Circular Welded Carbon Quality Steel Pipe from the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination; Preliminary Affirmative Determination of Critical Circumstances; and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination, 63875-63886 [E7-22144]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 72, Number 218 (Tuesday, November 13, 2007)]
[Notices]
[Pages 63875-63886]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22144]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-911]


Circular Welded Carbon Quality Steel Pipe from the People's 
Republic of China: Preliminary Affirmative Countervailing Duty 
Determination; Preliminary Affirmative Determination of Critical 
Circumstances; and Alignment of Final Countervailing Duty Determination 
with Final Antidumping Duty Determination

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are being provided to producers and exporters 
of circular welded carbon quality steel pipe from the People's Republic 
of China. For information on the estimated subsidy rates, see the 
``Suspension of Liquidation'' section of this notice. The Department 
further determines preliminarily that critical circumstances exist with 
respect to imports of the subject merchandise. This notice also serves 
to align the final countervailing duty determination in this 
investigation

[[Page 63876]]

with the final determination in the companion antidumping duty 
investigation of circular welded carbon quality steel pipe from the 
People's Republic of China.

EFFECTIVE DATE: November 13, 2007.

FOR FURTHER INFORMATION CONTACT: Salim Bhabhrawala, Damian Felton, or 
Shane Subler, AD/CVD Operations, Office 1, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230; telephone: 
(202) 482-1784, (202) 482-0133, or (202) 482-0189, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The following events have occurred since the publication of the 
Department of Commerce's (the Department) notice of initiation in the 
Federal Register. See Notice of Initiation of Countervailing Duty 
Investigation: Circular Welded Carbon Quality Steel Pipe from the 
People's Republic of China, 72 FR 36668 (July 5, 2007) (Initiation 
Notice).
    On July 26, 2007, the Department selected the three largest Chinese 
producers/exporters of circular welded carbon quality steel pipe (CWP), 
Tianjin Shuangjie Steel Pipe Group Co., Ltd. (Shuangjie), Weifang East 
Steel Pipe Co., Ltd. (East Pipe), and Zhejiang Kingland Pipeline and 
Technologies Co., Ltd. (Kingland), as mandatory respondents. See 
Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import 
Administration, ``Respondent Selection'' (July 26, 2007). This 
memorandum is on file in the Department's Central Records Unit in Room 
B-099 of the main Department building (CRU). On July 27, 2007, we 
issued the countervailing duty (CVD) questionnaire to the Government of 
the People's Republic of China (GOC), East Pipe, Kingland, and 
Shuangjie.
    On July 31, 2007, the International Trade Commission (ITC) issued 
its affirmative preliminary determination that there is a reasonable 
indication that an industry in the United States is materially injured 
by reason of allegedly subsidized imports of CWP from the People's 
Republic of China (PRC). See Circular Welded Carbon-Quality Steel Pipe 
from the PRC, Investigation Nos. 701-TA-447 and 731-TA-1116, 72 FR 
43295 (Preliminary) (August 3, 2007).
    On August 2, 2007, we published a postponement of the preliminary 
determination of this investigation until November 5, 2007. See 
Circular Welded Carbon Quality Steel Pipe from the People's Republic of 
China: Notice of Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 72 FR 42399 (August 2, 2007).
    The Ad Hoc Coalition for Fair Pipe Imports from the PRC and the 
United States Steel Workers (collectively, petitioners) filed a new 
subsidy allegation on August 21, 2007. On September 7, 2007, the 
Department determined to investigate aspects of the newly alleged 
subsidy relating to currency retention. See Memorandum to Susan 
Kuhbach, Director, AD/CVD Operations, Office 1, ``New Subsidy 
Allegation'' (September 7, 2007). The GOC submitted comments responding 
to petitioners' new subsidy allegation on September 10, 2007. Questions 
regarding this newly alleged subsidy were sent to the GOC and the 
respondent companies on September 11, 2007.
    The petitioners alleged that critical circumstances exist with 
respect to imports of CWP from the PRC on September 17, 2007. See 19 
CFR 351.206. Shuangjie submitted comments responding to petitioners' 
allegations of critical circumstances on September 24, 2007. 
Petitioners responded to Shuangjie's comments on September 27, 2007. 
The Department issued questionnaires to the respondent companies 
regarding the critical circumstances allegation on October 24, 2007. 
Responses to these questionnaires were received from Kingland and East 
Pipe on October 31, 2007, and November 1, 2007, respectively. As 
explained further below, Shuangjie did not respond. We address the 
allegation of critical circumstances below.
    On September 24, 2007, petitioners requested that the Department 
extend the deadline for the submission of new subsidy allegations 
beyond September 26, the normal deadline established in the 
Department's regulations. See 19 CFR 351.301(d)(4)(i)(A). The 
Department granted an extension of the deadline to October 5, and on 
that date received additional new subsidy allegations from the 
petitioners. The Department intends to address those allegations in the 
near future.
    We received responses to our CVD questionnaires from the GOC and 
the respondent companies on September 17, 2007, September 24, 2007, 
September 25, 2007, and October 19, 2007. The petitioners filed 
comments on these responses as follows: GOC - September 24, 2007, 
October 1, 2007 and October 11, 2007; East Pipe - September 25, 2007, 
September 27, 2007, and October 1, 2007; Kingland - September 25, 2007, 
and October 1, 2007; and, Shuangjie - September 25, 2007, and October 
1, 2007.
    We issued supplemental questionnaires to: East Pipe, Kingland and 
Shuangjie on October 4, 2007; the GOC on October 9, 2007 and October 
10, 2007; and Shuangjie on October 25, 2007. We received responses to 
these supplemental questionnaires from the GOC on October 23, 2007; 
East Pipe on October 18 and 19, 2007; and Kingland and Shuangjie on 
October 18, 2007. Petitioners filed comments on these supplemental 
responses as follows: Shuangjie on October 23, 2007, and East Pipe, 
Kingland and Shuangjie on October 25, 2007.
    On October 26, 2007, the petitioners submitted comments for 
consideration in the preliminary determination.
    On October 31, 2007, Shuangjie withdrew from the investigation and 
requested that the Department return all of its proprietary fillings.
    On August 20, 2007, Jiangsu Yulong Steel Pipe Co., Ltd. 
(``Yulong''), requested that the Department reconsider its mandatory 
respondent selection in this investigation. In addition, Yulong 
requested that if the Department declined to revisit its mandatory 
respondent selection process, that Yulong be allowed to participate as 
a voluntary respondent. On August 23, 2007, the Department declined 
Yulong's request that the Department revisit its mandatory respondent 
selection process. However, the Department did state that it would 
consider accepting Yulong as a voluntary respondent at a later date. 
Yulong filed timely responses to the Department's CVD questionnaires on 
September 17, 2007, and September 24, 2007.
    Even though Shuangjie has withdrawn from the investigation, we were 
unable to analyze Yulong's voluntary responses for consideration in 
this preliminary determination. Shuangjie's October 31, 2007 withdrawal 
came five days before the preliminary determination and, thus, the 
Department was unable to complete the necessary analyses of Yulong's 
submissions and issue the necessary supplemental questionnaires in 
sufficient time for the preliminary determination. Furthermore, the 
Department will not have sufficient time or resources to analyze 
Yulong's responses during the remainder of this investigation. Based on 
our experiences with the mandatory respondents in this investigation, 
it is likely that detailed supplemental questionnaires will be required 
in order to gather the information necessary to calculate an CVD rate 
for Yulong. At this point in the proceeding, analyzing Yulong's 
responses and issuing detailed

[[Page 63877]]

supplemental questionnaires prior to the final determination would be 
extremely burdensome and would likely inhibit the timely completion of 
the investigation. Consequently, the Department is not accepting Yulong 
as a voluntary respondent and will not calculate an individual 
countervailing duty rate for Yulong.
    On November 2, 2007, petitioners requested that the final 
determination of this countervailing duty investigation be aligned with 
the final determination in the companion antidumping duty investigation 
in accordance with section 705(a)(1) of the Tariff Act of 1930, as 
amended (the Act). We address this request below.

