[Federal Register Volume 75, Number 39 (Monday, March 1, 2010)]
[Notices]
[Pages 9163-9181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4192]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-570-957]


Certain Seamless Carbon and Alloy Steel Standard, Line, and 
Pressure Pipe From the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination, Preliminary Affirmative 
Critical Circumstances 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 certain seamless carbon and alloy steel standard, line, and pressure 
pipe from the People's Republic of China. For information on the 
estimated subsidy rates, see the ``Suspension of Liquidation'' section 
of this notice. The Department of Commerce further preliminarily 
determines that critical circumstances exist with respect to imports of 
the subject merchandise.

DATES: Effective Date: March 1, 2010.

FOR FURTHER INFORMATION CONTACT: Shane Subler, Yasmin Nair, Joseph 
Shuler, or Matthew Jordan, 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) 482-0189, (202) 482-3813, (202) 482-4162, (202) 
482-1293, and (202) 482-1540, 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 Certain Seamless Carbon and Alloy Steel Standard, 
Line, and Pressure Pipe from the People's Republic of China: Initiation 
of Countervailing Duty Investigation, 74 FR 52945 (October 15, 2009) 
(``Initiation Notice''), and the accompanying Initiation Checklist.
    On November 4, 2009, the Department selected two Chinese producers/
exporters of certain seamless carbon and alloy steel standard, line, 
and pressure pipe (``seamless pipe'') as mandatory respondents: (1) 
Hengyang Steel Tube Group Int'l Trading Inc., Hengyang Valin Steel Tube 
Co., Ltd., Hengyang Valin MPM Tube Co., Ltd., and their affiliate, 
Xigang Seamless Steel Tube Co., Ltd. (collectively, ``Hengyang''); and 
(2) Tianjin Pipe (Group) Corporation (``TPCO''). See Memorandum to 
Edward Yang, Acting Deputy Assistant Secretary for Antidumping and 
Countervailing Duty Operations, ``Respondent Selection Memo'' (November 
4, 2009). This memorandum is on file in the Department's Central 
Records Unit (``CRU'') in Room 1117 of the main Department building.
    On November 6, 2009, 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 threatened with material injury by reason of allegedly subsidized 
imports of seamless pipe from the People's Republic of China (``PRC''). 
See Certain Seamless Carbon and Alloy Steel Standard, Line, and 
Pressure Pipe From China, 74 FR 57521 (November 6, 2009).
    On November 9, 2009, we issued a questionnaire to the Government of 
the People's Republic of China (``GOC''), Hengyang, and TPCO. On 
December 3, 2009, the Department published a postponement of the 
deadline for the preliminary determination in this investigation until 
February 16, 2010. See Certain Seamless Carbon and Alloy Steel 
Standard, Line, and Pressure Pipe from the People's Republic of China: 
Postponement of Preliminary Determination in the Countervailing Duty 
Investigation, 74 FR 63391 (December 3, 2009).
    In December 2009 and January 2010, we received responses to our 
questionnaire from the GOC, Hengyang, and TPCO. See the GOC's Original 
Questionnaire Response (January 7, 2010) (``GQR''), Hengyang's Original 
Questionnaire Response (January 5, 2010) (``HQR''), and TPCO's Original 
Questionnaire Response (December 31, 2009) (``TQR''). We sent 
supplemental questionnaires to TPCO on January 27, 2010, and February 
4, 2010. We received responses to these

[[Page 9164]]

supplemental questionnaires on February 3, 2010, and February 12, 2010. 
We sent supplemental questionnaires to Hengyang on January 28, 2010, 
and February 4, 2010. We received responses to these supplemental 
questionnaires on February 4, 2010, and February 12, 2010. We sent a 
supplemental questionnaire to the GOC on January 28, 2010, and received 
a response to this questionnaire on February 4, 2010 (``G1SR'').
    On January 7, 2010, United States Steel Corporation (``U.S. 
Steel''), V&M Star L.P., TMK IPSCO, and United Steel, Paper and 
Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service 
Workers International Union (collectively, ``Petitioners'') filed an 
allegation of critical circumstances with regard to seamless pipe from 
the PRC. On January 22, 2010, we requested that Hengyang and TPCO 
submit shipment data related to this allegation. TPCO and Hengyang 
submitted these data on February 2, 2010.
    On January 7 and January 13, 2010, Petitioners submitted new 
subsidy allegations requesting the Department to expand its 
countervailing duty (``CVD'') investigation to include additional 
subsidy programs.\1\ On February 17, 2010, the Department issued a 
memorandum initiating certain of these new subsidy allegations. See 
Memorandum from Yasmin Nair, International Trade Compliance Analyst, 
Office 1 to Susan H. Kuhbach, Director, Office 1, ``New Subsidy 
Allegations'' (February 17, 2010).
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    \1\ See Petitioners' new subsidy allegations dated January 7, 
2010, and January 13, 2010.
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    On January 11, 2010, we issued a letter requesting that the GOC 
update its original questionnaire response for the cross-owned 
affiliates for which the respondent companies filed questionnaire 
responses. The GOC filed its response on January 25, 2010.
    On January 14, 2010, we issued a letter notifying the GOC that it 
did not provide responses to certain questions in the original 
questionnaire. In response to this letter, on January 25, 2010, the GOC 
filed a submission with information pertaining to the provision of 
steel rounds.
    On February 12, 2010, Petitioners submitted comments for the 
preliminary determination.
    The Department originally extended the deadline for this 
preliminary determination until February 16, 2010. As explained in the 
memorandum from the Deputy Assistant Secretary for Import 
Administration, the Department has exercised its discretion to toll 
deadlines for the duration of the closure of the Federal Government 
from February 5, through February 12, 2010. Thus, all deadlines in this 
segment of the proceeding have been extended by seven days. The revised 
deadline for the preliminary determination of this investigation is now 
February 22, 2010. See Memorandum to the Record from Ronald Lorentzen, 
DAS for Import Administration, regarding ``Tolling of Administrative 
Deadlines As a Result of the Government Closure During the Recent 
Snowstorm,'' dated February 12, 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, 74 FR at 52945. We did not receive 
comments concerning the scope of the antidumping duty (``AD'') and CVD 
investigations of seamless pipe from the PRC.

Scope of the Investigation

    The scope of this investigation consists of certain seamless carbon 
and alloy steel (other than stainless steel) pipes and redraw hollows, 
less than or equal to 16 inches (406.4 mm) in outside diameter, 
regardless of wall-thickness, manufacturing process (e.g., hot-finished 
or cold-drawn), end finish (e.g., plain end, beveled end, upset end, 
threaded, or threaded and coupled), or surface finish (e.g., bare, 
lacquered or coated). Redraw hollows are any unfinished carbon or alloy 
steel (other than stainless steel) pipe or ``hollow profiles'' suitable 
for cold finishing operations, such as cold drawing, to meet the 
American Society for Testing and Materials (``ASTM'') or American 
Petroleum Institute (``API'') specifications referenced below, or 
comparable specifications. Specifically included within the scope are 
seamless carbon and alloy steel (other than stainless steel) standard, 
line, and pressure pipes produced to the ASTM A-53, ASTM A-106, ASTM A-
333, ASTM A-334, ASTM A-335, ASTM A-589, ASTM A-795, ASTM A-1024, and 
the API 5L specifications, or comparable specifications, and meeting 
the physical parameters described above, regardless of application, 
with the exception of the exclusion discussed below.
    Specifically excluded from the scope of the investigation are 
unattached couplings.
    The merchandise covered by the investigation is currently 
classified in the Harmonized Tariff Schedule of the United States 
(``HTSUS'') under item numbers: 7304.19.1020, 7304.19.1030, 
7304.19.1045, 7304.19.1060, 7304.19.5020, 7304.19.5050, 7304.31.6050, 
7304.39.0016, 7304.39.0020, 7304.39.0024, 7304.39.0028, 7304.39.0032, 
7304.39.0036, 7304.39.0040, 7304.39.0044, 7304.39.0048, 7304.39.0052, 
7304.39.0056, 7304.39.0062, 7304.39.0068, 7304.39.0072, 7304.51.5005, 
7304.51.5060, 7304.59.6000, 7304.59.8010, 7304.59.8015, 7304.59.8020, 
7304.59.8025, 7304.59.8030, 7304.59.8035, 7304.59.8040, 7304.59.8045, 
7304.59.8050, 7304.59.8055, 7304.59.8060, 7304.59.8065, and 
7304.59.8070.
    Although the HTSUS subheadings are provided for convenience and 
customs purposes, our written description of the merchandise subject to 
this scope is dispositive.

Period of Investigation

    The period for which we are measuring subsidies, i.e., the period 
of investigation (``POI''), is January 1, 2008, through December 31, 
2008.

Critical Circumstances

    In their January 7, 2010, submission, Petitioners alleged that 
critical circumstances exist with respect to imports of seamless pipe 
from the PRC. Section 703(e)(1) of the Tariff Act of 1930, as amended 
(``the Act'') states that if the petitioner alleges critical 
circumstances, the Department will determine, on the basis of 
information available to it at the time, if there is a reason to 
believe or suspect that: (A) The alleged countervailable subsidy is 
inconsistent with the World Trade Organization (``WTO'') Agreement on 
Subsidies and Countervailing Measures (``SCM Agreement''), and (B) 
there have been massive imports of the subject merchandise over a 
relatively short period.
    In accordance with 19 CFR 351.206(c)(2)(i), because Petitioners 
submitted a critical circumstances allegation more than 20 days before 
the scheduled date of the preliminary determination, the Department 
must issue a preliminary critical circumstances determination not later 
than the date of the preliminary determination. See, e.g., Change in 
Policy Regarding Timing of Issuance of

[[Page 9165]]

