Aluminum Extrusions From the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination, 54302-54322 [2010-22204]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 75, Number 172 (Tuesday, September 7, 2010)]
[Notices]
[Pages 54302-54322]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-22204]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-968]


Aluminum Extrusions From the People's Republic of China: 
Preliminary Affirmative 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 being provided to 
producers and exporters of aluminum extrusions from the People's 
Republic of China (the PRC). For information on the estimated subsidy 
rates, see the ``Suspension of Liquidation'' section of this notice.

DATES: Effective Date: September 7, 2010.

FOR FURTHER INFORMATION CONTACT: Eric B. Greynolds, AD/CVD Operations, 
Office 3, Import Administration, U.S. Department of Commerce, Room 
4014, 14th Street and Constitution Avenue, NW., Washington, DC 20230; 
telephone: 202-482-6071.

SUPPLEMENTARY INFORMATION:

Case History

    On March 31, 2010, the Department received the petition filed in 
proper form by the petitioners.\1\ The Department initiated the 
investigation on April 20, 2010. See Aluminum Extrusions from the 
People's Republic of China: Initiation of Countervailing Duty 
Investigation, 75 FR 22114 (April 27, 2010) (Initiation), and 
accompanying Initiation Checklist.\2\
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    \1\ Petitioners are Aluminum Extrusion Fair Trade Committee: 
Aerolite Extrusion Company; Alexandria Extrusions Company; Beneda 
Aluminum of Florida, Inc.; William L. Bonnell Company, Inc.; 
Frontier Aluminum Corporation; Futura Industries Corporation; Hydro 
Aluminum North American Inc.; Kaiser Aluminum Corporation; Profile 
Extrusion Company; Sapa Extrusions, Inc.; Western Extrusions 
Corporation; and the United Steel, Paper, and Forestry, Rubber, 
Manufacturing, Energy, Allied Industrial and Service Workers 
International Union.
    \2\ Public and public versions of Departmental memoranda 
referenced in this Notice are on file in the Central Records Unit 
(CRU), Room 1117 in the main building of the Commerce Department.
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    On May 18, 2010, the Department of Commerce (the Department) 
selected the following firms as mandatory respondents in this 
countervailing duty (CVD) investigation: Dragonluxe Limited 
(Dragonluxe), Miland Luck Limited (Miland), and Liaoyang Zhongwang 
Aluminum Profile Co. Ltd./Liaoning Zhongwang Group (collectively, the 
Zhongwang Group) and concurrently issued to them, as well as the 
Government of China (GOC), the initial questionnaire.\3\ We confirmed 
that the three mandatory respondents received the CVD questionnaire.\4\ 
Responses were due on June 24, 2010. However, the June 24, 2010, 
deadline passed with none of the mandatory respondents submitting a 
questionnaire response or requesting an extension.
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    \3\ See Memorandum to John M. Andersen, Acting Deputy Assistant 
Secretary for Antidumping and Countervailing Duty Operations, 
``Respondent Selection,'' (May 18, 2010).
    \4\ See Memorandum to the File, ``Confirmation of Delivery of 
Initial Questionnaire to Firms Selected As Mandatory Respondents,'' 
(June 4, 2010) (Delivery of Questionnaire Memorandum).
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    The Department received requests for individual examination on a 
voluntary basis. On May 6, 2010, we received a request for treatment as 
a voluntary respondent from Zhaoqing New Zhongya Aluminum Co., Ltd. 
(New Zhongya), Zhongya Shaped Aluminum HK Holding Ltd. (Zhongya HK), 
and Karlton Aluminum Company Ltd. (Karlton) (collectively the Zhongya 
Companies), Chinese producers of subject merchandise. On May 26, 2010, 
Guang Ya Aluminum Industries Co., Ltd. (Guang Ya), Foshan Guangcheng 
Aluminum Co., Ltd. (Guangcheng), Guang Ya Aluminum Industries Hong Kong 
(Guang Ya HK), Kong Ah International Company Limited (Kong Ah), and 
Yongji Guanghai Aluminum Industry Co., Ltd. (Guanghai) (collectively 
the Guang Ya Companies), producers of subject merchandise, requested 
treatment as a voluntary respondent. In response to requests from the 
Zhongya and Guang Ya Companies, on June 21 and 22, 2010, we extended, 
by two weeks, the deadline for the submission of questionnaire 
responses by these companies to July 8, 2010. Both the Zhongya and 
Guang Ya Companies submitted questionnaire responses on July 8, 2010.
    On June 21, 2010, the Department postponed the deadline for the 
preliminary determination until August 30, 2010. See Aluminum 
Extrusions from the People's Republic of China: Notice of Postponement 
of Preliminary Determination in the Countervailing Duty Investigation, 
75 FR 34982 (June 21, 2010).
    On July 8, 2010, petitioners' submitted new subsidy allegations 
regarding the Zhongya and Guang Ya Companies.
    On July 21, 2010, the Department selected the Zhongya and Guang Ya 
Companies as voluntary respondents. See the Memorandum to Ronald K. 
Lorentzen, Deputy Assistant Secretary for Import Administration, 
``Acceptance of Requests for Treatment As Voluntary Respondents'' (July 
21, 2010) (Voluntary Respondent Selection Memorandum), a public 
document on file in room 1117 of the CRU. In addition, because 
Dragonluxe, Miland, and the Zhongwang Group did not submit responses to 
the Department's initial questionnaire, we found the firms to be non-
cooperative, mandatory respondents. Id.
    On July 21, 2010, we postponed the GOC's deadline for submitting a 
response to the Department's May 18, 2010, initial questionnaire until 
August 4, 2010. We subsequently extended the deadline until August 9, 
2010. The GOC submitted its initial questionnaire response on August 9, 
2010.
    On July 21, 2010, we also issued supplemental questionnaires to the 
Zhongya Companies, the Guang Ya Companies, and the GOC. We issued 
addenda to these supplemental questionnaires on July 28, 2010. The 
Zhongya and Guang Ya companies submitted responses to the supplemental 
questionnaires on August 6 and August 9, 2010, respectively. The GOC 
submitted its supplemental questionnaire response on August 4 and 
August 9, 2010. The GOC and the Zhonga and Guang Ya companies submitted 
their responses to the

