[Federal Register: November 7, 2007 (Volume 72, Number 215)]
[Notices]
[Page 62837-62841]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no07-38]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-489-502]
Certain Welded Carbon Steel Standard Pipe From Turkey:
Preliminary Results of Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (``the Department'') is conducting
an administrative review of the countervailing duty (``CVD'') order on
certain welded carbon steel standard pipe from Turkey for the period
January 1, 2006, through December 31, 2006. We preliminarily find that
the net subsidy rate for the company under review is de minimis. See
the ``Preliminary Results of Review'' section of this notice, infra.
Interested parties are invited to comment on these preliminary results.
(See the ``Public Comment'' section, infra.)
DATES: Effective Date: November 7, 2007.
FOR FURTHER INFORMATION CONTACT: Kristen Johnson, AD/CVD Operations,
Office 3, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230; telephone: (202) 482-4793.
SUPPLEMENTARY INFORMATION:
Background
On March 7, 1986, the Department published in the Federal Register
the CVD order on certain welded carbon steel pipe and tube products
from Turkey. See Countervailing Duty Order: Certain Welded Carbon Steel
Pipe and Tube Products from Turkey, 51 FR 7984 (March 7, 1986). On
March 2, 2007, the Department published a notice of opportunity to
request an administrative review of this CVD order. See Antidumping or
Countervailing Duty Order, Finding, or Suspended Investigation;
Opportunity to Request Administrative Review, 72 FR 9505 (March 2,
2007). On March 16, 2007, we received a timely request for review from
Borusan Mannesmann Boru Sanayi ve Ticaret A.S. (``BMB''), Borusan
Istikbal Ticaret T.A.S. (``Istikbal'') and their affiliates
(collectively, the Borusan Group (``Borusan'')), a Turkish producer and
exporter of the subject merchandise. On April 27, 2007, the Department
initiated an administrative review of the CVD order on certain welded
carbon steel standard pipe from Turkey, covering the period January 1,
2006, through December 31, 2006. See Initiation of Antidumping and
Countervailing Duty Administrative Reviews, 72 FR 20986 (April 27,
2007).
On May 1, 2007, the Department issued a questionnaire to Borusan
and the Government of the Republic of Turkey (``the GOT''); we received
[[Page 62838]]
Borusan's and the GOT's questionnaire responses on July 5, 2007.
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters of the subject merchandise for which a review
was specifically requested. The only company subject to this review is
Borusan. This review covers 11 programs.
Scope of the Order
The products covered by this order are certain welded carbon steel
pipe and tube with an outside diameter of 0.375 inch or more, but not
over 16 inches, of any wall thickness (pipe and tube) from Turkey.
These products are currently provided for under the Harmonized Tariff
Schedule of the United States (``HTSUS'') as item numbers 7306.30.10,
7306.30.50, and 7306.90.10. Although the HTSUS subheadings are provided
for convenience and customs purposes, the written description of the
merchandise is dispositive.
Period of Review
The period for which we are measuring subsidies is January 1, 2006,
through December 31, 2006.
Company History
BMB was the only company in the Borusan Group that produced the
subject merchandise during the period of review (``POR'').\1\ During
2006, all subject merchandise sold to the United States was either sold
directly to the U.S. customer by BMB, or first sold by BMB to Istikbal,
the affiliated export sales company, and then resold to an unaffiliated
U.S. customer.
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\1\ BMB was previously named Borusan Birlesik Boru Fabrikalari
San ve Tic. (``BBBF''). The company's name was changed to BMB on
December 13, 2004. See Final Results of Countervailing Duty
Administrative Review: Certain Welded Carbon Steel Standard Pipe
from Turkey, 71 FR 43111 (July 31, 2006) (``2004 Pipe Final''), and
accompanying Issues and Decision Memorandum at ``Company
Information'' (``2004 Pipe Memorandum'').
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BMB's shares are majority held by Borusan Mannesmann Boru Yatirim
Holding A.S., a holding company owned by Borusan Holding A.S.\2\ and by
Mannesmannrohren-Werke A.G., a publicly traded company in Germany.
Istikbal is majority-owned by Borusan Holding A.S.
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\2\ Borusan Holding A.S. is owned by the family of Asim
Kocabiyik, the company's founder.