Critical Circumstances Determinations, 63 FR 55364 (October 15, 1998).
    As discussed in the ``Analysis of Programs'' section below, the 
Department has preliminarily determined that TPCO and Hengyang received 
countervailable export subsidies during the POI. For ``all other'' 
exporters, we are basing our finding on the experience of TPCO and 
Hengyang and, therefore, we find that ``all others'' benefitted from 
export subsidies. Export subsidies are inconsistent with the SCM 
Agreement. Therefore, the criterion of section 703(e)(1)(A) of the Act 
has been satisfied. See Notice of Preliminary Affirmative 
Countervailing Duty Determination, Preliminary Affirmative Critical 
Circumstances Determination, and Alignment of Final Countervailing Duty 
Determination With Final Antidumping Duty Determination: Certain 
Softwood Lumber Products From Canada, 66 FR 43186, 43189-90 (August 17, 
2001); unchanged in Notice of Amended Final Affirmative Countervailing 
Duty Determination and Notice of Countervailing Duty Order: Certain 
Softwood Lumber Products From Canada, 67 FR 36070 (May 22, 2002).
    In determining whether there are ``massive imports'' over a 
``relatively short period'' pursuant to section 703(e)(1)(B) of the 
Act, the Department normally compares shipments of the subject 
merchandise for three months immediately preceding the filing of the 
petition (i.e., the ``base period'') with the three months following 
the filing of the petition (i.e., the ``comparison period''). In 
addition, 19 CFR 351.206(h)(2) provides that an increase in imports of 
15 percent during the ``relatively short period'' of time may be 
considered ``massive.'' Finally, 19 CFR 351.206(i) defines ``relatively 
short period'' as normally being the period beginning on the date the 
proceeding begins (i.e., the date the petition is filed) and ending at 
least three months later.
    In accordance with 19 CFR 351.206(i), we are using the three months 
preceding the filing of the petition (i.e., July to September 2009) as 
the base period and the three months following the filing of the 
petition (i.e., October to December 2009) as the comparison period. 
Because Petitioners filed their petition on September 16, 2009, which 
is the second half of the month, September is included in the base 
period.
    Based upon the monthly shipment data submitted by TPCO, we 
preliminarily find that TPCO's shipments did not reach the minimum 
threshold necessary for finding that imports have been massive over a 
relatively short period. Therefore, we preliminarily determine that 
critical circumstances do not exist with respect to imports of seamless 
pipe from TPCO. For further discussion, see the Memorandum to the File, 
``Critical Circumstances Analysis'' (February 22, 2010) (``Critical 
Circumstances Analysis Memo''), on file in the Department's CRU.
    Based upon the monthly shipment data submitted by Hengyang, we 
preliminarily find that Hengyang's seamless pipe imports increased more 
than 15 percent during the ``relatively short period,'' as required by 
19 CFR 351.206(h)(2). See Critical Circumstances Analysis Memo. 
Further, as explained above, we find that Hengyang received an export 
subsidy, i.e., a subsidy inconsistent with the SCM Agreement. 
Therefore, we preliminarily determine that the requirements of section 
703(e)(1)(B) of the Act have been satisfied, and that critical 
circumstances exist for Hengyang.
    For ``all other'' exporters, we are basing our finding on data from 
USITC Dataweb.\2\ We preliminarily determine that there were massive 
imports over a relatively short period for ``all other'' producers/
exporters of seamless pipe from the PRC. For further discussion, see 
Critical Circumstances Analysis Memo. Further, as explained above, we 
find that ``all other'' producers and exporters received a subsidy 
inconsistent with the SCM Agreement. Therefore, we preliminarily 
determine that the requirements of section 703(e)(1)(B) of the Act have 
been satisfied, and that critical circumstances exist for ``all 
others.''
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    \2\ http://dataweb.usitc.gov/
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Application of the Countervailing Duty Law to Imports From the PRC

    On October 25, 2007, the Department published Coated Free Sheet 
Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) 
(``CFS from the PRC''), and the accompanying Issues and Decision 
Memorandum (``CFS Decision Memorandum''). In CFS from the PRC, the 
Department found that

given the substantial difference between the Soviet-style economies 
and China's economy in recent years, the Department's previous 
decision not to apply the CVD law to these Soviet-style economies 
does not act as (a) bar to proceeding with a CVD investigation 
involving products from China.

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

Use of Facts Otherwise Available and Adverse Inferences

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

GOC--Steel Rounds

    The Department is investigating the alleged provision of steel 
rounds for less than adequate remuneration by the GOC. We requested 
information from the GOC about the PRC's steel rounds industry in 
general and the specific companies that produced the steel rounds 
purchased by the mandatory respondents. In both respects, the GOC has 
failed to provide the requested information within the established 
deadlines.
    At pages 87-89 of the GQR, the GOC responded, ``No such information 
is available,'' to the following questions on the steel rounds industry 
in the PRC. The GOC provided no further explanation on the following 
requested information:
    <bullet> The number of producers of steel rounds (e.g., billets, 
blooms);
    <bullet> the total volume and value of domestic production of steel 
rounds that is accounted for by companies in which

[[Page 9166]]

the GOC maintains an ownership or management interest either directly 
or through other government entities; \3\
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    \3\ Includes governments at all levels, including townships and 
villages, ministries, or agencies of those governments including 
state asset management bureaus, state-owned enterprises and labor 
unions.
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    <bullet> the total volume and value of domestic consumption of 
steel rounds and the total volume and value of domestic production of 
steel rounds;
    <bullet> the percentage of domestic consumption accounted for by 
domestic production; and
    <bullet> the names and addresses of the top ten steel rounds 
companies--in terms of sales and quantity produced--in which the GOC 
maintains and ownership or management interest, and identification of 
whether any of these companies have affiliated trading companies that 
sell imported or domestically produced steel rounds.
    On page 91 of the GQR, the GOC responded that it was still 
gathering information in response to the following question:

    Are there trade publications which specify the prices of the 
good/service within your country and on the world market? Provide a 
list of these publications, along with sample pages from these 
publications listing the prices of the good/service within your 
country and in world markets during the period of investigation.

    With respect to the specific companies that produced the steel 
rounds purchased by the mandatory respondents, we asked the GOC to 
provide particular ownership information for these producers so that we 
could determine whether the producers are ``authorities'' within the 
meaning of section 771(5)(B) of the Act. Specifically, we stated in our 
questionnaire that the Department normally treats producers that are 
majority owned by the government or a government entity as 
``authorities.'' Thus, for any steel rounds producers that were 
majority government-owned, the GOC needed to provide the following 
ownership information if it wished to argue that those producers were 
not authorities:
    <bullet> Translations of the most recent capital verification 
report predating the POI and, if applicable, any capital verification 
reports completed during the POI. Translation of the most recent 
articles of association, including amendments thereto.
    <bullet> The names of the ten largest shareholders and the total 
number of shareholders, a statement of whether any of these 
shareholders have any government ownership (including the percentage of 
ownership), and an explanation of any other affiliation between these 
shareholders and the government.
    <bullet> The total level (percentage) of state ownership, either 
direct or indirect, of the company's shares; the names of all 
government entities that own shares in the company; and the amount of 
shares held by each.
    <bullet> Any relevant evidence to demonstrate that the company is 
not controlled by the government, e.g., that the private, minority 
shareholder(s) controls of the company.
    For any suppliers that the GOC claimed were directly, 100-percent 
owned by individual persons during the POI, we requested the following:
    <bullet> Translated copies of source documents that demonstrate the 
supplier's ownership during the POI, such as capital verification 
reports, articles of association, share transfer agreements, or 
financial statements.
    <bullet> Identification of the owners, members of the board of 
directors, or managers of the suppliers who were also government or 
Chinese Communist Party (``CCP'') officials during the POI.
    <bullet> A discussion of whether and how operational or strategic 
decisions that are made by the management or board of directors are 
subject to government review or approval.
    For input suppliers with some direct corporate ownership or less-
than-majority state ownership during the POI, we explained that it was 
necessary to trace back the ownership to the ultimate individual or 
state owners. For these suppliers, we requested the following:
    <bullet> The total level (percentage) of state ownership of the 
company's shares; the names of all government entities that own shares, 
either directly or indirectly, in the company; whether any of the 
owners are considered ``state-owned enterprises'' by the government; 
and the amount of shares held by each government owner.
    <bullet> For each level of ownership, a translated copy of the 
section(s) of the articles of association showing the rights and 
responsibilities of the shareholders and, where appropriate, the board 
of directors, including all decision making (voting) rules for the 
operation of the company.
    <bullet> For each level of ownership, identification of the owners, 
members of the board of directors, or managers of the suppliers who 
were also government or CCP officials during the POI.
    <bullet> A discussion of whether and how operational or strategic 
decisions that are made by the management or board of directors are 
subject to government review or approval.
    <bullet> A statement of whether any of the shares held by 
government entities have any special rights, priorities, or privileges, 
e.g., with regard to voting rights or other management or decision-
making for the company; a statement of whether there are any 
restrictions on conducting, or acting through, extraordinary meetings 
of shareholders; whether there are any restrictions on the shares held 
by private shareholders; and the nature of the private shareholders' 
interest in the company, e.g., operational, strategic, or investment-
related, etc.
    On page 92 of the GQR, the GOC stated that it had not obtained 
complete ownership information for the suppliers to the mandatory 
respondents. The GOC further stated that it expected to provide such 
information when the Department determined which cross-owned affiliates 
of the mandatory respondents would be required to file responses.
    On January 11, 2010, we issued a letter requesting that the GOC 
update its initial questionnaire response to include the cross-owned 
affiliates for which the respondent companies filed questionnaire 
responses. After the GOC requested an extension to the deadline for 
filing this response, we set a final deadline of January 25, 2010.
    On January 14, 2010, we issued a separate letter noting that the 
GOC had failed to provide the information requested in the original 
questionnaire regarding the ownership of the firms that produce the 
steel rounds/billets used by the mandatory respondents. We pointed out 
that the GOC had not requested, and the Department had not granted, an 
extension of the deadline for submitting this information. We stated 
that the requested information must be submitted by January 25, 2010.
    On January 25, 2010, the GOC submitted a list of producers of the 
steel rounds that respondents purchased during the POI. The GOC 
identified the producers as state-owned enterprises (``SOEs''), 
foreign-invested enterprises (``FIEs''), privately-held, or ``to be 
updated.'' The GOC also submitted certain documentation on the 
ownership of many of the producers designated as FIEs or privately-
held. However, for producers that the GOC claimed to be privately-
owned, the GOC did not answer the question on whether owners, members 
of the board of directors, or managers of the suppliers were also 
government or CCP officials during the POI. The GOC also did not 
discuss whether and how operational or strategic decisions that are 
made by the management or board of directors are subject to government 
review or approval. For producers with some

[[Page 9167]]

