Import Administration, International Trade Administration, Department of Commerce.
The Department of Commerce (“the Department”) is conducting a new shipper review of the countervailing duty (“CVD”) order on certain welded carbon steel standard pipe from Turkey for the period January 1, 2005, through December 31, 2005. We preliminarily find that the net subsidy rate for the company under review is de minimis. See the “Preliminary Results of Review” section of this notice, infra. Interested parties are invited to comment on these preliminary results. See the “Public Comment” section, infra.
February 26, 2007.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Kristen Johnson, AD/CVD Operations, Office 3, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-4793.End Further Info End Preamble Start Supplemental Information
On March 7, 1986, the Department published in the Federal Register the CVD order on certain welded carbon steel pipe and tube products from Turkey. See Countervailing Duty Order: Certain Welded Carbon Steel Pipe and Tube Products from Turkey, 51 FR 7984 (March 7, 1986). On March 30, 2006, the Department received a request from Toscelik Profil ve Sac Endustrisi A.S. and its affiliated export trading company, Tosyali Dis Ticaret A.S. (collectively referred to as “Toscelik”), a producer and exporter of subject merchandise, to initiate a new shipper review. On May 2, 2006, the Department initiated a CVD new shipper review covering the period January 1, 2005, through December 31, 2005. See Certain Welded Carbon Steel Standard Pipe from Turkey: Notice of Initiation of Countervailing Duty New Shipper Review, 71 FR 25814 (May 2, 2006); see also, Memorandum to the File, “Request for CVD New Shipper Review: Certain Welded Carbon Steel Standard Pipe from Turkey,” (April 26, 2006) (“Initiation Checklist”).1
On May 8, 2006, the Department issued a questionnaire to Toscelik and the Government of the Republic of Turkey (“the GOT”); we received the GOT's questionnaire response on July 6, 2006, and Toscelik's response on July 10, 2006. On September 6, 2006, we issued supplemental questionnaires to Toscelik and the GOT. We received Toscelik's and the GOT's supplemental questionnaire responses on October 13, 2006.
On September 20, 2006, the Department published in the Federal Register an extension of the deadline for the preliminary results of this new shipper review. See Certain Welded Carbon Steel Standard Pipe from Turkey: Extension of Time Limit for Preliminary Results of Countervailing Start Printed Page 8349Duty New Shipper Review, 71 FR 54979 (September 20, 2006).
On January 8 through January 12, 2006, we conducted verification in Ankara, Turkey, of the questionnaire responses submitted by the GOT, and in Iskenderun, Turkey, of the questionnaire responses submitted by Toscelik.
In accordance with 19 CFR 351.213(b), this review covers only those producers or exporters of the subject merchandise for which a review was specifically requested. The only company subject to this review is Toscelik. This review covers eleven programs.
Additionally, we recently completed the companion antidumping (“AD”) new shipper review with respect to the AD order covering the same subject merchandise. See Final Results of Antidumping Duty New Shipper Review: Certain Welded Carbon Steel Pipe and Tube from Turkey, 71 FR 43444 (August 1, 2006), and accompanying Issues and Decision Memorandum (“AD NSR Memo”).2 In that review, we thoroughly examined the issue of whether Toscelik's sales were bona fide. See AD NSR Memo, at Comment 1. We, therefore, have not revisited that question in this review.
Scope of the Order
The products covered by this order are certain welded carbon steel pipe and tube with an outside diameter of 0.375 inch or more, but not over 16 inches, of any wall thickness (pipe and tube) from Turkey. These products are currently provided for under the Harmonized Tariff Schedule of the United States (“HTSUS”) as item numbers 7306.30.10, 7306.30.50, and 7306.90.10. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise is dispositive.
Period of Review
The period for which we are measuring subsidies is January 1, 2005, through December 31, 2005.
As noted above, Toscelik Profil ve Sac Endustrisi A.S. (“Toscelik Profil”) and its affiliated foreign trade company, Tosyali Dis Ticaret A.S. (“Tosyali”), produce and export subject merchandise. Toscelik Profil and Tosyali are wholly owned by Tosyali Holding, a Turkish holding company. Toscelik Profil, which produces subject merchandise for both the domestic and export markets, was established in 1992.3 Tosyali, founded in 1996, is the exporter of record with respect to Toscelik Profil's export sales and sells subject merchandise to unaffiliated customers in the United States. Toscelik Profil and Tosyali did not export, and was not affiliated with an exporter or producer that did export to the United States during the period of investigation (i.e., 1985). See Initiation Checklist.
