[Federal Register Volume 77, Number 109 (Wednesday, June 6, 2012)]
[Notices]
[Pages 33422-33439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13502]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-982]


Utility Scale Wind Towers From the People's Republic of China: 
Preliminary Affirmative Countervailing Duty Determination

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

SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are being provided to producers and exporters 
of utility scale wind towers from the People's Republic of China. For 
information on the estimated subsidy rates, see the ``Suspension of 
Liquidation'' section of this notice.

DATES: Effective Date: June 6, 2012.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Patricia Tran, AD/
CVD Operations, Office 3, Import Administration, U.S. Department of 
Commerce, Room 4014, 14th Street and Constitution Avenue NW., 
Washington, DC 20230; telephone: 202-482-4793 and 202-482-1503, 
respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On December 29, 2011, the Department of Commerce (the Department) 
received a countervailing duty (CVD) petition concerning imports of 
utility scale wind towers (wind towers) from the People's Republic of 
China (PRC) filed in proper form by the Wind Tower Trade Coalition (the 
Petitioner).\1\ See Petition for the Imposition of Antidumping and 
Countervailing Duties Against Utility Scale Wind Towers from the 
People's Republic of China and the Socialist Republic of Vietnam 
(December 29, 2011) (Petition).\2\ This investigation was initiated on 
January 18, 2012.\3\
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    \1\ The following companies compose the Wind Tower Trade 
Coalition: Broadwind Towers, Inc., DMI Industries, Katana Summit 
LLC, and Trinity Structural Towers, Inc. See Petition at Volume I, 
Exhibit I-1.
    \2\ The public version of the Petition and all other public 
versions and public documents generated in the course of this 
proceeding by the Department and interested parties are available to 
the public through Import Administration's Antidumping and 
Countervailing Duty Centralized Electronic Service System (IA 
ACCESS), located in Room 7046 of the main Commerce building.
    \3\ See Utility Scale Wind Towers From the People's Republic of 
China: Initiation of Countervailing Duty Investigation, 77 FR 3447 
(January 24, 2012) (Initiation Notice), and accompanying Initiation 
Checklist.
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    In the Initiation Notice, the Department stated that it intended to 
rely on data from U.S. Customs and Border Protection (CBP) for purposes 
of selecting the mandatory respondents. See Initiation Notice, 77 FR 
3449-50. On January 18, 2012, the Department released the results of a 
query performed on the CBP's database for calendar year 2011. See 
Memorandum

[[Page 33423]]

to the File from Eric B. Greynolds, Program Manager, AD/CVD Operations, 
Office 3, regarding ``Release of Query Results of Customs and Border 
Patrol Database'' (January 18, 2012). Due to the large number of 
producers and exporters of wind towers in the PRC, we determined that 
it was not practicable to individually investigate each producer and/or 
exporter. We, therefore, selected the following two producers and/or 
exporters of wind towers to be mandatory respondents: CS Wind China 
Co., Ltd. and CS Wind Corporation (collectively, CS Wind) and Titan 
Wind Energy (Suzhou) Co., Ltd. and its affiliates (collectively, Titan 
Companies), the largest publicly identifiable producers and/or 
exporters of the subject merchandise.\4\ See Memorandum to Christian 
Marsh, Deputy Assistant Secretary for AD/CVD Operations, from Eric B. 
Greynolds, Program Manager, AD/CVD Operations, Office 3, and Patricia 
M. Tran, International Trade Analyst, AD/CVD Operations, Office 3, 
through Melissa G. Skinner, Director, AD/CVD Operations, Office 3, 
regarding ``Countervailing Duty Investigation: Utility Scale Wind 
Towers from the People's Republic of China: Respondent Selection'' 
(February 17, 2012).
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    \4\ The companies are listed in alphabetical order and not 
listed based on export value/volume.
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    On February 17, 2012, we issued the initial CVD questionnaire to 
the Government of the People's Republic of China (the GOC) and selected 
mandatory respondents. We also issued a confirmation of shipment 
questionnaire on the same date to CS Wind and Titan Companies.
    On February 24, 2012, we received CS Wind's and Titan Companies' 
response to the shipment questionnaire in which each company certified 
that it exported subject merchandise to the United States during the 
period of investigation (POI). On March 1, 2012, we received comments 
from Chengxi Shipyard Co., Ltd. (CXS) regarding respondent selection. 
On March 5, 2012, we responded to CXS explaining that respondent 
selection had already been decided in this investigation and that the 
Department would not be considering the company's comments.
    On March 9, 2012, the Department postponed the deadline for the 
preliminary determination by 65 days to no later than May 29, 2012.\5\
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    \5\ See Utility Scale Wind Towers From the People's Republic of 
China: Notice of Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 77 FR 14342 (March 9, 2012).
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    On April 3, 2012, we received initial questionnaire responses from 
CS Wind, Titan Companies, and the GOC. On April 4, 2012, we issued a 
deficiency questionnaire to the GOC regarding the provision of 
electricity for less than adequate remuneration (LTAR) and policy 
lending to the renewable energy industry and received the GOC's 
response on April 18, 2012. On April 6, 2012, we issued a supplemental 
questionnaire to CS Wind and received the company's response on April 
30, 2012. On April 9, 2012, we received the GOC's response to the 
appendix for the provision hot-rolled steel (HRS) for LTAR program. On 
April 11, 2012, we issued to the GOC a second supplemental 
questionnaire and received the government's response on May 2, 2012. On 
April 11, 2012, we also issued a supplemental questionnaire to Titan 
Companies and received their responses on April 27 and May 3, 2012.
    On April 19, 2012, Petitioner filed deficiency comments with regard 
to the questionnaire responses filed by the GOC, CS Wind, and Titan 
Companies. On April 20, 2012, Petitioner filed a new factual 
information submission regarding HRS pricing data for the POI, and a 
new subsidy allegations submission alleging the provision of aluminum 
shapes for LTAR and the provision of steel flanges for LTAR. 
Subsequently, on April 27, 2012, the GOC filed a submission responding 
to the Petitioner's new subsidy allegations.
    On May 3, 2012, CS Wind filed a rebuttal new factual information 
submission regarding HRS plate pricing data for the POI. Also, on May 
3, 2012, we issued a second supplemental question to CS Wind and 
received the company's response on May 18, 2012.
    On May 8, 2012, we rejected the Petitioner's new subsidy 
allegations submission because the allegations were untimely filed with 
the Department. See Memorandum to Melissa G. Skinner, Director, AD/CVD 
Operations, Office 3, from Patricia M. Tran, International Trade 
Analyst, AD/CVD Operations, Office 3, through Robert Copyak, Acting 
Program Manager, AD/CVD Operations, Office 3, regarding ``Decision 
Memorandum Regarding Petitioner's New Subsidy Allegations'' (May 8, 
2012). On May 8, 2012, we also rejected the GOC's April 27, 2012, 
rebuttal submission regarding the Petitioner's new subsidy allegations. 
Additionally on May 8, 2012, the GOC submitted clarification 
information for a HRS producer. On May 9, 2012, we issued a second 
supplemental questionnaire to Titan Companies and received the 
company's response on May 18, 2012. Titan Companies submitted comments 
on May 9, 2012, with regards to Petitioner's April 20, 2012, HRS plate 
benchmark submission.
    On May 10, 2012, Petitioners filed comments on CS Wind's May 3, 
2012, HRS plate benchmark pricing data submission. On May 11, 2012, CS 
Wind filed a second factual submission regarding a HRS producer/
supplier and ocean freight rates, and submitted pre-preliminary 
determination comments. On May 16, 2012, the Department issued a third 
supplemental questionnaire to the GOC.
    On May 17, 2012, Department officials met with counsel representing 
Petitioner regarding the HRS benchmark pricing data that they submitted 
on the record of the investigation.\6\ Additionally, on May 17, 2012, 
CS Wind filed a third factual submission with regard to HRS benchmark 
data.
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    \6\ See Memorandum to the File from Patricia M. Tran, 
International Trade Analyst, AD/CVD Operations, Office 3, regarding 
``Countervailing Duty Investigation of Utility Scale Wind Towers 
from the People's Republic of China: Meeting with Counsel 
representing Wind Tower Trade Coalition (Petitioner)'' (May 21, 
2012).
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    On May 18, 2012, the Department received the following submissions: 
Titan Companies submitted ownership information for a HRS producer/
supplier; CS Wind submitted a correction to a chart that was included 
in Attachment 3 of the company's May 17, 2012, submission on HRS 
benchmark data; and Petitioner filed pre-preliminary comments regarding 
the provision of HRS for LTAR program.
    On May 22, 2012, Petitioner filed rebuttal comments on the 
benchmark data submitted by CS Wind on May 17, 2012. On May 23, 2012, 
we received the GOC's response to the Department's third supplemental 
questionnaire, in part. Specifically, the Department received the GOC's 
response to the electricity questions, but granted an extension to the 
GOC to respond to the questions regarding the tax offsets for research 
and development program; the GOC's response to those questions are due 
to the Department on May 30, 2012.
    As noted, CS Wind and Titan submitted ownership information for HRS 
suppliers/producers on May 11 and May 18, 2012, 18 and 11 days, 
respectively, before the preliminary determination. Due to the 
proximity to the preliminary determination, the Department intends to 
address CS Wind's and Titan's submissions, including the question of 
whether or not these submissions were timely, after the issuance of the 
preliminary determination. All parties will be informed of the 
Department's decision with regard to CS Wind's and Titan's submissions 
and provided the opportunity to comment on it.

[[Page 33424]]

Scope of Investigation

    The merchandise covered by this investigation are certain wind 
towers, whether or not tapered, and sections thereof. Certain wind 
towers are designed to support the nacelle and rotor blades in a wind 
turbine with a minimum rated electrical power generation capacity in 
excess of 100 kilowatts and with a minimum height of 50 meters measured 
from the base of the tower to the bottom of the nacelle (i.e., where 
the top of the tower and nacelle are joined) when fully assembled.
    A wind tower section consists of, at a minimum, multiple steel 
plates rolled into cylindrical or conical shapes and welded together 
(or otherwise attached) to form a steel shell, regardless of coating, 
end-finish, painting, treatment, or method of manufacture, and with or 
without flanges, doors, or internal or external components (e.g., 
flooring/decking, ladders, lifts, electrical buss boxes, electrical 
cabling, conduit, cable harness for nacelle generator, interior 
lighting, tool and storage lockers) attached to the wind tower section. 
Several wind tower sections are normally required to form a completed 
wind tower.
    Wind towers and sections thereof are included within the scope 
whether or not they are joined with non-subject merchandise, such as 
nacelles or rotor blades, and whether or not they have internal or 
external components attached to the subject merchandise.
    Specifically excluded from the scope are nacelles and rotor blades, 
regardless of whether they are attached to the wind tower. Also 
excluded are any internal or external components which are not attached 
to the wind towers or sections thereof.
    Merchandise covered by the investigation is currently classified in 
the Harmonized Tariff System of the United States (HTSUS) under 
subheadings 7308.20.0020 \7\ or 8502.31.0000.\8\ Prior to 2011, 
merchandise covered by this investigation was classified in the HTSUS 
under subheading 7308.20.0000 and may continue to be to some degree. 
While the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the scope of the investigation is 
dispositive.
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    \7\ Wind towers are classified under HTSUS 7308.20.0020 when 
imported as a tower or tower section(s) alone.
    \8\ Wind towers may also be classified under HTSUS 8502.31.0000 
when imported as part of a wind turbine (i.e., accompanying nacelles 
and/or rotor blades).
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Scope Comments

    In accordance with the Preamble to the Department's regulations 
(see Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May 
19, 1997)), in the Initiation Notice, we set aside a period of time for 
parties to raise issues regarding product coverage, and encouraged all 
parties to submit comments within 20 calendar days of publication of 
the Initiation Notice. On February 7, 2012, we received scope comments 
from the Petitioner.
    The Department is evaluating the comments submitted by the 
Petitioner and will issue its decision regarding the scope of the 
antidumping (AD) and CVD investigations in the preliminary 
determination of the companion AD investigation, which is due for 
signature on July 26, 2012.\9\ Scope decisions made in the AD 
investigation will be incorporated into the scope of the CVD 
investigation.
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    \9\ See Utility Scale Wind Towers From the People's Republic of 
China and the Socialist Republic of Vietnam: Postponement of 
Preliminary Determinations of Antidumping Duty Investigations, 77 FR 
29315 (May 17, 2012).
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Injury Test

    Because the PRC is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Tariff Act of 1930, as amended (the 
Act), the International Trade Commission (the ITC) is required to 
determine whether imports of the subject merchandise from the PRC 
materially injure, or threaten material injury to, a U.S. industry. On 
February 17, 2012, the ITC published its preliminary determination 
finding that there is a reasonable indication that an industry in the 
United States is threatened with material injury by reason of imports 
from China of wind towers. See Utility Scale Wind Towers from China and 
Vietnam, Investigation Nos. 701-TA-486 and 731-TA-1195-1196 
(Preliminary), 77 FR 9700 (February 17, 2012).

Application of the CVD Law to Imports From the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper From the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) 
(Coated Paper from the PRC), and the accompanying Issues and Decision 
Memorandum (Coated Paper Decision Memorandum). In Coated Paper from the 
PRC, the Department found that

given the substantial difference 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{time}  bar to proceeding with a CVD investigation 
involving products from China.

