Certain Magnesia Carbon Bricks From the People's Republic of China: Preliminary Negative Countervailing Duty Determination, 68241-68249 [E9-30525]

Download as PDF Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices Fair Value: Carbazole Pigment 23 from India, 69 FR 67306, 67307 (November 17, 2007). With respect to WJMP, the voluntary respondent in this proceeding, the Department did not individually examine its exports of merchandise under investigation in the PC Strand CVD Preliminary Determination. As a result, WJMP is captured under the ‘‘All Others’’ rate, which is an average of the companies examined in PC Strand CVD Preliminary Determination. Therefore, we will instruct CBP to require a cash deposit or posting of a bond equal to the weighted-average amount by which normal value exceeds U.S. price for WJMP, indicated above, minus the amount determined to constitute an export subsidy in the ‘‘All Others’’ rate. With respect to Fasten Group I&E, the separate rate company, we note that the rate applied in this proceeding as a separate rate is derived from the calculated rate received by Xinhua Metal. Therefore, because Xinhua Metal received export subsidies in PC Strand CVD Preliminary Determination, we will instruct CBP to require a cash deposit or posting of a bond equal to the weighted-average amount by which normal value exceeds U.S. price for Xinhua Metal, as indicated above, minus the amount determined to constitute an export subsidy. International Trade Commission Notification In accordance with section 733(f) of the Act, we have notified the ITC of our preliminary affirmative determination of sales at less than fair value. Section 735(b)(2) of the Act requires the ITC to make its final determination as to whether the domestic industry in the United States is materially injured, or threatened with material injury, by reason of imports of PC strand, or sales (or the likelihood of sales) for importation, of the merchandise under investigation within 45 days of our final determination. srobinson on DSKHWCL6B1PROD with NOTICES Public Comment Case briefs or other written comments may be submitted to the Assistant Secretary for Import Administration no later than seven business days after the date on which the final verification report is issued in this proceeding and rebuttal briefs limited to issues raised in case briefs and must be received no later than five business days after the deadline date for case briefs. See 19 CFR 351.309(c)(i) and (d). A list of authorities used and an executive summary of issues should accompany any briefs submitted to the Department. VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 This summary should be limited to five pages total, including footnotes. In accordance with section 774 of the Act, and if requested, we will hold a public hearing, to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs. If a request for a hearing is made, we intend to hold the hearing shortly after the deadline of submission of rebuttal briefs at the U.S. Department of Commerce, 14th Street and Constitution Ave, NW., Washington, DC 20230, at a time and location to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date. Interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, within 30 days after the date of publication of this notice. See 19 CFR 351.310(c). Requests should contain the party’s name, address, and telephone number, the number of participants, and a list of the issues to be discussed. At the hearing, each party may make an affirmative presentation only on issues raised in that party’s case brief and may make rebuttal presentations only on arguments included in that party’s rebuttal brief. This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act. Dated: December 17, 2009. Ronald K. Lorentzen, Deputy Assistant Secretary for Import Administration. [FR Doc. E9–30536 Filed 12–22–09; 8:45 am] BILLING CODE 3510–DS–P DEPARTMENT OF COMMERCE International Trade Administration [C–570–955] Certain Magnesia Carbon Bricks From the People’s Republic of China: Preliminary Negative Countervailing Duty Determination AGENCY: Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce (the Department) preliminarily determines that countervailable subsidies are not being provided to producers and exporters of Certain Magnesia Carbon Bricks (Bricks) from the People’s Republic of China (PRC). PO 00000 Frm 00018 Fmt 4703 Sfmt 4703 DATES: 68241 Effective Date: December 23, 2009. FOR FURTHER INFORMATION CONTACT: Toni Page and Summer Avery, AD/CVD Operations, Office 6, Operations, Import Administration, U.S. Department of Commerce, Room 7867, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482–1398 and (202) 482–4052, respectively. SUPPLEMENTARY INFORMATION: Case History On July 29, 2009, the Department received a countervailing duty (CVD) petition concerning Bricks from the People’s Republic of China filed in proper form by Resco Products, Inc. (Petitioner). This investigation was initiated on August 18, 2009. See Certain Magnesia Carbon Bricks from the People’s Republic of China: Initiation of Countervailing Duty Investigation, 74 FR 42858 (August 25, 2009) (Initiation Notice), and accompanying Initiation Checklist.1 On September 15, 2009, the Department selected Liaoning Mayerton Refractories Co., Ltd. (LMR) and RHI Refractories Liaoning Co., Ltd. (RHIL) as mandatory respondents in this investigation. See Memorandum from the Team through Barbara Tillman, Director, Office 6, Operations, to John M. Andersen, Acting Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations, Re: Respondent Selection (September 15, 2009). On September 15, 2009, we issued the initial CVD questionnaire to the Government of the People’s Republic of China (GOC), LMR, and RHIL. On October 2, 2009, pursuant to section 703(c)(1)(A) of the Tariff Act of 1930 as amended (the Act) and 19 CFR 351.205(e), the Department postponed the deadline for the preliminary determination by 55 days to no later than December 16, 2009. See Certain Magnesia Carbon Bricks From the People’s Republic of China: Postponement of Preliminary Determination in the Countervailing Duty Investigation, 74 FR 51558 (October 7, 2009). On November 5, 2009, the GOC submitted a response to the initial CVD questionnaire (GOC Questionnaire Response). Also on November 5, 2009, LMR submitted a response for itself and for its affiliate Dalian Mayerton Refractories Co. Ltd. (DMR) (collectively, the Mayerton Companies) (Mayerton Questionnaire Response); 1 A public version of this document and all public Departmental memoranda are on file in the Central Records Unit (CRU), room 1117 in the main building of the Department. E:\FR\FM\23DEN1.SGM 23DEN1 68242 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices srobinson on DSKHWCL6B1PROD with NOTICES and RHIL submitted a response for itself and for its affiliates RHI Refractories (Dalian) Co., Ltd. (RHI Dalian) and Liaoning RHI Jinding Magnesia Co., Ltd. (RHI Jinding) (collectively, the RHI Companies) (RHI Questionnaire Response). On November 17, 2009, the Department sent a letter to the Mayerton Companies requesting the sales information for its companies. The Mayerton Companies submitted the requested sales information on November 20, 2009 (Mayerton Sales Submission). In addition, Petitioner filed comments regarding the questionnaire responses on November 24, 2009. On November 30, 2009, the Department sent a letter requesting the Mayerton Companies to submit their tax information for the 2007 tax year. The Mayerton Companies submitted the requested information on December 4, 2009 (Mayerton Tax Submission). On December 8, 2009, we issued supplemental questionnaires to the GOC and the respondent companies, for which responses are not due until after the preliminary determination. On December 14, 2009, counsel for Petitioner met with Department officials. See Memorandum to the File through Barbara E. Tillman, Director, Office 6, from Toni Page, Case Analyst, Re: Meeting with Counsel for Petitioners: Countervailing Duty Investigation on Certain Magnesia Carbon Bricks from the People’s Republic of China (December 14, 2009). Also on December 14, 2009, Petitioner submitted further information regarding the provision of preferential loans to the Bricks industry. According to Petitioner’s information, the Bricks under investigation are considered to be refractory materials featuring finecomposition and irregularity. These refractory materials are identified as a supported project in the Directory Catalogue on Readjustment of Industrial Structure (Version 2005), Decree of the National Development and Reform Commission, No. 40. See Petitioner’s December 14, 2009 Comments. Scope of the Investigation Imports covered by this investigation consist of certain chemically bonded (resin or pitch), magnesia carbon bricks with a magnesia component of at least 70 percent magnesia (MgO) by weight, regardless of the source of raw materials for the MgO, with carbon levels ranging from trace amounts to 30 percent by weight, regardless of enhancements, (for example, magnesia carbon bricks can be enhanced with coating, grinding, tar impregnation or coking, high temperature heat treatments, anti-slip VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 treatments or metal casing) and regardless of whether or not antioxidants are present (for example, antioxidants can be added to the mix from trace amounts to 15 percent by weight as various metals, metal alloys, and metal carbides). Certain magnesia carbon bricks that are the subject of this investigation are currently classifiable under subheadings 6902.10.10.00, 6902.10.50.00, 6815.91.00.00, and 6815.99 of the Harmonized Tariff Schedule of the United States (HTSUS). While HTSUS subheadings are provided for convenience and customs purposes, the written description is dispositive. Scope Comments In accordance with the Preamble to the Department’s regulations, we set aside a period of time in our Initiation Notice for parties to raise issues regarding product coverage, and encouraged all parties to submit comments within 20 calendar days of publication of that notice. See Initiation Notice, 74 FR at 42858; see also, Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997). On September 8, 2009, Pilkington North America Inc. (PNA), a U.S. importer of Bricks from China and Mexico, submitted comments on the records of the instant CVD investigation, the antidumping duty (AD) investigation of Bricks from the PRC, and the AD investigation of Bricks from Mexico. In its submission, PNA requested that the Department amend the scope to exclude ceramic bonded magnesia bricks with or without trace amounts of carbon. The Department is currently evaluating PNA’s comments and will issue its decision regarding the scope of the investigations prior to the preliminary determinations in the companion AD investigations due on January 5, 2010. Injury Test Because the PRC is a ‘‘Subsidies Agreement Country’’ within the meaning of section 701(b) the Act, the International Trade Commission (ITC) is required to determine whether imports of the subject merchandise from the PRC materially injure, or threaten material injury to, a U.S. industry. On September 29, 2009, the ITC published its affirmative preliminary determination that there is a reasonable indication that an industry in the United States is threatened with material injury by reason of allegedly subsidized imports of Bricks from the PRC. See Certain Magnesia Carbon Bricks From China and Mexico Determinations, 74 FR 49889 (September 29, 2009); and PO 00000 Frm 00019 Fmt 4703 Sfmt 4703 Certain Magnesia Carbon Bricks From China and Mexico (Preliminary), USITC Pub. 4100, Inv. Nos. 701–TA–468 and 731–TA–1166–1167 (September 2009). 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 the accompanying Issues and Decision Memorandum (CFS 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 Decision Memorandum at Comments 1 and 6. The Department has subsequently affirmed its decision to apply the CVD law to the PRC, most recently in Certain Oil Country Tubular Goods From the People’s Republic of China: Final Affirmative Countervailing Duty Determination, Final Negative Critical Circumstances Determination, 74 FR 64045 (December 7, 2009), and the accompanying Issues and Decision Memorandum. Period of Investigation The period for which we are measuring subsidies, i.e., the period of investigation (POI), is January 1, 2008 through December 31, 2008. Subsidy Valuation Information Allocation Period Under 19 CFR 351.524(b), nonrecurring subsidies are allocated over a period corresponding to the average useful life (AUL) of the renewable physical assets used to produce the subject merchandise. Pursuant to 19 CFR 351.524(d)(2), there is a rebuttable presumption that the AUL will be taken from the U.S. Internal Revenue Service’s 1977 Class Life Asset Depreciation Range System (IRS Tables), as updated by the Department of Treasury. For the subject merchandise, the IRS Tables prescribe an AUL of 15 years. As no interested party has claimed that the AUL of 15 years is unreasonable, we are allocating non-recurring subsidies over a period of 15 years. Further, for non-recurring subsidies, we have applied the ‘‘0.5 percent expense test’’ described in 19 CFR E:\FR\FM\23DEN1.SGM 23DEN1 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices srobinson on DSKHWCL6B1PROD with NOTICES 351.524(b)(2). Under this test, we divide the amount of subsidies approved under a given program in a particular year by the sales (total sales or total export sales, as appropriate) for the same year. If the amount of subsidies is less than 0.5 percent of the relevant sales, then the benefits are allocated to the year of receipt rather than allocated over the AUL period. In accordance with the Department’s practice, we have determined that we will identify and measure subsidies in the PRC beginning on the date of the country’s accession to the World Trade Organization (WTO), i.e. December 11, 2001. See, e.g., Circular Welded Carbon Quality Steel Line Pipe from the People’s Republic of China: Final Affirmative Countervailing Duty Determination, 73 FR 70961 (November 24, 2008) (Line Pipe from the PRC), and accompanying Issues and Decision Memorandum (Line Pipe Decision Memorandum) at ‘‘Allocation Period’’ section and Comment 18. Benchmarks for Short-Term RMB Denominated Loans Section 771(5)(E)(ii) of the Act explains that the benefit for loans is the ‘‘difference between the amount the recipient of the loan pays on the loan and the amount the recipient would pay on a comparable commercial loan that the recipient could actually obtain on the market.’’ Normally, the Department uses comparable commercial loans reported by the company for benchmarking purposes. See 19 CFR 351.505(a)(3)(i). If the firm did not have any comparable commercial loans during the period, the Department’s regulations provide that we ‘‘may use a national interest rate for comparable commercial loans.’’ See 19 CFR 351.505(a)(3)(ii). As noted above, section 771(5)(E)(ii) of the Act indicates that the benchmark should be a market-based rate. For the reasons explained in CFS from the PRC, loans provided by Chinese banks reflect significant government intervention in the banking sector and do not reflect rates that would be found in a functioning market. See CFS Decision Memorandum at Comment 10. Because of this, any loans received by respondents from private Chinese or foreign-owned banks within China would be unsuitable for use as benchmarks under 19 CFR 351.505(a)(2)(i). Similarly, the significant intervention of the government within the Chinese banking sector prevents the use of a national interest rate for commercial loans as envisaged by 19 CFR 351.505(a)(3)(ii). Therefore, because of the special VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 difficulties inherent in using a Chinese benchmark for loans, the Department is selecting an external market-based benchmark interest rate. The use of an external benchmark is consistent with the Department’s practice. For example, in Softwood Lumber from Canada, the Department used U.S. timber prices to measure the benefit for governmentprovided timber in Canada. 