NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
C-357-403]
Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order; Oil Country Tubular Goods From Argentina
Tuesday, November 27, 1984
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AGENCY: Import Administration, International Trade Administration,
Commerce.
ACTION: Notice.
SUMMARY: We 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 (OCTG). The net
bounty or grant is determined to be 0.9 percent ad valorem. We are directing the U.S.
Customs Service to continue to suspend liquidation of all entries of oil country tubular
goods from Argentina that are entered, or withdrawn from warehouse, for
consumption, on or after the date of publication of the notice of our preliminary
determination and to require a cash deposit on this product in the amount equal to the
net bounty or grant.
EFFECTIVE DATE: November 27, 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 377-1769.
SUPPLEMENTARY INFORMATION: .
Final Determination and Order
Based upon our investigation, we determine that certain benefits constituting 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 program is found
to confer a bounty or grant:
1/8 Post-Financing of Exports Under Circular OPRAC 1-9
We determine the net bounty or grant to be 0.9 percent.
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 country tubular goods received, 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, and on July 3, 1984, we initiated such an investigation (49 FR 28289). We
stated that we expect 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 CR&I Steel Corporation.
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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 of
Argentina in Washington, D.C., on July 13, 1984. On August 17, 1984, we received
responses to the questionnaire.
On September 6, 1984, we preliminarily determined that benefits constituting 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 (49
FR 28289). A hearing was requested and took place on October 17, 1984. We received
briefs from the parties to the proceeding on October 10, 11 and 31.
Scope of the 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 products include oil well casing, tubing, and drill pipe of carbon or alloy steel,
whether welded or seamless, manufactured to either American Petroleum Institute (API)
or proprietary specifications. This investigation covers both finished and unfinished oil,
country tubular goods.
The provisions of the Tariff Schedules of the United States, Annotated (TSUSA) covering
all steel pipe and tube, including oil country tubular goods, were changed as of April 1,
1984. We have reviewed the classification of steel pipe and tube by the U.S. Customs
Service and determined that our original listing of the products subject to this
investigation should be amended. As a result of the changes mentioned above, oil country
tubular goods now comprise TSUSA item numbers 610.3216, 610.3219, 610.3233,
610.3242, 610.3243, 610.3249, 610.3252, 610.3254, 610.3256, 610.3258, 610.3262,
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,
610.4955, 610.4956, 610.4957, 610.4966, 610.4967, 610.4968, 610.4969, 610.4970,
610.5221, 610.5222, 610.5226, 610.5234, 610.5240, 610.5242, 610.5243, and
610.5244.
Dalmine Siderca S.A.I.C. (Dalsid) 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 principles are described in the "Subsidies Appendix" attached to the
notice of "Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina; Final
Affirmative Countervailing Duty Determination and Countervailing Duty Order",
which was published in the April 26, 1984, issue of the Federal Register (49 FR 18006).
I. Programs Determined to Confer Bounties or Grants
We determine that bounties or grants are being provided to manufactures, producers, or
exporters in Argentina of OCTG under the following program.
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.
In June 1982, the Central Bank of Argentina restructured the banking and financial
system. All outstanding short-term loans were refinanced under a regulated interest rate,
which is set monthly by the Central Bank. During this period banks were also allowed to
lend a portion of their deposits at an unregulated rate, known as the tasa libre.
For purposes of the preliminary determination, we used as our benchmark a
weighted-average of the regulated rate, the unregulated rate and the rates tied to the
wholesale price index. During verification we discovered that the loans tied to the
wholesale price index (WPI) are really variable rate long-term loans, and we now believe
that it would not be appropriate to use the WPI rate in any sort of a weighted-average.