See Coated Paper Decision Memorandum at Comment 6. The Department has 
affirmed its decision to apply the CVD law to the PRC in numerous 
subsequent determinations.\10\ Furthermore, on March 13, 2012, HR 4105 
was enacted which makes clear that the Department has the authority to 
apply the CVD law to non-market economies (NMEs) such as the PRC. The 
effective date provision of the enacted legislation makes clear that 
this provision applies to this proceeding.\11\
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    \10\ See, e.g., Circular Welded Carbon Quality Steel Pipe From 
the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Affirmative Determination of Critical 
Circumstances, 73 FR 31966 (June 5, 2008) (CWP from the PRC), and 
accompanying Issues and Decision Memorandum (CWP Decision 
Memorandum) at Comment 1.
    \11\ See HR 4105, 112th Cong. Sec.  1(b) (2012) (enacted).
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    Additionally, for the reasons stated in the CWP Decision 
Memorandum, we are using the date of December 11, 2001, the date on 
which the PRC became a member of the World Trade Organization (WTO), as 
the date from which the Department will identify and measure subsidies 
in the PRC. See CWP Decision Memorandum at Comment 2.

Use of Facts Otherwise Available and Adverse Inferences

    Sections 776(a)(1) and (2) of the Act provide that the Department 
shall apply ``facts otherwise available'' if, inter alia, necessary 
information is not on the record or an interested party or any other 
person: (A) Withholds information that has been requested; (B) fails to 
provide information within the deadlines established, or in the form 
and manner requested by the Department, subject to subsections (c)(1) 
and (e) of section 782 of the Act; (C) significantly impedes a 
proceeding; or (D) provides information that cannot be verified as 
provided by section 782(i) of the Act.
    Section 776(b) of the Act further provides that the Department may 
use an adverse inference in applying the facts otherwise available when 
a party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information. Section 776(b) of the 
Act also authorizes the Department to use as adverse facts available 
(AFA), information derived from the petition, the final determination, 
a previous administrative review, or other information placed on the 
record.

[[Page 33425]]

    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the result is 
sufficiently adverse ``as to effectuate the statutory purposes of the 
AFA rule to induce respondents to provide the Department with complete 
and accurate information in a timely manner.'' \12\ 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.'' \13\
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    \12\ See Notice of Final Determination of Sales at Less Than 
Fair Value: Static Random Access Memory Semiconductors From Taiwan, 
63 FR 8909, 8932 (February 23, 1998).
    \13\ See Statement of Administrative Action (SAA) accompanying 
the Uruguay Round Agreements Act, H. Doc. No. 316, 103d Cong. 2d 
Session, at 870 (1994).
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Application of AFA: HRS Producers Are ``Authorities''

    As discussed below under the section ``Programs Preliminarily 
Determined To Be Countervailable,'' the Department is investigating the 
provision of HRS for LTAR by the GOC. We requested information from the 
GOC regarding the specific companies that produced the HRS that CS Wind 
and Titan Companies purchased during the POI. Specifically, we sought 
information from the GOC 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.
    For each producer in which the GOC was a majority owner, we stated 
that the GOC needed to provide the following information that is 
relevant to our analysis of whether that producer is an ``authority.''
     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.
     The names of the ten largest shareholders and the total 
number of shareholders.
     The identification of any government ownership or other 
affiliations between the ten largest shareholders and the government.
     Total level of state ownership of the company's shares and 
the names of all government entities that own shares in the producer.
     Any other relevant evidence the GOC believes demonstrates 
that the company is not controlled by the government.
    For each producer that the GOC claimed was privately owned by 
individuals 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 statement regarding whether the producer had ever been a 
state-owned enterprise (SOE), and, if so, whether any of the current 
owners, directors, or senior managers had been involved in the 
operations of the company prior to its privatization.
     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 producers owned by other corporations (whether in 
whole or in part) or with less-than-majority state ownership during the 
POI, we requested information tracing the ownership of the producer 
back to the ultimate individual or state owners. For such producers, we 
requested the following information.
     The identification of any state ownership of the 
producer's shares; the names of all government entities that own 
shares, either directly or indirectly, in the producer; the 
identification of all owners considered SOEs by the GOC; and the amount 
of shares held by each government owner.
     For each level of ownership, identification of the owners, 
directors, or senior managers of the producer 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 regarding whether any of the shares held by 
government entities have any special rights, priorities, or privileges 
with regard to voting rights or other management or decision-making 
powers of the company; a statement regarding whether there are 
restrictions on conducting, or acting through, extraordinary meetings 
of shareholders; a statement regarding whether there are any 
restrictions on the shares held by private shareholders; and a 
discussion of the nature of the private shareholders' interests in the 
company (e.g., operational, strategic, or investment-related).
    In its questionnaire response on April 9, 2012, the GOC provided 
incomplete ownership information for all of the companies that produced 
HRS purchased by CS Wind and Titan Companies. The GOC provided the 
business registration for all of CW Wind and Titan Companies' input 
suppliers, but did not provide additional documentation, (e.g., capital 
verification reports, articles of association, or any other documents 
demonstrating the producers' ownership. For one producer only, it 
provided the articles of association, but this was still not enough 
information to trace ownership back to the ultimate individual owners, 
as the questionnaire requested.\14\ Further, the GOC provided no 
information at all regarding the identification of owners, directors, 
or senior managers who were also GOC or CCP officials or 
representatives. The GOC stated that ``it was unable to trace all 
ownership back to the ultimate individual or state owners for each and 
every input producer with some direct corporate ownership or less-than-
majority state ownership, and for each level of ownership of these 
input producers during the POI in the limited time allowed for this 
questionnaire response.'' \15\ For all of these producers, it provided 
none of the information requested in the standard ``input producers'' 
appendix, which the Department issues to determine the individual 
owners of producers and to determine the extent of GOC control, if any, 
over the producers.\16\ On April 11, 2012, we issued a supplemental 
questionnaire to the GOC requesting that it provide the requested 
ownership information for the HRS producers. We also requested that the 
GOC respond to the questions regarding the role, if any, that GOC and 
CCP officials and representatives had as owners, directors, or senior 
managers of the producers.\17\
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    \14\ See GOC's Provision of HRS Questionnaire Response (April 9, 
2012) (GOC HRS Response) at Attachment 1 to 11.
    \15\ See GOC HRS Response at 3.
    \16\ Id.
    \17\ See Department's Second Supplemental Questionnaire to the 
GOC (April 11, 2012).
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    In its May 2, 2012, response, the GOC did not provide any 
information regarding the role of GOC and CCP officials and 
representatives, nor did the GOC explain what efforts it undertook to 
obtain the requested information.
    In addition to not providing all of the requested information 
regarding government and CCP officials and representatives, the GOC 
also declined to answer questions about the CCP's

[[Page 33426]]

structure and functions that are relevant to our determination of 
whether the producers of HRS are ``authorities'' within the meaning of 
section 771(5)(B) of the Act. In its initial questionnaire response, 
the GOC asserted that HRS sheet and plate producers are not 
``authorities'' within the meaning of applicable U.S. law or ``public 
bodies'' with the meaning of the WTO Agreement on Subsidies and 
Countervailing Measures. Additionally, the GOC stated that it does not 
``play a role in the ordinary business operations, including pricing 
and marketing decisions, of the domestic Chinese hot-rolled industry, 
including those in which the state holds an ownership interest.'' \18\ 
The GOC argues that Chinese law prohibits GOC officials from taking 
positions in private companies.\19\
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    \18\ See GOC's Initial Questionnaire Response (April 3, 2012) 
(GOC's IQR) at 27.
    \19\ Id. at 32 and GOC's HRS Response at 7.
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    We have explained our understanding of the CCP's involvement in the 
PRC's economic and political structure in a past proceeding.\20\ Public 
information suggests that the CCP exerts significant control over 
activities in the PRC.\21\ This conclusion is supported by, among other 
documents, a publicly available background report from the U.S. 
Department of State.\22\ 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.\23\
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    \20\ See Memorandum to the File from Patricia Tran, 
International Trade Analyst, AD/CVD Operations, Office 3, regarding 
``Additional Documents for Preliminary Determination,'' May 29, 2012 
(Additional Documents Memorandum) at Attachments II and III (which 
include the post-preliminary analysis memorandum from certain 
seamless carbon and alloy steel standard, line, and pressure pipe 
and a State Department report, both recognizing the significant role 
the CCP has in the GOC).
    \21\ Id. at Attachment III.
    \22\ 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) (Seamless Pipe from the PRC), and accompanying 
Issues and Decision Memorandum (Seamless Pipe Decision Memorandum) 
at Comment 7.
    \23\ See Seamless Pipe Decision Memorandum at 16.
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    Thus, the Department finds, as it has in past investigations, that 
the information requested regarding the role of CCP officials in the 
management and operations of the HRS producers, and in the management 
and operations of the producers' owners, is necessary to our 
determination of whether these producers are authorities within the 
meaning of section 771(5)(B) of the Act. In addition, the GOC did not 
promptly notify the Department, in accordance with section 782(c) of 
the Act, that it was unable to submit the required information in the 
requested form and manner, nor did it suggest any alternative forms for 
submitting this information. In fact, in its initial questionnaire 
response to the ``Information Regarding Input Producers in the PRC 
Appendix,'' the GOC stated that it ``does not intend to respond to all 
aspects of the Department's extremely burdensome LTAR Appendix.'' \24\ 
Further, the GOC did not provide any information regarding the attempts 
it undertook to obtain the requested information for the HRS suppliers/
producers, despite the fact that we provided the GOC with a second 
opportunity to provide the information and additional time for 
responding to both the original and supplemental questionnaires.\25\
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    \24\ See GOC HRS Response at 1.
    \25\ The Department provided a 7-day extension to the GOC to 
submit is initial questionnaire response (see Department's March 21, 
2012, letter to the GOC). The Department subsequently provided to 
the GOC an additional four days to submit its response to the HRS 
``Information Regarding Input Producers in the PRC Appendix'' (see 
Department's March 28, 2012, letter to the GOC). The Department also 
extended by seven days the due date for the GOC's response to the 
second supplemental questionnaire, which contained HRS producer 
questions (see Department's April 23, 2012, letter to the GOC).
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    Therefore, 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. See sections 776(a)(1) and 776(a)(2)(A) of 
the Act. Moreover, we preliminarily determine that the GOC has failed 
to cooperate by not acting to the best of its ability to comply with 
our request for information. Consequently, we determine that the GOC 
has withheld information and impeded the investigation, and that an 
adverse inference is warranted in the application of facts available. 
See section 776(b) of the Act. As AFA, we are finding that all of the 
producers of HRS purchased by the respondents during the POI are 
``authorities'' within the meaning of section 771(5)(B) of the Act.
    In addition, for those instances in which the GOC provided the 
requested ownership documents (e.g., capital verification reports, 
business registration forms, and articles of association) but failed to 
provide information on whether individual owners of the input producers 
were officials of the CCP, and the extent to which CCP officials 
influenced the manner in which they conducted their firms' operations, 
we are assuming, adversely, that the firms were government authorities 
that provided a financial contribution. Our approach in this regard is 
consistent with the Department's practice.\26\
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    \26\ See, e.g., Certain Coated Paper Suitable For High-Quality 
Print Graphics Using Sheet-Fed Presses From the People's Republic of 
China: Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination with Final 
Antidumping Duty Determination, 75 FR 10774, 10778 (March 9, 2010); 
unchanged in Certain Coated Paper Suitable For High-Quality Print 
Graphics Using Sheet-Fed Presses From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 75 FR 
59212 (September 27, 2010) (Certain Coated Paper from the PRC), and 
accompanying Issues and Decision Memorandum (Certain Coated Paper 
Decision Memorandum).
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Application of AFA: Provision of HRS Is Specific to Wind Tower 
Producers

    The Department asked the GOC to provide a list of industries in the 
PRC that purchase HRS directly and to provide the amounts (volume and 
value) purchased by each of the industries, including the wind tower 
industry.\27\ The Department requests such information for purposes of 
its de facto specificity analysis.
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    \27\ See Department's Initial Questionnaire to the GOC (February 
17, 2012) at II-6.
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    The GOC stated that it did ``not impose any limitations on the 
consumption of hot-rolled steel'' and that ``the type of consumers that 
may purchase hot-rolled steel sheet and plate is highly varied within 
the economy.'' \28\ The Department again asked the GOC to provide a 
list of industries that purchased HRS with the associated value and 
volume data in a supplemental questionnaire. To that request, the GOC 
provided a list of various industries and sectors that may use hot-
rolled steel, which was produced based on the industrial classification 
scheme of China and that of the United Nations, i.e., ISIC Scheme. That 
information submitted by the GOC, however, is insufficient because it 
does not report the actual PRC industries that purchased HRS and the 
volume and value of each industry's respective purchase for the POI and 
the prior two years.\29\
---------------------------------------------------------------------------

    \28\ See GOC's IQR at 22 and 24.
    \29\ See GOC's Second Supplemental Questionnaire Response (May 
2, 2012) (GOC's Second SQR) at 4 and Exhibit S2-7.
---------------------------------------------------------------------------

    Therefore, 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

[[Page 33427]]

preliminary determination. See sections 776(a)(1) and 776(a)(2)(A) of 
the Act. Moreover, we preliminarily determine that the GOC has failed 
to cooperate by not acting to the best of its ability to comply with 
our request for information. Consequently, an adverse inference is 
warranted in the application of facts available. See section 776(b) of 
the Act. In drawing an adverse inference, we find that the GOC's 
provision of HRS to wind tower producers is specific within the meaning 
of section 771(5A) of the Act. The Department's preliminary 
determination that the benefits under this program are specific is 
supported by the Department's determinations regarding the GOC's 
provision of HRS for LTAR in Cylinders from the PRC \30\ and Steel 
Wheels from the PRC.\31\
---------------------------------------------------------------------------

    \30\ See High Pressure Steel Cylinders From the People's 
Republic of China: Final Affirmative Countervailing Duty 
Determination, 77 FR 26738 (May 7, 2012) (Cylinders from the PRC), 
and accompanying Issues and Decision Memorandum (Cylinders Decision 
Memorandum) at 17-18, where the Department states: ``Further, the 
GOC has reported that hot-rolled steel is used by a `wide variety of 
steel consuming industries.' Because hot-rolled steel is only 
provided to steel consuming industries, we determine that the 
subsidy is being provided to a limited number of industries and is, 
therefore, specific.''.
    \31\ Certain Steel Wheels From the People's Republic of China: 
Final Affirmative Countervailing Duty Determination, Final 
Affirmative Critical Circumstances Determination, 77 FR 17017 (March 
23, 2012) (Steel Wheels from the PRC), and accompanying Issues and 
Decision Memorandum (Steel Wheels Decision Memorandum) at 8-10 and 
Comment 18.
---------------------------------------------------------------------------

    For details regarding the remaining elements of our analysis, see 
the ``Provision of Hot-Rolled Steel for LTAR'' section below.

