NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-357-403]
Oil Country Tubular Goods From Argentina; Preliminary Results of Countervailing
Duty Administrative Review
Friday, June 13, 1997
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AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty administrative review.
SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty order on oil country tubular goods
(OCTG) from Argentina. For information on the net subsidy, see the Preliminary Results
of Review section of this notice. If the final results remain the same as these preliminary
results of administrative review, we will instruct the U.S. Customs Service to assess
countervailing duties as indicated in the Preliminary Results of Review section of this
notice. Interested parties are invited to comment on these preliminary results.
EFFECTIVE DATE: June 13, 1997.
FOR FURTHER INFORMATION CONTACT:
Richard Herring, Office of CVD/AD Enforcement VI, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th Street
and Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 482- 4149.
SUPPLEMENTARY INFORMATION:
Background
On November 27, 1984, the Department published in the Federal Register (49 FR 46564)
the countervailing duty order on oil country tubular goods (OCTG) from Argentina.
On November 5, 1992, the Department published a notice of "Opportunity to Request an
Administrative Review" (57 FR 52758) of this countervailing duty order. We received
a timely request for review from the U.S. Steel Group, a unit of USX Corporation.
We initiated the review, covering the period January 1, 1991 through December 31, 1991,
on December 29, 1992 (57 FR 61873). The review covers one producer/exporter,
Siderca, which accounts for all exports of the subject merchandise from Argentina, and
20 programs.
On September 17, 1993, the Department received allegations regarding new subsidies
from the petitioner in the concurrent 1991 administrative review of cold-rolled carbon
steel flat-rolled products from Argentina. After a careful review of the allegations, the
Department decided that sufficient information was provided regarding alleged benefits
provided under two new programs. These programs were alleged tax concessions
provided to the steel industry under the April 11, 1991 Steel Agreement signed between
the Government of Argentina and the Argentine steel industry, and preferential natural
gas and electricity rates also provided under the Steel Agreement. Although these
allegations were not made in this administrative review of OCTG, the allegations did
pertain to the steel industry in Argentina. Therefore, the Department deemed it
appropriate to seek information on the two alleged programs in this administrative
review of OCTG.
On January 1, 1995, the effective date of the Uruguay Round Agreements Act of 1994 (the
URAA), countervailing duty orders involving World Trade Organization (WTO)
signatories which had been issued without an injury determination by the International
Trade Commission (ITC), became entitled to an ITC injury determination under section
753 of the URAA. The order on OCTG did not receive an ITC injury investigation and
Argentina was a member of the WTO. Therefore, we determined that the
countervailing duty order on the subject merchandise was subject to section 753 of
the URAA. See Countervailing Duty Order; Opportunity to Request a Section 753
Injury Investigation, 60 FR 27963 (May 26, 1995). For the countervailing duty order
on OCTG from Argentina, the domestic interested parties exercised their right under
section 753(a) of the URAA to request an injury investigation.
The Ceramica Decision by the Court of Appeals for the Federal Circuit
On September 6, 1995, the Court of Appeals for the Federal Circuit in a case involving
imports of Mexican ceramic tile, ruled that, absent an injury determination by the ITC,
the Department may not assess countervailing duties under 19 U.S.C. 1303(a)(1)
(1988, repealed 1994) on entries of dutiable merchandise after April 23, 1985, the date
Mexico became "a country under the Agreement." Ceramica Regiomontana v. U.S., Court
No. 95-1026 (Fed. Cir., Sept. 6, 1995) (Ceramica).
Argentina attained the status of "a country under the Agreement" on September 20,
1991. Therefore, in consideration of the Ceramica decision, the Department, on April 2,
1996, initiated changed circumstances administrative reviews of the countervailing
duty orders on Leather, Wool, OCTG, and Cold- Rolled Carbon Steel Flat-Rolled Products
(Cold-Rolled Steel) from Argentina, which were in effect when Argentina became a
country under the Agreement. See Initiation of Changed Circumstances Countervailing
Duty Administrative Reviews: Leather from Argentina, Wool from Argentina, Oil
Country Tubular Goods from Argentina, and Cold Rolled Carbon Steel Flat Products
from Argentina (Changed Circumstances Reviews), 61 FR 14553 (April 2, 1996). These
reviews focused on the legal effect, if any, of Argentina's status as a "country under the
Agreement," and whether the Department has the authority to assess countervailing
duties on these orders. Because we had ongoing administrative reviews of the orders on
OCTG and Cold-Rolled Steel that covered review periods on or after September 20, 1991,
we had to determine whether the Department had the authority to assess
countervailing duties on unliquidated entries of subject merchandise occurring on or
after September 20, 1991, when Argentina became a "country under the Agreement"
and before January 1, 1995, that date that Argentina became a "subsidies Agreement
country" within the meaning of section 701(b) of the URAA.
