84-912

NOTICES

DEPARTMENT OF COMMERCE

[C-357-403]

Oil Country Tubular Goods From Argentina; Preliminary Affirmative
Countervailing Duty Determination

Wednesday, September 12, 1984

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

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ACTION: Notice.

SUMMARY: We preliminarily determine that certain benefits which constitute bounties
or grants within the meaning of the countervailing duty law are being provided to
manufacturers, producers, or exporters in Argentina of oil country tubular goods. The
estimated net bounty or grant is 0.90 percent ad valorem. We are directing the U.S.
Customs Services to suspend liquidation of all entries of oil country tubular goods from
Argentina which are entered, or withdrawn from warehouse, for consumption, and to
require a cash deposit or bond on this product in the amount equal to the estimated net
bounty or grant.

If this investigation proceeds normally, we will make our final determination by
November 20, 1984.

EFFECTIVE DATE: September 12, 1984.

FOR FURTHER INFORMATION CONTACT: Laura Winfrey or Stuart Keitz: Office of
Investigations, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C.
20230; telephone: (202) 377-0160 or (202) 377-1769.

SUPPLEMENTARY INFORMATION:

Preliminary determination

Based upon our investigation, we preliminarily determine that there is reason to believe
or suspect that certain benefits which constitute bounties or grants within the meaning of
section 303 of the Tariff Act of 1930, as amended (the Act), are being provided to
manufacturers, producers, or exporters in Argentina of oil country tubular goods. For
purposes of this investigation, the following programs are preliminarily found to confer
bounties or grants:
Post-financing of exports under Circular OPRAC 1-9.
Import duty reductions on raw materials.
We estimate the net bounty or grant to be 0.90 percent ad valorem.

Case History

On June 13, 1984, we received a petition from the Lone Star Steel Company, and the CF&I
Steel Corporation filed on behalf of the U.S. industry producing oil country tubular goods.
In compliance with the filing requirements of § 355.26 of the Commerce Regulations (19
CFR 355.26), the petition alleges that manufacturers, producers, or exporters in
Argentina of oil county tubular goods receive, directly or indirectly, benefits which
constitute bounties or grants within the meaning of section 303 of the Act.
We found the petition to contain sufficient grounds upon which to initiate a
countervailing duty investigation, and on July 3, 1984, we initiated such an
investigation (49 FR 28289). We stated we expected to issue a preliminary determination
by September 6, 1984. On August 3, 1984, LTV Steel Company entered this proceeding as
a co-petitioner with Lone Star Steel Company and CF&I Steel Corporation.
Argentina is not a "country under the Agreement" within the meaning of section 701(b)
of the Act; therefore, section 303 of the Act applies to this investigation. The merchandise
being investigated is dutiable. Therefore, the domestic industry is not required to allege
that, and the U.S. International Trade Commission is not required to determine whether,
imports of this product cause or threaten material injury to a U.S. industry.
We presented a questionnaire concerning the allegations to the government or
Argentina in Washington, D.C., on July 13, 1984. On August 17, 1984, we received
responses to the questionnaire.

Scope of Investigation

The products covered by this investigation are "oil country tubular goods" (OCTG), which
are hollow steel products of circular cross-section intended for use in the drilling of oil or
gas. These include oil well casing, tubing, and drill pipe of carbon or alloy steel, whether
welded or seamless, to either American Petroleum Institute (API) or non-API
specifications (such as proprietary), as currently provided for in the Tariff Schedules of
the United States, Annotated (TSUSA) under items 610.3216, 610.3219, 610.3249,
610.3252, 610.3256, 610.3258, 610.3264, 610.3721, 610.3722, 610.3751, 610.3925,
610.3935, 610.4025, 610.4035, 610.4225, 610.4235, 610.4325, 610.4335, 610.4942,
610.4944, 610.4946, 610.4954, 610.4957, 610.4968, 610.4969, 610.4970, 610.5221,
610.5222, 610.5226, 610.5234, 610.5240, 610.5242, 610.5243, and 610.5244. This
investigation includes OCTG that are in both finished or unfinished condition.
There is one known producer and exporter in Argentina of oil country tubular goods to
the United States. We have received information from the government of Argentina
regarding Dalmine Siderca S.A.I.C. (Dalsid) which is the sole exporter of this product to
the United States during the period for which we are measuring bounties or grants, April
1983 through March 1984.