Subsidies Valuation Information
Benchmark Interest Rate
To determine whether government-provided loans from the Export Credit Bank of Turkey (“Export Bank”) conferred a benefit to the company, the Department uses, where possible, company-specific interest rates for comparable commercial loans. See 19 CFR 351.505(a). Toscelik Profil, however, did not have commercial short-term loans denominated in Turkish lira (“YTL”) that were comparable to the pre-shipment loans against which it paid interest during the POR. See Memorandum to the File, “Verification of the Questionnaire Responses Submitted by Toscelik Profil ve Sac Endustrisi A.S. and its affiliated exporter, Tosyali Dis Ticaret A.S.,” at 7 (February 15, 2007) (“Toscelik Report”).4
Where no company-specific benchmark interest rates are available, the Department's regulations direct us to use a national average interest rate as the benchmark. See 19 CFR 351.505(a)(3)(ii). According to the GOT, however, there is no official national average short-term interest rate available. Therefore, we have calculated the benchmark interest rate for short-term YTL-denominated loans based on short-term interest rate data for 2005, as reported by The Economist.6
To calculate the benchmark, we sourced short-term interest rates to represent quarterly rates for Turkey in 2005. Specifically, we sourced the interest rate reported in the last weekly publication of The Economist for each quarter of 2005, i.e., the March 26, 2005, June 25, 2005, September 24, 2005, and December 24, 2005, editions. We then simple averaged those rates to calculate an annual short-term interest rate for Turkey. We then compared the nominal benchmark average interest rate with the nominal interest rates that the company paid against the Pre-Shipment Export Credit YTL-denominated loans.8 See Memorandum to the File, “Calculations for the Preliminary Results of the New Shipper Review of the Countervailing Duty Order on Certain Welded Carbon Steel Standard Pipe from Turkey,” at 2 (February 20, 2007) (“Preliminary NSR Calculations”). This methodology is consistent with the Department's practice. See Final Results of Countervailing Duty Administrative Review: Certain Welded Carbon Steel Standard Pipe from Turkey, 71 FR 43111 (July 31, 2006) (“2004 Pipe Final”), and accompanying Issues and Decision Memorandum, at “Benchmark Interest Rates” under “Subsidies Valuation Information” and Comment 1 (“2004 Pipe Memorandum”).
Analysis of Programs
I. Programs Preliminarily Determined To Be Countervailable
A. Deduction from Taxable Income for Export Revenue
Addendum 4108 of Article 40 of the Income Tax Law allows companies that operate internationally to claim a lump sum tax deduction equal to 0.5 percent of the foreign exchange revenue earned from exports and other international activities.9 The deduction may also be used to cover certain undocumented expenses, which were incurred through international activities, that would otherwise be non-deductible for tax purposes (e.g., expenses paid in cash, such as for lodging, gasoline, and food).Start Printed Page 8350
Consistent with the 2004 Pipe Final, we preliminarily find that this tax deduction is a countervailable subsidy. See 2004 Pipe Memorandum, at “Deduction from Taxable Income for Export Revenue” under “Programs Determined To Be Countervailable.” The deduction provides a financial contribution within the meaning of section 771(5)(D)(ii) of the Tariff Act of 1930, as amended (“the Act”), because it represents revenue forgone by the GOT. The deduction provides a benefit in the amount of the tax savings to the company pursuant to section 771(5)(E) of the Act. It is specific under section 771(5A)(B) of the Act because its receipt is contingent upon export performance. In this review, no new information or evidence of changed circumstances has been submitted to warrant reconsideration of the Department's prior findings.
During the POR, Tosyali used the deduction with respect to its 2004 income taxes to cover certain expenses, incurred through international activities, and not as a lump sum deduction claimed on its 2004 tax return. Specifically, Tosyali took the deduction directly on its income statement within the “marketing and selling expenses” account. The deduction within this expense account reduced Tosyali's taxable income. See Toscelik Report, at 7-8.
The Department typically treats a tax deduction as a recurring benefit in accordance with 19 CFR 351.524(c)(1). To calculate the countervailable subsidy rate for this program, we calculated the tax savings realized by Tosyali in 2005, as a result of the deduction for export earnings. We then divided that benefit by the company's total export sales for 2005. On this basis, we preliminarily determine the net countervailable subsidy for this program to be 0.20 percent ad valorem.
