Certain Magnesia Carbon Bricks From the People's Republic of China: Preliminary Negative Countervailing Duty Determination, 68241-68249 [E9-30525]
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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.
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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.
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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).
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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.
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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
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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
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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
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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
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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,
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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
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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
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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.
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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.
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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).
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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
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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
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16:41 Dec 22, 2009
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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.
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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
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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).
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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
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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
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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
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16:41 Dec 22, 2009
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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).
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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]
-----------------------------------------------------------------------
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.
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\3\ The ownership percentages are proprietary. See RHI Companies
Cross-Ownership Memorandum.
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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.
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\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).
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\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).
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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.
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\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).
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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