Circular Welded Austenitic Stainless Pressure Pipe From the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination, 39657-39667 [E8-15733]

Download as PDF 39657 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices jlentini on PROD1PC65 with NOTICES duty order on non–malleable pipe fittings from the PRC pursuant to section 751(c) of the Act. See Initiation of Five–year (‘‘Sunset’’) Reviews, 73 FR 11392 (March 3, 2008). The Department received Notice of Intent to Participate from Anvil International, Inc. and Ward Manufacturing (collectively ‘‘the domestic interested parties’’) within the deadline specified in 19 CFR 351.218(d)(1)(i). The domestic interested parties claimed interested party status under 19 CFR 351.102(b), as manufacturers of a domestic–like product in the United States. Jinan Meide Casting Co., Ltd. (‘‘JMC’’) filed an entry of appearance as an interested party, specifically, as a PRC–based producer and exporter of the subject merchandise under section 771(9)(A) of the Act. We received complete substantive responses from the domestic interested parties within the 30-day deadline specified in 19 CFR 351.218(d)(3)(i). We received no substantive response from JMC or from any other respondent interested parties. As a result, pursuant to section 751(c)(3)(B) of the Act and 19 CFR 351.218(e)(1)(ii)(C)(2), the Department conducted an expedited (120-day) sunset review of the order. Scope of the Order For purposes of this review, the products covered are finished and unfinished non–malleable cast iron pipe fittings with an inside diameter ranging from 1/4 inch to 6 inches, whether threaded or un–threaded, regardless of industry or proprietary specifications. The subject fittings include elbows, ells, tees, crosses, and reducers as well as flanged fittings. These pipe fittings are also known as ‘‘cast iron pipe fittings’’ or ‘‘gray iron pipe fittings.’’ These cast iron pipe fittings are normally produced to ASTM A–126 and ASME B.l6.4 specifications and are threaded to ASME B1.20.1 specifications. Most building codes require that these products are Underwriters Laboratories (‘‘UL’’) certified. The scope does not include cast iron soil pipe fittings or grooved fittings or grooved couplings. Fittings that are made out of ductile iron that have the same physical characteristics as the gray or cast iron fittings subject to the scope above or which have the same physical characteristics and are produced to ASME B.16.3, ASME B.16.4, or ASTM A–395 specifications, threaded to ASME B1.20.1 specifications and UL certified, regardless of metallurgical differences between gray and ductile iron, are also included in the scope of this petition. These ductile fittings do not include grooved fittings or grooved couplings. VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 Ductile cast iron fittings with mechanical joint ends (‘‘MJ’’), or push on ends (‘‘PO’’), or flanged ends and produced to the American Water Works Association (‘‘AWWA’’) specifications AWWA C110 or AWWA C153 are not included. Imports of covered merchandise are currently classifiable in the Harmonized Tariff Schedule of the United States (‘‘HTSUS’’) under item numbers 7307.11.00.30, 7307.11.00.60, 7307.19.30.60 and 7307.19.30.85. HTSUS subheadings are provided for convenience and customs purposes. The written description of the scope of this proceeding is dispositive. Analysis of Comments Received All issues raised in this review are addressed in the memorandum from Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, to David M. Spooner, Assistant Secretary for Import Administration, ‘‘Issues and Decision Memorandum for the Expedited Sunset Review of the Antidumping Duty Order on Non– Malleable Cast Iron Pipe Fittings from the People’s Republic of China; Final Results,’’ dated July 1, 2008 (‘‘Decision Memorandum’’), which is hereby adopted by this notice. The issues discussed in the Decision Memorandum include the likelihood of continuation or recurrence of dumping and the magnitude of the margins likely to prevail if the order were to be revoked. Parties can find a complete discussion of all issues raised in this review and the corresponding recommendations in this public memorandum which is on file in the Central Records Unit, room 1117 of the main Commerce building. In addition, a complete version of the Decision Memorandum can be accessed directly on the Web at https:// ia.ita.doc.gov/frn, under the heading ‘‘July 2008.’’ The paper copy and electronic version of the Decision Memorandum are identical in content. Manufacturers/Exporters/Producers Weighted–Average Margin (percent) PRC–Wide Entity Rate (including Myland Industrial Co., Ltd., and Buxin Myland (Foundry) Ltd.) ...................... 75.50 This notice also serves as the only reminder to parties subject to administrative protective orders (‘‘APO’’) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305. Timely notification of the return or destruction of APO materials or conversion to judicial protective orders is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction. We are issuing and publishing the results and notice in accordance with sections 751(c), 752(c), and 777(i)(1) of the Act. Dated: July 01, 2008. David M. Spooner, Assistant Secretary for Import Administration. [FR Doc. E8–15738 Filed 7–9–08; 8:45 am] BILLING CODE 3510–DS–S DEPARTMENT OF COMMERCE International Trade Administration [C–570–931] Circular Welded Austenitic Stainless Pressure Pipe From the People’s Republic of China: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce (the Department) preliminarily Final Results of Review determines that countervailable We determine that revocation of the subsidies are being provided to antidumping duty order on non– producers and exporters of circular malleable pipe fittings from the PRC welded austenitic stainless pressure would be likely to lead to continuation pipe (CWASPP) from the People’s or recurrence of dumping at the Republic of China (PRC). For following weighted–average percentage information on the estimated subsidy margins: rates, see the ‘‘Suspension of Liquidation’’ section of this notice. Manufacturers/ExportWeighted–Average Interested parties are invited to ers/Producers Margin (percent) comment on this preliminary determination. See ‘‘Disclosure and Jinan Meide Casting Co., Ltd. .................... 7.08 Public Comment’’ section below for procedures on filing comments. Shanghai Foreign Trade Enterprises Co., Ltd. 6.34 EFFECTIVE DATE: July 10, 2008. PO 00000 Frm 00012 Fmt 4703 Sfmt 4703 AGENCY: E:\FR\FM\10JYN1.SGM 10JYN1 39658 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices FOR FURTHER INFORMATION CONTACT: Robert Copyak, or Eric B. Greynolds, AD/CVD Operations, Office 3, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482–2209 and (202) 482–6071, respectively. SUPPLEMENTARY INFORMATION: jlentini on PROD1PC65 with NOTICES Case History The following events have occurred since the issuance of the Department’s notice of initiation in the Federal Register. See Circular Welded Austenitic Stainless Pressure Pipe from the People’s Republic of China: Notice of Initiation of Countervailing Duty Investigation, 73 FR 9994 (February 25, 2008) (Initiation Notice), and accompanying initiation checklist (February 19, 2008) (Initiation Checklist). On February 19, 2008, the Department issued the results of its query of the U.S. Customs and Border Protection (CBP) trade database to interested parties. See Memorandum to the File from Eric B. Greynolds, Program Manager, Office 3, Operations, ‘‘Results of Query of Customs and Border Protection Database’’ (February 19, 2008), a proprietary document of which the public version is on file in the Central Records Unit (CRU), room 1117 in the main Department building. On February 29, 2008, Zhejiang Jiuli HighTech Metals Co. Ltd. (Jiuli), a Chinese producer and exporter of CWASPP, requested that the Department select the company as a mandatory respondent. Jiuli further requested that, in the event that the Department did not select it as a mandatory respondent, the Department designate Jiuli as a voluntary respondent as provided under 19 CFR 351.204(d). On March 3, 2008, Jiuli submitted comments regarding the Department’s selection of mandatory respondents in the investigation. On March 14, 2008, the Department selected as mandatory respondents the two largest Chinese producers/exporters of CWASPP that could reasonably be examined. The mandatory respondents selected by the Department are, in alphabetical order, Froch Enterprise Co. Ltd. (Froch) (also known as Zhangyuan Metal Industry Co. Ltd.) and Winner Stainless Steel Tube Co. Ltd. (Winner). See Memorandum to Stephen J. Claeys, Deputy Assistant Secretary, for Import Administration, through Melissa G. Skinner, Director, Office 3, Operations, from the team, ‘‘Respondent Selection’’ (March 14, 2008), a proprietary document of which the public version is on file in the CRU. On the same day, we VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 issued a countervailing duty (CVD) questionnaire to the Government of China (GOC) requesting that the GOC forward the company sections of the questionnaire to the mandatory respondents. As a courtesy, we also issued the CVD questionnaire to Froch, and Winner, and to Jiuli.1 On March 17, 2008, 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 CWASPP from the PRC. See Welded Stainless Steel Pressure Pipe from China, USITC Pub 3986, Investigation Nos. 701–TA–454 and 731–TA–1144 (Preliminary) (March 2008). On the same day, Prudential Stainless & Alloy (Prudential), a U.S importer and distributor of CWASPP, submitted comments regarding the scope of the investigation.2 On April 4, 2008, we published a postponement of the preliminary determination of this investigation until no later than June 30, 2008. See Circular Welded Austenitic Stainless Pressure Pipe from the People’s Republic of China: Amended Notice of Postponement of Preliminary Determination in the Countervailing Duty Investigation, 73 FR 18511 (April 4, 2008). On May 5, 2008, we received the GOC’s response to the Department’s initial questionnaire. On May 9, 2008, we received a response to the initial questionnaire from Winner and its affiliates Winner Machinery Enterprises Company Limited (Winner HK) and Winner Steel Products (Guangzhou) Co., Ltd. (WSP) (collectively the Winner Companies). Froch did not respond to the Department’s initial questionnaire. On May 14, 2008, the GOC submitted its response to the Department’s government supplemental questionnaire. On June 10, 2008, the 1 We received confirmation that the CVD questionnaire was delivered to Froch on March 19, 2008. See Memorandum to the File from Eric B. Greynolds, Program Manager, Office 3, Operations (March 26, 2008), which includes a copy of the documentation from FedEx confirming delivery, a public document on file in the CRU. Winner also received a copy of the CVD questionnaire. See, e.g., Winner’s April 29, 2008, request for an extension of time to respond to the due date deadline, which serves as confirmation of Winner’s receipt of the CVD questionnaire. We also served Jiuli with a copy of the CVD questionnaire. See Memorandum to the File from Eric B. Greynolds, Program Manager, Office 3, Operations (March 26, 2008), a public document on file in room 1117 of the CRU, regarding the service of the initial questionnaire to Jiuli. 2 These comments are identical to the comments filed by Prudential on March 10, 2008, in the companion antidumping duty investigation on these same products. PO 00000 Frm 00013 Fmt 4703 Sfmt 4703 Winner Companies submitted their response to the Department’s supplemental questionnaire. On June 16, 2008, the GOC submitted its response to the Department’s second government supplemental questionnaire. On May 30, 2008, petitioners submitted new subsidy allegations concerning 11 programs.3 On June 9, 2008, members of the Import Administration staff met with officials from the GOC regarding new subsidy allegations filed by petitioners. See Memorandum to the File from Eric B. Greynolds, Program Manager, Office 3, Operations, ‘‘Ex Parte Meeting with Officials from the Government of China’’ (June 9, 2008), a public document on file in the CRU. On June 11, 2008, the GOC submitted comments to the Department urging it to reject petitioners’ new subsidy allegations on the grounds that petitioners alleged them in an untimely matter and that they are without merit. On June 12, 2008, the Department issued a letter to petitioners asking them to explain why they were unable to submit their new subsidy allegations within the regulatory deadline established under 19 CFR 351.301(d)(4)(i)(A). On June 18, 2008, petitioners submitted their response to the Department and responded to the comments made by the GOC in its June 12, 2008 submission. At this time, the Department continues to evaluate the timeliness of petitioners’ new subsidy allegations. If the Department determines that the new subsidy allegations were submitted in accordance with 19 CFR 351.301(d)(4)(i)(A), then the Department will issue a new subsidy allegation decision memorandum in which it will identify, if any, the programs it will investigate. Any such decision memorandum will be provided to interested parties. On June 25, 2008, petitioners requested that the Department align the final CVD determination with the final determination in the companion antidumping (AD) investigation of CWASPP from the PRC. Scope of the Investigation The merchandise covered by this investigation is circular welded austenitic stainless pressure pipe not greater than 14 inches in outside diameter. This merchandise includes, but is not limited to, the American Society for Testing and Materials 3 Petitioners are Bristol Metals, LLC, Felker Brothers Corp., Marcegaglia U.S.A., Inc., Outokumpu Stainless Pipe, Inc., and the United Steelworkers. E:\FR\FM\10JYN1.SGM 10JYN1 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices jlentini on PROD1PC65 with NOTICES (ASTM) A–312 or ASTM A–778 specifications, or comparable domestic or foreign specifications. ASTM A–358 products are only included when they are produced to meet ASTM A–312 or ASTM A–778 specifications, or comparable domestic or foreign specifications. Excluded from the scope are: (1) Welded stainless mechanical tubing, meeting ASTM A–554 or comparable domestic or foreign specifications; (2) boiler, heat exchanger, superheater, refining furnace, feedwater heater, and condenser tubing, meeting ASTM A– 249, ASTM A–688 or comparable domestic or foreign specifications; and (3) specialized tubing, meeting ASTM A–269, ASTM A–270 or comparable domestic or foreign specifications. The subject imports are normally classified in subheadings 7306.40.5005, 7306.40.5040, 7306.40.5062, 7306.40.5064, and 7306.40.5085 of the Harmonized Tariff Schedule of the United States. They may also enter under HTSUS subheadings 7306.40.1010, 7306.40.1015, 7306.40.5042, 7306.40.5044, 7306.40.5080, and 7306.40.5090. The HTSUS subheadings are provided for convenience and customs purposes only; the written description of the scope is dispositive. Scope Comments In our Initiation Notice, we set aside a period of time for parties to raise issues regarding product coverage, and encouraged all parties to submit comments within 20 calendar days of publication of the Initiation Notice. See Initiation Notice, 73 FR at 9994. As stated above, on March 17, 2008, Prudential submitted timely scope comments. Prudential argues that the current scope appears to cover all alloy grades within the specification ASTM A–312. However, according to Prudential, certain grades such as 309S, 310S, 321, 347, 317L, 904L (NO8904), 254SMO (S31254) and others are specialized, very low-volume products that do not compete with the high-volume commodity products such as 304, 304L, 316, and 316L that are manufactured by petitioners. Prudential contends that such low-volume, higher-priced specialty grades should be excluded from the scope. Specifically, Prudential argues that the Department should exclude all grades of CWASPP except the 304 series and 316 series. Prudential adds that series 304H and 304LN should remain within the scope in order to prevent circumvention. Additionally, Prudential asserts that the scope of the investigation is VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 unnecessarily broad with respect to schedules (e.g., wall thickness) of CWASPP. Prudential contends that the scope should only cover schedules 40S and 10S, which it claims constitute the vast majority of pipe produced by petitioners. Prudential argues that schedules 5S, 20, 30, 60, and 80S should be excluded from the scope because they do not represent a threat to petitioners. On March 14, 2008, petitioners filed rebuttal comments to Prudential’s scope and product coverage comments. Petitioners oppose changing the scope of the investigation arguing that Prudential’s proposed changes regarding alloy grade and schedules (wall thickness) would exclude products presently manufactured by the domestic industry that are important to the domestic industry. They note that these products were also covered by the ITC in its definition of like product in its preliminary investigation questionnaire. On April 28, 2008, Prudential filed a letter in response to petitioners’ March 14, 2008, submission. Prudential disagrees with petitioners’ claim that the items Prudential is proposing to exclude are ‘‘important’’ to the domestic industry. Arguing that, as a specialty ‘‘stockist,’’ these items are important to Prudential, but not the industry as a whole. Prudential requests that the Department determine factually how much, of the approximately 35,000 tons produced last year domestically, were not 304, 304L, 304/L, 316, 316L or 316/ L and were not schedule 10s or 40s. Prudential asserts that the percentages will be quite low and argues that it is doubtful that schedule 5s and 80s would be considered ‘‘important’’ and that, undeniably, the remaining schedules (20, 30, 60, 100, 120, 140, 160, and XXH) are of no importance to the domestic industry. The Department is evaluating these comments and will issue its decision regarding the scope of the investigation in the preliminary determination of the companion AD investigation due no later than August 27, 2008. Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination On June 25, 2008, petitioners submitted a letter, in accordance with section 705(a)(1) of the Tariff Act of 1930, as amended (the Act), requesting alignment of the final CVD determination with the final determination in the companion AD investigation of CWASPP 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 PO 00000 Frm 00014 Fmt 4703 Sfmt 4703 39659 CVD determination with the final determination in the companion AD investigation of CWASPP from the PRC. The final CVD determination will be issued on the same date as the final AD determination, which is currently scheduled to be issued no later than November 10, 2008. 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), and accompanying decision memorandum (CFS from the PRC Decision Memorandum). In CFS from the PRC, the Department found that * * * 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 the PRC. See CFS from the PRC Decision Memorandum at Comment 6. The Department has affirmed its decision to apply the CVD law to the PRC in subsequent final determinations. See, e.g., Circular Welded Carbon Quality Steel Pipe from the People’s Republic of China: Final Affirmative Countervailing Duty Determination and Final Affirmative Determination of Critical Circumstances, 73 FR 31966 (June 5, 2008) (CWP from the PRC), and accompanying decision memorandum (CWP from the PRC Decision Memorandum). Additionally, for the reasons stated in the CWP from the PRC Decision Memorandum, we are using the date of December 11, 2001, the date on which the PRC became a member of the World Trade Organization (WTO), as the date from which the Department will identify and measure subsidies in the PRC for purposes of this preliminary determination. See CWP from the PRC Decision Memorandum at Comment 2. Period of Investigation (POI) The period of investigation for which we are measuring subsidies is calendar year 2007. Adverse Facts Available A. The GOC As discussed below, the Department is investigating whether GOC authorities provided stainless steel coil, a major input in the production of CWASPP to respondents for less than adequate E:\FR\FM\10JYN1.SGM 10JYN1 39660 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices remuneration (LTAR). In our March 14, 2008, questionnaire, we asked the GOC to respond to the items in the Standard Questions Appendix at Appendix One and Provision of Goods/Services Appendix at Appendix Five with respect to the GOC’s alleged provision of stainless steel coil for LTAR. In its May 5, 2008, response, the GOC stated that: Given that the GOC does not believe there is a program providing stainless steel coil for less than adequate remuneration, the GOC believes that responding to Appendices One and Five is improper. See GOC’s May 5, 2008, questionnaire response at 21. On May 7, 2008, the Department issued a supplemental questionnaire to the GOC in which it requested that the GOC respond to the items contained in Appendices One and Five of the Department’s initial questionnaire, as they pertain to the GOC’s alleged provision of stainless steel coil for LTAR. In the May 7, 2008, supplemental questionnaire, the Department explained that failure to respond to the Department’s questions in a timely fashion and in the manner requested may result in the Department resorting to the use of adverse facts available (AFA) within the meaning of section 776(b) of the Act. In its May 14, 2008, supplemental questionnaire response, the GOC provided responses to most of the Department’s questions. However, the GOC failed to adequately respond to the Department’s questions concerning de facto specificity as it pertains to the GOC’s alleged provision of stainless steel coil for LTAR. Regarding this alleged subsidy program, the Department, referencing its initial questionnaire, instructed the GOC in its May 7, 2008, supplemental questionnaire to: Please provide a list by industry and by region of the number of companies which have received benefits under this program in the year the provision of benefits was approved and each of the preceding three years. Provide the total amounts of benefits received by each type of industry in each region in the year the provision of benefits was approved and each of the preceding three years. jlentini on PROD1PC65 with NOTICES Concerning the GOC’s alleged provision of stainless steel coil for LTAR, the GOC stated that: No such list exists, nor does any data exist from which to derive such a list absent inquiring with every stainless steel coil producer in China. Such records would only reflect amounts sold and prices charged, as opposed to any ‘‘benefit’’ conferred by the transaction. VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 See GOC’s May 14, 2008, supplemental questionnaire response at 8. 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. Because the GOC failed to provide the requested information by the established deadlines, the Department does not have the necessary information on the record to determine whether the GOC provided stainless steel coil to producers of CWASPP in a manner that was de facto specific within the meaning of section 771(5A)(D)(iii) of the Act. Therefore, the Department must base its determination on the facts otherwise available in accordance with sections 776(a)(2)(A) and (B) of the Act. 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 PO 00000 Frm 00015 Fmt 4703 Sfmt 4703 Department to use as AFA information derived from the petition, the final determination, a previous administrative review, or other information placed on the record. For the reasons discussed below, we determine that, in accordance with sections 776(a)(2)(A) and (B) and 776(b) of the Act, the use of AFA is appropriate for the preliminary determination with respect to the GOC’s alleged provision of stainless steel coil to producers of CWASPP for LTAR. As noted, the GOC refused to respond to the items contained in Appendices One and Five of the Department’s initial questionnaire, as they pertain to the GOC’s alleged provision of stainless steel coil to producers of CWASPP for LTAR. The Department issued a supplemental questionnaire in which it again instructed the GOC to respond to Appendices One and Five in regard to the LTAR allegations at issue. However, in its response, the GOC continued to provide insufficient information regarding the Department’s questions pertaining to de facto specificity. Therefore, consistent with sections 776(a)(2)(A) and (B) of the Act, we find that the GOC did not act to the best of its ability and, therefore, we are employing adverse inferences in selecting from among the facts otherwise available. Accordingly, pursuant to section 776(b) of the Act, we find that the provision of stainless steel coil to producers of CWASPP by GOC authorities is de facto specific within the meaning of section 771(5A)(D)(iii) of the Act. Thus, we preliminarily determine that the provision of stainless steel coil by GOC authorities to producers of CWASPP are countervailable to the extent that the provision of the goods constituted a financial contribution in accordance with 771(5)(D)(iii) of the Act and conferred a benefit upon producers of CWASPP within the meaning of 771(E)(iv) of the Act. The Department’s decision to rely on adverse inferences when lacking a response from a foreign government is in accordance with its practice. See, e.g., Notice of Preliminary Results of Countervailing Duty Administrative Review: Certain Cut-toLength Carbon-Quality Steel Plate from the Republic of Korea, 71 FR 11397, 11399 (March 7, 2006) (unchanged in the Notice of Final Results of Countervailing Duty Administrative Review: Certain Cut-to-Length CarbonQuality Steel Plate from the Republic of Korea, 71 FR 38861 (July 10, 2006) (relying on adverse inferences in determining that the Government of Korea directed credit to the steel E:\FR\FM\10JYN1.SGM 10JYN1 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices jlentini on PROD1PC65 with NOTICES industry in a manner that constituted a financial contribution and was specific to the steel industry within the meaning of the sections 771(5)(D)(i) and 771(5A)(D)(iii) of the Act, respectively. B. Froch In this case, Froch did not provide the requested information that is necessary to determine a CVD rate for this preliminary determination. Specifically, Froch did not respond to the Department’s March 14, 2008, initial questionnaire. Thus, in reaching our preliminary determination, pursuant to section 776(a)(2)(A) and (C) of the Act, we have based Froch’s CVD rate on facts otherwise available. The Department has determined that, in the instant investigation, an adverse inference is warranted, pursuant to section 776(b) of the Act. By failing to submit a response to the Department’s initial questionnaire, Froch did not cooperate to the best of its ability in this investigation. Accordingly, we find that an adverse inference is warranted to ensure that Froch will not obtain a more favorable result than had it fully complied with our request for information. 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 decision memorandum at ‘‘Analysis of Programs’’ and Comment 1. The Department’s practice when selecting an adverse rate from among the possible sources of information is to ensure that the margin is sufficiently adverse ‘‘as to effectuate the statutory purposes of the adverse facts available rule 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 VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 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). For the six alleged income tax programs pertaining to either the reduction of the income tax rates or exemption from income tax, we have applied an adverse inference that Froch paid no income tax during the POI. 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 six income tax rate programs is 33 percent. We are applying the 33 percent AFA rate on a combined basis (i.e., the six programs combined provided a 33 percent benefit). Our approach is consistent with the Department’s practice. This 33 percent AFA rate does not apply to income tax credit or rebate programs. See CWP from the PRC Decision Memorandum at ‘‘Use of Adverse Facts Available’’ section. Our preliminary finding in this regard includes the Reduced Income Tax Rate for FIEs Located in Economic and Technological Development Zones and Other Special Economic Zones program even though we have calculated a net subsidy rate for the Winner Companies for this program. See Light-Walled Rectangular Pipe and Tube From People’s Republic of China: Final Affirmative Countervailing Duty Investigation Determination, 73 FR 35642, 35644 (June 24, 2008) (LWP from the PRC), and accompanying decision memorandum (LWP from the PRC Decision Memorandum) at ‘‘Income Tax Subsidies for Foreign Invested Enterprises (FIEs)—Reduced Income Tax Rates for FIEs Based on Location’’ section, where the Department assigned an AFA rate of 33 percent for income tax programs alleged with respect to a non-responding mandatory respondent even though the Department calculated an income tax rate for a particular program for a mandatory respondent that participated in the proceeding. For the program involving the provision of stainless steel coil for LTAR, the Department has preliminarily determined to use the Winner Companies’ rate calculated in this investigation for this program (which is 1.39 percent). Because the Winner PO 00000 Frm 00016 Fmt 4703 Sfmt 4703 39661 Companies did not use any of the other alleged subsidy programs, for the remaining programs in this investigation (including the tax credit and refund programs), we are applying, where available, the highest non-de minimis subsidy rate calculated for the same or similar program in a China CVD investigation. Absent an above-de minimis subsidy rate calculated for the same or similar program, we are applying the highest calculated subsidy rate for any program otherwise listed, which could conceivably be used by the respondents in this investigation. The Department has reached affirmative final CVD determinations in several investigations of products from the PRC. See CFS from the PRC; CWP from the PRC; LWP from the PRC; and Laminated Woven Sacks from the People’s Republic of China: Final Affirmative Countervailing Duty Determination and Final Affirmative Determination, in Part, of Critical Circumstances, 73 FR 35639 (June 24, 2008) (Sacks from the PRC), and accompanying decision memorandum (Sacks Decision Memorandum). As such, we are including the subsidy rates calculated in those final determinations in our AFA analysis in the instant investigation because those final determinations were completed more than seven days prior to the deadline for our preliminary determination. For further information concerning the derivation of Froch’s AFA rate, see the Memorandum to the File from Eric B. Greynolds, ‘‘Calculations for Preliminary Determination’’ (Preliminary Calculations Memorandum) at Attachment III (June 30, 2008), a proprietary document of which the public version is on file in the CRU. 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 ‘‘information 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, e.g., Statement of Administrative Action (SAA) accompanying the Uruguay Round Agreements Act, H. Doc. No. 316, 103d Cong., 2d Session (1994) at 870. The Department considers information to be corroborated if it has probative value. See SAA at 870. To corroborate secondary information, the E:\FR\FM\10JYN1.SGM 10JYN1 jlentini on PROD1PC65 with NOTICES 39662 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices 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 instances in which it determines to apply AFA, the Department, in order to satisfy itself that such information has probative value, will examine, to the extent practicable, the reliability and relevance of the information used. With regard to the reliability aspect of corroboration, we note that these rates were calculated in prior final CVD determinations. No information has been presented that calls into question the reliability of these calculated rates that we are applying as AFA. Unlike other types of information, such as publicly available data on the national inflation rate of a given country or national average interest rates, there typically are no independent sources for data on company-specific benefits resulting from countervailable subsidy programs. With respect to the relevance aspect of corroborating the rates selected, the Department will consider information reasonably at its disposal in considering the relevance of information used to calculate a countervailable subsidy benefit. Where circumstances indicate that the information is not appropriate as AFA, the Department will not use it. See, e.g., Fresh Cut Flowers from Mexico; Final Results of Antidumping Duty Administrative Review, 61 FR 6812 (February 22, 1996). In the absence of record evidence concerning these programs due to Froch’s decision not to participate in the investigation, the Department has reviewed the information concerning China subsidy programs in this and other cases. For those programs for which the Department has found a program-type match, we find that programs of the same type are relevant to the programs of this case. For the programs for which there is no program-type match, the Department has selected the highest calculated subsidy for any China program from which Froch could conceivably receive a benefit to use as AFA. The relevance of this rate is that it is an actual calculated CVD rate for a China program from which Froch could actually receive a benefit. Due to the lack of participation by Froch and the resulting lack of record information concerning these programs, the Department has corroborated the rates it selected to the extent practicable. On this basis, we preliminarily determine the AFA countervailable subsidy rate for Froch to be 106.85 VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 percent ad valorem. See Preliminary Calculations Memorandum at Attachment III. Subsidies Valuation Information Cross-Ownership As stated above, Winner is affiliated with Winner HK and WSP. According to Winner, during the POI Winner HK purchased finished subject merchandise from Winner for sale and consigned steel coil to Winner for manufacturing into subject merchandise that Winner returned to Winner HK for sale. Winner further states that during the POI, WSP was a sub-contractor for Winner. Specifically, Winner provided coils or slit coils to WSP, which WSP slit and/ or formed into pipe and returned it to Winner. Winner states it then manufactured the processed coil into subject merchandise. In addition, WSP provided slit and/or formed pipe to Winner, which Winner claims were used to make non-subject merchandise. Winner states that during the POI, Winner, Winner HK, and WSP were ‘‘directly or indirectly, partially or wholly, owned’’ by the same shareholders. Under 19 CFR 351.525(b)(6)(vi) cross-ownership exists between corporations if one corporation can use or direct the individual assets of the other corporation(s) in essentially the same way it uses its own. This section of the Department’s regulations 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. Based on the information supplied by Winner indicating that the Winner Companies are owned by the same shareholders parent, we preliminarily determine that Winner, WSP, and Winner HK are crossowned under 351.525(b)(6)(vi). For purposes of attributing subsidies received by WSP (an affiliate that supplies stainless steel coil inputs to Winner) under the Provision of Stainless Steel Coil for LTAR program, in accordance with 19 CFR 351.525(b)(6)(iv), we preliminarily determine to attribute subsidies received by WSP to the combined sales of WSP’s sales of steel coil, and the total sales of Winner and Winner HK, excluding intra-company sales. We have adopted the same approach in the preliminary determination with respect to the attribution of subsidies received by Winner under the Provision of Stainless Steel Coil for LTAR and Reduced Income Tax Rate for Foreign Investment Enterprises (FIEs) Located in Economic and Technological Development Zones and Other Special PO 00000 Frm 00017 Fmt 4703 Sfmt 4703 Economic Zones programs. Regarding Winner HK, we preliminarily determine that Winner HK is a Hong Kong company and did not receive any subsidies from the GOC. Analysis of Programs I. Programs Preliminarily Determined To Be Countervailable A. Reduced Income Tax Rate for Foreign Investment Enterprises (FIEs) Located in Economic and Technological Development Zones and Other Special Economic Zones According to the GOC, this program provides tax incentives for enterprises located in special zones. The GOC states that the program was first enacted on June 