For the purpose of this final determination, we have used as our benchmark a weighted
average of the various forms of comparable short-term borrowing available from
Argentine banks as the national average commerical rate for short-term borrowing. Given
the particular characteristice of the Argentine economy and financial system during the
period of review, we feel that there is no single comparable instrument that we can use as
a short-term benchmark. Given this situation, we think that a weighted average of the
regulated, unregulated and acceptance lending rates, best reflects a comparable national
average short-term interest rate. During the period for which we are measuring bounties
or grants, various short-term borrowing rates were available from Argentine banks. From
April 1983 to July 1983 the regulated and unregulated rates were in effect. Beginning
August 1, 1983, funds were no longer lent at the unregulated rate. For the months of
August and September, when only the regulated rate was in effect, we are using this rate
alone as the benchmark. In October, 1983 the acceptance rate (aceptaciones) came into
use in Argentina. With this rate, a cash rich firm and a cash poor firm are matched
together by the banks. The banks endorse these agreements and act as intermediaries for
the transaction. The terms for acceptance loans are for up to 90 days. From October,
1983 to March, 1984 the basis for the weighted average is the regulated rate and the
acceptance rate.
Because the amount of credit that can be extended by Argentine banks is closely
controlled by the government, two types of extra-bank lending have come into practice
in Argentina. While not illegal, these forms of borrowing are not monitored or regulated
by the government in any way, and thus no official government statistics on the lending
rates or on the size of the credit pools exist. One type of extra-bank loan, known as Bonex
repurchase agreements, involves a loan agreement which is guaranteed by the sale and
repurchase of Argentine government dollar-denominated bonds. The other type of
extra-bank loan is guaranteed by a post-dated check. Both forms of borrowing are for
very short periods, normally two to seven days.
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In calculating a weighted-average benchmark, we have included the regulated
rate, the unregulated rate and the acceptance rate, because we felt that these rates best
represent the most comparable alternative instuments to OPRAC 1-9 borrowing. We have
not included the Bonex repurchase rates or rates on loans guaranteed by post-dated
checks, because the terms of these loan are for very short periods, and thus would not be
a likely source of borrowing to finance 180-day export transactions.
Using this weighted average as a benchmark, we calculate a bounty or grant on exports of
0.9 percent ad valorem.
II. Programs Determined Not to Confer Bounties or Grants
We determine that bounties or grants are not being provided to manufacturers,
producers, or exporters in Argentina of OCTG under the following programs.
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 exports is a bona fide rebate of indirect
taxes, we examine whether: (1) The program involved operated for the purpose of
rebating indirect taxes; (2) there is a clear link between eligibility for payments on
exports and indirect taxes paid; and (3) 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 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 conjuction with the more general study conducted in 1978, this review
provides a sufficient basis for our final 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 form
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.
During verification we verified the total amount of Dalsid's purchases of physically
incorporated inputs for OCTG production which allowed us to determine that the
proportion comprised of physically incorporated inputs is correct.
In the domestic raw material category, we determined that 6.2 percent of the tax
incidence claimed is allowed. For purposes of the preliminary determination, we did not
allow the tax incidence claimed on gas. However, during verification we determined that
Dalsid used the Midrex process for the reduction of iron. In our countervailing duty
investigation of Carbon Steel Wire Rod from Argentina, 47 FR 42393 (Sept. 27, 1982)
we determined that the firm under investigation also used the Midrex process. In
conjunction with that investigation, we found that a portion of natural gas used in the
reduction process meets our physical incorporation test. Therefore, of the total 6.5 tax
incidence claimed for domestic raw materials, we are allowing 6.2 percent. For the
imported raw materials, we allowed 0.6 percent. We verified 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 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
allowed.
The taxes on labor, which total 1.2 percent, are direct taxes. We have, therefore,
disallowed this amount.
The export taxes paid on oil country tubular goods, which include foreign exchange and
stamp taxes, also are allowable because these taxes are all final stage indirect taxes: The
rate of each tax and its incidence is calculated. The total incidence of the taxes in this
category is 2.5 percent.
In the response three taxes were included in the category of the taxes paid directly on oil
country tubular goods. We verified that the Provincial Law 9226 and the Municipal Tax
Law 1423/79 refer to indirect taxes actually paid by Dalsid, at the final stage on oil
country tubular goods. At verification we requested more information concerning the
Emergency Tax (Law 22915), which we preliminarily disallowed. We were given copies of
the law which instituted a 20 percent tax to cover budgetary shortfalls in Argentina.
Respondents claim that this tax is a surtax based on both direct and indirect taxes. We do
not have enough information to determine the portion of the surtax based only on
indirect taxes. For this reason, we are not allowing the Emergency Tax. In the category of
final stage taxes paid directly on OCTG, we are satisfied that two of the three taxes listed
are indirect taxes and meet our third test. Applying this standard, we determine that of
the 5.4 percent tax incidence claimed, 0.8 percent is allowable and 4.6 percent is not.