Analysis of Programs

Throughout this notice, we refer to general principles applied to the facts of the current
investigation. These general principles are described in detail in the Subsidies Appendix
to the "Final Affirmative Countervailing Duty Determination and Order: Cold-Rolled
Carbon Steel Flat-Rolled Products from Argentina" published in the Federal Register on
April 26, 1984 (49 FR 18806).
Consistent with our practice in preliminary determinations, where a response to an
allegation denies the existence of a program, receipt of benefits under a program, or
eligibility of a company or industry under a program, and the Department has no
persuasive evidence showing that the response is incorrect, we accept the response for
purposes of the preliminary determination. All such responses, of course, are subject to
rigorous verification. If the response cannot be supported at verification and the program
is otherwise countervailable, the program will be considered a subsidy in the final
determination.
Based upon our analysis to date of the petition, the additional information filed by
petitioners and the responses to our questionnaires, we preliminarily determine the
following:

I. Programs Preliminarily Determined To Confer Bounties or Grants

We preliminarily determine that bounties or grants are being provided to manufacturers,
producers, or exporters in Argentina of oil country tubular goods under the following
programs.

A. Post-Financing of Exports Under Circular OPRAC 1-9

On September 24, 1982, the Central Bank of Argentina established a post- financing
program for exports under Circular OPRAC 1-9. OPRAC 1-9 loans are granted for up to 30
percent of the peso equivalent of the foreign currency in which the export transaction
was paid. The term of the loan is 180 days. The interest rate charged on OPRAC 1-9 loans
is the regulated rate used by commercial banks, as established by Central Bank
Regulations. The system of financing is through the Central Bank of Argentina, which
delegates the responsibility for granting the loans to intermediary banks. Dalsid received
loans under the OPRAC 1-9 program.
To determine if the loans to Dalsid provided under the OPRAC 1-9 program constitute a
bounty or grant, we compared the rate of interest charged on the OPRAC 1-9 loans, with
the national average commercial rate for short-term borrowing, as required in the
Subsidies Appendix.
For the purpose of this preliminary determination, we have used a

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weighted-average of the various forms of short-term borrowing available from Argentine
banks during the period for which we are measuring bounties or grants, as the national
average commercial rate for short-term borrowing. We are using the regulated rate, the
unregulated rate, and the rate tied to the wholesale price index in our weighted-average
interest rate. These rates are established by the Central Bank of Argentina and are
compiled by the Fundacion de Investigaciones Economicas Latino Americanos (FIEL).
Beginning August 1, 1983, funds were no longer lent at the unregulated rate. Therefore the
basis for the weighted-average for the rest of the period of investigation is the regulated
rate and the rate tied to the wholesale price index.
Using this weighted-average as a benchmark, we calculate a bounty or grant on exports of
.69 percent ad valorem.

B. Import Duty Exemptions on Raw Materials

Argentine tariff law authorizes import duty exemptions on raw materials when there is no
domestic production or insufficient domestic production of the raw material to meet
domestic demand, provided that importation will not interfere with domestic production.
Neither Dalsid nor the government of Argentina provided enough information about the
program to establish that these benefits are not limited to a specific industry or group of
industries. Therefore, for purposes of this preliminary determination, we conclude that
import duty exemptions constitute a bounty or grant to Dalsid.
To calculate the benefit of the duty exemption, we multiplied the value of raw materials
imported by Dalsid during the period of investigation by the duty rate for each of these
inputs. Because any import duties that would have been paid would be eligible for a
rebate upon exportation under the reembolso program, we had to factor out the import
duties exempted on Dalsid's export sales from our calculation of the total amount of
import duties exempted. We then divided the remainder by the total value of all Dalsid's
sales to calculate a net bounty or grant of 0.21 percent ad valorem.