15, 1988, pursuant to the Provisional Rules on Exemption and Reduction of Corporate Income Tax and Business Tax of FIEs in Coastal Economic Zones, as issued by the Ministry of Finance. The GOC states that the program was continued on July 1, 1991, pursuant to Article 30 of the FIE Tax Law. Specifically, pursuant to Article 7 of the FIE Tax Law for productive FIEs established in a coastal economic development zone, special economic zone, or economic technology development zone, the applicable enterprise income tax rate is 15 or 24 percent, depending on the zones in which productive FIE are located, as opposed to the standard 30 percent income tax rate. We preliminarily determine that this program constitutes a financial contribution in the form of revenue forgone and confers a benefit equal to the amount of tax savings within the meaning of sections 771(5)(D)(ii) and 771(5)(E) of the Act. Because eligibility under this program is limited to firms located within designated geographical regions, we preliminarily determine that the program is specific within the meaning of section 771(5A)(D)(iv) of the Act. We note that the Department has found this program countervailable in previous CVD proceedings. See, e.g., CFS from the PRC Decision Memorandum at ‘‘Reduced Income Tax Rates for FIEs Based on Location’’ section. Under 19 CFR 351.509(b), in the case of an income tax reduction program, the Department normally will consider the benefit as having been received on the date on which the recipient firm would otherwise have had to pay the taxes associated with the reduction. Normally, this date is the date on which the firm in question filed its tax return. In its questionnaire response, Winner indicates that it received an income tax reduction under the program with E:\FR\FM\10JYN1.SGM 10JYN1 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices jlentini on PROD1PC65 with NOTICES respect to the tax return filed during the POI. Therefore, we preliminarily determine that Winner received a benefit under this program during the POI. In accordance with 19 CFR 351.509(a), to calculate the benefit, we subtracted the income tax rate Winner paid under the program from the income tax rate Winner would have paid absent the program and multiplied the difference by Winner’s taxable income. To calculate the net subsidy rate, we divided the benefit by the total sales denominator for Winner and WSP, as described in the ‘‘Cross-Ownership’’ section. On this basis, we preliminarily determine a net subsidy rate of 0.08 percent ad valorem for the Winner Companies. B. Provision of Stainless Steel Coil for Less Than Adequate Remuneration The Department is investigating whether GOC authorities provided stainless steel coil to producers of CWASPP for LTAR. As instructed in the Department’s questionnaires, the Winner Companies identified the suppliers from whom they purchased stainless steel coil during the POI. In addition to the supplier names, the Winner Companies, as instructed, indicated the date of payment, quantity, unit of measure, purchase price (with and without VAT and quantity discounts), grade, and delivery terms. Having obtained permission from the Winner Companies to disclose the proprietary names of their suppliers to the GOC, we asked the GOC to provide certain information regarding the Winner Companies’ domestic suppliers of stainless steel coil. See Memorandum to the File from Eric B. Greynolds, Program Manager, Office 3, Operations, ‘‘Consent to Release Company-Specific Proprietary Information to the Government of China (GOC)’’ (May 28, 2008), a public document on file in the CRU. In order to assess whether an entity should be considered to be the government for purposes of countervailing duty investigations, the Department has in the past considered the following factors to be relevant: (1) The government’s ownership; (2) the government’s presence on the entity’s board of directors; (3) the government’s control over the entity’s activities; (4) the entity’s pursuit of governmental policies or interests; and (5) whether the entity is created by statute. Not all of these criteria must be satisfied for an entity to be considered a government entity, but, taken together these five criteria inform our decision. See e.g., VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 Coated Free Sheet Paper from the Republic of Korea: Final Affirmative Countervailing Duty Determination, 72 FR 60639 (October 25, 2007) (CFS from Korea), and accompanying decision memorandum (CFS from Korea Decision Memorandum) at Comment 11. In addition, we instructed the GOC to indicate whether the Winner Companies’ domestic suppliers of stainless steel coil were trading companies, and if so, to provide information related to the five factors listed above as it pertains to the entities from whom the trading companies purchased the stainless steel coil. In its response, the GOC provided information pertaining to the ‘‘Five Factor Test’’ for each of the Winner Companies’’ domestic stainless steel coil suppliers. In its response, the GOC states that none of the domestic suppliers of the Winner Companies’ stainless steel coils met criteria two through five under the ‘‘Five Factor Test.’’ However, the GOC provided information indicating that, in certain instances, domestic suppliers of the Winner Companies’ stainless steel coil were majority-owned by GOC entities. See GOC’s second supplemental questionnaire response at Exhibit 1; GOC’s supplement to its second supplemental questionnaire response at Exhibits 1–24. Based on our review of the information submitted by the GOC, we preliminarily determine that domestic suppliers of the Winner Companies’ stainless steel coil that were majority-owned by the GOC during the POI constitute government authorities. In addition, in its response the GOC identified which of the Winner Companies’ domestic stainless steel coil suppliers were trading companies. However, the GOC was unable to provide the requested information concerning the ‘‘Five Factor Test’’ as it pertains to the suppliers from whom the domestic trading companies purchased the stainless steel coil. See GOC’s second supplemental questionnaire response at 3 (‘‘The GOC does not possess the information requested by the Department’’). Regarding domestic trading companies that supplied stainless steel coil to the Winner Companies during the POI, the GOC was unable to provide the requested information concerning the entities from which the trading companies acquired the input, even in instances involving government-owned trading companies. Thus, we preliminarily determine that the necessary information is not on the record, and we are resorting to the use of facts available within the meaning of sections 776(a)(1) and (2) of the Act. PO 00000 Frm 00018 Fmt 4703 Sfmt 4703 39663 In its response, the GOC provided information on the amount of stainless steel coil produced by state-owned enterprises (SOEs) and private producers in China. See GOC’s June 16, 2008, second supplemental questionnaire at page 4. Using these data, we derived the ratio of stainless steel coil produced by SOEs during the POI (82 percent).4 Thus, pursuant to sections 776(a)(1) and (2) of the Act, for purposes of this preliminary determination we are resorting to the use of facts available (FA) with regard to the stainless steel coil sold to the Winner Companies by domestic trading companies. Specifically, we are assuming that the percentage produced by government authorities is equal to the ratio of stainless steel coil produced by SOEs during the POI.5 This approach is consistent with the Department’s practice. See CWP from the PRC Decision Memorandum at the ‘‘Hotrolled Steel for Less Than Adequate Remuneration’’ section; see also LWP from the PRC Decision Memorandum at the ‘‘Hot-rolled Steel for Less Than Adequate Remuneration’’ section. For further discussion, see our description of the benefit calculations below. We will seek additional information regarding the amount of stainless steel coil purchased by domestic trading companies that was produced by SOEs. In their submissions, the Winner Companies argue that the Department should not subject the stainless steel coils that WSP purchased from GOC authorities to our LTAR subsidy analysis because the inputs were not subsequently used to make CWASPP. For purposes of this preliminary determination, we disagree with the Winner Companies’ arguments. We note that the Winner Companies are not arguing that the inputs WSP purchased from GOC authorities are incompatible with the production process used to produce CWASPP but that WSP did not use those inputs to produce CWASPP. In this regard, we note that 19 CFR 351.503(c) states that: In determining whether a benefit is conferred, the Secretary is not required to consider the effect of the government action on the firm’s performance, including its prices or output, or how the firm’s behavior otherwise is altered. Further, the Preamble adds that: 4 At this time, we have solicited from the GOC information concerning domestic consumption of imported stainless steel coil and stainless steel coil produced by SOEs and private companies. 5 In other words, as FA, we are assuming that 82 percent of the stainless steel coil purchased by domestic trading companies during the POI was produced by SOEs. E:\FR\FM\10JYN1.SGM 10JYN1 39664 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices jlentini on PROD1PC65 with NOTICES In analyzing whether a benefit exists, we are concerned with what goes into a company, such as enhanced revenues and reduced-cost inputs in the broad sense that we have used the term, not with what the company does with the subsidy. See Countervailing Duties; Final Rule, 63 FR 65348, 65361 (November 25, 1998) (Preamble)). See also, Polyethylene Terephthalate Film, Sheet, and Strip from India: Final Results of Countervailing Duty Administrative Review, 73 FR 7708 (February 11, 2008), and accompanying decision memorandum at Comment 8 (explaining that because the imported equipment at issue could be used to make subject merchandise, the respondent failed to demonstrate that subsidy benefits were tied to non-subject merchandise, pursuant to 19 CFR 351.525(b)(5)). Therefore, in accordance with our regulations, we do not consider the manner in which WSP used its inputs as a factor that is germane to the Department’s subsidy analysis and, thus, we have for purposes of this preliminary determination subjected WSP’s purchases of stainless steel coils from GOC authorities to our LTAR subsidy analysis. However, information on the record indicates that stainless steel coil that is of the grade 430 is incompatible with the production process used to produce CWASPP (i.e., stainless steel coil that is grade 430 is not austentitic). See June 30, 2008, Memorandum to the File from Eric B. Greynolds, Program Manager, Office 3, Operations, ‘‘Public Information Concerning Stainless Steel of Grades 201 and 430,’’ a public document on file in the CRU (June 30, 2008) (Steel Grade Memorandum). This circumstance is markedly different than the issue of whether or how a firm used a particular input and, therefore, is distinct from the issue described under 19 CFR 351.503(c). Thus, because record evidence indicates that stainless steel coil of grade 430 cannot, by its nature, be used to make CWASPP, we have for purposes of this preliminary determination excluded the grade from our LTAR subsidy analysis. See 19 CFR 351.525(b)(5). Having identified the extent to which the Winner Companies’ obtained stainless steel coil from GOC authorities, we preliminarily determine that the GOC authorities’ provision of stainless steel coil constitutes a financial contribution under section 771(5)(D)(iii) of the Act.6 Furthermore, 6 For purposes of this preliminary determination, we find that private producers that provided stainless steel coil to the Winner Companies during the POI do not constitute government authorities VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 as discussed above in the ‘‘Adverse Facts Available’’ section, pursuant to section 776(b) of the Act, we find that the provision of stainless steel coil to producers of CWASPP by GOC authorities is de facto specific within the meaning of section 771(5A)(D)(iii) of the Act. The Department’s regulation at 19 CFR 351.511(a)(2) sets forth the basis for identifying appropriate marketdetermined benchmarks for measuring the adequacy of remuneration for government-provided goods or services. These potential benchmarks are listed in hierarchical order by preference: (1) Market prices from actual transactions within the country under investigation (e.g., actual sales, actual imports or competitively run government auctions) (‘‘tier one’’); (2) world market prices that would be available to purchasers in the country under investigation (‘‘tier two’’); or (3) an assessment of whether the government price is consistent with market principles (‘‘tier three’’). As we have explained in Canadian Lumber, the preferred benchmark in the hierarchy is an observed market price from actual transactions within the country under investigation.7 This is because such prices generally would be expected to reflect most closely the prevailing market conditions of the purchaser under investigation. Based on the hierarchy established above, we must first determine whether there are market prices from actual sales transactions involving Chinese buyers and sellers that can be used to determine whether GOC authorities sold stainless steel coils to the Winner Companies for LTAR. Notwithstanding the regulatory preference for the use of prices stemming from actual transactions in the country, where the Department finds that the government provides the majority, or a substantial portion of, the market for a good or service, prices for such goods and services in the country will be considered significantly distorted and will not be an appropriate basis of comparison for determining whether there is a benefit.8 As explained above, for purposes of this preliminary determination, we find that SOEs account for approximately 82 percent of the stainless steel coil and, thus, their provision of stainless steel coil to the Winner Companies does not constitute a financial contribution within the meaning of section 771(5)(D)(iii) of the Act. 7 See Notice of Final Affirmative Countervailing Duty Determination and Final Negative Critical Circumstances Determination: Certain Softwood Lumber Products from Canada, 67 FR 15545 (April 2, 2002) (Canadian Lumber), and accompanying decision memorandum at 36. 8 See Preamble, 63 FR at 65377. PO 00000 Frm 00019 Fmt 4703 Sfmt 4703 production in the PRC during the POI (and approximately 71 percent of production if available data on import volume are included). Consequently, because of the government’s overwhelming involvement in the PRC stainless steel coil market, the use of private producer prices in China would be akin to comparing the benchmark to itself (i.e., such a benchmark would reflect the distortions of the government presence).9 As we explained in Canadian Lumber: Where the market for a particular good or service is so dominated by the presence of the government, the remaining private prices in the country in question cannot be considered to be independent of the government price. It is impossible to test the government price using another price that is entirely, or almost entirely, dependent upon it. The analysis would become circular because the benchmark price would reflect the very market distortion which the comparison is designed to detect.10 For these reasons, prices stemming from private transactions within China cannot give rise to a price that is sufficiently free from the effects of the GOC’s actions, and therefore cannot be considered to meet the statutory and regulatory requirement for the use of market-determined prices to measure the adequacy of remuneration. We note that our finding in this regard is consistent with the Department’s finding in CWP from the PRC. See CWP from the PRC Decision Memorandum at Comment 7, n. 206: Even if, arguendo, we were to rely on the GOC’s 71 percent production figure, we would still find that government production accounts for a significant portion of the HRS industry, so that it is reasonable to conclude that private prices in China are significantly distorted, and therefore unusable as benchmarks. Next, turning to tier one benchmark prices stemming from actual import prices, there is record evidence that Winner HK purchased stainless steel coil from a supplier located outside of China during the POI.11 The stainless steel coil Winner HK imported from the foreign supplier accounts for a significant percentage of the stainless steel coil purchased by the Winner Companies during the POI. The company-specific import price data contain information on monthly prices. In addition, the data contain prices for every grade of stainless steel that the Winner Companies purchased from 9 See Canadian Lumber decision memorandum at 34. 10 See Canadian Lumber decision memorandum at 38–39. 