[Federal Register Volume 63, Number 73 (Thursday, April 16, 1998)]
[Notices]
[Pages 18885-18891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10168]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-489-502]
Certain Welded Carbon Steel Pipe and Tube and Welded Carbon Steel
Line Pipe From Turkey; Final Results and Partial Rescission of
Countervailing Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
reviews.
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SUMMARY: On December 9, 1997, the Department of Commerce published in
the Federal Register its preliminary results of administrative reviews
of the countervailing duty orders on certain welded carbon steel pipe
and tube and welded carbon steel line pipe from Turkey for the period
January 1, 1996 through December 31, 1996 (62 FR 64808). The Department
has now completed these administrative reviews in accordance with
section 751(a) of the Tariff Act of 1930, as amended. For information
on the net subsidy for each reviewed company, and for all non-reviewed
companies, please see the Final Results of Reviews section of this
notice. We will instruct the U.S. Customs Service to assess
countervailing duties as detailed in the Final Results of Reviews
section of this notice.
EFFECTIVE DATE: April 16, 1998.
FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Maria MacKay,
Office of CVD/AD Enforcement VI, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-3692 or (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
Pursuant to 19 CFR 355.22(a), these reviews cover only those
producers or exporters of the subject merchandise for which a review
was specifically requested. Accordingly, the review of the order on
certain welded carbon steel pipe and tube (pipe and tube) covers
[[Page 18886]]
Borusan Birlesik Boru Fabrikalari A.S. and Borusan Ihracat Ithalat ve
Dagitim A.S. (Borusan Group). The review of the order on welded carbon
steel line pipe (line pipe) covers Mannesmann-Sumerbank Boru Endustrisi
T.A.S. (Mannesmann). These reviews cover the period January 1, 1996
through December 31, 1996, and 21 programs.
The Department also received a timely request from Wheatland Tube
Company and the Maverick Tube Corporation (the petitioners) to conduct
reviews of Erciyas Boru Sanayii ve Ticaret A.S. (Erbosan), Yucel Boru
ve Profil Endustrisi A.S. (Yucel Boru), Bant Boru Sanayii ve Ticaret
A.S. (Bant Boru), Erkboru Profil San ve Tic A.S. (Erkboru). These
companies did not export pipe and tube or line pipe to the United
States during the period of review. Therefore, in the preliminary
results notice, we rescinded the reviews with respect to these
companies.
Since the publication of the preliminary results on December 9,
1997 (62 FR 64808), the following events have occurred. We invited
interested parties to comment on the preliminary results. On January 8,
1997, a case brief was submitted by the Government of the Republic of
Turkey (GRT), Mannesmann, which exported line pipe, and the Borusan
Group, which exported pipe and tube to the United States during the
review period (the respondents). On January 15, 1998, a rebuttal brief
was submitted by the petitioners.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the
Act). The Department is conducting these administrative reviews in
accordance with section 751(a) of the Act. Because these administrative
reviews were initiated on April 24, 1997, 19 CFR Part 355 is
applicable.
Scope of the Reviews
Imports covered by these reviews are shipments from Turkey of two
classes or kinds of merchandise: (1) Certain welded carbon steel pipe
and tube, having an outside diameter of 0.375 inch or more, but not
more than 16 inches, of any wall thickness. These products, commonly
referred to in the industry as standard pipe and tube or structural
tubing, are produced to various American Society for Testing and
Materials (ASTM) specifications, most notably A-53, A-120, A-135, A-
500, or A-501; and (2) Certain welded carbon steel line pipe with an
outside diameter of 0.375 inch or more, but not more than 16 inches,
and with a wall thickness of not less than 0.065 inch. These products
are produced to various American Petroleum Institute (API)
specifications for line pipe, most notably API-L or API-LX. These
products are classifiable under the Harmonized Tariff Schedule of the
United States (HTSUS) as item numbers 7306.30.10 and 7306.30.50. The
HTSUS item numbers are provided for convenience and Customs purposes.
The written description remains dispositive.
