High Pressure Steel Cylinders From the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination, 64301-64307 [2011-26925]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 76, Number 201 (Tuesday, October 18, 2011)]
[Notices]
[Pages 64301-64307]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26925]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-978]


High Pressure Steel Cylinders From the People's Republic of 
China: Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination

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

SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are being provided to producers and exporters 
of high pressure steel cylinders from the People's Republic of China. 
For information on the estimated subsidy rates, see the ``Suspension of 
Liquidation'' section of this notice.

DATES: Effective Date: October 18, 2011.

FOR FURTHER INFORMATION CONTACT: Christopher Siepmann or David Layton, 
AD/CVD Operations, Office 1, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
7958 and (202) 482-0371, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The following events have occurred since the publication of the 
Department of Commerce's (``Department'') notice of initiation in the 
Federal Register. See High Pressure Steel Cylinders From the People's 
Republic of China; Initiation of Countervailing Duty Investigation, 76 
FR 33239 (June 8, 2011) (``Initiation Notice''), and the accompanying 
Initiation Checklist.
    On July 5, 2011, the U.S. International Trade Commission (``ITC'') 
published its affirmative preliminary determination that there is a 
reasonable indication that an industry in the United States is 
materially injured by reason of allegedly subsidized imports of high 
pressure steel cylinders (``steel cylinders'') from the People's 
Republic of China (``PRC''). See High Pressure Steel Cylinders From 
China, 76 FR 38697 (July 1, 2011).
    On July 13, 2011, we selected Beijing Tianhai Industry Co., Ltd. 
(``BTIC'') as the mandatory respondent in this proceeding. See 
Memorandum to Christian Marsh, Deputy Assistant Secretary for 
Antidumping and Countervailing Duty Operations, ``Selection of 
Respondents for the Countervailing Duty Investigation of High Pressure 
Steel Cylinders from the People's Republic of China'' (July 13, 2011) 
(``Respondent Selection Memo''). The public version of this memorandum 
and all other memoranda referenced in this notice are on file 
electronically via Import Administration's Antidumping and 
Countervailing Duty Centralized Electronic Service System (``IA 
ACCESS''). Access to IA ACCESS is available in the Department's Central 
Records Unit in Room 7046 of the main Department building.
    On July 19, 2011, the Department published a postponement of the 
deadline for the preliminary determination in this Investigation until 
October 11, 2011. See High Pressure Steel Cylinders From the People's 
Republic of China: Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 76 FR 42682 (July 19, 2011).
    On July 20, 2011, we issued a questionnaire to BTIC and the 
Government of the People's Republic of China (``GOC''). We received 
responses from BTIC and the GOC on September 2, and September 7, 2011, 
respectively. Supplemental questionnaires were sent to BTIC on 
September 15, and 23, 2011, and we received responses September 26, and 
September 28, and October 3, 2011. We sent supplemental questionnaires 
to the GOC on September 20, and September 23, 2011, and received a 
response to the former on September 27, 2011. We currently expect to 
receive a response to our September 23, 2011 questionnaire from the GOC 
on or before October 14, 2011.
    We received pre-preliminary comments from BTIC and Norris Cylinder 
Co. (``Petitioner'') on October 4, and October 6, 2011, respectively. 
We did not have time to analyze these comments for this preliminary 
determination.
    The Department also received a questionnaire response from Zhejiang 
Jindun Pressure Container Co., Ltd. (``Jindun'') on September 2, 2011. 
Jindun was not selected for individual examination in this 
investigation and its voluntary response has not been analyzed. See 
Respondent Selection Memo.

Period of Investigation

    The period for which we are measuring subsidies, i.e., the period 
of investigation (``POI''), is January 1, 2010, through December 31, 
2010.

Scope Comments

    In accordance with the preamble to the Department's regulations, we 
set aside a period of time in our Initiation Notice for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of that notice. 
See Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May 
19, 1997), and Initiation Notice, 76 FR at 33239. We did not receive 
any comments.

Scope of the Investigation

    The merchandise covered by the scope of the investigation is 
seamless steel cylinders designed for storage or transport of 
compressed or liquefied gas (``high pressure steel cylinders''). High 
pressure steel cylinders are fabricated of chrome alloy steel 
including, but not limited to, chromium-molybdenum steel or chromium 
magnesium steel, and have permanently impressed into the steel, either 
before or after importation, the symbol of a U.S. Department of 
Transportation, Pipeline and Hazardous Materials Safety Administration 
(``DOT'')-approved high pressure steel cylinder manufacturer, as well 
as an approved DOT type marking of DOT 3A, 3AX, 3AA, 3AAX, 3B, 3E, 3HT, 
3T, or DOT-E (followed by a specific exemption number) in accordance 
with the requirements of sections 178.36 through 178.68 of Title 49 of 
the Code of Federal Regulations, or any subsequent amendments thereof. 
High pressure steel cylinders covered by these investigations have a 
water