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) (Softwood Lumber from Canada), and accompanying Issues and Decision Memorandum at ‘‘Analysis of Programs, Provincial Stumpage Programs Determined to Confer Subsidies, Benefit.’’ We are calculating the external benchmark using the regression-based methodology first developed in CFS from the PRC and more recently updated in Lightweight Thermal Paper from the People’s Republic of China. See CFS Decision Memorandum at Comment 10; see also Lightweight Thermal Paper From the People’s Republic of China: Final Affirmative Countervailing Duty Determination, 73 FR 57323 (October 2, 2008) (LWTP from the PRC) and accompanying Issues and Decision Memorandum (LWTP Decision Memorandum) at ‘‘Benchmarks and Discount Rates’’ section. This benchmark interest rate is based on the inflation-adjusted interest rates of countries with per capita gross national incomes (GNIs) similar to the PRC, and takes into account a key factor involved in interest rate formation, i.e. quality of a country’s institutions, that is not directly tied to the state-imposed distortions in the PRC banking sector discussed above. Following the methodology developed in CFS from the PRC and as updated by LWTP from the PRC, we first determined which countries are similar to the PRC in terms of GNIs, based on the World Bank’s classification of countries as: low income; lower-middle income; upper-middle income; and high income. The PRC falls in the lowermiddle income category, a group that includes 55 countries as of July 2008. As explained in OCTG from the PRC, this pool of countries captures the broad inverse relationship between income and interest rates. See Certain Oil Country Tubular Goods From the People’s Republic of China: Preliminary Affirmative Countervailing Duty Determination, Preliminary Negative Critical Circumstances Determination, 74 FR 47210, 47216 (September 15, PO 00000 Frm 00020 Fmt 4703 Sfmt 4703 68243 2009) (OCTG from the PRC), unchanged in final determination. Many of these countries reported lending and inflation rates to the International Monetary Fund and they are included in that agency’s international financial statistics (IFS). With the exceptions noted below, we have used the interest and inflation rates reported in the IFS for the countries identified as ‘‘lower-middle income’’ by the World Bank. First, we did not include those economies that the Department considered to be nonmarket economies for antidumping (AD) purposes for any part of the years in question (Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Turkmenistan). Second, the pool necessarily excludes any country that did not report both lending and inflation rates to IFS for those years. Third, we removed any country that reported a rate that was not a lending rate or that based its lending rate on foreign-currency denominated instruments. Specifically, Jordan reported a deposit rate, not a lending rate, and the rates reported by Ecuador and East Timor are dollar-denominated rates; therefore, the rates for these three countries have been excluded. Finally, for each year the Department calculated an inflation-adjusted short-term benchmark rate, we have also excluded any countries with aberrational or negative real interest rates for the year in question. See Memorandum to File from Nicholas Czajkowski, International Trade Compliance Analyst, Re: Preliminary Determination Calculations Loan Benchmark Analysis (December 16, 2009). The resulting inflation-adjusted benchmark lending rates are provided in the calculation memorandum for the Mayerton Companies. See Memorandum from Nicholas Czajkowski, International Trade Compliance Analyst, Re: Preliminary Determination Calculations for Liaoning Mayerton Refractories Co., Ltd. and Dalian Mayerton Refractories Co. Ltd. (December 16, 2009) (Mayerton Companies Calculation Memorandum). Because these are inflation-adjusted benchmarks, it is necessary to adjust the interest payments made by the Mayerton Companies for inflation. This was done using the PRC inflation figure as reported in the IFS. Discount Rates The lending rates reported in the IFS represent short- and medium-term lending. However, there are not sufficient publicly available long-term interest rate data upon which to base a robust benchmark for long-term loans. To address this problem, the E:\FR\FM\23DEN1.SGM 23DEN1 68244 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices srobinson on DSKHWCL6B1PROD with NOTICES Department has developed an adjustment to the short- and mediumterm rates to convert them to long-term rates using Bloomberg U.S. corporate BB-rated bond rates. See Light-Walled Rectangular Pipe and Tube From the People’s Republic of China: Final Affirmative Countervailing Duty Investigation Determination, 73 FR 35642 (June 24, 2008) (LWRP from the PRC), and accompanying Issues and Decision Memorandum (LWRP Decision Memorandum) at Comment 12, ‘‘Discount Rate’’ section. In Citric Acid from the PRC, this methodology was revised by switching from a long-term mark-up based on the ratio of the rates of BB-rated bonds to applying a spread which is calculated as the difference between the two-year BB bond rate and the n-year BB bond rate, where n equals or approximates the number of years of the term of the loan in question. See Citric Acid and Certain Citrate Salts From the People’s Republic of China: Final Affirmative Countervailing Duty Determination, 74 FR 16836 (April 13, 2009) (Citric Acid from the PRC), and accompanying Issues and Decision Memorandum (Citric Acid Decision Memorandum) at Comment 14. Attribution of Subsidies The Department’s regulations at 19 CFR 351.525(b)(6)(i) state that the Department will normally attribute a subsidy to the products produced by the corporation that received the subsidy. However, 19 CFR 351.525(b)(6)(ii) provides that when two or more corporations with cross-ownership produce the subject merchandise, the Department will attribute subsidies received by either or both corporations to the products produced by both corporations. Moreover, under 19 CFR 351.525(b)(6)(iv), when there is crossownership between an input supplier and a downstream producer, and production of the input is primarily dedicated to production of the downstream product, the Department will attribute subsidies received by the input supplier to the combined sales of the input and downstream products produced by both corporations (excluding the sales between the two corporations). According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists between two or more corporations where one corporation can use or direct the individual assets of the other corporation(s) in essentially the same ways it can use its own assets. This regulation states that this standard will normally be met where there is a majority voting interest between two corporations or through common VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 ownership of two (or more) corporations. The Preamble to the Department’s countervailing duty regulations also states, ‘‘[I]n certain circumstances, a large minority voting interest (for example, 40 percent) or a ‘‘golden share’’ may also result in crossownership.’’ See Countervailing Duties; Final Rule, 63 FR 65348, 65401 (November 25, 1998). The Court of International Trade (CIT) has further upheld the Department’s authority to attribute subsidies based on whether a company could use or direct the subsidy benefits of another company in essentially the same way it could use its own subsidy benefits. See Fabrique de Fer de Charleroi v. United States, 166 F. Supp. 2d 593, 600–603 (CIT 2001). Cross-Ownership The Mayerton Companies As discussed above, we selected Liaoning Mayerton Refractories Co., Ltd. (i.e. LMR) as a mandatory respondent in the instant investigation. LMR reported that it is affiliated with Dalian Mayerton Refractories Co., Ltd. (i.e. DMR). Since both companies produce subject merchandise, the Mayerton Companies submitted a response to the Department’s questionnaires providing both DMR’s and LMR’s information. In these responses, DMR and LMR reported that each company is affiliated with numerous companies. Among the other affiliated companies, according to the Mayerton Questionnaire Response, Mayerton Refractories China Ltd. (MRC) is a Chinese company involved in domestic sales (but not production) of Bricks, and thus did not sell Bricks to the United States. Accordingly, the Mayerton companies did not provide a questionnaire response for MRC. We have asked follow-up questions regarding MRC in our supplemental questionnaire. The Mayerton Questionnaire Response indicates that a single foreign (i.e., non-Chinese) parent company is the majority shareholder in each company.2 See Memorandum from Summer Avery, International Trade Compliance Analyst, Re: CrossOwnership of Mayerton Refractories Co., Ltd. and Dalian Mayerton Refractories Co. Ltd. (December 16, 2009) (Mayerton Companies CrossOwnership Memorandum). In addition, the legal representative for LMR and DMR is the same individual. Other business proprietary information on the record of this proceeding indicates cross-ownership between LMR and 2 The ownership percentages are proprietary. See Mayerton Companies’ Cross-Ownership Memorandum. PO 00000 Frm 00021 Fmt 4703 Sfmt 4703 DMR. See Mayerton Questionnaire Response at Exhibit 1 and Exhibit 9(a). See also Mayerton Companies CrossOwnership Memorandum. Therefore, pursuant to 19 CFR 351.525(b)(6)(vi), we preliminarily determine that DMR and LMR are cross-owned. The RHI Companies As discussed above RHI Refractories Liaoning Co., Ltd. (i.e. RHIL) was selected as a mandatory respondent in the instant investigation. RHIL reported that it is affiliated with RHI Refractories (Dalian) Co., Ltd. (i.e. RHI Dalian) and Liaoning RHI Jinding Magnesia Co., Ltd. (i.e. RHI Jinding). Therefore, the RHI Questionnaire Response covers RHIL, RHI Dalian, and RHI Jinding. The RHI Questionnaire Response reported that each company is affiliated with numerous companies. However, of these affiliated companies, the RHI Companies reported that only RHIL and RHI Dalian are involved in the sale and production of subject merchandise. We have asked follow-up questions regarding the other affiliated companies in our supplemental questionnaire. The RHI Companies’ questionnaire response indicates that a company named RHI AG is the ultimate majority shareholder in RHIL, RHI Dalian, and RHI Jinding.3 See Memorandum from Summer Avery, International Trade Compliance Analyst, Re: CrossOwnership of RHI Refractories Liaoning Co., Ltd., RHI Refractories (Dalian) Co., Ltd., and Liaoning RHI Jinding Magnesia Co., Ltd. (December 16, 2009) (RHI Companies Cross-Ownership Memorandum). In addition, the RHI Companies stated in their questionnaire response that RHI AG has indirect majority voting ownership interest in all of the RHI affiliates. See RHI Questionnaire Response at III–2. See also RHI Companies Cross-Ownership Memorandum. Therefore, pursuant to 19 CFR 351.525(b)(6)(ii), we preliminarily determine that RHIL and RHI Dalian are cross-owned and, pursuant to 19 CFR 351.525(b)(6)(iv), RHIL, RHI Dalian, and RHI Jinding are cross-owned. Denominator When selecting an appropriate denominator for use in calculating the ad valorem subsidy rate, the Department considered the basis for respondents’ receipt of benefits under each program at issue. We have preliminarily found that the benefits received by the Mayerton Companies and the RHI Companies under the programs found 3 The ownership percentages are proprietary. See RHI Companies Cross-Ownership Memorandum. E:\FR\FM\23DEN1.SGM 23DEN1 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices foreign investment in excess of 25 percent of the total investment in the enterprise. Article 4 defines the type of equipment eligible for the VAT exemption, which includes equipment falling under the Encouraged and Restricted B categories listed in the Notice of the State Council Concerning the Adjustment of Taxation Policies for Imported Equipment (No. 37 (1997)) and equipment for projects listed in the Catalogue of Key Industries, Products and Technologies Encouraged for Development by the State. To receive the rebate, an FIE must meet the requirements above and, prior to the equipment purchase, bring its ‘‘Registration Handbook for Purchase of Domestically Produced Equipment by FIEs’’ as well as additional registration documents to the taxation administration for registration. After purchasing the equipment, FIEs must complete a Declaration Form for Tax Refund (or Exemption) of Exported Goods, and submit it with the registration documents to the tax administration. The Department has previously found this program to be countervailable. See Citric Acid and Certain Citrate Salts from the People’s Republic of China: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailiang Duty Determination with Final Antidumping Duty Determination, 73 FR 54367, 54379 (September 19, 2008), results unchanged in the final determination. The RHI Companies reported receiving VAT rebates on their purchases of domestically produced equipment under this program in several years. The Mayerton Companies reported that they did not use this program. We preliminarily determine that the rebate of the VAT paid on purchases of domestically produced Analysis of Programs equipment by FIEs confers a I. Programs Preliminarily Determined To countervailable subsidy. The rebates are Be Countervailable a financial contribution in the form of revenue foregone by the GOC and they A. VAT Rebates on Purchases of provide a benefit to the recipients in the Domestically Produced Equipment amount of the VAT rebate. See section As outlined in GUOSHUIFA (1999) 771(5)(D)(ii) of the Act and 19 CFR No. 171, Notice of the State 351.510(a)(1). We further preliminarily Administration of Taxation Concerning determine that the VAT rebates are the Trial Administrative Measures on contingent upon the use of domestic Purchase of Domestically Produced over imported goods and, hence, Equipment by Foreign Invested specific under section 771(5A)(C) of the Enterprises (FIEs), the GOC refunds FIEs Act. with the value added tax (VAT) on Normally, we treat exemptions from purchases of certain domestic indirect taxes and import charges, such equipment produced if the purchases as VAT rebates, as recurring benefits, are within the enterprise’s investment consistent with 19 CFR 351.524(c)(1), amount and if the equipment falls under and allocate these benefits only in the year that they were received. However, a tax-free category. Article 3 specifies that this program is limited to FIEs with when an indirect tax or import charge exemption is provided for, or tied to, the completed tax registrations and with srobinson on DSKHWCL6B1PROD with NOTICES countervailable were not tied to export performance or to the production of a particular product. As such, for subsidies received by the Mayerton Companies and the RHI Companies, we are using that company’s sales (and those of its cross-owned affiliates