11 The identity of the foreign supplier is business proprietary. E:\FR\FM\10JYN1.SGM 10JYN1 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices jlentini on PROD1PC65 with NOTICES GOC authorities during the POI, though month-to-month comparisons of prices within grades are not possible in some instances due to the lack of companyspecific import prices in certain months. In addition, the Department has on the record of the investigation tier two benchmark prices for certain grades of stainless steel coil, namely grades 304 and 316. The sources for the tier two benchmark prices are the Steel Business Briefing (SBB) publication and Management Engineering and Production Services (MEPS). The data reported by SBB contain delivered, monthly prices for stainless steel coil, grade 304, for Europe, North America, Asia (on an import price basis), and the world for the POI. The data reported by MEPS contain monthly prices for stainless steel coil (both hot- and coldrolled), grades 304 and 316, for Europe, North America, Asia, and the world for the POI.12 Further, as discussed above, the GOC reported aggregate import data for the POI, as reported by its Customs Service. However, these aggregate import data do not delineate the prices by grade or month. Therefore, because the aggregated import data submitted by the GOC do not delineate the prices by grade or month, we are excluding this information from consideration for use as benchmarks. As stated above, we preliminarily determine that government production accounts for a significant portion of the stainless steel coil industry so that it is reasonable to conclude that private prices in China are significantly distorted, and therefore unusable as benchmarks. Given this finding, we must test the available company-specific import prices of stainless steel coil in order to ascertain whether they are also distorted by the dominance of government production in the PRC. To conduct the test, we have compared the company-specific import price data for stainless steel coil to the world price data for stainless steel coil reported in MEPS and SBB and have validated these import prices with market-based world prices. Furthermore, we preliminarily find that the world prices for stainless steel coil reported by MEPS and SBB are comparable to the company-specific import prices reported by the Winner Companies. Therefore, for purposes of 12 The data reported by MEPS do not indicate whether the prices are reported on a delivered basis. However, when compared on a monthly basis, the prices reported by MEPS for grade 304 are, in some instances, higher than the prices for grade 304 reported by SBB, which are reported on a delivered basis. Thus, for purposes of the preliminary determination, we are assuming that the stainless steel coil prices in MEPS are reported on a delivered basis. VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 this preliminary determination, we conclude that the world prices for stainless steel coil reported by MEPS and SBB should be treated as surrogate import prices and, thus, serve as a tier one benchmark. Although the regulations refer to ‘‘actual imports,’’ we see no meaningful difference in actual and potential market-determined import prices stemming from transactions outside the country.13 This is particularly the case where, as here, an actual import price is comparable to world market-determined price, such as those contained in MEPS and SBB. In effect, because of the comparability between the company-specific import prices and the MEPS and SBB world prices, we consider the latter to be equivalent or surrogates for actual imports. These prices are thus appropriately considered tier one benchmark prices. We note that this approach is consistent with the Department’s approach in CWP from the PRC. See CWP from the PRC Decision Memorandum at Comment 7. For these reasons, to measure whether GOC authorities sold stainless steel coil to the Winner Companies for LTAR during the POI, we are relying on the simple average of the company-specific import prices, MEPS, and SBB. To calculate the benefit, we first converted the benchmark prices into the same unit of measure (USD per tonne). Next, we converted the benchmark unit prices from U.S. dollars to renminbi (RMB) using average USD to RMB exchange rates, as reported by the Federal Reserve Statistical Release. We then compared the benchmark unit prices to the unit prices the Winner Companies paid to domestic suppliers of stainless steel coil during the POI. We conducted the benefit calculation by comparing prices within each grade. Information concerning the grades of stainless steel coil imported by Winner HK during the POI is business proprietary. Therefore, for further discussion regarding the manner in which the Department conducted its benefit calculation, see the Memorandum to the File from Eric B. Greynolds, Program Manager, Office 3, Operations, ‘‘Comparisons of Grades of Stainless Steel Coil for Purposes of the Preliminary Determination’’ (Jun 30, 2008), a business proprietary document, 13 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, 43197 (August 17, 2001) (unchanged in the final determination, see Canadian Lumber decision memorandum at 37–38). PO 00000 Frm 00020 Fmt 4703 Sfmt 4703 39665 of which the public version is on file in the CRU. Regarding petitioners’ allegation concerning export restraints on stainless steel coil, we find that it is not necessary to examine the allegation because our benchmarks account for any influence that export restraints may have on domestic prices for the input. We encourage interested parties to submit comments on our use of company-specific import prices and prices from MEPS and SBB in the derivation of the benchmark including the most appropriate method to employ to validate company-specific import prices into the PRC using world market pricing data. We also invite interested parties to comment on the manner in which we conducted the benefit calculation as it pertains to the comparison of prices by grade and month. In instances in which the benchmark unit price was greater than the price paid to GOC authorities, we multiplied the difference by the quantity of stainless steel coil purchased from GOC authorities to arrive at the benefit. As explained above, in instances in which the Winner Companies purchased the stainless steel coil from government trading companies and/or private trading companies, we multiplied the product of the price difference per unit and the quantity of stainless steel coil purchased by 82 percent to arrive at the benefit. To calculate the net subsidy rate, we divided the total benefit by the Winner Companies’ total sales for the POI. On this basis, we calculated a total net subsidy rate of 1.39 percent ad valorem for the Winner Companies. II. Program Preliminarily Found Not To Provide Countervailable Benefits During the POI A. Provision of Land-Use Rights for Less Than Adequate Remuneration As explained in the Initiation Checklist, the Department is examining whether GOC-owned/controlled entities sold land to producers of CWASPP for LTAR. In its questionnaire responses, Winner states in 1993, 1996, and 2000, it made payments for land-use rights. Winner states that in 1993, prior to the incorporation of Winner, one of its founders purchased land-use rights from a foreign investor, who had, in turn, acquired the land from the Xiaobu Village Administration. Similarly, Winner states that in 1996 it acquired land-use rights from an individual, who had in turn acquired the land-use rights from the Xiaobu Village Administration. Further, Winner states that in 1999 it E:\FR\FM\10JYN1.SGM 10JYN1 39666 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices purchased land-use rights from the Huasan Town Administration. Winner states that in 2000, the Huasan Town Administration ‘‘confirmed’’ the granting of land-use rights. Winner also states that in 2002 it received from the Government of the Province of Guandong a certificate of land-use rights for the land it acquired in 1993, 1996, and 1999. Winner further states that no land-use payments were made to the GOC or GOC governments during the POI. Based on Winner’s questionnaire responses, we preliminarily determine that there were no payments associated with its acquisition of land-use rights after the December 11, 2001, ‘‘cut-off’’ date established in CWP from the PRC. See CWP from the PRC Decision Memorandum at Comment 2. Therefore, in accordance with the approach established in CWP from the PRC, we preliminarily determine that this program did not confer benefits upon Winner during the POI. III. Programs Preliminarily Determined To Be Not Used We preliminarily determine that the Winner Companies did not apply for or receive benefits during the POI under the programs listed below.14 A. Preferential Lending 1. Loans and Export Credits Pursuant to the Northeast Revitalization Program Income Tax Programs. B. Tax Programs 2. ‘‘Two Free, Three Half’’ Program. 3. Income Tax Reductions for ExportOriented Foreign Investment Enterprises (‘‘FIEs’’). 4. Income Tax Credit or Refund for Reinvestment of FIE Profits. 5. Provincial and Local Tax Exemptions and Reductions for Productive FIEs. 6. Local Income Tax Reductions in Certain Development Zones. 7. Preferential Tax Policies for Research and Development at FIEs. C. Indirect Tax Programs and Import Tariff Program 8. VAT Refunds on Purchases of Domestically Produced Equipment by FIEs. 9. Tax Credits on Purchases of Domestically Produced Equipment by Domestically Owned Companies. D. Provincial Subsidy Programs 10. Guangdong Province’s ‘‘Outward Expansion’’ Program. 11. Preferential Loans Pursuant to Liaoning Province’s Five-Year Framework. 12. Preferential Tax Policies for Town and Village Enterprises (‘‘TVEs’’). E. Provision of Goods or Services for Less Than Adequate Remuneration 13. Provision of Stainless Steel Coil for Less than Adequate Remuneration. 14. Provision of Land-Use Rights for Less Than Adequate Remuneration. Government Restraints on Exports 15. Export Restraints on Flat-rolled Steel. Verification In accordance with section 782(i)(1) of the Act, we intend to verify the information submitted by the Winner Companies and the GOC prior to making our final determination. Suspension of Liquidation In accordance with section 703(d)(1)(A)(i) of the Act, we have calculated an individual rate for each producer/exporter of the subject merchandise. We preliminarily determine the total estimated net countervailable subsidy rate to be: Exporter/manufacturer Net subsidy rate jlentini on PROD1PC65 with NOTICES Winner Stainless Steel Tube Co. Ltd. (Winner)/ Winner Steel Products (Guangzhou) Co., Ltd. (WSP)/ Winner Machinery Enterprises Company Limited (Winner HK) (Collectively the Winner Companies). Froch Enterprise Co. Ltd. (Froch) (also known as Zhangyuan Metal Industry Co. Ltd.) ..................................... All Others ............................................................................................................................................................... 1.47 percent ad valorem. 106.85 percent ad valorem. 1.47 percent ad valorem. Sections 703(d) and 705(c)(5)(A)(i) of the Act state that for companies not investigated, we will determine an allothers rate by weighting the individual company subsidy rate of each of the companies investigated by each company’s exports of the subject merchandise to the United States, excluding any zero and de minimis net subsidy rates, and any rates determined entirely under section 776 of the Act. Thus, in accordance with sections 703(d) and 705(c)(5)(A)(i) of the Act, we are equating the net subsidy rate for all other producers/exporters of CWASPP from the PRC with the net subsidy rate calculated for the Winner Companies. In accordance with sections 703(d)(1)(B) and (2) of the Act, we are directing CBP to suspend liquidation of all entries of CWASPP from the PRC that are entered, or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the Federal Register, and to require a cash deposit or bond for such entries of merchandise in the amounts indicated above. In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all nonprivileged and non-proprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Import Administration. In accordance with 19 CFR 351.224(b), the Department will disclose to the parties the calculations for this preliminary determination within five days of its announcement. The Department will notify interested parties of the schedule for submission of case briefs. As part of the case brief, parties are encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited. See 19 CFR 351.309(c)(2). Rebuttal briefs must be limited to issues raised in the case briefs. See 19 CFR 351.309(d)(2). 14 As explained above, Froch did not respond to the Department’s initial questionnaire. Therefore, as AFA, we are assigning net subsidy rates to Froch for each of the programs listed in this section, the exception being Export Restraints on Hot Rolled Stainless Steel Coils, which as explained above, the Department has determined it is not necessary to examine this subsidy program due to the benchmark used to calculate the benefit calculation. VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 ITC Notification PO 00000 Frm 00021 Fmt 4703 In accordance with section 705(b)(2)(B) of the Act, if our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination. Disclosure and Public Comment Sfmt 4703 E:\FR\FM\10JYN1.SGM 10JYN1 Federal Register / Vol. 73, No. 133 / Thursday, July 10, 2008 / Notices In accordance with 19 CFR 351.310(c), we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination. Individuals who wish to request a hearing must submit a written request within 30 days of the publication of this notice in the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Parties will be notified of the schedule for the hearing and parties should confirm the time, date, and place of the hearing 48 hours before the scheduled time. Requests for a public hearing should contain: (1) Party’s name, address, and telephone number; (2) the number of participants; and (3) to the extent practicable, an identification of the arguments to be raised at the hearing. This determination is issued and published pursuant to sections 703(f) and 777(i) of the Act and 19 CFR 351.221(b)(4). Dated: June 30, 2008. David M. Spooner, Assistant Secretary for Import Administration. [FR Doc. E8–15733 Filed 7–9–08; 8:45 am] BILLING CODE 3510–DS–P DEPARTMENT OF COMMERCE International Trade Administration (C–570–923) Raw Flexible Magnets from the People’s Republic of China: Final Affirmative Countervailing Duty Determination Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce (the Department) has made a final determination that countervailable subsidies are being provided to producers and exporters of raw flexible magnets (RFM) from the People’s Republic of China (PRC). For information on the estimated subsidy rates, see the ‘‘Suspension of Liquidation’’ section of this notice. EFFECTIVE DATE: July 10, 2008. FOR FURTHER INFORMATION CONTACT: Kristen Johnson, AD/CVD Operations, Office 3, Import Administration, International Trade Administration, U.S. Department of Commerce, Room 4012, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: 202–482–4793. jlentini on PROD1PC65 with NOTICES AGENCY: VerDate Aug<31>2005 16:58 Jul 09, 2008 Jkt 214001 SUPPLEMENTARY INFORMATION: Petitioner The petitioner in this investigation is Magnum Magnetics Corporation (petitioner). Period of Investigation The period for which we are measuring subsidies, or period of investigation (POI), is January 1, 2006, through December 31, 2006. Case History On February 25, 2008, the Department published in the Federal Register its preliminary affirmative determination in the countervailing duty (CVD) investigation of RFM from the PRC. See Raw Flexible Magnets from the People’s Republic of China: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination, 73 FR 9998 (February 25, 2008) (RFM Preliminary Determination). On April 29, 2008, we received a case brief from the Government of the People’s Republic of China (GOC). Petitioner submitted a rebuttal brief on May 5, 2008. Neither the GOC nor petitioner requested a hearing. Scope of Investigation The products covered by this investigation are certain flexible magnets regardless of shape,1 color, or packaging.2 Subject flexible magnets are bonded magnets composed (not necessarily exclusively) of (i) any one or combination of various flexible binders (such as polymers or co–polymers, or rubber) and (ii) a magnetic element, which may consist of a ferrite permanent magnet material (commonly, strontium or barium ferrite, or a combination of the two), a metal alloy (such as NdFeB or Alnico), any combination of the foregoing with each other or any other material, or any other material capable of being permanently magnetized. Subject flexible magnets may be in either magnetized or unmagnetized (including demagnetized) condition, and may or may not be fully or partially laminated or fully or partially bonded with paper, plastic, or other material, of any composition and/or color. Subject flexible magnets may be uncoated or may be coated with an adhesive or any other coating or combination of coatings. 1 The term ‘‘shape’’ includes, but is not limited to profiles, which are flexible magnets with a nonrectangular cross-section. 2 Packaging includes retail or specialty packaging such as digital printer cartridges. PO 00000 Frm 00022 Fmt 4703 Sfmt 4703 39667 Specifically excluded from the scope of this investigation are printed flexible magnets, defined as flexible magnets (including individual magnets) that are laminated or bonded with paper, plastic, or other material if such paper, plastic, or other material bears printed text and/or images, including but not limited to business cards, calendars, poetry, sports event schedules, business promotions, decorative motifs, and the like. This exclusion does not apply to such printed flexible magnets if the printing concerned consists of only the following: a trade mark or trade name; country of origin; border, stripes, or lines; any printing that is removed in the course of cutting and/or printing magnets for retail sale or other disposition from the flexible magnet; manufacturing or use instructions (e.g., ‘‘print this side up,’’ ‘‘this side up,’’ ‘‘laminate here’’); printing on adhesive backing (that is, material to be removed in order to expose adhesive for use such as application of laminate) or on any other covering that is removed from the flexible magnet prior or subsequent to final printing and before use; non– permanent printing (that is, printing in a medium that facilitates easy removal, permitting the flexible magnet to be re– printed); printing on the back (magnetic) side; or any combination of the above. All products meeting the physical description of subject merchandise that are not specifically excluded are within the scope of this investigation. The products subject to the investigation are currently classifiable principally under subheadings 8505.19.10 and 8505.19.20 of the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS subheadings are provided only for convenience and customs purposes; the written description of the scope of this proceeding is dispositive. Scope Comments Interested parties submitted comments on the scope of investigation. Those comments are fully addressed in the Decision Memorandum, which is hereby adopted by this notice. Injury Test Because the PRC is a ‘‘Subsidies Agreement Country’’ within the meaning of section 701(b) of the Tariff Act of 1930, as amended, (the Act), section 701(a)(2) of the Act applies to this investigation. Accordingly, the International Trade Commission (ITC) must determine whether imports of the subject merchandise from the PRC materially injure, or threaten material injury to a U.S. industry. On November 9, 2007, the ITC published its preliminary determination that there is E:\FR\FM\10JYN1.SGM 10JYN1