direct corporate ownership or less-than-majority state ownership during 
the POI, the GOC did not respond to our requests for the following 
information:
    <bullet> The total level (percentage) of state ownership of the 
company's shares; the names of all government entities that own shares, 
either directly or indirectly, in the company; whether any of the 
owners are considered ``state-owned enterprises'' by the government; 
and the amount of shares held by each government owner.
    <bullet> For each level of ownership, identification of the owners, 
members of the board of directors, or managers of the suppliers who 
were also government or CCP officials during the POI.
    <bullet> A discussion of whether and how operational or strategic 
decisions that are made by the management or board of directors are 
subject to government review or approval.
    <bullet> A statement of whether any of the shares held by 
government entities have any special rights, priorities, or privileges, 
e.g., with regard to voting rights or other management or decision-
making for the company; a statement of whether there are any 
restrictions on conducting, or acting through, extraordinary meetings 
of shareholders; whether there are any restrictions on the shares held 
by private shareholders; and the nature of the private shareholders' 
interest in the company, e.g., operational, strategic, or investment-
related, etc.
    Based on the above, we preliminarily determine that the GOC has 
withheld necessary information that was requested of it and, thus, that 
the Department must rely on ``facts available'' in making our 
preliminary determination. See sections 776(a)(1) and (a)(2)(A) of the 
Act. Moreover, we preliminarily determine that the GOC has failed to 
cooperate by not acting to the best of its ability to comply with our 
request for information. Consequently, an adverse inference is 
warranted in the application of facts available. See section 776(b) of 
the Act.
    With respect to the GOC's failure to provide requested information 
about the production and consumption of steel rounds or billets 
generally, we are assuming adversely that the GOC's dominance of the 
market in the PRC for this input results in significant distortion of 
the prices and, hence, that use of an external benchmark is warranted. 
With respect to the GOC's failure to provide certain requested 
ownership information about the producers of the steel rounds purchased 
by the respondents, we are assuming adversely that all of the 
respondents' non-cross-owned suppliers of steel rounds are 
``authorities.''
    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the result is 
sufficiently adverse ``as to effectuate the statutory purposes of the 
adverse facts available rule to induce respondents to provide the 
Department with complete and accurate information in a timely manner.'' 
See Notice of Final Determination of Sales at Less than Fair Value: 
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909, 
8932 (February 23, 1998). The Department's practice also ensures ``that 
the party does not obtain a more favorable result by failing to 
cooperate than if it had cooperated fully.'' See Statement of 
Administrative Action (``SAA'') accompanying the Uruguay Round 
Agreements Act, H.R. Doc. No. 103-316, vol. 1 at 870 (1994).
    Section 776(c) of the Act provides that, when the Department relies 
on secondary information rather than on information obtained in the 
course of an investigation or review, it shall, to the extent 
practicable, corroborate that information from independent sources that 
are reasonably at its disposal. Secondary information is ``information 
derived from the petition that gave rise to the investigation or 
review, the final determination concerning the subject merchandise, or 
any previous review under section 751 concerning the subject 
merchandise.'' See, e.g., SAA, at 870. The Department considers 
information to be corroborated if it has probative value. See id. To 
corroborate secondary information, the Department will, to the extent 
practicable, examine the reliability and relevance of the information 
to be used. The SAA emphasizes, however, that the Department need not 
prove that the selected facts available are the best alternative 
information. See SAA, at 869.
    To corroborate the Department's treatment of the companies that 
produced the steel rounds and billets purchased by the mandatory 
respondents as authorities and our finding that the GOC dominates the 
domestic market for this input, we are relying on Circular Welded 
Carbon Quality Steel Line Pipe from the People's Republic of China: 
Final Affirmative Countervailing Duty Determination, 73 FR 70961 
(November 24, 2008) (``Line Pipe from the PRC''). In that case, the 
Department determined that the GOC owned or controlled the entire hot-
rolled steel industry in the PRC. See Line Pipe from the PRC and 
accompanying Issues and Decision Memorandum at Comment 1. Evidence on 
the record of this investigation shows that many steel producers in the 
PRC are integrated, producing both long products (rounds and billets) 
and flat products (hot-rolled steel). See Memorandum to the File, 
``Additional Information on Steel Rounds,'' dated February 22, 2010. 
Consequently, government ownership in the hot-rolled steel industry is 
a reasonable proxy for government ownership in the steel rounds and 
billets industry.
    For details on the calculation of the subsidy rate for the 
respondents, see below at section I.C., ``Provision of Steel Rounds for 
Less Than Adequate Remuneration.''

GOC--Electricity

    The GOC also did not provide a complete response to the 
Department's November 9, 2009 questionnaire regarding its alleged 
provision of electricity for less than adequate remuneration. 
Specifically, the Department requested that the GOC explain how 
electricity cost increases are reflected in retail price increases. The 
GOC responded that it was gathering this information, but it did not 
request an extension from the Department for submitting this 
information after the original questionnaire deadline date. On January 
14, 2010, the Department reiterated its request for this information 
and notified the GOC that this information would be accepted if the GOC 
submitted it by January 25, 2010. However, the GOC's subsequent 
supplemental questionnaire responses did not address the missing 
information. Consequently, we preliminarily determine that the GOC has 
withheld necessary information that was requested of it and, thus, that 
the Department must rely on ``facts available'' in making our 
preliminary determination. See section 776(a)(1), section 776(a)(2)(A), 
and section 776(a)(2)(B) of the Act. Moreover, we preliminarily 
determine that the GOC has failed to cooperate by not acting to the 
best of its ability to comply with our request for information as it 
did not respond by the deadline dates, nor did it explain why it was 
unable to provide the requested information, with the result that an 
adverse inference is warranted in the application of facts available. 
See section 776(b) of the Act. In drawing an adverse inverse inference, 
we find that the GOC's provision of electricity constitutes a financial 
contribution within the meaning of section 771(5)(D) of the Act and is 
specific within the meaning of section 771(5A) of the Act. We have also 
relied on an adverse inference in selecting the

[[Page 9168]]

benchmark for determining the existence and amount of the benefit. See 
section 776(b)(2) of the Act and section 776(b)(4) of the Act. The 
benchmark rates we have selected are derived from information submitted 
by the GOC in the countervailing duty investigation of ``Certain 
Kitchen Appliance Shelving and Racks from the People's Republic of 
China'' and information from the record of the instant review. See 
Memorandum to File from Yasmin Nair, International Trade Compliance 
Analyst, Office 1, ``Electricity Rate Data'' (February 22, 2010).
    For details on the calculation of the subsidy rate for the 
respondents, see below at section I.D., ``Provision of Electricity for 
Less Than Adequate Remuneration.''

GOC--TPCO's Other Subsidies

    At pages 143-144 of TPCO Group's 2008 Audit Report in Exhibit 6 of 
the TQR and at page 14 of its February 16, 2010 supplemental 
questionnaire response, TPCO reported receipt of countervailable 
grants. In our January 26, 2010, supplemental questionnaire to TPCO, we 
instructed TPCO to provide information regarding other subsidies 
identified in its 2008 financial statements and to provide the GOC with 
the names of the programs under which these subsidies were given.
    The Department requested that the GOC provide information about 
these grants in the initial questionnaire and the January 27, 2010 
supplemental questionnaire. In the GOC's February 4, 2010, supplemental 
response, at page 10, the GOC did not provide the requested 
information, asserting that it needed additional time to gather the 
data. Although the GOC responded that it was gathering this 
information, it did not request an extension from the Department for 
submitting this information after the supplemental questionnaire 
deadline date.
    Because the GOC did not provide the requested information 
concerning these grants, we preliminarily determine that necessary 
information is not on the record and that the GOC did not provide 
requested information by the submission deadline. Accordingly, the use 
of facts otherwise available is appropriate. See sections 776(a)(1) and 
(2)(B) of the Act. Also, we preliminarily determine that the GOC has 
failed to cooperate by not acting to the best of its ability to comply 
with our request for information as it did not respond by the deadline 
dates, nor did it explain why it is unable to provide the requested 
information, with the result that an adverse inference is warranted in 
the application of facts available. See section 776(b) of the Act.
    For details on the calculation of the subsidy rate for TPCO, see 
below at section I.G., ``Other Subsidies Received by TPCO.''

Subsidies Valuation Information

Allocation Period

    The average useful life (``AUL'') period in this proceeding, as 
described in 19 CFR 351.524(d)(2), is 15 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)-(iv) direct the Department to 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, or produce an input 
that is primarily dedicated to the production of the downstream 
product. In the case of a transfer of a subsidy between cross-owned 
companies, 19 CFR 351.525(b)(6)(v) directs the Department to attribute 
the subsidy to the sales of the company that receives the transferred 
subsidy.
    According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. This regulation states that 
this standard will normally be met where there is a majority voting 
interest between two corporations or through common ownership of two 
(or more) corporations. The Court of International Trade (``CIT'') has 
upheld the Department's authority to attribute subsidies based on 
whether a company could use or direct the subsidy benefits of another 
company in essentially the same way it could use its own subsidy 
benefits. See Fabrique de Fer de Charleroi v. United States, 166 F. 
Supp. 2d 593, 600-604 (CIT 2001).

TPCO

    TPCO responded to the Department's original and supplemental 
questionnaires on behalf of itself, Tianjin Pipe Iron Manufacturing 
Co., Ltd. (``TPCO Iron''); Tianguan Yuantong Pipe Product Co., Ltd. 
(``Yuantong''); Tianjin Pipe International Economic and Trading Co., 
Ltd. (``TPCO International''); and TPCO Charging Development Co., Ltd. 
(``Charging''). These companies are cross-owned within the meaning 19 
CFR 351.525(b)(6)(vi) because of TPCO's substantial ownership position 
in each of them. See the TQR at page 2 and Exhibits 1-3.
    TPCO stated that TPCO Iron provides ``pig iron and direct reduced 
iron'' to TPCO and that Yuantong provides ``threading and other 
finishing processes to {TPCO's{time}  seamless pipe production.'' \4\ 
Because TPCO Iron produced an input that is primarily dedicated to the 
production of the downstream product, we are preliminarily attributing 
subsidies received by TPCO Iron to TPCO, in accordance with 19 CFR 
351.525(b)(6)(iv). Yuantong had direct involvement in the production of 
subject merchandise during the POI. Thus, we are preliminarily 
attributing subsidies received by Yuantong to TPCO, in accordance with 
19 CFR 351.525(b)(6)(ii).\5\
---------------------------------------------------------------------------

    \4\ See TQR at 5.
    \5\ See Certain Oil Country Tubular Goods From the People's 
Republic of China: Preliminary Affirmative Countervailing Duty 
Determination, Preliminary Negative Critical Circumstances 
Determination, 74 FR 47210, 47215 (September 15, 2009) (unchanged in 
Certain Oil Country Tubular Goods From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, Final 
Negative Critical Circumstances Determination, 74 FR 64045 (December 
7, 2009) (``OCTG from the PRC '')).
---------------------------------------------------------------------------

    Regarding TPCO International, TPCO stated, ``{TPCO 
International{time}  is the trading company through which {TPCO{time}  
exports all subject merchandise.'' Because TPCO International exported 
subject merchandise during the POI, we are preliminarily cumulating the 
benefit from subsidies received by TPCO International with subsidies 
provided to TPCO, in accordance with 19 CFR 351.525(c). We are 
preliminarily using TPCO's consolidated sales as the denominator for 
subsidies to TPCO International. On page 12 of the TQR, TPCO stated 
that TPCO consolidates directly-owned subsidiaries in which it holds an 
equity share of more than 50 percent. On page 9 of the TQR, TPCO stated 
that the consolidated sales totals in its financial statements are net 
of