Application of AFA: Provision of Electricity for LTAR

    The Department is also investigating the provision of electricity 
for LTAR to the respondents by the GOC. The GOC, however, did not 
provide a complete response to the Department's request for information 
regarding this program. In the February 17, 2012, initial 
questionnaire, we requested that the GOC provide the provincial price 
proposals for each province in which a mandatory respondent and any 
reported cross-owned company is located for the applicable tariff 
schedules that were in effect during the POI, and to explain how those 
price proposals were created.\32\ We also asked the GOC to explain how 
increases in labor costs, capital expenses, and transmission and 
distribution costs are factored into the price proposals, and 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.\33\ In its April 3, 2012, initial questionnaire response, 
the GOC responded that it was unable to provide the price proposals 
because they are working documents for the National Development and 
Reform Commission's (NDRC) review.\34\ To the questions regarding how 
electricity cost increases are reflected in retail price increases, the 
GOC's response explained theoretically how price increase should be 
formulated and did not explain the actual process that led to the price 
increases.\35\
---------------------------------------------------------------------------

    \32\ See Department's Initial Questionnaire to the GOC at 
Electricity Appendix.
    \33\ Id.
    \34\ See GOC's IQR at 44.
    \35\ Id. at 46-49.
---------------------------------------------------------------------------

    As such, on April 4, 2012, the Department issued a deficiency 
questionnaire to the GOC reiterating its request for this 
information.\36\ In its April 18, 2012, questionnaire response, to the 
Electricity Appendix questions, the GOC reiterated its response 
contained in its initial questionnaire response.\37\
---------------------------------------------------------------------------

    \36\ See Department's Deficiency Questionnaire to the GOC (April 
4, 2012) at 3-4.
    \37\ See GOC's First Supplemental Questionnaire Response (April 
18, 2012) (GOC's First SQR) at 2-5.
---------------------------------------------------------------------------

    After reviewing the GOC's responses to the Department's electricity 
questions, we preliminarily determine that the GOC's answers are 
inadequate and did not provide the necessary information required by 
the Department to analyze the provision of electricity in the PRC 
because the GOC did not provide the requested price proposal documents 
or explain how price increases were formulated. As a result, the 
Department must rely on the facts otherwise available in its analysis 
for this preliminary determination. See sections 776(a)(1) and 
776(a)(2)(A) of the Act.
    Moreover, we preliminarily determine that the GOC has failed to 
cooperate by not acting to the best of its ability to comply with the 
Department's requests for information. In this regard, the GOC stated 
it couldn't provide the NDRC documents because they were ``working 
documents.'' However, the GOC did not explain why such documents could 
not be submitted on the record of this proceeding, particularly as the 
Department permits parties to submit information for limited disclosure 
if it is business proprietary. See, e.g., 19 CFR 351.306. Therefore, an 
adverse inference is warranted in the application of facts available. 
See section 776(b) of the Act. Drawing an adverse inference, we 
preliminarily determine 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 are also relying on an adverse inference by 
selecting the highest electricity rates that were in effect during the 
POI as our benchmarks for determining the existence and amount of any 
benefit under this program. See section 776(b)(4) of the Act.
    The GOC provided the provincial rates schedules that were effect 
during the POI.\38\ We have used those schedules as a benchmark rate 
source and identified the highest provincial electricity rates in 
effect during POI to serve as the benchmark rates applied in the 
benefit calculations for this program. For details on the preliminary 
calculated subsidy rates for the respondents, see below at ``Provision 
of Electricity for LTAR.''
---------------------------------------------------------------------------

    \38\ See GOC's First SQR at Exhibits S1-1 and S1-2.
---------------------------------------------------------------------------

Application of AFA: Grants Discovered During the Investigation

    The Department will investigate potential subsidies it discovers 
during the course of an investigation, even if those subsidies were not 
alleged in the countervailing duty petition. See section 775 of the 
Act.
    In supplemental questionnaires issued to CS Wind, Titan Companies, 
and the GOC, we identified a number of grants that the companies 
appeared to have received based on information in the financial 
statements that the companies placed on the record. Respondents had not 
reported these grants nor did they complete the appropriate appendices, 
despite the Department's request in the initial questionnaire that the 
respondents should report all subsidies used during the POI, not merely 
those related to allegations under investigation. In the supplemental 
questionnaires, we requested that CS Wind and Titan Companies provide 
more information about these grants by responding to the relevant 
appendices.\39\ We also instructed the companies to share with the GOC 
the grant information so that the Chinese government could also submit 
information on the programs under which these grants were provided.\40\ 
In the April 11, 2012, supplemental questionnaire issued to the GOC, we 
asked the Chinese government to coordinate with the respondents to 
ensure receipt of the information regarding the assistance

[[Page 33428]]

that the companies received and to provide a complete response to the 
Department's appendices.\41\ In response to the GOC's April 23, 2012, 
extension request in which it stated that the PRC government needed 
more time ``to coordinate with the respondents on the overlapping 
issues raised in the questionnaire,'' we provided to the GOC an 
additional week to respond to the Department's request for 
information.\42\
---------------------------------------------------------------------------

    \39\ See Department's First Supplemental Questionnaire to CS 
Wind (April 6, 2012) and Titan Companies (April 11, 2012).
    \40\ Id.
    \41\ See Department's Second Supplemental Questionnaire to the 
GOC (April 11, 2012).
    \42\ See GOC's Extension Request to Respond to the Second 
Supplemental Questionnaire (April 23, 2012) and the Department's 
Response to the GOC's Extension Request (April 23, 2012).
---------------------------------------------------------------------------

    Both CS Wind and Titan Companies provided responses for the grants, 
which they respectively received.\43\ The GOC, however, only confirmed 
that the respondents received the grants and in a few instances 
provided a limited program description. The GOC did not provide a 
response to any of the required appendices (i.e., Standard Questions 
Appendix, Allocation Appendix, and Grant Appendix) and, as such, did 
not provide any specificity information on the programs.\44\ The GOC 
stated that it was unable to respond to the request for information 
with regard to the programs during the timeframe given for the 
supplemental questionnaire \45\ despite the Department granting to the 
GOC additional time to respond to the questionnaire.
---------------------------------------------------------------------------

    \43\ See CS Wind's First SQR (April 30, 2012) and Titan 
Companies' First Supplemental Questionnaire Response Part 1 (April 
30, 2012) (Titan's First SQR Part 1).
    \44\ See GOC Second SQR at 7-12.
    \45\ Id. at 10 and 12.
---------------------------------------------------------------------------

    The Department normally relies on information from the government 
to assess program specificity. However, in their respective responses, 
CS Wind and Titan Companies did provide some information originally 
generated by the GOC (i.e., approval documents) which the Department 
could use in its specificity analysis. Therefore, where the respondents 
submitted such information about the specificity of a program, we 
relied upon that information to make our preliminary determination. 
Where neither a respondent company nor the GOC provided information 
that would allow us to determine the specificity of a program, we 
relied upon AFA to make our preliminary determination. For those 
particular programs, we preliminarily find that the GOC withheld 
necessary information that was requested of it and, thus, has impeded 
the investigation. Further, the GOC has not cooperated to the best of 
its ability in responding to the Department's request for information. 
Consequently, an adverse inference is warranted in the applicable of 
facts available. See section 776(b) of the Act.
    We analyzed the grants and preliminarily found that a number of 
them provided benefits to the respondents during the POI. For those 
grants, see ``Programs Preliminarily Determined To Be Countervailable'' 
below. As we discuss in the section ``Programs Preliminarily Determined 
Not To Provide Countervailable Benefits During the POI,'' those grants 
found to be used but the benefit from the program results in a net 
subsidy rate that is less than 0.005 percent ad valorem as well as 
grants provided prior to the POI that did not pass the ``0.5 percent 
test'' do not give rise to a benefit during the POI.

Subsidies Valuation Information

Period of Investigation

    The POI for which we are measuring subsidies is January 1, 2011, 
through December 31, 2011, which corresponds to the most recently 
completed fiscal year. See 19 CFR 351.204(b)(2).

Allocation Period

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

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 company that 
received the subsidy. However, 19 CFR 351.525(b)(6)(ii)-(v) provides 
additional rules for the attribution of subsidies received by 
respondents with cross-owned affiliates. Subsidies to the following 
types of cross-owned affiliates are covered in these additional 
attribution rules: (ii) producers of the subject merchandise; (iii) 
holding companies or parent companies; (iv) producers of an input that 
is primarily dedicated to the production of the subject merchandise; or 
(v) an affiliate producing non-subject merchandise that otherwise 
transfers a subsidy to a respondent.

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 another corporation in essentially the 
same ways it can use its own assets. 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 ways it 
could use its own subsidy benefits.\46\ Based on information on the 
record, we preliminarily determine that cross-ownership exists, in 
accordance with 19 CFR 351.525(b)(6)(vi), among the following 
companies.
---------------------------------------------------------------------------

    \46\ See Fabrique de Fer de Charleroi v. United States, 166 F. 
Supp 2d 593, 600-604 (CIT 2001).
---------------------------------------------------------------------------

CS Wind \47\

    As discussed above, the Department selected CS Wind (consisting of 
CS Wind China Co., Ltd. and CS Wind Corporation) as a mandatory 
respondent. The companies that responded to the Department's 
questionnaires are CS Wind China Co., Ltd. (CSWC) \48\ and its cross-
owned affiliate, CS Wind Tech (Shanghai) Co., Ltd. (CSWS). CSWC and 
CSWS are affiliated with other companies. CS Wind provided information 
on those affiliates to demonstrate that none of them are required to 
provide questionnaire responses under the Department's attribution and 
cross-ownership regulations.
---------------------------------------------------------------------------

    \47\ For the company information, see CS Wind's Initial 
Questionnaire Response (April 3, 2012) (CS Wind's IQR) at 2-6 and 
Exhibit CVD-4.
    \48\ Company was previously known as ``CS Wind Tech Co., Ltd.'' 
During the POI, the company changed its English name to ``CS Wind 
China Co., Ltd.'' See CS Wind's IQR at 2.

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

[[Page 33429]]

    CSWC, the Chinese producer of subject merchandise, was established 
on September 8, 2006, as a foreign invested enterprise (FIE) in the 
Lianyungang Economic and Technological Development Zone, Lianyungang 
City, Jiangsu Province. CSWC is wholly-owned by CS Wind Corporation (CS 
Wind Korea).\49\ In 2006, CS Wind Korea was established in Korea and 
has no Chinese based ownership.\50\ CS Wind Korea is the entity that 
sells the PRC-origin wind towers and related equipment produced by CSWC 
to foreign markets, including the United States.\51\
---------------------------------------------------------------------------

    \49\ See CS Wind's IQR at 2-6 and Exhibit CVD-4.
    \50\ Id.
    \51\ Id.
---------------------------------------------------------------------------

    Established on November 23, 2009, in Shanghai, CSWS is the wholly-
owned subsidiary of CSWC.\52\ CSWS is a domestically-owned trading 
company that sells minor inputs (e.g., paint) to CSWC for the 
production of subject merchandise.\53\
---------------------------------------------------------------------------

    \52\ Id.
    \53\ Id.
---------------------------------------------------------------------------

    Pursuant to 19 CFR 351.525(b)(6)(vi), we preliminarily determine 
that CSWC and CSWS are cross-owned because of common ownership. 
Regarding CSWS, we are attributing any subsidy received by the company 
as directed under 19 CFR 351.525(b)(6)(iv). As such, for this 
preliminary determination, we are attributing any subsidy received by 
either CSWC or CSWS to the combined sales of both companies, excluding 
inter-company sales. Hereinafter, we refer to CSWC and CSWS 
collectively as CS Wind, unless otherwise indicated.