On April 29, 1997, the Department determined that it lacked the authority to assess
countervailing duties on entries of OCTG and Cold-Rolled Steel from Argentina made
on or after September 20, 1991 and before January 1, 1995 (62 FR 24639; May 6, 1997).
As a result we terminated the pending administrative reviews of the countervailing
duty order on OCTG covering 1992, 1993, and 1994, as well as the pending
administrative reviews of the countervailing duty order on Cold-Rolled Steel covering
1992 and 1993.
However, because the 1991 review covers a period before Argentina became a "country
under the Agreement," we must continue the 1991 administrative review to determine the
amount of countervailing duties to be assessed on entries made between January 1,
1991 and September 19, 1991 (i.e., up to the date Argentina became "a country under
the Agreement.") Pursuant to the
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Ceramica decision, entries of subject
merchandise made on or after September 20, 1991 will be liquidated without regard to
countervailing duties.
Applicable Statute
The Department is conducting this administrative review in accordance with section
751(a) of the Tariff Act of 1930, as amended (the Act). Unless otherwise indicated, all
citations to the statute are in reference to the provisions as they existed on December 31,
1994.
Scope of Review
Imports covered by this review are shipments of Argentine oil country tubular goods.
These products include finished and unfinished oil country tubular goods, which are
hollow steel products of circular cross section intended for use in the drilling of oil or gas,
and 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. During the review period this merchandise was classifiable under item
numbers 7304.20.20, 7304.20.40, 7304.20.50, 7304.20.60, 7304.20.70, 7304.20.80,
7304.39.00, 7304.51.50, 7304.59.60, 7304.59.80, 7304.90.70, 7305.20.40,
7305.20.60, 7305.20.80, 7305.31.40, 7305.31.60, 7305.39.10, 7305.39.50,
7305.90.10, 7305.90.50, 7306.20.20, 7306.20.30, 7306.20.40, 7306.20.60,
7306.20.80, 7306.30.50, 7306.50.50, 7306.60.70, and 7306.90.10 of the Harmonized
Tariff Schedule (HTS). The HTS numbers are provided for convenience and Customs
purposes. The written description of the scope remains dispositive.
Verification
As provided in section 776 of the Act, we verified information submitted by the
Government of Argentina (GOA) and Siderca. We followed standard verification
procedures, including meeting with government and company officials, examining
relevant accounting and financial records and other original source documents. Our
verification results are outlined in the public versions of the verification reports which
are on file in the Central Records Unit (Room B-099 of the Main Commerce Building).
Calculation Methodology for Assessment and Cash Deposit Purposes
Because Siderca accounts for virtually all exports of OCTG from Argentina during the
period of review, the subsidy rate calculated for Siderca constitutes the country-wide
rate.
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined to Confer Subsidies
1. Government Counterguarantees
In 1986, Siderca began to receive funds from an Inter-American Development Bank
(IADB) loan. This loan was guaranteed by the Banco Nacional de Desarollo (BANADE). In
order to satisfy the IADB's lending requirements, the GOA provided a counterguarantee
to BANADE's guarantee, which assured the IADB that the government would reimburse
BANADE if Siderca defaulted on the loan and BANADE was required to make the
payments. This counterguarantee was provided under the authority of Law 16,432/61
(Article 48), which allows the GOA to back loans to public and private enterprises if the
monies will be used for projects the government deems fundamental for the economic
development of the country. Because Siderca was able to acquire the counterguarantee, it
was able to negotiate a 50 percent reduction in the rate charged by BANADE for the
primary loan guarantee. This program was found countervailable in the 1989
administrative review of this order (see Oil Country Tubular Goods From Argentina,
Final Results of Countervailing Duty Administrative Review, 56 FR 64493 (December
10, 1991) (1989 OCTG Review)). No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant reconsideration of this
program's countervailability.