[[Page 64302]]

capacity up to 450 liters, and a gas capacity ranging from 8 to 702 
cubic feet, regardless of corresponding service pressure levels and 
regardless of physical dimensions, finish or coatings.
    Excluded from the scope of the investigation are high pressure 
steel cylinders manufactured to UN-ISO-9809-1 and 2 specifications and 
permanently impressed with ISO or UN symbols. Also excluded from the 
investigation are acetylene cylinders, with or without internal porous 
mass, and permanently impressed with 8A or 8AL in accordance with DOT 
regulations.
    Merchandise covered by the investigation is classified in the 
Harmonized Tariff Schedule of the United States (``HTSUS'') under 
subheading 7311.00.00.30. Subject merchandise may also enter under 
HTSUS subheadings 7311.00.00.60 or 7311.00.00.90. Although the HTSUS 
subheadings are provided for convenience and customs purposes, the 
written description of the merchandise under the investigation is 
dispositive.

Alignment of Final Determination

    On June 8, 2011, the Department initiated the antidumping duty 
(``AD'') and countervailing duty (``CVD'') investigations of steel 
cylinders from the PRC. See High Pressure Steel Cylinders from the 
People's Republic of China: Initiation of Antidumping Duty 
Investigation, 76 FR 33213 (June 8, 2011) and Initiation Notice (for 
the CVD investigation). The scope of the merchandise being covered is 
the same for both the AD and CVD investigations. On September 27, 2011, 
Petitioner submitted a letter, in accordance with section 705(a)(1) of 
the Act, requesting alignment of the final CVD determination with the 
final determination in the companion AD investigation. Therefore, in 
accordance with section 705(a)(1) of the Act and 19 CFR 351.210(b)(4), 
the final CVD determination will be issued on the same date as the 
final AD determination, which is currently scheduled to be issued on or 
about February 21, 2012.

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 Memo''). 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 Memo, 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), and accompanying Issues and 
Decision Memorandum (``CWP Decision Memo''), at Comment 1.
    Additionally, for the reasons stated in the CWP Decision Memo, we 
are using the date of December 11, 2001, the date on which the PRC 
became a member of the World Trade Organization, as the date from which 
the Department will identify and measure subsidies in the PRC. See CWP 
Decision Memo, at Comment 2.

Subsidies Valuation Information

Allocation Period

    The average useful life (``AUL'') period in this proceeding, as 
described in 19 CFR 351.524(d)(2), is 12 years according to the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System. See U.S. Internal Revenue Service Publication 946 (2008), How 
to Depreciate Property, at Table B-2: Table of Class Lives and Recovery 
Periods. No party in this proceeding has disputed this allocation 
period.

Attribution of Subsidies

    The Department's regulations at 19 CFR 351.525(b)(6)(i) state that 
the Department will normally attribute a subsidy to the products 
produced by the corporation that received the subsidy. However, 19 CFR 
351.525(b)(6)(ii)-(v) directs that the Department will attribute 
subsidies received by certain other companies to the combined sales of 
those companies if (1) cross-ownership exists between the companies, 
and (2) the cross-owned companies produce the subject merchandise, are 
a holding or parent company of the subject company, produce an input 
that is primarily dedicated to the production of the downstream 
product, or transfer a subsidy to a cross-owned company.
    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, SA v. United States, 166 F. 
Supp. 2d 593, 600-604 (CIT 2001).
    As of this preliminary determination, BTIC has responded to the 
Department's original and supplemental questionnaires on behalf of 
itself; Tianjin Tianhai High Pressure Container Co., Ltd., (``Tianjin 
Tianhai''); Langfang Tianhai High Pressure Container Co., Ltd. 
(``Langfang Tianhai'') and Beijing Jingcheng Machinery Electric Holding 
Co., Ltd. (``Jingcheng Holding''). We preliminarily determine that 
BTIC, Tianjin Tianhai, Langfang Tianhai and Jingcheng Holding are 
cross-owned within the meaning of 19 CFR 351.525(b)(6)(vi). Because the 
nature of the relationships between these companies is proprietary, we 
have discussed the basis for our cross-ownership determination 
separately. See Memorandum from Christopher Siepmann to Susan Kuhbach, 
``Preliminary Results Calculation Memorandum for Beijing Tianhai 
Industry Co., Ltd (October 11, 2011) (``Prelim Calc Memo'').
    BTIC, Tianjin Tianhai, and Langfang Tianhai are producers of 
subject merchandise. Accordingly, we are attributing subsidies received 
by BTIC, Tianjin Tianhai, and Langfang Tianhai to the combined sales of 
the three companies, excluding sales to other cross-owned companies. 
Jingcheng Holding is a holding company within the meaning of 19 CFR 
351.525(b)(6)(iii). Under 19 CFR 351.525(b)(6)(iii), the Department 
will attribute subsidies received by a holding company to the 
consolidated sales of the holding company and its subsidiaries; 
however, Jingcheng Holding reported that it did not receive benefits 
under any investigated program during the POI and the allocation 
period, except for the investigated programs for which more information 
is needed. See ``Programs For Which More Information is Required'' 
below.
    In our first supplemental questionnaire to BTIC, we asked questions 
about certain affiliates that