Titan Companies \54\

    Titan Wind responded to the Department's original and supplemental 
questionnaires on behalf of itself and five cross-owned affiliates: 
Titan Lianyungang Metal Products Co. Ltd. (Titan Lianyungang), Baotou 
Titan Wind Energy Equipment Co., Ltd. (Titan Baotou), Shenyang Titan 
Metal Co., Ltd. (Titan Shenyang), Titan (Suzhou) Wind Power Equipment 
Co., Ltd. (Titan Suzhou), and Shanghai Tianshen Investment Management 
Co., Ltd. (Shanghai Tianshen).
---------------------------------------------------------------------------

    \54\ For company information, see Titan Companies' Initial 
Questionnaire Response (April 3, 2012) (IQR) at 5-12 and Exhibit 1.
---------------------------------------------------------------------------

    Titan Wind was established on January 18, 2005, as an FIE in 
Taicang Economic Development Zone.\55\ Its original name was Titan 
(Suzhou) Metal Product Co., Ltd. (Titan Metal) and changed to Titan 
Wind Energy (Suzhou) Co. Ltd. in December 8, 2009.\56\ Its original 
legal organization also transformed from a limited liability company to 
a joint stock limited company at that time.\57\ Shanghai Tianshen is a 
holding company with majority (i.e., wholly owns or owns more than 50 
percent) ownership in Titan Wind. Titan Wind reported that it, in turn, 
owns the majority of the shares of Titan Lianyungang, Titan Baotou, 
Titan Shenyang and Titan Suzhou.\58\ As all of these companies have 
common ownership through Titan Wind, we preliminarily determine that 
Shanghai Tianshen, Titan Wind, Titan Lianyungang, Titan Baotou, Titan 
Shenyang and Titan Suzhou are cross-owned within the meaning of 19 CFR 
351.525(b)(6)(vi). Titan Wind, Titan Lianyungang, Titan Baotou, and 
Titan Shenyang are producers of subject merchandise; Titan Suzhou 
provides inputs for the production of subject merchandise; and Shanghai 
Tianshen is a holding company and does not produce any merchandise. 
Consequently, the subsidies received by these companies are being 
attributed according to the rules established in 19 CFR 
351.525(b)(6)(ii) and (b)(6)(iv). Regarding the holding company, 
Shanghai Tianshen, normally the Department would attribute subsidies 
received by the firm over its total consolidated sales, as described 
under 19 CFR 351.525(b)(6)(iii). However, we preliminarily determine 
that the information supplied by the Titan Companies does not allow the 
derivation of a consolidated sales figure.\59\ As a result, we have 
attributed subsidies to Shanghai Tianshen in the manner described 
below. Hereinafter, we refer to Titan Wind, Titan Lianyungang, Titan 
Baotou, Titan Shenyang and Titan Suzhou, collectively as Titan 
Companies, unless otherwise indicated.
---------------------------------------------------------------------------

    \55\ See Titan Companies' IQR at 5.
    \56\ Id. at 6-8.
    \57\ Id. at 8.
    \58\ Id. at 10-12.
    \59\ As stated above, Titan Companies reported Shanghai Taishen 
is the parent company of Titan Wind. Shanghai Tainshen's 2009, 2010, 
and 2011 financial statement does not appear to be on a consolidated 
basis (incorporating its own financial information and its 
affiliates). See Titan Companies' IQR at Exhibit 15, 16, 17 and its 
April 27, 2012, supplemental questionnaire response at Exhibit SCVD-
27 and SCVD-28. Therefore, the Department will continue to review 
this information.
---------------------------------------------------------------------------

    We preliminarily determine that multiple sales denominators are 
appropriate for use in the attribution of subsidies to Titan Companies. 
To attribute a subsidy received by Titan Wind, Titan Lianyungang, Titan 
Baotou, or Titan Shenyang, we used as the denominator the total 
consolidated sales of Titan Wind, Titan Lianyungang, Titan Baotou, and 
Titan Shenyang, exclusive of sales among affiliated companies, for 
2011. To attribute a subsidy received by Titan Suzhou, we used as the 
denominator the total consolidated sales of Titan Wind, Titan 
Lianyungang, Titan Baotou, Titan Shenyang, and Titan Suzhou, exclusive 
of sales among affiliated companies, for 2011. As explained above, we 
find we are unable to derive a consolidated sales figure for Shanghai 
Tianshen. Therefore, to attribute a subsidy received by Shanghai 
Tianshen, we used as the denominator the total consolidated sales of 
Shanghai Tianshen, Titan Wind, Titan Lianyungang, Titan Baotou, Titan 
Shenyang, and Titan Suzhou, exclusive of sales among affiliated 
companies, for 2011.\60\ Lastly, to attribute an export subsidy 
received by a company, we used as the denominator the 2011 export sales 
of Titan Wind because it is the only cross-owned company with export 
sales.
---------------------------------------------------------------------------

    \60\ See Department's methodology and treatment of RZBC Co. Ltd. 
and its affiliates in Citric Acid and Certain Citrate Salts from the 
People's Republic of China: Preliminary Results of Countervailing 
Duty Administrative Review, 76 FR 33219 (June 8, 2011) and unchanged 
in the final results, Citric Acid and Certain Citrate Salts From the 
People's Republic of China: Final Results of Countervailing Duty 
Administrative Review, 76 FR 77206 (December 12, 2011).
---------------------------------------------------------------------------

Benchmarks and Discount Rates

    The Department is investigating loans received by the respondents 
from Chinese policy banks and state-owned commercial banks (SOCBs), as 
well as non-recurring, allocable subsidies (see 19 CFR 351.524(b)(1)). 
The derivation of the benchmark and discount rates used to value these 
subsidies is discussed below.

Short-Term RMB-Denominated Loans

    Section 771(5)(E)(ii) of the Act explains that the benefit for 
loans is the ``difference between the amount the recipient of the loan 
pays on the loan and the amount the recipient would pay on a comparable 
commercial loan that the recipient could actually obtain on the 
market.'' Normally, the Department uses comparable commercial loans 
reported by the company as a benchmark.\61\ If the firm did not have 
any comparable commercial loans during the period, the Department's 
regulations provide that we ``may use a national average interest rate 
for comparable commercial loans.'' \62\
---------------------------------------------------------------------------

    \61\ See 19 CFR 351.505(a)(3)(i).
    \62\ See 19 CFR 351.505(a)(3)(ii).
---------------------------------------------------------------------------

    As noted above, section 771(5)(E)(ii) of the Act indicates that the 
benchmark should be a market-based rate. For the

[[Page 33430]]

reasons first explained in Coated Paper from the PRC,\63\ 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. Because of this, any loans received by respondents 
from private Chinese or foreign-owned banks would be unsuitable for use 
as benchmarks under 19 CFR 351.505(a)(2)(i). Similarly, we cannot use a 
national interest rate for commercial loans as envisaged by 19 CFR 
351.505(a)(3)(ii). Therefore, because of the special difficulties 
inherent in using a Chinese benchmark for loans, the Department is 
selecting an external market-based benchmark interest rate. The use of 
an external benchmark is consistent with the Department's practice. For 
example, in Softwood Lumber from Canada, the Department used U.S. 
timber prices to measure the benefit for government-provided timber in 
Canada.\64\
---------------------------------------------------------------------------

    \63\ See Coated Paper Decision Memorandum at Comment 10; see 
also Memorandum to the File from Kristen Johnson, Trade Analyst, AD/
CVD Operations, Office 3, regarding ``Placement of Banking Memoranda 
on Record of the Instant Investigation'' (May 29, 2012).
    \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) (Softwood Lumber from Canada), and 
accompanying Issues and Decision Memorandum (Softwood Lumber 
Decision Memorandum) at ``Analysis of Programs, Provincial Stumpage 
Programs Determined to Confer Subsidies, Benefit.''
---------------------------------------------------------------------------

    In past proceedings involving imports from the PRC, we calculated 
the external benchmark using the methodology first developed in Coated 
Paper from the PRC \65\ and more recently updated in Thermal Paper from 
the PRC.\66\ Under that methodology, we first determine which countries 
are similar to the PRC in terms of gross national income, based on the 
World Bank's classification of countries as: low income; lower-middle 
income; upper-middle income; and high income. As explained in Coated 
Paper from the PRC, this pool of countries captures the broad inverse 
relationship between income and interest rates. For 2001 through 2009, 
the PRC fell in the lower-middle income category.\67\ Beginning in 
2010, however, the PRC is in the upper-middle income category.\68\ 
Accordingly, as explained further below, we are using the interest 
rates of upper-middle income countries to construct the benchmark.
---------------------------------------------------------------------------

    \65\ See Coated Paper Decision Memorandum at Comment 10.
    \66\ See Lightweight Thermal Paper from the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 73 FR 
57323 (October 2, 2008) (Thermal Paper from the PRC), and 
accompanying Issues and Decision Memorandum (Thermal Paper Decision 
Memorandum) at 8-10.
    \67\ See World Bank Country Classification, http://econ.worldbank.org/. See also Memorandum to the File from Patricia 
M. Tran, International Trade Analyst, AD/CVD Operations, Office 3, 
regarding ``Interest Rate Benchmarks'' (Interest Rate Benchmarks 
Memorandum) (May 29, 2012).
    \68\ Id.
---------------------------------------------------------------------------

    The Department's methodology relies on data published by the World 
Bank and International Monetary Fund. For the year 2011 (the POI), the 
World Bank, however, has not yet published all the necessary data 
relied on by the Department to compute a short-term benchmark interest 
rate for the PRC. Specifically, the World Governance Indicators are not 
yet available. Therefore, for purposes of this preliminary 
determination, where the use of a short-term benchmark rate for 2011 is 
required, we have applied the 2010 short-term benchmark rate for the 
PRC, as calculated by the Department and discussed below. The 
Department notes that the current 2010 loan benchmark may be updated, 
pending the release of all the necessary 2011 data, by the final 
determination.
    After the Department identifies the appropriate interest rates, the 
next step in constructing the benchmark has been to incorporate an 
important factor in interest rate formation, the strength of governance 
as reflected in the quality of the countries' institutions. The 
strength of governance has been built into the analysis by using a 
regression analysis that relates the interest rates to governance 
indicators. In each of the years from 2001-2009, the results of the 
regression analysis reflected the intended, common sense result: 
stronger institutions meant relatively lower real interest rates, while 
weaker institutions meant relatively higher real interest rates.\69\ 
For 2010, however, the regression does not yield that outcome for the 
PRC's income group.\70\
---------------------------------------------------------------------------

    \69\ See Additional Documents Memorandum at Attachment I for 
Federal Reserve Consultation Memorandum.
    \70\ See Interest Rate Benchmarks Memorandum.
---------------------------------------------------------------------------

    This contrary result for a single year in ten does not lead us to 
reject the strength of governance as a determinant of interest rates. 
As confirmed by the Federal Reserve, ``there is a significant negative 
correlation between institutional quality and the real interest rate, 
such that higher quality institutions are associated with lower real 
interest rates.'' \71\ However, for 2010, incorporating the governance 
indicators in our analysis does not make for a better benchmark. 
Therefore, while we have continued to rely on the regression-based 
analysis used since Coated Paper from the PRC to compute the benchmarks 
for loans taken out prior to the POI, for the 2010 benchmark we are 
using an average of the interest rates of the upper-middle income 
countries. Based on our experience for the 2001-2009 period, in which 
the average interest rate of the lower-middle income group did not 
differ significantly from the benchmark rate resulting from the 
regression for that group, use of the average interest rate for 2010 
does not introduce a distortion into our calculations.
---------------------------------------------------------------------------

    \71\ Id.
---------------------------------------------------------------------------

    Many of the countries in the World Bank's upper-middle and lower-
middle income categories 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 ``upper middle income'' by the 
World Bank for 2010 and ``lower middle income'' for 2001-2009. First, 
we did not include those economies that the Department considered to be 
non-market economies for antidumping 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.\72\
---------------------------------------------------------------------------

    \72\ See Interest Rate Benchmarks Memorandum.
---------------------------------------------------------------------------

    The resulting inflation-adjusted benchmark lending rates are 
included in the respondents' preliminarily calculations memoranda. 
Because these rates are net of inflation, we adjusted the benchmark to 
include an inflation component. \73\
---------------------------------------------------------------------------

    \73\ Id.
---------------------------------------------------------------------------

Long-Term RMB-Denominated Loans

    The lending rates reported in the IFS represent short- and medium-
term lending, and there are not sufficient publicly available long-term 
interest rate

[[Page 33431]]

data upon which to base a robust benchmark for long-term loans. To 
address this problem, the Department has developed an adjustment to the 
short- and medium-term rates to convert them to long-term rates using 
Bloomberg U.S. corporate BB-rated bond rates.\74\
---------------------------------------------------------------------------

    \74\ 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) 
(Rectangular Pipe from the PRC), and accompanying Issues and 
Decision Memorandum (Rectangular Pipe Decision Memorandum) at 8.
---------------------------------------------------------------------------

    In Citric Acid from the PRC, this methodology was revised by 
switching from a long-term mark-up based on the ratio of the rates of 
BB-rated bonds to applying a spread which is calculated as the 
difference between the two-year BB bond rate and the n-year BB bond 
rate, where n equals or approximates the number of years of the term of 
the loan in question.\75\ Finally, because these long-term rates are 
net of inflation as noted above, we adjusted the benchmark to include 
an inflation component.\76\
---------------------------------------------------------------------------

    \75\ See Citric Acid and Certain Citrate Salts From the People's 
Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 16836 (April 13, 2009) (Citric Acid from the 
PRC), and accompanying Issues and Decision Memorandum (Citric Acid 
Decision Memorandum) at Comment 14.
    \76\ See Interest Rate Benchmarks Memorandum.
---------------------------------------------------------------------------

Foreign Currency-Denominated Loans

    To calculate benchmark interest rates for foreign currency-
denominated loans, the Department is again following the methodology 
developed over a number of successive PRC investigations. For US dollar 
short-term loans, the Department used as a benchmark the one-year 
dollar London Interbank Offering Rate (LIBOR), plus the average spread 
between LIBOR and the one-year corporate bond rates for companies with 
a BB rating. Likewise, for any loans denominated in other foreign 
currencies, we used as a benchmark the one-year LIBOR for the given 
currency plus the average spread between the LIBOR rate and the one-
year corporate bond rate for companies with a BB rating.
    For any long-term foreign currency-denominated loans, the 
Department added the applicable short-term LIBOR rate to a spread which 
is calculated as the difference between the one-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.\77\
---------------------------------------------------------------------------

    \77\ Id.
---------------------------------------------------------------------------

Discount Rate Benchmarks

    Consistent with 19 CFR 351.524(d)(3)(i)(A), we have used, as our 
discount rate, the long-term interest rate calculated according to the 
methodology described above for the year in which the government 
provided non-recurring subsidies.\78\
---------------------------------------------------------------------------

    \78\ Id., and Respondents' preliminary calculations memoranda.
---------------------------------------------------------------------------

    The resulting interest rate benchmarks that we used in the 
preliminary calculations are provided in the respondents' preliminarily 
calculations memoranda.