[[Page 54303]]

addendum to the supplemental questionnaire on August 9, 2010.
    On July 28, 2010, petitioners submitted additional new subsidy 
allegations regarding the Zhongya and Guang Ya Companies. On August 11, 
2010, the Department issued a new subsidy memorandum concerning 
petitioners' July 13 and July 28, 2010, new subsidy allegations. See 
the Department's August 11, 2010, Memorandum, ``New Subsidy Allegations 
for the Guang Ya and Zhongya Companies,'' (August 11, 2010) (New 
Subsidy Memorandum), a public document on file in room 1117 of the CRU. 
The Department issued new subsidy questionnaires to the GOC and the 
Zhongya and Guang Ya companies on August 11, 2010. The new subsidy 
questionnaires are due on September 3, 2010, and, as a result, the 
Department is not able to incorporate the responses to the 
questionnaire into the preliminary determination.
    On August 16, 19, and 23, 2010, the Zhongya Companies, Guang Ya 
Companies, and the GOC submitted their second supplemental 
questionnaire responses, respectively.
    In the Initiation, the Department deferred initiating on 
petitioners' allegation that the GOC, in an effort to benefit domestic 
producers, intervenes in the currency market in order to ensure that 
the RMB/U.S. dollar exchange rate understates the value of the RMB. See 
Initiation, 75 FR at 22117. On August 30, 2010, the Department issued a 
decision memorandum concerning petitioners' currency manipulation 
allegation. Specifically, the Department has determined not to initiate 
an investigation of the allegation. See Memorandum to Ronald K. 
Lorentzen, Deputy Assistant Secretary for Import Administration, 
``Subsidy Allegation--Currency,'' (August 30, 2010).

Period of Investigation

    The period of investigation (POI) for which we are measuring 
subsidies is January 1, 2009, through December 31, 2009, which 
corresponds to the most recently completed fiscal year. See 19 CFR 
351.204(b)(2).

Scope of the Investigation

    The merchandise covered by this investigation is aluminum 
extrusions which are shapes and forms, produced by an extrusion 
process, made from aluminum alloys having metallic elements 
corresponding to the alloy series designations published by The 
Aluminum Association commencing with the numbers 1, 3, and 6 (or 
proprietary equivalents or other certifying body equivalents). 
Specifically, the subject merchandise made from aluminum alloy with an 
Aluminum Association series designation commencing with the number 1 
contains not less than 99 percent aluminum by weight. The subject 
merchandise made from aluminum alloy with an Aluminum Association 
series designation commencing with the number 3 contains manganese as 
the major alloying element, with manganese accounting for not more than 
3.0 percent of total materials by weight. The subject merchandise made 
from an aluminum alloy with an Aluminum Association series designation 
commencing with the number 6 contains magnesium and silicon as the 
major alloying elements, with magnesium accounting for at least 0.1 
percent but not more than 2.0 percent of total materials by weight, and 
silicon accounting for at least 0.1 percent but not more than 3.0 
percent of total materials by weight. The subject aluminum extrusions 
are properly identified by a four-digit alloy series without either a 
decimal point or leading letter. Illustrative examples from among the 
approximately 160 registered alloys that may characterize the subject 
merchandise are as follows: 1350, 3003, and 6060.
    Aluminum extrusions are produced and imported in a wide variety of 
shapes and forms, including, but not limited to, hollow profiles, other 
solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that 
are drawn subsequent to extrusion (``drawn aluminum'') are also 
included in the scope.
    Aluminum extrusions are produced and imported with a variety of 
finishes (both coatings and surface treatments), and types of 
fabrication. The types of coatings and treatments applied to subject 
aluminum extrusions include, but are not limited to, extrusions that 
are mill finished (i.e., without any coating or further finishing), 
brushed, buffed, polished, anodized (including bright-dip anodized), 
liquid painted, or powder coated. Aluminum extrusions may also be 
fabricated, i.e., prepared for assembly. Such operations would include, 
but are not limited to, extrusions that are cut-to-length, machined, 
drilled, punched, notched, bent, stretched, knurled, swedged, mitered, 
chamfered, threaded, and spun. The subject merchandise includes 
aluminum extrusions that are finished (coated, painted, etc.), 
fabricated, or any combination thereof.
    Subject aluminum extrusions may be described at the time of 
importation as parts for final finished products that are assembled 
after importation, including, but not limited to, window frames, door 
frames, solar panels, curtain walls, or furniture. Such parts that 
otherwise meet the definition of aluminum extrusions are included in 
the scope. The scope includes aluminum extrusions that are attached 
(e.g., by welding or fasteners) to form subassemblies, i.e., partially 
assembled merchandise.
    Subject extrusions may be identified with reference to their end 
use, such as heat sinks, door thresholds, or carpet trim. Such goods 
are subject merchandise if they otherwise meet the scope definition, 
regardless of whether they are finished products and ready for use at 
the time of importation.
    The following aluminum extrusion products are excluded: Aluminum 
extrusions made from aluminum alloy with an Aluminum Association series 
designations commencing with the number 2 and containing in excess of 
1.5 percent copper by weight; aluminum extrusions made from aluminum 
alloy with an Aluminum Association series designation commencing with 
the number 5 and containing in excess of 1.0 percent magnesium by 
weight; and aluminum extrusions made from aluminum alloy with an 
Aluminum Association series designation commencing with the number 7 
and containing in excess of 2.0 percent zinc by weight.
    The scope also excludes finished merchandise containing aluminum 
extrusions as parts that are fully and permanently assembled and 
completed at the time of entry, such as finished windows with glass, 
doors, picture frames, and solar panels. The scope also excludes 
finished goods containing aluminum extrusions that are entered 
unassembled in a ``kit.'' A kit is understood to mean a packaged 
combination of parts that contains, at the time of importation, all of 
the necessary parts to fully assemble a final finished good.
    The scope also excludes aluminum alloy sheet or plates produced by 
other than the extrusion process, such as aluminum products produced by 
a method of casting. Cast aluminum products are properly identified by 
four digits with a decimal point between the third and fourth digit. A 
letter may also precede the four digits. The following Aluminum 
Association designations are representative of aluminum alloys for 
casting: 208.0, 295.0, 308.0, 355.0, C355.0, 356.0, A356.0, A357.0, 
360.0, 366.0, 380.0, A380.0, 413.0, 443.0, 514.0, 518.1, and 712.0. The 
scope also

[[Page 54304]]

excludes pure, unwrought aluminum in any form.
    Imports of the subject merchandise are provided for under the 
following categories of the Harmonized Tariff Schedule of the United 
States (``HTS''): 7604.21.0000, 7604.29.1000, 7604.29.3010, 
7604.29.3050, 7604.29.5030, 7604.29.5060, 7608.20.0030, and 
7608.20.0090. The subject merchandise entered as parts of other 
aluminum products may be classifiable under the following additional 
Chapter 76 subheadings: 7610.10, 7610.90, 7615.19, 7615.20, and 7616.99 
as well as under other HTS chapters. While HTS subheadings are provided 
for convenience and customs purposes, the written description of the 
scope in this proceeding is dispositive.