II. Programs Preliminarily Determined Not To Confer Bounties or Grants

A. "Reembolso"--Tax Rebate on Exports

The reembolso program was established in 1971. It authorized a refund by cash payment
on export of taxes "that bear directly or indirectly" on exported products and/or their
component raw materials for the purpose of promoting exports. The amount of the
reimbursement is equal to a fixed percentage of the f.o.b. value of the exported
merchandise. This percentage varies by product. Dalsid participates in the reembolso
program.
Under the Act, the non-excessive rebate of indirect taxes levied at the final stage, and of
prior stage cumulative indirect taxes borne by inputs that are physically incorporated
into the final product, is not considered a subsidy. With respect to such non-VAT rebates,
in order to determine whether a cash payment on export is a bona fide rebate of indirect
taxes, we examine whether: (1) The program involved operates for the purpose of
rebating indirect taxes; (2) whether there is a clear link between eligibility for payments
on exports and indirect taxes paid, and (3) whether the government has reasonably
calculated and documented the actual tax incidence borne by the product concerned and
has demonstrated a clear link between such tax incidence and the rebate amount paid on
export.
The reembolso program is designed to refund taxes that "bear directly or indirectly on
exported products." We view taxes borne by a product as indirect, and taxes on, for
example, income and labor as direct.
Based on our review of the total tax incidence which the reembolso is designed to rebate,
we are satisfied that the reembolso operates "for the purpose of rebating indirect taxes,"
and that it meets our first test.
In 1980, the Value Added Tax was established (Law 22.294/80) and in 1981, certain
minor taxes were suspended (Law 22.374/81). As a result of these modifications to the
Argentine tax system, the government in 1983 reviewed the incidence of taxes on oil
country tubular goods in order to reevaluate the levels of the reembolso. In reviewing the
studies on fiscal incidence of taxes, the government selected Dalsid as representative of
the oil country tubular goods industry, as it is the only Argentine firm producing these
products. In conjunction with the more general study conducted in 1978, this review
provides a sufficient basis for our preliminary determination that there is a clear link
between eligibility for the reembolso and indirect taxes paid.
In the questionnaire response, the government of Argentina provided us with data from
its most recent analysis of the tax incidence on oil country tubular goods. This analysis,
which was completed in 1983, shows that the taxes levied on oil country tubular goods,
which the reembolso is designed to rebate, total 25.1 percent of the f.o.b. value of the
exports. Six categories are included in the analysis: domestic raw material inputs,
imported raw material inputs, transformation costs, labor, taxes paid directly, and export
taxes.
In calculating the allowable tax incidence in the domestic and imported raw material
categories, we only included those indirect taxes levied at prior stages of production that
apply to physically incorporated inputs. Using this standard, we found that for domestic
raw materials 5.4 percent of the tax incidence claimed is allowable and for imported raw
materials 0.6 percent is allowable. We are satisfied that the government has reasonably
calculated and documented the tax incidence on the physically incorporated raw
materials, and has demonstrated a clear link between such tax incidence and the rebate
paid on export, thus meeting our third test.
Regarding taxes paid on the transformation costs, we are preliminarily including those
indirect taxes paid on materials used in transforming the raw materials into oil country
tubular goods, which meet our standard for physical incorporation. Taxes on energy,
equipment and services do not meet this standard. Thus of the 8.9 percent claimed, 1.5
percent is disallowed.
The taxes on labor, which total 1.2 percent, do not meet our standard for physical
incorporation into the final product. We have therefore disallowed this amount.
The export taxes paid on oil country tubular goods, which include foreign exchange and
stamp taxes, also meet our third test because they are itemized, and the rate of each tax
and its incidence category are all indirect taxes. The total incidence of the taxes in this
category is 2.5 percent.
Three taxes were included in the category of the taxes paid directly on oil country tubular
goods. For the purpose of this preliminary determination, we are satisfied that two of the
three taxes listed are indirect taxes and also meet our third test. No information was
provided in the response concerning the Emergency Tax which permits us to determine if
this tax is direct or indirect. Therefore, for this preliminary determination, we are
disallowing this portion of the taxes paid directly on oil country tubular goods. Applying
this standard, we found that of the 5.4 percent tax incidence claimed, 0.8 percent is
allowable and 4.6 U.S. is not.

