id.
    Regarding natural gas, all industrial companies located in all of 
industrial estates pay the same rate. (GSO QR at 42.) Al Jazeera is 
located in the Sohar Industrial Estate and the natural gas bills it 
submitted show that it paid the standard rate charged to all industries 
located in Sohar Industrial Estate and all other industrial estates. 
(AJ QR at Exhibit 15.) Companies located nearby, but outside of 
industrial estates normally purchase gas from the Ministry of Oil and 
Gas, but are supplied by the industrial estates. According to the GSO, 
these companies would normally pay the same for natural gas as 
companies within the industrial estates, but might pay more if the cost 
of providing the gas was higher due, for example, to having constructed 
a pipeline. (GSO SQR at 13.)
    Because all industrial users proximate to the gas pipeline pay the 
same price for natural gas, we preliminarily determine that any 
potential subsidy related to the GSO's provision of natural gas is not 
specific within the meaning of section 771(5A) of the Act.

E. Provision of Land and/or Buildings for LTAR

    As explained above under ``Provision of Natural Gas for LTAR,'' the 
GSO states that virtually all industries in Oman are located in 
industrial estates or free trade zones. These estates and zones have 
been established on government-owned land and are managed by the Public 
Establishment for Industrial Estates. (GSO QR at 33.) A small number of 
very large industrial companies, established by the GSO, are located 
outside the industrial estates on government-owned land, but the GSO 
does not provide land under lease outside of the industrial estates. 
(GSO SQR at 13.)
    Privately owned ``industrial land'' outside of the estates differs 
from land in the estates, according to the GSO. (GSO SQR at 14.) The 
plots cannot exceed 85 square meters and rental periods are shorter 
than those in the estates (which range about 25 years). (GSO SQR at 
14.) Companies located outside the estates are small workshops such as 
carwashes and welders which cannot rent land in the industrial estates 
because they are not industrial establishments per RD 61/2008. Id. The 
lease rates for these plots are set by the market and, according to the 
GSO, possibly range around .50 OR per square meter/month. Also 
according to the GSO, no land in the vicinity of the Sohar industrial 
estate (where Al Jazeera is located) is provided under lease to 
industrial establishments by private parties. Id.
    Regarding lease rates in the industrial estates, the GSO reports 
that they are set taking into account the location of the industrial 
estate and lease rates in neighboring countries. Id. Lease rates in the 
Sohar and Rusayl Industrial Estates are uniform at 0.5 OR per square 
meter per year, while the lease rates in effect for the five other 
industrial estates maintained by the GSO are 0.25 OR per square meter 
per year for the first five years and 0.5 OR per square meter per year 
thereafter. (GSO SQR at Appendix SQ-23.) Lease rates in the free trade 
zones are typically higher, ranging from 1.5 to 2.5 OR per square meter 
per year. (GSO SQR at 15.)
    According to the GSO, these higher prices reflect additional 
services and

[[Page 19641]]

benefits available in the free trade zones: one stop shop for 
industrial license and work permits, and various regulatory and policy 
exemptions. If the land in the free trade zone is not developed, the 
lease rates may be lower. Id.
    In summary, the GSO provides industrial land under leases in 
industrial estates and free trade zones. Companies locating in free 
trade zones receive benefits or services that are not received in the 
industrial estates and the lease rates in free trade zones are, 
therefore, higher. Within the industrial estates, the rates are uniform 
except for the existence of ``introductory'' rates in certain zones. 
Because Al Jazeera has been located in Sohar Industrial Estate beyond 
any ``introductory'' period in the other industrial estates, it would 
face the uniform rate of 0.50 OR.
    Because all recipients of industrial leases in the industrial 
estates that have been located there beyond five years pay the same 
lease rates, we preliminarily determine that any potential subsidy 
related to the GSO's provision of industrial leases is not specific 
within the meaning of section 771(5A) of the Act.

III. Programs Preliminarily Determined To Be Not Used By Respondents or 
To Not Provide Benefits During the POI

A. Exemption from Corporate Income Tax

    Based on information included in Al Jazeera's questionnaire 
response, Wheatland Tube alleged that Al Jazeera benefitted from a 
countervailable exemption from income tax during the POI. Al Jazeera's 
response indicates that the company has a tax loss for 2009 (relating 
to the tax return filed during the POI) (AJ SQR at 5) and did not 
belatedly pay corporate income taxes in 2009 for prior years. (AJ NSQR 
at 2.) Therefore, we preliminarily determine that any income tax 
exemption was not used during the POI.

B. Pre-Shipment Export Credit Guarantees

IV. Programs For Which More Information Is Required

A. Export Credit Discounting Subsidy (identified as ``Post-Shipment 
Financing Loans'' in the Initiation Notice)

    The Export Credit Guarantee Agency of Oman (``ECGA'') is the 
national export credit agency of the Sultanate. Exporters whose sales 
are insured by ECGA can discount their export bills with commercial 
banks and ECGA provides a one percent subsidy on the export sales it 
has insured. (GSO QR at 26.) Al Jazeera received an interest subsidy 
for a loan outstanding during the POI. (AJ QR at 13-14.) However, the 
interest subsidy for this loan was received after the POI. (AJ SQR at 
4.) Consequently, the interest subsidy does not give rise to a benefit 
during the POI.
    We intend to seek further information from Al Jazeera regarding 
possible interest subsidies received during the POI arising from loans 
outstanding prior to the POI.

Verification

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

Preliminary Negative Determination

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an estimated countervailable subsidy rate for Al Jazeera. 
Further, because Al Jazeera is the only company for which a rate has 
been calculated, we are also assigning that rate to all other producers 
and exporters of circular welded pipe from Oman.

------------------------------------------------------------------------
           Exporter/manufacturer                  Net subsidy rate
------------------------------------------------------------------------
Al Jazeera Tube Mills Company SAOG........  0.12 percent
All Others................................  0.12 percent
------------------------------------------------------------------------

    Because all of the rates are de minimis, we preliminarily determine 
that no countervailable subsidies are being provided to the production 
or exportation of circular welded pipe from Oman. As such, we will not 
direct CBP to suspend liquidation of entries of the subject 
merchandise.

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)(3) of the Act, if our final 
determination is affirmative, the ITC will make its final determination 
within 75 days after the Department makes its final affirmative 
determination.

Disclosure and Public Comment

    In accordance with 19 CFR 351.224(b), we intend to disclose to the 
parties the calculations for this preliminary determination within five 
days of its announcement. Due to the anticipated timing of verification 
and issuance of verification reports, case briefs for this 
investigation must be submitted no later than one week after the 
issuance of the last verification report. See 19 CFR 351.309(c)(i) (for 
a further discussion of case briefs). Rebuttal briefs must be filed 
within five days after the deadline for submission of case briefs, 
pursuant to 19 CFR 351.309(d)(1). A list of authorities relied upon, a 
table of contents, and an executive summary of issues should accompany 
any briefs submitted to the Department. Executive summaries should be 
limited to five pages total, including footnotes. See 19 CFR 
351.309(c)(2) and (d)(2).
    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), at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, DC 20230. Parties should confirm 
by telephone the time, date, and place of the hearing 48 hours before 
the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must electronically submit a written request to 
the Assistant Secretary for Import Administration using IA ACCESS, 
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; (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. See id.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: March 26, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-7839 Filed 3-30-12; 8:45 am]
BILLING CODE 3510-DS-P