Scope Comments

    In accordance with the Preamble to the Department's regulations 
(see Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May 
19, 1997) (Preamble)), in the Initiation, we set aside a period of time 
for parties to raise issues regarding product coverage, and encouraged 
all parties to submit comments within 20 calendar days of publication 
of the Initiation.
    The Department received several scope comments from interested 
parties. The Department is evaluating the comments submitted by the 
parties and will issue its decision regarding the scope of the 
antidumping (AD) and CVD investigations in the preliminary 
determination of the companion AD investigation, which is due for 
signature on October 27, 2010.

Injury Test

    Because the PRC is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Tariff Act of 1930 (the Act), the 
International Trade Commission (the 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 May 17, 
2010, the ITC published its preliminary determination finding that 
there is a reasonable indication that an industry in the United States 
is materially injured by reason of imports of certain aluminum 
extrusions from the PRC. See Certain Aluminum Extrusion from China, 
Investigation Nos. 701-TA-475 and 731-TA-1177 (Preliminary), 75 FR 
34482 (May 17, 2010).

Application of the Countervailing Duty Law to Imports From the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper From the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) (CFS 
from the PRC), and accompanying 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 China's economy in recent years, the Department's 
previous decision not to apply the CVD law to these Soviet-style 
economies does not act as a bar to proceeding with a CVD 
investigation involving products from China.

See CFS Decision Memorandum at Comment 6. The Department has affirmed 
its decision to apply the CVD law to the PRC in subsequent final 
determinations. See, e.g., Circular Welded Carbon Quality Steel Pipe 
From the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Affirmative Determination of Critical 
Circumstances, 73 FR 31966 (June 5, 2008) (CWP from the PRC), and 
accompanying Issues and Decision Memorandum (CWP from the PRC Decision 
Memorandum) at Comment 1.
    Additionally, for the reasons stated in the CWP Decision 
Memorandum, we are using the date of December 11, 2001, the date on 
which the PRC became a member of the World Trade Organization (WTO), as 
the date from which the Department will identify and measure subsidies 
in the PRC for purposes of this investigation. See CWP Decision 
Memorandum at Comment 2.

Use of Facts Otherwise Available and Adverse Inferences

    Sections 776(a)(1) and (2) of the Tariff Act of 1930, as amended 
(the Act), provide that the Department shall apply ``facts otherwise 
available'' if, inter alia, necessary information is not on the record 
or an interested party or any other person: (A) Withholds information 
that has been requested; (B) fails to provide information within the 
deadlines established, or in the form and manner requested by the 
Department, subject to subsections (c)(1) and (e) of section 782 of the 
Act; (C) significantly impedes a proceeding; or (D) provides 
information that cannot be verified as provided by section 782(i) of 
the Act.
    Section 776(b) of the Act further provides that the Department may 
use an adverse inference in applying the facts otherwise available when 
a party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information.

Application of Adverse Inferences: Non-Cooperative Companies

    As explained above in the ``Background'' section, the Department 
selected Dragonluxe, Miland, and the Zhongwang Group as mandatory 
respondents. Accordingly, the Department sent the initial questionnaire 
to the three companies on May 18, 2010. The Department confirmed that 
the three firms received copies of the initial questionnaire. See 
Delivery of Questionnaire Memorandum. Dragonluxe, Miland, and the 
Zhongwang Group failed to respond the Department's initial 
questionnaire. As a result of the failure of Dragonluxe, Miland, and 
the Zhongwang Group to submit responses to the Department's initial 
questionnaire, we found the firms to be non-cooperative, mandatory 
respondents. See the Voluntary Respondent Memorandum.
    We find that, by not responding to the Department's initial 
questionnaire, Dragonluxe, Miland, and the Zhongwang Group withheld 
requested information and significantly impeded this proceeding. Thus, 
in reaching our preliminary determination, pursuant to sections 
776(a)(2)(A) and (C) of the Act, we are basing the CVD rate for 
Dragonluxe, Miland, and the Zhongwang Group on facts otherwise 
available.
    We further preliminarily determine that an adverse inference is 
warranted, pursuant to section 776(b) of the Act. By failing to submit 
responses to the Department's initial questionnaire, Dragonluxe, 
Miland, and the Zhongwang Group did not cooperate to the best of their 
ability in this investigation. Accordingly, we preliminarily find that 
an adverse inference is warranted to ensure that the three companies 
will not obtain a more favorable result than had they fully complied 
with our request for information. For purposes of this preliminary 
determination, we have limited our application of adverse inferences 
under section 776(b) of the Act to those programs included in the 
Initiation.
    In deciding which facts to use as adverse facts available (AFA), 
section 776(b) of the Act and 19 CFR 351.308(c)(1) and (2) authorize 
the Department to rely on information derived from: (1) The petition; 
(2) a final determination in the investigation; (3) any previous review 
or determination; or (4) any other information placed on the record. 
The Department's practice when selecting an adverse rate from among the 
possible sources of information is to ensure that the rate is

[[Page 54305]]