Agencies

[Federal Register Volume 73, Number 133 (Thursday, July 10, 2008)]
[Notices]
[Pages 39657-39667]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-15733]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-931]


Circular Welded Austenitic Stainless Pressure Pipe From the 
People's Republic of China: Preliminary Affirmative Countervailing Duty 
Determination 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 (the Department) preliminarily 
determines that countervailable subsidies are being provided to 
producers and exporters of circular welded austenitic stainless 
pressure pipe (CWASPP) from the People's Republic of China (PRC). For 
information on the estimated subsidy rates, see the ``Suspension of 
Liquidation'' section of this notice. Interested parties are invited to 
comment on this preliminary determination. See ``Disclosure and Public 
Comment'' section below for procedures on filing comments.

EFFECTIVE DATE: July 10, 2008.

[[Page 39658]]


FOR FURTHER INFORMATION CONTACT: Robert Copyak, or Eric B. Greynolds, 
AD/CVD Operations, Office 3, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
2209 and (202) 482-6071, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The following events have occurred since the issuance of the 
Department's notice of initiation in the Federal Register. See Circular 
Welded Austenitic Stainless Pressure Pipe from the People's Republic of 
China: Notice of Initiation of Countervailing Duty Investigation, 73 FR 
9994 (February 25, 2008) (Initiation Notice), and accompanying 
initiation checklist (February 19, 2008) (Initiation Checklist). On 
February 19, 2008, the Department issued the results of its query of 
the U.S. Customs and Border Protection (CBP) trade database to 
interested parties. See Memorandum to the File from Eric B. Greynolds, 
Program Manager, Office 3, Operations, ``Results of Query of Customs 
and Border Protection Database'' (February 19, 2008), a proprietary 
document of which the public version is on file in the Central Records 
Unit (CRU), room 1117 in the main Department building. On February 29, 
2008, Zhejiang Jiuli High-Tech Metals Co. Ltd. (Jiuli), a Chinese 
producer and exporter of CWASPP, requested that the Department select 
the company as a mandatory respondent. Jiuli further requested that, in 
the event that the Department did not select it as a mandatory 
respondent, the Department designate Jiuli as a voluntary respondent as 
provided under 19 CFR 351.204(d). On March 3, 2008, Jiuli submitted 
comments regarding the Department's selection of mandatory respondents 
in the investigation. On March 14, 2008, the Department selected as 
mandatory respondents the two largest Chinese producers/exporters of 
CWASPP that could reasonably be examined. The mandatory respondents 
selected by the Department are, in alphabetical order, Froch Enterprise 
Co. Ltd. (Froch) (also known as Zhangyuan Metal Industry Co. Ltd.) and 
Winner Stainless Steel Tube Co. Ltd. (Winner). See Memorandum to 
Stephen J. Claeys, Deputy Assistant Secretary, for Import 
Administration, through Melissa G. Skinner, Director, Office 3, 
Operations, from the team, ``Respondent Selection'' (March 14, 2008), a 
proprietary document of which the public version is on file in the CRU. 
On the same day, we issued a countervailing duty (CVD) questionnaire to 
the Government of China (GOC) requesting that the GOC forward the 
company sections of the questionnaire to the mandatory respondents. As 
a courtesy, we also issued the CVD questionnaire to Froch, and Winner, 
and to Jiuli.\1\
---------------------------------------------------------------------------

    \1\ We received confirmation that the CVD questionnaire was 
delivered to Froch on March 19, 2008. See Memorandum to the File 
from Eric B. Greynolds, Program Manager, Office 3, Operations (March 
26, 2008), which includes a copy of the documentation from FedEx 
confirming delivery, a public document on file in the CRU. Winner 
also received a copy of the CVD questionnaire. See, e.g., Winner's 
April 29, 2008, request for an extension of time to respond to the 
due date deadline, which serves as confirmation of Winner's receipt 
of the CVD questionnaire. We also served Jiuli with a copy of the 
CVD questionnaire. See Memorandum to the File from Eric B. 
Greynolds, Program Manager, Office 3, Operations (March 26, 2008), a 
public document on file in room 1117 of the CRU, regarding the 
service of the initial questionnaire to Jiuli.
---------------------------------------------------------------------------

    On March 17, 2008, 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 CWASPP from the PRC. See 
Welded Stainless Steel Pressure Pipe from China, USITC Pub 3986, 
Investigation Nos. 701-TA-454 and 731-TA-1144 (Preliminary) (March 
2008). On the same day, Prudential Stainless & Alloy (Prudential), a 
U.S importer and distributor of CWASPP, submitted comments regarding 
the scope of the investigation.\2\
---------------------------------------------------------------------------

    \2\ These comments are identical to the comments filed by 
Prudential on March 10, 2008, in the companion antidumping duty 
investigation on these same products.
---------------------------------------------------------------------------

    On April 4, 2008, we published a postponement of the preliminary 
determination of this investigation until no later than June 30, 2008. 
See Circular Welded Austenitic Stainless Pressure Pipe from the 
People's Republic of China: Amended Notice of Postponement of 
Preliminary Determination in the Countervailing Duty Investigation, 73 
FR 18511 (April 4, 2008).
    On May 5, 2008, we received the GOC's response to the Department's 
initial questionnaire. On May 9, 2008, we received a response to the 
initial questionnaire from Winner and its affiliates Winner Machinery 
Enterprises Company Limited (Winner HK) and Winner Steel Products 
(Guangzhou) Co., Ltd. (WSP) (collectively the Winner Companies). Froch 
did not respond to the Department's initial questionnaire. On May 14, 
2008, the GOC submitted its response to the Department's government 
supplemental questionnaire. On June 10, 2008, the Winner Companies 
submitted their response to the Department's supplemental 
questionnaire. On June 16, 2008, the GOC submitted its response to the 
Department's second government supplemental questionnaire.
    On May 30, 2008, petitioners submitted new subsidy allegations 
concerning 11 programs.\3\ On June 9, 2008, members of the Import 
Administration staff met with officials from the GOC regarding new 
subsidy allegations filed by petitioners. See Memorandum to the File 
from Eric B. Greynolds, Program Manager, Office 3, Operations, ``Ex 
Parte Meeting with Officials from the Government of China'' (June 9, 
2008), a public document on file in the CRU. On June 11, 2008, the GOC 
submitted comments to the Department urging it to reject petitioners' 
new subsidy allegations on the grounds that petitioners alleged them in 
an untimely matter and that they are without merit. On June 12, 2008, 
the Department issued a letter to petitioners asking them to explain 
why they were unable to submit their new subsidy allegations within the 
regulatory deadline established under 19 CFR 351.301(d)(4)(i)(A). On 
June 18, 2008, petitioners submitted their response to the Department 
and responded to the comments made by the GOC in its June 12, 2008 
submission.
---------------------------------------------------------------------------

    \3\ Petitioners are Bristol Metals, LLC, Felker Brothers Corp., 
Marcegaglia U.S.A., Inc., Outokumpu Stainless Pipe, Inc., and the 
United Steelworkers.
---------------------------------------------------------------------------

    At this time, the Department continues to evaluate the timeliness 
of petitioners' new subsidy allegations. If the Department determines 
that the new subsidy allegations were submitted in accordance with 19 
CFR 351.301(d)(4)(i)(A), then the Department will issue a new subsidy 
allegation decision memorandum in which it will identify, if any, the 
programs it will investigate. Any such decision memorandum will be 
provided to interested parties.
    On June 25, 2008, petitioners requested that the Department align 
the final CVD determination with the final determination in the 
companion antidumping (AD) investigation of CWASPP from the PRC.