[[Page 9169]]

inter-company sales. Thus, TPCO's consolidated sales already include 
TPCO International's sales (net of inter-company sales). By using 
TPCO's consolidated sales as the denominator for subsidies to TPCO 
International, we do not double-count TPCO International's sales in the 
calculation of the subsidy rate.
    With regard to Charging, TPCO stated on pages 4-5 of the TQR that 
Charging acts as a trading company that purchased and provided steel 
rounds to TPCO during the POI. If the GOC provided steel rounds to 
Charging for less than adequate remuneration during the POI, the 
supplier relationship between Charging and TPCO may fall under 19 CFR 
351.525(b)(6)(iv) (subsidies to cross-owned input suppliers) or 19 CFR 
351.525(b)(6)(v) (transfer of subsidies). As we stated in the previous 
paragraph, however, TPCO consolidates the sales of directly-owned 
subsidiaries in which it holds an equity share of more than 50 percent 
(net of inter-company sales). Because TPCO consolidates Charging's 
sales into its own sales, the attribution of the subsidy for TPCO's 
purchases through Charging is identical under 19 CFR 351.525(b)(6)(iv) 
or 19 CFR 351.525(b)(6)(v). Under both sections of the regulations, the 
attribution of the subsidy is to TPCO's consolidated sales. Thus, we 
are preliminarily attributing any subsidies under the provision of 
steel rounds to Charging for less than adequate remuneration to TPCO's 
consolidated sales, which includes Charging's sales.
    On page 3 of our January 26, 2010, supplemental questionnaire to 
TPCO, we asked TPCO to explain why it did not provide a response on 
behalf of Tianjin TEDA Investment Holding Co., Ltd. (``TEDA''), Tianjin 
Pipe Investment Holding Co., Ltd. (``TPCO Holding''), and China Cinda 
Asset Management Corporation (``Cinda''), which have held majority 
interests in TPCO since December 11, 2001. Under 19 CFR 
351.525(b)(6)(iii), we would normally attribute to TPCO any subsidies 
that these owners received while each was cross-owned with TPCO. In its 
response dated February 16, 2010, TPCO responded that TEDA, a 
government agency, is primarily involved in the operation and 
management of assets and public infrastructure, and TPCO Holding was 
originally established by the Tianjin SASAC (``State-owned Assets 
Supervision and Administration Commission of the State Council'') for 
the sole purpose of holding the assets of TPCO. In TPCO's explanation 
of why it did not file a response for Cinda, it refers to the 
Department's finding in OCTG from the PRC, in which the Department 
found that TEDA and TPCO Holding were government agencies.\6\ TPCO 
states ``for the same reasons,'' TPCO did not file a response for 
Cinda, which was specifically established to restructure debt and non-
performing assets. Based on TPCO's response, we preliminarily determine 
that these entities were government agencies since December 11, 2001. 
Thus, we are preliminarily countervailing subsidies that these entities 
provided to TPCO, rather than any subsidies that these entities may 
have received. Moreover, as agencies of the government, we 
preliminarily determine these entities to be ``government 
authorities.''
---------------------------------------------------------------------------

    \6\ See OCTG from the PRC, and accompanying Issues and Decision 
Memorandum at 9 and Comment 40.
---------------------------------------------------------------------------

    In the January 26, 2010, supplemental questionnaire, we also asked 
TPCO questions about certain affiliates that may have met the cross-
ownership standard under 19 CFR 351.525(b)(6)(vi) and one or more of 
the attribution standards under 19 CFR 351.525(b)(6)(ii)-(v). TPCO 
provided responses to these questions in its February 12, 2010, 
response at pages 5-6. Based on TPCO'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 calculation.
    For other affiliated companies that TPCO identified in Exhibits 1 
and 2 of the TQR, TPCO either held a small ownership share during the 
POI or identified the companies as having no involvement with subject 
merchandise. Thus, we have not included any subsidies to these 
companies in the subsidy calculation.
    Regarding the sales denominator for calculating TPCO's subsidy 
rate, we note that the Department will attribute subsidies bestowed on 
a parent or holding company to the consolidated sales of the parent or 
holding company and its subsidiaries under 19 CFR 351.525(b)(6)(iii). 
TPCO was a parent company to other companies during the POI. On page 12 
of the TQR, TPCO stated, ``{TPCO{time}  consolidated those directly 
owned subsidiaries in which it holds more than 50% equity shares, as 
well as those indirectly owned subsidiaries in which its wholly-owned 
subsidiaries hold more than 50% equity shares.'' In accordance with 19 
CFR 351.525(b)(6)(iii), we are preliminarily attributing subsidies to 
TPCO to the consolidated sales of TPCO and its subsidiaries.
    Therefore, based on information currently on the record, we 
preliminarily determine that cross-ownership within the meaning of 19 
CFR 351.525(b)(6)(vi) exists between TPCO, TPCO Iron, Yuantong, TPCO 
International, and Charging. Moreover, pursuant to 19 CFR 
351.525(b)(6)(iii), we are preliminarily attributing subsidies received 
by TPCO to the consolidated sales of TPCO and its subsidiaries (net of 
inter-company sales). TPCO Iron, Yuantong, and Charging are 
consolidated into TPCO's sales; thus, we are preliminarily attributing 
subsidies received by TPCO Iron, Yuantong, and Charging to TPCO's 
consolidated sales (net of inter-company sales). For TPCO 
International, we preliminarily have cumulated TPCO International's 
subsidy benefits with TPCO's subsidy benefits. See 19 CFR 351.525(c). 
We have preliminarily used TPCO's consolidated sales net of inter-
company sales as the denominator for subsidies to TPCO International.

Hengyang

    As of this preliminary determination, Hengyang has responded to the 
Department's original and supplemental questionnaires on behalf of 
Hengyang Steel Tube Group International Trading, Inc. (``Hengyang 
Trading''), Hengyang Valin Steel Tube Co., Ltd. (``Hengyang Valin''), 
and Hengyang Valin MPM Tube Co., Ltd. (``Hengyang MPM''), and their 
affiliated parties Xigang Seamless Steel Tube Co., Ltd. (``Xigang 
Seamless''), Wuxi Seamless Special Pipe Co., Ltd. (``Special Pipe''), 
Wuxi Resources Steel Making Co., Ltd. (``Resources Steel''), and 
Jiangsu Xigang Group Co., Ltd. (``Xigang Group''). These companies are 
cross-owned within the meaning of 19 CFR 351.525(b)(6)(vi) by virtue of 
common ownership.\7\
---------------------------------------------------------------------------

    \7\ See HQR at 2.
---------------------------------------------------------------------------

    Hengyang reports the following roles for each of the seven 
companies: \8\
---------------------------------------------------------------------------

    \8\ See HQR at 2 and HQR at Vol. 5 p. 1-2.
---------------------------------------------------------------------------

    <bullet> Hengyang Valin: a parent company to Hengyang MPM and 
Hengyang Trading, and a producer of subject merchandise;
    <bullet> Hengyang MPM: a producer of subject merchandise, as well 
as a producer and supplier of an input to Hengyang Valin for production 
of subject merchandise;
    <bullet> Hengyang Trading: an exporter of subject merchandise on 
behalf of Hengyang Valin and Hengyang MPM;
    <bullet> Xigang Seamless: a producer and exporter of subject 
merchandise;

[[Page 9170]]

    <bullet> Special Pipe: a producer of subject merchandise;
    <bullet> Resources Steel: a producer and supplier of an input to 
Xigang Seamless and Special Pipe for production of subject merchandise; 
and
    <bullet> Xigang Group: a holding company, and the parent of Xigang 
Seamless, Special Pipe, and Resources Steel.
    Because Hengyang Valin, Hengyang MPM, Xigang Seamless, and Special 
Pipe are producers of subject merchandise, we are preliminarily 
attributing subsidies received by any of these companies to the sales 
of all four (excluding sales between the companies), in accordance with 
19 CFR 351.525(b)(6)(ii).
    During the POI, Hengyang Trading exported subject merchandise 
produced by Hengyang Valin and Hengyang MPM. Thus, we are preliminarily 
cumulating the benefit from subsidies received by Hengyang Trading with 
the benefit from subsidies provided to Hengyang Valin and MPM, in 
accordance with 19 CFR 351.525(c).
    Hengyang identified Resources Steel as a producer and supplier of 
steel billet to Xigang Seamless and Special Pipe. Because steel billet 
is primarily dedicated to the production of the downstream product, we 
are preliminarily attributing subsidies received by Resources Steel to 
Resources Steel, Xigang Seamless, and Special Pipe, in accordance with 
19 CFR 351.525(b)(6)(iv).
    Xigang Group was the parent of Xigang Seamless, Special Pipe, and 
Resources Steel during the POI. Thus, we are preliminarily attributing 
subsidies received by Xigang Group to the consolidated sales of Xigang 
Group and its subsidiaries, in accordance with 19 CFR 
351.525(b)(6)(iii).
    In a supplemental questionnaire dated January 28, 2010, we asked 
Hengyang to provide responses on behalf of certain affiliates that met 
the cross-ownership standard under 19 CFR 351.525(b)(6)(vi) and one or 
more of the attribution standards under 19 CFR 351.525(b)(6)(ii)-(v). 
Hengyang is scheduled to provide this response on February 22, 2010. We 
intend to address this response in a post-preliminary determination.
    At Volume 1, page 7 of the HQR, Hengyang stated that Hengyang 
Trading also exports subject merchandise produced by an unaffiliated 
producer, although Hengyang stated that Hengyang Trading did not export 
this merchandise to the United States during the POI. At Volume 5, 
pages 7-8 of the HQR, Hengyang stated that Xigang Seamless purchased 
and exported subject merchandise produced by unaffiliated companies 
during the POI. Although any subsidies to the unaffiliated producers 
would normally be cumulated with subsidies provided to these trading 
companies pursuant to 19 CFR 351.525(c), the Department has, in some 
instances, limited the number of producers it examines where their 
merchandise was not exported to the United States during the POI or 
accounted for a very small share of respondent's exports to the United 
States. In this investigation, we have not sent CVD questionnaires to 
the unaffiliated suppliers because their merchandise was not exported 
to the United States during the POI or accounted for a minor share of 
Hengyang's exports to the United States.\9\ See, e.g., Pasta From 
Italy, in which one of the mandatory respondents was a trading company 
that exported pasta produced by multiple pasta manufacturers, but the 
Department limited its analysis to the two major pasta manufacturers 
that supplied the trading company during the period of review. See 
Certain Pasta from Italy: Final Results of the Fourth Countervailing 
Duty Administrative Review, 66 FR 64214 (December 12, 2001) (``Pasta 
from Italy''), and accompanying Issues and Decision Memorandum at 
``Attribution.''
---------------------------------------------------------------------------

    \9\ Hengyang Trading did not export subject merchandise produced 
by unaffiliated producers to the United States during the POI. See 
the HQR at Volume 1, page 7. The percentage of Xigang Seamless's 
exports of subject merchandise to the United States from 
unaffiliated producers is business proprietary information. See the 
HQR at Volume 5, page 8.
---------------------------------------------------------------------------

Benchmarks and Discount Rates

Benchmarks for Short-Term RMB Denominated Loans

    Section 771(5)(E)(ii) of the Act explains that the benefit for 
loans is the ``difference between the amount the recipient of the loan 
pays on the loan and the amount the recipient would pay on a comparable 
commercial loan that the recipient could actually obtain on the 
market.'' Normally, the Department uses comparable commercial loans 
reported by the company as a benchmark.\10\ If the firm did not have 
any comparable commercial loans during the period, the Department's 
regulations provide that we ``may use a national average interest rate 
for comparable commercial loans.'' \11\
---------------------------------------------------------------------------

    \10\ See 19 CFR 351.505(a)(3)(i).
    \11\ See 19 CFR 351.505(a)(3)(ii).
---------------------------------------------------------------------------

    As noted above, section 771(5)(E)(ii) of the Act indicates that the 
benchmark should be a market-based rate. For the reasons explained in 
CFS from the PRC,\12\ loans provided by Chinese banks reflect 
significant government intervention in the banking sector and do not 
reflect rates that would be found in a functioning market. Because of 
this, any loans received by respondents from private Chinese or 
foreign-owned banks would be unsuitable for use as benchmarks under 19 
CFR 351.505(a)(2)(i). Similarly, we cannot use a national interest rate 
for commercial loans as envisaged by 19 CFR 351.505(a)(3)(ii). 
Therefore, because of the special difficulties inherent in using a 
Chinese benchmark for loans, the Department is selecting an external 
market-based benchmark interest rate. The use of an external benchmark 
is consistent with the Department's practice. For example, in Softwood 
Lumber from Canada, the Department used U.S. timber prices to measure 
the benefit for government-provided timber in Canada.\13\
---------------------------------------------------------------------------