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Subsidies Valuation Information
Benchmark Interest Rates
To determine whether government-provided loans under review
conferred a benefit, the Department uses, where possible, company-
specific interest rates for comparable commercial loans. See 19 CFR
351.505(a). Where no company-specific benchmark interest rates are
available, as is the case in this review, the Department's regulations
direct us to use a national average interest rate as the benchmark. See
19 CFR 351.505(a)(3)(ii). According to the GOT, however, there is no
official national average short-term interest rate available.\3\
Therefore, we have calculated the benchmark interest rate for short-
term New Turkish Lira (``YTL'') denominated loans based on short-term
interest rate data for 2006, as reported by The Economist.\4\
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\3\ See GOT's Questionnaire Response, at 19 (July 5, 2007).
\4\ In each issue, The Economist reports short-term interest
data on a percentage per annum basis for select countries.
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To calculate the benchmark, we sourced the short-term interest rate
reported in the last weekly publication of The Economist for each
quarter of 2006, i.e., the March 23, 2006, June 22, 2006, September 28,
2006, and December 19, 2006, editions. We then simple averaged those
rates to calculate an annual short-term interest rate for Turkey.\5\ We
then compared the nominal average interest rate with the interest rates
that the company paid against the YTL-denominated Foreign Trade
Companies Short-Term Export Credits and Pre-Export Credits. See
Memorandum to the File concerning the Calculations for the Preliminary
Results of the 2006 Review of the Countervailing Duty Order on Certain
Welded Carbon Steel Standard Pipe from Turkey, at 2 (November 1, 2007).
This methodology is consistent with the Department's practice. See
Final Results of Countervailing Duty Administrative Review: Certain
Welded Carbon Steel Standard Pipe from Turkey, 72 FR 13479 (March 22,
2007) (``2005 Pipe Final'') (affirming methodology from the preliminary
results, 71 FR 68550, 68551 (November 27, 2006)); see also, 2004 Pipe
Memorandum at ``Benchmark Interest Rates'' and ``Comment 1: Benchmark
Interest Rate for Turkish lira Loans.''
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\5\ The short-term YTL interest rates sourced from The Economist
do not include commissions or fees paid to commercial banks, i.e.,
they are nominal rates. See Carbon and Certain Alloy Steel Wire Rod
from Turkey; Final Negative Countervailing Duty Determination, 67 FR
55815 (August 30, 2002) (``Wire Rod''), and accompanying Issues and
Decision Memorandum, at ``Benchmark Interest Rates'' (``Wire Rod
Memorandum'').
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Analysis of Programs
I. Programs Preliminarily Determined To Be Countervailable
A. Deduction From Taxable Income for Export Revenue
Addendum 4108 of Article 40 of the Income Tax Law, dated June 2,
1995, allows companies that operate internationally to claim, directly
on their corporate income tax returns, a tax deduction equal to 0.5
percent of the foreign exchange revenue earned from exports and other
international activities.\6\ The income tax deduction for export
earnings may either be taken as a lump sum or be used to cover certain
undocumented expenses, which were incurred through international
activities, that would otherwise be non-deductible for tax purposes
(e.g., expenses paid in cash, such as for lodging, gasoline, and food).
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\6\ These actions include construction, repair, installation,
and transportation activities that occur abroad.
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Consistent with prior determinations, we preliminarily find that
this tax deduction is a countervailable subsidy. See 2005 Pipe Final,
72 FR 13429 (affirming preliminary results, 71 FR at 68552) and 2004
Pipe Memorandum, at ``Deduction from Taxable Income for Export
Revenue.'' The deduction provides a financial contribution within the
meaning of section 771(5)(D)(ii) of the Tariff Act of 1930, as amended
(``the Act''), because it represents revenue forgone by the GOT. The
deduction provides a benefit in the amount of the tax savings to the
company pursuant to section 771(5)(E) of the Act. It is also specific
under section 771(5A)(B) of the Act because its receipt is contingent
upon export earnings. In this review, no new information or evidence of
changed circumstances has been submitted to warrant reconsideration of
the Department's prior findings.
During 2006, the review period, BMB and Istikbal filed separate
corporate income tax returns for tax year 2005. Each company utilized
the deduction for export earnings with respect to its 2005 income
taxes.
The Department typically treats a tax deduction as a recurring
benefit in accordance with 19 CFR 351.524(c)(1). To calculate the
countervailable subsidy rate for this program, we calculated the tax
savings realized by BMB and Istikbal in 2006, as a result of the
deduction for export earnings. We then divided that benefit by
Borusan's total export sales for 2006. On this basis, we preliminarily
determine the net countervailable subsidy for this program to be 0.12
percent ad valorem.