where applicable) of all products as the denominator in our calculations. See 19 CFR 351.525(b)(3). As discussed in the ‘‘CrossOwnership’’ section above regarding the Mayerton Companies, LMR is crossowned with DMR, a producer of subject merchandise that received benefits that were not tied to export performance or to the production of a particular product. As such, for benefits received by LMR or DMR, we are using total sales of all products by LMR and DMR (less any internal sales between LMR and DMR) as the denominator in our calculations. See 19 CFR 351.525(b)(6)(iv). As discussed in the ‘‘CrossOwnership’’ section above regarding the RHI Companies, RHIL, RHI Dalian, and RHI Jinding are cross-owned and each received benefits that were not tied to export performance or to the production of a particular product. As such, for benefits received by RHIL or RHI Dalian, which both produce the subject merchandise, we are using total sales of all products by RHIL and RHI Dalian (less any internal sales) as the denominator in our calculations. See 19 CFR 351.525(b)(6)(ii). For benefits received by RHI Jinding, we are using total sales of all products by RHIL, RHI Dalian, and RHI Jinding (less any internal sales) as the denominator in our calculations, because RHI Jinding is an input supplier, and the input is primarily dedicated to the production of the subject merchandise. See 19 CFR 351.525(b)(6)(iv). VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 PO 00000 Frm 00022 Fmt 4703 Sfmt 4703 68245 capital structure or capital assets of a firm, the Department may treat it as a non-recurring benefit and allocate the benefit to the firm over the AUL. See 19 CFR 351.524(c)(2)(iii) and 19 CFR 351.524(d)(2). As discussed above, the RHI Companies reported receiving VAT rebates on its purchases of domestically produced capital equipment under this program in several years since the December 11, 2001 cut-off date for subsidies. Because these rebates are tied to capital equipment purchases, we find it appropriate to treat them as nonrecurring benefits consistent with 19 CFR 351.524(c)(2)(iii). After applying the 0.5 percent test pursuant to 19 CFR 351.524(b)(2), we found that the VAT rebates received over the years should be allocated over time. See Memorandum from Nicholas Czajkowski, International Trade Compliance Analyst, Re: Preliminary Determination Calculations for RHI Refractories Liaoning Co., Ltd., RHI Refractories (Dalian) Co., Ltd., and Liaoning RHI Jinding Magnesia Co., Ltd. (December 16, 2009) (RHI Companies Calculation Memorandum). To calculate the countervailable subsidy for the RHI Companies, we used our standard methodology for non-recurring benefits. See 19 CFR 351.524(b) and the ‘‘Allocation Period’’ section of this notice. Specifically, we used the discount rate described above in the ‘‘Benchmarks and Discount Rates’’ section to calculate the amount of the benefit attributable to the POI. We divided the benefits attributable to the POI by the appropriate denominator (see the ‘‘Denominator’’ section above) to calculate the countervailable subsidy of 0.51 percent ad valorem exists for the RHI Companies. See RHI Companies Calculation Memorandum. B. Location-Based Income Tax Reduction Programs for FIEs The GOC provides a complex system of tax benefits to FIEs operating in Special Economic Areas such as coastal economic zones, export processing zones, and economic and technological development zones. For example, although the standard corporate income tax rate during the POI was 30 percent, FIEs located in the designated economic zones pay income tax at a reduced rate of either 15 or 24 percent. FIEs are also eligible for further income tax reductions if they are located in ‘‘Old Urban Districts’’ or ‘‘Coastal Economic Zones’’ and are engaged in (1) technology or knowledge intensive projects; (2) long-term projects with foreign investment; or (3) energy resource development, transportation E:\FR\FM\23DEN1.SGM 23DEN1 srobinson on DSKHWCL6B1PROD with NOTICES 68246 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices and port construction projects. See the GOC Questionnaire Response at Exhibit D1 (FIE Tax Law at Article 7). The GOC reports that RHIL is located in Yingkou Economic Development Zone, and the applicable tax rate for RHIL under this program was less than the standard PRC corporate income tax rate. See the GOC Questionnaire Response at page 5, and the RHI Questionnaire Response at Appendix 1. The Mayerton Companies did not use this program. We preliminarily determine that the exemption or reduction in the income tax paid by FIEs in specially designated geographic areas under this program confers a countervailable subsidy. The exemption/reduction is a financial contribution in the form of revenue foregone by the GOC and it provides a benefit to the recipients in the amount of the tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also preliminarily determine that the exemption/reduction is limited to enterprises located in designated geographical regions and, hence, is specific under section 771(5A)(D)(iv) of the Act. The Department also found this program to be countervailable in the CFS investigation. See Coated Free Sheet Paper From the People’s Republic of China: Amended Preliminary Affirmative Countervailing Duty Determination, 72 FR 17484, 17494 (April 9, 2007) (CFS Amended Preliminary), results unchanged in CFS from the PRC. To calculate the benefit from this program to the RHI Companies, we treated the income tax exemption claimed by RHIL as a recurring benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of tax savings, we multiplied RHIL’s taxable income by the standard income tax rate for corporations (i.e., 30 percent) and subtracted that actual amount of income tax paid by RHIL. In accordance with 19 CFR 351.525(b)(6)(i), we attributed the benefit received to the combined sales of RHIL and RHI Dalian. Additional information on this calculation is provided in the calculation analysis memorandum for the RHI Companies. See RHI Companies Calculation Memorandum. On this basis, we preliminarily determine a countervailable subsidy of 0.34 percent ad valorem for the RHI Companies for this program. C. Local Income Tax Exemption and Reduction Programs for ‘‘Productive’’ FIEs Pursuant to Article 9 of the FIE Tax Law and Article 71 of Decree 85 of the VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 Council of 1991, local provinces can establish eligibility criteria and administer the application process for local income tax reductions or exemptions for FIEs, effectively extending the tax exemptions or reductions that are provided to FIEs by the national ‘‘Two Free, Three Half’’ program.4 In its questionnaire response, the RHI Companies reported that RHIL participated in this program but none of the other cross-owned RHI Companies in the group did. The GOC confirmed that RHIL received benefits under this program during the POI. See the GOC Questionnaire Response at pages 41–42. The Mayerton Companies reported that they did not use this program. The GOC confirmed that the Mayerton Companies did not receive benefits under this program during the POI. See the GOC Questionnaire Response at pages 41–42. We preliminarily determine that the exemption or reduction in the local income tax paid by ‘‘productive’’ FIEs under this program confers a countervailable subsidy. The exemption/reduction is a financial contribution in the form of revenue foregone by the government and it provides a benefit to the recipients in the amount of the tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also preliminarily determine that the exemption/reduction afforded by this program is limited as a matter of law to certain enterprises, ‘‘productive’’ FIEs, and, hence, is specific under section 771(5A)(D)(i) of the Act. The Department has also found this program to be countervailable in the CFS investigation. See CFS Amended Preliminary, 72 FR at 17494, results unchanged in CFS from the PRC. To calculate the benefit from this program to the RHI Companies, we treated the income tax exemption claimed by RHIL as a recurring benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of tax savings, we compared the tax rate paid (1.5 percent) to the rate that would have been paid by RHIL otherwise (the standard local rate is 3 percent) and multiplied the difference by RHIL’s taxable income. In accordance with 19 CFR 351.525(b)(6)(i), we attributed the benefit received to the combined sales of RHIL and RHI Dalian. Additional 4 Under the ‘‘Two Free, Three Half’’ program, an FIE that is productive and scheduled to operate for not less than ten years may be exempted from income tax in the first two years of profitability and pay only half of their applicable income taxes for the next three years. The Department has previously found this program to be countervailable. See, e.g., CFS Decision Memorandum, Line Pipe Decision Memorandum, Citric Acid Decision Memorandum, and LWTP Decision Memorandum. PO 00000 Frm 00023 Fmt 4703 Sfmt 4703 information on this calculation is provided in the calculation analysis memorandum for the RHI Companies. See RHI Companies Calculation Memorandum. On this basis, we preliminarily determine a countervailable subsidy of 0.03 percent ad valorem for the RHI Companies. D. Income Tax Credits for FIEs Purchasing Domestically Produced Equipment The Circular of the Ministry of Finance and the State Administration of Taxation of the People’s Republic of China on Distribution of Interim Measures Concerning the Reduction and Exemption of Enterprise Income Tax for Investment in Domestic Equipment for Technological Renovation (CAISHUZI (1999) (209)) and Circular of the Ministry of Finance and the State Administration of Taxation on Enterprise Income Tax Credits for Purchases of Domestic Equipment by Foreign Invested Enterprises and Foreign Enterprises (CAISHUI (2000) No. 49) permit FIEs to obtain tax credits of up to 40 percent of the purchase value of domestically produced equipment. Specifically, the tax credit is available to FIEs and foreign-owned enterprises whose projects are classified in either the Encouraged or Restricted B categories of the Catalogue of Industrial Guidance for Foreign Investment. The credit can be taken for domestically produced equipment so long as the equipment is not listed in the Catalogue of Non-Duty-Exemptible Articles of Importation. The Department has previously found this program to be countervailable. See, e.g., Citric Acid, 73 FR at 54371 (September 19, 2008), results unchanged in the final determination. For this preliminary determination, we find that income tax credits for the purchase of domestically produced equipment are countervailable subsidies. The tax credits are a financial contribution in the form of revenue foregone by the government and provide a benefit to the recipients in the amount of the tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further determine that these tax credits are contingent upon use of domestic over imported goods and, hence, are specific under section 771(5A)(C) of the Act. The RHI Companies reported receiving income tax credits on domestically purchased equipment under this program. To calculate the benefit for this program, we treated the income tax savings as a recurring benefit, consistent with 19 CFR 351.524(c)(1). Based on the information E:\FR\FM\23DEN1.SGM 23DEN1 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices in the RHI Questionnaire Response, it appears that the RHI Companies claimed through subsequent tax returns these income credits under this program prior to the POI and that none of the credits were carried forward into the tax returns filed in the POI. Accordingly, we determine that the RHI Companies did not receive benefits under this program during the POI. srobinson on DSKHWCL6B1PROD with NOTICES E. Preferential Loans and Directed Credit to the Magnesia Carbon Brick Industry The Department is examining whether Bricks producers receive preferential lending through state-owned commercial banks (SOCBs) or policy banks. Information on the record of this investigation demonstrates that the GOC has highlighted and supported the development of Bricks production and that GOC directives in this regard include financing support. As in Tires from the PRC 5 and OCTG from the PRC,6 the Department considered Decision of the State Council on Promulgating the ‘‘Interim Provisions on Promoting Industrial Structure Adjustment’’ for Implementation (No. 40 (2005) of the State Council) (Decision No. 40) and the Directory Catalogue on Readjustment of Industrial Structure (Version 2005) (Directory Catalogue). Consistent with Tires from the PRC and OCTG from the PRC, the Department finds that the GOC relied on Decision No. 40 and the Directory Catalogue in order to achieve the objectives of the Eleventh Five-Year Plan. On August 7, 2009, Petitioners placed excerpts from Decision No. 40 on the record of this investigation. For the preliminary determination, we are placing Decision No. 40 and the Directory Catalogue in their entirety on the record of this investigation. See Memorandum to File from Summer Avery, Office 6, Operations, Re: Policy Lending Documents of the Government of the People’s Republic of China (December 16, 2009). Decision No. 40 makes clear that the State, at all levels, has the ability and means to implement measures to encourage specific projects. We note 5 See Certain New Pneumatic Off-the-Road Tires From the People’s Republic of China: Final Affirmative Countervailing Duty Determination and Final Negative Determination of Critical Circumstances, 73 FR 40480 (July 15, 2008), and the accompanying Issues and Decision Memorandum at ‘‘Government Policy Lending’’ section. 6 See OCTG from the PRC at 47217–47218, unchanged in final determination. See Certain Oil Country Tubular Goods from the People’s Republic of China: Final Affirmative Countervailing Duty Determination, Final Negative Critical Circumstances Determination, 74 FR 64045 (December 7, 2009). VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 that Decision No. 40 is explicit in its mandate for the State at all levels: The people’s governments of all provinces, autonomous regions, and municipalities directly under the Central Government shall take the promotion of industrial structure adjustment as an important reform and development task at present and within a period in the future lay emphasis on implementation and shall, in accordance with the ‘‘Interim Provisions’’ formulate specific measures, rationally guide the investment directions, encourage and support the development of advanced production capacities, restrict and eliminate outdated production capacities. All relevant administrative departments shall speed up the formulation and amendment of policies on public finance, taxation, credit, land, import, export, etc., effectively intensify the coordination and cooperation with industrial policies, and further improve and promote the policy system on industrial structure adjustment. Decision No. 40 at para. 2. Moreover, Decision No. 40 calls for strengthening financing (among other benefits) to encouraged projects listed in the Directory Catalogue. Specifically, Article 17 of Decision No. 40 states: The encouraged investment projects shall be examined, approved, ratified or archived in accordance with the relevant provisions of the state on investment administration. All financial institutions shall provide credit supports in compliance with credit principles. The equipment shall be imported within the total amount of investments for the importer’s own use. Except for the commodities listed in the ‘‘Catalogue of Nontax Free Imported Commodities for Domestic Investment Projects (Amended in 2000)’’ promulgated by the Ministry of Finance, the abovementioned equipment shall still be exempted from customs duties and import value-added tax, and shall, after the new provisions such as the catalogue of investment projects exempted from no tax have been promulgated, be governed by such new provisions. As for other preferential policies on encouraged industry projects, the relevant provisions of the state shall apply. Decision No. 40 at Article 17. These provisions detail an active role for the State in implementing industrial policies, whether through industrial policy coordination or through the guidance of financial resources towards those projects or products that the State encourages, including Bricks which are explicitly designated to be an ‘‘encourage industry’’ in section VII (21) of the Directory Catalogue, ‘‘Production of refractory materials featuring finecomposition and irregularity.’’ See Petitioners December 14, 2009 Comments. As described above, Decision No. 40 makes it clear that the State, at all levels, has the ability and means to implement measures, including PO 00000 Frm 00024 Fmt 4703 Sfmt 4703 68247 directing financial resources such as credit, in order to develop specific projects or products in various industries. We note that several provincial and local five year plans covering areas where our respondents and their cross-owned companies are located refer to the goal of encouraging the production and development of magnesia products. In particular, the 11th Yingkou Economic and Social Development Five-Year Plan specifically ‘‘calls for the development of magnesia bricks of high quality.’’ See the GOC Questionnaire Response at Exhibit P–13. Only the Mayerton Companies had outstanding loans from state-owned commercial banks (SOCBs) during the POI. Therefore, on the basis of the record information described above, we preliminarily determine that the GOC has a policy in place to encourage the development of production of Bricks through policy lending. Loans to Bricks producers from policy banks and SOCBs in the PRC constitute a direct financial contribution from the government, pursuant to section 771(5)(D)(i) of the Act, and they provide a benefit equal to the difference between what the recipients paid on their loans and the amount they would have paid on comparable commercial loans (see section 771(5)(e)(2) of the Act). Finally, we determine that the loans are de jure specific because of the GOC’s policy, as illustrated in the government directive and plans, to encourage and support the growth and development of the Bricks industry. To calculate the benefit under the policy lending program, we compared the amount of interest that the Mayerton companies paid on their outstanding loans from SOCBs to the amount they would have paid on comparable commercial loans. See ‘‘Subsidies Valuation—Benchmarks Rates’’ section above. Most of the details about these loans are business proprietary; for a more complete discussion see Mayerton Companies Calculation Memorandum. We summed the benefit attributable to the POI and divided this amount by the Mayerton Companies’ total sales. See the ‘‘Subsidies Valuation –Denominator’’ section above. On this basis, we calculated a total net subsidy rate of 0.07 percent ad valorem for the Mayerton Companies. III. Programs Preliminarily Determined To Be Not Used We preliminarily determine that the RHI Companies and the Mayerton Companies did not apply for or receive benefits during the POI under the programs listed below. Because of the E:\FR\FM\23DEN1.SGM 23DEN1 68248 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices complicated cross-ownership issues in this investigation, we are continuing to gather information concerning the reported non-use of these programs by all companies that may be cross-owned within each company group. A. Provision of Land-Use Rights to State-Owned Enterprises (SOEs) for Less Than Adequate Remuneration B. Two Free/Three Half Program for Foreign-Invested Enterprises (FIEs) C. Income Tax Reductions for ExportOriented FIEs D. Preferential Income Tax Policy for Enterprises in the Northeast Region E. Forgiveness of Tax Arrears for Enterprises in the Old Industrial Bases of Northeast China F. Income Tax Credits for Domestically Owned Companies Purchasing Domestically Produced Equipment G. Preferential Tax Programs for Enterprises Recognized as High or New Technology Enterprises H. Northeast Revitalization Program and Related Provincial Policies I. The State Key Technology Renovation Project Fund J. Famous Brands Programs K. Grants to Companies for ‘‘Outward Expansion’’ and Export Performance in Guangdong Province L. Fund for Supporting Technological Innovation for Technological Small- and Medium-Sized Enterprises (SMEs) M. Development Fund for SMEs N. Fund for International Market Exploration by SMEs O. Zhejiang Province Program to Rebate Antidumping Costs srobinson on DSKHWCL6B1PROD with NOTICES IV. Programs for Which We Need Additional Information A. Provision of Electricity for Less Than Adequate Remuneration The Department initiated on the GOC’s provision of electricity at less than adequate remuneration (LTAR). Under this program, the GOC provides electricity to SOEs and special industrial sectors, and/or certain provincial, municipal and local governments provide electricity at preferential rates to entice investors to locate to certain zones. Petitioner alleged that the National Development and Reform Commission (NDRC) establishes rates that do not reflect true market prices, and that the GOC caps prices charged to end-users and provides direct energy subsidies to special industrial sectors. The GOC, RHI Companies, and Mayerton Companies reported in their VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 respective questionnaire responses that no benefits were provided under this program. According to the GOC, there are no price preferences for the Bricks industry and each respondent paid rates under the ‘‘Large Scale Industry’’ classification. See the GOC Questionnaire Response at page 9. The Department has requested that the GOC provide the additional information needed to complete our analysis of whether this program provides a countervailable subsidy to the RHI Companies or the Mayerton Companies. B. Export Restraints of Raw Materials Under this program, Petitioner alleged that the GOC has established export quotas and a minimum acceptable export sales price (i.e., export restraints) 7 for a number of raw materials, including three types of magnesia used in the production of Bricks. Essentially, Petitioner has alleged that export restraints on raw materials such as magnesia artificially increase the domestic supply of the raw materials, thereby decreasing the price of raw materials available to PRC manufacturers. All PRC exporters of magnesia are subject to these export restraints, including the affiliated and unaffiliated magnesia suppliers of the RHI Companies and the Mayerton Companies. Under this system, the GOC appears to rank ‘‘bids’’ received from exporters by price and quantity and then awards exporting rights to the companies that can command the highest export prices. In its response, the GOC has stated that there is no basis under WTO rules to treat export restraints as a countervailable program as such restraints cannot constitute a government-entrusted or governmentdirected provision of goods and therefore do not constitute financial contributions under Article 1.1.(a) of the Subsidy and Countervailable Measures Agreement. Moreover, the GOC reported that the purpose of setting export quotas for magnesia is to help regulate an exhaustible natural resource and protect the environment, as processing magnesia is an energy-intensive, highpolluting activity. Although the GOC maintains multiple factors affect magnesia production, the GOC also 7 The U.S. Trade Representative requested a WTO panel against the GOC over export restraints on raw materials (including magnesia) on June 23, 2009. See WTO Dispute Settlement Proceeding Regarding China –Measures Related to the Exportation of Various Raw Materials, 74 FR 32218 (July 7, 2009). PO 00000 Frm 00025 Fmt 4703 Sfmt 4703 concedes that elimination of the export quota on magnesia ‘‘could have a variety of short term effects related to production and consumption patterns in domestic and overseas markets.’’ See the GOC Questionnaire Response at page 26. The Department has issued a supplemental questionnaire requesting that the GOC fully describe and document the process whereby it determined that magnesia should be subject to an export quota as well as what factors it considers in setting that export quota and minimum acceptable export price. In addition, our supplemental questions to the responding companies request that each provide complete volume and value information regarding the domestic purchases of magnesia during the POI as well as other information relevant to our analysis. Verification In accordance with section 782(i)(1) of the Act, we will verify the information submitted by the respondents prior to making our final determination. Suspension of Liquidation In accordance with section 703(d)(1)(A)(i) of the Act, we have determined individual rates for The Mayerton Companies and The RHI Companies. Section 705(c)(5)(A)(i) provides that the all others rate will generally be an amount equal to the weighted average countervailable subsidy rates established for exporters or producers individually investigated, excluding any zero or de minimis countervailable subsidy rates and any rates determined entirely on the basis of the facts available. In this case, however, the countervailable subsidy rates for all of the individually investigated exporters or producers are de minimis. Section 705(c)(5)(A)(ii) provides that, when this is the case, the administering authority may use any reasonable method to establish the all others rate, including averaging the weighted average countervailable subsidy rates determined for the exporters and producers individually examined. Thus, to calculate the allothers rate, we weight-averaged the individual rates of the Mayerton Companies and the RHI Companies based on each company’s respective sales during the POI. These rates are summarized in the table below: E:\FR\FM\23DEN1.SGM 23DEN1 Federal Register / Vol. 74, No. 245 / Wednesday, December 23, 2009 / Notices Producer/exporter Subsidy rate The Mayerton Companies (Dalian Mayerton Refractories Co., Ltd. and Liaoning Mayerton Refractories Co., Ltd.). The RHI Companies (RHI Refractories Liaoning Co., Ltd., RHI Refractories (Dalian) Co., Ltd., and Liaoning RHI Jinding Magnesia Co., Ltd.). All Others ........................................................................................................................................................... Because all of the rates are de minimis, we preliminarily determine that no countervailable subsidies are being provided to the production or exportation of certain magnesia carbon bricks in the PRC. As such, we will not direct U.S. Customs and Border Protection to suspend liquidation of entries of certain magnesia carbon bricks from the PRC. srobinson on DSKHWCL6B1PROD with NOTICES ITC Notification 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 section 705(b)(2) 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 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. Case briefs for this investigation must be submitted no later than one week after the issuance of the last verification report. See 19 CFR 351.309(c) (for a further discussion of case briefs). Rebuttal briefs, which must be limited to issues raised in the case briefs, must be filed within five days after the deadline for submission of case briefs. See 19 CFR 351.309(d). A list of authorities relied upon, a table of contents, and an executive summary of issues should accompany any briefs submitted to the Department. Executive summaries should be limited to five pages total, including footnotes. 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 VerDate Nov<24>2008 16:41 Dec 22, 2009 Jkt 220001 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)(1) of the Act and 19 CFR 351.221(b)(4). Dated: December 16, 2009. Ronald K. Lorentzen, Deputy Assistant Secretary for Import Administration. [FR Doc. E9–30525 Filed 12–22–09; 8:45 am] BILLING CODE 3510–DS–P DEPARTMENT OF COMMERCE International Trade Administration [A–570–863] Seventh Administrative Review of Honey from the People’s Republic of China: Preliminary Results of Antidumping Duty Administrative Review and Intent to Rescind, In Part AGENCY: Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce (‘‘Department’’) is conducting an administrative review of the antidumping duty order on honey from the People’s Republic of China (‘‘PRC’’), covering the period of review (‘‘POR’’) of December 1, 2007, through November 30, 2008. As discussed below, we have preliminarily determined to rescind this administrative review because we have found the sales made by Dongtai Peak Honey Industry Co., Ltd. (‘‘Dongtai Peak’’) that entered during the POR were not bona fide. In addition, we have PO 00000 Frm 00026 68249 Fmt 4703 Sfmt 4703 de minimis percent ad valorem. de minimis percent ad valorem. de minimis percent ad valorem. preliminarily determined to apply adverse facts available (‘‘AFA’’) with respect to the PRC–wide entity which includes Anhui Native Produce Import and Export Corp. (‘‘Anhui Native’’), as it failed to cooperate to the best of its ability and impeded the proceeding. We are also preliminarily finding that Qinhuangdao Municipal Dafeng Industrial Co., Ltd. (‘‘QMD’’), Inner Mongolia Youth Trade Development Co., Ltd. (‘‘Inner Mongolia’’), and Wuhu Qinshgi Tangye (‘‘Wuhu Qinshgi’’) did not demonstrate their eligibility for a separate rate and thus are considered to be part of the PRC–wide entity. If these preliminary results are adopted in our final results of this review, we will instruct U.S. Customs and Border Protection (‘‘CBP’’) to assess antidumping duties on appropriate entries of subject merchandise during the POR for which importer–specific assessment rates are above de minimis. Interested parties are invited to comment on these preliminary results. EFFECTIVE DATE: December 23, 2009. FOR FURTHER INFORMATION CONTACT: Blaine Wiltse, AD/CVD Operations, Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington DC 20230; telephone (202) 482–6345. SUPPLEMENTARY INFORMATION: Background On December 19, 2008, we received a request from Dongtai Peak, and on December 31, 2008, we received a request from Petitioners1 to conduct administrative reviews for a total of 38 companies.2 On February 2, 2009, the 1 The petitioners are the members of the American Honey Producers Association and the Sioux Honey Association (hereinafter referred to as ‘‘Petitioners’’). 2 Alfred L. Wolff (Beijing) Co., Ltd., Anhui Honghui Foodstuff (Group) Co., Ltd., Anhui Native Produce Imp & Exp Corp., Cheng Du Wai Yuan Bee Products Co., Ltd., Chengdu Stone Dynasty Art Stone, Dongtai Peak Honey Industry Co., Ltd., Eurasia Bee’s Products Co., Ltd., Fresh Honey Co., Ltd. (formerly Mgl. Yun Shen), Golden Tadco Int’l., Hangzhou Golden Harvest Health Industry Co., Ltd., Haoliluck Co., Ltd., Hubei Yusun Co., Ltd., Inner Mongolia Altin Bee-Keeping, Inner Mongolia Youth Trade Development Co., Ltd., Jiangsu Kanghong Natural Healthfoods Co., Ltd., Jiangsu Light Industry Products Imp & Exp (Group) Corp., Jilin E:\FR\FM\23DEN1.SGM Continued 23DEN1