Scope of the Investigation

    The merchandise covered by this investigation is circular welded 
austenitic stainless pressure pipe not greater than 14 inches in 
outside diameter. This merchandise includes, but is not limited to, the 
American Society for Testing and Materials

[[Page 39659]]

(ASTM) A-312 or ASTM A-778 specifications, or comparable domestic or 
foreign specifications. ASTM A-358 products are only included when they 
are produced to meet ASTM A-312 or ASTM A-778 specifications, or 
comparable domestic or foreign specifications.
    Excluded from the scope are: (1) Welded stainless mechanical 
tubing, meeting ASTM A-554 or comparable domestic or foreign 
specifications; (2) boiler, heat exchanger, superheater, refining 
furnace, feedwater heater, and condenser tubing, meeting ASTM A-249, 
ASTM A-688 or comparable domestic or foreign specifications; and (3) 
specialized tubing, meeting ASTM A-269, ASTM A-270 or comparable 
domestic or foreign specifications.
    The subject imports are normally classified in subheadings 
7306.40.5005, 7306.40.5040, 7306.40.5062, 7306.40.5064, and 
7306.40.5085 of the Harmonized Tariff Schedule of the United States. 
They may also enter under HTSUS subheadings 7306.40.1010, 7306.40.1015, 
7306.40.5042, 7306.40.5044, 7306.40.5080, and 7306.40.5090. The HTSUS 
subheadings are provided for convenience and customs purposes only; the 
written description of the scope is dispositive.

Scope Comments

    In our Initiation Notice, we set aside a period of time for parties 
to raise issues regarding product coverage, and encouraged all parties 
to submit comments within 20 calendar days of publication of the 
Initiation Notice. See Initiation Notice, 73 FR at 9994. As stated 
above, on March 17, 2008, Prudential submitted timely scope comments.
    Prudential argues that the current scope appears to cover all alloy 
grades within the specification ASTM A-312. However, according to 
Prudential, certain grades such as 309S, 310S, 321, 347, 317L, 904L 
(NO8904), 254SMO (S31254) and others are specialized, very low-volume 
products that do not compete with the high-volume commodity products 
such as 304, 304L, 316, and 316L that are manufactured by petitioners. 
Prudential contends that such low-volume, higher-priced specialty 
grades should be excluded from the scope. Specifically, Prudential 
argues that the Department should exclude all grades of CWASPP except 
the 304 series and 316 series. Prudential adds that series 304H and 
304LN should remain within the scope in order to prevent circumvention.
    Additionally, Prudential asserts that the scope of the 
investigation is unnecessarily broad with respect to schedules (e.g., 
wall thickness) of CWASPP. Prudential contends that the scope should 
only cover schedules 40S and 10S, which it claims constitute the vast 
majority of pipe produced by petitioners. Prudential argues that 
schedules 5S, 20, 30, 60, and 80S should be excluded from the scope 
because they do not represent a threat to petitioners.
    On March 14, 2008, petitioners filed rebuttal comments to 
Prudential's scope and product coverage comments. Petitioners oppose 
changing the scope of the investigation arguing that Prudential's 
proposed changes regarding alloy grade and schedules (wall thickness) 
would exclude products presently manufactured by the domestic industry 
that are important to the domestic industry. They note that these 
products were also covered by the ITC in its definition of like product 
in its preliminary investigation questionnaire.
    On April 28, 2008, Prudential filed a letter in response to 
petitioners' March 14, 2008, submission. Prudential disagrees with 
petitioners' claim that the items Prudential is proposing to exclude 
are ``important'' to the domestic industry. Arguing that, as a 
specialty ``stockist,'' these items are important to Prudential, but 
not the industry as a whole. Prudential requests that the Department 
determine factually how much, of the approximately 35,000 tons produced 
last year domestically, were not 304, 304L, 304/L, 316, 316L or 316/L 
and were not schedule 10s or 40s. Prudential asserts that the 
percentages will be quite low and argues that it is doubtful that 
schedule 5s and 80s would be considered ``important'' and that, 
undeniably, the remaining schedules (20, 30, 60, 100, 120, 140, 160, 
and XXH) are of no importance to the domestic industry.
    The Department is evaluating these comments and will issue its 
decision regarding the scope of the investigation in the preliminary 
determination of the companion AD investigation due no later than 
August 27, 2008.

Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

    On June 25, 2008, petitioners submitted a letter, in accordance 
with section 705(a)(1) of the Tariff Act of 1930, as amended (the Act), 
requesting alignment of the final CVD determination with the final 
determination in the companion AD investigation of CWASPP 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 CVD determination with the 
final determination in the companion AD investigation of CWASPP from 
the PRC. The final CVD determination will be issued on the same date as 
the final AD determination, which is currently scheduled to be issued 
no later than November 10, 2008.

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), and accompanying decision memorandum (CFS from the PRC 
Decision Memorandum). In CFS from the PRC, the Department found that

* * * 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 the PRC.

See CFS from the PRC Decision Memorandum at Comment 6. The Department 
has affirmed its decision to apply the CVD law to the PRC in subsequent 
final determinations. See, e.g., Circular Welded Carbon Quality Steel 
Pipe from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination and Final Affirmative Determination 
of Critical Circumstances, 73 FR 31966 (June 5, 2008) (CWP from the 
PRC), and accompanying decision memorandum (CWP from the PRC Decision 
Memorandum).
    Additionally, for the reasons stated in the CWP from the PRC 
Decision Memorandum, we are using the date of December 11, 2001, the 
date on which the PRC became a member of the World Trade Organization 
(WTO), as the date from which the Department will identify and measure 
subsidies in the PRC for purposes of this preliminary determination. 
See CWP from the PRC Decision Memorandum at Comment 2.

Period of Investigation (POI)

    The period of investigation for which we are measuring subsidies is 
calendar year 2007.

Adverse Facts Available

A. The GOC

    As discussed below, the Department is investigating whether GOC 
authorities provided stainless steel coil, a major input in the 
production of CWASPP to respondents for less than adequate

[[Page 39660]]

remuneration (LTAR). In our March 14, 2008, questionnaire, we asked the 
GOC to respond to the items in the Standard Questions Appendix at 
Appendix One and Provision of Goods/Services Appendix at Appendix Five 
with respect to the GOC's alleged provision of stainless steel coil for 
LTAR. In its May 5, 2008, response, the GOC stated that:

    Given that the GOC does not believe there is a program providing 
stainless steel coil for less than adequate remuneration, the GOC 
believes that responding to Appendices One and Five is improper.

See GOC's May 5, 2008, questionnaire response at 21.
    On May 7, 2008, the Department issued a supplemental questionnaire 
to the GOC in which it requested that the GOC respond to the items 
contained in Appendices One and Five of the Department's initial 
questionnaire, as they pertain to the GOC's alleged provision of 
stainless steel coil for LTAR. In the May 7, 2008, supplemental 
questionnaire, the Department explained that failure to respond to the 
Department's questions in a timely fashion and in the manner requested 
may result in the Department resorting to the use of adverse facts 
available (AFA) within the meaning of section 776(b) of the Act.
    In its May 14, 2008, supplemental questionnaire response, the GOC 
provided responses to most of the Department's questions. However, the 
GOC failed to adequately respond to the Department's questions 
concerning de facto specificity as it pertains to the GOC's alleged 
provision of stainless steel coil for LTAR. Regarding this alleged 
subsidy program, the Department, referencing its initial questionnaire, 
instructed the GOC in its May 7, 2008, supplemental questionnaire to:

    Please provide a list by industry and by region of the number of 
companies which have received benefits under this program in the 
year the provision of benefits was approved and each of the 
preceding three years. Provide the total amounts of benefits 
received by each type of industry in each region in the year the 
provision of benefits was approved and each of the preceding three 
years.

Concerning the GOC's alleged provision of stainless steel coil for 
LTAR, the GOC stated that:

    No such list exists, nor does any data exist from which to 
derive such a list absent inquiring with every stainless steel coil 
producer in China. Such records would only reflect amounts sold and 
prices charged, as opposed to any ``benefit'' conferred by the 
transaction.

See GOC's May 14, 2008, supplemental questionnaire response at 8.
    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.
    Because the GOC failed to provide the requested information by the 
established deadlines, the Department does not have the necessary 
information on the record to determine whether the GOC provided 
stainless steel coil to producers of CWASPP in a manner that was de 
facto specific within the meaning of section 771(5A)(D)(iii) of the 
Act. Therefore, the Department must base its determination on the facts 
otherwise available in accordance with sections 776(a)(2)(A) and (B) of 
the Act.
    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 AFA information derived 
from the petition, the final determination, a previous administrative 
review, or other information placed on the record. For the reasons 
discussed below, we determine that, in accordance with sections 
776(a)(2)(A) and (B) and 776(b) of the Act, the use of AFA is 
appropriate for the preliminary determination with respect to the GOC's 
alleged provision of stainless steel coil to producers of CWASPP for 
LTAR.
    As noted, the GOC refused to respond to the items contained in 
Appendices One and Five of the Department's initial questionnaire, as 
they pertain to the GOC's alleged provision of stainless steel coil to 
producers of CWASPP for LTAR. The Department issued a supplemental 
questionnaire in which it again instructed the GOC to respond to 
Appendices One and Five in regard to the LTAR allegations at issue. 
However, in its response, the GOC continued to provide insufficient 
information regarding the Department's questions pertaining to de facto 
specificity. Therefore, consistent with sections 776(a)(2)(A) and (B) 
of the Act, we find that the GOC did not act to the best of its ability 
and, therefore, we are employing adverse inferences in selecting from 
among the facts otherwise available. Accordingly, pursuant to section 
776(b) of the Act, we find that the provision of stainless steel coil 
to producers of CWASPP by GOC authorities is de facto specific within 
the meaning of section 771(5A)(D)(iii) of the Act. Thus, we 
preliminarily determine that the provision of stainless steel coil by 
GOC authorities to producers of CWASPP are countervailable to the 
extent that the provision of the goods constituted a financial 
contribution in accordance with 771(5)(D)(iii) of the Act and conferred 
a benefit upon producers of CWASPP within the meaning of 771(E)(iv) of 
the Act. The Department's decision to rely on adverse inferences when 
lacking a response from a foreign government is in accordance with its 
practice. See, e.g., Notice of Preliminary Results of Countervailing 
Duty Administrative Review: Certain Cut-to-Length Carbon-Quality Steel 
Plate from the Republic of Korea, 71 FR 11397, 11399 (March 7, 2006) 
(unchanged in the Notice of Final Results of Countervailing Duty 
Administrative Review: Certain Cut-to-Length Carbon-Quality Steel Plate 
from the Republic of Korea, 71 FR 38861 (July 10, 2006) (relying on 
adverse inferences in determining that the Government of Korea directed 
credit to the steel

[[Page 39661]]

industry in a manner that constituted a financial contribution and was 
specific to the steel industry within the meaning of the sections 
771(5)(D)(i) and 771(5A)(D)(iii) of the Act, respectively.

B. Froch

    In this case, Froch did not provide the requested information that 
is necessary to determine a CVD rate for this preliminary 
determination. Specifically, Froch did not respond to the Department's 
March 14, 2008, initial questionnaire. Thus, in reaching our 
preliminary determination, pursuant to section 776(a)(2)(A) and (C) of 
the Act, we have based Froch's CVD rate on facts otherwise available.
    The Department has determined that, in the instant investigation, 
an adverse inference is warranted, pursuant to section 776(b) of the 
Act. By failing to submit a response to the Department's initial 
questionnaire, Froch did not cooperate to the best of its ability in 
this investigation. Accordingly, we find that an adverse inference is 
warranted to ensure that Froch will not obtain a more favorable result 
than had it fully complied with our request for information.
    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 decision memorandum at ``Analysis of Programs'' and 
Comment 1.
    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the margin is 
sufficiently adverse ``as to effectuate the statutory purposes of the 
adverse facts available rule 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).
    For the six alleged income tax programs pertaining to either the 
reduction of the income tax rates or exemption from income tax, we have 
applied an adverse inference that Froch paid no income tax during the 
POI. 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 six income tax rate programs is 33 
percent. We are applying the 33 percent AFA rate on a combined basis 
(i.e., the six programs combined provided a 33 percent benefit). Our 
approach is consistent with the Department's practice. This 33 percent 
AFA rate does not apply to income tax credit or rebate programs. See 
CWP from the PRC Decision Memorandum at ``Use of Adverse Facts 
Available'' section. Our preliminary finding in this regard includes 
the Reduced Income Tax Rate for FIEs Located in Economic and 
Technological Development Zones and Other Special Economic Zones 
program even though we have calculated a net subsidy rate for the 
Winner Companies for this program. See Light-Walled Rectangular Pipe 
and Tube From People's Republic of China: Final Affirmative 
Countervailing Duty Investigation Determination, 73 FR 35642, 35644 
(June 24, 2008) (LWP from the PRC), and accompanying decision 
memorandum (LWP from the PRC Decision Memorandum) at ``Income Tax 
Subsidies for Foreign Invested Enterprises (FIEs)--Reduced Income Tax 
Rates for FIEs Based on Location'' section, where the Department 
assigned an AFA rate of 33 percent for income tax programs alleged with 
respect to a non-responding mandatory respondent even though the 
Department calculated an income tax rate for a particular program for a 
mandatory respondent that participated in the proceeding.
    For the program involving the provision of stainless steel coil for 
LTAR, the Department has preliminarily determined to use the Winner 
Companies' rate calculated in this investigation for this program 
(which is 1.39 percent). Because the Winner Companies did not use any 
of the other alleged subsidy programs, for the remaining programs in 
this investigation (including the tax credit and refund programs), we 
are applying, where available, the highest non-de minimis subsidy rate 
calculated for the same or similar program in a China CVD 
investigation. Absent an above-de minimis subsidy rate calculated for 
the same or similar program, we are applying the highest calculated 
subsidy rate for any program otherwise listed, which could conceivably 
be used by the respondents in this investigation. The Department has 
reached affirmative final CVD determinations in several investigations 
of products from the PRC. See CFS from the PRC; CWP from the PRC; LWP 
from the PRC; and Laminated Woven Sacks from the People's Republic of 
China: Final Affirmative Countervailing Duty Determination and Final 
Affirmative Determination, in Part, of Critical Circumstances, 73 FR 
35639 (June 24, 2008) (Sacks from the PRC), and accompanying decision 
memorandum (Sacks Decision Memorandum). As such, we are including the 
subsidy rates calculated in those final determinations in our AFA 
analysis in the instant investigation because those final 
determinations were completed more than seven days prior to the 
deadline for our preliminary determination. For further information 
concerning the derivation of Froch's AFA rate, see the Memorandum to 
the File from Eric B. Greynolds, ``Calculations for Preliminary 
Determination'' (Preliminary Calculations Memorandum) at Attachment III 
(June 30, 2008), a proprietary document of which the public version is 
on file in the CRU.
    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 ``information 
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, e.g., Statement of Administrative Action (SAA) 
accompanying the Uruguay Round Agreements Act, H. Doc. No. 316, 103d 
Cong., 2d Session (1994) at 870. The Department considers information 
to be corroborated if it has probative value. See SAA at 870. To 
corroborate secondary information, the