[[Page 64303]]

may have met the cross-ownership standard under 19 CFR 
351.525(b)(6)(vi). Based on BTIC's responses, we preliminarily 
determine that none of these affiliates met both the cross-ownership 
standard of 19 CFR 351.525(b)(6)(vi) and one or more of the attribution 
standards under 19 CFR 351.525(b)(6)(ii)-(v). Thus, we have not 
included any subsidies to these companies in the subsidy calculations.
    Also in our first supplemental questionnaire to BTIC, we asked 
questions regarding a shareholder that used to hold a controlling 
interest in BTIC and may have met the attribution standard under 19 CFR 
351.525(b)(6)(iii). BTIC reported that this company did not receive 
non-recurring subsidies during the period that it was cross-owned with 
BTIC.

Analysis of Programs

    Based upon our analysis of the petition and the responses to our 
questionnaires, we preliminarily determine the following:

I. Programs Preliminarily Determined To Be Countervailable

A. ``Two Free, Three Half'' Program for Foreign-Invested Enterprises 
(``FIEs'')

    Under Article 8 of the FIE Tax Law, an FIE that is ``productive'' 
and scheduled to operate for more than ten years may be exempted from 
income tax in the first two years of profitability and pay income taxes 
at half the standard rate for the next three years. According to the 
GOC, the ``Two Free, Three Half'' program was terminated effective 
January 1, 2008, by the Enterprise Income Tax Law but companies already 
enjoying the preference were permitted to continue paying taxes at 
reduced rates. Tianjin Tianhai paid taxes at a reduced rate under this 
program during the POI.
    The Department has previously found the ``Two Free, Three Half'' 
program to confer countervailable subsidies. See CFS Decision Memo at 
11-12; see also Certain Seamless Carbon and Alloy Steel Standard, Line, 
and Pressure Pipe from the People's Republic of China: Final 
Affirmative Countervailing Duty Determination, Final Affirmative 
Critical Circumstances Determination, 75 FR 57444 (September 21, 2010), 
and accompanying Issues and Decision Memorandum at 25.
    Consistent with the earlier cases, we preliminarily determine that 
the ``Two Free, Three Half'' income tax exemption/reduction confers a 
countervailable subsidy. The exemption/reduction is a financial 
contribution in the form of revenue forgone by the GOC and it provides 
a benefit to the recipient 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 
determine that the exemption/reduction afforded by the program is 
limited as a matter of law to certain enterprises, i.e., productive 
FIEs, and, hence, is specific under section 771(5A)(D)(i) of the Act.
    To calculate the benefit, we treated the income savings enjoyed by 
Tianjin Tianhai as a recurring benefit, consistent with 19 CFR 
351.524(c)(1). To compute the amount of the tax savings, we compared 
Tianjin Tianhai's tax rate to the rate it would have paid in the 
absence of the program. We divided Tianjin Tianhai's tax savings for 
the return filed during the POI by the combined sales (exclusive of 
inter-company sales) of BTIC, Tianjin Tianhai and Langfang Tianhai 
during the POI, in accordance with 19 CFR 351.525(b)(6)(ii).
    On this basis, we preliminarily determine that BTIC received a 
countervailable subsidy of 0.01 percent ad valorem under this program.

B. Enterprise Income Tax Rate Reduction in the Tianjin Port Free Trade 
Zone

    Under Article 4 of the ``Official Reply of the State Council 
Concerning the Establishment of the Tianjin Port Free Trade Zone,'' 
FIEs located in the Tianjin Port Free Trade Zone were permitted to pay 
a reduced income tax at a rate of 15 percent. According to the GOC, 
this program terminated on January 1, 2008, but companies that enjoyed 
the reduced tax rate are gradually transitioning to the national tax 
rate of 25 percent. Consequently, Tianjin Tianhai paid taxes at a 
reduced rate of 20 percent under this program during the POI.
    We preliminarily determine that the Enterprise Income Tax Rate 
Reduction in the Tianjin Port Free Trade Zone program confers a 
countervailable subsidy. The reduction is a financial contribution in 
the form of revenue forgone by the GOC and it provides a benefit to the 
recipient 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 determine that the 
exemption/reduction afforded by the program is regionally specific 
under section 771(5A)(D)(iv) of the Act, because it is limited to 
companies that are located in the Tianjin Port Free Trade Zone.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Tianjin Tianhai as a recurring benefit, consistent with 19 CFR 
351.524(c)(1). To compute the amount of the tax savings, we compared 
Tianjin Tianhai's tax rate to the rate it would have paid in the 
absence of the program. We divided Tianjin Tianhai's tax savings for 
the return filed during the POI by the combined sales of BTIC, Tianjin 
Tianhai and Langfang Tianhai (exclusive of inter-company sales) during 
the POI, in accordance with 19 CFR 351.525(b)(6)(ii).
    On this basis, we preliminarily determine that BTIC received a 
countervailable subsidy of 0.01 percent ad valorem under this program.