[[Page 62839]]
B. Foreign Trade Companies Short-Term Export Credits
The Foreign Trade Company (``FTC'') loan program was established by
the Export Credit Bank of Turkey (``Export Bank'') to meet the working
capital needs of exporters, manufacturer-exporters, and manufacturers
supplying exporters. This program is specifically designed to benefit
Foreign Trade Corporate Companies (``FTCC'') and Sectoral Foreign Trade
Companies (``SFTC'').\7\ An FTCC is a company whose export performance
was at least US$100 million in the previous year and whose paid in
capital is at least YTL 2 million.
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\7\ To promote exports and diversity in products exported, the
GOT encouraged small and medium scale enterprises to form SFTC,
which comprise five to ten companies that operate together in a
similar sector.
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To eligible applicants, the Export Bank provides short-term export
loans directly to companies in Turkish lira or foreign currency, based
on their prior export performance, up to 100 percent of the FOB export
commitment. The loan interest rates are set by the Export Bank and the
maturity of the loans is usually 180 days for YTL-denominated loans and
360 days for foreign currency-denominated loans. To qualify for an FTC
loan, along with the necessary application documents, a company must
provide a bank letter of guarantee, equivalent to the loan's principal
and interest amount, because the financing is a direct credit from the
Export Bank. Istikbal, which has FTC status, was the only Borusan
company to receive FTC credits during the POR.
Consistent with previous determinations, we preliminarily find that
these loans confer a countervailable subsidy within the meaning of
section 771(5) of the Act. See, e.g., 2005 Pipe Final, 72 FR 13429
(affirming preliminary results, 71 FR at 68552); and 2004 Pipe
Memorandum at ``Foreign Trade Companies Short-Term Export Credits.''
The loans constitute a financial contribution in the form of a direct
transfer of funds from the GOT, under section 771(5)(D)(i) of the Act.
A benefit exists under section 771(5)(E)(ii) of the Act in the amount
of the difference between the payments of interest that Istikbal made
on its loans during the POR and the payments the company would have
made on comparable commercial loans. The program is also specific in
accordance with section 771(5A)(B) of the Act because receipt of the
loans is contingent upon export performance. Further, the FTC loans are
not tied to a particular export destination. Therefore, we have treated
this program as an untied export loan program, which renders it
countervailable regardless of whether the loans were used for exports
to the United States. See id.
Pursuant to 19 CFR 351.505(a)(1), we have calculated the benefit as
the difference between the payments of interest that Istikbal made on
its FTC loans during the POR and the payments the company would have
made on comparable commercial loans.\8\ In accordance with section
771(6)(A) of the Act, we subtracted from the benefit amount the fees
that Istikbal paid to commercial banks for the required letters of
guarantee. We then divided the resulting benefit by Borusan's total
export sales for 2006. On this basis, we preliminarily find that the
net countervailable subsidy for this program is 0.06 percent ad
valorem.
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\8\ See ``Benchmark Interest Rates,'' supra (discussing the
benchmark rates used in these preliminary results).
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C. Pre-Export Credits
This program is similar to the FTC credit program described above;
however, companies classified as either FTC or SFTC are not eligible
for pre-export loans. Under the pre-export credit program, a company's
past export performance is considered in evaluating its eligibility for
loans and establishing the credit limit. Specifically, to be eligible
for a loan, a company must have exported more than $200,000 of goods in
the prior 12-month period. Like FTC loans, the Export Bank directly
extends to companies' pre-export loans, which are contingent upon
export commitment. The loans, whose interest rates are set by the
Export Bank, are denominated in either Turkish lira or foreign currency
and have a maximum maturity of 360 and 540 days, respectively. To
quality for a pre-export loan, along with necessary application
documents, a company must provide a bank letter of guarantee,
equivalent to the loan's principal and interest amount. During the POR,
BMB paid interest against pre-export loans.
Consistent with previous determinations, we preliminarily find that
these loans confer a countervailable subsidy within the meaning of
section 771(5) of the Act. See, e.g., 2005 Pipe Final, 72 FR 13429
(affirming preliminary results, 71 FR at 68552); and 2004 Pipe
Memorandum at ``Pre-Export Credits.'' The loans constitute a financial
contribution in the form of a direct transfer of funds from the GOT,
under section 771(5)(D)(i) of the Act. A benefit exists under section
771(5)(E)(ii) of the Act in the amount of the difference between the
payments of interest that BMB made on the loans during the POR and the
payments the company would have made on comparable commercial loans.
The program is also specific in accordance with section 771(5A)(B) of
the Act because receipt of the loans is contingent upon export
performance.
Further, like the FTC loans, these loans are not tied to a
particular export destination. Therefore, we have treated this program
as an untied export loan program rendering it countervailable
regardless of whether the loans were used for exports to the United
States. See id.