Of the total 25.1 percent tax incidence calculated in the reembolso study, we have
allowed 11.6 percent.
Since July 5, 1982, the reembolos 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 percent, we determine that the reembolso does
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not confer a
bounty or grant on oil country tubular goods.
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 to meet domestic demand, and
when importation will not interfere with the market for domestic production. On its face
the program is not limited to a specific enterprise or industry or group of enterprises or
industries, but rather is available to any industry facing inadequate local supply of raw
materials. However, because nominal general availability is not necessarily sufficient to
prevent a program from being a domestic subsidy, we preliminarily determined the
program to be countervailable. Neither Dalsid nor the government of Argentina had
provided enough information about the program to establish that the benefits were not
limited to a specific industry or group of industries.
At verification we requested documentation to determine whether the exemptions are
limited to a specific industry or group of industries. We verified that a number of firms in
a wide variety of industries were exempted from import duties on raw materials. Thus, we
determine that import duty exemptions on raw materials are not limited to a specific
industry or group of industries.
C. Government Loan Guarantees
Petitioners alleged that the Argentine OCTG industry may have benefited from
preferential loan guarantees provided by the Banco Nacional de Desarrollo (National
Development Bank or BANADE).
BANADE is a state-owned financial institution that extents credit to Argentine companies
for the purchase of locally made capital goods, and provides loan guarantees to Argentine
companies wishing to purchase capital goods abroad and needing foreign currency loans
to do so.
At verification we found that BANADE financing was made available to all industries in
every province of Argentina. None of the criteria laid out in BANADE regulations is
industry- or region-specific.
III. Programs Determined Not To Be Used
We 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 OCTG.
A. Medium- and Long-Term Loans Under Law 22.510 and Under Decrees 989/81 and
1894/83
Petitioners alleged that the Argentine OCTG industry may have benefited from
preferential medium- and long-term loans under Law 22.510 and under Decree 989/81
and 1894/83.
We verified that Dalsid did not receive any loans under Law 22.510. Regarding Decree
1894/83, we verified that this decree only applies to state enterprises, provinces and
municipalities. Dalsid does not fit into any of these categories.
Decree 989/81 was cancelled by decree 169/82, but we verified that Dalsid never
received any benefits from 989/81.
B. Capital Tax Exemptions Under Decrees 5038/61 and 548/81
Petitioners alleged that the Argentine OCTG industry received preferential capital tax
exemptions.
We verified that Dalsid pays the capital tax and does not receive any exemption under
Decrees 5038/61 and 548/81.
C. Subsidized Raw Material Inputs Under Decree 619
Petitoners alleged that the Argentine OCTG industry may have benefited 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.
We verified that Dalsid did not receive benefits under Decree 619. The National Direction
of Industrial Control administers Decree 619 and other tax benefits. After reviewing
information from that agency, we determined that Dalsid did not use Decree 619.
D. Government Trade Promotion Programs
Petitioners alleged that the Argentine OCTG industry benefited 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.
We verified that the government of Argentina had not organized trade fairs in which
Dalsid participated.
E. Additional Reembolso for Exports From Southern Argentine Ports
Petitioners alleged that the Argentine OCTG industry received additional rebates of taxes
through the reembolso program for exports from southern Argentine ports.
We verified that the only companies eligible for this additional reembolso are those
located south of the Colorado River. Since Dalsid is located north of this river, it could not
avail itself of this program.
F. Exemption From Stamp Tax Under Decree 186/76
Petitioners alleged that the Argentine OCTG industry received an exemption from paying
stamp taxes, which is authorized under Decree 186/76.
We verified that Dalsid is not exempted from paying stamp taxes under Decree 186/76.
G. Preferential Exchange Rates for Steel Industry Imports
Petitioners alleged that the Argentine OCTG industry benefited from preferential
exchange rates in place under Argentine law for imports of machinery, parts, raw
material, fuels, and other products used or installed in steel plants.
On October 29, 1982, the Central Bank established a single exchange rate. While in
Argentina, we verified that only one exchange rate existed during our period of
investigation.