C. Import Tariff and VAT Exemptions for FIEs and Certain Domestic 
Enterprises Using Imported Equipment in Encouraged Industries

    Enacted in 1997, the Circular of the State Council on Adjusting Tax 
Policies on Imported Equipment (GUOFA No. 37) (Circular No. 37) exempts 
both FIEs and certain domestic enterprises from the VAT and tariffs on 
imported equipment used in their production so long as the equipment 
does not fall into prescribed lists of non-eligible items. The National 
Development and Reform Commission or its provincial branch provides a 
certificate to enterprises that receive the exemption. The objective of 
the program is to encourage foreign investment and to introduce foreign 
advanced technology equipment and industry technology upgrades. BTIC 
and Langfang Tianhai received VAT and tariff exemptions under this 
program as FIEs. The Department has previously found VAT and tariff 
exemptions under this program to confer countervailable subsidies. See 
CFS Decision Memo at 13-14; see also Certain Seamless Carbon and Alloy 
Steel Standard, Line, and Pressure Pipe from the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, Final 
Affirmative Critical Circumstances Determination, 75 FR 57444 
(September 21, 2010), and accompanying Issues and Decision Memorandum 
at 23-25.
    Consistent with the earlier cases, we preliminarily determine that 
VAT and tariff exemptions on imported equipment confer a 
countervailable subsidy. The exemptions are a financial contribution in 
the form of revenue forgone by the GOC and they provide a benefit to 
the recipient in the amount of the VAT and tariff savings. See section 
771(5)(D)(ii) of the Act and 19 CFR 351.510(a)(1). As described above, 
FIEs and certain domestic enterprises are eligible to receive VAT and 
tariff exemptions under this program. We also determine that the VAT 
and tariff exemptions afforded by the program are specific under 
section 771(5A)(D)(iii)(I) of the Act because the program is limited to 
certain enterprises, i.e., FIEs

[[Page 64304]]

and domestic enterprises involved in ``encouraged'' projects. See CFS 
Decision Memo at Comment 16.
    Normally, we treat exemptions from indirect taxes and import 
charges, such as the VAT and tariff exemptions, as recurring benefits, 
consistent with 19 CFR 351.524(c)(1) and allocate the benefits to the 
year in which 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). In the 
instant investigation, BTIC and Langfang Tianhai have provided a list 
of VAT and tariff exemptions that they received for capital equipment 
imported after December 11, 2001. Based on BTIC's information, we 
preliminarily determine that the VAT and tariff exemptions were for 
capital equipment.
    To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants. See 19 CFR 351.524(b). We 
preliminarily determine that, for each year in which BTIC and Langfang 
Tianhai received benefits under this program, the amount received did 
not exceed 0.5 percent of relevant sales for that year. Pursuant to 19 
CFR 351.524(b)(2), we have expensed the entire amount received for both 
firms to the years in which they received the exemptions.
    On this basis, we preliminarily determine that BTIC received a 
countervailable benefit of 0.02 percent ad valorem for this program.