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Of the total 25.1 percent tax incidence calculated in the reembolso study, we
have allowed 10.84 percent.
Since July 5, 1982, the reembolso for oil country tubular goods has been 10 percent
(Resolution ME 8/82). Because the reembolso does not exceed the total allowable
indirect taxes of 10.84 percent, we determine that the reembolso does not confer a
bounty or grant on oil country tubular goods.

B. Government Loan Guarantees

Petitioners alleged that the Argentine OCTG industry benefits from preferential loan
guarantees provided by the government of Argentina.
In its response, Dalsid provides information concerning loan guarantees provided to it by
the Banco Nacional de Desarrollo (BANADE), which is a development bank administered
by the government of Argentina. Dalsid contracts for these guarantees only when
required to by the lender. The terms and conditions of the guarantees are the same for all
clients in Argentina. In order to receive a loan guarantee from BANADE, Dalsis is
required to provide a counter-guarantee to secure the guarantee. Dalsid's guarantee
could take the form of mortgages or securities. In addition, Dalsid pays a guarantee fee to
BANADE of 0.1 percent.
We therefore preliminarily find that these loans guarantees are provided to Dalsid by
BANADE on a strictly commercial basis, thus providing no preferential bounty or grant to
Dalsid.

III. Programs Preliminarily Determined Not To Be Used

We preliminarily determine that the following programs, listed in the notice of "Initiation
of Countervailing Duty Investigation," were not used by the manufacturers,
producers, or exporters in Argentina of oil country tubular goods.

A. Medium- and Long-Term Loans Under Law 22.510 and Under Decrees 989/81 and
1894/83

Petitioners allege that the Argentine OCTG industry benefits from preferential medium-
and long-term loans under Law 22.510 and under Decree 989/81 and 1894/83.
The response indicates that Dalsid has not received either medium- or long- term loans
under either Law 22.510 or under Decrees 989/81 and 1894/83.

B. Capital Tax Exemptions Under Decrees 5038/61 and 548/81

Petitioners allege that the Argentine OCTG industry receives preferential capital tax
exemptions.
The response indicates that Dalsid does pay capital taxes and does not avail itself of either
Decree 5038/61 or Decree 548/81.

C. Subsidized Raw Material Inputs Under Decree 619

Petitioners allege that the Argentine OCTG industry benefits from subsidized raw material
inputs under Decree 619, which provides that the Argentine government may subsidize
industries supplying basic inputs, such as oil residue coal, electricity, and natural gas, to
the steel industry.
The response indicates that Dalsid does not use Decree 619.

D. Government Trade Promotion Programs

Petitioners allege that the Argentine OCTG industry benefits from trade promotion
programs which are funded by the government of Argentina and are designed to
increase participation of Argentine companies in international trade fairs and trade
missions.
As the response indicates, Dalsid has not participated in any such trade fairs. Further, no
financial or other considerations were provided by the Argentine government in
connection with such fairs.