Pursuant to 19 CFR 351.505(a)(1), we have calculated the benefit as
the difference between the payments of interest that BMB made on its
pre-export loans during the POR and the payments the company would have
made on comparable commercial loans.\9\ In accordance with section
771(6)(A) of the Act, we subtracted from the benefit amount the fees
which BMB paid to commercial banks for the required letters of
guarantee. We then divided the resulting benefit by Borusan's total
export value for 2006. On this basis, we preliminarily find that the
net countervailable subsidy for this program is 0.05 percent ad
valorem.
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\9\ See ``Benchmark Interest Rates,''supra (discussing the
benchmark rates used in these preliminary results).
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II. Program Preliminarily Determined To Not Confer Countervailable
Benefits
A. Inward Processing Certificate Exemption
Under the Inward Processing Certificate (``IPC'') \10\ program,
companies are exempt from paying customs duties and value added taxes
(``VAT'') on raw materials and intermediate unfinished goods imported
to be used in the production of exported goods. Companies may choose
whether to be exempted from the applicable duties and taxes upon
importation (i.e., the Suspension System) or have the duties and taxes
reimbursed after exportation of the finished goods (i.e., the Drawback
System). Under the Suspension System, companies provide a letter of
guarantee that is returned to the companies upon fulfillment of the
export commitment.
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\10\ During the POR, the IPC was implemented under Resolution
No. 2005/8391. A copy of this resolution was submitted by the GOT in
its July 5, 2007, Questionnaire Response as Exhibit 23.
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To participate in this program, a company must hold an IPC, which
lists the amount of raw materials/intermediate unfinished goods to be
[[Page 62840]]
imported and the amount of product to be exported. To obtain an IPC, an
exporter must submit an application, which states the amount of
imported raw material required to produce the finished products and a
``letter of export commitment,'' which specifies that the importer of
materials will use the materials to produce exported goods. There are
two types of IPCs: a D-1 certificate and a D-3 certificate.\11\ During
the POR, Borusan utilized D-1 certificates associated with imports of
hot-rolled coil and zinc used in the production of carbon steel pipe
and tube. Borusan did not utilize any D-3 certificates during the POR.
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\11\ For more information on D-3 certificates, see GOT's
Questionnaire Response, at 38-40 (July 5, 2007); 2004 Pipe
Memorandum, at ``Inward Processing Certificate Exemption,'' and
Memorandum to Melissa Skinner, Director, AD/CVD Operations, Office
3, from Team regarding Verification of the Questionnaire Responses
submitted by the Government of the Republic of Turkey, at 9-12
(March 31, 2006) (the public version of the verification report is
available on the public file in the Department's Central Records
Unit, room B-099).
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An IPC specifies the maximum quantity of inputs that can be
imported under the program. Under the IPC program, the value of
imported inputs may not exceed the value of the exported products.
Input/output usage rates listed on an IPC are set by the GOT working in
conjunction with Turkey's Exporter Associations, which are quasi-
governmental organizations, which represent different industries. The
input/output usage rates vary by product and industry and are
determined using data from capacity reports submitted by companies that
apply for IPCs. The input/output usage rates are subject to periodic
review and verification by the GOT. The GOT uses the input/output usage
rates to ensure that a company's expected export quantities are
sufficient to cover the quantity of inputs imported duty-free under the
program.\12\ Each time a company imports raw materials on a duty exempt
basis, the company must present the IPC to Turkish customs.
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\12\ For more information on how waste/usage rates are set by
the GOT, see 2004 Pipe Memorandum, at ``Inward Processing
Certificate Exemption''; and GOT's Questionnaire Response, at
Exhibit 5, pages 10-11 (July 14, 2006).
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Pursuant to 19 CFR 351.519(a)(1)(ii), a benefit exists to the
extent that the exemption extends to inputs that are not consumed in
the production of the exported product, making normal allowances for
waste, or if the exemption covers charges other than imported charges
that are imposed on the input. In regard to the VAT exemption granted
under this program, pursuant to 19 CFR 351.517(a), in the case of the
exemption upon export of indirect taxes, a benefit exists to the extent
that the Department determines that the amount exempted exceeds the
amount levied with respect to the production and distribution of like
products when sold for domestic consumption.