H. Price Premiums From Argentine Government Purchases of Argentine-Produced Steel
Petitioners alleged that the Argentine OCTG industry may have benefited from price
premiums paid by the Argentine government on its purchases of Argentine- produced
steel products.
During verification, we determined that government enterprises actually paid less than
private companies for the same Argentine-produced steel products.
IV. Programs Determined To Have Been Suspended
A. Pre-Financing of Exports Under Circular OPRAC 1-1
Petitioners alleged that the Argentine OCTG industry benefited 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 peso loans.
This program was initiated on August 21, 1981, and terminated on March 31, 1982. Under
Circular OPRAC 1-1, loans could not exceed one year, and firms receiving
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OPRAC
1-1 loans could not also receive Circular RF-153 loans.
We verified that the Circular OPRAC 1-1 program was terminated on March 31, 1982 and
that Dalsid had no Circular OPRAC 1-1 loans outstanding during the period for which we
were measuring bounties or grants.
B. Benefits Under the "Argentine Steel Industry Development Contribution Fund"
Petitioners alleged 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.
This fund was eliminated by law 22.374 on January 16, 1981. Dalsid did not benefit from
this fund during our period of measuring bounties or grant. We also verified that Dalsid
did not, in the past 15 years, receive benefits from this fund.
Comments by Petitioners
Comment 1. Because it supplied its annual reports in Spanish, without translations,
petitioners allege that Dalsid did not cooperate with Department of Commerce (DOC)
procedure.
DOC Position. Pursuant to § 355.39(d) of Commerce Regulations (19 CFR 355.39), all
responses to requests for information must be in English and in the form requested unless
such requirement is waived. In this case there were no existing translations and the DOC
did not need to have the reports translated.
Comment 2. Petitioners argue that DOC erred by choosing a benchmark interest rate for
OPRAC 1-9 that does not accurately reflect the true cost of short-term commercial
borrowing in Argentina. Petitioners argue that at least 30 percent of total short-term
credit in Argentina consists of non-bank loans at unregulated rates after August 1, 1983,
and that the DOC should use a national average commercial rate, which includes non-bank
interest rates.
DOC Position. See the "Analysis of Programs" section of this notice.
Comment 3. Petitioners argue that all reembolso rebates [of indirect taxes] received by
Dalsid on its exports of OCTG are countervailable because the government of Argentina
did not prove that the incidence of indirect taxes on OCTG is clearly linked to the amount
of rebate which the reembolso provides for OCTG.
DOC Position. DOC verified (1) that the reembolso program operates for the purpose of
rebating indirect taxes; (2) that there is a clear link between eligibility for payments on
exports and indirect taxes paid; and (3) that 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
exports.
Comment 4. Petitioners allege that DOC failed to assess on an item-by- item basis whether
the imported items in the reembolso program were physically incorporated.
DOC Position. Part of our verification process consisted of determining that those
imported raw materials are physically incorporated into the final product as claimed in
the reembolso study. Dalsid claimed that iron ore and iron alloys are physically
incorporated. We verified this claim and allowed Dalsid its claim for the indirect taxes
associated with these items.
Comment 5. Under the input categories of domestic raw materials and transformation
costs, petitioners argue that certain items are not physically incorporated, and that
certain taxes, such as those for the fund on electricity consumption and the North
Hydroelectric fund appear to apply to goods not physically incorporated.
DOC Position. We verified that a portion of gas claimed in the domestic raw material
category does become physically incorporated in the Midrex iron reduction process, and
we have allowed only this portion of the gas. It was also verified that certain inputs
claimed under the transformation cost category (such as paint, grease and a portion of
electrodes) also meet our standard for physical incorporation. We verified that such taxes
as those on electricity consumption and the North Hydroelectric fund are borne by
physically incorporated inputs.
Comment 6. Petitioners argue that certain taxes paid directly by the OCTG industry are
not clearly stipulated to be indirect taxes and therefore, absent such information, should
be considered as direct taxes.
DOC Position. The DOC verified that the municipal tax and the taxes under Provincial Law
9226 79, are indirect taxes levied on the final stage of OCTG production and are actually
paid by Dalsid. The Emergency Tax is a surtax on all direct and indirect taxes paid by
Dalsid. Because of a lack of information concerning this tax, we have disallowed this
portion of the taxes paid directly.