sufficiently adverse ``as to effectuate the statutory purposes of the 
adverse facts available rule to induce respondents to provide the 
Department with complete and accurate information in a timely manner.'' 
See, e.g., Notice of Final Determination of Sales at Less Than Fair 
Value: Static Random Access Memory Semiconductors From Taiwan, 63 FR 
8909, 8932 (February 23, 1998). The Department's practice also ensures 
``that the party does not obtain a more favorable result by failing to 
cooperate than if it had cooperated fully.'' See Statement of 
Administrative Action (SAA) accompanying the Uruguay Round Agreements 
Act, H.R. Rep. No. 103-316, Vol. I, at 870 (1994), reprinted at 1994 
U.S.C.C.A.N. 4040, 4199.
    It is the Department's practice in CVD proceedings to select, as 
AFA, the highest calculated rate in any segment of the proceeding. See, 
e.g., Laminated Woven Sacks From the People's Republic of China: Final 
Affirmative Countervailing Duty Determination and Final Affirmative 
Determination, in Part, of Critical Circumstances, 73 FR 35639 (June 
24, 2008) (LWS from the PRC), and accompanying Issues and Decision 
Memorandum (LWS from the PRC Decision Memorandum) at ``Selection of the 
Adverse Facts Available.'' In previous CVD investigations of products 
from the PRC, we adapted the practice to use the highest rate 
calculated for the same or similar program in other PRC CVD proceeding. 
See id. and Certain Tow-Behind Lawn Groomers and Certain Parts Thereof 
From the People's Republic of China: Preliminary Affirmative 
Countervailing Duty Determination and Alignment of Final Countervailing 
Duty Determination With Final Antidumping Duty Determination, 73 FR 
70971, 70975 (November 24, 2008) (unchanged in the Certain Tow-Behind 
Lawn Groomers and Certain Parts Thereof From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 74 FR 29180 
(June 19, 2009), and accompanying Issues and Decision Memorandum (Lawn 
Groomers Decision Memorandum) at ``Application of Facts Available, 
Including the Application of Adverse Inferences'').
    Thus, under this practice, for investigations involving the PRC, 
the Department computes the total AFA rate for non-cooperating 
companies generally using program-specific rates calculated for the 
cooperating respondents in the instant investigation or calculated in 
prior PRC CVD cases. Specifically, for programs other than those 
involving income tax exemptions and reductions, the Department applies 
the highest calculated rate for the identical program in the 
investigation if a responding company used the identical program, and 
the rate is not zero. If there is no identical program match within the 
investigation, the Department uses the highest non-de minimis rate 
calculated for the same or similar program (based on treatment of the 
benefit) in another PRC CVD proceeding. Absent an above-de minimis 
subsidy rate calculated for the same or similar program, the Department 
applies the highest calculated subsidy rate for any program otherwise 
listed that could conceivably be used by the non-cooperating companies. 
See, e.g., 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 from the PRC Decision Memorandum) at 
``Selection of the Adverse Facts Available Rate.''
    However, in the instant investigation the cooperating firms are 
voluntary respondents. Under 19 CFR 351.204(d)(3), in calculating an 
all-others rate under section 705(c)(5) of the Act, the Department will 
exclude net subsidy rates calculated for voluntary respondents. Thus, 
as discussed in further detail below in the ``Suspension of 
Liquidation'' section, in accordance with section 705(c)(5)(A)(ii) of 
the Act and 19 CFR 351.204(d)(3), we have equated the all-others rate 
with the AFA rates calculated for the non-cooperative companies. We 
have adopted this approach because the inclusion of self-selected 
respondents in the derivation of the all-others rate could result in 
the distortion or manipulation of the all-others rate. See Preamble to 
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 
27310 (May 19, 1997) (Preamble to Procedural Regulations). Furthermore, 
in light of this concern, we determine that it is not appropriate to 
compute total AFA rates for non-cooperative companies using company-
specific rates calculated for participating respondents, because to do 
so would require the use of program rates calculated for voluntary 
respondents. In addition, our reasoning not to base the AFA rate on 
program rates calculated for voluntary respondents extends to our use 
of program rates from other CVD proceedings involving the PRC. Thus, in 
deriving the AFA rate for the three non-cooperating mandatory 
respondents in the instant investigation, we have not utilized company-
specific program rates that were calculated for voluntary respondents.
    Therefore, for purposes of deriving the AFA rate for the three non-
cooperating mandatory respondents, we are using the highest non-de 
minimis rate calculated for the same or similar program (based on 
treatment of the benefit) in another PRC CVD investigation. Absent an 
above-de minimis subsidy rate calculated for the same or similar 
program, we are applying the highest calculated subsidy rate for any 
program otherwise listed that could conceivably be used by the non-
cooperating companies. See, e.g., LWTP from the PRC Decision Memorandum 
at ``Selection of the Adverse Facts Available Rate.''
    Further, where the GOC can demonstrate through complete, 
verifiable, positive evidence that Dragonluxe, Miland, and the 
Zhongwang Group (including all their facilities and cross-owned 
affiliates) are not located in particular provinces whose subsidies are 
being investigated, the Department will not include those provincial 
programs in determining the countervailable subsidy rate for those 
companies. See, e.g., Certain Kitchen Shelving and Racks from the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 37012 (July 27, 2009) (Racks From the PRC), and 
accompanying Issues and Decision Memorandum (Racks Decision from the 
PRC Decision Memorandum) at ``Use of Facts Otherwise Available and 
Adverse Facts Available.'' In this investigation, the GOC has not 
provided any such information. Therefore, we are making the adverse 
inference that the three non-cooperative companies, Dragonluxe, Miland, 
and the Zhongwang Group, had facilities and/or cross-owned affiliates 
that received subsidies under all of the sub-national programs on which 
the Department initiated.
    For the seven income tax rate reduction or exemption programs at 
issue in the instant investigation, we are applying an adverse 
inference that Dragonluxe, Miland, and the Zhongwang Group paid no 
income taxes during the POI. The seven programs are: (1) Tax Reductions 
for High or New Technology Enterprises (HNTEs) Involved in Designated 
Projects, (2) Two Free, Three Half Tax Exemptions for Productive FIEs, 
(3) Local Income Tax Exemption and Reduction Programs for 
``Productive'' FIEs, (4) Income Tax Benefits for FIEs in Designated 
Geographic Location, (5) Income Tax Benefits for Technology- or 
Knowledge-Intensive FIEs, (6) Income Tax Benefits for FIES That Are 
Also High or New

[[Page 54306]]