[[Page 39662]]

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 instances in which it determines to apply AFA, the Department, 
in order to satisfy itself that such information has probative value, 
will examine, to the extent practicable, the reliability and relevance 
of the information used. With regard to the reliability aspect of 
corroboration, we note that these rates were calculated in prior final 
CVD determinations. No information has been presented that calls into 
question the reliability of these calculated rates that we are applying 
as AFA. Unlike other types of information, such as publicly available 
data on the national inflation rate of a given country or national 
average interest rates, there typically are no independent sources for 
data on company-specific benefits resulting from countervailable 
subsidy programs.
    With respect to the relevance aspect of corroborating the rates 
selected, the Department will consider information reasonably at its 
disposal in considering the relevance of information used to calculate 
a countervailable subsidy benefit. Where circumstances indicate that 
the information is not appropriate as AFA, the Department will not use 
it. See, e.g., Fresh Cut Flowers from Mexico; Final Results of 
Antidumping Duty Administrative Review, 61 FR 6812 (February 22, 1996). 
In the absence of record evidence concerning these programs due to 
Froch's decision not to participate in the investigation, the 
Department has reviewed the information concerning China subsidy 
programs in this and other cases. For those programs for which the 
Department has found a program-type match, we find that programs of the 
same type are relevant to the programs of this case. For the programs 
for which there is no program-type match, the Department has selected 
the highest calculated subsidy for any China program from which Froch 
could conceivably receive a benefit to use as AFA. The relevance of 
this rate is that it is an actual calculated CVD rate for a China 
program from which Froch could actually receive a benefit. Due to the 
lack of participation by Froch and the resulting lack of record 
information concerning these programs, the Department has corroborated 
the rates it selected to the extent practicable.
    On this basis, we preliminarily determine the AFA countervailable 
subsidy rate for Froch to be 106.85 percent ad valorem. See Preliminary 
Calculations Memorandum at Attachment III.

Subsidies Valuation Information

Cross-Ownership

    As stated above, Winner is affiliated with Winner HK and WSP. 
According to Winner, during the POI Winner HK purchased finished 
subject merchandise from Winner for sale and consigned steel coil to 
Winner for manufacturing into subject merchandise that Winner returned 
to Winner HK for sale. Winner further states that during the POI, WSP 
was a sub-contractor for Winner. Specifically, Winner provided coils or 
slit coils to WSP, which WSP slit and/or formed into pipe and returned 
it to Winner. Winner states it then manufactured the processed coil 
into subject merchandise. In addition, WSP provided slit and/or formed 
pipe to Winner, which Winner claims were used to make non-subject 
merchandise.
    Winner states that during the POI, Winner, Winner HK, and WSP were 
``directly or indirectly, partially or wholly, owned'' by the same 
shareholders. Under 19 CFR 351.525(b)(6)(vi) cross-ownership exists 
between corporations if one corporation can use or direct the 
individual assets of the other corporation(s) in essentially the same 
way it uses its own. This section of the Department's regulations 
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. Based on the information 
supplied by Winner indicating that the Winner Companies are owned by 
the same shareholders parent, we preliminarily determine that Winner, 
WSP, and Winner HK are cross-owned under 351.525(b)(6)(vi).
    For purposes of attributing subsidies received by WSP (an affiliate 
that supplies stainless steel coil inputs to Winner) under the 
Provision of Stainless Steel Coil for LTAR program, in accordance with 
19 CFR 351.525(b)(6)(iv), we preliminarily determine to attribute 
subsidies received by WSP to the combined sales of WSP's sales of steel 
coil, and the total sales of Winner and Winner HK, excluding intra-
company sales. We have adopted the same approach in the preliminary 
determination with respect to the attribution of subsidies received by 
Winner under the Provision of Stainless Steel Coil for LTAR and Reduced 
Income Tax Rate for Foreign Investment Enterprises (FIEs) Located in 
Economic and Technological Development Zones and Other Special Economic 
Zones programs. Regarding Winner HK, we preliminarily determine that 
Winner HK is a Hong Kong company and did not receive any subsidies from 
the GOC.

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. Reduced Income Tax Rate for Foreign Investment Enterprises (FIEs) 
Located in Economic and Technological Development Zones and Other 
Special Economic Zones

    According to the GOC, this program provides tax incentives for 
enterprises located in special zones. The GOC states that the program 
was first enacted on June 15, 1988, pursuant to the Provisional Rules 
on Exemption and Reduction of Corporate Income Tax and Business Tax of 
FIEs in Coastal Economic Zones, as issued by the Ministry of Finance. 
The GOC states that the program was continued on July 1, 1991, pursuant 
to Article 30 of the FIE Tax Law. Specifically, pursuant to Article 7 
of the FIE Tax Law for productive FIEs established in a coastal 
economic development zone, special economic zone, or economic 
technology development zone, the applicable enterprise income tax rate 
is 15 or 24 percent, depending on the zones in which productive FIE are 
located, as opposed to the standard 30 percent income tax rate.
    We preliminarily determine that this program constitutes a 
financial contribution in the form of revenue forgone and confers a 
benefit equal to the amount of tax savings within the meaning of 
sections 771(5)(D)(ii) and 771(5)(E) of the Act. Because eligibility 
under this program is limited to firms located within designated 
geographical regions, we preliminarily determine that the program is 
specific within the meaning of section 771(5A)(D)(iv) of the Act. We 
note that the Department has found this program countervailable in 
previous CVD proceedings. See, e.g., CFS from the PRC Decision 
Memorandum at ``Reduced Income Tax Rates for FIEs Based on Location'' 
section.
    Under 19 CFR 351.509(b), in the case of an income tax reduction 
program, the Department normally will consider the benefit as having 
been received on the date on which the recipient firm would otherwise 
have had to pay the taxes associated with the reduction. Normally, this 
date is the date on which the firm in question filed its tax return. In 
its questionnaire response, Winner indicates that it received an income 
tax reduction under the program with

[[Page 39663]]

respect to the tax return filed during the POI. Therefore, we 
preliminarily determine that Winner received a benefit under this 
program during the POI.
    In accordance with 19 CFR 351.509(a), to calculate the benefit, we 
subtracted the income tax rate Winner paid under the program from the 
income tax rate Winner would have paid absent the program and 
multiplied the difference by Winner's taxable income.
    To calculate the net subsidy rate, we divided the benefit by the 
total sales denominator for Winner and WSP, as described in the 
``Cross-Ownership'' section. On this basis, we preliminarily determine 
a net subsidy rate of 0.08 percent ad valorem for the Winner Companies.

B. Provision of Stainless Steel Coil for Less Than Adequate 
Remuneration

    The Department is investigating whether GOC authorities provided 
stainless steel coil to producers of CWASPP for LTAR. As instructed in 
the Department's questionnaires, the Winner Companies identified the 
suppliers from whom they purchased stainless steel coil during the POI. 
In addition to the supplier names, the Winner Companies, as instructed, 
indicated the date of payment, quantity, unit of measure, purchase 
price (with and without VAT and quantity discounts), grade, and 
delivery terms. Having obtained permission from the Winner Companies to 
disclose the proprietary names of their suppliers to the GOC, we asked 
the GOC to provide certain information regarding the Winner Companies' 
domestic suppliers of stainless steel coil. See Memorandum to the File 
from Eric B. Greynolds, Program Manager, Office 3, Operations, 
``Consent to Release Company-Specific Proprietary Information to the 
Government of China (GOC)'' (May 28, 2008), a public document on file 
in the CRU.
    In order to assess whether an entity should be considered to be the 
government for purposes of countervailing duty investigations, the 
Department has in the past considered the following factors to be 
relevant: (1) The government's ownership; (2) the government's presence 
on the entity's board of directors; (3) the government's control over 
the entity's activities; (4) the entity's pursuit of governmental 
policies or interests; and (5) whether the entity is created by 
statute. Not all of these criteria must be satisfied for an entity to 
be considered a government entity, but, taken together these five 
criteria inform our decision. See e.g., Coated Free Sheet Paper from 
the Republic of Korea: Final Affirmative Countervailing Duty 
Determination, 72 FR 60639 (October 25, 2007) (CFS from Korea), and 
accompanying decision memorandum (CFS from Korea Decision Memorandum) 
at Comment 11. In addition, we instructed the GOC to indicate whether 
the Winner Companies' domestic suppliers of stainless steel coil were 
trading companies, and if so, to provide information related to the 
five factors listed above as it pertains to the entities from whom the 
trading companies purchased the stainless steel coil.
    In its response, the GOC provided information pertaining to the 
``Five Factor Test'' for each of the Winner Companies'' domestic 
stainless steel coil suppliers. In its response, the GOC states that 
none of the domestic suppliers of the Winner Companies' stainless steel 
coils met criteria two through five under the ``Five Factor Test.'' 
However, the GOC provided information indicating that, in certain 
instances, domestic suppliers of the Winner Companies' stainless steel 
coil were majority-owned by GOC entities. See GOC's second supplemental 
questionnaire response at Exhibit 1; GOC's supplement to its second 
supplemental questionnaire response at Exhibits 1-24. Based on our 
review of the information submitted by the GOC, we preliminarily 
determine that domestic suppliers of the Winner Companies' stainless 
steel coil that were majority-owned by the GOC during the POI 
constitute government authorities.
    In addition, in its response the GOC identified which of the Winner 
Companies' domestic stainless steel coil suppliers were trading 
companies. However, the GOC was unable to provide the requested 
information concerning the ``Five Factor Test'' as it pertains to the 
suppliers from whom the domestic trading companies purchased the 
stainless steel coil. See GOC's second supplemental questionnaire 
response at 3 (``The GOC does not possess the information requested by 
the Department'').
    Regarding domestic trading companies that supplied stainless steel 
coil to the Winner Companies during the POI, the GOC was unable to 
provide the requested information concerning the entities from which 
the trading companies acquired the input, even in instances involving 
government-owned trading companies. Thus, we preliminarily determine 
that the necessary information is not on the record, and we are 
resorting to the use of facts available within the meaning of sections 
776(a)(1) and (2) of the Act.
    In its response, the GOC provided information on the amount of 
stainless steel coil produced by state-owned enterprises (SOEs) and 
private producers in China. See GOC's June 16, 2008, second 
supplemental questionnaire at page 4. Using these data, we derived the 
ratio of stainless steel coil produced by SOEs during the POI (82 
percent).\4\ Thus, pursuant to sections 776(a)(1) and (2) of the Act, 
for purposes of this preliminary determination we are resorting to the 
use of facts available (FA) with regard to the stainless steel coil 
sold to the Winner Companies by domestic trading companies. 
Specifically, we are assuming that the percentage produced by 
government authorities is equal to the ratio of stainless steel coil 
produced by SOEs during the POI.\5\ This approach is consistent with 
the Department's practice. See CWP from the PRC Decision Memorandum at 
the ``Hot-rolled Steel for Less Than Adequate Remuneration'' section; 
see also LWP from the PRC Decision Memorandum at the ``Hot-rolled Steel 
for Less Than Adequate Remuneration'' section. For further discussion, 
see our description of the benefit calculations below. We will seek 
additional information regarding the amount of stainless steel coil 
purchased by domestic trading companies that was produced by SOEs.
---------------------------------------------------------------------------

    \4\ At this time, we have solicited from the GOC information 
concerning domestic consumption of imported stainless steel coil and 
stainless steel coil produced by SOEs and private companies.
    \5\ In other words, as FA, we are assuming that 82 percent of 
the stainless steel coil purchased by domestic trading companies 
during the POI was produced by SOEs.
---------------------------------------------------------------------------

    In their submissions, the Winner Companies argue that the 
Department should not subject the stainless steel coils that WSP 
purchased from GOC authorities to our LTAR subsidy analysis because the 
inputs were not subsequently used to make CWASPP. For purposes of this 
preliminary determination, we disagree with the Winner Companies' 
arguments. We note that the Winner Companies are not arguing that the 
inputs WSP purchased from GOC authorities are incompatible with the 
production process used to produce CWASPP but that WSP did not use 
those inputs to produce CWASPP. In this regard, we note that 19 CFR 
351.503(c) states that:

    In determining whether a benefit is conferred, the Secretary is 
not required to consider the effect of the government action on the 
firm's performance, including its prices or output, or how the 
firm's behavior otherwise is altered.

Further, the Preamble adds that:


[[Page 39664]]


    In analyzing whether a benefit exists, we are concerned with 
what goes into a company, such as enhanced revenues and reduced-cost 
inputs in the broad sense that we have used the term, not with what 
the company does with the subsidy.

See Countervailing Duties; Final Rule, 63 FR 65348, 65361 (November 25, 
1998) (Preamble)). See also, Polyethylene Terephthalate Film, Sheet, 
and Strip from India: Final Results of Countervailing Duty 
Administrative Review, 73 FR 7708 (February 11, 2008), and accompanying 
decision memorandum at Comment 8 (explaining that because the imported 
equipment at issue could be used to make subject merchandise, the 
respondent failed to demonstrate that subsidy benefits were tied to 
non-subject merchandise, pursuant to 19 CFR 351.525(b)(5)). Therefore, 
in accordance with our regulations, we do not consider the manner in 
which WSP used its inputs as a factor that is germane to the 
Department's subsidy analysis and, thus, we have for purposes of this 
preliminary determination subjected WSP's purchases of stainless steel 
coils from GOC authorities to our LTAR subsidy analysis.