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. Policy Lending to the Renewable Energy Industry

    Petitioner alleged that the GOC subsidizes wind tower producers 
through the provision of policy loans. According to Petitioner, the GOC 
provides for preferential policy lending to wind tower producers 
through the ``Renewable Energy Law,'' the ``Medium and Long-Term 
Development Plan for Renewable Energy in China,'' the ``Interim 
Measures for the Administration of Financial Subsidy Fund for Renewable 
and Energy Saving-Building Materials,'' and other Chinese central 
government programs and measures, including the GOC's five-year 
plans.\79\
---------------------------------------------------------------------------

    \79\ See Department's Initiation Checklist for this 
investigation (January 18, 2012) at ``Policy Lending to the 
Renewable Energy Industry'' (page 19-20).
---------------------------------------------------------------------------

    Both respondents reported having loans outstanding during the POI. 
The Department finds that the loans to the respondents are 
countervailable. The information on the record indicates the GOC has 
placed great emphasis on targeting the renewable energy industry, 
including wind towers, for development in recent years. For example, 
the ``Renewable Energy Law,'' in Article 25, calls specifically for the 
use of loans in implementing the GOC's plans for renewable energy: 
``Financial institutions may offer preferential loans with financial 
interest subsidy to projects for exploitation of renewable energy that 
are listed in the national development guidance catalogue of the 
renewable energy industry and meet the requirements for granting 
loans.''\80\
---------------------------------------------------------------------------

    \80\ See Petition at Volume III, Exhibit III-7.
---------------------------------------------------------------------------

    The GOC's ``Guidelines of the Eleventh Five-Year Plan for National 
Economic and Social Development'' (2006-2010) contains the section 
``All Out Develop Renewable Energy Resources'' with the instruction to 
``carry out preferential finance and taxation and investment policies 
and mandatory market share policies, encourage the production and 
consumption of renewable energy resources * * *'' \81\ At Article 5 of 
the ``Decision of the State Council on Promulgating the Interim 
Provisions on Promoting Industrial Structure Adjustment for 
Implementation'' (December 2, 2005) (Decision 40), the GOC announced 
that: ``We shall actively support and develop new energy and renewable 
energy industries, encourage the development and utilization of 
substitute resources for petroleum, and clean energy, as well, actively 
propel the industrialization of clean coal technology, and speed up the 
development of wind power, solar energy, and biomass energy, etc.'' 
\82\ Decision 40 states that renewable energy is an encouraged category 
that is ``to be encouraged and supported with policies and measures.'' 
\83\
---------------------------------------------------------------------------

    \81\ See GOC's IQR at D-7.1, Chapter 12 ``Optimize the 
Development of Energy Industry,'' Section 4 ``All Out Develop 
Renewable Energy Resources.''
    \82\ Id. at D-10.
    \83\ Id. at D-10, Article 14.
---------------------------------------------------------------------------

    Renewable energy is among the projects listed in the NDRC's 
``Directory Catalogue on Readjustment of Industrial Structure'' 
(December 2, 2005) (the Catalogue), which contains a list of encouraged 
projects the GOC develops through loans and other forms of assistance, 
and which the Department has relied upon in prior specificity 
determinations.\84\ Specifically, the Catalogue includes the encouraged 
power project IV(5) for: ``wind power and the development and 
utilization of such renewable energy as solar energy, geothermal 
energy, ocean power, and biomass power'' and the encouraged machinery 
project XII(12) for: ``manufacturing of clean energy power generation 
equipment (nuclear power, wind power, solar energy and tide, 
etc.)''\85\
---------------------------------------------------------------------------

    \84\ See, e.g., Certain New Pneumatic Off-the-Road Tires From 
the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Negative Determination of Critical 
Circumstances, 73 FR 40480 (July 15, 2008) (Tires from the PRC), and 
accompanying Issues and Decision Memorandum (Tires Decision 
Memorandum) at ``Government Policy Lending.''
    \85\ See GOC's IQR at Exhibit D-11.
---------------------------------------------------------------------------

    Additionally, the GOC provided source documents concerning the 
largest loans that the respondents had outstanding during the POI. 
Information in these business proprietary documents further supports 
our preliminary determination that the GOC has a policy in place to 
encourage the development and production of wind towers through policy 
lending. See Memorandum to the File from Patricia M. Tran, 
International Trade Analyst, AD/CVD Operations, Office 3, regarding 
``Excerpt of Internal Loan Documents'' (May 29, 2012).

[[Page 33432]]

    Therefore, given the evidence demonstrating the GOC's objective of 
developing the renewable energy sector, and wind power in particular, 
through loans and other financial incentives, we preliminarily 
determine there is a program of preferential policy lending specific to 
wind tower producers, within the meaning of section 771(5A)(D)(i) of 
the Act. Additionally, because CSWC reported that it applied for bank 
loans in the form of export invoice financing,\86\ we preliminarily 
determine that the loans received by CSWC are specific under section 
771(5A)(A) of the Act because receipt of the financing is contingent 
upon exporting and that these export loans confer a benefit within the 
meaning of section 771(5)(E)(ii) of the Act.
---------------------------------------------------------------------------

    \86\ See CS Wind's IQR at 21.
---------------------------------------------------------------------------

    We also preliminarily find that loans from SOCBs under this program 
constitute financial contributions, pursuant to sections 771(5)(B)(i) 
and 771(5)(D)(i) of the Act, because SOCBs are ``authorities'' \87\ The 
loans provide a benefit equal to the difference between what the 
recipients paid on their loans and the amount they would have paid on 
comparable commercial loans. See section 771(5)(E)(ii) of the Act. To 
calculate the benefit from this program, we used the benchmarks 
discussed above under the ``Subsidy Valuation Information'' section and 
applied, for CS Wind, an export sales denominator.\88\ To calculate the 
net subsidy rate attributable to the Titan Companies, we divided the 
benefit by total sales in the manner described in the ``Cross-
Ownership'' section. To calculate the net subsidy rate attributable to 
CS Wind, we divided the benefit by total export sales, as described in 
the ``Cross-Ownership'' section. On this basis, we preliminarily 
determine countervailable subsidy rates of 0.03 percent ad valorem for 
CS Wind and 0.30 percent ad valorem for Titan Companies.\89\
---------------------------------------------------------------------------

    \87\ See, e.g.,Tires Decision Memorandum at Comment E2, where 
the Department discusses that a complete analysis of the facts and 
circumstances of the Chinese banking system that have led us to find 
that Chinese policy banks and SOCBs constitute a government 
authority as outlined in Coated Paper Decision Memorandum at Comment 
8. Parties in the instant case have not demonstrated that conditions 
within the Chinese banking sector have changed significantly since 
that previous decision such that a reconsideration of that decision 
is warranted.
    \88\ See also 19 CFR 351.505(c).
    \89\ See Memorandum to the File from Kristen Johnson, Trade 
Analyst, AD/CVD Operations, Office 3, regarding ``CS Wind's 
Preliminary Calculations'' (CS Wind's Preliminary Calculations) (May 
29, 2012) and Memorandum to the File from Patricia M. Tran, 
International Trade Analyst, AD/CVD Operations, Office 3 regarding 
``Titan Companies Preliminary Calculations'' (Titan Companies' 
Preliminary Calculations) (May 29, 2012).
---------------------------------------------------------------------------

B. Two Free, Three Half Program for FIEs

    Under Article 8 of the ``Income Tax Law of the People's Republic of 
China for Enterprises with Foreign Investment and Foreign Enterprises'' 
(FIE Tax Law), an FIE that is ``productive'' and scheduled to operate 
for more than ten years is exempt from income tax in the first two 
years of profitability and pays income taxes at half the standard rate 
for the next three years.\90\ According to the GOC, the program was 
terminated effective January 1, 2008, by the ``Enterprise Income Tax 
Law'' (EITL), but companies already enjoying the preference were 
permitted to continue paying taxes at reduced rates.\91\ CSWC benefited 
from tax savings provided under this program during the POI.\92\
---------------------------------------------------------------------------

    \90\ See GOC IQR at 60-70.
    \91\ Id. at 70.
    \92\ See CS Wind's IQR at 23-25.
---------------------------------------------------------------------------

    The Department has previously found the ``Two Free, Three Half'' 
program to confer a countervailable subsidy.\93\ Consistent with the 
earlier cases, we preliminarily determine that the ``Two Free, Three 
Half'' income tax exemption/reduction confers a countervailable 
subsidy. The exemption/reduction is a financial contribution in the 
form of revenue forgone by the GOC and it provides a benefit to the 
recipient in the amount of the tax savings. See section 771(5)(D)(ii) 
of the Act and 19 CFR 351.509(a)(1). We also determine that the 
exemption/reduction afforded by the program is limited as a matter of 
law to certain enterprises, i.e., productive FIEs, and, hence, is 
specific under section 771(5A)(D)(i) of the Act.
---------------------------------------------------------------------------

    \93\ See Coated Paper Decision Memorandum at 11-12; see also 
Seamless Pipe Decision Memorandum at 25.
---------------------------------------------------------------------------

    To calculate the benefit, we treated the income savings by CSWC as 
a recurring benefit, consistent with 19 CFR 351.524(c)(1). We compared 
the income tax rate that the company should have paid (22 percent) with 
the reduced income tax rate of (11 percent), which CSWC paid during the 
POI, to calculate the tax savings. To calculate the net subsidy rate 
attributable to CS Wind, we divided the benefit by total sales, as 
described in the ``Cross-Ownership'' section. On this basis, we 
preliminarily determine a countervailable subsidy rate of 0.32 percent 
ad valorem for CS Wind.\94\
---------------------------------------------------------------------------

    \94\ See CS Wind's Preliminary Calculations.
---------------------------------------------------------------------------

    To calculate the benefit, we treated the income savings by Titan 
Wind as a recurring benefit, consistent with 19 CFR 351.524(c)(1). We 
compared the income tax rate that the company should have paid (25 
percent) with the reduced income tax rate of (12.5 percent), which 
Titan Wind paid during the POI, to calculate the tax savings. To 
calculate the net subsidy rate attributable to Titan Companies, we 
divided the benefit by total sales, as described in the ``Cross-
Ownership'' section.\95\ On this basis, we preliminarily determine a 
countervailable subsidy rate of 1.50 percent ad valorem for Titan 
Companies.
---------------------------------------------------------------------------

    \95\ See Titan Companies' Preliminary Calculations.
---------------------------------------------------------------------------

C. Income Tax Benefits for FIEs Based on Geographic Location

    Pursuant to Article 7 of the FIE Tax Law, productive FIEs 
established in a coastal economic development zone, special economic 
zone, or economic technology development zone pay a reduced corporate 
income tax rate of either 15 or 24 percent, depending on the zone.\96\ 
CSWC reported that it is entitled to a reduced tax rate because of its 
location in the Lianyungang Economic and Technological Development 
Zone.\97\
---------------------------------------------------------------------------

    \96\ See GOC's IQR at 73.
    \97\ See CS Wind's IQR at 26.
---------------------------------------------------------------------------

    The GOC reported that after the EITL became effective January 1, 
2008, all enterprises in China are subject to the unified tax rate of 
25 percent regardless of whether they are located in a special economic 
zone.\98\ However, the GOC added that as stipulated in Article 57 of 
the new tax law, enterprises approved and incorporated prior to the 
promulgation of the law and were already subject to the preferential 
tax rates under previous tax laws, were given a grace period of five 
years from the implementation of the new tax law.\99\ Specifically, the 
GOC explained that enterprises that enjoyed preferential policies of 
reduced tax rates are gradually transitioned to the statutory, uniform 
tax rate of 25 percent over a 5-year period after the implementation of 
the new income tax law.\100\ For tax year 2010, enterprises enjoyed a 
tax rate of 22 percent.\101\
---------------------------------------------------------------------------

    \98\ See GOC's IQR at 80.
    \99\ Id.
    \100\ Id.
    \101\ Id. at 81.
---------------------------------------------------------------------------

    We preliminarily determine that the reduced income tax rate paid by 
FIEs under this program confers a countervailable subsidy. The reduced 
rate is a financial contribution in the form of revenue forgone by the 
GOC and it provides a benefit to the recipient in the amount of the tax 
savings. See

[[Page 33433]]

section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also 
preliminarily determine that the reduction afforded by this program is 
limited to enterprises located in designated geographic regions and, 
hence, is specific under section 771(5A)(D)(iv) of the Act. The 
Department has previously found this program to be 
countervailable.\102\ Consistent with those prior PRC proceedings, we 
treated the income tax savings enjoyed by CSWC as a recurring benefit, 
consistent with 19 CFR 351.524(c)(1). To calculate the benefit, we 
compared the income tax rate that the company should have paid (25 
percent) with the reduced income tax rate (22 percent), which the 
company paid during the POI. To calculate the net subsidy rate 
attributable to CS Wind, we divided the benefit by total sales, as 
described in the ``Cross-Ownership'' section. On this basis, we 
preliminarily determine that CS Wind received a countervailable subsidy 
of 0.09 percent ad valorem under this program.\103\
---------------------------------------------------------------------------