As we stated in the 1989 OCTG Review, the Department does not consider loans provided
by international lending institutions, such as the IADB, to be countervailable under the
U.S. countervailing duty law. However, we do consider that government action taken
in connection with such loans is within the purview of the U.S. countervailing duty
law. By not charging Siderca a fee for the counterguarantee, despite the fact that a fee is
usually charged for a loan guarantee in Argentina, the government took an action that
was inconsistent with commercial considerations. The Department further stated that the
benefit from the counterguarantee is not the difference between the interest rate on the
IADB loan and a commercial benchmark loan because this type of methodology would be
tantamount to countervailing the IADB loan itself. We concluded in the 1989 OCTG
Review that the commercial alternative to Siderca would have been to pay the full
amount for the guarantee fee charged by BANADE.
To calculate the benefit under this program, we compared the amount of fees Siderca
would have paid for the BANADE loan guarantee absent the GOA counterguarantee and
subtracted from the amount the actual amount of fees it did pay during the period of
review. We then divided the resultant amount by Siderca's total sales during 1991. On this
basis, we preliminarily determine the ad valorem subsidy to be 0.05 percent for the
period of review.
2. Pre-shipment Export Financing
The Central Bank of Argentina provided pre-export financing through a program known
as OPRAC-1, as amended by Central Bank Resolution A-1205. Under Resolution A-1205,
OPRAC pre-export financing provided 180-day loans with an additional 60 days for
repayment. Under this program, two types of pre- shipment export financing were
available: "internal lines" from Central Bank resources and "external lines" from foreign
banks. For "external lines" pre- shipment export financing, the Central Bank provided a
portion of the interest rate, usually three percent, to the private banks as an incentive to
extend these lines of credit to exporters. Exporters negotiated the terms of this financing
directly with the commercial banks and the Central Bank would then provide the three
percent incentive payment to the bank. We found pre-shipment export financing under
OPRAC-1 countervailing in the 1987 administrative review of Certain Cold-Rolled Carbon
Steel Flat-Rolled Products From Argentina; Final Results of Countervailing Duty
Administrative Review, 56 FR 28527 (June 21, 1991) (1987 Cold-Rolled Steel Review). No
new information or evidence of changed circumstances has been submitted to warrant
reconsideration of this program's countervailability.
Under this program, Siderca received pre-shipment export loans under "external lines" of
financing provided by commercial banks. Under this financing program, commercial
banks could reduce their lending rates to exporters and keep the three percent interest
rebates, or the banks could maintain the commercial interest rates and pass on the rebate
from the Central Bank to the exporter. Siderca received loans under this program from
January 1, 1991 through March 8, 1991, when the OPRAC program was suspended under
Central Bank Communication A-1807.
Siderca struck deals with the commercial banks stipulating that the
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intervening
commercial bank would pass the three percent rebate to Siderca, while at the same time
raising the nominal interest rate charged to Siderca for the pre-shipment loan. Siderca
would receive the three percent rebate, in australes, several months after the term of the
loan. We verified that Siderca received pre-shipment export financing tied to shipments
to specific markets, including exports of OCTG to the United States. Therefore, to
calculate the benefit under this program during period of review, we calculated the
difference between the commercial interest rates charged by the commercial banks and
the net interest rates paid by Siderca after taking into account the three percent interest
rebates. We then took the interest savings received by Siderca on its pre-shipment export
loans for OCTG exports to the United States and divided that amount by the company's
export sales of OCTG to the United States. On this basis, we preliminarily determine the ad
valorem subsidy to be 0.18 percent for this program during the period of review.