    However, information on the record indicates that stainless steel 
coil that is of the grade 430 is incompatible with the production 
process used to produce CWASPP (i.e., stainless steel coil that is 
grade 430 is not austentitic). See June 30, 2008, Memorandum to the 
File from Eric B. Greynolds, Program Manager, Office 3, Operations, 
``Public Information Concerning Stainless Steel of Grades 201 and 
430,'' a public document on file in the CRU (June 30, 2008) (Steel 
Grade Memorandum). This circumstance is markedly different than the 
issue of whether or how a firm used a particular input and, therefore, 
is distinct from the issue described under 19 CFR 351.503(c). Thus, 
because record evidence indicates that stainless steel coil of grade 
430 cannot, by its nature, be used to make CWASPP, we have for purposes 
of this preliminary determination excluded the grade from our LTAR 
subsidy analysis. See 19 CFR 351.525(b)(5).
    Having identified the extent to which the Winner Companies' 
obtained stainless steel coil from GOC authorities, we preliminarily 
determine that the GOC authorities' provision of stainless steel coil 
constitutes a financial contribution under section 771(5)(D)(iii) of 
the Act.\6\ Furthermore, as discussed above in the ``Adverse Facts 
Available'' section, pursuant to section 776(b) of the Act, we find 
that the provision of stainless steel coil to producers of CWASPP by 
GOC authorities is de facto specific within the meaning of section 
771(5A)(D)(iii) of the Act.
---------------------------------------------------------------------------

    \6\ For purposes of this preliminary determination, we find that 
private producers that provided stainless steel coil to the Winner 
Companies during the POI do not constitute government authorities 
and, thus, their provision of stainless steel coil to the Winner 
Companies does not constitute a financial contribution within the 
meaning of section 771(5)(D)(iii) of the Act.
---------------------------------------------------------------------------

    The Department's regulation at 19 CFR 351.511(a)(2) sets forth the 
basis for identifying appropriate market-determined benchmarks for 
measuring the adequacy of remuneration for government-provided goods or 
services. These potential benchmarks are listed in hierarchical order 
by preference: (1) Market prices from actual transactions within the 
country under investigation (e.g., actual sales, actual imports or 
competitively run government auctions) (``tier one''); (2) world market 
prices that would be available to purchasers in the country under 
investigation (``tier two''); or (3) an assessment of whether the 
government price is consistent with market principles (``tier three''). 
As we have explained in Canadian Lumber, the preferred benchmark in the 
hierarchy is an observed market price from actual transactions within 
the country under investigation.\7\ This is because such prices 
generally would be expected to reflect most closely the prevailing 
market conditions of the purchaser under investigation.
---------------------------------------------------------------------------

    \7\ See Notice of Final Affirmative Countervailing Duty 
Determination and Final Negative Critical Circumstances 
Determination: Certain Softwood Lumber Products from Canada, 67 FR 
15545 (April 2, 2002) (Canadian Lumber), and accompanying decision 
memorandum at 36.
---------------------------------------------------------------------------

    Based on the hierarchy established above, we must first determine 
whether there are market prices from actual sales transactions 
involving Chinese buyers and sellers that can be used to determine 
whether GOC authorities sold stainless steel coils to the Winner 
Companies for LTAR. Notwithstanding the regulatory preference for the 
use of prices stemming from actual transactions in the country, where 
the Department finds that the government provides the majority, or a 
substantial portion of, the market for a good or service, prices for 
such goods and services in the country will be considered significantly 
distorted and will not be an appropriate basis of comparison for 
determining whether there is a benefit.\8\
---------------------------------------------------------------------------

    \8\ See Preamble, 63 FR at 65377.
---------------------------------------------------------------------------

    As explained above, for purposes of this preliminary determination, 
we find that SOEs account for approximately 82 percent of the stainless 
steel coil production in the PRC during the POI (and approximately 71 
percent of production if available data on import volume are included). 
Consequently, because of the government's overwhelming involvement in 
the PRC stainless steel coil market, the use of private producer prices 
in China would be akin to comparing the benchmark to itself (i.e., such 
a benchmark would reflect the distortions of the government 
presence).\9\ As we explained in Canadian Lumber:
---------------------------------------------------------------------------

    \9\ See Canadian Lumber decision memorandum at 34.

    Where the market for a particular good or service is so 
dominated by the presence of the government, the remaining private 
prices in the country in question cannot be considered to be 
independent of the government price. It is impossible to test the 
government price using another price that is entirely, or almost 
entirely, dependent upon it. The analysis would become circular 
because the benchmark price would reflect the very market distortion 
which the comparison is designed to detect.\10\
---------------------------------------------------------------------------

    \10\ See Canadian Lumber decision memorandum at 38-39.

For these reasons, prices stemming from private transactions within 
China cannot give rise to a price that is sufficiently free from the 
effects of the GOC's actions, and therefore cannot be considered to 
meet the statutory and regulatory requirement for the use of market-
determined prices to measure the adequacy of remuneration. We note that 
our finding in this regard is consistent with the Department's finding 
in CWP from the PRC. See CWP from the PRC Decision Memorandum at 
---------------------------------------------------------------------------
Comment 7, n. 206:

    Even if, arguendo, we were to rely on the GOC's 71 percent 
production figure, we would still find that government production 
accounts for a significant portion of the HRS industry, so that it 
is reasonable to conclude that private prices in China are 
significantly distorted, and therefore unusable as benchmarks.

    Next, turning to tier one benchmark prices stemming from actual 
import prices, there is record evidence that Winner HK purchased 
stainless steel coil from a supplier located outside of China during 
the POI.\11\ The stainless steel coil Winner HK imported from the 
foreign supplier accounts for a significant percentage of the stainless 
steel coil purchased by the Winner Companies during the POI. The 
company-specific import price data contain information on monthly 
prices. In addition, the data contain prices for every grade of 
stainless steel that the Winner Companies purchased from

[[Page 39665]]

GOC authorities during the POI, though month-to-month comparisons of 
prices within grades are not possible in some instances due to the lack 
of company-specific import prices in certain months.
---------------------------------------------------------------------------

    \11\ The identity of the foreign supplier is business 
proprietary.
---------------------------------------------------------------------------

    In addition, the Department has on the record of the investigation 
tier two benchmark prices for certain grades of stainless steel coil, 
namely grades 304 and 316. The sources for the tier two benchmark 
prices are the Steel Business Briefing (SBB) publication and Management 
Engineering and Production Services (MEPS). The data reported by SBB 
contain delivered, monthly prices for stainless steel coil, grade 304, 
for Europe, North America, Asia (on an import price basis), and the 
world for the POI. The data reported by MEPS contain monthly prices for 
stainless steel coil (both hot- and cold-rolled), grades 304 and 316, 
for Europe, North America, Asia, and the world for the POI.\12\ 
Further, as discussed above, the GOC reported aggregate import data for 
the POI, as reported by its Customs Service. However, these aggregate 
import data do not delineate the prices by grade or month. Therefore, 
because the aggregated import data submitted by the GOC do not 
delineate the prices by grade or month, we are excluding this 
information from consideration for use as benchmarks.
---------------------------------------------------------------------------

    \12\ The data reported by MEPS do not indicate whether the 
prices are reported on a delivered basis. However, when compared on 
a monthly basis, the prices reported by MEPS for grade 304 are, in 
some instances, higher than the prices for grade 304 reported by 
SBB, which are reported on a delivered basis. Thus, for purposes of 
the preliminary determination, we are assuming that the stainless 
steel coil prices in MEPS are reported on a delivered basis.
---------------------------------------------------------------------------

    As stated above, we preliminarily determine that government 
production accounts for a significant portion of the stainless steel 
coil industry so that it is reasonable to conclude that private prices 
in China are significantly distorted, and therefore unusable as 
benchmarks. Given this finding, we must test the available company-
specific import prices of stainless steel coil in order to ascertain 
whether they are also distorted by the dominance of government 
production in the PRC. To conduct the test, we have compared the 
company-specific import price data for stainless steel coil to the 
world price data for stainless steel coil reported in MEPS and SBB and 
have validated these import prices with market-based world prices.
    Furthermore, we preliminarily find that the world prices for 
stainless steel coil reported by MEPS and SBB are comparable to the 
company-specific import prices reported by the Winner Companies. 
Therefore, for purposes of this preliminary determination, we conclude 
that the world prices for stainless steel coil reported by MEPS and SBB 
should be treated as surrogate import prices and, thus, serve as a tier 
one benchmark. Although the regulations refer to ``actual imports,'' we 
see no meaningful difference in actual and potential market-determined 
import prices stemming from transactions outside the country.\13\ This 
is particularly the case where, as here, an actual import price is 
comparable to world market-determined price, such as those contained in 
MEPS and SBB. In effect, because of the comparability between the 
company-specific import prices and the MEPS and SBB world prices, we 
consider the latter to be equivalent or surrogates for actual imports. 
These prices are thus appropriately considered tier one benchmark 
prices. We note that this approach is consistent with the Department's 
approach in CWP from the PRC. See CWP from the PRC Decision Memorandum 
at Comment 7. For these reasons, to measure whether GOC authorities 
sold stainless steel coil to the Winner Companies for LTAR during the 
POI, we are relying on the simple average of the company-specific 
import prices, MEPS, and SBB.
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    \13\ 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, 43197 (August 17, 
2001) (unchanged in the final determination, see Canadian Lumber 
decision memorandum at 37-38).
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    To calculate the benefit, we first converted the benchmark prices 
into the same unit of measure (USD per tonne). Next, we converted the 
benchmark unit prices from U.S. dollars to renminbi (RMB) using average 
USD to RMB exchange rates, as reported by the Federal Reserve 
Statistical Release. We then compared the benchmark unit prices to the 
unit prices the Winner Companies paid to domestic suppliers of 
stainless steel coil during the POI.
    We conducted the benefit calculation by comparing prices within 
each grade. Information concerning the grades of stainless steel coil 
imported by Winner HK during the POI is business proprietary. 
Therefore, for further discussion regarding the manner in which the 
Department conducted its benefit calculation, see the Memorandum to the 
File from Eric B. Greynolds, Program Manager, Office 3, Operations, 
``Comparisons of Grades of Stainless Steel Coil for Purposes of the 
Preliminary Determination'' (Jun 30, 2008), a business proprietary 
document, of which the public version is on file in the CRU.
    Regarding petitioners' allegation concerning export restraints on 
stainless steel coil, we find that it is not necessary to examine the 
allegation because our benchmarks account for any influence that export 
restraints may have on domestic prices for the input.
    We encourage interested parties to submit comments on our use of 
company-specific import prices and prices from MEPS and SBB in the 
derivation of the benchmark including the most appropriate method to 
employ to validate company-specific import prices into the PRC using 
world market pricing data. We also invite interested parties to comment 
on the manner in which we conducted the benefit calculation as it 
pertains to the comparison of prices by grade and month.
    In instances in which the benchmark unit price was greater than the 
price paid to GOC authorities, we multiplied the difference by the 
quantity of stainless steel coil purchased from GOC authorities to 
arrive at the benefit. As explained above, in instances in which the 
Winner Companies purchased the stainless steel coil from government 
trading companies and/or private trading companies, we multiplied the 
product of the price difference per unit and the quantity of stainless 
steel coil purchased by 82 percent to arrive at the benefit.
    To calculate the net subsidy rate, we divided the total benefit by 
the Winner Companies' total sales for the POI. On this basis, we 
calculated a total net subsidy rate of 1.39 percent ad valorem for the 
Winner Companies.

II. Program Preliminarily Found Not To Provide Countervailable Benefits 
During the POI

A. Provision of Land-Use Rights for Less Than Adequate Remuneration

    As explained in the Initiation Checklist, the Department is 
examining whether GOC-owned/controlled entities sold land to producers 
of CWASPP for LTAR. In its questionnaire responses, Winner states in 
1993, 1996, and 2000, it made payments for land-use rights. Winner 
states that in 1993, prior to the incorporation of Winner, one of its 
founders purchased land-use rights from a foreign investor, who had, in 
turn, acquired the land from the Xiaobu Village Administration. 
Similarly, Winner states that in 1996 it acquired land-use rights from 
an individual, who had in turn acquired the land-use rights from the 
Xiaobu Village Administration. Further, Winner states that in 1999 it

[[Page 39666]]

purchased land-use rights from the Huasan Town Administration. Winner 
states that in 2000, the Huasan Town Administration ``confirmed'' the 
granting of land-use rights.
    Winner also states that in 2002 it received from the Government of 
the Province of Guandong a certificate of land-use rights for the land 
it acquired in 1993, 1996, and 1999. Winner further states that no 
land-use payments were made to the GOC or GOC governments during the 
POI.
    Based on Winner's questionnaire responses, we preliminarily 
determine that there were no payments associated with its acquisition 
of land-use rights after the December 11, 2001, ``cut-off'' date 
established in CWP from the PRC. See CWP from the PRC Decision 
Memorandum at Comment 2. Therefore, in accordance with the approach 
established in CWP from the PRC, we preliminarily determine that this 
program did not confer benefits upon Winner during the POI.

III. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the Winner Companies did not apply 
for or receive benefits during the POI under the programs listed 
below.\14\
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    \14\ As explained above, Froch did not respond to the 
Department's initial questionnaire. Therefore, as AFA, we are 
assigning net subsidy rates to Froch for each of the programs listed 
in this section, the exception being Export Restraints on Hot Rolled 
Stainless Steel Coils, which as explained above, the Department has 
determined it is not necessary to examine this subsidy program due 
to the benchmark used to calculate the benef