    \102\ See e.g., Coated Paper Decision Memorandum at ``Reduced 
Income Tax Rates for FIEs Based on Location'' and Thermal Paper 
Decision Memorandum at ``Reduced Income Tax Rates for FIEs Based on 
Location.''
    \103\ See CS Wind's Preliminary Calculations.
---------------------------------------------------------------------------

D. Import Tariff and Value Added Tax Exemptions for Use of Imported 
Equipment

    Enacted in 1997, the ``Circular of the State Council on Adjusting 
Tax Policies on Imported Equipment'' (GUOFA No. 37), exempts both FIEs 
and certain domestic enterprises from VAT and tariffs on imported 
equipment provided the equipment is not included in the catalogs on 
non-duty exemptible article of importation for either FIEs or domestic 
enterprises.\104\ The objective of the program is to encourage foreign 
investment and to introduce foreign advanced technology equipment and 
industry technology upgrades.\105\ The NDRC, or its provincial branch, 
provides a certificate to enterprises, which receive the 
exemption.\106\ Those enterprises then present the certificates along 
with other application documentation to their local customs authorities 
to receive the tariff and VAT exemptions on eligible equipment imports. 
CSWC received VAT and tariff exemptions under this program.\107\ The 
Department has previously found VAT and tariff exemptions under this 
program to confer countervailable subsidies.\108\
---------------------------------------------------------------------------

    \104\ See GOC's IQR at 90-100.
    \105\ Id.
    \106\ Id.
    \107\ Id.
    \108\ See Coated Paper Decision Memorandum at 13-14; see also 
Seamless Pipe Decision Memorandum at 23-25.
---------------------------------------------------------------------------

    Consistent with the prior PRC proceedings, we preliminarily 
determine that VAT and tariff exemptions on imported equipment confer a 
countervailable subsidy. The exemptions are a financial contribution in 
the form of revenue forgone by the GOC and they provide a benefit to 
the recipient in the amount of VAT and tariff savings.\109\ We also 
preliminarily determine that the VAT and tariff exemptions afforded by 
the program are specific under section 771(5A)(D)(iii)(I) of the Act 
because the program is limited to certain enterprises, i.e., FIEs and 
domestic enterprises involved in ``encouraged'' projects.\110\
---------------------------------------------------------------------------

    \109\ See section 771(5)(D)(ii) of the Act and 19 CFR 
351.510(a)(1).
    \110\ See Coated Paper Decision Memorandum at Comment 16.
---------------------------------------------------------------------------

    Normally, we treat exemptions from indirect taxes and import 
charges, such as VAT and tariff exemptions, as recurring benefits, 
consistent with 19 CFR 351.524(c)(1), and allocate the benefits to the 
year in which they were received. However, when an indirect tax or 
import charge exemption is provided for, or tied to, the capital 
structure or capital assets of a firm, the Department normally treats 
it as a non-recurring benefit and allocates the benefit to the firm 
over the AUL.\111\ CSWC provided a list of VAT and tariff exemptions 
that the company received for imported capital equipment.\112\ Based on 
that information, we preliminarily determine that the VAT and tariff 
exemptions are tied to the capital structure or capital assets of the 
company, and, as such, should be allocated over time.
---------------------------------------------------------------------------

    \111\ See 19 CFR 351.524(c)(2)(iii) and 19 CFR 351.524(d)(2).
    \112\ See CS Wind's First SQR at Exhibit S1-21.
---------------------------------------------------------------------------

    To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants.\113\ CSWC reported importing the 
equipment in 2007 and 2008.\114\ For 2007, the benefits received by 
CSWC under this program exceeded 0.5 percent of relevant sales for that 
year. We, thus, allocated the benefits received in 2007 over the AUL of 
12 years, pursuant to 19 CFR 351.524(b)(1). For 2008, the benefits 
received by CSWC under this program did not exceed 0.5 percent of 
relevant sales for that year. As such, we expensed those benefits to 
the year in which they were received, i.e., 2008, pursuant to 19 CFR 
351.524(b)(2).\115\
---------------------------------------------------------------------------

    \113\ See 19 CFR 351.524(b).
    \114\ Id.
    \115\ See CS Wind's Preliminary Calculations.
---------------------------------------------------------------------------

    To allocate the 2007 benefits, we used the discount rates described 
above in the section ``Subsidies Valuation Information'' to calculate 
the amount of the benefit allocable to the POI. To calculate the net 
subsidy rate attributable to CS Wind, we divided the benefit by total 
sales, as described in the ``Cross-Ownership'' section. On this basis, 
we preliminarily determine a countervailable subsidy rate of 0.14 
percent ad valorem for CS Wind.\116\
---------------------------------------------------------------------------

    \116\ Id.
---------------------------------------------------------------------------

    Additionally, the GOC reported that, pursuant to the ``Announcement 
of Ministry of Finance, China Customs, and State Administration of 
Taxation,'' No. 43 (2008), the VAT exemption was terminated.\117\ Under 
19 CFR 351.526(a)(1) and (2), the Department may take a program-wide 
change to a subsidy program into account in establishing the cash 
deposit rate if it determines that subsequent to the POI, but before 
the preliminary determination, a program-wide change occurred and the 
Department is able to measure the change in the amount of 
countervailable subsidies provided under the program in question. With 
regard to this program, we preliminarily determine that a program-wide 
change has not occurred. Under 351.526(d)(1), the Department will only 
adjust the cash deposit rate of a possibly terminated program if there 
are no residual benefits. However, this program still provides for 
residual benefits because import tariff and VAT exemptions were 
provided for the importation of capital equipment and, thus, those 
exemptions are treated as non-recurring subsidies pursuant to 19 CFR 
351.524(c)(2)(iii). This decision is consistent with the Department's 
approach to this program in prior PRC proceedings.\118\
---------------------------------------------------------------------------

    \117\ See GOC's IQR at 90-91.
    \118\ See, e.g., 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) (Drill Pipe from the PRC), and accompanying 
Issues and Decision Memorandum (Drill Pipe Decision Memorandum) at 
``Import Tariff and VAT Exemptions for FIEs and Certain Domestic 
Enterprises Using Imported Equipment in Encouraged Industries.''
---------------------------------------------------------------------------

E. Provision of Hot-Rolled Steel for LTAR

    The Department is investigating whether GOC authorities provided 
HRS to producers of wind towers for LTAR. As instructed in the 
Department's questionnaires, the respondent companies identified the 
suppliers and producers from whom they purchased

[[Page 33434]]

HRS during the POI. In addition, they reported the date of payment, 
quantity, unit of measure, and purchase price for the HRS purchased 
during the POI.
    As discussed above under ``Use of Facts Otherwise Available and 
Adverse Inferences,'' we are finding, as AFA, that all of the producers 
of HRS purchased by the respondents during the POI are ``authorities'' 
within the meaning of section 771(5)(B) of the Act. Therefore, we 
preliminarily determine that the HRS producers which are majority-owned 
by the government are ``authorities'' under section 771(5) of the Act. 
As a result, we preliminarily determine that HRS supplied by companies 
deemed to be government authorities constitute a financial contribution 
in the form of a governmental provision of a good under section 
771(5)(D)(iii) of the Act and that the respondents received a benefit 
to the extent that the price they paid for HRS produced by these 
suppliers was for LTAR. See sections 771(5)(D)(iv) and 771(5)(E)(iv) of 
the Act.
    As explained above in ``Use of Facts Otherwise Available and 
Adverse Inferences,'' we preliminarily determine that the GOC has 
failed to act to the best of its ability in terms of providing the 
Department with the information it requested concerning the ownership 
of the firms that produced the HRS purchased by respondents during the 
POI. Specifically, in many instances, the GOC failed to provide any of 
the requested ownership information. In one instance, the GOC provided 
basic ownership information (e.g., business registration license and 
articles of association) but failed to respond to questions concerning 
the extent to which the owners of the HRS producer were CCP officials 
and the extent to which CCP officials rendered the HRS producer a 
government authority. Thus, pursuant to section 776(b) of the Act, we 
are assuming that all of the HRS producers were government authorities 
that provided a financial contribution in the form of a provision of a 
good and that the respondents received a benefit to the extent that the 
price they paid for HRS produced by government authorities was for 
LTAR. See sections 771(5)(D)(iii) and 771(5)(E)(iv) of the Act.
    Under 19 CFR 351.511(a)(2), the Department sets forth the basis for 
identifying appropriate market-determined benchmarks for measuring the 
adequacy of remuneration for government-provided goods or services. 
These potential benchmarks are listed in hierarchical order by 
preference: (1) Market prices from actual transactions within the 
country under investigation (e.g., actual sales, actual imports or 
competitively run government auctions) (tier one); (2) world market 
prices that would be available to purchasers in the country under 
investigation (tier two); or (3) an assessment of whether the 
government price is consistent with market principles (tier three). As 
provided in our regulations, the preferred benchmark in the hierarchy 
is an observed market price from actual transactions within the country 
under investigation.\119\ This is because such prices generally would 
be expected to reflect most closely the prevailing market conditions of 
the purchaser under investigation.
---------------------------------------------------------------------------

    \119\ See also Softwood Lumber Decision Memorandum at ``Market-
Based Benchmark.''
---------------------------------------------------------------------------

    Based on the hierarchy established above, we must first determine 
whether there are market prices from actual sales transactions 
involving Chinese buyers and sellers that can be used to determine 
whether the GOC authorities sold HRS to the respondents for LTAR. 
Notwithstanding the regulatory preference for the use of prices 
stemming from actual transactions in the country, where the Department 
finds that the government provides the majority, or a substantial 
portion of, the market for a good or service, prices for such goods and 
services in the country will be considered significantly distorted and 
will not be an appropriate basis of comparison for determining whether 
there is a benefit.\120\
---------------------------------------------------------------------------

    \120\ See Countervailing Duties; Final Rule, 63 FR 65348, 65377 
(November 25, 1998).
---------------------------------------------------------------------------

    In its initial questionnaire response, the GOC provided information 
on the amount of total HRS production; and amount of HRS produced by 
SOEs in the PRC.\121\ Using this data, we derived the ratio of HRS 
produced by SOEs during the POI (68.34 percent). Consequently, because 
of the government's overwhelming involvement in the HRS market, the use 
of private producer prices in the PRC would be akin to comparing the 
benchmark to itself (i.e., such a benchmark would reflect the 
distortions of the government presence).\122\ As we explained in 
Softwood Lumber from Canada:
---------------------------------------------------------------------------

    \121\ See GOC's IQR at page 11.
    \122\ See Softwood Lumber Decision Memorandum at ``There are no 
market-based internal Canadian benchmarks'' section.

    Where the market for a particular good or service is so 
dominated by the presence of the government, the remaining private 
prices in the country in question cannot be considered to be 
independent of the government price. It is impossible to test the 
government price using another price that is entirely, or almost 
entirely, dependent upon it. The analysis would become circular 
because the benchmark price would reflect the very market distortion 
which the comparison is designed to detect.\123\
---------------------------------------------------------------------------

    \123\ Id. at 38-39.

For these reasons, prices stemming from private transactions within the 
PRC cannot give rise to a price that is sufficiently free from the 
effects of the GOC's actions and, therefore, cannot be considered to 
meet the statutory and regulatory requirement for the use of market-
determined prices to measure the adequacy of remuneration.
    Given that we have preliminarily determined that no tier one 
benchmark prices are available, we next evaluated information on the 
record to determine whether there is a tier two world market price 
available to producers of subject merchandise in the PRC. Turning to 
tier two benchmarks, i.e., world market prices available to purchasers 
in the PRC, Petitioner and CS Wind submitted prices that they suggest 
are appropriate bases for constructing a benchmark. Based on our review 
of the proposed benchmarks, we are preliminarily relying on prices from 
MEPS International (MEPS), SteelBenchmarker, and Steel Orbis for hot-
rolled plate/sheet.\124\ Pursuant to 19 CFR 351.511(a)(2)(ii), we are 
averaging the selected prices. Since ocean freight to the PRC is to be 
added into the benchmark price (see below), we did not rely on any 
SteelBenchmarker or MEPS prices price that included ocean freight, 
thereby ensuring that ocean freight would not be counted twice.
---------------------------------------------------------------------------

    \124\ See Petitioner's April 20, 2012, benchmark data and CS 
Wind's May 11 and 17, 2012, pre-preliminary determination comments. 
Petitioner submitted additional benchmark data on May 10, 2012 
advocating the Department utilize pricing information from Global 
Trade Information Services (GTIS). CS Wind's May 11, 2012, 
submission provided convincing evidence to show that the MEP--World 
Price data included import prices into the PRC. For the same reasons 
stated in the Department's tier one discussion, we determine that 
import prices into the PRC cannot serve as a benchmark. Therefore 
the Department is excluding Petitioner's April 20, 2012, MEP--World 
Price data and May 10, 2012, GTIS data from the benchmark. We 
continue to use as part of the HRS benchmark: MEPS--Nordic, MEPS--
EU, MEPS--North America, and MEPS--CIS data submitted in 
Petitioner's April 20, 2012, benchmark data and CS Wind's May 3, 
2011, benchmark submission.
---------------------------------------------------------------------------

    Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of 
remuneration under tier one or tier two, the Department will adjust the 
benchmark price to reflect the price that a firm actually paid or would 
pay if it imported the product, including delivery charges and import 
duties. Regarding delivery charges, we have added ocean freight to the 
monthly benchmark prices. With regard to inland freight charges that 
would be incurred