Technology Enterprises (HNTEs), and (7) Income Tax Reductions For 
Export-Oriented FIEs.
    The standard income tax rate for corporations in the PRC during the 
POI was 25 percent. See, e.g., ``Notification of the State Council on 
Carrying out the Transition Preferential Policies Concerning Enterprise 
Income Tax, Guo Fa 2007, No. 39 as included in the March 31, 2010, 
petition at Exhibit III-65. Further, the GOC response indicates that 
the three percent provincial income tax was no longer in effect during 
the POI. See the GOC's August 4, 2010, supplemental questionnaire at 4. 
Therefore, the highest possible benefit for all income tax reduction or 
exemption programs combined is 25 percent. Therefore, we are applying a 
CVD rate of 25 percent on an overall basis for these seven income tax 
programs (i.e., these seven income tax programs combined provide a 
countervailable benefit of 25 percent). This 25 percent AFA rate does 
not apply to tax credit or tax refund programs. This approach is 
consistent with the Department's past practice. See, e.g., CWP from the 
PRC Decision Memorandum at 2, and LWTP from the PRC Decision Memorandum 
at ``Selection of the Adverse Facts Available Rate.''
    The 25 percent AFA rate does not apply to the following nine income 
tax credit and rebate or accelerated depreciation programs found 
countervailable because such programs may not affect the tax rate and, 
hence, the subsidy conferred, in the current year: (1) Value Added Tax 
(VAT) and Tariff Exemptions on Imported Equipment to FIEs and Certain 
Domestic Enterprises, (2) VAT Rebates on FIEs Purchases of Chinese-Made 
Equipment, (3) City Tax and Surcharge Exemptions for FIEs, and (4) Tax 
Offsets for Research and Development, (5) Income Tax Credits for 
Domesticall-Owned Companies Purchasing Chinese-Made Equipment, (6) Tax 
Reductions for FIEs Purchasing Chinese-Made Equipment, (7) Tax Refunds 
for Reinvesting of FIE Profits in Export-Oriented Enterprises, (8) 
Accelerated Depreciation for Enterprises Located in Northeast Region, 
and (9) Forgiveness of Tax Arrears for Enterprises in the ``Old 
Industrial Bases'' of Northeast China.
    Based on the methodology discussed above, we preliminarily 
determine to use the highest non-de minimis rate for any indirect tax 
program from a China CVD investigation. The rate we select is 1.51 
percent, calculated for the ``Value-Added Tax and Tariff Exemptions on 
Imported Equipment'' program in CFS from the PRC. See CFS Decision 
Memorandum at ``VAT and Tariff Exemptions on Imported Equipment''.
    Regarding the Preferential Loans as Part of the Northeast 
Revitalization Program and the Policy Loans for Aluminum Extrusion 
Producers, we preliminarily determine to apply the highest non-de 
minimis subsidy rate for any loan program in a prior China CVD 
investigation. The highest non-de minimis subsidy rate is 8.31 percent 
calculated for the ``Government Policy Lending Program,'' from LWTP 
from the PRC. See Lightweight Thermal Paper From the People's Republic 
of China: Notice of Amended Final Affirmative Countervailing Duty 
Determination and Notice of Countervailing Duty Order, 73 FR 70958 
(November 24, 2008) (Amended LWTP from the PRC).
    We are investigating a number of grant programs including: (1) 
State Key Technology Renovation Fund, (2) GOC and Sub-Central 
Government Grants, Loans, and Other Incentives for Development of 
Famous Brands and China World Top Brands, (3) Grants to Cover Legal 
Fees in Trade Remedy Cases in Shenzhen, (4) Special Fund for Energy 
Saving Technology Reform: Guangdong Province, (5) The Clean Production 
Technology Fund, (6) Grants for Listing Shares: Liaoyang City 
(Guangdong Province), Wenzhou Municipality (Zhejiang Province), and 
Quanzhou Municipality (Fujian Province), (7) Northeast Region Foreign 
Trade Development Fund, and (8) Northeast Region Technology Reform 
Fund. The Department has not calculated above de minimis rate for any 
of these programs in prior investigations, and, moreover, all 
previously calculated rates for grant programs from prior China CVD 
investigations have been de minimis. Therefore, for each of these grant 
programs, we preliminarily determine to use the highest calculated 
subsidy rate for any program otherwise listed, which could have been 
used by the non-cooperative companies. We preliminarily determine that 
this rate is 8.31 percent from the ``Government Policy Lending 
Program,'' in the

Amended LWTP From the PRC

    The Department is also investigating several provision of a good or 
service for less than adequate remuneration (LTAR) programs: Provision 
of Land-Use Rights for LTAR in Liaoyang High-Tech Industry Development 
Zone, Provision of Land-Use Rights for LTAR to SOEs, and Provision of 
Primary Aluminum for LTAR. For two of these LTAR programs, we are 
applying the highest non-de minimis subsidy rate for any provision of 
land-use rights for LTAR program in a prior China CVD investigation. 
The highest non-de minimis subsidy rate is 2.55 percent calculated for 
the ``Subsidies Provided in the TBNA and the Tianjin Economic and 
Technological Development Area'' from OCTG from the PRC. See OCTG from 
the PRC Decision Memorandum at ``Subsidies Provided in the TBNA and the 
Tianjin Economic and Technological Development Area.'' Concerning the 
provision of Primary Aluminum for LTAR, the Department has not 
previously investigated allegations concerning this input product. 
Therefore, for this program, we are applying the highest calculated 
subsidy rate for any program otherwise listed that could conceivably be 
used by the non-cooperating companies. We preliminarily determine that 
this similar program rate is 2.55 percent from OCTG from the PRC. Id.
    In addition, the Department is investigating government purchases 
of aluminum extrusions for more than adequate remuneration (MTAR). The 
Department has not previously investigated allegations concerning this 
input. Therefore, for this program, we are applying the highest 
calculated subsidy rate for any program otherwise listed that could 
conceivably be used by the non-cooperating companies. We preliminarily 
determine that this rate is 8.31 percent from the Amended LWTP from the 
PRC.
    On this basis, we preliminarily determine the AFA countervailable 
subsidy rate for the non-cooperative respondents (Dragonluxe, Miland, 
and the Zhongwang Group) to be 137.65 percent ad valorem. See AFA 
Memorandum.
    As noted above, on July 8 and July 28, 2010, petitioners submitted 
new subsidy allegations. On August 11, 2010, the Department initiated 
investigations of all the allegations included in petitioners' July 8 
and July 28, 2010, submissions. See New Subsidy Memorandum. On August 
11, 2010, the Department also sent a new subsidy questionnaire to the 
GOC as well as to the Zhongya and Guang Ya Companies regarding these 
new subsidy allegations. The new subsidy questionnaire responses are 
currently due on September 5, 2010. Therefore, for purposes of the 
preliminary determination, we have not included these additional 
subsidy programs under investigation in this proceeding in the total 
AFA rates calculated for Dragonluxe, Miland, and the Zhongwang Group. 
We invite interested parties to comment on whether the Department 
should include the additional alleged programs and the various programs 
self-reported by the

[[Page 54307]]

Guang Ya and Zhongya companies into the AFA rate calculated for the 
non-cooperating, mandatory respondents.

Various Grant Programs Self-Reported by the Guang Ya Companies

    The Guang Ya Companies self-reported receiving various lump sum 
cash grants from the GOC. As a result, the Department sent 
questionnaires to the GOC regarding these programs. See the July 21, 
2010, first supplemental questionnaire sent to the GOC. In its 
supplemental questionnaire responses the GOC provided information 
concerning the nature of the programs and indicated that the programs 
were not contingent upon exports, and thus are not specific under 
section 771(5A)(B) of the Act. However, the GOC failed to respond to 
the Department's questions concerning the distribution of benefits, 
which is information that the Department uses to determine whether 
alleged subsidy programs are de facto specific under section 
771(5A)(D)(iii) of the Act. See the GOC's August 9, 2010, supplemental 
questionnaire response. Further, the GOC failed to supply the requested 
benefit distribution data in its second supplemental questionnaire 
response, despite the Department's request that it do so. See the GOC's 
August 19, 2010, second supplemental questionnaire response.
    Because the GOC failed to provide the requested benefit 
distribution data, we find that necessary information is not on the 
record, pursuant to section 776(a) of the Act and that the GOC has not 
cooperated to the best of its ability. Therefore, for those programs 
for which we lack the necessary information and for which the GOC 
failed to cooperate, in accordance with section 776(b) of the Act, we 
are assuming as an adverse inference that the programs are de facto 
specific as domestic subsidies within the meaning of section 
771(5A)(D)(iii) of the Act.