Analysis of Programs
Based upon the responses to our questionnaire and written comments
from the interested parties, we determine the following:
I. Programs Conferring Subsidies
A. Programs Previously Determined to Confer Subsidies
1. Pre-shipment Export Credit. In the preliminary results, we found
that this program conferred countervailable subsidies on the subject
merchandise. We did not receive any comments on this program from the
interested parties. However, a review of the record has led us to
modify the calculations. In the preliminary results, we inadvertently
did not calculate the benefit on two loans for the Borusan Group. We
also amended our calculations of the benefit from all loans of the
Borusan Group to conform with the term of the commercial loans obtained
by the company. Accordingly, the net subsidies for this program have
changed from the preliminary results and are as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter of pipe and tube (percent)
------------------------------------------------------------------------
Borusan Group................................................ 0.22
Mannesmann................................................... 0.29
------------------------------------------------------------------------
2. Freight Program. In the preliminary results, we found that this
program conferred countervailable subsidies on the subject merchandise.
Our review of the record and our analysis of the comments submitted by
the interested parties, summarized below (see comments 3 and 4,
Adjustment of the Freight Program Denominator), has led us to modify
our calculations for this program from the preliminary results.
Accordingly, the net subsidies for this program have changed and are as
follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter of pipe and tube (percent)
------------------------------------------------------------------------
Borusan Group................................................ 2.43
Mannesmann................................................... 3.28
------------------------------------------------------------------------
3. Foreign Exchange Loan Assistance. In the preliminary results, we
found that this program conferred countervailable subsidies on pipe and
tube. We did not receive any comments on this program from the
interested parties, and our review of the record has not led us to
change any findings or calculations. Accordingly, the net subsidy for
this program remain unchanged from the preliminary results and are as
follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter of pipe and tube (percent)
------------------------------------------------------------------------
Borusan Group................................................ 0.43
------------------------------------------------------------------------
4. Incentive Premium on Domestically Obtained Goods. In the
preliminary results, we found that this program conferred
countervailable subsidies on pipe and tube. We did not receive any
comments on this program from the interested parties, and our review of
the record has not led us to change any findings or calculations.
Accordingly, the net subsidy for this program remain unchanged from the
preliminary results and are as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter of pipe and tube (percent)
------------------------------------------------------------------------
Borusan Group................................................ 0.01
------------------------------------------------------------------------
5. Investment Allowance. In the preliminary results, we found that
this program conferred countervailable subsidies on pipe and tube. We
did not receive any comments on this program from the interested
parties, and our review of the record has not led us to change any
findings or calculations. Accordingly, the net subsidy for this program
remain unchanged from the preliminary results and are as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter of pipe and tube (percent)
------------------------------------------------------------------------
Borusan Group................................................ 0.02
------------------------------------------------------------------------
B. New Program Determined to Confer Subsidies
Deduction from Taxable Income for Export Revenues. In the
preliminary results, we found that the Deduction from Taxable Income
for Export Revenues conferred countervailable benefits on the subject
merchandise. We did not receive any comments on this program from the
interested parties.
[[Page 18887]]
Accordingly, the net subsidies for this program remain unchanged from
the preliminary results and are as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter of pipe and tube (percent)
------------------------------------------------------------------------
Borusan Group................................................ <0.005
Mannesmann................................................... 0.16
------------------------------------------------------------------------
II. Programs Found To Be Not Used
In the preliminary results, we found that the producers and/or
exporters of the subject merchandise did not apply for or receive
benefits under the following programs:
1. Resource Utilization Support.
2. State Aid for Exports Program.
3. Advance Refunds of Tax Savings.
4. Export Credit Through the Foreign Trade Corporate Companies
Rediscount Credit Facility (Eximbank).
5. Past Performance Related Foreign Currency Export Loans
(Eximbank).
6. Export Credit Insurance (Eximbank).
7. Subsidized Turkish Lira Credit Facilities.
8. Subsidized Credit for Proportion of Fixed Expenditures.
9. Fund Based Credit.
10. Export Incentive Certificate Customs Duty & Other Tax
Exemptions.
11. Resource Utilization Support Premium (RUSP).
12. Regional Subsidies.
(a) Additional Refunds of VAT (VAT + 10%).
(b) Postponement of VAT on Imported Goods.
(c) Land Allocation (GIP).
(d) Taxes, Fees (Duties), Charge Exemption (GIP).
We did not receive any comments on these programs from the
interested parties, and our review of the record has not led us to
change our findings from the preliminary results.