Agencies

[Federal Register Volume 74, Number 245 (Wednesday, December 23, 2009)]
[Notices]
[Pages 68241-68249]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-30525]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-955]


Certain Magnesia Carbon Bricks From the People's Republic of 
China: Preliminary Negative Countervailing Duty Determination

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

SUMMARY: The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are not being provided to 
producers and exporters of Certain Magnesia Carbon Bricks (Bricks) from 
the People's Republic of China (PRC).

DATES: Effective Date: December 23, 2009.

FOR FURTHER INFORMATION CONTACT: Toni Page and Summer Avery, AD/CVD 
Operations, Office 6, Operations, Import Administration, U.S. 
Department of Commerce, Room 7867, 14th Street and Constitution Avenue, 
NW., Washington, DC 20230; telephone: (202) 482-1398 and (202) 482-
4052, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On July 29, 2009, the Department received a countervailing duty 
(CVD) petition concerning Bricks from the People's Republic of China 
filed in proper form by Resco Products, Inc. (Petitioner). This 
investigation was initiated on August 18, 2009. See Certain Magnesia 
Carbon Bricks from the People's Republic of China: Initiation of 
Countervailing Duty Investigation, 74 FR 42858 (August 25, 2009) 
(Initiation Notice), and accompanying Initiation Checklist.\1\ On 
September 15, 2009, the Department selected Liaoning Mayerton 
Refractories Co., Ltd. (LMR) and RHI Refractories Liaoning Co., Ltd. 
(RHIL) as mandatory respondents in this investigation. See Memorandum 
from the Team through Barbara Tillman, Director, Office 6, Operations, 
to John M. Andersen, Acting Deputy Assistant Secretary for Antidumping 
and Countervailing Duty Operations, Re: Respondent Selection (September 
15, 2009).
---------------------------------------------------------------------------

    \1\ A public version of this document and all public 
Departmental memoranda are on file in the Central Records Unit 
(CRU), room 1117 in the main building of the Department.
---------------------------------------------------------------------------

    On September 15, 2009, we issued the initial CVD questionnaire to 
the Government of the People's Republic of China (GOC), LMR, and RHIL.
    On October 2, 2009, pursuant to section 703(c)(1)(A) of the Tariff 
Act of 1930 as amended (the Act) and 19 CFR 351.205(e), the Department 
postponed the deadline for the preliminary determination by 55 days to 
no later than December 16, 2009. See Certain Magnesia Carbon Bricks 
From the People's Republic of China: Postponement of Preliminary 
Determination in the Countervailing Duty Investigation, 74 FR 51558 
(October 7, 2009).
    On November 5, 2009, the GOC submitted a response to the initial 
CVD questionnaire (GOC Questionnaire Response). Also on November 5, 
2009, LMR submitted a response for itself and for its affiliate Dalian 
Mayerton Refractories Co. Ltd. (DMR) (collectively, the Mayerton 
Companies) (Mayerton Questionnaire Response);

[[Page 68242]]

and RHIL submitted a response for itself and for its affiliates RHI 
Refractories (Dalian) Co., Ltd. (RHI Dalian) and Liaoning RHI Jinding 
Magnesia Co., Ltd. (RHI Jinding) (collectively, the RHI Companies) (RHI 
Questionnaire Response).
    On November 17, 2009, the Department sent a letter to the Mayerton 
Companies requesting the sales information for its companies. The 
Mayerton Companies submitted the requested sales information on 
November 20, 2009 (Mayerton Sales Submission). In addition, Petitioner 
filed comments regarding the questionnaire responses on November 24, 
2009. On November 30, 2009, the Department sent a letter requesting the 
Mayerton Companies to submit their tax information for the 2007 tax 
year. The Mayerton Companies submitted the requested information on 
December 4, 2009 (Mayerton Tax Submission).
    On December 8, 2009, we issued supplemental questionnaires to the 
GOC and the respondent companies, for which responses are not due until 
after the preliminary determination. On December 14, 2009, counsel for 
Petitioner met with Department officials. See Memorandum to the File 
through Barbara E. Tillman, Director, Office 6, from Toni Page, Case 
Analyst, Re: Meeting with Counsel for Petitioners: Countervailing Duty 
Investigation on Certain Magnesia Carbon Bricks from the People's 
Republic of China (December 14, 2009). Also on December 14, 2009, 
Petitioner submitted further information regarding the provision of 
preferential loans to the Bricks industry. According to Petitioner's 
information, the Bricks under investigation are considered to be 
refractory materials featuring fine-composition and irregularity. These 
refractory materials are identified as a supported project in the 
Directory Catalogue on Readjustment of Industrial Structure (Version 
2005), Decree of the National Development and Reform Commission, No. 
40. See Petitioner's December 14, 2009 Comments.

Scope of the Investigation

    Imports covered by this investigation consist of certain chemically 
bonded (resin or pitch), magnesia carbon bricks with a magnesia 
component of at least 70 percent magnesia (MgO) by weight, regardless 
of the source of raw materials for the MgO, with carbon levels ranging 
from trace amounts to 30 percent by weight, regardless of enhancements, 
(for example, magnesia carbon bricks can be enhanced with coating, 
grinding, tar impregnation or coking, high temperature heat treatments, 
anti-slip treatments or metal casing) and regardless of whether or not 
anti-oxidants are present (for example, antioxidants can be added to 
the mix from trace amounts to 15 percent by weight as various metals, 
metal alloys, and metal carbides).
    Certain magnesia carbon bricks that are the subject of this 
investigation are currently classifiable under subheadings 
6902.10.10.00, 6902.10.50.00, 6815.91.00.00, and 6815.99 of the 
Harmonized Tariff Schedule of the United States (HTSUS). While HTSUS 
subheadings are provided for convenience and customs purposes, the 
written description is dispositive.

Scope Comments

    In accordance with the Preamble to the Department's regulations, we 
set aside a period of time in our Initiation Notice for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of that notice. 
See Initiation Notice, 74 FR at 42858; see also, Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997). 
On September 8, 2009, Pilkington North America Inc. (PNA), a U.S. 
importer of Bricks from China and Mexico, submitted comments on the 
records of the instant CVD investigation, the antidumping duty (AD) 
investigation of Bricks from the PRC, and the AD investigation of 
Bricks from Mexico. In its submission, PNA requested that the 
Department amend the scope to exclude ceramic bonded magnesia bricks 
with or without trace amounts of carbon. The Department is currently 
evaluating PNA's comments and will issue its decision regarding the 
scope of the investigations prior to the preliminary determinations in 
the companion AD investigations due on January 5, 2010.

Injury Test

    Because the PRC is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) the Act, the International Trade Commission 
(ITC) is required to determine whether imports of the subject 
merchandise from the PRC materially injure, or threaten material injury 
to, a U.S. industry. On September 29, 2009, the ITC published its 
affirmative preliminary determination that there is a reasonable 
indication that an industry in the United States is threatened with 
material injury by reason of allegedly subsidized imports of Bricks 
from the PRC. See Certain Magnesia Carbon Bricks From China and Mexico 
Determinations, 74 FR 49889 (September 29, 2009); and Certain Magnesia 
Carbon Bricks From China and Mexico (Preliminary), USITC Pub. 4100, 
Inv. Nos. 701-TA-468 and 731-TA-1166-1167 (September 2009).

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 the accompanying Issues and Decision Memorandum (CFS 
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{time} .'' See CFS Decision Memorandum at 
Comments 1 and 6.
    The Department has subsequently affirmed its decision to apply the 
CVD law to the PRC, most recently in Certain Oil Country Tubular Goods 
From the People's Republic of China: Final Affirmative Countervailing 
Duty Determination, Final Negative Critical Circumstances 
Determination, 74 FR 64045 (December 7, 2009), and the accompanying 
Issues and Decision Memorandum.

Period of Investigation

    The period for which we are measuring subsidies, i.e., the period 
of investigation (POI), is January 1, 2008 through December 31, 2008.

Subsidy Valuation Information

Allocation Period

    Under 19 CFR 351.524(b), non-recurring subsidies are allocated over 
a period corresponding to the average useful life (AUL) of the 
renewable physical assets used to produce the subject merchandise. 
Pursuant to 19 CFR 351.524(d)(2), there is a rebuttable presumption 
that the AUL will be taken from the U.S. Internal Revenue Service's 
1977 Class Life Asset Depreciation Range System (IRS Tables), as 
updated by the Department of Treasury. For the subject merchandise, the 
IRS Tables prescribe an AUL of 15 years. As no interested party has 
claimed that the AUL of 15 years is unreasonable, we are allocating 
non-recurring subsidies over a period of 15 years.
    Further, for non-recurring subsidies, we have applied the ``0.5 
percent expense test'' described in 19 CFR

[[Page 68243]]

351.524(b)(2). Under this test, we divide the amount of subsidies 
approved under a given program in a particular year by the sales (total 
sales or total export sales, as appropriate) for the same year. If the 
amount of subsidies is less than 0.5 percent of the relevant sales, 
then the benefits are allocated to the year of receipt rather than 
allocated over the AUL period.
    In accordance with the Department's practice, we have determined 
that we will identify and measure subsidies in the PRC beginning on the 
date of the country's accession to the World Trade Organization (WTO), 
i.e. December 11, 2001. See, e.g., Circular Welded Carbon Quality Steel 
Line Pipe from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 73 FR 70961 (November 24, 2008) 
(Line Pipe from the PRC), and accompanying Issues and Decision 
Memorandum (Line Pipe Decision Memorandum) at ``Allocation Period'' 
section and Comment 18.