Scope Comments

    In accordance with the preamble to the Department's regulations, we 
set aside a period of time in our Initiation Notice for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of that notice. 
See Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323, (May 
19, 1997) and Initiation Notice, 72 FR at 36669.
    On July 19, 2007, the petitioners submitted comments concerning the 
scope of the CWP antidumping and countervailing duty investigations. 
MAN FERROSTAAL INC., MACSTEEL SERVICE CENTERS USA, and SUNBELT GROUP 
L.P. (collectively, FERROSTAAL) also submitted comments concerning the 
scope of these investigations on July 19, 2007. The petitioners and 
FERROSTAAL both submitted rebuttal comments on July 26, 2007.
    We have analyzed the comments of the interested parties regarding 
the scope of this investigation. See Memorandum to Stephen J. Claeys, 
Deputy Assistant Secretary for Import Administration, Re: Scope of the 
Antidumping and Countervailing Duty Investigations of Circular Welded 
Carbon Quality Steel Pipe from the People's Republic of China, 
``Analysis of Comments and Recommendation for Scope of Investigations'' 
(November 5, 2007). Our position on these comments is reflected below.

Scope of the Investigation

    The scope of this investigation covers certain welded carbon 
quality steel pipes and tubes, of circular cross-section, and with an 
outside diameter of 0.372 inches (9.45 mm) or more, but not more than 
16 inches (406.4 mm), whether or not stenciled, regardless of wall 
thickness, surface finish (e.g., black, galvanized, or painted), end 
finish (e.g., plain end, beveled end, grooved, threaded, or threaded 
and coupled), or industry specification (e.g., ASTM, proprietary, or 
other), generally known as standard pipe and structural pipe (they may 
also be referred to as circular, structural, or mechanical tubing).
    Specifically, the term ``carbon quality'' includes products in 
which (a) iron predominates, by weight, over each of the other 
contained elements; (b) the carbon content is 2 percent or less, by 
weight; and (c) none of the elements listed below exceeds the quantity, 
by weight, as indicated:
(i) 1.80 percent of manganese;
(ii) 2.25 percent of silicon;
(iii) 1.00 percent of copper;
(iv) 0.50 percent of aluminum;
(v) 1.25 percent of chromium;
(vi) 0.30 percent of cobalt;
(vii) 0.40 percent of lead;
(viii) 1.25 percent of nickel;
(ix) 0.30 percent of tungsten;
(x) 0.15 percent of molybdenum;
(xi) 0.10 percent of niobium;
(xii) 0.41 percent of titanium;
(xiii) 0.15 percent of vanadium; or
(xiv) 0.15 percent of zirconium.
    Standard pipe is made primarily to American Society for Testing and 
Materials (``ASTM'') specifications, but can be made to other 
specifications. Standard pipe is made primarily to ASTM specifications 
A-53, A-135, and A-795. Structural pipe is made primarily to ASTM 
specifications A-252 and A-500. Standard and structural pipe may also 
be produced to proprietary specifications rather than to industry 
specifications. This is often the case, for example, with fence tubing. 
Pipe multiple-stenciled to a standard and/or structural specification 
and to any other specification, such as the American Petroleum 
Institute (``API'') API-5L or 5L X-42 specifications, is also covered 
by the scope of this investigation when it meets the physical 
description set forth above and also satisfies one or more of the 
following characteristics: is a single random length; less than 2.0 
inches (50 mm) in outside diameter; has a galvanized and/or painted 
surface finish; or has a threaded and/or coupled end finish.
    The scope of this investigation does not include: (a) pipe suitable 
for use in boilers, superheaters, heat exchangers, condensers, refining 
furnaces and feedwater heaters, whether or not cold drawn; (b) 
mechanical tubing, whether or not cold-drawn; (c) finished electrical 
conduit; (d) finished scaffolding; (e) tube and pipe hollows for 
redrawing; (f) oil country tubular goods produced to API 
specifications; and (g) line pipe produced to only API specifications.
    The pipe products that are the subject of this investigation are 
currently classifiable in HTSUS statistical reporting numbers 
7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 
7306.30.50.55, 7306.30.50.85, 7306.30.50.90, 7306.50.10.00, 
7306.50.50.50, 7306.50.50.70, 7306.19.10.10, 7306.19.10.50, 
7306.19.51.10, and 7306.19.51.50. However, the product description, and 
not the HTSUS classification, is dispositive of whether merchandise 
imported into the United States falls within the scope of the 
investigation.

Use of Facts Otherwise Available

    Sections 776(a)(1) and (2) of the Act provide that the Department 
shall apply ``facts otherwise available'' if, inter alia, necessary 
information is not on the record or an interested party or any other 
person: (A) withholds information that has been requested; (B) fails to 
provide information within the deadlines established, or in the form 
and manner requested by the Department, subject to subsections (c)(1) 
and (e) of section 782 of the Act; (C) significantly impedes a 
proceeding; or (D) provides information that cannot be verified as 
provided by section 782(i) of the Act.
    Where the Department determines that a response to a request for 
information does not comply with the request, section 782(d) of the Act 
provides that the Department will so inform the party submitting the 
response and will, to the extent practicable, provide that party the 
opportunity to remedy or explain the deficiency. If the party fails to 
remedy the deficiency within the applicable time limits and subject to 
section 782(e) of the Act, the Department may disregard all or part of 
the original and subsequent responses, as appropriate. Section 782(e) 
of the Act provides that the Department ``shall not decline to consider 
information that is submitted by an interested party and is necessary 
to the determination but does not meet all applicable requirements 
established by the administering authority'' if the information is 
timely, can be verified, is not so incomplete that it cannot be used, 
and if the interested party acted to the best of its ability in 
providing the information. Where all of these conditions are met, the 
statute requires the Department to use the information if it can do so 
without undue difficulties.
    In this case, Shuangjie did not provide information we requested 
that is necessary to determine a