In prior reviews, the Department found that, in accordance with 19
CFR 351.519(a)(4)(i), the GOT has a system in place to confirm which
inputs are consumed in the production of the exported product and in
what amounts, and that the system is reasonable for the purposes
intended. See 2005 Pipe Final, 72 FR 13429 (affirming preliminary
results, 71 FR at 68552); and 2004 Pipe Memorandum, at ``Inward
Processing Certificate Exemption.'' During the POR, under D-1
certificates, Borusan received duty and VAT exemptions on certain
imported inputs used in the production of steel pipes and tubes and not
duty or VAT refunds. There is no evidence on the record of this review
that indicates the amount of exempted inputs imported under the program
were excessive or that Borusan used the imported inputs for any other
product besides those exported. Further, there is no evidence on the
record of this review to warrant a reconsideration of the Department's
finding that the GOT's IPC monitoring system is reasonable.
Therefore, consistent with the 2005 Pipe Final and 2004 Pipe Final,
we preliminarily determine that the tax and duty exemptions, which
Borusan received on imported inputs under D-1 certificates of the IPC
program, did not confer countervailable benefits as Borusan consumed
the imported inputs in the production of the exported product, making
normal allowance for waste. We further preliminarily find that the VAT
exemption did not confer countervailable benefits on Borusan because
the exemption does not exceed the amount levied with respect to the
production and distribution of like products when sold for domestic
consumption. Further, because Borusan did not import any goods under a
D-3 certificate during the POR, we preliminarily determine that this
aspect of the IPC program was not used.
III. Programs Preliminarily Determined To Not Be Used
We examined the following programs and preliminarily determine that
Borusan did not apply for or receive benefits under these programs
during the POR:
A. VAT Support Program (Incentive Premium on Domestically Obtained
Goods)\13\
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\13\ Although we found this program to be terminated in Wire
Rod, residual payments for puchases made prior to the program's
termination were permitted. See Wire Rod Memorandum, at ``VAT
Support Program.''
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B. Pre-Shipment Export Credits
C. Post-Shipment Export Loans
D. Pre-Shipment Rediscount Loans
E. Subsidized Turkish Lira Credit Facilities
F. Subsidized Credit for Proportion of Fixed Expenditures
G. Regional Subsidies.
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we have calculated a
subsidy rate for Borusan for the period January 1, 2006, through
December 31, 2006. We preliminarily determine that the total net
countervailable subsidy rate is 0.23 percent ad valorem, which is de
minimis, pursuant to 19 CFR 351.106(c).
The Department intends to issue assessment instructions to U.S.
Customs and Border Protection (``CBP'') 15 days after the date of
publication of the final results of this review. If the final results
remain the same as these preliminary results, the Department will
instruct CBP to liquidate without regard to countervailing duties all
shipments of subject merchandise produced by Borusan entered, or
withdrawn from warehouse, for consumption from January 1, 2006, through
December 31, 2006. The Department will also instruct CBP not to collect
cash deposits of estimated countervailing duties on all shipments of
the subject merchandise produced by Borusan, entered, or withdrawn from
warehouse, for consumption on or after the date of publication of the
final results of this review.
CBP will continue to collect cash deposits for non-reviewed
companies at the most recent company-specific or country-wide rate
applicable to the company. Accordingly, the cash deposit rates that
will be applied to companies covered by this order but not examined in
this review, are those established in the most recently completed
administrative proceeding for each company. Those rates shall apply to
all non-reviewed companies until a review of a company assigned these
rates is requested.
These deposit requirements, when imposed, shall remain in effect
until further notice.
[[Page 62841]]
Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of the public
announcement of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these preliminary
results. Unless otherwise indicated by the Department, case briefs must
be submitted within 30 days after the date of publication of this
notice, pursuant to 19 CFR 351.309(c)(1)(ii). Rebuttal briefs, limited
to arguments raised in case briefs, must be submitted no later than
five days after the time limit for filing case briefs, unless otherwise
specified by the Department, pursuant to 19 CFR 351.309(d)(1). Parties
who submit argument in this proceeding are requested to submit with the
argument: (1) A statement of the issues, and (2) a brief summary of the
argument. Parties submitting case and/or rebuttal briefs are requested
to provide the Department copies of the public version on disk. Case
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310(c), within 30
days of the date of publication of this notice, interested parties may
request a public hearing on arguments to be raised in the case and
rebuttal briefs. Unless the Secretary specifies otherwise, the hearing,
if requested, will be held two days after the date for submission of
rebuttal briefs, that is, 37 days after the date of publication of
these preliminary results.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(ii), are due. See 19 CFR
351.305(b)(3). The Department will publish the final results of this
administrative review, including the results of its analysis of
arguments made in any case or rebuttal briefs.
This administrative review is issued and published in accordance
with section 751(a)(1), 777(i)(1) of the Act and 19 CFR 351.221(b)(4).
Dated: November 1, 2007.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E7-21874 Filed 11-6-07; 8:45 am]
BILLING CODE 3510-DS-P