Analysis of Comments
Comment 1: Measurement of Countervailable Benefit: Earned Versus
Receipt Basis
The respondents argue that the Department's preliminary finding
that exporters could not ``predict at the time of export what the
benefit would be'' under the Freight Program was in error and is
contrary to the Department's long-standing practice. The respondents
state that the Department's practice is to measure benefits on the date
of export in cases where the benefit is earned on a shipment-by-
shipment basis, and the exporter knows the amount of the benefit at the
time of export. Thus, because the exporters earned the benefit on a
shipment-by-shipment basis upon exportation, and knew the precise U.S.
dollar amount of the benefit at the time of exportation, the benefit
should be measured on an ``earned basis.''
The respondents also cite, but do not discuss, several cases to
demonstrate the Department's practice of measuring benefits on the date
of export in cases where the benefit is earned on a shipment-by-
shipment basis, and the exporter knows the amount of the benefit at the
time of export. Therefore, since the Freight Program encompasses these
facts, they argue that, in order to apply this rule consistently, the
Department must calculate the benefits under the Freight Program on an
``as earned'' basis, or explain the reason for the methodological
change.
In addition, the respondents claim that in Certain Welded Carbon
Steel Pipes and Tubes and Welded Carbon Steel Line Pipe from Turkey;
Preliminary Results of Countervailing Duty Administrative Reviews, 62
FR 16782, 16787 (April 8, 1997) and Certain Welded Carbon Steel Pipes
and Tubes and Welded Carbon Steel Line Pipe from Turkey; Final Results
of Countervailing Duty Administrative Reviews, 62 FR 43984 (August 18,
1997) (Pipe and Tube and Line Pipe 1995), the Department countervailed
benefits provided under the Export Performance Credit program, which
are similar to those provided under the Freight Program, on the date
the merchandise was exported. The respondents state that the Export
Performance Credit program provided credits to exporters based on a
percentage of the f.o.b. value of their exports, and the Freight
Program provided rebates to exporters in the amount of $50 per ton for
merchandise exported on Turkish vessels, and $30 per ton for non-
Turkish vessels. They argue that the exporters did not know, at the
time of export, the exact rate of exchange that would be used to
convert the dollar amount to Turkish Lira (TL) under either of the
programs and, therefore, the exporters did not know the ``precise''
amount of the benefit in TL that they would receive at a later date.
The respondents also claim that, in designing the Freight Program,
the GRT was well aware that Turkish companies invoice their export
shipments in U.S. dollars. Because both the benefit and the sales value
were expressed in U.S. dollars, they claim that a benefit denominated
in U.S. dollars would directly affect the price Turkish companies
charged their customers. By contrast, a benefit denominated in TL that
would be given at an unspecified later date would, in a
hyperinflationary economy, have been of unknown value at the time of
export and would have had little or no effect on the price or volume of
goods exported. Therefore, they argue that a benefit amount expressed
in U.S. dollars clearly provided the exporters with a far more certain
knowledge of the true ``value'' of the benefit, because U.S. dollars
hold their value, than if the benefit had originally been expressed in
TL because of high inflation in Turkey.
The petitioners argue that, on the date of export, the exporters
knew only the U.S. dollar-denominated amount that would be used to
calculate the TL benefit at some uncertain future date, and that the
participants were not assured that they would ultimately receive the
equivalent of the U.S. dollar-denominated amount in TL. Instead, the
conversion of the benefit into a TL amount was accomplished using an
exchange rate that was not contemporaneous with either the date of
export or the date of payment. Between the exchange rate date and the
date of payment, the real benefit eroded from hyperinflation. As a
result, the amount the exporters received was not the TL equivalent of
the dollar-denominated benefit. The petitioners further argue that, in
fact, the Borusan Group and Mannesmann did not ultimately receive a
benefit of $30/$50 per ton. At the time of payment, the lira-
denominated benefit was worth no more than $17.10/$28.50, respectively.
The petitioners also claim that none of the cases cited by the
respondents argues for a different result from that in the preliminary
determination or the Department's decision in Pipe and Tube and Line
Pipe 1995. The petitioners point to the Final Affirmative
Countervailing Duty Determinations; Certain Welded Carbon Steel Pipe
and Tube Products from Turkey, 51 FR 1268, 1273 (January 10, 1986)
(Final Affirmative 1986) (wherein the Department enunciated its general
rule for assessing benefits on an ``as earned'' basis where the benefit
rebates a fixed proportion of the value of the shipment and is known to
the exporter), noting that the rationale for countervailing amounts
received applies when the recipient could not anticipate precisely how
much would be received and hence could not make business decisions
based upon benefits received at a future date. Thus, they argue that
the Department's position in the Final Affirmative 1986 is consistent
with its treatment of the Freight Program in this review because the
exporters did not know and could not have known precisely the amount of
the benefit at the time of export.