B. Pre-Shipment Export Credits
Turkey's Export Bank provides short-term pre-shipment export loans to exporters through intermediary commercial banks. This loan program is designed to support export-related firms. Loans are made to exporters who commit to export within a specified period of time. These loans cover up to 100 percent of the FOB export value and may be extended for a maximum of 360 days. These loans are denominated in either YTL or foreign currency. The interest rates charged on these pre-shipment loans are set by the Export Bank. In several previous determinations, the Department found this program to be countervailable because receipt of the loans is contingent upon export performance and the interest rates paid on these loans are less than the amount the recipient would pay on comparable commercial loans. See, e.g., 2004 Pipe Memorandum, at “Pre-Shipment Export Credits” under “Programs Determined To Be Countervailable.”
We also found that this program is an untied export loan program because the loans are not specifically tied to a particular destination at the time of approval and the borrower only has to show that the export commitment was satisfied (i.e., exports amounting to the FOB value of the credit) to close the loan. See id. In this review, no new information or evidence of changed circumstances has been submitted to warrant reconsideration of the Department's prior findings. During the POR, Toscelik Profil paid interest against pre-shipment export credit loans denominated in YTL.
Pursuant to section 771(5)(E)(ii) of the Act, a benefit shall be treated as conferred “in the case of a loan, if there is a 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.” To calculate the amount of interest the recipient would pay on a comparable YTL-denominated commercial loan, in absence of a company-specific interest rate, we have used, as the benchmark rate, a simple average of short-term interest rates for Turkey as reported by The Economist in 2005. See “Benchmark Interest Rate” section, supra, for more information.
Using this benchmark rate, we continue to find the pre-shipment export credit loans countervailable because the interest rate charged is less than the rate for comparable commercial loans that the company could obtain on the market. Therefore, the loans constitute a financial contribution in the form of a direct transfer of funds from the GOT, under section 771(5)(D)(i) of the Act. A benefit exists under section 771(5)(E)(ii) of the Act in the amount of the difference between the payments of interest that Toscelik Profil made on the loans and the payments the company would have made on comparable commercial loans during the POR. The program is also specific in accordance with section 771(5A)(B) of the Act because receipt of the loans is contingent upon export performance.
To determine the benefit, we calculated the difference between the actual interest paid on the pre-shipment loans during the POR and the interest that would have been paid using the benchmark interest rate. We then divided the benefit amount by the company's total export sales for 2005. On this basis, we preliminarily determine the net countervailable subsidy under this program to be less than 0.005 percent ad valorem.10
II. Program Preliminary Determined To Not Confer Countervailable Benefits
A. Inward Processing Certificate Exemption
Under the Inward Processing Regime (“IPR”),11 companies are exempt from paying customs duties and value added taxes (“VAT”) on raw material imports to be used in the production of exported goods. Companies may choose whether to be exempted from the applicable duties and taxes or have them refunded upon export. Under the exemption system, companies provide a letter of guarantee that is returned to them upon fulfillment of the export commitment indicated on the Inward Processing Certificate (“IPC”).
To participate in this program, a company must hold an IPC, which lists the amount of raw materials to be imported and the amount of product to be exported. There are two types of certificates: D-1 and D-3. During the POR, Toscelik Profil utilized D-1 certificates to import raw materials for use in the production of pipe and tube exports. We verified that Tosyali did not have D-1 certificates. See Memorandum to the File, “Verification of the Questionnaire Responses Submitted by the Government of the Republic of Turkey,” at 7 (February 15, 2007) (“GOT Report”). We also verified that neither Toscelik Profil nor Tosyali had D-3 certificates. See id.
An IPC specifies the maximum quantity of inputs that can be imported under the certificate. The value of imported inputs may not exceed the value of the exported products. In setting the amount of raw material inputs that can be imported, the GOT Start Printed Page 8351relies on yield rates to determine the amount of each raw material input required to produce a given unit of exported product. The yield rate used for each input is either a company-specific yield rate or is an industry average rate set by the Undersecretariat of Foreign Trade (“UFT”) based on its knowledge of production processes, production capacity reports submitted by companies, and declarations by independent engineers regarding yield rates for raw materials consumed in the production of finished goods. See GOT Report, at 5-6. The GOT refers to those yield rates when reviewing a company's input/output usage table to ensure that a company's expected export quantities are sufficient to cover the quantity of input imported duty-free under the program.