The Zhongya Companies' Failure To Report All of Its Sales of Aluminum 
Extrusions Under the Purchase of Aluminum Extrusions for MTAR Program

    In its July 8, 2010, questionnaire response, the Zhongya Companies 
failed to provide any information concerning the purchase of aluminum 
extrusions for MTAR program. In response to the Department's July 21, 
2010, supplemental questionnaire, the Zhongya Companies provided MTAR 
data. See the Zhongya Companies' August 6, 2010, first supplemental 
questionnaire response. However, the dataset was not complete. 
Specifically, the Zhongya Companies provided data for its ``top 10 
domestic customers.'' Id. The Zhongya Companies state that the top 10 
customers accounted for ``more than 70 percent of New Zhongya's total 
domestic sales of subject merchandise during the POI.'' Id. The Zhongya 
Companies did not identify its other customers; therefore we have 
determined that necessary information is not on the record and that the 
Zhongya Companies have therefore ``significantly impeded the 
proceeding,'' pursuant to sections 776(a)(1) and (a)(2) of the Act.
    In light of its failure to provide the requested benefit 
distribution data, we find that the Zhongya Companies have failed to 
cooperate to the best of its ability. See section 776(b) of the Act. 
Therefore, we are applying facts available with an adverse inference 
with respect to the 30 percent of the sales that the Zhongya Companies 
did not report to the Department.
    Materials used in certain government projects are subject to the 
GOC's ``Government Procurement Law of the PRC'' (Procurement Law). See 
the March 31, 2010, petition at Exhibit III-153. Under the Procurement 
Law, government authorities are permitted to procure imported goods or 
services only when domestic goods or services are either unavailable or 
cannot be obtained under ``reasonable commercial conditions.'' The 
``Implementing Measures on the Government Procurement Law of the PRC'' 
(Implementing Measures of the Procurement Law) state that:

    The situation where reasonable commercial terms are not 
available for procurement under Article 10 of the Government 
Procurement Law refers to instances where the lowest offered price 
for domestic goods, construction, or services, that meet the 
requirements of procurement documents, exceeds the lowest offered 
price for foreign goods, construction, or services by more than 20 
percent.

See the March 31, 2010, petition at Exhibit III-155.
    Based on the information in the Implementing Measures of the 
Procurement Law, we are assuming as AFA under section 776(b) of the Act 
that the Zhongya Companies' unreported sales were made to GOC 
authorities and, thus, constitute a financial contribution under 
section 771(5)(D)(iv) of the Act. We are further assuming as AFA that 
the Zhongya Companies received a 20 percent price premium on the 
unreported sales volumes of aluminum extrusions. For further 
information concerning the derivation of the benefit, see the 
``Purchase of Aluminum Extrusions for MTAR'' section below.
    Regarding our decision to apply AFA, we acknowledge that the GOC 
has stated in its questionnaire response that the Zhongya Companies did 
not sell its aluminum extrusions under any procurement program. See, 
e.g., the GOC's August 9, 2010, questionnaire response at 38. However, 
we preliminarily determine that the Zhongya Companies' failure to 
provide any information concerning the missing ``30 percent'' of its 
customers has impeded the Department's ability to adequately 
investigate whether these customers acquired subject merchandise from 
the Zhongya Companies for MTAR. Thus, we preliminarily determine that 
the application of AFA with regard to the Zhongya Companies' use of 
this program is warranted.

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)--(v) provides that the Department will attribute 
subsidies received by certain other companies to the combined sales of 
those companies when: (1) Two or more corporations with cross-ownership 
produce the subject merchandise; (2) a firm that received a subsidy is 
a holding or parent company of the subject company; (3) a firm that 
produces an input that is primarily dedicated to the production of the 
downstream product; or (4) a corporation producing non-subject 
merchandise received a subsidy and transferred the subsidy to a 
corporation with cross-ownership with the subject company.
    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 Court of International Trade (CIT) has 
upheld the Department's authority to attribute subsidies based on 
whether a company could use or direct the subsidy benefits of another 
company in essentially the same way it could use its own subsidy 
benefits. See Fabrique de Fer de Charleroi v. United States, 166 F. 
Supp. 2d 593, 600-604 (CIT 2001).

[[Page 54308]]

The Guang Ya Companies

    As discussed above, the Guang Ya Companies are Guang Ya, 
Guangcheng, Guanghai, Guang Ya HK, and Kong Ah. Guang Ya and Guangcheng 
are the producers of subject merchandise. Guanghai produces aluminum 
billet that it supplies to Guangcheng. Guang Ya HK and Kong Ah are Hong 
Kong-based trading companies that export merchandise produced by Guang 
Ya and Guangcheng. According to the Guang Ya Companies, only Guang Ya 
HK exported subject merchandise to the United States that was produced 
by the Guang Ya Companies. We find that the Guang Ya Companies are 
cross-owned with each other via common ownership within the meaning of 
19 CFR 351.525(b)(6)(vi). See the Guang Ya Companies July 8, 2010, 
questionnaire response at Exhibit 1.
    Guang Ya and Guangcheng are the members of the Guang Ya Companies 
that produce subject merchandise. Therefore, in accordance with 19 CFR 
351.525(b)(6)(ii), we have attributed subsidies received by Guang Ya 
and Guangcheng to the products produced by the two firms. According to 
the questionnaire response of the Guang Ya Companies, Guanghai is an 
input supplier to Guangcheng. Therefore, in accordance with 19 CFR 
351.525(b)(6)(iv), we would attribute subsidies received by Guanghai to 
the combined sales of the input made by Guanghai and downstream 
products produced by Guang Ya and Guangcheng, excluding the sales 
between corporations.\5\
---------------------------------------------------------------------------

    \5\ For purposes of the preliminary determination, we have not 
calculated net subsidy rates for Guanghai.
---------------------------------------------------------------------------

    As explained above, during the POI Guang Ya HK exported to the 
United States aluminum extrusions produced by Guang Ya and Guangcheng. 
In supplemental questionnaires issued to the Guang Ya Companies, the 
Department inquired about the sales value of extrusions destined for 
the United States that Guang Ya and Guangcheng made to Guang Ya HK 
during the POI. The Department also inquired about the sales value of 
aluminum extrusions Guang Ya HK made to the United States that during 
the POI. The purpose of these questions was to ascertain the extent to 
which the ``export values'' recorded in the books of Guang Ya and 
Guangcheng did not reflect the actual U.S. prices because there was a 
mark-up on those sales by Guang Ya HK, the Hong Kong-based affiliate. 
The Department has six criteria it uses to determine whether such a 
difference in sales values exists and whether an adjustment to the net 
subsidy rate calculations is warranted. See, e.g., Circular Welded 
Austenitic Stainless Pressure Pipe from the People's Republic of China: 
Final Affirmative Countervailing Duty Determination, 74 FR 4936 
(January 28, 2009) (CWASPP from the PRC), and accompanying Issues and 
Decision Memorandum (CWASPP from the PRC Decision Memorandum) at 
``Adjustment to Net Subsidy Rate Calculation,'' in which the Department 
describes the six criteria utilized by the Department.
    We have analyzed the sales information supplied by the Guang Ya 
Companies. Based on our review, we preliminarily determine that an 
adjustment to the net subsidy rate, as described in CWASPP from the 
PRC, is not warranted. We preliminarily determine that the sales data 
reported by the Guang Ya Companies indicate that the sales value of 
aluminum extrusions destined for the United States that Guang Ya and 
Guangcheng made to Guang Ya HK during the POI exceed the sales value of 
aluminum extrusions that Guang Ya HK made to the United States during 
the POI. See the Guang Ya Companies' August 23, 2010, supplemental 
questionnaire at Exhibit 93 and the Guang Ya Companies' August 9, 2010, 
supplemental questionnaire at Exhibit 56.