[[Page 18888]]
Moreover, all the other cases cited by the respondents, the
petitioners argue, did not deal with hyperinflationary economies. See
Certain Iron-Metal Castings from India (Indian Castings), 60 FR 44843
(August 29, 1995); Cotton Shop Towels from Pakistan (Shop Towels), 61
FR 50273, 50275 (September 25, 1996), (rebates earned on a shipment-by-
shipment basis upon export with no diminution of value due to
hyperinflation). See also, Carbon Steel Butt-Weld Pipe Fittings from
Thailand (Butt-Weld Pipe Fittings), 55 FR 1695 (January 18, 1990)
(benefits under the Tax Certificates for Exports program assessed on
``as earned'' because the benefits were payable on a fixed percentage
of the f.o.b. value of export); Certain Carbon Steel Products from
Brazil, 49 FR 17988 (April 26, 1984). However, the petitioners argue
that in a hyperinflationary economy, a delay in receiving payment can
render the amount of the eventual benefit uncertain, unless it is tied
to a stable currency.
Department's Position: As we have already stated in Pipe and Tube
and Line Pipe 1995, it is the Department's long-standing practice to
countervail an export subsidy on the date of export on an ``earned
basis'' rather than on the date the benefit is received where it is
provided as a percentage of the value of the exported merchandise on a
shipment-by-shipment basis, and the exact amount of the countervailable
subsidy is known at the time of export. Contrary to the respondents'
assertions, we have not departed from our practice. In Pipe and Tube
and Line Pipe 1995 at 16785, and in these preliminary results, we
stated that although the benefit under the Freight Program is
calculated based on export tonnage and not as a percent of the f.o.b.
value, it is possible that the value of a benefit determined by tonnage
could be known at the time of export and, thus, the countervailable
benefit could be earned upon exportation. However, as we previously
determined in Pipe and Tube and Line Pipe 1995, and as the facts in
these reviews establish, with regard to the Freight Program, the
exporter did not know the amount of the benefit at the time of export.
The benefits under the Freight Program were stated in U.S. dollars per
ton at the time of export, and were converted to TLs when they were
paid at a later date. Because the GRT did not commit to use the
exchange rate prevailing on the day the payment was made, as in the
Export Performance Credit Program, the exporter could not have known
the value of the benefit at the time of export, neither in U.S. dollars
nor in TLs. In fact, the GRT announced in February 1995, two months
after the shipments took place, that it would convert the dollar amount
of the freight benefits using the exchange rate that was in effect on
the last day in December 1994. Thus, the exporter ultimately received
in 1996 an amount in TLs that did not correspond to the U.S. dollar
value of the benefit granted by the government in 1994 at the time of
shipment; under the circumstances, it is also obvious that, at the time
of shipment, the exporter was in no position to predict what the amount
of the final payment would be. See Pipe and Tube and Line Pipe 1995 at
43991. Indeed, the respondents concede that ``[h]ad the benefit been
denominated in TL, the value of the ultimate benefit received, as
measured in constant TL, would not have been known at the time of
export due to the high inflation in Turkey at the time.'' Case Brief p.
7-8.
Contrary to the respondents' argument that the Freight Program is
indistinguishable from the Export Performance Credit Program, we found
that the programs are distinguishable. Under the Export Performance
Credit Program, the value of the benefit was tied to the U.S. dollar.
Exporters would receive a percentage of the U.S. dollar value of their
exports in TLs based on the foreign exchange rate prevailing at the
time of payment. Thus, although at the time of receipt the exporters
received more TL than they would have been paid upon exportation,
because the benefit was tied to the U.S. dollar, the value of the TL
amount remained the same in U.S. dollar terms. However, under the
Freight Program, the GRT converted the U.S. dollar value in TL using an
exchange rate that did not reflect the full U.S. dollar value of the
benefit at the time of payment. Therefore, we have determined that in
the case of the Export Performance Program, the value of the benefit
was known at the time of export, and therefore can be calculated on an
``as earned'' basis, but in the case of the Freight Program, the value
of the benefit was not known at the point of export because the
exporters did not know the exchange rate that the GRT would use to
convert the U.S. dollar benefit into TLs. As such, for the Freight
Program, the calculation must be based on an ``as received'' basis.