Benchmarks for Short-Term RMB Denominated Loans

    Section 771(5)(E)(ii) of the Act explains that the benefit for 
loans is the ``difference between the amount the recipient of the loan 
pays on the loan and the amount the recipient would pay on a comparable 
commercial loan that the recipient could actually obtain on the 
market.'' Normally, the Department uses comparable commercial loans 
reported by the company for benchmarking purposes. See 19 CFR 
351.505(a)(3)(i). If the firm did not have any comparable commercial 
loans during the period, the Department's regulations provide that we 
``may use a national interest rate for comparable commercial loans.'' 
See 19 CFR 351.505(a)(3)(ii).
    As noted above, section 771(5)(E)(ii) of the Act indicates that the 
benchmark should be a market-based rate. For the reasons explained in 
CFS from the PRC, loans provided by Chinese banks reflect significant 
government intervention in the banking sector and do not reflect rates 
that would be found in a functioning market. See CFS Decision 
Memorandum at Comment 10. Because of this, any loans received by 
respondents from private Chinese or foreign-owned banks within China 
would be unsuitable for use as benchmarks under 19 CFR 
351.505(a)(2)(i). Similarly, the significant intervention of the 
government within the Chinese banking sector prevents the use of a 
national interest rate for commercial loans as envisaged by 19 CFR 
351.505(a)(3)(ii). Therefore, because of the special difficulties 
inherent in using a Chinese benchmark for loans, the Department is 
selecting an external market-based benchmark interest rate. The use of 
an external benchmark is consistent with the Department's practice. For 
example, in Softwood Lumber from Canada, the Department used U.S. 
timber prices to measure the benefit for government-provided timber in 
Canada. 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) (Softwood Lumber from Canada), and accompanying Issues and 
Decision Memorandum at ``Analysis of Programs, Provincial Stumpage 
Programs Determined to Confer Subsidies, Benefit.''
    We are calculating the external benchmark using the regression-
based methodology first developed in CFS from the PRC and more recently 
updated in Lightweight Thermal Paper from the People's Republic of 
China. See CFS Decision Memorandum at Comment 10; see also Lightweight 
Thermal Paper From the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 73 FR 57323 (October 2, 2008) (LWTP 
from the PRC) and accompanying Issues and Decision Memorandum (LWTP 
Decision Memorandum) at ``Benchmarks and Discount Rates'' section. This 
benchmark interest rate is based on the inflation-adjusted interest 
rates of countries with per capita gross national incomes (GNIs) 
similar to the PRC, and takes into account a key factor involved in 
interest rate formation, i.e. quality of a country's institutions, that 
is not directly tied to the state-imposed distortions in the PRC 
banking sector discussed above.
    Following the methodology developed in CFS from the PRC and as 
updated by LWTP from the PRC, we first determined which countries are 
similar to the PRC in terms of GNIs, based on the World Bank's 
classification of countries as: low income; lower-middle income; upper-
middle income; and high income. The PRC falls in the lower-middle 
income category, a group that includes 55 countries as of July 2008. As 
explained in OCTG from the PRC, this pool of countries captures the 
broad inverse relationship between income and interest rates. See 
Certain Oil Country Tubular Goods From the People's Republic of China: 
Preliminary Affirmative Countervailing Duty Determination, Preliminary 
Negative Critical Circumstances Determination, 74 FR 47210, 47216 
(September 15, 2009) (OCTG from the PRC), unchanged in final 
determination.
    Many of these countries reported lending and inflation rates to the 
International Monetary Fund and they are included in that agency's 
international financial statistics (IFS). With the exceptions noted 
below, we have used the interest and inflation rates reported in the 
IFS for the countries identified as ``lower-middle income'' by the 
World Bank. First, we did not include those economies that the 
Department considered to be non-market economies for antidumping (AD) 
purposes for any part of the years in question (Armenia, Azerbaijan, 
Belarus, Georgia, Moldova, and Turkmenistan). Second, the pool 
necessarily excludes any country that did not report both lending and 
inflation rates to IFS for those years. Third, we removed any country 
that reported a rate that was not a lending rate or that based its 
lending rate on foreign-currency denominated instruments. Specifically, 
Jordan reported a deposit rate, not a lending rate, and the rates 
reported by Ecuador and East Timor are dollar-denominated rates; 
therefore, the rates for these three countries have been excluded. 
Finally, for each year the Department calculated an inflation-adjusted 
short-term benchmark rate, we have also excluded any countries with 
aberrational or negative real interest rates for the year in question. 
See Memorandum to File from Nicholas Czajkowski, International Trade 
Compliance Analyst, Re: Preliminary Determination Calculations Loan 
Benchmark Analysis (December 16, 2009).
    The resulting inflation-adjusted benchmark lending rates are 
provided in the calculation memorandum for the Mayerton Companies. See 
Memorandum from Nicholas Czajkowski, International Trade Compliance 
Analyst, Re: Preliminary Determination Calculations for Liaoning 
Mayerton Refractories Co., Ltd. and Dalian Mayerton Refractories Co. 
Ltd. (December 16, 2009) (Mayerton Companies Calculation Memorandum). 
Because these are inflation-adjusted benchmarks, it is necessary to 
adjust the interest payments made by the Mayerton Companies for 
inflation. This was done using the PRC inflation figure as reported in 
the IFS.

Discount Rates

    The lending rates reported in the IFS represent short- and medium-
term lending. However, there are not sufficient publicly available 
long-term interest rate data upon which to base a robust benchmark for 
long-term loans. To address this problem, the

[[Page 68244]]

Department has developed an adjustment to the short- and medium-term 
rates to convert them to long-term rates using Bloomberg U.S. corporate 
BB-rated bond rates. See Light-Walled Rectangular Pipe and Tube From 
the People's Republic of China: Final Affirmative Countervailing Duty 
Investigation Determination, 73 FR 35642 (June 24, 2008) (LWRP from the 
PRC), and accompanying Issues and Decision Memorandum (LWRP Decision 
Memorandum) at Comment 12, ``Discount Rate'' section. In Citric Acid 
from the PRC, this methodology was revised by switching from a long-
term mark-up based on the ratio of the rates of BB-rated bonds to 
applying a spread which is calculated as the difference between the 
two-year BB bond rate and the n-year BB bond rate, where n equals or 
approximates the number of years of the term of the loan in question. 
See Citric Acid and Certain Citrate Salts From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 74 FR 16836 
(April 13, 2009) (Citric Acid from the PRC), and accompanying Issues 
and Decision Memorandum (Citric Acid Decision Memorandum) at Comment 
14.

Attribution of Subsidies

    The Department's regulations at 19 CFR 351.525(b)(6)(i) state that 
the Department will normally attribute a subsidy to the products 
produced by the corporation that received the subsidy. However, 19 CFR 
351.525(b)(6)(ii) provides that when two or more corporations with 
cross-ownership produce the subject merchandise, the Department will 
attribute subsidies received by either or both corporations to the 
products produced by both corporations. Moreover, under 19 CFR 
351.525(b)(6)(iv), when there is cross-ownership between an input 
supplier and a downstream producer, and production of the input is 
primarily dedicated to production of the downstream product, the 
Department will attribute subsidies received by the input supplier to 
the combined sales of the input and downstream products produced by 
both corporations (excluding the sales between the two corporations).
    According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. This regulation states that 
this standard will normally be met where there is a majority voting 
interest between two corporations or through common ownership of two 
(or more) corporations. The Preamble to the Department's countervailing 
duty regulations also states, ``[I]n certain circumstances, a large 
minority voting interest (for example, 40 percent) or a ``golden 
share'' may also result in cross-ownership.'' See Countervailing 
Duties; Final Rule, 63 FR 65348, 65401 (November 25, 1998). The Court 
of International Trade (CIT) has further upheld the Department's 
authority to attribute subsidies based on whether a company could use 
or direct the subsidy benefits of another company in essentially the 
same way it could use its own subsidy benefits. See Fabrique de Fer de 
Charleroi v. United States, 166 F. Supp. 2d 593, 600-603 (CIT 2001).

Cross-Ownership

The Mayerton Companies
    As discussed above, we selected Liaoning Mayerton Refractories Co., 
Ltd. (i.e. LMR) as a mandatory respondent in the instant investigation. 
LMR reported that it is affiliated with Dalian Mayerton Refractories 
Co., Ltd. (i.e. DMR). Since both companies produce subject merchandise, 
the Mayerton Companies submitted a response to the Department's 
questionnaires providing both DMR's and LMR's information. In these 
responses, DMR and LMR reported that each company is affiliated with 
numerous companies. Among the other affiliated companies, according to 
the Mayerton Questionnaire Response, Mayerton Refractories China Ltd. 
(MRC) is a Chinese company involved in domestic sales (but not 
production) of Bricks, and thus did not sell Bricks to the United 
States. Accordingly, the Mayerton companies did not provide a 
questionnaire response for MRC. We have asked follow-up questions 
regarding MRC in our supplemental questionnaire.
    The Mayerton Questionnaire Response indicates that a single foreign 
(i.e., non-Chinese) parent company is the majority shareholder in each 
company.\2\ See Memorandum from Summer Avery, International Trade 
Compliance Analyst, Re: Cross-Ownership of Mayerton Refractories Co., 
Ltd. and Dalian Mayerton Refractories Co. Ltd. (December 16, 2009) 
(Mayerton Companies Cross-Ownership Memorandum). In addition, the legal 
representative for LMR and DMR is the same individual. Other business 
proprietary information on the record of this proceeding indicates 
cross-ownership between LMR and DMR. See Mayerton Questionnaire 
Response at Exhibit 1 and Exhibit 9(a). See also Mayerton Companies 
Cross-Ownership Memorandum. Therefore, pursuant to 19 CFR 
351.525(b)(6)(vi), we preliminarily determine that DMR and LMR are 
cross-owned.
---------------------------------------------------------------------------

    \2\ The ownership percentages are proprietary. See Mayerton 
Companies' Cross-Ownership Memorandum.
---------------------------------------------------------------------------

The RHI Companies
    As discussed above RHI Refractories Liaoning Co., Ltd. (i.e. RHIL) 
was selected as a mandatory respondent in the instant investigation. 
RHIL reported that it is affiliated with RHI Refractories (Dalian) Co., 
Ltd. (i.e. RHI Dalian) and Liaoning RHI Jinding Magnesia Co., Ltd. 
(i.e. RHI Jinding). Therefore, the RHI Questionnaire Response covers 
RHIL, RHI Dalian, and RHI Jinding. The RHI Questionnaire Response 
reported that each company is affiliated with numerous companies. 
However, of these affiliated companies, the RHI Companies reported that 
only RHIL and RHI Dalian are involved in the sale and production of 
subject merchandise. We have asked follow-up questions regarding the 
other affiliated companies in our supplemental questionnaire.
    The RHI Companies' questionnaire response indicates that a company 
named RHI AG is the ultimate majority shareholder in RHIL, RHI Dalian, 
and RHI Jinding.\3\ See Memorandum from Summer Avery, International 
Trade Compliance Analyst, Re: Cross-Ownership of RHI Refractories 
Liaoning Co., Ltd., RHI Refractories (Dalian) Co., Ltd., and Liaoning 
RHI Jinding Magnesia Co., Ltd. (December 16, 2009) (RHI Companies 
Cross-Ownership Memorandum). In addition, the RHI Companies stated in 
their questionnaire response that RHI AG has indirect majority voting 
ownership interest in all of the RHI affiliates. See RHI Questionnaire 
Response at III-2. See also RHI Companies Cross-Ownership Memorandum. 
Therefore, pursuant to 19 CFR 351.525(b)(6)(ii), we preliminarily 
determine that RHIL and RHI Dalian are cross-owned and, pursuant to 19 
CFR 351.525(b)(6)(iv), RHIL, RHI Dalian, and RHI Jinding are cross-
owned.
---------------------------------------------------------------------------

    \3\ The ownership percentages are proprietary. See RHI Companies 
Cross-Ownership Memorandum.
---------------------------------------------------------------------------

Denominator

    When selecting an appropriate denominator for use in calculating 
the ad valorem subsidy rate, the Department considered the basis for 
respondents' receipt of benefits under each program at issue. We have 
preliminarily found that the benefits received by the Mayerton 
Companies and the RHI Companies under the programs found

[[Page 68245]]

countervailable were not tied to export performance or to the 
production of a particular product. As such, for subsidies received by 
the Mayerton Companies and the RHI Companies, we are using that 
company's sales (and those of its cross-owned affiliates where 
applicable) of all products as the denominator in our calculations. See 
19 CFR 351.525(b)(3).
    As discussed in the ``Cross-Ownership'' section above regarding the 
Mayerton Companies, LMR is cross-owned with DMR, a producer of subject 
merchandise that received benefits that were not tied to export 
performance or to the production of a particular product. As such, for 
benefits received by LMR or DMR, we are using total sales of all 
products by LMR and DMR (less any internal sales between LMR and DMR) 
as the denominator in our calculations. See 19 CFR 351.525(b)(6)(iv).
    As discussed in the ``Cross-Ownership'' section above regarding the 
RHI Companies, RHIL, RHI Dalian, and RHI Jinding are cross-owned and 
each received benefits that were not tied to export performance or to 
the production of a particular product. As such, for benefits received 
by RHIL or RHI Dalian, which both produce the subject merchandise, we 
are using total sales of all products by RHIL and RHI Dalian (less any 
internal sales) as the denominator in our calculations. See 19 CFR 
351.525(b)(6)(ii). For benefits received by RHI Jinding, we are using 
total sales of all products by RHIL, RHI Dalian, and RHI Jinding (less 
any internal sales) as the denominator in our calculations, because RHI 
Jinding is an input supplier, and the input is primarily dedicated to 
the production of the subject merchandise. See 19 CFR 
351.525(b)(6)(iv).