3. Rebate of Indirect Taxes (Reembolso/Reintegro)
The Reembolso program provides a cumulative tax rebate paid upon export and is
calculated as a percentage of the f.o.b. invoice price of the exported merchandise. The
Department will find that the entire amount of any such rebate is countervailable unless
the following conditions are met: (1) The program operates for the purpose of rebating
prior stage cumulative indirect taxes and/or import charges; (2) the government
accurately ascertained the level of the rebate; and (3) the government reexamines its
schedules periodically to reflect the amount of actual indirect taxes and/or import
charges paid. In prior investigations and administrative reviews of the Argentina
Reembolso program, the Department determined that these conditions have been met,
and, as such, the entire amount of the rebate has not been countervailed (see, e.g., Cold
Rolled Carbon Steel Flat-Rolled Products from Argentina, Final Results of
Countervailing Duty Administrative Review (56 FR 28527; June 21, 1991); Oil
Country Tubular Goods from Argentina, Final results of Countervailing Duty
Administrative Review (56 FR 64493; December 10, 1991).
However, once a rebate program meets this threshold, the Department must still
determine in each case whether there is an overrebate; that is, the Department must still
analyze whether the rebate exceeds the total amount of indirect taxes and import duties
borne by inputs that are physically incorporated into the exported product. If the rebate
exceeds the amount of allowable indirect taxes and import duties on physically
incorporated inputs, the Department will find a countervailable benefit equal to the
difference between the Reembolso rebate rate and the allowable rate determined by the
Department (i.e., the overrebate).
To determine whether there was an overrebate during the review period, the Department
requested the GOA to provide information on any changes to the Reembolso program for
OCTG. We verified that the Reembolso program continue to be governed by Decree
1555/86, which modified the program and set precise guidelines to implement the refund
of indirect taxes and import charges. This decree established three broad rebate levels
covering all products and industry sectors. The rates for levels I, II, and III were 10
percent, 12.5 percent, and 15 percent respectively. The rebate rate for OCTG was at level
II at 12.5 percent.
In April 1989, the GOA suspended cash payments of rebates under the Reembolso
program. Pursuant to the Emergency Economic Law dated September 25, 1989 (Law
23,697), the suspension of cash payments was continued for an additional 180 days.
Rebates accrued during the suspension period were paid in export credit bonds. On
March 4, 1990, the entire program was suspended for 90 days by Decree 435/90. Decree
1930/90 suspended payments of the reembolso for an additional 12-month period.
Decree 612/91 issued April 10, 1991, reinstated cash payments under the program, but
reduced the rates of reimbursement by 33 percent for all products. Therefore, the rebate
for OCTG was reduced from 12.5 to 8.3 percent.
In May 1991, Decree 1011/91 was issued. This decree changed the legal structure of the
program. Decree 1011/91 changed the rebate system to cover only the reimbursements
of indirect local taxes and does not cover import duties, except reimbursement of duties
paid on imported products which are re- exported. Decree 1011/91 also set the
reembolso rate as that in Decree 612/91. Therefore, during the period of review, rebates
were suspended from January through April 10, 1991, and the rebate rate applicable to
OCTG exports was 8.3 percent for the rest of the review period.
To determine whether there were overrebates under this program in 1991, we calculated
the allowable tax incidence for the subject merchandise for that period. This calculation
of the allowable tax incidence was based on a 1991 tax incidence study. We made
adjustments in our calculation of the allowable tax incidence for items we determined not
to be physically incorporated into the exported OCTG. We then compared this calculation
of the allowable tax incidence to the Reembolso rebate of 8.3 percent received on OCTG
exports. Based on this comparison, we found that the rebate of taxes did not exceed the
total amount of allowable cumulative indirect taxes and/or import charges paid on
physically incorporated inputs, and prior stage indirect taxes levied on the exported
product at the final stage of production. Therefore, we preliminarily determine that there
was no benefit from this program during the review period.
B. New Program Preliminarily Found to Confer Subsidies
Preferential Electricity Tariff Rates
Until April 1991, the tariff rates for electricity were set by the government. On April 17,
1991, the GOA published Decree 634/91 which provided for the deregulation of the
electricity industry in Argentina. This Decree created two market levels for electricity
in Argentina, the wholesale market and the retail market. The wholesale market was
comprised of the producers, generators, and distributors of electricity as well as the large
individual consumers of electricity. Under Decree 634, the producers and generators
would sell electricity through a central dispatch agency. The distributors would then
purchase the electricity from this central dispatch agency for delivery to the individual
consumer. In order to encourage competition within the wholesale market, a large
individual consumer could negotiate a contract with any utility company within the
country.