[[Page 63878]]

countervailing duty rate for this preliminary determination. 
Specifically, Shuangjie did not respond to the Department's October 24, 
2007, request for shipment data relating to the allegation of critical 
circumstances, did not respond to the Department's October 25, 2007, 
supplemental questionnaire and, finally, on October 31, 2007, withdrew 
all of its proprietary information from the record. Thus, in reaching 
our preliminary determination, pursuant to section 776(a)(2)(A), and 
(C) of the Act, we have based Shuangjie's countervailing duty rate on 
facts otherwise available.
    Section 776(b) of the Act further provides that the Department may 
use an adverse inference in applying the facts otherwise available when 
a party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information. Section 776(b) of the 
Act also authorizes the Department to use as adverse facts available 
(AFA) information derived from the petition, the final determination, a 
previous administrative review, or other information placed on the 
record.
    Section 776(c) of the Act provides that, when the Department relies 
on secondary information rather than on information obtained in the 
course of an investigation or review, it shall, to the extent 
practicable, corroborate that information from independent sources that 
are reasonably at its disposal. Secondary information is defined as 
``{i{time} nformation derived from the petition that gave rise to the 
investigation or review, the final determination concerning the subject 
merchandise, or any previous review under section 751 concerning the 
subject merchandise.'' See Statement of Administrative Action (SAA) 
accompanying the Uruguay Round Agreements Act, H. Doc. No. 316, 103d 
Cong., 2d Session (1994) at 870. Corroborate means that the Department 
will satisfy itself that the secondary information to be used has 
probative value. See SAA at 870. To corroborate secondary information, 
the Department will, to the extent practicable, examine the reliability 
and relevance of the information to be used. The SAA emphasizes, 
however, that the Department need not prove that the selected facts 
available are the best alternative information. See SAA at 869.
    In selecting from among the facts available, the Department has 
determined that an adverse inference is warranted, pursuant to section 
776(b) of the Act because, in addition to not responding to all of our 
requests for information, Shuangjie has withdrawn all of its 
proprietary information and has withdrawn from all participation in the 
investigation thereby precluding verification of the public information 
remaining on the record. Thus, Shuangjie failed to cooperate by not 
acting to the best of its ability, and our preliminary determination is 
based on AFA.

Selection of the Adverse Facts Available Rate

    In deciding which facts to use as AFA, section 776(b) of the Act 
and 19 CFR 351.308(c)(1) authorize the Department to rely on 
information derived from (1) the petition, (2) a final determination in 
the investigation, (3) any previous review or determination, or (4) any 
information placed on the record. It is the Department's practice to 
select, as AFA, the highest calculated rate in any segment of the 
proceeding. See, e.g., Certain In-shell Roasted Pistachios from the 
Islamic Republic of Iran: Final Results of Countervailing Duty 
Administrative Review, 71 FR 66165 (November 13, 2006), and 
accompanying Issues and Decision Memorandum at ``Analysis of 
Programs.''
    The Department's practice when selecting an adverse margin from 
among the possible sources of information is to ensure that the margin 
is sufficiently adverse ``as to effectuate the purpose of the facts 
available role to induce respondents to provide the Department with 
complete and accurate information in a timely manner.'' See Notice of 
Final Determination of Sales at Less than Fair Value: Static Random 
Access Memory Semiconductors From Taiwan; 63 FR 8909, 8932 (February 
23, 1998). The Department's practice also ensures ``that the party does 
not obtain a more favorable result by failing to cooperate than if it 
had cooperated fully.'' See SAA at 870. In choosing the appropriate 
balance between providing a respondent with an incentive to respond 
accurately and imposing a rate that is reasonably related to the 
respondent's prior commercial activity, selecting the highest prior 
margin ``reflects a common sense inference that the highest prior 
margin is the most probative evidence of current margins, because, if 
it were not so, the importer, knowing of the rule, would have produced 
current information showing the margin to be less.'' See Rhone Poulenc, 
Inc. v. United States, 899 F. 2d 1185, 1190 (Fed. Cir. 1990).
    Because Shuangjie failed to act to the best of its ability, as 
discussed above, for each program examined, we made the adverse 
inference that Shuangjie benefitted from the program unless the record 
evidence made it clear that Shuangjie could not have received benefits 
from the program because, for example, we have preliminarily found the 
program not countervailable. See, e.g., Certain Cold-Rolled Carbon 
Steel Flat Products From Korea; Final Affirmative CVD Determination, 67 
FR 62102 (October 3, 2002) and accompanying Issues and Decision 
Memorandum at ``Methodology and Background Information.'' To calculate 
the program rates, we have generally relied upon the highest program 
rate calculated for any responding company in this investigation as 
adverse facts available. See Certain In-shell Roasted Pistachios from 
the Islamic Republic of Iran: Final Results of Countervailing Duty 
Administrative Review, 71 FR 66165 (November 13, 2006) and accompanying 
Issues and Decision Memorandum at ``Analysis of Programs.''
    Thus, for programs based on the provision of goods at less than 
adequate remuneration, we have used the Kingland rate for the provision 
of hot-rolled steel for less than adequate remuneration. For value 
added tax (``VAT'') programs, we are unable to utilize company-specific 
rates from this proceeding because neither respondent received any 
countervailable subsidies from these subsidy programs. Therefore, for 
VAT programs we are applying the highest subsidy rate for any program 
otherwise listed, which in this instance is Kingland's rate for the 
provision of hot-rolled steel for less than adequate remuneration.
    Similarly, for the grant programs, we are not relying on the 
highest calculated preliminary subsidy rate because it is de minimis. 
Instead, we are applying the highest calculated preliminary subsidy 
rate, which in this instance is Kingland's rate for the provision of 
hot-rolled steel for less than adequate remuneration.
    Finally, for the seven alleged income tax programs pertaining to 
either the reduction of the income tax rates or the payment of no 
income tax, we have applied an adverse inference that Shuangjie paid no 
income tax during the period of investigation (i.e., calendar year 
2006). The standard income tax rate for corporations in the PRC is 30 
percent, plus a 3 percent provincial income tax rate. Therefore, the 
highest possible benefit for these seven income tax rate programs is 33 
percent. We are applying the 33 percent AFA rate on a combined basis 
(i.e., the seven programs combined provided a 33 percent benefit). This 
33 percent AFA rate does not apply to income tax deduction or credit 
programs. For income tax