The Zhongya Companies

    As discussed above, the Zhongya Companies are New Zhongya, Zhongya 
HK, and Karlton. New Zhongya is the producer of subject merchandise. 
Zhongya HK and Karlton are Hong-Kong based firms that are cross-owned 
with New Zhongya, within the meaning of 19 CFR 351.525(b)(6)(vi). 
During the POI, Zhongya HK exported products, including subject 
merchandise, produced by New Zhongya. During the POI, New Zhongya did 
not export aluminum extrusions to the United States through Karlton. In 
this preliminary determination, in accordance with 19 CFR 
351.525(b)(6)(ii), we are attributing subsidies received by New Zhongya 
to products produced by New Zhongya and exported through Zhongya HK.
    In supplemental questionnaires issued to the Zhongya Companies, the 
Department inquired about the sales value of extrusions destined for 
the United States which New Zhongya produced and sold to Zhongya HK 
during the POI. As explained above, the Department also inquired about 
the sales value of aluminum extrusions which New Zhongya produced and 
which Zhongya HK sold to the United States that during the POI. The 
purpose of these questions was to ascertain the extent to which the 
``export values'' recorded in the books of New Zhongya did not reflect 
the actual U.S. prices due to a mark-up on those sales by Zhongya HK, 
the Hong Kong-based affiliate. Based on our review of the information 
submitted by the Zhongya Companies, we preliminarily determine that no 
such mark-up exists and, as a result, an adjustment to the net subsidy 
rate, as discussed in CWASPP from the PRC, is not necessary. See 
Zhongya Companies July 8, 2010, questionnaire response at 6 for 
information concerning the sales of aluminum extrusions Zhongya HK made 
to the United States and the Zhongya Companies August 16, 2010, second 
supplemental questionnaire response at 2 for information concerning the 
sales of aluminum extrusions destined for the United States that New 
Zhongya made to Zhongya HK. In addition, we find that the Zhongya 
Companies have not adequately responded to the Department's questions 
concerning the extent to which the price charged by New Zhonga to 
Zhongya HK differs from the price Zhongya HK charges to its U.S. 
Customers, which is one of the six criteria the Departments examines 
when determining whether to adjust the net subsidy rate. See the 
Zhongya Companies August 6, 2010, first supplemental questionnaire 
response at 12.

Benchmarks and Discount Rates

    The Department is investigating loans received by the Guang Ya 
Companies from Chinese policy banks and state-owned commercial banks 
(SOCBs), which are alleged to have been granted on a preferential, non-
commercial basis. Therefore, the derivation of the Department's 
benchmark and discount rates is discussed below.
    Benchmark 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

[[Page 54309]]

should be a market-based rate. However, 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 would be 
unsuitable for use as benchmarks under 19 CFR 351.505(a)(2)(i). 
Similarly, because Chinese banks reflect significant government 
intervention in the banking sector, we cannot use 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 (Softwood Lumber from 
Canada 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 LWTP from the PRC. See CFS Decision Memorandum at Comment 
10; see also LWTP from the PRC Decision Memorandum at ``Benchmarks and 
Discount Rates.'' 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. The benchmark interest rate 
takes into account a key factor involved in interest rate formation 
(i.e., the quality of a country's institutions), which is not directly 
tied to the state-imposed distortions in the banking sector discussed 
above.
    This methodology relies on data published by the World Bank and 
International Monetary Fund (see further discussion below). For the 
year 2009, the World Bank, however, has not yet published all the 
necessary data relied on by the Department to compute a short-term 
benchmark interest rate for the PRC. Specifically, the following data 
are not yet available: World Governance Indicators and World Bank 
classifications of lower-middle income countries based on GNI per 
capita in U.S. dollars. Therefore, for purposes of this preliminary 
determination, where the use of a short-term benchmark rate for 2009 is 
required, we have applied the 2008 short-term benchmark rate for the 
PRC, as calculated by the Department (see discussion below). The 
Department notes that the current 2008 loan benchmark may be updated, 
by the final determination, pending the release of all the necessary 
2009 data.
    The 2008 short-term benchmark was computed following the 
methodology developed in CFS from the PRC. We first determined which 
countries are similar to the PRC in terms of GNI, 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 2007. As 
explained in CFS from the PRC, this pool of countries captures the 
broad inverse relationship between income and interest rates.
    Many of these countries reported lending and inflation rates to the 
International Monetary Fund and 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 ``low middle income'' by the World 
Bank. First, we did not include those economies that the Department 
considered to be non-market economies for AD purposes for any part of 
the years in question, for example: 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. For example, Jordan 
reported a deposit rate, not a lending rate, and the rates reported by 
Ecuador and Timor L'Este are dollar-denominated rates; therefore, the 
rates for these three countries have been excluded. Finally, for the 
calculation of the inflation-adjusted short-term benchmark rate, we 
also excluded any countries with aberrational or negative real interest 
rates for the year in question.
    For the resulting inflation-adjusted benchmark lending rate, see 
Memorandum to the File from Eric B. Greynolds, Program Manager, AD/CVD 
Operations, Office 3, regarding ``2008 Short-Term Interest Rate 
Benchmark'' (August 30, 2010). Because these are inflation-adjusted 
benchmarks, it is necessary to adjust the respondent's interest 
payments for inflation. This was done using the PRC inflation rate as 
reported in the IFS.
    Benchmark for Long-Term RMB Denominated Loans: The lending rates 
reported in the IFS represent short- and medium-term lending, and there 
are no sufficient publicly available long-term interest rate data upon 
which to base a robust long-term benchmark. To address this problem, 
the 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 ``Discount Rates.'' 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 from the PRC Decision Memorandum) 
at Comment 14.
    Discount Rates: Consistent with 19 CFR 351.524(d)(3)(i)(A), we have 
used, as our discount rate, the long-term interest rate calculated 
according to the methodology described above for the year in which the 
government provided the subsidy.