Comment 7. Petitioners argue that import duties paid by suppliers should not be an
allowable rebate because they are paid by suppliers and are not borne by the product.
DOC Position. The DOC verified that import duties on inputs into goods purchased from
Dalsid's suppliers are indeed indirect prior stage taxes borne by the goods purchased by
Dalsid.
Comment 8. Petitioners allege that Table C, Annex 7 of the response shows an indirect tax
incidence of 11.9% on scrap, without an explanation.
DOC Position. On November 6, 1984, respondents amended the response filed by the
government of Argentina on August 17, 1984. In this amendment, each indirect tax
corresponding to scrap is listed.
We verified that Dalsid pays the indirect taxes borne by scrap.
Comment 9. Petitioners allege that because the reembolso information provided by
respondents does not include allowances for fixed costs and inland transportation, the
proportion of allowable indirect taxes on OCTG is overstated.
DOC Position. DOC verified the percentage of f.o.b. value accounted for by inputs, by
examining invoices of OCTG inputs actually purchased by Dalsid. We determined that the
percentage of the f.o.b. value which is comprised of variable costs (upon which the
indirect taxes are levied) and final stage taxes, total 99.5 percent. Petitioners' contention
that fixed costs and inland freight should account for some portion of the f.o.b. value of
OCTG is not born out by Dalsid's actual cost experience. Petitioners work the calculation
backwards, by imposing a share within the f.o.b. value which represents fixed costs and
inland freight, without regard to whether fixed costs are actually being covered by each
shipment.
Comment 10. Petitioners allege that the government of Argentina may direct suppliers
of raw materials to set preferential prices for targeted industries and that DOC erred in not
initiating an investigation on whether any subsidy on the production of an input flows
down to the production of the end product if the purchaser buys the input from an
unrelated supplier.
DOC Position. We did not investigate petitioners' allegation that OCTG producers in
Argentina have benefited subsidized inputs, i.e., upstream subsidies. As explained in
our "Notice of Initiation of a Countervailing Duty Investigation" (49 FR 28289),
petitioners did not provide sufficient evidence to warrant an investigation of these claims.
Since our decision not to initiate on the upstream subsidy allegations in this case, the
Trade and Tariff Act of 1984 (TTA) has come into force. We have determined that there is
nothing in the
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upstream subsidies provisions of the TTA that would cause us to
change our earlier conclusions.
Comment 11. Petitioners allege that regarding input purchases for OCTG from related
suppliers, Dalsid only provides information about scrap purchases.
DOC Position. We verified that the only suppliers related to Dalsid are those listed in the
response, and that the only raw material input purchased from these related suppliers is
scrap. However, when a firm under investigation purchases the same input from related
and unrelated suppliers, it is our practice to compare the prices paid to each type of
supplier. In this situation, we need not compare the prices that Dalsid's related supplier
charges to customers other than Dalsid, with what Dalsid paid. We verified that Dalsid
pays the same prices to both related and unrelated suppliers for its scrap purchases.
Comment 12. Petitioners contend that import duty exemptions on raw materials and
BANADE guarantees are countervailable even if they are generally available, citing the
Court of International Trade's decision in Bethlehem Steel Corp. v. United States, 7
CIT--------, Slip OP. 84-67 (June 8, 1984).
DOC Position. In Bethlehem, the courts broad opinion that the Department cannot apply a
rule that "generally available" benefits are not subsidies is dictum. The Department
continues to interpret the language in section 771(5)(B) of the Act that the term subsidy
includes "domestic subsidies, if provided or required by government action to a specific
enterprise or industry, or group of enterprises or industries. . . ." to mean that benefits
broadly or "generally" available do not constitute countervailable bounties or grants. In
this case we determine that the exemption from certain programs is "generally available."
Comment13. Petitioners argue that even if one accepts the notion that generally available
benefits are not countervailable, programs such as import duty exemptions on raw
materials and capital goods and BANADE guarantees should be examined for the pattern
of disbursement to determine if OCTG producers or exporters as a group benefit
disproportionately.