Although large consumers could negotiate contracts for electricity in the wholesale
market, the tariff rates charged to individual consumers in the retail market were still set
by the government. However, the GOA also took steps to reduce tariff rates in the retail
market. On March 27, 1991, the Ministry of Economy published Resolution 194/91 which
set new reduced tariff rates for electricity in the retail market in Argentina. These rates
applied to residential, commercial and industrial consumers in the retail market for
electricity purchased from nationally-owned utility companies.
During the review period, Siderca's price for electricity was set by two different contracts.
From January 1, 1991 through March 31, 1991, Siderca's electricity rates were set in a
contract
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signed with Direccion de Energia de Buenos Aires (DEBA), a branch of
the Ministry of Works and Public Utilities of the Province of Buenos Aires. After this
contract was signed in 1990, DEBA was split into two entities, Empresa Social de Energia
de Buenos Aires (ESEBA), which was responsible for providing electricity to the Province
of Buenos Aires and for setting the tariff rates, and DEBA, which was responsible for
approving ESEBA's tariff rates.
In April 1991, because of the amount of electricity consumed by Siderca, it qualified as a
"large consumer" in the wholesale market under Decree 634/91. Therefore, Siderca was
eligible to have its tariff rate for electricity determined by negotiations with utility
companies. Siderca negotiated and signed an individual contract with ESEBA for the
provision of electricity. The effective date of this contract was April 1, 1991. The rates set
by the ESEBA contract applied for the rest of the period of review. Because Siderca's
electricity rate during the period of review was not set by a published tariff schedule but
by individual contracts signed with each utility company, we must determine whether the
electricity rates paid by Siderca under the DEBA and ESEBA contracts were preferential.
Prior to the effective date of April 1, 1991 for the ESEBA contract, Siderca's price for
electricity was determined by a contract which was signed between Siderca and DEBA.
Under the DEBA contract, the price of 70 percent of Siderca's monthly electricity
consumption was set by the published tariff rates, while the remaining portion was set by
the price in the contract. This pricing scheme was provided by DEBA to other companies
in the Province of Buenos Aires in contracts identical to the one signed with Siderca. The
DEBA contract was signed on July 12, 1990, and remained in effect until March 31, 1991.
Although individually tailored company contracts with government-owned utility
companies are, by definition, specific under section 771(5)(A) of the Act, we must
examine the issue of specificity with respect to the DEBA contract because the DEBA
contract did not provide an individually-tailored company-specific rate like the rate
provided in the ESEBA contract. Instead, the DEBA contract provided the same
electricity rate to all the companies which signed a contract identical to the one signed
between Siderca and DEBA. Therefore, we must examine the group of companies which
signed identical contracts to determine whether the DEBA contract is specific under
section 771(5)(A) of the Act.
During our examination of the DEBA contracts at verification, we found that only a very
small number of companies had a contract identical to the one signed between Siderca
and DEBA (see verification report (public version) at page 17). Therefore, we
preliminarily determine that the DEBA contract is specific under section 771(5)(A) of the
Act. To determine whether the rates under the DEBA contract were preferential, we
compared the rates of electricity in the DEBA contract to the rates in the published tariff
schedule for large users. Based upon this comparison, we find that the rates in the DEBA
contract are preferential. Therefore, we preliminarily determine that the electricity rates
provided to Siderca under the DEBA contract are countervailable.
To calculate the benefit under this program, we calculated the difference between the
price of electricity Siderca would have paid based on the published tariff schedule and the
price of electricity the company actually paid under the DEBA contract. We then divided
the difference by Siderca's total sales in 1991 and calculated an ad valorem subsidy rate of
0.26 percent for the period of review. We next had to examine whether the ESEBA
contract was countervailable.
An individually tailored contract with a government-owned utility company is by
definition specific under section 771(5)(A) of the Act; however, in order for the contract
to be countervailable, the rates provided under the contract must be preferential. The
preferentiality of individual electricity contracts was an issue in the Final Affirmative
Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium from
Canada, 57 FR 30946 (July 13, 1992), and in the Final Results of Changed Circumstances
Administrative Reviews: Pure Magnesium and Alloy Magnesium from Canada).