D. Provision of Hot-Rolled Steel for Less Than Adequate Remuneration 
(``LTAR'')

    BTIC reported purchasing hot-rolled steel, although not for use in 
the production of subject merchandise, and identified the producers of 
the hot-rolled steel it purchased during the POI. The GOC reported that 
these hot-rolled steel producers are majority owned and controlled by 
the GOC. In tires from the PRC, the Department determined that majority 
government ownership of an input producer is sufficient to qualify it 
as an ``authority.'' 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 accompanying Issues and 
Decision Memorandum at 10. Thus, we preliminarily determine these 
suppliers are ``authorities'' within the meaning of section 771(5)(B) 
of the Act.
    We preliminarily determine that the GOC is conferring a 
countervailable subsidy through its provision of hot-rolled steel for 
LTAR. We determine that authorities are providing a good and, hence, a 
financial contribution under section 771(5)(D)(iii) of the Act and that 
a benefit is being conferred because the hot-rolled steel is being 
provided for LTAR, as explained below. Further, the GOC has reported 
that hot-rolled steel is used by a ``wide variety of steel consuming 
industries.'' Because hot-rolled steel is only provided to steel 
consuming industries, we preliminarily determine that the subsidy is 
being provided to a limited number of industries and is, therefore, 
specific. See section 771(5A)(D)(iii)(I) of the Act. This finding is 
consistent with prior Department determinations. See, e.g., CWP 
Decision Memo at 9.
    The Department's regulations at 19 CFR 351.511(a)(2) set out the 
bases for identifying an appropriate market-based benchmark for 
measuring the adequacy of the remuneration of a government provided 
good or service. The potential benchmarks listed in this regulation, in 
order of preference are: (1) Market prices from actual transactions 
within the country under investigation for the government-provided good 
(e.g., actual sales, actual imports, or competitively run government 
auctions) (``tier one'' benchmarks); (2) world market prices that would 
be available to purchasers in the country under investigation (``tier 
two'' benchmarks); or (3) prices consistent with market principles 
based on an assessment by the Department of the government-set price 
(``tier three'' benchmarks). As we explained in softwood lumber from 
Canada, the preferred benchmark in the hierarchy is an observed market 
price from actual transactions within the country under investigation 
because such prices generally would be expected to reflect most closely 
the prevailing market conditions of the purchaser under investigation. 
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), and 
accompanying Issues and Decision Memorandum at ``Analysis of Programs, 
Provincial Stumpage Programs Determined to Confer Subsidies, Benefit.''
    Beginning with tier one, we must determine whether the prices from 
actual sales transactions involving Chinese buyers and sellers are 
significantly distorted. As explained in the CVD Preamble: ``Where it 
is reasonable to conclude that actual transaction prices are 
significantly distorted as a result of the government's involvement in 
the market, we will resort to the next alternative {tier two{time}  in 
the hierarchy.'' See Countervailing Duties; Final Rule, 63 FR 65348, 
65377 (November 25, 1998) (``CVD Preamble''). The CVD Preamble further 
recognizes that distortion can occur when the government provider 
constitutes a majority, or in certain circumstances, a substantial 
portion of the market.
    Based on the GOC's response, companies that the GOC classified as 
state-owned accounted for 70 percent of hot-rolled steel production in 
the PRC during the POI and, therefore, government-owned providers 
constitute a majority of the market. We also note that imports as a 
share of domestic consumption are insignificant. We preliminarily 
determine that domestic prices in the PRC for hot-rolled steel are 
distorted such that they cannot be used as a tier one benchmark. For 
the same reasons, we determine that import prices into the PRC cannot 
serve as a benchmark.
    Turning to tier two benchmarks, i.e., world market prices available 
to purchasers in the PRC, both Petitioner and BTIC have submitted 
prices that they suggest are appropriate bases for constructing a 
benchmark. Based on our review of the proposed benchmarks, we are 
preliminarily relying on prices from both MEPS International (``MEPS'') 
and the Steel Business Briefing (``SBB'') for hot-rolled strip, hot-
rolled coil, and hot-rolled plate/sheet. Pursuant to 19 CFR 
351.511(a)(2)(ii) we are averaging the selected prices. Since ocean 
freight to the PRC is to be added into the benchmark price (see below), 
we did not rely on any SBB or MEPS prices price that included ocean 
freight, thereby ensuring that ocean freight would not be counted 
twice.
    Under 19 CFR 351.511(a)(2)(iv), when measuring the adequacy of 
remuneration under tier one or tier two, the Department will adjust the 
benchmark price to reflect the price that a firm actually paid or would 
pay if it imported the product, including delivery charges and import 
duties. Regarding delivery charges, we have included ocean freight and 
the freight charges that would be incurred to deliver hot-rolled steel 
to BTIC's plants. We have also added import duties, as reported by the 
GOC, and the value-added tax (``VAT'') applicable to imports of hot-
rolled steel into the PRC. See Prelim Calc Memo for a full explanation 
of how we derived the benchmark. We have compared these prices to 
BTIC's actual purchase prices, including taxes and delivery charges.

[[Page 64305]]

    Based on this comparison, we preliminarily determine that hot-
rolled steel was provided for LTAR and that a subsidy exists in the 
amount of the difference between the benchmark and what BTIC paid. See 
19 CFR 351.511(a).
    On this basis, we preliminarily determine that BTIC received a 
countervailable subsidy of 0.13 percent ad valorem under this program.