If a company applies for an IPC using a company-specific yield rate for the raw material to be imported, the company's production data must be validated by independent engineers and the company's production process is subject to verification by the UFT. See id. At verification, we confirmed, through examination of the company's production records, that the yield rate used by Toscelik Profil to apply for D-1 certificates accurately reflects the company's production performance. See Toscelik Report, at 11.
Pursuant to 19 CFR 351.519(a)(1)(ii), a benefit exists to the extent that the exemption extends to inputs that are not consumed in the production of the exported product, making normal allowances for waste, or if the exemption covers charges other than import charges that are imposed on the input. With regard to the VAT exemption granted under this program, pursuant to 19 CFR 351.517(a), in the case of the exemption upon export of indirect taxes, a benefit exists to the extent that the Department determines that the amount exempted exceeds the amount levied with respect to the production and distribution of like products when sold for domestic consumption.
During the POR, Toscelik Profil received duty and VAT exemptions under D-1 certificates on certain imported inputs used in the production of steel pipes and tubes and not duty or VAT refunds. There is no evidence on the record of this review that demonstrates that the amount of exempted inputs imported under the program was excessive or that Toscelik Profil used the imported inputs for any other product besides those exported. See Toscelik Report, at 10-12. In addition, consistent with 2004 Pipe Final, we verified that the GOT continues to have a monitoring system in place to confirm which inputs are consumed in the production of the exported products and in what amounts, and that the system remains reasonable for the purposes intended. See GOT Report, at 5-8.
Therefore, we preliminarily determine that, during the POR, the tax and duty exemptions, which Toscelik Profil received on imported inputs under D-1 certificates of the IPR, did not confer countervailable benefits as the company consumed the imported inputs in the production of exported products, making normal allowance for waste. We further preliminarily find that the VAT exemption did not confer countervailable benefits on Toscelik Profil because the exemption does not exceed the amount levied with respect to the production and distribution of like products when sold for domestic consumption. Further, because neither Toscelik Profil nor Tosyali had D-3 certificates during the POR, we preliminarily determine that this aspect of the IPR was not used.
III. Programs Preliminarily Determined To Not Be Used
We examined the following programs and preliminarily determine that the respondents did not apply for or receive benefits under these programs during the POR:
A. VAT Support Program (Incentive Premium on Domestically Obtained Goods)
B. Pre-Export Credit Loans
C. Foreign Trade Company Loans
D. Post-Shipment Export Loans
E. Pre-Shipment Rediscount Loans
F. Subsidized Turkish Lira Credit Facilities
G. Subsidized Credit for Proportion of Fixed Expenditures
H. Regional Subsidies.
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we have calculated a subsidy rate for Toscelik for the period January 1, 2005, through December 31, 2005. We preliminarily determine that the net countervailable subsidy rate is 0.20 percent ad valorem, which is de minimis, pursuant to 19 CFR 351.106(c).
The Department intends to issue assessment instructions to U.S. Customs and Border Protection (“CBP”) 15 days after the date of publication of the final results of this review. If the final results remain the same as these preliminary results, the Department will instruct CBP to liquidate without regard to countervailing duties all shipments of subject merchandise produced by Toscelik entered, or withdrawn from warehouse, for consumption from January 1, 2005, through December 31, 2005. The Department will also instruct CBP not to collect cash deposits of estimated countervailing duties on all shipments of the subject merchandise produced by Toscelik, entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this new shipper review.
Pursuant to 19 CFR 351.224(b), the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of the public announcement of this notice. Pursuant to 19 CFR 351.309, interested parties may submit written comments in response to these preliminary results. Unless otherwise indicated by the Department, case briefs must be submitted within 30 days after the date of publication of this notice, pursuant to 19 CFR 351.309(c)(ii). Rebuttal briefs, limited to arguments raised in case briefs, must be submitted no later than five days after the time limit for filing case briefs, unless otherwise specified by the Department, pursuant to 19 CFR 351.309(d). Parties who submit argument in this proceeding are requested to submit with the argument: (1) a statement of the issues, and (2) a brief summary of the argument. Parties submitting case and/or rebuttal briefs are requested to provide the Department copies of the public version on disk. Case and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310(c), within 30 days of the date of publication of this notice, interested parties may request a public Start Printed Page 8352hearing on arguments to be raised in the case and rebuttal briefs. Unless the Secretary specifies otherwise, the hearing, if requested, will be held two days after the date for submission of rebuttal briefs, that is, 37 days after the date of publication of these preliminary results, pursuant to 19 CFR 351.310(d)(1).