Magnesium from Canada described the Department's approach to evaluating whether
electricity is being provided on preferential terms.
The first step the Department takes in analyzing the potential preferential provision of
electricity is to compare the price charged in the contract with the applicable rate on the
utility company's non-specific rate schedule. If the amount of electricity purchased by
the company is so great that the rate schedule is not applicable, the Department will
examine whether the price charged in the contract is consistent with the utility
company's standard pricing mechanism. If the rate charged is consistent with the utility
company's standard pricing mechanism, and the company under investigation or review
is, in all other respects, treated no differently than other industries which purchase
comparable amounts of electricity, then there would be no apparent basis to find the
contract preferential.
In Magnesium from Canada, the utility company's published tariff schedule did not
provide rates for electricity consumers the size of Norsk Hydro Canada Inc. (NHCI), the
respondent in that investigation. Therefore, in determining whether NHCI's contract was
preferential, the Department had to examine the utility company's standard pricing
mechanism. However, in the instant review, we do not need to examine the utility
company's standard pricing mechanism because the published tariff rates are applicable
to all large users regardless of the amount of electricity consumed by the individual large
user. Therefore, we have analyzed the Siderca contract with ESEBA by comparing the
price charged with an applicable tariff rate schedule.
As previously stated, Decree 634/91 started the deregulation of the electricity market in
Argentina. Under this decree, large consumers, such as Siderca, were free to negotiate
individual electricity contracts with any utility company in the country. While the GOA
was allowing large consumers to negotiate contracts in the wholesale electricity market,
the GOA also reduced the published tariff rates for electricity with the publication of the
Ministry of Economy's Resolution 194/91. Resolution 194/91 set the tariff rates for all
nationally-owned utility companies in the country. However, these new rates were not
applicable to ESEBA because ESEBA was a provincially-owned utility company.
Although Resolution 194/91 for national tariff rates did not apply to ESEBA, these rates
were available to Siderca because under Decree 634/91 it could sign a contract for
electricity with any nationally-owned utility company in Argentina. Therefore, to
determine whether the Siderca contract with ESEBA provided a preferential rate for
electricity to Siderca, we compared the electricity rate provided in the ESEBA contract to
the published tariff rates in Resolution 194/91 which were in effect during the same time
as the ESEBA contract. Based on this comparison, we find that the rates in the ESEBA
contract are equal to or higher than the published national tariff rates in Resolution
194/91. Therefore, we preliminarily determine that the contract Siderca signed with
ESEBA did not provide electricity at preferential
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rates to Siderca and, thus, is not
counterviable.
However, we note that this contract expired in 1992, and another contract between
Siderca and ESEBA was subsequently negotiated and signed in September 1992, outside
the period of review. Because the rates negotiated in the 1992 contract were lower than
the rates in the contract in effect during 1991, we will have to reexamine this program in
any subsequent administrative review of this order.
II. Program Preliminarily Found Not to Confer Subsidies
Preferential Natural Gas Tariffs
According to the GOA, at the end of 1990, Argentina was emerging from an extended
period of hyperinflation. The GOA believed that deregulating and privatizing the large,
state-owned utility companies would lead to price stability by introducing competition in
the market. The beginning of this deregulation can be found with the passage of Decree
633. Also, within this context, the GOA entered into sectoral agreements with Argentine
industries in order to secure commitments from industries that they would hold down
prices charged to their customers in order to stabilize the inflation rate within the
economy. In exchange for this commitment, the GOA committed itself to broad- based
economic reforms, including the maintenance of stable energy prices.
In early 1991, the GOA began the first steps towards deregulating the natural gas market
in Argentina. Until April 1991, the GOA set and regulated the tariff rates for natural gas
in the country. Prices for natural gas could not deviate from those prices set by the
Economy Minister. In April 1991, with the enactment of Decree 633, two separate
markets for natural gas were created. The first market was the wholesale market which
covered transactions between producers and distributors as well as between producers
and large users of natural gas. The other market created by Decree 633 was the retail
market which covered sales to residential and commercial consumers. Under Decree 633,
companies in the wholesale market were permitted to engage in negotiations and to enter
into individual contracts for natural gas.