DOC Position. Concerning import duty exemptions on capital goods, in the final
affirmative countervailing duty determination on cold-rolled carbon steel flat- rolled
products from Argentina (49 FR 18006) DOC determined that import duty exemptions
on capital goods were not countervailable because such exemptions were not limited to a
specific industry or group of industries. DOC verified that import duty exemptions on raw
materials and BANADE guarantees are, indeed, generally available.
Comment 14. Petitioners argue that although the multiple exchange rate system was
abolished prior to the period of investigation, DOC erred in not investigating precisely
what machinery or capital goods Dalsid may have purchased while the dual rates were in
effect. They allege that Dalsid would continue to receive benefits from such purchases,
which should be treated as grants and allocated over time.
DOC Position. Under the multiple exchange rate regime that was in effect from July
through December 1981, and July through November 1982, only exporters of certain
specified goods were eligible for the higher rate of exchange on their export operations.
In no case were firms eligible to receive a higher rate of exchange for their purchases of
imported inputs.
Comment 15. Petitioners allege that no information was given concerning price premiums
for Agentine Government purchases of Argentine-produced steel.
DOC Position. At verification, we reviewed invoices which pertained to sales to
government enterprises and private companies. The sales covered the same product and
the transactions took place on roughly the same date. In each case, the
government-owned company paid less than the private company.
Comment 16. Petitioners allege that in the response Dalsid did not state whether it had
participated in trade shows, nor did Dalsid provide information about its trade missions.
DOC Position. It is stated in Argentine Government response that Dalsid does not
participate in trade shows organized by the Argentine Government.
The GAO provided a calendar of trade fairs for 1983 and 1984 for DOC officials. Dalsid did
not appear in either of the listings.
Respondent's Comments
Comment 1. Respondents argue that DOC should use Dalsid's own commercial experience
as the short-term benchmark to measure benefits under the OPRAC 1-9 program, because
the administrative burden of calculating a company-specific benchmark, when only one
firm is under investigation, is not great.
DOC Position. We believe that the use of a national average interest rate as the
commercial benchmark for short-term loans captures the benefit to the companies with
sufficient accuracy. We believe that the weighted average of comparable short-term
interest rates best represents what a firm would have to pay for short-term borrowing if it
did not have access to OPRAC 1-9 financing. Further, we attempt to establish policy
guidelines that apply across all cases. While the burden of calculating company-specific
short-term benchmarks may not be great in this particular case because only one firm is
involved, it is likely that this will not always be the case.
Comment 2. Respondents argue that information made available to DOC at verification
demonstrates that import duty exemptions on raw materials are not limited to a specific
industry or group of industries, and are therefore not a countervailable benefit.
DOC Position. We agree, and have reversed our preliminary finding that import duty
exemptions constitute bounties or grants.
Comment 3. Respondents argue that the DOC erred in not allowing the portion of indirect
taxes levied on gas which is rebated under the reembolso program.
DOC Position. We agree. Under the Midrex process for iron reduction, 75% of the gas used
in the process becomes physically incorporated into the final product. We have therefore
allowed this amount of the portion claimed.
Verification
In accordance with section 776(a) of the Act, we verified the date used in making our final
determination. During this verification, we followed normal procedures, including
inspection of documents, discussions with government officials and on-site inspection of
Dalsid's operations and records.
Administration Procedures
The Department has afforded interested parties an opportunity to present oral views in
accordance with its regulations (19 CFR 355.35). A public hearing was held on October
17, 1984. In accordance with the Department's regulations (19 CFR 355.34(a)), all written
views have been received and considered. The suspension of liquidation ordered in our
preliminary affirmative countervailing duty determination shall remain in effect until
further notice. The net bounty or grant for duty deposit purposes is 0.9 percent ad
valorem. We are directing the United States Customs Service to require a cash deposit in
the amount indicated above for each entry of the subject merchandise entered or
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withdrawn from warehouse, for consumption on or after the date of publication of this
notice in the Federal Register.
This notice is published in accordance with sections 303 and 706 of the Act (19 U.S.C.
1303, 1671e).
Dated: November 20, 1984.
William T. Archey,
Acting Assistant Secretary.
[FR Doc. 84-31041 Filed 11-26-84; 8:45 am]
BILLING CODE 3510-DS-M