    \12\ See CFS Decision Memorandum at Comment 10.
    \13\ See Notice of Final Affirmative Countervailing Duty 
Determination and Final Negative Critical Circumstances 
Determination: Certain Softwood Lumber Products From Canada, 67 FR 
15545 (April 2, 2002) (``Softwood Lumber from Canada'') and 
accompanying Issues and Decision Memorandum at ``Analysis of 
Programs, Provincial Stumpage Programs Determined to Confer 
Subsidies, Benefit.''
---------------------------------------------------------------------------

    We are calculating the external benchmark using the regression-
based methodology first developed in CFS from the PRC \14\ and more 
recently updated in LWTP from the PRC.\15\ This benchmark interest rate 
is based on the inflation-adjusted interest rates of countries with per 
capita gross national incomes (``GNIs'') similar to the PRC, and takes 
into account a key factor involved in interest rate formation, that of 
the quality of a country's institutions, that is not directly tied to 
the state-imposed distortions in the banking sector discussed above.
---------------------------------------------------------------------------

    \14\ See CFS Decision Memorandum at Comment 10.
    \15\ See Lightweight Thermal Paper From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination, 73 FR 
57323 (October 2, 2008) (``LWTP from the PRC'') and accompanying 
Issues and Decision Memorandum (``LWTP Decision Memorandum'') at 8-
10.
---------------------------------------------------------------------------

    Following the methodology developed in CFS from the PRC, we first 
determined which countries are similar to the PRC in terms of GNI, 
based on the World Bank's classification of countries as: low income; 
lower-middle income; upper-middle income; and high income. The PRC 
falls in the lower-middle income category, a group that includes 55 
countries.\16\ As explained in CFS from the PRC, this pool of countries

[[Page 9171]]

captures the broad inverse relationship between income and interest 
rates.
---------------------------------------------------------------------------

    \16\ See The World Bank Country Classification, http://econ.worldbank.org/.
---------------------------------------------------------------------------

    Many of these countries reported lending and inflation rates to the 
International Monetary Fund, and they are included in that agency's 
international financial statistics (``IFS''). With the exceptions noted 
below, we have used the interest and inflation rates reported in the 
IFS for the countries identified as ``low middle income'' by the World 
Bank. First, we did not include those economies that the Department 
considered to be non-market economies for AD purposes for any part of 
the years in question, for example: Armenia, Azerbaijan, Belarus, 
Georgia, Moldova, Turkmenistan. Second, the pool necessarily excludes 
any country that did not report both lending and inflation rates to IFS 
for those years. Third, we removed any country that reported a rate 
that was not a lending rate or that based its lending rate on foreign-
currency denominated instruments. For example, Jordan reported a 
deposit rate, not a lending rate, and the rates reported by Ecuador and 
Timor L'Este are dollar-denominated rates; therefore, the rates for 
these three countries have been excluded. Finally, for each year the 
Department calculated an inflation-adjusted short-term benchmark rate, 
we have also excluded any countries with aberrational or negative real 
interest rates for the year in question.
    The resulting inflation-adjusted benchmark lending rates are 
provided in the respondents' preliminary calculation memoranda. See 
Memorandum to File, ``Preliminary Determination Calculation Memorandum 
for (TPCO),'' (February 22, 2010) (``TPCO Calculation Memo''); see also 
Memorandum to File, ``Preliminary Determination Calculation Memorandum 
for (Hengyang),'' (February 22, 2010) (``Hengyang Calculation Memo''). 
Because these are inflation-adjusted benchmarks, it is necessary to 
adjust the respondents' interest payments for inflation. This was done 
using the PRC inflation figure as reported in the IFS. See TPCO 
Calculation Memo and Hengyang Calculation Memo.

Benchmarks for Long-Term Loans

    The lending rates reported in the IFS represent short- and medium-
term lending, and there are not sufficient publicly available long-term 
interest rate data upon which to base a robust benchmark for long-term 
loans. To address this problem, the Department has developed an 
adjustment to the short- and medium-term rates to convert them to long-
term rates using Bloomberg U.S. corporate BB-rated bond rates. See, 
e.g., Light-Walled Rectangular Pipe and Tube From People's Republic of 
China: Final Affirmative Countervailing Duty Investigation 
Determination, 73 FR 35642 (June 24, 2008) and accompanying Issues and 
Decision Memorandum (``LWRP Decision Memo'') at 8. In Citric Acid from 
the PRC, this methodology was revised by switching from a long-term 
mark-up based on the ratio of the rates of BB-rated bonds to applying a 
spread which is calculated as the difference between the two-year BB 
bond rate and the n-year BB bond rate, where n equals or approximates 
the number of years of the term of the loan in question. See Citric 
Acid and Certain Citrate Salts From the People's Republic of China: 
Final Affirmative Countervailing Duty Determination, 74 FR 16836 (April 
13, 2009) (``Citric Acid from the PRC'') and accompanying Issues and 
Decision Memorandum (``Citric Acid Decision Memorandum'') at Comment 
14. Finally, because these long-term rates are net of inflation as 
noted above, we adjusted the PRC respondents' payments to remove 
inflation.

Benchmarks for Foreign Currency-Denominated Loans

    For foreign currency-denominated short-term loans, the Department 
used as a benchmark the one-year dollar interest rates for the London 
Interbank Offering Rate (``LIBOR''), plus the average spread between 
LIBOR and the one-year corporate bond rates for companies with a BB 
rating. See LWTP Decision Memo at 10. For long-term foreign currency-
denominated loans, the Department added the applicable short-term LIBOR 
rate to a spread which is calculated as the difference between the one-
year BB bond rate and the n-year BB bond rate, where n equals or 
approximates the number of years of the term of the loan in question.

Discount Rates

    Consistent with 19 CFR 351.524(d)(3)(i)(A), we have used, as our 
discount rate, the long-term interest rate calculated according to the 
methodology described above for the year in which the government agreed 
to provide the subsidy.

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. Policy Loans to the Seamless Pipe Industry

    The Department is examining whether seamless pipe producers receive 
preferential lending through state-owned commercial or policy banks. 
According to the allegation, preferential lending to the seamless pipe 
industry is supported by the GOC through the issuance of national and 
provincial five-year plans; industrial plans for the steel sector; 
catalogues of encouraged industries, and other government laws and 
regulations. Based on our review of the information and responses of 
the GOC, we preliminarily determine that loans received by the seamless 
pipe industry from state-owned commercial banks (``SOCBs'') were made 
pursuant to government directives.
    Record evidence demonstrates that the GOC, through its directives, 
has highlighted and advocated the development of the seamless pipe 
industry. At the national level, the GOC has placed an emphasis on the 
development of high-end, value-added steel products through foreign 
investment as well as through technological research, development, and 
innovation. In laying out this strategy, the GOC has identified the 
specific products it has in mind. For example, an ``objective'' of The 
10th Five-Year Plan for the Metallurgical Industry (``Plan'') was to 
develop key steel types that were mainly imported; high strength, 
anticrushing and corrosion resistant petroleum pipe was among the 
listed products. Moreover, among the ``Policy Measures'' set out in the 
Plan for achieving its objectives was the encouragement of enterprises 
to cooperate with foreign enterprises, particularly in the production 
and development of high value-added products and high-tech products. 
See Memorandum to File from Yasmin Nair, Analyst regarding ``Additional 
Documents Placed on the Record'' (February 22, 2010) (``Additional 
Documents Memo'').
    Similarly, in the Development Policies for the Iron and Steel 
Industry (July 2005) at Article 16, the GOC states that it will ``* * * 
enhance the R&D, design, and manufacture level in relation to the key 
technology, equipment and facilities for the Chinese steel industry.'' 
To accomplish this, the GOC states it will provide support to key steel 
projects relying on domestically produced and newly developed equipment 
and facilities, through tax and interest assistance, and scientific 
research expenditures. See Petition at Exhibit III-

[[Page 9172]]

10. Later in 2005, the GOC implemented the Decision of the State 
Council on Promulgating the ``Interim Provisions on Promoting 
Industrial Structure Adjustment'' for Implementation (No. 40 (2005)) 
(``Decision 40'') in order to achieve the objectives of the Eleventh 
Five-Year Plan. See Additional Documents Memo. Decision 40 references 
the Directory Catalogue on Readjustment of Industrial Structure 
(``Industrial Catalogue''), which outlines the projects which the GOC 
deems ``encouraged,'' ``restricted,'' and ``eliminated,'' and describes 
how these projects will be considered under government policies. Steel 
tube for oil well pipe, high-pressure boiler pipe, and long-distance 
transmission pipe was named in the Industrial Catalogue as an 
``encouraged project.'' See Petition at Exhibit III-44. For the 
``encouraged'' projects, Decision 40 outlines several support options 
available to the government, including financing.
    Turning to the provincial and municipal plans, the Department has 
described the inter-relatedness of national level plans and directives 
with those at the sub-national level. See LWTP Decision Memo at Comment 
6. Based on our review of the sub-national plans submitted by the GOC 
in this investigation, we find that they mirror the national 
government's objective of supporting and promoting the production of 
innovative and high-value added products, including seamless pipe. 
Examples from the five-year plans of the provinces and/or 
municipalities where each of the respondents is located follow:

    Outline of the 10th Five-Year Plan for the National Economic and 
Social Development of Tianjin Municipality: ``For metallurgical 
industry, we attach importance to the development of high quality 
and efficiency steel products and high grade metal products, such as 
seamless steel tube and cold rolled sheet, and carry out the oil 
steel pipe extension and east-movement project of steel.'' See GQR 
at Exhibit GOC-12.
    Outline of the 11th Five-Year Program of Social and Economic 
Development of Tianjin Municipality: ``Build a pipe production base, 
mainly producing seamless pipes * * * Develop a production capacity 
of 2600 seamless pipes, 10 million plates, and 1 million first class 
metal products by 2010.'' See GQR at Exhibit GOC-13.
    10th Five-Year Plan for Industrial Development in Tianjin: 
``Surrounding the object of establishing a national manufacturing 
base for seamless steel tube and metallic products, metallurgy 
industries will actively optimize structure, properly adjust layout, 
and develop advantageous products. We shall let the backward 
techniques and facilities give way to latest applicable technologies 
to treat pollution properly, promote development of quality steel 
and metallic products with high added value and huge domestic demand 
represented by seamless steel tube and cold rolled sheet * * *'' See 
GQR at Exhibit GOC-16.
    Outline of the 11th Five-Year Program for the Development of the 
Industrial Economy of Tianjin: ``Development objective: * * * 
Production capacities of major products: * * * production of rolled 
steel exceeds 30 million tons, including 2.6 million tons of 
seamless steel tubes * * * One of the world largest technical 
equipment leading seamless steel tube production base and important 
domestic high grade sheet and metal products production base shall 
be established here * * * Key projects and investment: There shall 
be a total investment of 32.5 billion Yuan during the period of the 
11th Five-Year Program, mainly including the project of seamless 
steel tube, stainless steel tube and heavy caliber welding steel 
tubes with a total investment of 3.6 billion Yuan contributed by 
TPCO, Shuangjie Steel Tubes and other companies * * *'' See GQR at 
Exhibit GOC-17.
    Outline of the 10th Five-Year Plan for National Economy and 
Social Development of Tianjin Binhai New Area: ``Complete the 
eastward movement of Tianjin Steel Factory relying on the current 
conditions of Steel Pipe Company and No.3 Gas Factory, establish the 
manufacturing base and metallurgical casting base for steel of 
quality and efficiency and its hot-processed products.'' See G1SR at 
Exhibit 1.
    Notice of Tianjin Municipal People's Government Concerning the 
Printing and Distribution of the Outline for the 11th Five-Year 
Program for the National Economic and social Development in Tianjin 
Binhai New Area: ``4. Constructing deep processing base of petroleum 
steel pipe and high quality steel material--We shall quicken 
technology innovation and structural adjustment, extend industrial 
link, enhance the concentration effort, strive the commanding point 
of the industry, consolidate and develop the leading position of 
deep processing of petroleum steel pipe and high quality steel 
material.'' See G1SR at Exhibit 2.
    Outlines of the 10th and 11th Five-Year Program for Industrial 
Structural Adjustment and Development in Jiangsu: ``Emphasize on the 
development of high-quality steel products with high added value and 
high technological content such as motor plates, shipbuilding steel 
plates, * * * pinion steel, oil well billet, special pipes and 
sticks, and highly qualified high-carbon hard wires.'' See GQR at 
Exhibit GOC-14 and 15.
    Outline of the 11th Five-Year Plan of Social and Economic 
Development of Jiangsu Province: ``We shall lay emphasis upon the 
development of competitive industries * * * By setting up industrial 
bases of integrated circuit, photoelectric display, petrochemical 
industry, metallurgy, shipbuilding, and paper making, we shall 
increase shares of competitive industries in the manufacturing 
industry. Focus shall be put on developing special metallurgy, 
petrochemical, new building material and other basic industries. We 
shall actively speed up development of special steel, * * *'' See 
GQR at Exhibit GOC-9.
    Outline of the 10th Five-Year Plan of Social and Economic 
Development of Wuxi Municipality: ``We should insist on the guidance 
of market, support the consumer products with big market share, fill 
the blanket area in domestic market, replace the exported products, 
high class facility class, upgrade and update products with 
competitive and high added value, new products with good 
industrialization base and comparative relativeness and dragging 
force, endeavor to construct 10 distinctive product group of 
electronic devices, * * * steel & iron and metal products and form a 
batch of international renowned brand and brands famous in China and 
Jiangsu.'' See GQR at Exhibit GOC-10.
    Outline of the 11th Five-Year Plan of Social and Economic 
Development of Wuxi Municipality: ``We will take such industries as 
metallurgy, chemical industry and so on as the foundation, 
prioritize products of several domains such as new composition 
material and high polymer material, new ceramic material, special 
steel and product, * * *'' See GQR at Exhibit GOC-11.
    Outline of the 10th Five-Year Plan of Social and Economic 
Development of Hunan Province: ``We shall optimize the structure, 
form the characteristics and enlarge the production of high quality 
plate and strip material, seamless tube, rigid line, manganese and 
other deep processing and special alloy products.'' See GQR at 
Exhibit GOC-4.
    Outline of the 11th Five-Year Program of Social and Economic 
Development of Hunan Province: ``We shall vigorously import advanced 
technological equipment and production techniques * * *; concentrate 
on development of high-quality excellent steel materials such as 
plates, tubes and bars etc * * *'' See GQR at Exhibit GOC-5.
    Outline of the 10th Five-Year Plan of Social and Economic 
Development of Hengyang Municipality: ``Focus shall be put on 
singling out these six pillar industries for support such as 
metallurgy, machinery, * * * We shall attach great importance to ten 
key enterprises and ten knock-out products. The ten key enterprises 
include: * * * Hengyang Steel Tube Group Corporation * * *'' See GQR 
at Exhibit GOC-6.
    Outline of the 11th Five-Year Program of Social and Economic 
Development of Hengyang Municipality: ``We shall stress the 
development of such major industries such as iron and steel smelting 
and tube processing, * * * we shall introduce international 
strategic investment, promote tube processing and manufacturing * * 
* Up to 2010, the smelting of steel and iron and the output for 
affiliated industrial clusters of tube processing shall reach 14 
billion.'' See GQR at Exhibit GOC-7.

    As noted in Citric Acid from the PRC: \17\
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    \17\ See Citric Acid from the PRC, and Citric Acid Decision 
Memo, at Comment 5.

    In general, the Department looks to whether government plans or 
other policy directives lay out objectives or goals for developing 
the industry and call for lending to support those objectives or 
goals. Where

[[Page 9173]]

such plans or policy directives exist, then we will find a policy 
lending program that is specific to the named industry (or producers 
that fall under that industry).\18\ Once that finding is made, the 
Department relies upon the analysis undertaken in CFS from the PRC 
\19\ to further conclude that national and local government control 
over the SOCBs results in the loans being a financial contribution 
by the GOC.\20\
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    \18\ See CFS Decision Memorandum, at 49; and LWTP Decision 
Memorandum, at 98.
    \19\ See CFS Decision Memorandum, at Comment 8.
    \20\ See Certain New Pneumatic Off-The-Road Tires from the 
People's Republic of China: Final Affirmative Determination of Sales 
at Less Than Fair Value and Partial Affirmative Determination of 
Critical Circumstances, 73 FR 40485 (July 15, 2008) (``OTR Tires 
from the PRC''), and the accompanying Issues and Decision Memorandum 
(``OTR Tires Decision Memo'') at 15; and LWTP Decision Memorandum, 
at 11.

    Therefore, on the basis of the record information described above, 
we preliminarily determine that the GOC has a policy in place to 
encourage the development of production of seamless pipe through policy 
lending. The loans to seamless pipe producers from Policy Banks and 
SOCBs in the PRC constitute a direct financial contribution from the 
government, pursuant to section 771(5)(D)(i) of the Act, and they 
provide a benefit equal to the difference between what the recipients 
paid on their loans and the amount they would have paid on comparable 
commercial loans (see section 771(5)(E)(2) of the Act). Finally, we 
determine that the loans are de jure specific within the meaning of 
section 771 of the Act because of the GOC's policy, as illustrated in 
the government plans and directives, to encourage and support the 
growth and development of the seamless pipe industry.
    To calculate the benefit under the policy lending program, we used 
the benchmarks described under ``Subsidies Valuation--Benchmarks and 
Discount Rates'' above. See also 19 CFR 351.505(c). On this basis, we 
preliminarily determine that Hengyang received a countervailable 
subsidy of 1.44 percent ad valorem and TPCO received a countervailable 
subsidy of 0.88 percent ad valorem.

B. Export Loans From the Export-Import Bank of China

TPCO
    On page 20 of the GQR, the GOC reported that the Export-Import Bank 
of China (``EIBC'') provided TPCO with three loans that were 
outstanding during the POI. The GOC claimed that none of the loans 
related to exportation of subject merchandise.
    Based on the proprietary description of these loans at page 21 of 
the GOC's response, however, we preliminarily find that one of the 
loans is a countervailable export loan from the EIBC.\21\ As a loan 
from a government policy bank, this loan constitutes a direct financial 
contribution from the government, pursuant to section 771(5)(D)(i) of 
the Act. We further determine that the export loan is specific under 
section 771(5A)(B) of the Act because receipt of the financing is 
contingent upon export. Also, we determine that the export loan confers 
a benefit within the meaning of section 771(5)(E)(ii) of the Act.
---------------------------------------------------------------------------

    \21\ We have addressed the proprietary details of this loan in 
the TPCO Calculation Memo.
---------------------------------------------------------------------------

    To calculate the benefit under this program, we compared the amount 
of interest paid against the export loan to the amount of interest that 
would have been paid on a comparable commercial loan. As our benchmark, 
we used the short-term interest rates discussed above in the 
``Benchmarks and Discount Rates'' section. To calculate the net 
countervailable subsidy rate, we divided the benefit by TPCO's export 
sales value for the POI. On this basis, we preliminarily determine the 
net countervailable subsidy rate to be 0.08 percent ad valorem.
Hengyang
    On page 14 of the HQR, Hengyang reported two loans made to Hengyang 
Valin that are ``contingent on the loans being used for anticipated 
activities that generate exports of high-tech products.'' \22\ On page 
15 of the HQR, Hengyang stated that all of Hengyang Valin's exports 
benefit from these loans.
---------------------------------------------------------------------------

    \22\ See HQR at 14.
---------------------------------------------------------------------------

    On page 28 of the GQR, the GOC stated, ``Hengyang Valin received 
{proprietary amount of{time}  export contingent loans from {the 
EIBC{time} .''
    We preliminarily find that Hengyang's loans from the EIBC that were 
outstanding during the POI are countervailable export loans. As a loan 
from a government policy bank, these loans constitute a direct 
financial contribution from the government, pursuant to section 
771(5)(D)(i) of the Act. We further determine that the export loans are 
specific under section 771(5A)(B) of the Act because receipt of the 
financing is contingent upon export. Also, we determine that the export 
loans confer a benefit within the meaning of section 771(5)(E)(ii) of 
the Act.
    To calculate the benefit under this program, we compared the amount 
of interest paid against the export loans to the amount of interest 
that would have been paid on a comparable commercial loan. As our 
benchmark, we used the short-term interest rates discussed above in the 
``Benchmarks and Discount Rates'' section. To calculate the net 
countervailable subsidy rate, we divided the benefit by Hengyang's 
export sales value for the POI. On this basis, we preliminarily 
determine the net countervailable subsidy rate to be 1.03 percent ad 
valorem.