For the period January 1, 1991 through March 31, 1991, the rates for natural gas paid by
Siderca were set through the issuance of tariff schedules. Gas del Estado (GdE) was the
sole provider of natural gas through this period. After March 31, 1991, Siderca no longer
had its natural gas rates set by tariff resolutions. With the deregulation of the natural gas
market under Decree 633, large consumers in the wholesale market could negotiate
contracts for natural gas. Siderca, being one of the largest consumers of natural gas in the
country, was one of the first industrial consumers to negotiate a separate contract for
natural gas.
Because Siderca was a large consumer for natural gas, it qualified as a consumer in the
wholesale market. On June 28, 1991, Siderca entered into a requirements contract with
GdE, which was made retroactive to April 1, 1991, and remained in effect throughout
1991, the period of review. Under the contract arrangement, Siderca would purchase
natural as from a privately-owned company, TECPETROL, and then Siderca would pay
GdE for transportation of the natural gas from TECPETROL. Under the contract, there
were two different rates for transportation, one rate for the winter and another rate for
the rest of the year. If TECPETROL could not supply enough gas to meet all of Siderca's
requirements, then, under GdE contract, Siderca would purchase natural gas from GdE to
make up the shortfall, at a specified contract rate plus a commission.
The GdE contract provided rates for both the transportation of natural gas and for the
supply of natural gas. Therefore, we must determine whether a countervailable benefit
was provided to Siderca either in the form of preferential transportation rates or
preferential natural gas rates. In order for a non-export program to be countervailable it
must meet both the test for specificity and preferentiality. Specificity requires that the
program be limited to an enterprise or industry or group of enterprises or industries
under section 771(5)(b) of the Act. Because an individually negotiated contract price
with a government-owned utility is, by definition, specific to the individual negotiating
the contract, we must examine whether the transportation and tariff rate for natural gas
provided to Siderca under the GdE contract are preferential to determine whether this
program is countervailable. If these rates are not preferential, then the program is not
countervailable. If the rates are preferential, then the program is countervailable.
To determine whether a government has provided a good or service, such as natural gas,
at preferential rates, the Department generally measures that rate against a nonspecific
tariff rate against a nonspecific tariff rate charged to other users of that good or service by
the government, or to rates charged for an identical good or service from a private
provider. However, in prior cases involving the provision of natural gas or electricity, we
have stated that the tariff schedule rate is not necessarily the appropriate benchmark to
determine whether a contracted rate is preferential. See, e.g., Magnesium from Canada.
We stated in Magnesium from Canada that if the amount of electricity purchased by a
company is so great that the rate schedule is not applicable, we will examine whether the
rate charged in a contract is preferential by determining whether the rate is consistent
with the utility company's standard pricing mechanism. If the rate charged in a contract is
consistent with the standard pricing mechanism used by the utility company to set its
tariff rates, then the contract rate is not preferential. Therefore, under the practice set
forth in Magnesium from Canada, if the contract price is set in a manner consistent with
the utility company's standard pricing mechanism for setting tariffs, then the contract
rate does not provide a countervailable benefit.
Two years prior to our verification, GdE was privatized. In 1992, two private transporters
and eight private distributors purchased the assets of GdE. After its privatization, the cost
structure studies used by GdE to propose its tariff rate schedules were destroyed or
thrown away. Therefore, we are unable to determine whether GdE used its standard
pricing methodology to negotiate its rates and tariffs with companies in the wholesale
market. However, the Department may determine whether the provision of a good or
service is preferential by comparing the price charged by the government to a price
charged by private sellers to buyers in the market for an identical good or service.
Therefore, in order to determine whether the price charged to Siderca for natural gas
under the GdE contract is preferential, we compared that price to the price of natural gas
charged to Siderca from private companies. In 1991, after the enactment of Decree 633,
Siderca also entered into a contract to purchase natural gas from a private producer,
TECPETROL. We compared the price of natural gas charged to Siderca from TECPETROL to
the price of natural gas charged to Siderca by GdE. Based on this comparison, we
determine that the price of natural gas charged by GdE was not preferential and, thus, not
countervailable during the review period.