As petitioners point out, the cases cited accord with the
Department's measurement of the benefits for the Freight Program. In
Shop Towels and in Indian Castings, export rebates were earned on a
shipment-by-shipment basis, and the exact amount of the rebate was
known at the time of export because the rebate was set as a percentage
of the f.o.b. value of the exported merchandise. See also, Butt-Weld
Pipe Fittings; Certain Textile Mill Products and Apparel from Colombia;
Certain Textile Mill Products from Thailand; Certain Carbon Steel
Products from Brazil. Further, in Paint Filters and Strainers from
Brazil, 52 FR 19184 (May 21, 1987) (Paint Filters), the Department did
not countervail the benefit from the IPI export credit premium program
because we found that the program was terminated prior to the
initiation of that case, and companies could no longer receive benefits
after the date of termination. We did make a statement in Paint Filters
that, the Department had consistently calculated the benefit under the
IPI export credit premium program in prior cases based on the date the
premium was earned. However, as noted in Certain Carbon Steel Products
from Brazil, the IPI export credit premium was based on the f.o.b.
value of the exported merchandise, and the amount of the benefit was
known at the time of export.
Comment 2: Policy Considerations for Measurement of Benefits
The respondents argue that policy considerations dictate that the
Freight Program should be countervailed based on the date the benefit
was earned because benefits should be countervailed when they will have
the greatest potential effect on a company's export volumes or pricing
to the United States. Since, they argue, the countervailing duty law is
intended to offset export subsidies, it makes no sense to now
countervail benefits under the Freight Program, which was terminated at
the end of 1994, because there were no longer any incentives for
companies to export during the period of review.
In proffering this policy argument, the respondents claim that,
because the benefits under the Freight Program were intended to offset
freight charges incurred on export shipments, the benefit should only
be countervailable on the date of export because the freight charges
were payable immediately after the goods were exported. In support, the
respondents point to section 351.514(b) of the Countervailing Duties:
Notice of Proposed Rulemaking, 62 FR 8818 (February 26, 1997)
(Department's proposed regulations), which deals with freight charges.
The respondents argue that under this proposed regulation, the
Department will consider the benefit to have been received as of the
date on which the firm pays or, in the absence of payment, was due to
pay the
[[Page 18889]]
transport or freight charges. Therefore, because section 351.514(b)
countervails freight benefits when they are actually incurred, they
argue that the Freight Program benefits should be countervailed on the
date the freight charges were incurred, and not when the reimbursements
for these charges were later received.
The petitioners counter that it is incorrect for the respondents to
suggest that there is any support for their position in section
351.514(b) of the Department's proposed regulations. Section 351.514
corresponds to paragraph (c) of the Illustrative List of Export
Subsidies (Illustrative List), annexed to the Agreement on Subsidies
and Countervailing Measures and deals with preferential internal
transport and freight charges on export shipments. The petitioners
argue that neither subsection (c) of the Illustrative List nor section
351.514 can apply to the Freight Program, because the Turkish Freight
Program does not involve the provision of internal transport at
preferential rates. Rather, petitioners claim that the Freight Program
provides a bounty, which may lower the exporter's costs, but the actual
freight charge payable is not altered. They claim that where the
benefit consists of providing freight at preferential rates, the
exporter reaps the benefit at the time of shipment. Therefore, it makes
sense to assess duties on the basis of shipment when there is a
simultaneous discount in a fixed amount. However, it is another matter
to provide a bounty of an indeterminate amount at some later time,
particularly in a hyperinflationary economy.
Department's Position: We disagree with the respondents' argument
that, as a matter of policy, the Department should countervail benefits
under the Freight Program on the date of export because benefits should
be countervailed when they have the greatest potential to affect the
exporters' volume and pricing decisions. The countervailing duty law
does not examine when benefits will have the greatest potential effect
on exports to the United States. Pursuant to section 771(5)(C), ``the
administering authority is not required to consider the effect of the
subsidy in determining whether a subsidy exists * * *.'' Moreover,
under the Act, a benefit that is contingent upon export is an export
subsidy and, thus, countervailable. See section 771(5A)(B). Therefore,
in accordance with section 771(5A)(B), we found the Freight Program to
be a countervailable export subsidy because the benefit is contingent
upon export performance, regardless of whether we measure the benefit
on an earned or received basis.