E. Provision of Seamless Tube Steel for LTAR

    BTIC reported purchasing seamless tube steel for the production of 
subject merchandise and identified several producers of this input. The 
GOC provided ownership information indicating that certain of these 
seamless tube steel producers are state-owned enterprises (``SOEs''). 
Thus, we preliminarily determine these producers are ``authorities'' 
within the meaning of section 771(5)(B) of the Act. Regarding one 
seamless tube steel producer, we are seeking further information. See 
``Case History'' above regarding the outstanding supplemental 
questionnaire to the GOC. Thus, for this preliminary determination, we 
are not including BTIC's purchases of seamless tube steel produced by 
this company in our calculation.
    We preliminarily determine that the GOC is conferring a 
countervailable subsidy through its provision of seamless tube steel 
for LTAR. We determine that authorities are providing a good and, 
hence, a financial contribution under section 771(5)(D)(iii) of the Act 
and that a benefit is being conferred because the seamless tube steel 
is being provided for LTAR, as explained below. Further, the GOC has 
reported that seamless tube steel is used by a ``wide variety of steel 
consuming industries,'' and the GOC specifically identified the 
following uses: plumbing and heating systems, air conditioning units, 
sprinklers, and in the construction and repair of refineries and 
chemical plants. Because seamless tube steel is only provided to steel 
consuming industries, we preliminarily determine that the subsidy is 
being provided to a limited number of industries and is, therefore, 
specific. See section 771(5A)(D)(iii)(I) of the Act.
    We have selected our benchmark for measuring the adequacy of the 
remuneration in accordance with 19 CFR 351.511(a)(2). With regard to 
tier one, market prices from actual transactions within the country 
under investigation, the GOC has reported that companies that it has 
designated as state-owned accounted for 38 percent of seamless tube 
steel production in the PRC during the POI. We determine that this 
level of government ownership is substantial. Combining this with the 
fact that imports as a share of domestic consumption are insignificant, 
we preliminarily determine that domestic prices in the PRC for seamless 
tube steel are distorted such that they cannot be used as a tier one 
benchmark. For the same reasons, we determine that import prices into 
the PRC cannot serve as a benchmark.
    Turning to tier two benchmarks, i.e., world market prices available 
to purchasers in the PRC, both Petitioner and BTIC have submitted 
prices that they suggest are appropriate bases for constructing a 
benchmark. Based on our review of the proposed benchmarks, we are 
preliminarily relying on FOB and export prices from Steel Orbis for 
seamless tube steel. Pursuant to 19 CFR 351.511(a)(2)(ii), we are 
averaging the selected prices. Since ocean freight to the PRC is to be 
added into the benchmark price (see below), we did not rely on any 
prices that included ocean freight, thereby ensuring that ocean freight 
would not be counted twice.
    As explained above, the Department adjusts the benchmark price to 
include delivery charges and import duties. Regarding delivery charges, 
we have included ocean freight and the freight charges that would be 
incurred to deliver seamless tube steel to BTIC's plants. We have also 
added import duties, as reported by the GOC, and the VAT applicable to 
imports of seamless tube steel into the PRC. See Prelim Calc Memo for a 
full explanation of how we derived the benchmark. We have compared 
these prices to BTIC's actual purchase prices, including taxes and 
delivery charges.
    Based on this comparison, we preliminarily determine that seamless 
tube steel was provided for LTAR and that a subsidy exists in the 
amount of the difference between the benchmark and what BTIC paid. See 
19 CFR 351.511(a).
    On this basis, we preliminarily determine that BTIC received a 
countervailable subsidy of 22.14 percent ad valorem under this program.

F. Provision of Standard Commodity Steel Billets and Blooms, and High-
Quality Chromium Molybdenum Alloy Steel Billets and Blooms for LTAR

    BTIC reported purchasing standard commodity steel billets and 
blooms (``commodity billets'') and high-quality chromium molybdenum 
alloy steel billets and blooms (``CrMo billets'') (collectively, 
``billets'') for the production of subject merchandise and identified 
several producers of these inputs. The GOC provided ownership 
information for these input producers indicating that all are directly 
or indirectly majority owned by the GOC. As explained above, the 
Department has determined that majority government ownership of an 
input producer is sufficient to qualify it as an ``authority.''
    We preliminarily determine that the GOC is conferring a 
countervailable subsidy through its provision of billets for LTAR. We 
determine that authorities are providing a good and, hence, a financial 
contribution under section 771(5)(D)(iii) of the Act and that a benefit 
is being conferred because the billets are being provided for LTAR, as 
explained below. Further, the GOC has reported that billets are used by 
a ``wide variety of steel consuming industries.'' Because billets are 
provided only to steel consuming industries, we preliminarily determine 
that the subsidy is being provided to a limited number of industries 
and is, therefore, specific. See section 771(5A)(D)(iii)(I) of the Act.
    We have selected our benchmark for measuring the adequacy of the 
remuneration in accordance with 19 CFR 351.511(a)(2). With regard to 
tier one, market prices from actual transactions within the country 
under investigation, the GOC has reported that companies it designates 
as government-owned accounted for 60 percent of crude steel production 
in the PRC during the POI. (Because the PRC's State Statistical Bureau 
does not track production of commodity billets or high-quality chromium 
molybdenum alloy steel billets the GOC has responded with information 
on crude steel production.) Therefore, government-owned providers 
constitute a majority of the market. See CVD Preamble, 63 FR at 65377. 
We also note that imports as a share of domestic consumption are 
insignificant. We preliminarily determine that domestic prices in the 
PRC for billets are distorted such that they cannot be used as a tier 
one benchmark. For the same reasons, we determine that import prices 
into the PRC cannot serve as a benchmark.
    Turning to tier two benchmarks, i.e., world market prices available 
to purchasers in the PRC, the Department has been unable to locate 
benchmark prices for CrMo billets, and no world market prices for CrMo 
billets were placed on the record of this investigation. Therefore, we 
have relied on a single benchmark for both types of billets. Both 
Petitioner and BTIC have submitted billet prices. Based on our review 
of the proposed benchmarks, we are preliminarily relying on FOB and 
export prices from the SBB and the London Metal Exchange for billets. 
Pursuant to 19 CFR 351.511(a)(2)(ii), we