[[Page 63879]]

deduction or credit programs we are applying the highest subsidy rate 
for any program otherwise listed, which in this instance is Kingland's 
rate for provisions of hot-rolled-steel at less than adequate 
remuneration. See Memorandum to the File, entitled ``Selection of the 
Adverse Facts Available Rate for Tianjin Shuangjie Steel Pipe Co., 
Ltd.'' (November 5, 2007) (this memorandum is on file in the 
Department's CRU).
    We do not need to corroborate the calculated subsidy rates we are 
using as AFA because they are not considered secondary information as 
they are based on information obtained in the course of this 
investigation. See section 776(c) of the Act; see also the SAA at 870.
    We have also identified certain instances in which the GOC has 
failed to cooperate to the best of its ability in providing requested 
information. First, in our questionnaire, we asked the GOC to provide 
information about the hot-rolled steel industry in the PRC (including a 
description of the industry, users of hot rolled steel in the PRC, and 
whether hot-rolled steel producers are state-owned enterprises). The 
GOC limited its response to the ``hot-rolled steel narrow strip'' 
industry, arguing that this narrow strip industry was separate from the 
hot-rolled steel industry. In our supplemental questionnaire, we asked 
the GOC to provide the requested information for the hot-rolled steel 
industry as a whole. While some limited information was provided in the 
GOC's supplemental questionnaire response (October 23, 2007), the GOC 
stated, ``We hope to prove (sic) the Department a broader analysis of 
hot-rolled steel producers at a later date.'' Similarly, in response to 
our supplemental questionnaire seeking additional information on rates 
charged for water in Tianjin (where Shuangjie is located), the GOC 
responded that it had contacted the local agencies and was awaiting 
their reply (this rate information had also been requested in our 
initial questionnaire).
    The failure to provide this information within the established 
deadlines has impeded our investigation. Moreover, the GOC has not 
provided us with any plausible explanation as to why it cannot provide 
us with the information within the established deadlines. Therefore, we 
preliminarily determine that the GOC has failed to act to the best of 
its ability and we are applying facts available with an adverse 
inference to address these omissions. With respect to hot-rolled steel, 
the Department is preliminarily rejecting prices in the PRC as possible 
benchmarks for determining whether hot-rolled steel is being provided 
for less than adequate remuneration. With respect to water, we are 
preliminarily finding that this input is being provided for less than 
adequate remuneration for Shuangjie, as AFA.

Critical Circumstances

    On September 17, 2007, petitioners requested that the Department 
make an expedited finding that critical circumstances exist with 
respect to imports of CWP from the PRC. Section 703(e)(1) of the Act 
states that if the petitioner alleges critical circumstances, the 
Department will determine, on the basis of information available to it 
at the time, if there is a reason to believe or suspect the alleged 
countervailable subsidy is inconsistent with the WTO Agreement on 
Subsidies and Countervailing Measures (the SCM Agreement) and whether 
there have been massive imports of the subject merchandise over a 
relatively short period.
    In accordance with 19 CFR 351.206(c)(2)(i), because the petitioners 
submitted a critical circumstances allegation more than 20 days before 
the scheduled date of the preliminary determination, the Department 
must issue a preliminary critical circumstances determination not later 
than the date of the preliminary determination. See, e.g., Policy 
Bulletin 98/4 regarding Timing of Issuance of Critical Circumstances 
Determinations, 63 FR 55364 (October 15, 1998). Due to resource 
constraints, we were unable to accommodate petitioners' request that 
the Department make an expedited determination with respect to critical 
circumstances. Specifically, given the complex issues inherent to this 
investigation, i.e., the second countervailing duty investigation of 
imports from the PRC, as well as the multiple other ongoing antidumping 
and countervailing duty investigations, the Department was unable to 
make a critical circumstances determination prior to the preliminary 
results of this investigation.
    We preliminarily find that East Pipe received no countervailable 
subsidies inconsistent with the SCM Agreement. Therefore, in accordance 
with section 703(e)(1) of the Act, we preliminarily determine that 
critical circumstances do not exist with respect to imports of CWP from 
East Pipe.
    As discussed in the Analysis of Programs section below, the 
Department has preliminarily determined that Kingland received 
countervailable export subsidies during the POI. These export subsidies 
are inconsistent with the SCM Agreement. Although the countervailable 
subsidy rate for these export subsidies is de minimis, use of an export 
subsidy program is sufficient to make an affirmative preliminary 
determination of critical circumstances under section 703(e)(1)(A) of 
the Act. See Notice of Preliminary Affirmative Countervailing Duty 
Determination, Preliminary Affirmative Critical Circumstances 
Determination, and Alignment of Final Countervailing Duty Determination 
With Final Antidumping Duty Determination: Certain Softwood Lumber 
Products From Canada, 66 FR 43186, 43189-90 (August 17, 2001); and 
Notice of Amended Final Affirmative Countervailing Duty Determination 
and Notice of Countervailing Duty Order: Certain Softwood Lumber 
Products From Canada, 67 FR 36070 (May 22, 2002) (the unchanged final 
determination).
    Regarding Shuangjie, we have made an adverse inference that 
Shuangjie benefitted from countervailable export and import 
substitution subsidy programs pursuant to our determination to apply 
AFA to this company.
    For ``all other'' exporters, we are basing our finding on the 
experience of Kingland and, therefore, find that ``all others'' 
benefitted from export subsidies.
    In determining whether there are ``massive imports'' over a 
``relatively short period,'' pursuant to section 703(e)(1)(B) of the 
Act, the Department normally compares the import volume of the subject 
merchandise for three months immediately preceding the filing of the 
petition (i.e., the base period) with the three months following the 
filing of the petition (i.e., the comparison period). Section 
351.206(h)(1) of our regulations provides that, in determining whether 
imports of the subject merchandise have been ``massive,'' the 
Department normally will examine: (i) the volume and value of the 
imports; (ii) seasonal trends; and (iii) the share of domestic 
consumption accounted for by the imports. In addition, 19 CFR 
351.206(h)(2) provides that an increase in imports of 15 percent during 
the ``relatively short period'' of time may be considered ``massive.'' 
Finally, 19 CFR 351.206(i) defines ``relatively short period'' as 
normally being the period beginning on the date the proceeding begins 
(i.e., the date the petition is filed) and ending at least three months 
later.
    On October 31, 2007, Kingland filed its monthly shipment data for 
subject merchandise exported to the United States for calendar years 
2005 and 2006, and for January through September 2007. Based upon these 
data, we preliminarily find that Kingland's CWP

[[Page 63880]]

imports increased more than 15 percent during the ``relatively short 
period.'' See Memorandum to the File Re ``Critical Circumstances 
Analysis for Zhejiang Kingland Pipeline and Technologies Co., Ltd. 
Import Shipment Analysis for Zhejiang Kingland Pipeline and 
Technologies Co., Ltd. and ``All Others'' (November 5, 2007) (Import 
Analysis Memorandum) (this memorandum is on file in the Department's 
CRU). Therefore, we preliminarily determine that the requirements of 
section 703(e)(1)(B) of the Act have been satisfied, and that critical 
circumstances exist for Kingland.
    Regarding Shuangjie, as part of our adverse facts available 
determination we have made an adverse inference that there were massive 
imports from Shuangjie over a relatively short period. See Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Affirmative Preliminary Determination of Critical Circumstances: Wax 
and Wax/Resin Thermal Transfer Ribbons from Japan, 68 FR 71072, 71076-
77 (December 22, 2003); and Notice of Final Determination of Sales at 
Less Than Fair Value and Affirmative Final Determination of Critical 
Circumstances: Wax and Wax/Resin Thermal Transfer Ribbons from Japan, 
69 FR 11834 (March 12, 2004) (the unchanged final determination). 
Therefore, we preliminarily determine that the requirements of section 
703(e)(1)(B) of the Act have been satisfied, and that critical 
circumstances exist for Shuangjie.
    For ``all others,'' we preliminarily determine that there were 
massive imports over a relatively short period based on import 
statistics from the ITC's Dataweb (adjusted to remove East Pipe's and 
Kingland's shipments). See Import Analysis Memorandum. Therefore, we 
preliminarily determine that the requirements of section 703(e)(1)(B) 
of the Act have been satisfied, and that critical circumstances exist 
for ``all others.''