Analysis of Programs

Programs Preliminarily Determined To Be Countervailable

A. Exemption From City Construction Tax and Education Tax for FIEs
    Pursuant to the Circular Concerning Temporary Exemption from Urban 
Maintenance and Construction Tax and Additional Education Fees for 
Foreign-Funded and Foreign Enterprises (GUOSHUIFA {1994{time}  No. 38), 
the local tax authorities exempt all FIEs and

[[Page 54310]]

foreign enterprises from the city maintenance and construction tax and 
education fee surcharge. The construction tax is based on the amount of 
product tax; value added tax, and/or business tax actually paid by the 
taxpayer. For taxpayers located in urban areas, the rate is seven 
percent; for taxpayers located in counties or townships, the rate is 
five percent; and for taxpayers located in areas other than urban 
areas, counties, and townships, the rate is one percent. Regarding the 
education fee surcharge, FIEs pay only one percent of the actual amount 
of the product tax, value-added tax, and business tax paid, whereas 
other entities pay four percent of that amount. Guangcheng and New 
Zhongya are FIEs and, therefore, received exemptions under this 
program.
    Consistent with our finding in Racks from the PRC, we preliminarily 
determine that the exemptions from the city construction tax and 
education surcharge under this program confer a countervailable 
subsidy. See Racks from the PRC Decision Memorandum at ``Exemption from 
City Construction Tax and Education Tax for FIEs in Guangdong 
Province.'' The exemptions are financial contributions in the form of 
revenue forgone by the government and provide a benefit to the 
recipient in the amount of the savings. See section 771(5)(D)(ii) of 
the Act and 19 CFR 351.509(a)(1). We also preliminarily determine that 
the exemptions afforded by this program are limited as a matter of law 
to certain enterprises, i.e., FIEs, and, hence, specific under section 
771(5A)(D)(i) of the Act. To calculate the benefit, we treated the tax 
savings and exemptions received by Guangcheng and New Zhongya as 
recurring benefits, consistent with 19 CFR 351.524(c)(1). Guangcheng 
and New Zhongya both reported that they are exempted from the city 
construction tax and education fee surcharge.
    To compute the amount of city construction tax savings, we first 
determined the rate the companies would have paid in the absence of the 
program. Both Guangcheng and New Zhongya reported that a seven percent 
construction tax would have been applied to them absent the program. 
They further reported that they paid a one percent education tax 
instead of a four percent education tax that would have been applicable 
absent the program. Thus, we compared the rates the companies would 
have paid during the POI in the absence of the program (seven percent 
for the construction tax and 4 percent on the education tax) with the 
rate the companies paid (zero percent construction tax and 1 percent 
education tax), because they are FIEs. To calculate the total benefit 
under the program, we summed the savings from the construction tax 
exemption and education fee exemption.
    To calculate the program rate, we divided the companies' tax 
savings received during the POI by their total consolidated sales, net 
of intra-company sales. Specifically, for New Zhongya, we divided the 
benefit by Zhongya's total sales for the POI. For Guangcheng, we 
divided the benefit the combined total sales of Guangcheng and Guang 
Ya.
    On this basis, we preliminarily determine the countervailable 
subsidy to be 0.01 percent ad valorem for the Guang Ya Companies and 
0.07 percent ad valorem for the Zhongya Companies.
B. GOC and Sub-Central Government Grants, Loans, and Other Incentives 
for Development of Famous Brands and China World Top Brands
    The Famous Brand program is administered at the central, 
provincial, and municipal government level. During the POI, New Zhongya 
and Guang Ya reported receiving grants under the Famous Brand program 
from their respective local governments.
    Though operated at the local level, the GOC issued ``Measures for 
the Administration of Chinese Top-Brand Products,'' which state that 
the requirements for application require that firms provide information 
concerning their export ratio as well as the extent to which their 
product quality meets international standards. See Chapter 3 of the 
``Measures for the Administration of Chinese Top-Brand Products'' at 
Exhibit 24 of the Guang Ya Companies July 8, 2010, questionnaire 
response.
    Based on the information available on the record of the 
investigation, we determine that the grants that the Zhongya and Guang 
Ya Companies received under the famous brand program constitute a 
financial contribution and a benefit under sections 771(5)(D)(i) and 
771(5)(E) of the Act, respectively. Regarding specificity, section 
771(5A)(B) of the Act states that an export subsidy is a subsidy that 
is, in law or in fact, contingent upon export performance, alone or as 
one of two or more conditions. Based on the information on the record 
of the investigation, we determine that grants provided to the Zhongya 
and Guang Ya Companies under the famous brands program are contingent 
on export activity. Therefore, we find that the program is specific 
under section 771(5A)(B) of the Act. Our approach in this regard is 
consistent with the Department's findings in prior CVD proceedings 
involving the PRC. See, e.g., Pre-Stressed Concrete Steel Wire Strand 
from the People's Republic of China: Final Affirmative Countervailing 
Duty Determination, 75 FR 28557 (May 21, 2010) (PC Strand from the 
PRC), and accompanying Issues and Decision Memorandum (PC Strand from 
the PRC Decision Memorandum) at ``Subsidies for Development of Famous 
Export Brands and China World Top Brands at Central and Sub-Central 
Level.''
    The grants that the Zhongya and Guang Ya Companies received during 
the POI were less than 0.5 percent of their respective total export 
sales in the year of approval/receipt. Therefore, pursuant to 19 CFR 
351.524(b)(2), we expensed the grant amount year of receipt. Guang Ya 
also received a grant prior to the POI that was greater than 0.5 
percent of its total export sales in the year of approval/receipt. 
Therefore, we allocated the benefit over time using the methodology 
provided under 19 CFR 351.524(d)(2).
    On this basis, we calculated a total net subsidy rate of 0.32 
percent ad valorem for the Guang Ya Companies. Concerning the Zhongya 
Companies, the benefit it received under the program was fully expensed 
prior to the POI.
C. Two Free, Three Half Income Tax Exemptions for FIEs
    The Foreign Invested Enterprise and Foreign Enterprise Income Tax 
Law (FIE Tax Law), enacted in 1991, established the tax guidelines and 
regulations for FIEs in the PRC. The intent of this law is to attract 
foreign businesses to the PRC. According to Article 8 of the FIE Tax 
Law, FIEs that are ``productive'' and scheduled to operate not less 
than 10 years are exempt from income tax in their first two profitable 
years and pay half of their applicable tax rate for the following three 
years. FIEs are deemed ``productive'' if they qualify under Article 72 
of the Detailed Implementation Rules of the Income Tax Law of the 
People's Republic of China of Foreign Investment Enterprises and 
Foreign Enterprises. New Zhongya reported receiving benefits under this 
program that are attributable to the POI.
    We