[[Page 64306]]

are averaging the submitted prices. Since ocean freight to the PRC is 
to be added into the benchmark price (see below), we did not rely on 
any prices that included ocean freight, thereby ensuring that ocean 
freight would not be counted twice.
    As explained above, the Department adjusts the benchmark price to 
include delivery charges and import duties. Regarding delivery charges, 
we have included ocean freight and the freight charges that would be 
incurred to deliver billets to BTIC's plants. We have also added import 
duties, as reported by the GOC, and the VAT applicable to imports of 
billets into the PRC. See Prelim Calc Memo for a full explanation of 
how we derived the benchmark. We have compared these prices to BTIC's 
actual purchase prices, including taxes and delivery charges.
    Based on this comparison, we preliminarily determine that commodity 
billets were provided for LTAR and that a subsidy exists in the amount 
of the difference between the benchmark and what the respondents paid. 
See 19 CFR 351.511(a). We preliminarily determine that BTIC received a 
countervailable subsidy of 0.03 percent ad valorem with respect to the 
provision of this input. Regarding CrMo billets, we preliminarily 
determine that BTIC did not receive a benefit from its purchases during 
the POI. However, we intend to continue seeking a benchmark specific to 
CrMo billets and will consider whether altering our methodology for the 
final determination is appropriate.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Provision of Land-Use Rights in the Tianjin Port Free Trade Zone for 
LTAR

    BTIC submitted information regarding Tianjin Tianhai's purchase of 
land-use rights showing that Tianjin Tianhai is located in the Tianjin 
Port Free Trade Zone (``TPFTZ'') and that the company purchased its 
land-use rights from the land bureau for that Zone. Additionally, the 
GOC submitted the Regulation of the Tianjin Harbour Free Trade Zone for 
Land Administration. This regulation does not show any preference in 
providing land-use rights for particular areas within the TPFTZ.
    The Department has found that when land is in an industrial park 
located within the seller's (e.g., county's or municipality's) 
jurisdiction, the provision of land-use rights is regionally specific 
under section 771(5A)(D)(iv) of the Act. See, e.g., 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 
accompanying Issues and Decision Memorandum at 20. However, with 
respect to the land-use rights within the TPFTZ, the jurisdiction of 
the granting authority does not extend beyond the TPFTZ. As such, the 
provision of land-use rights under this program is not limited to an 
enterprise or industry located within a designated geographical region. 
Therefore, we preliminarily determine that the provision of land-use 
rights to Tianjin Tianhai within the TPFTZ is not specific under 
section 771(5A)(D)(iv) of the Act and, thus, this program does not 
confer a countervailable subsidy.

III. Programs Preliminarily Determined To Be Not Used by Respondents or 
To Not Provide Benefits During the POI

A. Provision of Welded Tube Steel for LTAR

    BTIC reported purchasing welded tube steel, although not for use in 
the production of subject merchandise. BTIC submitted the amount it 
purchased in the POI and the price paid, but not the date(s) or terms 
of the purchase. The GOC did not provide any requested information 
regarding welded tube steel.
    Even under adverse inferences regarding financial contribution, 
specificity, unsuitability of tier one benchmarks, and the dates and 
terms of the purchases, we preliminarily determine that this program 
did not result in a measurable benefit during the POI. Therefore, 
consistent with CFS Decision Memo at 15, we are not including this 
subsidy in our calculation.

B. Subsidies Provided in the Tianjin Binhai New Area (``TBNA'') and the 
Tianjin Economic and Technological Development Area

    The GOC and BTIC reported that Tianjin Tianhai received benefits 
under three programs by virtue of its location in the TBNA. The first 
is addressed under ``Enterprise Income Tax Rate Reduction in the 
Tianjin Port Free Trade Zone'' above. The payment to Tianjin Tianhai 
under the second program, the Energy Saving and Emission Reduction 
Fund, was less than 0.5 percent of BTIC's sales in the year or receipt, 
2009. Therefore, because any potential subsidy would have been expensed 
prior to the POI in accordance with 19 CFR 351.524(b)(2), we have not 
analyzed this program further and have not included it our 
calculations.
    Similarly, payments to Tianjin Tianhai under the third program, the 
Enterprise Development Fund, were less than 0.5 percent of BTIC's sales 
in the years of receipt, 2008 and 2009. Therefore, because any 
potential subsidy would have been expensed prior to the POI in 
accordance with 19 CFR 351.524(b)(2), we have not analyzed this program 
further and have not included it our calculations.