C. Provision of Steel Rounds for Less Than Adequate Remuneration

    As discussed under ``Use of Facts Otherwise Available and Adverse 
Inferences,'' above, we are preliminarily relying on ``adverse facts 
available'' (``AFA'') for our analysis regarding the GOC's provision of 
steel rounds and billets to seamless pipe producers. First, as a result 
of the GOC's failure to provide requested ownership information for the 
companies that produced the steel rounds and billets purchased by the 
mandatory respondents in this investigation, we are treating all 
unaffiliated producers of steel rounds and billets as ``authorities'' 
within the meaning of section 771(5)(B) of the Act. Therefore, we 
preliminarily determine that seamless pipe producers have received a 
financial contribution from the government in the form of the provision 
of a good. See section 771(5)(D)(iii) of the Act.
    To determine whether this financial contribution results in a 
subsidy to the seamless pipe producers, we followed 19 CFR 
351.511(a)(2) for identifying an appropriate market-based benchmark for 
measuring the adequacy of the remuneration for the steel rounds and 
billets. 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 Softwood Lumber from Canada and accompanying Issues and Decision 
Memorandum at ``Analysis of Programs, Provincial Stumpage

[[Page 9174]]

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.
    As explained under ``Use of Facts Otherwise Available and Adverse 
Inferences,'' above, we are preliminarily relying on AFA to determine 
that GOC authorities play a predominant role in the PRC market for 
steel rounds and billets. Because of the predominant role played by GOC 
authorities in the production of steel rounds and billets, we 
preliminarily determine that the prices actually paid in the PRC for 
steel rounds and billets during the POI are not appropriate tier one 
benchmarks under our regulations.
    Turning to tier two benchmarks, i.e., world market prices available 
to purchasers in the PRC, we have placed on the record the benchmark 
price information that we used in the final determination of OCTG from 
the PRC. See OCTG from the PRC, and accompanying Issues and Decision 
Memorandum at Comment 13a; see also Memorandum to the File dated 
February 22, 2010, ``Steel Rounds Benchmark Prices.'' The benchmark 
price that we used in OCTG from the PRC is a compilation of the 
following prices: Export prices from Steel Business Briefing (``SBB'') 
for billet from Latin America, Turkey, the Black Sea/Baltic region; SBB 
East Asia import prices; and two series of London Metal Exchange 
prices.
    The benchmark price from OCTG from the PRC represents an average of 
commercially-available world market prices for steel rounds and billets 
that would be available to purchasers in the PRC. We note that, in 
addition to OCTG from the PRC, the Department has relied on pricing 
data from industry publications such as SBB in other recent CVD 
proceedings involving the PRC. See, e.g., CWP Decision Memorandum at 11 
and LWRP Decision Memo at 9. Also, 19 CFR 351.511(a)(2)(ii) states that 
where there is more than one commercially available world market price, 
the Department will average the prices to the extent practicable. 
Therefore, we have averaged the prices to calculate an overall 
benchmark.
    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 the freight 
charges that would be incurred to deliver steel rounds to the 
respondents' plants. We have also added import duties, as reported by 
the GOC, and the value-added tax (``VAT'') applicable to imports of 
steel rounds and billet into the PRC. We have compared these prices to 
the respondents' actual purchase prices, including any taxes and 
delivery charges incurred to deliver the product to the respondents' 
plants.
    Comparing the adjusted benchmark prices to the prices paid by the 
respondents for their steel rounds and billet, we preliminarily 
determine that the GOC provided steel rounds and billet for less than 
adequate remuneration, and that a benefit exists in the amount of the 
difference between the benchmark and what the respondents paid. See 19 
CFR 351.511(a).
    Finally, with respect to specificity, the GOC at page 91 of the GQR 
stated, ``Steel rounds (billets in round shape that can be used to 
produce seamless pipe) are {used{time}  by the seamless pipe 
industry.'' Therefore, we preliminarily determine that this subsidy is 
specific because the recipients are limited in number. See section 
771(5A)(D)(iii)(I) of the Act.
    Based on the above, we preliminarily determine that the GOC 
conferred a countervailable subsidy on TPCO and Hengyang through the 
provision of steel rounds for less than adequate remuneration. To 
calculate the subsidy, we took the difference between the delivered 
world market price and what each respondent paid for steel rounds, 
including delivery charges, during the POI. On this basis, we 
preliminarily calculated a net countervailable ad valorem subsidy rate 
of 4.98 percent for TPCO and 2.82 percent for Hengyang.

D. Provision of Electricity for Less Than Adequate Remuneration

    For the reasons explained in the ``Use of Facts Otherwise Available 
and Adverse Facts Available'' section above, we are basing our 
determination regarding the government's provision of electricity in 
part on AFA.
    In a CVD case, the Department requires information from both the 
government of the country whose merchandise is under investigation and 
the foreign producers and exporters. When the government fails to 
provide requested information concerning alleged subsidy programs, the 
Department, as AFA, typically finds that a financial contribution 
exists under the alleged program and that the program is specific. 
However, where possible, the Department will normally rely on the 
responsive producer's or exporter's records to determine the existence 
and amount of the benefit to the extent that those records are useable 
and verifiable.
    Consistent with this practice, the Department finds that the GOC's 
provision of electricity confers a financial contribution, under 
section 771(5)(D)(iii) of the Act, and is specific, under section 
771(5A) of the Act. To determine the existence and amount of any 
benefit from this program, we relied on the companies' reported 
information on the amounts of electricity they purchased and the 
amounts they paid for electricity during the POI. We compared the rates 
paid by TPCO and Hengyang for their electricity to the highest rates 
that they would have paid in the PRC during the POI. Specifically, we 
have selected the highest rates for ``large industrial users'' for the 
peak, valley and normal ranges. The valley and normal ranges were 
selected from the GQR at Exhibit 85, Electricity Sale Rate Schedule of 
Zhejiang Grid. The peak rate is the electricity rate for Dongguan City 
as reported in the GOC's March 12, 2009 supplemental questionnaire 
response at Exhibit S2-4 in the CVD investigation of ``Certain Kitchen 
Appliance Shelving and Racks from the People's Republic of China.'' See 
Memorandum to File from Yasmin Nair, International Trade Compliance 
Analyst, Office 1, ``Electricity Rate Data'' (February 22, 2010). This 
benchmark reflects the adverse inference we have drawn as a result of 
the GOC's failure to act to the best of its ability in providing 
requested information about its provision of electricity in this 
investigation.
    On this basis, we preliminarily determine the countervailable 
subsidy to be 1.53 percent ad valorem for TPCO and 3.91 percent ad 
valorem for Hengyang.

E. The State Key Technology Project Fund

    TPCO reported that it received funds from the State Key Technology 
Renovation Fund in 2003. In Exhibit V-

[[Page 9175]]

1 of the GQR, the GOC provided the notice for implementation of the 
fund. The notice states that the purpose of the program is to ``support 
the technological renovation of key industries, key enterprises and key 
products * * *'' The notice also states, ``The enterprises shall be 
mainly selected from large-sized state-owned enterprises and large-
sized state holding enterprises among the 512 key enterprises, 120 
pilot enterprise groups and the leading enterprises of the 
industries.''
    The Department has previously found this program to be 
countervailable. See, e.g., Certain New Pneumatic Off-the-Road Tires 
From the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Negative Determination of Critical 
Circumstances, 73 FR 40480 (July 15, 2008), and the accompanying Issues 
and Decision Memorandum at page 23 and Comment G.7.
    We preliminarily determine that TPCO received a countervailable 
subsidy under the State Key Technology Renovation Fund. We find that 
this grant is a direct transfer of funds within the meaning of section 
771(5)(D)(i) of the Act, providing a benefit in the amount of the 
grant. See 19 CFR 351.504(a). Further, we preliminarily determine that 
the grant provided under this program is limited as a matter of law to 
certain enterprises; i.e., large-sized state-owned enterprises and 
large-sized state holding enterprises among the 512 key enterprises. 
Hence, we preliminarily find that the subsidy is specific under section 
771(5A)(D)(i) of the Act.
    To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants. See 19 CFR 351.524(b). Because 
the grant exceeded 0.5 percent of TPCO's sales in the year the grant 
was approved (i.e., 2003), we have allocated the benefit over the 15-
year AUL using the discount rate described under the ``Benchmarks and 
Discount Rates'' section above. On this basis, we preliminarily 
determine the countervailable subsidy to be 0.01 percent ad valorem for 
TPCO.

F. Subsidies Provided in the Tianjin Binhai New Area and the Tianjin 
Economic and Technological Development Area

    TPCO reported that it used two programs for companies in the 
Tianjin Binhai New Area (``TBNA''): the Science and Technology Fund 
Program and the Accelerated Depreciation Program. TPCO received a grant 
under the Science and Technology Fund Program and paid reduced income 
taxes under the Accelerated Depreciation Program. TPCO also reported 
that it purchased land-use rights and rented land-use rights for 
different plots of land within the TBNA during the POI and prior to the 
POI.
Science and Technology Fund
    The GOC's measures for the Science and Technology Fund, which the 
GOC provided at 134 of the GQR, describe the fund's purpose as follows: 
(1) Promote the construction of the science-technology infrastructure 
in TBNA; (2) enhance science-technology renovation and service 
abilities; (3) improve the business environment of renovation 
entrepreneurship; and 4) construct a new science-technology renovation 
system. On page 138 of the GQR, the GOC stated that eligibility for the 
program is limited to enterprises within the TBNA Administrative 
Committee's jurisdiction.
    We preliminarily determine that TPCO received a countervailable 
subsidy during the POI under the TBNA Science and Technology Fund 
Program. We find that this grant is a direct transfer of funds within 
the meaning of section 771(5)(D)(i) of the Act, providing a benefit in 
the amount of the grant. See 19 CFR 351.504(a). We further determine 
preliminarily that grants under this program are limited to enterprises 
located in a designated geographic region (i.e., the TBNA). Hence, the 
grants are specific under section 771(5A)(D)(iv) of the Act.
    To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants. See 19 CFR 351.524(b). Because 
the benefit was less than 0.5 percent of TPCO's consolidated sales 
during the POI, we have preliminarily expensed the entire amount to the 
POI. See 19 CFR 351.524(b)(2). On this basis, we preliminarily 
determine the countervailable subsidy to be 0.03 percent ad valorem for 
TPCO.
Accelerated Depreciation Program
    Regarding the Accelerated Depreciation program, the GOC circular 
for the program (Exhibit 109 of the GQR) stipulates that enterprises in 
the TBNA may shorten the depreciation period of certain fixed assets by 
a maximum of 40 percent of the present depreciation period. On page 147 
of the GQR, the GOC stated that eligibility for the program is limited 
to enterprises within the TBNA.
    We preliminarily determine that TPCO received a countervailable 
subsidy during the POI under the Accelerated Depreciation program. The 
Accelerated Depreciation program constitutes a financial contribution 
in the form of revenue forgone that is otherwise due within the meaning 
of section 771(5)(D)(ii) of the Act, with the benefit equaling the 
income tax savings (see 19 CFR 351.509(a)). The program affected TPCO's 
income taxes for the 2007 tax year. Thus, under the normal standard in 
19 CFR 351.509(b), TPCO received a benefit from this program in 2008, 
when it filed its 2007 annual tax return. Further, we determine 
preliminarily that the reduction afforded by this program is limited to 
enterprises located in designated geographic regions and, hence, is 
specific under section 771(5A)(D)(iv) of the Act.
    To calculate the benefit, we divided the reduction in TPCO's income 
taxes resulting from the program by TPCO's consolidated sales, in 
accordance with 19 CFR 351.524(c)(1) and 19 CFR 351.525(b)(6)(iii). On 
this basis, we preliminarily determine the countervailable subsidy to 
be 0.58 percent ad valorem for TPCO.
Land
    Regarding land, TPCO and its reporting cross-owned affiliates are 
all located in the TBNA, and TPCO, TPCO Iron, and Yuantong have 
purchased ``granted'' land-use rights within the TBNA. At page 86 of 
the GQR, the GOC reported that TPCO obtained its land-use rights in 
accordance with Article 11 of Decree 21 of the Ministry of Land and 
Resources. Article 11, at Exhibit 73 of the GQR, establishes provisions 
for the ``agreement-based assignment of the right to use state-owned 
land.'' Article 11 states that the ``agreement-based assignment of the 
right to use state-owned land'' refers to the land user's right to use 
state-owned land for a certain period, and to the land user's payment 
of a fee to the state for the land-use right. TPCO and TPCO Iron 
purchased their land-use rights from the Dongli District Land and 
Resource Administration Bureau, and Yuantong purchased its land-use 
rights from the Tianjin Port Bonded Zone Land and Resource 
Administration Bureau.
    The Department determined in LWS that the provision of land-use 
rights constitutes the provision of a good within the meaning of 
section 771(5)(D)(iii) of the Act.\23\ The Department also found that 
when the land is in an industrial park located