Alignment of Final Countervailing Duty Determination with Final 
Antidumping Duty Determination

    On July 5, 2007, the Department initiated the countervailing duty 
and antidumping duty investigations on CWP from the PRC. See Initiation 
Notice and Initiation of Antidumping Duty Investigation: Circular 
Welded Carbon Quality Steel Pipe from the People's Republic of China, 
72 FR 36663 (July 5, 2007). The countervailing duty investigation and 
the antidumping duty investigation have the same scope with regard to 
the merchandise covered.
    On November 2, 2007, petitioners submitted a letter, in accordance 
with section 705(a)(1) of the Act, requesting alignment of the final 
countervailing duty determination with the final determination in the 
companion antidumping duty investigation of CWP from the PRC. 
Therefore, in accordance with section 705(a)(1) of the Act, and 19 CFR 
351.210(b)(4), we are aligning the final countervailing duty 
determination with the final determination in the companion antidumping 
duty investigation of CWP from the PRC. The final countervailing duty 
determination will be issued on the same date as the final antidumping 
duty determination, which is currently scheduled to be issued on or 
about March 18, 2008. See Postponement of Preliminary Determination of 
Antidumping Duty Investigation: Circular Welded Carbon Quality Steel 
Pipe from the People's Republic of China (signed, November 1, 2007) 
(this memorandum is on file in the Department's CRU).

Application of the Countervailing Duty Law to Imports from the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) (CFS 
from the PRC). In that determination, the Department found, ''. . . 
given the substantial differences between the Soviet-style economies 
and the PRC's economy in recent years, the Department's previous 
decision not to apply the CVD law to these Soviet-style economies does 
not act as a bar to proceeding with a CVD investigation involving 
products from China.'' CFS from the PRC, and accompanying Issues and 
Decision Memorandum at Comment 6; see also Memorandum to David M. 
Spooner, Countervailing Duty Investigation of Coated Free Sheet Paper 
from the People's Republic of China - Whether the Analytical Elements 
of the Georgetown Steel Opinion are Applicable to China's Present-day 
Economy at 2 (March 29, 2007) (Georgetown Steel Memo).
    The GOC, in an October 11, 2007 submission in this proceeding, 
argues that the Department should not investigate certain newly alleged 
subsidies that occurred before 2005, the period of investigation in the 
CFS from the PRC proceeding. Citing the Georgetown Steel Memo, the GOC 
claims that the Department found that ``it is possible to determine 
whether the PRC Government has bestowed a benefit upon a Chinese 
producer (i.e., the subsidy can be identified and measured) and whether 
any such benefit is specific,'' as of 2005. See Georgetown Steel Memo 
at 2. The GOC additionally points to Final Affirmative Countervailing 
Duty Determination: Sulfanilic Acid from Hungary, 67 FR 60223 and 
accompanying Issues and Decision Memorandum at Comment 1 (September 25, 
2003) (Sulfanilic Acid from Hungary), in which the Department declined 
to countervail capital infusions received by the respondent in the year 
prior to Hungary's transition to a market economy, when Hungary also 
became subject to the countervailing duty law. Finally, the GOC notes 
that in the preamble to the Department's countervailing duty 
regulations, the Department states that it intends to continue its 
practice of only countervailing subsidies bestowed after a country's 
status is changed to market economy. See Countervailing Duties; Final 
Rule, 63 FR 65348, 65360 (November 25, 1998) (CVD Preamble).
    We have carefully reviewed CFS from the PRC, the Georgetown Steel 
Memo, and the CVD Preamble, and do not agree with the GOC that we are 
precluded from investigating subsidies bestowed prior to 2005. In 
particular, although 2005 served as the period of investigation in CFS 
from the PRC, we found loans given prior to 2005 under the Policy 
Lending Program to be countervailable. See CFS from the PRC and 
accompanying Issues and Decision Memorandum at Comment 12. More 
importantly, although we found that we could apply the CVD law to 
imports from the PRC, we did not squarely address the issue of how far 
back in time we should find countervailable subsidies. Now that this 
issue has been clearly presented in this investigation, we 
preliminarily determine that it is appropriate and administratively 
desirable to identify a uniform date from which the Department will 
identify and measure subsidies in the PRC for purposes of the CVD law.
    We preliminarily determine that date to be December 11, 2001, the 
date on which the PRC became a member of the WTO. Prior to this date, 
many changes were occurring in the PRC's economy. Many of the 
obligations undertaken by the PRC pursuant to its accession to the WTO 
were in line with the PRC's objective of economic reform. See Report of 
the Working Party on the Accession of China, WT/ACC/CHN/49 (October 1, 
2001), for example, at paragraph 4. Taken together, these changes would 
permit the Department to determine whether the GOC has bestowed a 
countervailable subsidy on Chinese producers. See Georgetown Steel 
Memo; CFS from the PRC at

[[Page 63881]]

Comments 1 and 6. Finally, the GOC acknowledged the changing nature of 
its economy in so far as its Accession Protocol contemplates the 
application of the CVD law to the PRC, even while it remains a non-
market economy (NME). See Protocol of Accession of the People's 
Republic of China, WT/L/432 (November 23, 2001) at Section 15(b); see 
also, CFS at Comment 1. Therefore, for this preliminary determination, 
we have selected the date of December 11, 2001, as the date from which 
we will measure countervailable subsidies in the PRC.

Period of Investigation

    The period for which we are measuring subsidies, or the period of 
investigation (POI), is calendar year 2006.