Representatives of parties to the proceeding may request disclosure of proprietary information under administrative protective order no later than 10 days after the representative's client or employer becomes a party to the proceeding, but in no event later than the date the case briefs, under 19 CFR 351.309(c)(ii), are due. See 19 CFR 351.305(b)(3). The Department will publish the final results of this new shipper review, including the results of its analysis of arguments made in any case or rebuttal briefs.
This review is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.Start Signature
Dated: February 20, 2007.
David M. Spooner,
Assistant Secretary for Import Administration.
1. A public version of the Initiation Checklist is available on the public record in the Department's Central Records Unit ("CRU") (room B-099).Back to Citation
2. A public version of the memorandum is available on the public record in CRU (room B-099).Back to Citation
3. Toscelik Profil was founded as “Celik Endustri Urunleri San. ve Insaat Malz” in 1992. The company name was subsequently changed to its current name, “Toscelik Profil ve Sac Endustrisi A.S.” in 1997.Back to Citation
4. A public version of the verification report is available on the public file in the Department's CRU (room B-099).Back to Citation
5. See GOT's Initial Questionnaire Response, at 14 (July 6, 2006). A public version of the GOT's response is available on the public record in the CRU.Back to Citation
6. In each issue, The Economist reports short-term interest data on a percentage per annum basis for select countries.In each issue, The Economist reports short-term interest data on a percentage per annum basis for select countries.Back to Citation
7. The short-term YTL interest rates sourced from The Economist do not include commissions or fees paid to commercial banks, i.e., they are nominal rates. See Carbon and Certain Alloy Steel Wire Rod from Turkey; Final Negative Countervailing Duty Determination, 67 FR 55815 (August 30, 2002) (“Wire Rod”), and accompanying Issues and Decision Memorandum, at “Benchmark Interest Rates” (“Wire Rod Memorandum”).Back to Citation
8. It is the Department's practice to normally compare effective interest rates rather than nominal rates in making the loan comparison. See Countervailing Duties; Final Rule, 63 FR 65348, 65362 (November 25, 1998) (“Preamble”). Toscelik Profil, however, was able to break-out the bank commission it paid against the loans and report separately the interest rates set on the loans by the Export Bank. Therefore, for purposes of these preliminary results, we have conducted our loan comparison on a nominal interest rate basis.Back to Citation
9. These actions include construction, repair, installation, and transportation activities that occur abroad.Back to Citation
10. Where the countervailable subsidy rate for a program is less than 0.005 percent, the program is not included in the total CVD rate. See, e.g., Final Results of Countervailing Duty Administrative Review: Low Enriched Uranium from France, 70 FR 39998 (July 12, 2005), and accompanying Issues and Decision Memorandum at “Purchases at Prices that Constitute More than Adequate Remuneration.”Back to Citation
11. The IPR is governed by the following GOT provisions: Customs Code No. 4458 (Articles 80, 108, 111, 115, and 121), IPC Council of Ministers' Decree No. 2005/8391, and Communique of IPR No. Export 2005/1.Back to Citation
12. A public version of the verification report is available on the public file in the Department's CRU (room B-099).Back to Citation
13. For more information about D-3 certificates, see GOT Verification Report, at 5; see also, 2004 Pipe Memorandum, at “Inward Processing Certificate Exemption” under “Programs Determined To Not Confer Countervailable Benefits.”Back to Citation
14. For more information on how the UFT confirms the appropriate amount of raw material imports for the export commitment amount under an IPC, see 2004 Pipe Memorandum, at “Inward Processing Certificate Exemption” under “Programs Determined To Not Confer Countervailable Benefits” (please note that “waste/usage rate” has the same meaning as “yield rate”); see also, GOT's Questionnaire Response, at Exhibit 5, pages 10-11 (July 14, 2006).Back to Citation
15. In the 2004 Pipe Final, the Department found that, in accordance with 19 CFR 351.519(a)(4)(i), the GOT has a system in place to confirm which inputs are consumed in the production of the exported product and in what amounts, and that the system is reasonable for the purposes intended. See 2004 Pipe Memorandum, at “Inward Processing Certificate Exemption” under “Programs Determined To Not Confer Countervailable Benefits.”Back to Citation
16. Although we found this program to be terminated in Wire Rod, residual payments for purchases made prior to the program's termination were permitted. See Wire Rod Memorandum, at 11.Back to Citation
[FR Doc. E7-3237 Filed 2-23-07; 8:45 am]
Billing Code: 3510-DS-S