[[Page 33435]]

to deliver HRS from the port to the company's facility, we added a 
freight cost to the benchmark prices used for Titan Companies' benefit 
calculations. We, however, did not add an inland freight cost to the 
benchmark prices used for CS Wind's benefit calculations because the 
company is unable to provide information on the cost to transport 
either HRS from the port to the facility or the cost to transport wind 
towers from the facility to the port. For more information on this 
topic, see Memorandum to the File from Kristen Johnson, Trade Analyst, 
AD/CVD Operations, Office 3, regarding ``CS Wind's Preliminary 
Calculations'' (May 29, 2012).
    Concerning VAT and import duties, in its pre-preliminary comments, 
CS Wind states that it is exempt from paying VAT and import duties on 
imported inputs that are used in exported products.\125\ Therefore, to 
determine the price that the company would pay if it imported HRS 
plate, CS Wind argues that the Department must not add VAT and import 
duties to the base price, i.e., the ``delivered price'' that CS Wind 
would pay for imported steel would only include freight. This issue was 
recently addressed in Cylinders from the PRC, where the Department 
found that section 351.511(a)(2)(iv) of the regulations is clear in its 
requirement to use delivered prices which includes all delivery charges 
and import duties.\126\ In that final determination, the Department 
discusses that domestic inputs purchased by a firm are delivered prices 
which include all delivery charges and VAT. Therefore, in order to 
ensure an ``apples-to-apples'' comparison between domestic input 
purchases and the world-market benchmark, the regulations require the 
use of delivered prices, which include import duties and VAT. CS Wind 
did not present any arguments in its pre-preliminary comments that 
warrant the Department to reconsider its position on this issue as 
outlined in Cylinders from the PRC. As such, for the preliminary 
calculations in this investigation, we have added to the benchmark 
prices the applicable duties and VAT for imports of HRS plate, as 
reported by the GOC.
---------------------------------------------------------------------------

    \125\ See CS Wind's Pre-Preliminary Comments (May 11, 2012) at 
3-6.
    \126\ See Cylinders Decision Memorandum at Comment 9.
---------------------------------------------------------------------------

    For a full explanation of how we derived the monthly hot-rolled 
steel benchmark prices, see CS Wind's and Titan Companies' Preliminary 
Calculations Memoranda. We then compared the monthly benchmark prices 
to CS Wind's and Titan Companies' actual purchase prices, including 
taxes and delivery charges.
    To calculate the benefit, we then compared the benchmark unit 
prices to the unit prices the respondents paid to domestic suppliers of 
HRS during the POI that the Department has preliminarily determined 
constitute government authorities. In instances in which the benchmark 
unit price was greater than the price paid to GOC authorities, we 
multiplied the difference by the quantity of HRS purchased from the GOC 
authorities to arrive at the benefit.
    As discussed under ``Use of Facts Otherwise Available and Adverse 
Inferences,'' above, the Department is relying on AFA to preliminarily 
determine that the GOC's provision of HRS for LTAR is specific because 
the GOC failed to provide information, which was requested of it on two 
occasions, regarding the details of the government assistance.
    We preliminarily find that the GOC's provision of HRS for LTAR to 
be a domestic subsidy as described under 19 CFR 351.525(b)(3). To 
calculate the net subsidy rate attributable to the Titan Companies, we 
divided the benefit by total sales in the manner described in the 
``Cross-Ownership'' section. To calculate the net subsidy rate 
attributable to CS Wind, we divided the benefit by total sales, as 
described in the ``Cross-Ownership'' section. On this basis, we 
preliminarily determine countervailable subsidy rates of 12.63 percent 
ad valorem for CS Wind and 23.55 percent ad valorem for Titan 
Companies.\127\
---------------------------------------------------------------------------

    \127\ See CS Wind's and Titan Companies' Preliminary 
Calculations Memoranda.
---------------------------------------------------------------------------

F. Provision of Electricity for LTAR

    For the reasons explained in the ``Use of Facts Otherwise Available 
and Adverse Inferences'' section above, we are basing our preliminary 
determination regarding the government's provision of electricity in 
part on AFA.
    In a countervailing duty case, the Department requires information 
from both the government of the country whose merchandise is under 
investigation and the foreign producers and exporters.\128\ 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 because without the requested information from the 
government the Department typically cannot determine whether the 
program was specific within the meaning of section 771(5A) of the Act 
(e.g., whether the program was contingent on export performance or 
limited to certain enterprises as a matter of law or in fact).\129\ 
With regards to benefit, the Department will normally rely on the 
responsive producer's or exporter's records to determine the existence 
and amount of the benefit to the extent that those records are useable 
and verifiable.\130\ On the record of this investigation, the 
respondents provided data on the electricity consumed and the rates 
paid during the POI.
---------------------------------------------------------------------------

    \128\ See Cylinders Decision Memorandum at ``Provision of 
Electricity for LTAR.''
    \129\ Id.
    \130\ Id.
---------------------------------------------------------------------------

    We preliminarily determine that the GOC's provision of electricity 
confers a financial contribution as a provision of a good under section 
771(5)(D)(iii) of the Act, and is specific, under section 
771(5A)(D)(iii) of the Act because, as discussed in the AFA section 
above, the GOC failed to provide the requested information so that the 
Department could make a de facto specificity determination. To 
determine the existence and amount of any benefit from this program, we 
used the information provided by the respondents regarding the amounts 
of electricity that they purchased and the rates they paid for that 
electricity during the POI.
    For determining the existence and amount of any benefit under this 
program, we have relied on an adverse inference by selecting the 
highest electricity rates that were in effect during the POI as our 
benchmarks because 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. See section 776(b)(4) of the Act. To 
determine the benchmark, we selected the highest non-seasonal 
provincial rates in the PRC, as provided by the GOC for each 
electricity category (e.g., ``large industry,'' ``general industry and 
commerce,'' and ``base charge'' (either maximum demand or transformer 
capacity) used by the respondents. Additionally, where applicable, we 
identified and applied the peak, normal, and valley rates within a 
category. For more information on how the Department selected 
provincial electricity rates used as benchmark rates in the benefit 
calculations, see Memorandum to the File from Kristen Johnson, Trade 
Analyst, AD/CVD Operations, Office 3, regarding ``PRC

[[Page 33436]]

Electricity Benchmark Rates'' (May 29, 2012).
    Consistent with our approach in Drill Pipe from the PRC,\131\ to 
measure whether the respondents received a benefit under this program, 
we first calculated the variable electricity costs they paid by 
multiplying the monthly kilowatt (kWh) consumed at each price category 
(e.g., peak, normal, and valley, where appropriate) by the 
corresponding electricity rates charged at each price category by the 
respective province. Next, we calculated the benchmark variable 
electricity cost by multiplying the monthly kWh consumed at each price 
category by the highest electricity rate charged at each price 
category. To calculate the benefit for each month, we subtracted the 
variable electricity cost paid by each respondent during the POI from 
the monthly benchmark variable electricity cost.\132\
---------------------------------------------------------------------------

    \131\ See Drill Pipe Decision Memorandum at ``Provision of 
Electricity for LTAR.''
    \132\ See CS Wind's and Titan Companies' Preliminary 
Calculations Memoranda.
---------------------------------------------------------------------------

    To measure whether the respondents received a benefit with regard 
to their base rate (i.e., either maximum demand or transformer capacity 
charge), we first multiplied the monthly base rate charged to the 
companies by the corresponding consumption quantity. Next, we 
calculated the benchmark base rate cost by multiplying the companies' 
consumption quantities by the highest maximum demand or transformer 
capacity rate. To calculate the benefit, we subtracted the maximum 
demand or transformer capacity costs paid by the companies during the 
POI from the benchmark base rate costs. We then calculated the total 
benefit received during the POI under this program by summing the 
benefits stemming from the respondents' variable electricity payments 
and base rate payments.\133\
---------------------------------------------------------------------------

    \133\ Id.
---------------------------------------------------------------------------

    CS Wind and Titan Companies also reported efficiency adjustment 
fees and other discount and charges that were part of their electricity 
payments during the POI. Consistent with the Department's approach in 
Steel Wire from the PRC, we have included the adjustment fees, 
discounts, and other charges into the preliminary benefit calculations 
for this program.\134\ For a more detailed explanation of the 
adjustment fees, discounts, and other charges and how they are 
incorporated into preliminary benefits calculations, see CS Wind's and 
Titan Companies' Preliminarily Calculations Memoranda.
---------------------------------------------------------------------------

    \134\ See Galvanized Steel Wire From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 77 FR 
17418 (March 26, 2012) (Steel Wire from the PRC), and accompanying 
Issues and Decision Memorandum (Steel Wire Decision Memorandum) at 
Comment 10.
---------------------------------------------------------------------------

    To calculate the net subsidy rate attributable to the Titan 
Companies, we divided the benefit by total sales in the manner 
described in the ``Cross-Ownership'' section. To calculate the net 
subsidy rate attributable to CS Wind, we divided the benefit by total 
sales, as described in the ``Cross-Ownership'' section. On this basis, 
we preliminarily determine countervailable subsidy rates of 0.29 
percent ad valorem for CS Wind and 0.53 percent ad valorem for Titan 
Companies.\135\
---------------------------------------------------------------------------

    \135\ See CS Wind's and Titan Companies' Preliminary 
Calculations Memoranda.
---------------------------------------------------------------------------

G. Land Development Program Grant

    In response to the Department's inquiry about an item in the 
company's financial statements, CSWC reported that it received a one-
time grant from the Lianyungang Economic and Technological Development 
Zone (LETDZ) Administration Committee in 2009.\136\ CSWC stated that it 
received the grant because it established its wind tower and flange 
plate construction facility in the LETDZ.\137\ CSWC reported that it 
signed a contract with the LETDZ Administration Committee on December 
26, 2007, which was in conjunction with CSWC's purchase of land and 
investment within the zone.\138\
---------------------------------------------------------------------------

    \136\ See CS Wind's First SQR at 2-6.
    \137\ Id.
    \138\ Id.
---------------------------------------------------------------------------

    The GOC did not respond to the Department's request for information 
regarding this program. See ``Use of Facts Otherwise Available and 
Adverse Inferences'' section above.
    We preliminarily determine that the grant issued under this program 
constitutes a financial contribution under section 771(5)(D)(i) of the 
Act, in the form of a direct transfer of funds, and a benefit under 
section 771(5)(E) of the Act. As discussed under ``Use of Facts 
Otherwise Available and Adverse Inferences,'' the Department is relying 
on AFA to preliminarily determine that this grant program is specific 
because the GOC failed to submit the requested information regarding 
the assistance provided under this program so that the Department could 
determine whether the program was specific under section 771(5A) of the 
Act.
    To calculate the benefit from the grant, we first applied the ``0.5 
percent expense test'' described in 19 CFR 351.524(b)(2). We 
preliminarily find that the grant amount approved in 2007 is greater 
than 0.5 percent of the company's total sales for 2007. Because the 
2007 grant is a non-recurring benefit consistent with 19 CFR 
351.524(c)(2)(iii), we are allocating the benefit over the 12-year AUL 
in the year in which it was received, i.e., 2009, and applied a 
discount rate discussed in the ``Benchmarks and Discount Rates'' 
section above. To calculate the net subsidy rate attributable to CS 
Wind, we divided the benefit, allocated to the POI, by total sales, as 
described in the ``Cross-Ownership'' section. On this basis, we 
preliminarily determine that CS Wind received a countervailable subsidy 
of 0.22 percent ad valorem.\139\
---------------------------------------------------------------------------

    \139\ See CS Wind's Preliminary Calculations.
---------------------------------------------------------------------------

H. Award for Good Performance in Paying Taxes

    After the Department inquired about an item in the company's 2011 
financial statement, CSWC reported that it received a grant during the 
POI from the LETDZ Administration Committee for its good performance in 
paying taxes for fiscal year 2010.\140\ CSWC stated that the grant was 
award by the LETDZ Administration Committee to the top 20 income 
taxpayers in the zone for fiscal year 2010 taxes. CSWC added that there 
is no application process for the receipt of the award; the receipt of 
the award is determined by a review of the tax records retained at the 
local state tax bureau.
---------------------------------------------------------------------------

    \140\ See CS Wind's First SQR at 6-9.
---------------------------------------------------------------------------

    The GOC did not respond to the Department's request for information 
regarding this program. See ``Use of Facts Otherwise Available and 
Adverse Inferences'' section above.
    We preliminarily determine that the grant issued under this program 
constitutes a financial contribution under section 771(5)(D)(i) of the 
Act, in the form of a direct transfer of funds, and a benefit under 
section 771(5)(E) of the Act. Based on CSWC's response, the grant is 
limited to the top 20 income taxpayers located in the LETDZ. As such, 
we preliminarily determine that this grant program is de facto specific 
under section 771(5A)(D)(iii)(I) of the Act.
    To calculate the benefit from the grant, we first applied the ``0.5 
percent expense test'' and found that the grant amount approved in 2011 
is less than 0.5 percent of CS Wind's total sales, as described in the 
``Cross-Ownership'' section. As such, we are expensing the grant to the 
year of receipt, the POI. On this basis, we preliminarily determine 
that CS Wind received a countervailable subsidy of 0.02 percent ad 
valorem.\141\
---------------------------------------------------------------------------

    \141\ See CS Wind's Preliminary Calculations.