Moreover, we disagree with the respondents' argument that once a
program is terminated, benefits received thereafter should not, as a
matter of policy, be countervailed because the effect of such benefits
on the exporters' decision to export has passed. Under the logic of the
respondents' argument, the Department would never be able to
countervail export subsidies unless the benefit from such subsidies
could be measured at the time of shipment. Clearly this proposal
conflicts with the statute and our long-standing practice. Our standard
methodology is to countervail subsidies at the time the subsidy affects
the cash flow of the company. See, e.g., Ferrochrome from South Africa;
Final Results of Countervailing Duty Administrative Review, 56 FR
33254, 33255 (July 19, 1991). Generally, that can only be determined
when the subsidy is paid or received by the company. The only exception
to this general proposition has been when export subsidies are paid as
a percentage of the f.o.b. value of the exported merchandise. See the
Department's Position on Comment 1. Only in these situations does the
company know with precision at all times what the benefit from the
subsidy is. Only under these circumstances is the Department able to
determine the subsidy rate on an ``as earned'' basis.
Because the respondents received benefits during the period of
review, we have properly included these benefit amounts in our subsidy
calculations. The fact that the program was terminated prior to the
period of review is not material. It is the Department's practice to
countervail residual benefits from a terminated program. See, e.g.,
Live Swine from Canada; Notice of Preliminary Results of Countervailing
Duty Administrative Reviews; Initiation and Preliminary Results of
Changed Circumstances Review and Intent to Revoke Order in Part, 61 FR
26879, 26889 (May 29, 1996) and Live Swine from Canada; Final Results
of Countervailing Duty Administrative Reviews, 61 FR 52408 (October 7,
1996); Pipe and Tube and Line Pipe 1995 at 43991. Furthermore, we note
that, in the instant case, because the benefits were provided in cash
and bonds with a two-year maturity, benefits will continue to accrue
beyond this period of review.
Finally, the respondents also argue that the Department should
countervail the benefits under the Freight Program on the date the
freight charges for exportation were payable and not when the
reimbursements for these charges were received. In support of their
argument, the respondents cite to section 351.514 of the Department's
proposed regulations. First, we note that the proposed regulations have
not yet been finalized, and, thus, are not controlling in these
reviews. However, even in citing to those proposed regulations, the
respondents have erred in their interpretation. Section 351.514(b) of
the Department's proposed regulations corresponds to paragraph (c) of
the Illustrative List, and deals with preferential internal transport
and freight charges on goods destined for export. Paragraph (a)(1)
restates the general principle that a benefit exists to the extent that
a firm pays less for the internal transport of goods destined for
export than it would for the transport of goods destined for domestic
consumption. Therefore, the financial contribution is provided when the
payment for the freight charges occurs. Consequently, we would
countervail the benefit at the time of payment of the reduced freight
charges. As stated in the proposed regulations, ``the Secretary
normally will consider the benefit as having been received by the firm
on the date the firm paid, or in the absence of payment, was due to
pay, the charges.''
The Freight Program, on the other hand, does not involve the
provision of transport services at preferential rates. Rather,
according to the enabling legislation, the Freight Program was a
freight bonus, i.e., a benefit contingent upon export. See,
Questionnaire Response, Volume II--Exhibit 9, dated June 30, 1997.
Therefore, we continue to countervail this benefit at the time the
financial contribution affects the cash flow of the company, which is
when the company receives the payment of the subsidy to which it is
entitled as a result of prior exportations.
Comment 3: Adjustment of Sales Values for Foreign Exchange Difference
(Kur Farki)
The respondents argue that the Department's decision to adjust the
sales value by the amount of the foreign exchange difference (kur farki
account) reduced the export sales amount in the denominator, which led
to an erroneous increase of the countervailable benefit for each
company under review.