C. Beijing Industrial Development Fund

    BTIC reported receiving grants under this program in 2008 and 2009. 
Payments to BTIC under this program were less than 0.5 percent of 
BTIC's sales in the years of receipt, 2008 and 2009. Therefore, because 
any potential subsidy would have been expensed prior to the POI in 
accordance with 19 CFR 351.524(b)(2), we have not analyzed this program 
further and have not included it our calculations.

D. Provision of Land and/or Land Use Rights to SOEs at LTAR

E. Loan and Interest Forgiveness for SOEs

F. The State Key Technology Renovation Project Fund

G. Circular on Issuance of Foreign Trade Development Support Fund

H. Rebates for Export and Credit Insurance Fees

I. GOC and Sub-Central Grants, Loans, and Other Incentives for 
Development of Famous Brands and China Top World Brands

J. Preferential Lending to Steel Product Producers Under the Ninth 
Five-Year Plan

K. Treasury Bond Loans

L. Preferential Lending to Steel Cylinders Producers and Exporters 
Classified as ``Honorable Enterprises''

M. Income Tax Reductions for Export-Oriented FIEs

N. Preferential Tax Programs for FIEs that are Engaged in Research and 
Development

O. Income Tax Reduction for FIEs that Reinvest Profits in Export-
Oriented Enterprises

P. Local Income Tax Exemption and Reduction Programs for ``Productive'' 
FIEs

Q. Income Tax Credits for Domestically Owned Companies Purchasing 
Domestically Produced Equipment

R. VAT Refunds for FIEs Purchasing Domestically Produced Equipment

S. VAT Exemptions for Central Region

IV. Programs for Which More Information Is Required

    Supplemental questionnaires are outstanding with respect to two 
programs included in the Initiation

[[Page 64307]]

Notice: ``Preferential Loans for SOEs'' and ``Provision of Electricity 
for LTAR.'' Additionally, we intend to seek further information with 
respect to certain pension grants to Jingcheng Holding identified in 
recent questionnaire responses. Based on the information we receive, we 
plan to address these programs in a post-preliminary 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 
calculated an individual rate for each producer/exporter of the subject 
merchandise individually investigated. Because only one company was 
investigated, that company's rate also serves as the All Others rate.
    We preliminarily determine the total estimated net countervailable 
subsidy rates to be:

------------------------------------------------------------------------
                                                            Net subsidy
                  Exporter/manufacturer                        rate
------------------------------------------------------------------------
Beijing Tianhai Industry Co., Ltd.; Tianjin Tianhai High           22.34
 Pressure Corp., Ltd.; Langfang Tianhai High Pressure
 Container Co., Ltd.....................................
All Others..............................................           22.34
------------------------------------------------------------------------

    In accordance with sections 703(d)(1)(B) and (2) of the Act, we are 
directing U.S. Customs and Border Protection to suspend liquidation of 
all entries of steel cylinders from the PRC that are entered, or 
withdrawn from warehouse, for consumption on or after the date of the 
publication of this notice in the Federal Register, and to require a 
cash deposit or bond for such entries of merchandise in the amounts 
indicated above.
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), we will disclose to the 
parties the calculations for this preliminary determination within five 
days of its announcement. Due to the anticipated timing of verification 
and issuance of verification reports, 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)(i) (for 
a further discussion of case briefs). Rebuttal briefs must be filed 
within five days after the deadline for submission of case briefs, 
pursuant to 19 CFR 351.309(d)(1). 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. See 19 CFR 
351.309(c)(2) and (d)(2).
    Section 774 of the Act provides that the Department will hold a 
public hearing to afford interested parties an opportunity to comment 
on arguments raised in case or rebuttal briefs, provided that such a 
hearing is requested by an interested party. If a request for a hearing 
is made in this investigation, the hearing will be held two days after 
the deadline for submission of the rebuttal briefs, pursuant to 19 CFR 
351.310(d), at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, DC 20230. Parties should confirm 
by telephone the time, date, and place of the hearing 48 hours before 
the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must electronically submit a written request to 
the Deputy Assistant Secretary for Import Administration using IA 
ACCESS, within 30 days of the publication of this notice, pursuant to 
19 CFR 351.310(c). Requests should contain: (1) The party's name, 
address, and telephone; (2) the number of participants; and (3) a list 
of the issues to be discussed. Oral presentations will be limited to 
issues raised in the briefs. See id.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

     Dated: October 11, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-26925 Filed 10-17-11; 8:45 am]
BILLING CODE 3510-DS-P