Subsidies Valuation Information

Allocation Period
    The average useful life (``AUL'') period in this proceeding as 
described in 19 CFR 351.524(d)(2) is 15 years according to the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System for assets used to manufacture primary steel mill products. No 
party in this proceeding has disputed this allocation period.
Attribution of Subsidies
    The Department's regulations at 19 CFR 351.525(b)(6)(i) state that 
the Department will normally attribute a subsidy to the products 
produced by the corporation that received the subsidy. However, 19 CFR 
351.525(b)(6)(ii) directs that the Department will attribute subsidies 
received by certain other companies to the combined sales of those 
companies if (1) cross-ownership exists between the companies, and (2) 
the cross-owned companies produce the subject merchandise, are a 
holding or parent company of the subject company, produce an input that 
is primarily dedicated to the production of the downstream product, or 
transfer a subsidy to a cross-owned company. The Court of International 
Trade (CIT) has upheld the Department's authority to attribute 
subsidies based on whether a company could use or direct the subsidy 
benefits of another company in essentially the same way it could use 
its own subsidy benefits. See Fabrique de Fer de Charleroi v. United 
States, 166 F. Supp. 2d. 593, 604 (CIT 2001).
    According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. This regulation states that 
this standard will normally be met where there is a majority voting 
interest between two corporations or through common ownership of two 
(or more) corporations.
    East Pipe: In its response, East Pipe reported that it is 
affiliated with East Pipe Transportation Facility Co., Ltd. (East 
Highway). East Pipe states that East Highway's primary business is to 
install highway guardrails in the PRC and that East Highway did not 
produce subject merchandise during the POI. East Pipe further contends 
that East Highway cannot be considered the holding company of East Pipe 
because its ownership interest in East Pipe is nominal (the details of 
the relationship between these two companies are proprietary).
    Given the unusual nature of the ownership relation between these 
companies, we preliminarily agree that any subsidies to East Highway 
should not be attributed to East Pipe under 19 CFR 351.525(b)(6)(iii). 
Moreover, because East Highway does not produce subject merchandise, we 
preliminarily determine that any subsidies it receives should not be 
attributed to East Pipe under 19 CFR 351.5252(b)(6)(ii). See Memorandum 
from Salim Bhabhrawala to Susan Kuhbach Re: Preliminary Negative 
Countervailing Duty Determination: Circular Welded Carbon Quality Steel 
Pipe from the People's Republic of China; Calculations for the 
Preliminary Determination for Weifang East Steel Pipe Co., Ltd. 
(November 5, 2007).
    East Pipe acknowledges a second company with which it is legally 
affiliated by virtue of a long-term investment, but which East Pipe 
views as commercially independent (the details of the relationship 
between these two companies are also proprietary). According to East 
Pipe, the company does not produce the subject merchandise and does not 
provide inputs to East Pipe. Because the company does not produce 
subject merchandise or otherwise fall within the situations described 
in 19 CFR 351.525(b)(6)(iii)-(v), we do not need to reach the issue of 
whether this company and East Pipe are cross-owned within the meaning 
of 19 CFR 351.525(b)(6)(vi), and we are not attributing any subsidies 
received by this company to East Pipe. Consequently, we are limiting 
our investigation to subsidies received by East Pipe.
    Kingland: Kingland has responded to the Department's original and 
supplemental questionnaires on behalf of itself; its parent company, 
Kingland Group Co., Ltd. (Kingland Group); Beijing Kingland Century 
Technologies Co. (Kingland Century); Zhejiang Kingland Pipeline 
Industry Co., Ltd. (Kingland Industry); and Shanxi Kingland Pipeline 
Co., Ltd. (Shanxi Kingland). According to Kingland, Kingland Group and 
Kingland Century do not produce the subject merchandise. However, 
because Kingland Group is the parent company of Kingland, we are 
preliminarily attributing subsidies received by Kingland Group to 
Kingland, in accordance with 19 CFR 351.525(b)(6)(iii).
    With respect to Kingland Century, this company is a domestic 
trading company and does not produce any merchandise. Instead, it 
purchased and provided inputs to Kingland during the POI. Because it is 
not an input producer, we are not treating Kingland Century as an input 
supplier as described in 19 CFR 351.525(b)(6)(iv) (which refers to 
subsidies received by the input producer). Instead, for the preliminary 
determination, we are treating these inputs as being provided directly 
to Kingland. See Memorandum from Shane Subler to Susan Kuhbach Re: 
Preliminary Affirmative Countervailing Duty Determination: Circular 
Welded Carbon Quality Steel Pipe from the People's Republic of China; 
Calculations for the Preliminary Determination for Zhejiang Kingland 
Pipeline and Technologies Co., Ltd.; Kingland Group Co., Ltd., and 
Beijing Kingland Century Technologies Co. (November 5, 2007) (Kingland 
Calculation Memorandum).
    Kingland Industry and Shanxi Kingland produced and sold subject 
merchandise domestically during the POI. Therefore, in accordance with 
19 CFR 351.525(b)(6)(ii), we are preliminarily including Kingland 
Industry and Shanxi Kingland in the subsidy calculation.
    Kingland also identified other affiliated companies whose names 
indicated that they might be involved in the production or sales of 
CWP. In response to our supplemental questionnaire, Kingland reported 
that these companies do not produce or sell the subject merchandise. 
See Kingland's supplemental questionnaire response (October 19, 2007) 
at pages 1-6. For one of these companies, CNOOC Kingland Pipeline Co., 
Ltd. (CNOOC Kingland), Kingland stated it produces certain casings tube 
and steel pipes that are outside the scope of the investigation. 
Furthermore, Kingland provided evidence on CNOOC Kingland's shareholder 
voting rights, board of directors, and management to demonstrate that 
cross-ownership did not exist between Kingland and CNOOC Kingland 
during the POI. After

[[Page 63882]]

reviewing the current record, we preliminarily determine that cross-
ownership did not exist between Kingland and CNOOC Kingland during the 
POI. Moreover, we have preliminarily accepted Kingland's claims that 
CNOOC Kingland Pipeline does not produce subject merchandise.
    Finally, Kingland's organization chart shows several additional 
companies that appear to be service companies with no relationship to 
the subject merchandise or companies in which the responding companies 
held a very limited share of ownership during the POI. We have 
discussed these companies in a separate, proprietary memorandum, 
entitled ``Zhejiang Kingland Pipeline Co., Ltd.: Cross-owned 
Companies'' (November 5, 2007) (this memorandum is on file in the 
Department's CRU). We have preliminarily excluded these companies from 
the subsidy calculation.
    Therefore, based on information currently on the record, we 
preliminarily determine that cross-ownership within the meaning of 19 
CFR 351.525(b)(6)(vi) exists between Kingland, Kingland Group, Kingland 
Century, Kingland Industry, and Shanxi Kingland. Because we 
preliminarily determine that Kingland, Kingland Industry, and Shanxi 
Kingland are cross-owned producers of the subject merchandise, as 
addressed in 19 CFR 351.525(b)(6)(ii), we are attributing the subsidies 
received by the three companies to their combined sales. We also 
preliminarily determine that subsidies received by Kingland Group 
should be attributed to the consolidated sales of the parent company 
and its subsidiaries. See 19 CFR 351.525(b)(6)(iii).

Benchmark

    Petitioners alleged that Baosteel received countervailable loans 
and that it was uncreditworthy (see, Initiation Notice, 72 FR at 
36671). Because we did not select Baosteel as a mandatory respondent in 
this investigation, we are making no finding regarding that company's 
creditworthiness.