The respondents state that the Department specifically requested
that the respondents provide total sales as booked and recorded in
their accounting records, which included the sales revenue account plus
the sum of the values in the kur farki account. This accounting
practice is consistent with the standardized Turkish accounting
principles. They state that the Department's explanation for deducting
[[Page 18890]]
the foreign exchange difference from the sales value is based on a
fundamental misunderstanding of what the kur farki account actually
represents. They argue that it does not represent an inflation
adjustment, but actual revenue earned on export sales. They claim that
the Department incorrectly assumes that the benefits initially
denominated in dollars are received precisely on the date of export and
are converted to TL on that date, whereas the income from the sale is
converted at a later date and is therefore ``inflation adjusted.''
Specifically, they claim that the kur farki account reflects the
difference between the estimated TL amount recorded on the invoice
date, when the sale is booked, and the TL amount actually received upon
receipt of payment from the customer. Depending on the date that the
payment is received, the exchange difference can increase or decrease
the invoice value. Therefore, the total amount in the kur farki account
and the sale revenues account represents total actual income received
from export sales transactions.
Finally, the respondents argue that if the Department insists on
reducing the total export value by the foreign exchange difference,
then it must compute and deduct from the numerator (the countervailable
benefit) the foreign exchange difference included in the benefit
calculated from the date of exportation generating the benefit until
the date the benefit was converted to TL. The respondents conclude that
such an adjustment would more than offset the adjustment to the
denominator.
The petitioners counter that the issue is not whether the foreign
exchange difference amounts are actual revenue; the issue is how to
treat an adjustment that is made solely to reflect differences in the
relative value of currencies over time in a highly inflationary
economy. The initial invoice price represents the true price in terms
of the currency as it was valued on the date of the invoice, while the
foreign exchange difference represents the true price in terms of the
currency as it was valued on a different date. Both prices are
``actual'' prices but are expressed in currencies having different
values. Thus, they argue that the Department would not wish to use
dollar-denominated benefits in the numerator and lira-denominated
benefits in the denominator, it also cannot allow the differing values
of the TL over time to distort the results of its calculations.
Department's Position: The same arguments were discussed in the
prior review. Although there was further explanation of the accounting
system in this review, basically, the facts are the same and our
position remains unchanged. See Pipe and Tube and Line Pipe 1995. We do
not agree with the respondents that the amounts in their kur farki
account are actual sales revenue. When the exporter makes a sale, the
invoice amount in TL is recorded in the company's sales ledger. Payment
of the invoice is subsequently received in U.S. dollars which are
converted into TL based on the exchange rate prevailing on that date.
Any difference between the invoice amount in TL and the actual payment
in TL is recorded in the kur farki account. Therefore, we conclude that
the adjustment recorded in the kur farki account is income derived from
fluctuations of the relative value of the dollar versus the TL, rather
than additional sales revenue, as respondents claim.
Such foreign exchange difference becomes particularly significant
in Turkey's highly inflationary economy. As such, it is inappropriate
to include it in the denominator. We understand that the amounts in the
kur farki account are included in the companies' total revenue figures,
in accordance with Turkey's generally accepted principles. However,
although the amounts recorded in the kur farki account may be included
in the companies' income statement as part of the total revenue figure
for tax purposes, this does not detract from our finding. See Price
Waterhouse, Doing Business in Turkey, Chapter 11 (1992) (lack of
clearly defined commercial accounting principles and the predominance
of tax law mean that Turkish law should be treated with extreme
caution, and international accounting standards are preferred).
Therefore, it is proper for the Department to exclude the amounts in
the kur farki account from the sales figures (denominators).
We also disagree with the respondents' argument that the Department
must compute and deduct from the numerator the foreign exchange
difference included in the benefit calculated from the date of export
until the benefit was converted to TL. As discussed in the Department's
Position on Comment 1, the countervailable benefit under the Freight
Program is the actual amount of TL measured at the time of receipt.
Therefore, benefits from this program in the numerator reflect the TL
received at that time. For these reasons, the Department's position
remains unchanged from the preliminary results.
Comment 4: Adjustments of the Freight Program Denominator
The respondents contend that the Department made a clerical error
in calculating the denominator used to determine benefits received by
the Borusan Group under the Freight Program. The respondents also argue
that, if the Department continues to incorrectly adjust the sales
values by the foreign exchange difference, then the Department must
correct a clerical error it made in calculating the ``adjusted'' value
of Mannesmann's total exports of the subject merchandise to the United
States. The respondents state that Mannesmann reported a negative
foreign exchange difference in connection with export sales of the
subject merchandise to the United States, and because the value is
negative, they argue that the Department should have added the negative
foreign exchange difference to the original sales value rather than
subtracting it.