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

[[Page 33437]]

I. Award for Taicang City To Support Public Listing of Enterprises

    Titan Companies reported that the Taicang City government awarded 
bonus payments to Titan Wind in recognition of the company's successful 
listing on the Shenzhen Stock Exchange.\142\ The Titan Companies report 
that the local governments approved and issued the grants to Titan Wind 
some time after the application was submitted.
---------------------------------------------------------------------------

    \142\ See Titan Companies' SQR (April 27, 2012) at 7.
---------------------------------------------------------------------------

    We preliminarily determine that the grants received by Titan Wind 
constitute a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. Regarding 
specificity, because the grants were expressly limited to firms 
undertaking an IPO, we find the grants to be specific under section 
771(5A)(D)(i) of the Act.
    To calculate the benefit from the grant, we first applied the ``0.5 
percent expense test'' described in 19 CFR 351.524(b)(2). We 
preliminarily find that the total grant amount approved in 2010 is 
greater than 0.5 percent of the company's total sales for 2010. Because 
the 2010 grant is a non-recurring benefit consistent with 19 CFR 
351.524(c)(2)(iii), we are allocating the benefit over the 12-year AUL 
in the years in which it was received, 2010 and 2011, and applied a 
discount rate discussed in the ``Benchmarks and Discount Rates'' 
section above. We then divided the benefit amount attributed to the POI 
by Titan Companies' total consolidated sales for 2011 (less inter-
company sales). On this basis, we preliminarily determine that Titan 
Companies received a net countervailable subsidy of 0.07 percent ad 
valorem.\143\
---------------------------------------------------------------------------

    \143\ See Titan Companies' Preliminary Calculations.
---------------------------------------------------------------------------

J. Awards for Taicang City To Promote Development of Industrial Economy 
for the Three-Year Period of 2010 to 2012

    After the Department inquired about an item in the company's 
financial statements, Titan Companies reported that Titan Wind received 
a bonus for doubling output in three years. The Titan Companies stated 
Titan Wind applied for and the local government approved the amount for 
the program some time after the application.\144\
---------------------------------------------------------------------------

    \144\ See Titan Companies' SQR at 47-48.
---------------------------------------------------------------------------

    We preliminarily determine that the grants received by Titan Wind 
constitute a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. As discussed under 
``Use of Facts Otherwise Available and Adverse Inferences,'' above, the 
Department is relying on AFA to preliminarily determine that the grant 
program is specific because the GOC failed to submit the requested 
information regarding grants provided under the program so that the 
Department could determine whether the program was specific under 
section 771(5A) of the Act.
    The grant that Titan Wind received during the POI was less than 0.5 
percent of Titan Companies' total sales in the manner described in the 
``Cross-Ownership'' section. Therefore, pursuant to 19 CFR 
351.524(b)(2), we expensed the grant amounts to the POI. On this basis, 
we preliminarily determine that Titan Companies received a 
countervailable subsidy of 0.02 percent ad valorem.\145\
---------------------------------------------------------------------------

    \145\ See Titan Companies' Preliminary Calculations.
---------------------------------------------------------------------------

K. Special Funds for Development of Science and Technology

    After the Department inquired about an item in the company's 
financial statements, Titan Companies reported that Titan Wind received 
a benefit from the government's science and technology development 
fund.\146\
---------------------------------------------------------------------------

    \146\ See Titan Companies' SQR at 47-48.
---------------------------------------------------------------------------

    We preliminarily determine that the grants received by Titan Wind 
constitute a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. As discussed under 
``Use of Facts Otherwise Available and Adverse Inferences,'' above, the 
Department is relying on AFA to preliminarily determine that the grant 
program is specific because the GOC failed to submit the requested 
information regarding grants provided under the program so that the 
Department could determine whether the program was specific under 
section 771(5A) of the Act.
    The grant that Titan Wind received during the POI was less than 0.5 
percent of Titan Companies' total sales in the manner described in the 
``Cross-Ownership'' section. Therefore, pursuant to 19 CFR 
351.524(b)(2), we expensed the grant amounts to the POI. On this basis, 
we preliminarily determine that Titan Companies received a 
countervailable subsidy of 0.01 percent ad valorem.\147\
---------------------------------------------------------------------------

    \147\ See Titan Companies' Preliminary Calculations.
---------------------------------------------------------------------------

L. Award for Baotou Rare Earth High and New Technology Industrial 
Development Zone for Excellent Construction Projects

    After the Department inquired about an item in the company's 
financial statements, Titan Companies reported that Titan Baotou 
received a reward for ``excellent construction projects.'' \148\ We 
preliminarily determine that the grants received by Titan Wind 
constitute a financial contribution and a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. As discussed under 
``Use of Facts Otherwise Available and Adverse Inferences,'' above, the 
Department is relying on AFA to preliminarily determine that the grant 
program is specific because the GOC failed to submit the requested 
information regarding grants provided under the program so that the 
Department could determine whether the program was specific under 
section 771(5A) of the Act.
---------------------------------------------------------------------------

    \148\ See Titan Companies' SQR at 47-48.
---------------------------------------------------------------------------

    The grant that Titan Baotou received during the POI was less than 
0.5 percent of Titan Companies' total sales in the manner described in 
the ``Cross-Ownership'' section. Therefore, pursuant to 19 CFR 
351.524(b)(2), we expensed the grant amounts to the POI. On this basis, 
we preliminarily determine that Titan Companies received a 
countervailable subsidy of 0.02 percent ad valorem.\149\
---------------------------------------------------------------------------

    \149\ See Titan Companies' Preliminary Calculations.
---------------------------------------------------------------------------

II. Program for Which More Information Is Necessary

1. Tax Offsets for Research and Development

    According to Titan Companies' April 3, 2012, initial questionnaire 
response, Titan Wind received a similar benefit to ``Tax Offsets for 
Research and Development by FIEs,'' under the EITL during the POI. 
Because we lack complete information on this program, we have requested 
additional information from the GOC and the current due date for the 
information is May 30, 2012, after the preliminary determination.\150\ 
We requested information on the program's purpose, the laws/regulations 
related to the program, government agencies that administer the 
program, the application process, eligibility criteria, and specificity 
data.\151\
---------------------------------------------------------------------------

    \150\ See Department's Extension Letter to the GOC (May 22, 
2012).
    \151\ See Department's Third Supplemental Questionnaire to the 
GOC (May 16, 2012).

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

[[Page 33438]]

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

1. Production Expansion and Stable Employment Award

    In response to the Department's inquiry about an item in the 
company's financial statement, CSWC reported that it was approved for 
and received a grant from the financial bureau of the LETDZ 
Administration Committee in 2009.\152\ CSWC stated that the grant was 
related to the company's production and export expansion in 2009 
compared to its operations in 2008.
---------------------------------------------------------------------------

    \152\ See CS Wind's First SQR at 11-14.
---------------------------------------------------------------------------

    We preliminarily find that the award represents less than 0.5 
percent of the company's total export sales 2009. As such, this grant 
is expensed in 2009, the year of receipt, under 19 CFR 351.524(b)(2), 
and not allocable to the POI.
    Consistent with our past practice, we therefore have not included 
this program in our preliminary net countervailing duty rate 
calculations. See, e.g., Coated Paper Decision Memorandum at ``Analysis 
of Programs, Programs Determined Not To Have Been Used or Not To Have 
Provided Benefits During the POI for GE,'' and Final Results of 
Countervailing Duty Administrative Review: Low Enriched Uranium from 
France, 70 FR 39998 (July 12, 2005) (Uranium from France), and 
accompanying Issues and Decision Memorandum (Uranium Decision 
Memorandum) at ``Purchases at Prices that Constitute More than Adequate 
Remuneration,'' (citing Notice of Final Results of Countervailing Duty 
Administrative Review and Rescission of Certain Company-Specific 
Reviews: Certain Softwood Lumber Products From Canada, 69 FR 75917 
(December 20, 2004), and accompanying Issues and Decision Memorandum at 
``Other Programs Determined to Confer Subsidies'').

2. Titan Companies' Other Subsidies Discovered During the Investigation

    After the Department inquired about several items in each company's 
financial statement, Titan Companies reported that it received a total 
of 18 grants from various governmental entities. Titan Companies 
reported that Titan Suzhou received a grant in 2009; Titan Wind 
received 15 grants in 2009, 2010, and 2011; Titan Baotou received a 
grant in 2011; and Shanghai Tianshen received a grant in 2010 and 2011. 
Those grants for which we preliminarily find a countervailable benefit 
are described above. Those grants for which we preliminarily find that 
the award represents less than 0.5 percent of Titan Companies' total 
sales, as described in the ``Cross-Ownership'' section, for the year of 
approval are expensed to the year of receipt, under 19 CFR 
351.524(b)(2), and not allocable to the POI, are listed below:

(a) Bonus for quality system authentication (Award of Taicang City 
for Cell Projects of Eco-City Construction (Environmental System 
Certification Award))
(b) Encouragement for expanding domestic market Awards of Expanding 
Domestic Demands and Encouraging Consumption
(c) Bonus for foreign trade promotion (Awards of Taicang City to 
Promote Foreign Trade Development)
(d) Support fund for small- and medium-sized enterprises (Support 
and Development Funds of Taicang City for Small- and Medium-Sized 
Enterprises (SMEs)
(e) Bonus for significant increase in tax payment (Awards of Taicang 
City to Encourage Enterprise Development and Tax Payment)
(f) Bonus for environment-friendly production (Green Production 
Awards)
(g) Support fund (Industry Support Funds of Huangpu District)
(h) Energy saving fund (Special Funds for Energy Conservation)
(i) Patent promotion fund (Patent Special Funds of Taicang City)
(j) Science and technology development fund (Special Funds of 
Jiangsu Province for Science and Technology Support Program)
(k) Support fund for industrial upgrading (Special Funds of Jiangsu 
Province for Industry Transformation and Upgrading)
(l) Bonus for Obtaining Patent

IV. Programs Preliminarily Determined To Be Not Used

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

1. Export Product Research and Development Fund
2. Subsidies for Development of ``Famous Brands'' and ``China World 
Top Brands''
3. Sub-Central Government Subsidies for Development of ``Famous 
Brands'' and ``China World Top Brands''
4. Special Energy Fund of Shandong Province
5. National Defense Science and Technology Industry Grants for the 
Wind Power Equipment Industry
6. Funds for Outward Expansion of Industries in Guangdong Province
7. Renewable Energy Development Fund
8. Special Fund for Wind Power Manufacturing Grants
9. Government Provision of Aluminum for LTAR
10. Government Provision of Land-Use Rights to State-Owned 
Enterprises for LTAR
11. Government Provision of Land-Use Rights by the Hunan Province 
Government for LTAR
12. Income Tax Reductions for Export-Oriented FIEs
13. Local Income Tax Exemption and Reduction Programs for 
``Productive'' FIEs
14. Tax Reductions for FIEs Purchasing Chinese-Made Equipment
15. Tax Refunds for Reinvestment of FIE Profits in Export-Oriented 
Enterprises
16. Preferential Tax Programs for FIEs Recognized as High or New 
Technology Enterprises
17. Tax Offsets for Research and Development for FIEs
18. City Tax and Surcharge Exemptions for FIEs
19. Tax Reductions for High and New-Technology Enterprises Involved 
in Designated Projects
20. Preferential Income Tax Policy for Enterprises in the Northeast 
Region
21. Foregiveness of Tax Arrears for Enterprises Located in the Old 
Industrial Bases of Northeast China
22. Hunan Province Special Fund for Renewable Energy Development
23. VAT Rebates on FIE Purchases of Chinese-Made Equipment
24. VAT and Tariff Exemptions for Purchases of Fixed Assets Under 
the Foreign Trade Development Fund Program
25. Tax Benefits for Imported Large Power Wind Turbine System Key 
Components and Raw Materials
26. Export Credit Subsidy Programs
27. Export Guarantees and Insurance for Green Technology

Verification

    In accordance with section 782(i)(1) of the Act, we intend to 
verify the information submitted by CS Wind and Titan Companies as well 
as information submitted by the GOC prior to making our final 
determination.

Suspension of Liquidation

    In accordance with section 705(c)(1)(B)(i)(I) of the Act, we have 
calculated an individual countervailable subsidy rate for each 
respondent. Section 705(c)(5)(A)(i) of the Act states that for 
companies not individually investigated, we will determine an all 
others rate equal to the weighted average of the countervailable 
subsidy rates established for exporters and producers individually 
investigated, excluding any zero and de minimis countervailable subsidy 
rates, and any rates based entirely on AFA under section 776 of the 
Act.
    Notwithstanding the language of section 705(c)(5)(A)(i) of the Act, 
we have not calculated the ``all others'' rate by weight averaging the 
rates of CS Wind and Titan Companies, because doing so risks disclosure 
of proprietary information. Therefore, for the all others rate, we have 
calculated a simple average of the two responding firms' rates.

[[Page 33439]]

    We preliminarily determine the total countervailable subsidy rates 
to be as follows.

------------------------------------------------------------------------
             Company                            Subsidy rate
------------------------------------------------------------------------
CS Wind China Co., Ltd., CS Wind   13.74 percent ad valorem.
 Tech (Shanghai) Co., Ltd., and
 CS Wind Corporation
 (collectively, CS Wind).
Titan Wind Energy (Suzhou) Co.,    26.00 percent ad valorem.
 Ltd. (Titan Wind), Titan
 Lianyungang Metal Products Co.
 Ltd. (Titan Lianyungang), Baotou
 Titan Wind Energy Equipment Co.,
 Ltd. (Titan Baotou), and
 Shenyang Titan Metal Co., Ltd.
 (Titan Shenyang)(collectively,
 Titan Companies).
All Others Rate..................  19.87 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 for such entries 
of the merchandise in the amounts indicated above.\153\
---------------------------------------------------------------------------

    \153\ See Modification of Regulations Regarding the Practice of 
Accepting Bonds During the Provisional Measures Period in 
Antidumping and Countervailing Duty Investigations, 76 FR 61042 
(October 3, 2011).
---------------------------------------------------------------------------

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.
    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. 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.
    This determination is issued and published pursuant to sections 
703(f) and 771(i) of the Act.

    Dated: May 29, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-13502 Filed 6-5-12; 8:45 am]
BILLING CODE 3510-DS-P