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. VAT Rebates on Purchases of Domestically Produced Equipment
    As outlined in GUOSHUIFA (1999) No. 171, Notice of the State 
Administration of Taxation Concerning the Trial Administrative Measures 
on Purchase of Domestically Produced Equipment by Foreign Invested 
Enterprises (FIEs), the GOC refunds FIEs with the value added tax (VAT) 
on purchases of certain domestic equipment produced if the purchases 
are within the enterprise's investment amount and if the equipment 
falls under a tax-free category. Article 3 specifies that this program 
is limited to FIEs with completed tax registrations and with foreign 
investment in excess of 25 percent of the total investment in the 
enterprise. Article 4 defines the type of equipment eligible for the 
VAT exemption, which includes equipment falling under the Encouraged 
and Restricted B categories listed in the Notice of the State Council 
Concerning the Adjustment of Taxation Policies for Imported Equipment 
(No. 37 (1997)) and equipment for projects listed in the Catalogue of 
Key Industries, Products and Technologies Encouraged for Development by 
the State. To receive the rebate, an FIE must meet the requirements 
above and, prior to the equipment purchase, bring its ``Registration 
Handbook for Purchase of Domestically Produced Equipment by FIEs'' as 
well as additional registration documents to the taxation 
administration for registration. After purchasing the equipment, FIEs 
must complete a Declaration Form for Tax Refund (or Exemption) of 
Exported Goods, and submit it with the registration documents to the 
tax administration. The Department has previously found this program to 
be countervailable. See Citric Acid and Certain Citrate Salts from the 
People's Republic of China: Preliminary Affirmative Countervailing Duty 
Determination and Alignment of Final Countervailiang Duty Determination 
with Final Antidumping Duty Determination, 73 FR 54367, 54379 
(September 19, 2008), results unchanged in the final determination.
    The RHI Companies reported receiving VAT rebates on their purchases 
of domestically produced equipment under this program in several years. 
The Mayerton Companies reported that they did not use this program. We 
preliminarily determine that the rebate of the VAT paid on purchases of 
domestically produced equipment by FIEs confers a countervailable 
subsidy. The rebates are a financial contribution in the form of 
revenue foregone by the GOC and they provide a benefit to the 
recipients in the amount of the VAT rebate. See section 771(5)(D)(ii) 
of the Act and 19 CFR 351.510(a)(1). We further preliminarily determine 
that the VAT rebates are contingent upon the use of domestic over 
imported goods and, hence, specific under section 771(5A)(C) of the 
Act.
    Normally, we treat exemptions from indirect taxes and import 
charges, such as VAT rebates, as recurring benefits, consistent with 19 
CFR 351.524(c)(1), and allocate these benefits only in the year that 
they were received. However, when an indirect tax or import charge 
exemption is provided for, or tied to, the capital structure or capital 
assets of a firm, the Department may treat it as a non-recurring 
benefit and allocate the benefit to the firm over the AUL. See 19 CFR 
351.524(c)(2)(iii) and 19 CFR 351.524(d)(2).
    As discussed above, the RHI Companies reported receiving VAT 
rebates on its purchases of domestically produced capital equipment 
under this program in several years since the December 11, 2001 cut-off 
date for subsidies. Because these rebates are tied to capital equipment 
purchases, we find it appropriate to treat them as non-recurring 
benefits consistent with 19 CFR 351.524(c)(2)(iii).
    After applying the 0.5 percent test pursuant to 19 CFR 
351.524(b)(2), we found that the VAT rebates received over the years 
should be allocated over time. See Memorandum from Nicholas Czajkowski, 
International Trade Compliance Analyst, Re: Preliminary Determination 
Calculations for RHI Refractories Liaoning Co., Ltd., RHI Refractories 
(Dalian) Co., Ltd., and Liaoning RHI Jinding Magnesia Co., Ltd. 
(December 16, 2009) (RHI Companies Calculation Memorandum). To 
calculate the countervailable subsidy for the RHI Companies, we used 
our standard methodology for non-recurring benefits. See 19 CFR 
351.524(b) and the ``Allocation Period'' section of this notice. 
Specifically, we used the discount rate described above in the 
``Benchmarks and Discount Rates'' section to calculate the amount of 
the benefit attributable to the POI. We divided the benefits 
attributable to the POI by the appropriate denominator (see the 
``Denominator'' section above) to calculate the countervailable subsidy 
of 0.51 percent ad valorem exists for the RHI Companies. See RHI 
Companies Calculation Memorandum.
B. Location-Based Income Tax Reduction Programs for FIEs
    The GOC provides a complex system of tax benefits to FIEs operating 
in Special Economic Areas such as coastal economic zones, export 
processing zones, and economic and technological development zones. For 
example, although the standard corporate income tax rate during the POI 
was 30 percent, FIEs located in the designated economic zones pay 
income tax at a reduced rate of either 15 or 24 percent. FIEs are also 
eligible for further income tax reductions if they are located in ``Old 
Urban Districts'' or ``Coastal Economic Zones'' and are engaged in (1) 
technology or knowledge intensive projects; (2) long-term projects with 
foreign investment; or (3) energy resource development, transportation

[[Page 68246]]

and port construction projects. See the GOC Questionnaire Response at 
Exhibit D1 (FIE Tax Law at Article 7).
    The GOC reports that RHIL is located in Yingkou Economic 
Development Zone, and the applicable tax rate for RHIL under this 
program was less than the standard PRC corporate income tax rate. See 
the GOC Questionnaire Response at page 5, and the RHI Questionnaire 
Response at Appendix 1. The Mayerton Companies did not use this 
program.
    We preliminarily determine that the exemption or reduction in the 
income tax paid by FIEs in specially designated geographic areas under 
this program confers a countervailable subsidy. The exemption/reduction 
is a financial contribution in the form of revenue foregone by the GOC 
and it provides a benefit to the recipients in the amount of the tax 
savings. See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). 
We also preliminarily determine that the exemption/reduction is limited 
to enterprises located in designated geographical regions and, hence, 
is specific under section 771(5A)(D)(iv) of the Act. The Department 
also found this program to be countervailable in the CFS investigation. 
See Coated Free Sheet Paper From the People's Republic of China: 
Amended Preliminary Affirmative Countervailing Duty Determination, 72 
FR 17484, 17494 (April 9, 2007) (CFS Amended Preliminary), results 
unchanged in CFS from the PRC.
    To calculate the benefit from this program to the RHI Companies, we 
treated the income tax exemption claimed by RHIL as a recurring 
benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of 
tax savings, we multiplied RHIL's taxable income by the standard income 
tax rate for corporations (i.e., 30 percent) and subtracted that actual 
amount of income tax paid by RHIL. In accordance with 19 CFR 
351.525(b)(6)(i), we attributed the benefit received to the combined 
sales of RHIL and RHI Dalian. Additional information on this 
calculation is provided in the calculation analysis memorandum for the 
RHI Companies. See RHI Companies Calculation Memorandum. On this basis, 
we preliminarily determine a countervailable subsidy of 0.34 percent ad 
valorem for the RHI Companies for this program.
C. Local Income Tax Exemption and Reduction Programs for ``Productive'' 
FIEs
    Pursuant to Article 9 of the FIE Tax Law and Article 71 of Decree 
85 of the Council of 1991, local provinces can establish eligibility 
criteria and administer the application process for local income tax 
reductions or exemptions for FIEs, effectively extending the tax 
exemptions or reductions that are provided to FIEs by the national 
``Two Free, Three Half'' program.\4\ In its questionnaire response, the 
RHI Companies reported that RHIL participated in this program but none 
of the other cross-owned RHI Companies in the group did. The GOC 
confirmed that RHIL received benefits under this program during the 
POI. See the GOC Questionnaire Response at pages 41-42. The Mayerton 
Companies reported that they did not use this program. The GOC 
confirmed that the Mayerton Companies did not receive benefits under 
this program during the POI. See the GOC Questionnaire Response at 
pages 41-42.
---------------------------------------------------------------------------

    \4\ Under the ``Two Free, Three Half'' program, an FIE that is 
productive and scheduled to operate for not less than ten years may 
be exempted from income tax in the first two years of profitability 
and pay only half of their applicable income taxes for the next 
three years. The Department has previously found this program to be 
countervailable. See, e.g., CFS Decision Memorandum, Line Pipe 
Decision Memorandum, Citric Acid Decision Memorandum, and LWTP 
Decision Memorandum.
---------------------------------------------------------------------------

    We preliminarily determine that the exemption or reduction in the 
local income tax paid by ``productive'' FIEs under this program confers 
a countervailable subsidy. The exemption/reduction is a financial 
contribution in the form of revenue foregone by the government and it 
provides a benefit to the recipients in the amount of the tax savings. 
See section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We also 
preliminarily determine that the exemption/reduction afforded by this 
program is limited as a matter of law to certain enterprises, 
``productive'' FIEs, and, hence, is specific under section 
771(5A)(D)(i) of the Act. The Department has also found this program to 
be countervailable in the CFS investigation. See CFS Amended 
Preliminary, 72 FR at 17494, results unchanged in CFS from the PRC.
    To calculate the benefit from this program to the RHI Companies, we 
treated the income tax exemption claimed by RHIL as a recurring 
benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of 
tax savings, we compared the tax rate paid (1.5 percent) to the rate 
that would have been paid by RHIL otherwise (the standard local rate is 
3 percent) and multiplied the difference by RHIL's taxable income. In 
accordance with 19 CFR 351.525(b)(6)(i), we attributed the benefit 
received to the combined sales of RHIL and RHI Dalian. Additional 
information on this calculation is provided in the calculation analysis 
memorandum for the RHI Companies. See RHI Companies Calculation 
Memorandum. On this basis, we preliminarily determine a countervailable 
subsidy of 0.03 percent ad valorem for the RHI Companies.
D. Income Tax Credits for FIEs Purchasing Domestically Produced 
Equipment
    The Circular of the Ministry of Finance and the State 
Administration of Taxation of the People's Republic of China on 
Distribution of Interim Measures Concerning the Reduction and Exemption 
of Enterprise Income Tax for Investment in Domestic Equipment for 
Technological Renovation (CAISHUZI (1999) (209)) and Circular of the 
Ministry of Finance and the State Administration of Taxation on 
Enterprise Income Tax Credits for Purchases of Domestic Equipment by 
Foreign Invested Enterprises and Foreign Enterprises (CAISHUI (2000) 
No. 49) permit FIEs to obtain tax credits of up to 40 percent of the 
purchase value of domestically produced equipment. Specifically, the 
tax credit is available to FIEs and foreign-owned enterprises whose 
projects are classified in either the Encouraged or Restricted B 
categories of the Catalogue of Industrial Guidance for Foreign 
Investment. The credit can be taken for domestically produced equipment 
so long as the equipment is not listed in the Catalogue of Non-Duty-
Exemptible Articles of Importation.
    The Department has previously found this program to be 
countervailable. See, e.g., Citric Acid, 73 FR at 54371 (September 19, 
2008), results unchanged in the final determination. For this 
preliminary determination, we find that income tax credits for the 
purchase of domestically produced equipment are countervailable 
subsidies. The tax credits are a financial contribution in the form of 
revenue foregone by the government and provide a benefit to the 
recipients in the amount of the tax savings. See section 771(5)(D)(ii) 
of the Act and 19 CFR 351.509(a)(1). We further determine that these 
tax credits are contingent upon use of domestic over imported goods 
and, hence, are specific under section 771(5A)(C) of the Act.
    The RHI Companies reported receiving income tax credits on 
domestically purchased equipment under this program. To calculate the 
benefit for this program, we treated the income tax savings as a 
recurring benefit, consistent with 19 CFR 351.524(c)(1). Based on the 
information

[[Page 68247]]

in the RHI Questionnaire Response, it appears that the RHI Companies 
claimed through subsequent tax returns these income credits under this 
program prior to the POI and that none of the credits were carried 
forward into the tax returns filed in the POI. Accordingly, we 
determine that the RHI Companies did not receive benefits under this 
program during the POI.
E. Preferential Loans and Directed Credit to the Magnesia Carbon Brick 
Industry
    The Department is examining whether Bricks producers receive 
preferential lending through state-owned commercial banks (SOCBs) or 
policy banks. Information on the record of this investigation 
demonstrates that the GOC has highlighted and supported the development 
of Bricks production and that GOC directives in this regard include 
financing support.
    As in Tires from the PRC \5\ and OCTG from the PRC,\6\ the 
Department considered Decision of the State Council on Promulgating the 
``Interim Provisions on Promoting Industrial Structure Adjustment'' for 
Implementation (No. 40 (2005) of the State Council) (Decision No. 40) 
and the Directory Catalogue on Readjustment of Industrial Structure 
(Version 2005) (Directory Catalogue). Consistent with Tires from the 
PRC and OCTG from the PRC, the Department finds that the GOC relied on 
Decision No. 40 and the Directory Catalogue in order to achieve the 
objectives of the Eleventh Five-Year Plan. On August 7, 2009, 
Petitioners placed excerpts from Decision No. 40 on the record of this 
investigation. For the preliminary determination, we are placing 
Decision No. 40 and the Directory Catalogue in their entirety on the 
record of this investigation. See Memorandum to File from Summer Avery, 
Office 6, Operations, Re: Policy Lending Documents of the Government of 
the People's Republic of China (December 16, 2009).
---------------------------------------------------------------------------

    \5\ See Certain New Pneumatic Off-the-Road Tires From the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination and Final Negative Determination of Critical 
Circumstances, 73 FR 40480 (July 15, 2008), and the accompanying 
Issues and Decision Memorandum at ``Government Policy Lending'' 
section.
    \6\ See OCTG from the PRC at 47217-47218, unchanged in final 
determination. See Certain Oil Country Tubular Goods from the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination, Final Negative Critical Circumstances Determination, 
74 FR 64045 (December 7, 2009).
---------------------------------------------------------------------------

    Decision No. 40 makes clear that the State, at all levels, has the 
ability and means to implement measures to encourage specific projects. 
We note that Decision No. 40 is explicit in its mandate for the State 
at all levels:

    The people's governments of all provinces, autonomous regions, 
and municipalities directly under the Central Government shall take 
the promotion of industrial structure adjustment as an important 
reform and development task at present and within a period in the 
future lay emphasis on implementation and shall, in accordance with 
the ``Interim Provisions'' formulate specific measures, rationally 
guide the investment directions, encourage and support the 
development of advanced production capacities, restrict and 
eliminate outdated production capacities. All relevant 
administrative departments shall speed up the formulation and 
amendment of policies on public finance, taxation, credit, land, 
import, export, etc., effectively intensify the coordination and 
cooperation with industrial policies, and further improve and 
promote the policy system on industrial structure adjustment.