We next had to determine whether the transportation rates for natural gas specified in the
GdE contract were preferential. During 1991, there were no
*32312
private transporters
of natural gas in Argentina. GdE was the sole transporter of natural gas in the country.
In addition, there were no separate transportation rates for natural gas in the country
until after 1992. During our review period, the published tariff rates for natural gas
included the cost for the natural gas, its transportation, and its distribution.
Therefore, because there were no separate rates for transportation in Argentina during
the period of review, to determine whether the transportation rates for natural gas
charged to Siderca under the GdE contract were preferential, we compared those prices
to the transportation cost study conducted by an independent consulting firm, Stone &
Webster. Stone & Webster were technical advisors to the GOA in the privatization of GdE.
This Stone & Webster cost study detailed the cost of transporting natural gas from the gas
fields to Siderca's plant. We compared the transportation cost detailed in the Stone &
Webster study to the price negotiated in the GdE contract. Based upon this comparison,
we determined that the price charged to Siderca for transportation of natural gas under
the GdE contract was much higher than the gas company's costs and provided a large
profit for GdE. Therefore, we preliminarily determine that the transportation rates
charged to Siderca in the GdE contract were not preferential, and thus not
countervailable, during the review period.
III. Programs Preliminary Found Not To Be Used
We examined the following programs and preliminary find that the producers and/or
exporters of the subject merchandise did not apply for or receive benefits under these
programs during the period of review:
- Medium- and Long-Term Loans
- Capital Grants
- Income and Capital Tax Exemptions
- Government Trade Promotion Programs
- Exemption from Stamp Taxes Under Decree 186/74
- Incentives for Trade (Stamp Tax Exemption Under Decree 716)
- Incentive for Export
- Export Financing Under OPRAC 1, Circular RF-21
- Pre-Financing of Exports Under Circular RF-153
- Loan Guarantees
- Post-Export Financing Under OPRAC 1-9
- Debt Forgiveness
- Tax Deduction Under Decree 173/85
IV. Program Preliminarily Found Not to Exist
Tax Concessions for the Steel Industry
Petitioners alleged that under Paragraph 8 of the April 11, 1991 Steel Agreement between
the GOA and Argentine steel producers that the GOA provides the steel industry with tax
concessions. According to the response of the GOA, Paragraph 8 of the Steel Agreement
does not provide tax concessions to the steel industry but merely states that the
industry's Reembolso level will be studied taking into account the tax incidence of steel
producers. For information on the Reembolso/Reintegro program, see the program
"Rebate of Indirect Taxes," above. Therefore, we preliminarily determine that there were
no new tax concessions provided to the steel industry under the Steel Agreement.
Preliminary Results of Review
For the period January 1, 1991 through December 31, 1991, we preliminarily determine
the net subsidy to be 0.49 percent ad valorem.
If the final results of this review remain the same as these preliminary results, the
Department intends to instruct the U.S. Customs Service to assess countervailing
duties of 0.49 percent ad valorem on entries of the subject merchandise covered by this
administrative review for the period January 1, 1991 through September 19, 1991, and to
liquidate all entries made on or after September 20, 1991 through December 31, 1991,
without regard to countervailing duties.
Parties to the proceeding may request disclosure of the calculation methodology and
interested parties may request a hearing not later than 10 days after the date of
publication of this notice. Interested parties may submit written arguments in case briefs
on these preliminary results within 30 days of the date of publication. Rebuttal briefs,
limited to arguments raised in case briefs, may be submitted seven days after the time
limit for filing the case brief. Parties who submit argument in this proceeding are
requested to submit with the argument (1) a statement of the issue and (2) a brief
summary of the argument. Any hearing, if requested, will be held seven days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs and rebuttal briefs
must be served on interested parties in accordance with 19 CFR 355.38(e).
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 section 355.38(c), are due.
The Department will publish the final results of this administrative review including the
results of its analysis of issues raised in any case or rebuttal brief or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Act
(19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: June 4, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-15607 Filed 6-12-97; 8:45 am]
BILLING CODE 3510-DS-M