The petitioners claim that the ``error'' in calculating
Mannesmann's denominator could not have been ministerial unless the
Department was clearly informed previously that a negative amount in
the ``kur farki'' account was intended to reflect the fact that
Mannesmann received payment from the customer prior to the date that
the invoice was issued. The sole source cited by Mannesmann for this
alleged factual information is a letter submitted to the Department on
November 20, 1997, one month after the deadline for submissions of
factual information. Therefore, the petitioners argue that because
Mannesmann's factual information is untimely, the Department should not
consider it in its final results.
Department's Position: We agree with the respondents that a
clerical error was made in calculating the benefit to the Borusan Group
from the Freight Program. In calculating the ``adjusted'' denominator,
the Department did make a typographical error. We have now corrected
the error and calculated a benefit of 2.43 percent ad valorem for the
Borusan Group.
We also agree with the respondents that we incorrectly calculated
the denominator for total exports of the subject merchandise to the
United States for Mannesmann. In instances where the foreign exchange
difference was a positive amount it was deducted, therefore, in
instances where the foreign exchange difference is denoted as a
negative amount, which was the case for Mannesmann, the amount should
be added back to the total sales figure. See Pipe and Tube and Line
Pipe 1995. We
[[Page 18891]]
disagree with the petitioners that the respondents' comment is an
untimely submission of factual information. The calculations were based
on information that was requested by the Department. We have now
corrected the calculation and obtained a net countervailable subsidy
under the Freight Program of 3.28 percent ad valorem for Mannesmann.
Final Results of Reviews
In accordance with 19 CFR 355.22(c)(4)(ii), we calculated an
individual subsidy rate for each producer/exporter subject to these
administrative reviews. For the period January 1, 1996 through December
31, 1996, we determine the net subsidy to be as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter of pipe and tube (percent)
------------------------------------------------------------------------
Borusan Group................................................ 3.10
Mannesmann................................................... 3.73
------------------------------------------------------------------------
We will instruct the U.S. Customs Service (``Customs'') to assess
countervailing duties as indicated above. The Department will also
instruct Customs to collect cash deposits of estimated countervailing
duties in the percentages detailed above of the f.o.b. invoice price on
all shipments of each class or kind of merchandise from reviewed
companies, entered, or withdrawn from warehouse, for consumption on or
after the date of publication of the final results of these reviews.
Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for
investigated and reviewed companies, the procedures for establishing
countervailing duty rates, including those for non-reviewed companies,
are now essentially the same as those in antidumping cases, except as
provided for in Sec. 777A(e)(2)(B) of the Act. The requested review
will normally cover only those companies specifically named. See 19 CFR
355.22(a). Pursuant to 19 CFR 355.22(g), for all companies for which a
review was not requested, duties must be assessed at the cash deposit
rate, and cash deposits must continue to be collected at the rate
previously ordered. As such, the countervailing duty cash deposit rate
applicable to a company can no longer change, except pursuant to a
request for a review of that company. See Federal-Mogul Corporation and
The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993);
Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic
assessment, which is identical to 19 CFR 355.22(g)). Therefore, the
cash deposit rates for all companies except those covered by these
reviews will be unchanged by the results of these reviews.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit
rates that will be applied to non-reviewed companies covered by this
order will be the rate for that company established in the most
recently completed administrative proceeding conducted under the URAA.
If such a review has not been conducted, the rate established in the
most recently completed administrative proceeding pursuant to the
statutory provisions that were in effect prior to the URAA amendments
is applicable. See Certain Welded Carbon Steel Pipe and Tube Products
from Turkey; Final Results of Countervailing Duty Administrative
Reviews, 53 FR 9791. These rates shall apply to all non-reviewed
companies until a review of a company assigned these rates is
requested. In addition, for the period January 1, 1996 through December
31, 1996, the assessment rates applicable to all non-reviewed companies
covered by this order are the cash deposit rates in effect at the time
of entry.
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 355.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
These administrative reviews are issued and published in accordance
with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C.
1675(a)(1)).
Dated: April 8, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-10168 Filed 4-15-98; 8:45 am]
BILLING CODE 3510-DS-P