Analysis of Programs

    Based upon our analysis of the petition and the responses to our 
questionnaires, wedetermine the following:
I. Programs Preliminarily Determined to Be Countervailable
A. Provision of Inputs for Less than Adequate Remuneration

Hot-rolled Steel

    The Department initiated an investigation into whether state-owned 
steel producers in the PRC provide hot-rolled steel to CWP producers 
for less than adequate remuneration. In response to the Department's 
questions on the PRC's hot-rolled steel industry in the original 
questionnaire, the GOC provided information on the hot-rolled steel 
narrow strip industry, as discussed in the Selection of the Adverse 
Facts Available Rate section, above. Citing information from market 
observer MYSTEEL and industry journal articles, the GOC claims that the 
hot-rolled steel narrow strip industry does not compete with other hot-
rolled steel products because narrow strip has a lower market price, is 
used primarily to produce CWP and light section steel, and has a 
production process that is different from hot-rolled steel sheet. The 
GOC argues further that pipe producers incur additional cost in 
slitting hot-rolled steel sheet into a narrow strip product.
    In their pre-preliminary comments, the petitioners reject the GOC's 
argument that hot-rolled steel narrow strip production is a separate 
industry. Referring to price information provided by the GOC, the 
petitioners contend that prices for hot-rolled steel narrow strip and 
hot-rolled wide coil move in tandem. Moreover, citing the respondents' 
reported purchase information, petitioners argue that the respondents 
use both products in their production of subject merchandise. 
Therefore, the petitioners argue that the Department should analyze the 
hot-rolled steel industry as a whole, not only the production of hot-
rolled steel narrow strip.
    We preliminarily agree with petitioners and do not find the 
producers of hot-rolled steel narrow strip to be an industry separate 
from the wider hot-rolled steel industry because there is no clear 
distinction between hot-rolled steel narrow strip and other hot-rolled 
steel. The GOC relies on price information provided by MYSTEEL to 
define hot-rolled steel narrow strip as having a width of less than 
1000 millimeters and hot-rolled steel sheet as having a width of no 
less than 1250 millimeters. However, these definitions leave out a 
classification for products between 1000 millimeters and 1250 
millimeters wide. Therefore, there is no specific width that 
distinguishes hot-rolled steel narrow strip from other hot-rolled steel 
sheet. Moreover, all of the products are hot-rolled steel, which is the 
input product on which the Department initiated an investigation. 
Therefore, we are basing our preliminary analysis on the hot-rolled 
steel industry as a whole.
    Kingland reported that it purchased hot-rolled steel for its CWP 
from GOC-owned hot-rolled steel producers and suppliers. East Pipe 
reported that it purchased its steel input for CWP entirely from 
privately owned suppliers. Therefore, we preliminarily determine that 
the GOC did not provide East Pipe with hot-rolled steel for CWP during 
the POI and our analysis is limited to Kingland.
    In its response, the GOC listed the industries that use hot-rolled 
steel: ``construction, automobile, electronic appliance, machineries, 
chemical industries, and long transmission pipelines, etc.'' See GOC 
questionnaire response at 56 (September 17, 2007). We preliminarily 
find that these industries are ``limited in number'' and, hence, that 
the provision of hot-rolled steel is de facto specific under section 
771(5A)(D)(i) of the Act. See also Notice of Final Affirmative 
Countervailing Duty Determination: Certain Cold-Rolled Carbon Flat 
Steel Products from the Republic of Korea, 67 FR 62102 (October 3, 
2002) and accompanying Issues and Decision Memorandum at Comment 1 and 
Comment 2, where the Department found that Posco's provision of hot-
rolled coil was countervailable.
    We further determine preliminarily that the GOC's provision of hot-
rolled steel through its state-owned producers is a financial 
contribution within the meaning of section 771(5)(D)(iii) and that it 
confers a benefit on CWP producers because the good is being sold for 
less than adequate remuneration as described in section 771(5)(E)(iv). 
In determining what constitutes adequate remuneration, the Department 
is not relying on prices in the PRC, as explained in the Selection of 
the Adverse Facts Available Rate section, above. Instead, in accordance 
with 19 CFR 351.511(a)(2), we have used a world market price as a 
benchmark to compare to the respondents' reported purchase prices from 
state-owned steel suppliers. Specifically, we used the ``World Export 
Price'' from Steel Benchmarker, as provided in Exhibit 38 of the 
petitioners' pre-preliminary comments (October 26, 2007).
    To calculate the benefit, we compared the monthly weighted-average 
price paid by Kingland for hot-rolled steel purchased from state-owned 
enterprises (SOEs) to the average monthly prices reported in Steel 
Benchmarker. Steel Benchmarker does not include prices for January - 
March 2006; therefore, we have used the April 2006 price as a 
surrogate. On this basis, we preliminarily determine that Kingland 
received a countervailable benefit of 16.57 percent ad valorem.
    For certain of Kingland's suppliers, we did not have information 
about their

[[Page 63883]]

ownership and did not have time to request it for this preliminary 
determination, therefore, it is unclear what portion of this steel is 
provided by SOEs. We intend to seek this supplier information for our 
final determination. For the preliminary determination, we have relied 
on neutral facts available and treated this pool of steel as having 
been provided by suppliers in the same proportion as reported for known 
SOE and non-SOE suppliers. See Kingland Calculation Memorandum.