E. Pre-Financing of Exports Under Circular OPRAC 1-1

Petitioners allege that the Argentine OCTG industry benefits from preferential short-term
loans for pre-financing of exports under Circular OPRAC 1-1. Circular OPRAC 1-1
instituted a pre-financing program for Argentine exports as an alternative to the Circular
RF 153 program for pre-financing of exports through dollar-indexed pesos. This program
was initiated on Augsut 21, 1981, and terminated on March 31, 1982. Under Circular
OPRAC 1-1, loans could not exceed one year, and firms receiving OPRAC 1-1 loans could
not also receive Circular RF-153 loans. Dalsid did not use these loans.

F. Additional Reembolso for Exports From Southern Argentine Ports

Petitioners allege that the Argentine OCTG industry receives additional rebates of taxes
through the reembolso program for exports from southern Argentine ports.
The response indicates that according to the laws governing the reembolso program for
exports from southern ports, exporters of OCTG are not not eligible for this program.

G. Exemption From Stamp Tax Under Decree 186/76

Petitioners allege that the Argentine OCTG industry receives an exemption from paying
stamp taxes, which is authorized under Decree 186/76.
The response indicates that Dalsid is not eligible for exemption for the Stamp tax under
Decree 186/76.

H. Benefits Under the "Argentine Steel Industry Development Contribution Fund"

Petitioners allege that the Argentine OCTG industry benefits from the "Argentine Steel
Industry Development Contribution Fund," a fund which earmarks certain import
surcharge taxes for steel industry development.
According to the response, Dalsid has never received any benefits from this fund and this
particular fund was eliminated January 16, 1981, by Law 22.374.

I. Preferential Exchange Rates for Steel Industry Imports

Petitioners allege that the Argentine OCTG industry benefits from preferential exchange
rates allowed under Argentine law for imports of machinery, parts, raw material, fuels,
and other products used or installed in steel plants.
As indicated in the response, from July 6, 1982, through October 31, 1982, there was a
dual exchange rate in Argentina. One rate existed for "commercial" transactions and one
for "financial". On November 1, 1982, the Central Bank established a single exchange rate.
During the period for which we are measuring bounties or grants, only one exchange rate
was in effect for both commercial and financial transactions.

J. Price Premiums From Argentine Government Purchases of Argentine-Produced Steel

Petitioners allege that the Argentine OCTG industry benefits from price premiums paid by
the Argentine government on its purhcases of Argentine- produced steel products.
The response indicates that the Argentine government does not have a program for
paying premium prices for its purchases of Argentine produced OCTG.

Verification

In accordance with section 776(a) of the Act, we will verify data used in making our final
determination.

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Suspension of Liquidation

In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service
to suspend liquidation of all entries of OCTG from Argentina which are entered, or
withdrawn from warehouse, for consumption, on or after the date of publication of this
notice in the Federal Register and to require a cash deposit or bond for each such entry of
this merchandise in the amount of 0.90 percent ad valorem. This suspension will remain
in effect until further notice.

Public Comment

In accordance with § 355.35 of the Commerce Department Regulations, if requested, we
will hold a public hearing at 10:00 a.m. on October 12, 1984, to afford interested parties
an opportunity to comment on this preliminary determination at the U.S. Department of
Commerce, Room 6802, 14th Street and Constitution Avenue, NW., Washington, D.C.
20230. Individuals who wish to participate in the hearing must submit a request to the
Deputy Assistant Secretary for Import Administration, Room B099, at the above address
within 10 days of this notice's publication.
Requests should contain: (1) The party's name, address, and telephone number; (2) the
number of participants; (3) the reason for attending; and (4) a list of the issues to be
discussed. In addition, prehearing briefs in at least 10 copies must be submitted to the
Deputy Assistant Secretary by October 6, 1984. Oral presentations will be limited to
issues raised in the briefs. All written views should be filed in accordance with 19 CFR
355.34, within 30 days of this notice's publication, at the above address and in at least 10
copies.
September 6, 1984.

Alan F. Holmer,

Deputy Assistant Secretary for Import Administration.

[FR Doc. 84-24105 Filed 9-11-84; 8:45 am]

BILLING CODE 3510-DS-M