Decision No. 40 at para. 2. Moreover, Decision No. 40 calls for 
strengthening financing (among other benefits) to encouraged projects 
listed in the Directory Catalogue. Specifically, Article 17 of Decision 
No. 40 states:

    The encouraged investment projects shall be examined, approved, 
ratified or archived in accordance with the relevant provisions of 
the state on investment administration. All financial institutions 
shall provide credit supports in compliance with credit principles. 
The equipment shall be imported within the total amount of 
investments for the importer's own use. Except for the commodities 
listed in the ``Catalogue of Non-tax Free Imported Commodities for 
Domestic Investment Projects (Amended in 2000)'' promulgated by the 
Ministry of Finance, the abovementioned equipment shall still be 
exempted from customs duties and import value-added tax, and shall, 
after the new provisions such as the catalogue of investment 
projects exempted from no tax have been promulgated, be governed by 
such new provisions. As for other preferential policies on 
encouraged industry projects, the relevant provisions of the state 
shall apply.

Decision No. 40 at Article 17. These provisions detail an active role 
for the State in implementing industrial policies, whether through 
industrial policy coordination or through the guidance of financial 
resources towards those projects or products that the State encourages, 
including Bricks which are explicitly designated to be an ``encourage 
industry'' in section VII (21) of the Directory Catalogue, ``Production 
of refractory materials featuring fine-composition and irregularity.'' 
See Petitioners December 14, 2009 Comments.
    As described above, Decision No. 40 makes it clear that the State, 
at all levels, has the ability and means to implement measures, 
including directing financial resources such as credit, in order to 
develop specific projects or products in various industries. We note 
that several provincial and local five year plans covering areas where 
our respondents and their cross-owned companies are located refer to 
the goal of encouraging the production and development of magnesia 
products. In particular, the 11th Yingkou Economic and Social 
Development Five-Year Plan specifically ``calls for the development of 
magnesia bricks of high quality.'' See the GOC Questionnaire Response 
at Exhibit P-13.
    Only the Mayerton Companies had outstanding loans from state-owned 
commercial banks (SOCBs) during the POI. Therefore, on the basis of the 
record information described above, we preliminarily determine that the 
GOC has a policy in place to encourage the development of production of 
Bricks through policy lending. Loans to Bricks producers from policy 
banks and SOCBs in the PRC constitute a direct financial contribution 
from the government, pursuant to section 771(5)(D)(i) of the Act, and 
they provide a benefit equal to the difference between what the 
recipients paid on their loans and the amount they would have paid on 
comparable commercial loans (see section 771(5)(e)(2) of the Act). 
Finally, we determine that the loans are de jure specific because of 
the GOC's policy, as illustrated in the government directive and plans, 
to encourage and support the growth and development of the Bricks 
industry.
    To calculate the benefit under the policy lending program, we 
compared the amount of interest that the Mayerton companies paid on 
their outstanding loans from SOCBs to the amount they would have paid 
on comparable commercial loans. See ``Subsidies Valuation--Benchmarks 
Rates'' section above. Most of the details about these loans are 
business proprietary; for a more complete discussion see Mayerton 
Companies Calculation Memorandum. We summed the benefit attributable to 
the POI and divided this amount by the Mayerton Companies' total sales. 
See the ``Subsidies Valuation -Denominator'' section above. On this 
basis, we calculated a total net subsidy rate of 0.07 percent ad 
valorem for the Mayerton Companies.

III. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the RHI Companies and the Mayerton 
Companies did not apply for or receive benefits during the POI under 
the programs listed below. Because of the

[[Page 68248]]

complicated cross-ownership issues in this investigation, we are 
continuing to gather information concerning the reported non-use of 
these programs by all companies that may be cross-owned within each 
company group.
    A. Provision of Land-Use Rights to State-Owned Enterprises (SOEs) 
for Less Than Adequate Remuneration
    B. Two Free/Three Half Program for Foreign-Invested Enterprises 
(FIEs)
    C. Income Tax Reductions for Export-Oriented FIEs
    D. Preferential Income Tax Policy for Enterprises in the Northeast 
Region
    E. Forgiveness of Tax Arrears for Enterprises in the Old Industrial 
Bases of Northeast China
    F. Income Tax Credits for Domestically Owned Companies Purchasing 
Domestically Produced Equipment
    G. Preferential Tax Programs for Enterprises Recognized as High or 
New Technology Enterprises
    H. Northeast Revitalization Program and Related Provincial Policies
    I. The State Key Technology Renovation Project Fund
    J. Famous Brands Programs
    K. Grants to Companies for ``Outward Expansion'' and Export 
Performance in Guangdong Province
    L. Fund for Supporting Technological Innovation for Technological 
Small- and Medium-Sized Enterprises (SMEs)
    M. Development Fund for SMEs
    N. Fund for International Market Exploration by SMEs
    O. Zhejiang Province Program to Rebate Antidumping Costs

IV. Programs for Which We Need Additional Information

A. Provision of Electricity for Less Than Adequate Remuneration
    The Department initiated on the GOC's provision of electricity at 
less than adequate remuneration (LTAR). Under this program, the GOC 
provides electricity to SOEs and special industrial sectors, and/or 
certain provincial, municipal and local governments provide electricity 
at preferential rates to entice investors to locate to certain zones. 
Petitioner alleged that the National Development and Reform Commission 
(NDRC) establishes rates that do not reflect true market prices, and 
that the GOC caps prices charged to end-users and provides direct 
energy subsidies to special industrial sectors.
    The GOC, RHI Companies, and Mayerton Companies reported in their 
respective questionnaire responses that no benefits were provided under 
this program. According to the GOC, there are no price preferences for 
the Bricks industry and each respondent paid rates under the ``Large 
Scale Industry'' classification. See the GOC Questionnaire Response at 
page 9. The Department has requested that the GOC provide the 
additional information needed to complete our analysis of whether this 
program provides a countervailable subsidy to the RHI Companies or the 
Mayerton Companies.
B. Export Restraints of Raw Materials
    Under this program, Petitioner alleged that the GOC has established 
export quotas and a minimum acceptable export sales price (i.e., export 
restraints) \7\ for a number of raw materials, including three types of 
magnesia used in the production of Bricks. Essentially, Petitioner has 
alleged that export restraints on raw materials such as magnesia 
artificially increase the domestic supply of the raw materials, thereby 
decreasing the price of raw materials available to PRC manufacturers. 
All PRC exporters of magnesia are subject to these export restraints, 
including the affiliated and unaffiliated magnesia suppliers of the RHI 
Companies and the Mayerton Companies. Under this system, the GOC 
appears to rank ``bids'' received from exporters by price and quantity 
and then awards exporting rights to the companies that can command the 
highest export prices.
---------------------------------------------------------------------------

    \7\ The U.S. Trade Representative requested a WTO panel against 
the GOC over export restraints on raw materials (including magnesia) 
on June 23, 2009. See WTO Dispute Settlement Proceeding Regarding 
China -Measures Related to the Exportation of Various Raw Materials, 
74 FR 32218 (July 7, 2009).
---------------------------------------------------------------------------

    In its response, the GOC has stated that there is no basis under 
WTO rules to treat export restraints as a countervailable program as 
such restraints cannot constitute a government-entrusted or government-
directed provision of goods and therefore do not constitute financial 
contributions under Article 1.1.(a) of the Subsidy and Countervailable 
Measures Agreement. Moreover, the GOC reported that the purpose of 
setting export quotas for magnesia is to help regulate an exhaustible 
natural resource and protect the environment, as processing magnesia is 
an energy-intensive, high-polluting activity. Although the GOC 
maintains multiple factors affect magnesia production, the GOC also 
concedes that elimination of the export quota on magnesia ``could have 
a variety of short term effects related to production and consumption 
patterns in domestic and overseas markets.'' See the GOC Questionnaire 
Response at page 26.
    The Department has issued a supplemental questionnaire requesting 
that the GOC fully describe and document the process whereby it 
determined that magnesia should be subject to an export quota as well 
as what factors it considers in setting that export quota and minimum 
acceptable export price. In addition, our supplemental questions to the 
responding companies request that each provide complete volume and 
value information regarding the domestic purchases of magnesia during 
the POI as well as other information relevant to our analysis.

Verification

    In accordance with section 782(i)(1) of the Act, we will verify the 
information submitted by the respondents prior to making our final 
determination.

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
determined individual rates for The Mayerton Companies and The RHI 
Companies. Section 705(c)(5)(A)(i) provides that the all others rate 
will generally be an amount equal to the weighted average 
countervailable subsidy rates established for exporters or producers 
individually investigated, excluding any zero or de minimis 
countervailable subsidy rates and any rates determined entirely on the 
basis of the facts available. In this case, however, the 
countervailable subsidy rates for all of the individually investigated 
exporters or producers are de minimis. Section 705(c)(5)(A)(ii) 
provides that, when this is the case, the administering authority may 
use any reasonable method to establish the all others rate, including 
averaging the weighted average countervailable subsidy rates determined 
for the exporters and producers individually examined. Thus, to 
calculate the all-others rate, we weight-averaged the individual rates 
of the Mayerton Companies and the RHI Companies based on each company's 
respective sales during the POI. These rates are summarized in the 
table below:

[[Page 68249]]



------------------------------------------------------------------------
             Producer/exporter                       Subsidy rate
------------------------------------------------------------------------
The Mayerton Companies (Dalian Mayerton      de minimis percent ad
 Refractories Co., Ltd. and Liaoning          valorem.
 Mayerton Refractories Co., Ltd.).
The RHI Companies (RHI Refractories          de minimis percent ad
 Liaoning Co., Ltd., RHI Refractories         valorem.
 (Dalian) Co., Ltd., and Liaoning RHI
 Jinding Magnesia Co., Ltd.).
All Others.................................  de minimis percent ad
                                              valorem.
------------------------------------------------------------------------

    Because all of the rates are de minimis, we preliminarily determine 
that no countervailable subsidies are being provided to the production 
or exportation of certain magnesia carbon bricks in the PRC. As such, 
we will not direct U.S. Customs and Border Protection to suspend 
liquidation of entries of certain magnesia carbon bricks from the PRC.

ITC Notification

    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 non-privileged 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 section 705(b)(2) 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

    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. Case briefs for this 
investigation must be submitted no later than one week after the 
issuance of the last verification report. See 19 CFR 351.309(c) (for a 
further discussion of case briefs). Rebuttal briefs, which must be 
limited to issues raised in the case briefs, must be filed within five 
days after the deadline for submission of case briefs. See 19 CFR 
351.309(d). A list of authorities relied upon, a table of contents, and 
an executive summary of issues should accompany any briefs submitted to 
the Department. Executive summaries should be limited to five pages 
total, including footnotes.
    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)(1) of the Act and 19 CFR 351.221(b)(4).

    Dated: December 16, 2009.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. E9-30525 Filed 12-22-09; 8:45 am]
BILLING CODE 3510-DS-P