B. Other Subsidies (Kingland)

    Kingland, Kingland Group, and Kingland Industry reported that they 
received different city, district, and provincial grants related to 
export assistance, research and development, and other business 
activities in 2004, 2005, and 2006. Kingland only identified two of 
these programs, the ``Electromechanical Products Technologies 
Renovation Project Fund'' and ``Superstar Enterprise'' award, as public 
information. Kingland designated information about the other programs 
as business proprietary. Therefore, we have addressed these programs in 
more detail in the Kingland Calculation Memorandum. Current information 
on the record does not indicate that these grants are tied to any of 
the programs discussed in this notice.
    We preliminarily determine that all the grants received in 2004 and 
2005 should be expensed in those years, i.e., prior to the POI because 
even if they were treated as non-recurring, the total amount received 
was less than 0.5 percent of the relevant sales in those years (see 19 
CFR 351.524(b)(2)). Hence, they would confer no benefit in the POI.
    For the export assistance grants received in 2006, certain of them 
pertained to markets other than the United States. We have not included 
these in our analysis pursuant to 19 CFR 351.525(b)(4). For the 
remaining export assistance grant, we preliminarily determine the grant 
is a countervailable subsidy within the meaning of section 771(5) of 
the Act. It is a financial contribution under section 771(5)(D)(i), and 
it provides a benefit in the amount of the grant (see 19 CFR 
351.504(a)). Finally, because it is contingent upon export performance, 
it is specific under section 771(5A)(B).
    To calculate the benefit, we divided the amount received by 
Kingland's export sales in 2006. On this basis, we preliminarily 
determine that a countervailable subsidy of less than .005 percent ad 
valorem exists for Kingland. Where the countervailable subsidy rate for 
a program is less than .005 percent, the program is not included in the 
total countervailing duty rate. See, e.g., Final Results of 
Countervailing Duty Administrative Review: Low Enriched Uranium from 
France, 70 FR 39998 (July 12, 2005), and the accompanying Issues and 
Decision Memorandum at ``Purchases at Prices that Constitute 'More than 
Adequate Remuneration''' (citing Final Results of Administrative 
Review: Certain Softwood Lumber Products from Canada, 69 FR 75917 
(December 20, 2004)).
    Kingland Group reported that it received a Super Star Enterprise 
award from Huzhou City. Kingland Group explained that Huzhou City 
granted this award based on the total value of a company's sales. The 
company met the relevant sales threshold for 2005 and received this 
award in 2006.
    We preliminarily determine that Kingland received a countervailable 
subsidy under the Huzhou City Super Star Enterprises award program. We 
find that this grant is a direct transfer of funds within the meaning 
of section 771(5)(D)(i) of the Act, providing a benefit in the amount 
of the grant. See 19 CFR 351.504(a). We further preliminarily determine 
that the grant provided under this program is limited as a matter of 
law to certain enterprises, i.e., enterprises that exceed certain sales 
values during a year. Hence, we preliminarily find that the subsidy is 
specific under section 771(5A)(D)(i) of the Act.
    To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants. See 19 CFR 351.524(b). Because 
the award was not tied to any specific product, we attributed the 
subsidy to the consolidated sales of the Kingland Group. Also, because 
the benefit was less than 0.5 percent, the entire amount was attributed 
to the POI. On this basis, we preliminarily determine the 
countervailable subsidy to be 0.02 percent ad valorem for Kingland.
    For the remaining grants, we intend to seek further information for 
our final determination.
II. Programs Preliminarily Determined to Be Not Countervailable
A. Government Policy Lending Program
    In CFS from the PRC, the Department found Government Policy Lending 
to provide a countervailable subsidy because record evidence indicated 
that: (i) the GOC had a policy in place to encourage and support the 
growth and development of the forestry and paper industry through 
preferential financing initiatives as illustrated in the GOC's five-
year plans and industrial policies; and (ii) the GOC's policy toward 
the paper industry was carried out by the central and local governments 
through the provision of loans extended by GOC Policy Banks and state-
owned commercial banks. See CFS from the PRC and accompanying Issues 
and Decision Memorandum at Comment 8.
    In this investigation, the evidence submitted to date does not 
support a finding that the CWP industry in the PRC received 
preferential financing pursuant to the GOC's Iron and Steel Policy. 
Therefore, we preliminarily determine that producers and exporters of 
CWP in the PRC did not receive government policy loans. We will, 
however, continue to investigate whether the GOC's Iron and Steel 
Policy or other plans apply to the CWP industry, and, if so, the 
purpose of those policies and whether preferential lending was provided 
to the CWP industry pursuant to those policies.
B. Provision of Inputs for Less than Adequate Remuneration
    Electricity: According to the GOC, electricity in the PRC is 
produced by numerous power plants and it is transmitted for local 
distribution by two state-owned transmission companies, State Grid and 
China South Power Grid. Generally, prices for uploading electricity to 
the grid and transmitting it are regulated by the GOC, as are the final 
sales prices. See, e.g., Circular on Implementation Measures Regarding 
Reform of Electricity Prices, (FAGAIJIAGE {2005{time}  No. 514, 
National Development and Reform Commission) at Appendix 3 of the 
Provisional Measures on Prices for Sales of Electricity at Article 29 
(``Government departments in charge of pricing at various levels shall 
be responsible for the administration and supervision of electricity 
sales prices.''), provided within the GOC response at Exhibit 114 
(September 17, 2007).
    Electricity consumers are divided into broad categories such as 
residential, commercial, large-scale industry and agriculture. The 
rates charged vary across customer categories and within customer 
categories based on the amount of electricity consumed. Moreover, among 
industrial users, certain industries are specifically broken out and 
these industries receive special, discounted rates. Based on our review 
of the rate schedules submitted for two of the three provinces in which 
the respondents are located, discounted rates are established for 
producers of calcium carbide, electrolyte caustic alkali, synthetic 
ammonia, yellow phosphorus with electric furnace, and chemical 
fertilizer producers. For the third province, discounted rates are 
established for the production of chlor alkali, electrolyte aluminum, 
and chemical fertilizer. Thus, there is not a

[[Page 63884]]

discounted rate for CWP producers and, according to the GOC, the number 
of customers in the large-scale enterprise category (which includes the 
CWP producers) ranges from over 400 to more than 2200, across these 
three localities.
    Based on the record evidence, we preliminarily determine that the 
provision of electricity to large-scale enterprises in the PRC is 
neither de jure nor de facto specific. Although producers in a few 
particular industries are eligible for discounts under the law, all 
other large-scale enterprises within a locality pay the same rate for 
their electricity. Moreover, the absence of price discrimination among 
most users may also support a preliminary finding that electricity is 
not being provided to CWP producers for less than adequate 
remuneration. See Countervailing Duties; Final Rule, 63 FR 65348, 65378 
(November 25, 1998) (discussing that, where the government is the sole 
provider of a good or service, especially in the case of electricity, 
land or water, the Department may assess whether the government price 
was set in accordance with market principles, which may include an 
analysis of whether there is price discrimination among the users of 
the good or service that is provided and that ``{w{time} e would only 
rely on a price discrimination analysis if the government good or 
service is provided to more than a specific enterprise or industry, or 
group thereof.'').
    On this basis, we preliminarily determine that the GOC's provision 
of electricity does not confer a countervailable subsidy.
    Water: According to the GOC, water suppliers in the PRC are highly 
localized. Many suppliers are SOEs, particularly in cities, but there 
is also private ownership. Water prices generally are regulated by the 
local governments. See, e.g., the Regulation on Administration of City 
Water Supply (Decree 158 of the State Council, 1994), provided within 
the GOC response at Exhibit 118 (September 17, 2007).
    East Pipe's water supplier, Weifang Treated Water Company, Ltd., is 
a majority privately owned company. Therefore, for East Pipe, we 
preliminarily determine that water is not provided by an ``authority'' 
and, hence, that no countervailable subsidy is bestowed. See section 
771(5)(b) of the Act. We will continue to examine whether East Pipe's 
water supplier is a private entity during the course of this 
investigation. Regarding Shuangjie, the GOC did not provide water rate 
schedules.
    For Kingland, the GOC has provided the Circular on Adjusting the 
Water Resource Charge Rate ZHEJAIFEI {2004{time}  No. 209 and Circular 
of Huzhou City People's Government on Approving and Forwarding the 
Provisional Regulation on the Collection of River Network Water Supply 
Fee Issued by City Water Resource Bureau HUZHENGFA {2002{time}  No. 39, 
provided within the GOC supplemental response as exhibits S - 5 and S - 
6 (October 23, 2007). These two schedules show that uniform rates are 
charged, with no discounts for any industry groups.
    Therefore, for the same reasons described above for electricity, we 
preliminarily determine that record evidence demonstrates that the 
provision of water in Zhejiang Province and Huzhou City (location of 
Kingland Pipe) is neither de jure nor de facto specific. Consequently, 
we preliminarily find that the government's provision of water does not 
confer a countervailable subsidy on Kingland.
    Because the GOC has failed to provide the requested rate 
information for water purchased by Shuangjie, we are preliminarily 
treating this program as countervailable for this company. See 
Selection of Adverse Facts Available Rate section, above.
C. VAT Rebates (originally referred to as ``Export Incentive Payments 
Characterized as ``VAT Rebates'')
    According to the GOC, the ``exemption, deduction and refund'' of 
VAT applies if a manufacturer exports its self-produced goods by itself 
or via a trading company. See Article 1 of the Circular on Further 
Promotion of Methodology of ``Exemption, Deduction, and Refund'' of Tax 
for Exported Goods (CAISHUI (2002) No. 7) provided within the GOC 
response at Exhibit 98. Under the ``VAT refund system,'' when a 
producer/exporter purchases inputs (e.g,, raw materials, components, 
fuel and power) it pays a VAT based on the purchase price of inputs. 
The GOC repor