[[Page 9176]]

within the seller's (e.g., county's or municipality's) jurisdiction, 
the provision of the land-use rights is regionally specific (see 
section 771(5A)(D)(iv) of the Act).\24\ In the instant investigation, 
the TBNA is a designated area within the jurisdictions that provided 
land-use rights to TPCO and its cross-owned affiliates since December 
11, 2001. Therefore, consistent with LWS, we preliminarily find that 
TPCO's purchases of granted land-use rights give rise to 
countervailable subsidies to the extent that the purchases conferred a 
benefit. We will continue to evaluate for the final determination the 
circumstances under which TPCO received land for LTAR pursuant to its 
location in this zone.
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    \23\ See Laminated Woven Sacks From the People's Republic of 
China: Final Affirmative Countervailing Duty Determination and Final 
Affirmative Determination, in Part, of Critical Circumstances, 73 FR 
35639 (June 24, 2008) (``LWS''), and the accompanying Issues and 
Decision Memorandum at Comment 8.
    \24\ Id. at Comment 9.
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    To determine whether TPCO received a benefit, we have analyzed 
potential benchmarks in accordance with 19 CFR 351.511(a). First, we 
look to whether there are market-determined prices within the country. 
See 19 CFR 351.511(a)(2)(i). In LWS, the Department determined that 
``Chinese land prices are distorted by the significant government role 
in the market'' and, hence, that usable tier one benchmarks do not 
exist.\25\ The Department also found that tier two benchmarks (world 
market prices that would be available to purchasers in the PRC) are not 
appropriate.\26\ See 19 CFR 351.511(a)(2)(ii). Therefore, the 
Department determined the adequacy of remuneration by reference to tier 
3 and found that the sale of land-use rights in the PRC was not 
consistent with market principles because of the overwhelming presence 
of the government in the land-use rights market and the widespread and 
documented deviation from the authorized methods of pricing and 
allocating land.\27\ See 19 CFR 351.511(a)(2)(iii). There is 
insufficient new information on the record of this investigation to 
warrant a change from the findings in LWS.
---------------------------------------------------------------------------

    \25\ Id. at Comment 10.
    \26\ Id. at section IV.A.1, ``Analysis of Programs--Government 
Provision of Land for Less Than Adequate Remuneration.''
    \27\ Id. at Comment 10.
---------------------------------------------------------------------------

    For these reasons, we are not able to use Chinese or world market 
prices as a benchmark. Therefore, we are preliminarily comparing the 
price that TPCO paid for its granted land-use rights with comparable 
market-based prices for land purchases in a country at a comparable 
level of economic development that is reasonably proximate to, but 
outside of, the PRC. Specifically, we are preliminarily comparing the 
price TPCO paid to sales of certain industrial land in industrial 
estates, parks, and zones in Thailand, consistent with LWS.
    To calculate the benefit, we computed the amount that TPCO would 
have paid for its granted land-use rights and subtracted the amount 
TPCO actually paid for each purchase. For purchases in which the 
subsidy amount exceeded 0.5 percent of TPCO's sales in the year of 
purchase, we have used the discount rate described under the Benchmarks 
and Discount Rates section above to allocate the benefit over the life 
of the land-use rights contract. For these purchases, we divided the 
amount allocated to the POI by TPCO's consolidated sales during the 
POI. For purchases in which the benefit was less than 0.5 percent of 
TPCO's consolidated sales in the year of the purchase, we have 
preliminarily expensed the entire amount to the year in which TPCO 
purchased the land-use rights. See 19 CFR 351.524(b)(2). On this basis, 
we preliminarily determine the total countervailable subsidy for all of 
TPCO's land-use rights purchases to be 0.11 percent ad valorem during 
the POI.
    TPCO also reported that it rented certain land parcels within the 
TBNA from TPCO Holding during the POI. Specifically, on pages 45-46 of 
the TQR, TPCO reported that it operates on the largest of these three 
parcels under a lease agreement that it signed with TPCO Holding in 
2005. TPCO also stated that it will compensate TPCO Holding for the 
lease of two other parcels under terms that TPCO and TPCO Holding will 
memorialize in 2009. Finally, TPCO explained that it rented office 
space in the TBNA from another party during the POI.\28\
---------------------------------------------------------------------------

    \28\ The information on this party is business proprietary. 
Thus, we have addressed this information in the TPCO Calculation 
Memo.
---------------------------------------------------------------------------

    As we explained above in the ``Attribution of Subsidies'' section, 
we preliminarily determine that TPCO Holding was an authority within 
the meaning of section 771(5)(B) of the Act at the time of the lease 
agreement and throughout the POI. Moreover, we preliminarily determine 
that this subsidy is de facto specific because it is limited to TPCO 
(section 771(5A)(D)(iii)(I) of the Act). Therefore, consistent with OTR 
Tires from the PRC, we preliminarily find that TPCO's lease of land 
under the 2005 lease gives rise to a countervailable subsidy to the 
extent that the lease conferred a benefit.\29\
---------------------------------------------------------------------------

    \29\ See OTR Tires Decision Memo at Comment F.12.
---------------------------------------------------------------------------

    To determine whether TPCO received a benefit, we are following the 
same steps outlined above for the purchase of land-use rights. 
Specifically, we are preliminarily comparing the rent TPCO paid to 
industrial rental rates for factory space in Thailand during the POI. 
We are preliminarily attributing the subsidy to TPCO's consolidated 
sales, in accordance with 19 CFR 351.525(b)(6)(iii).
    On this basis, we preliminarily determine the countervailable 
subsidy to be 2.55 percent ad valorem for TPCO.

G. Other Subsidies Received by TPCO

    For the reasons explained in the ``Use of Facts Otherwise Available 
and Adverse Facts Available'' section above, we are basing our 
determination regarding the government's provision of other subsidies 
received by TPCO in part on AFA.
    The information submitted by TPCO in its February 16, 2010, 
response regarding these subsidies is business proprietary. 
Consequently, we have addressed these subsidies in the TPCO Calculation 
Memo.
    We preliminarily determine that TPCO received countervailable 
subsidies. We find that these subsidies are a direct transfer of funds 
within the meaning of section 771(5)(D)(i) of the Act, providing a 
benefit in the amount of the grant. See 19 CFR 351.504(a). We 
determine, in the absence of a response from the GOC, that the 
subsidies received under this program are limited to TPCO. Hence, we 
find that these subsidies are specific under section 771(5A)(D)(i) of 
the Act.
    To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants. See 19 CFR 351.524(b). Because 
the benefit was less than 0.5 percent of TPCO's consolidated sales 
during the POI, we have preliminarily expensed the entire amount to the 
POI. See 19 CFR 351.524(b)(2). On this basis, we preliminarily 
determine the countervailable subsidy to be 0.03 percent ad valorem for 
TPCO.

H. Import Tariff and VAT Exemptions for FIEs 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

[[Page 9177]]

the program is to encourage foreign investment and to introduce foreign 
advanced technology equipment and industry technology upgrades.
    TPCO Group, through TPCO International, received VAT and tariff 
exemptions under this program. TPCO received these exemptions due to 
its status as a qualified domestic enterprise that received a 
Certificate for State-Encouraged Projects, according to the GQR at page 
70. Hengyang Valin and Hengyang MPM also reported using this program 
during the POI.
    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. In 
CFS from the PRC, the Department found the beneficiaries of this 
program to be specific within the meaning of section 771(5A)(D)(iii)(I) 
of the Act. See CFS Decision Memorandum at Comment 16 (discussing and 
affirming the preliminary determination that this program is specific 
under section 771(5A)(D)(iii)(I) of the Act despite the fact that the 
``pool of companies eligible for benefits is larger than FIEs''). No 
information has been provided in this investigation to demonstrate that 
the beneficiary companies are a non-specific group. Therefore, 
consistent with the determination in CFS from the PRC, we preliminarily 
find that the VAT and tariff exemptions extended under this program are 
provided to a group of industries and that the subsidy is specific.
    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, TPCO and Hengyang have provided a 
list of VAT and tariff exemptions that they received for imported 
capital equipment during the 15-year AUL period. In light of our 
preliminary determination to find subsidies only after December 11, 
2001, we have not examined VAT and tariff exemptions prior to this 
date. To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants. See 19 CFR 351.524(b). For 
certain years prior to the POI, TPCO and Hengyang reported VAT and 
tariff exemptions that were more than 0.5% of their sales. Based on 
TPCO's and Hengyang's information, we preliminarily determine that the 
VAT and tariff exemptions were for capital equipment. We have allocated 
the benefit over the 15-year AUL using the discount rate described 
under the ``Benchmarks and Discount Rates'' section above.
    For TPCO and Hengyang, the total amount of VAT and tariff 
exemptions received during the POI did not exceed 0.5% of their POI 
sales. Based on TPCO's and Hengyang's information, we preliminarily 
determine that the VAT and tariff exemptions were for capital 
equipment. Thus, we have preliminarily expensed the entire amount to 
the POI. See 19 CFR 351.524(b)(2).
    To calculate the countervailable subsidy, we used our standard 
methodology for non-recurring grants. See 19 CFR 351.524(b). 
Specifically, we used the discount rate described above in the 
``Benchmarks and Discount Rates'' section to calculate the amount of 
the benefit for the POI. On this basis, we preliminarily determine that 
a countervailable benefit of 0.18 percent ad valorem exists for TPCO, 
and that a countervailable benefit of 0.44 percent ad valorem exists 
for Hengyang.

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

    According to the Provisional Measures on Enterprise Income Tax 
Credit for Investment in Domestically Produced Equipment for Technology 
Renovation {Projects{time}  (CAI SHU ZI {1999{time}  No. 290), a 
domestically invested company may claim tax credits on the purchase of 
domestic equipment if the project is compatible with the industrial 
policies of the GOC. Specifically, a tax credit up to 40 percent of the 
purchase price of the domestic equipment may apply to the incremental 
increase in tax liability from the previous year.\30\ The Department 
has previously found this program countervailable. See, e.g., Line Pipe 
from the PRC and accompanying Issues and Decision Memorandum at 25-26.
---------------------------------------------------------------------------

    \30\ See GQR at 51.
---------------------------------------------------------------------------

    Hengyang reported that Hengyang MPM received this benefit during 
the POI. See HQR at 24.
    We preliminarily determine that income tax credits for the purchase 
of domestically produced equipment are countervailable subsidies. The 
tax credits are a financial contribution in the form of revenue forgone 
by the government and provide a benefit to the recipients in the amount 
of the tax savings. See section 771(5)(D)(ii) of the Act and 19 CFR 
351.509(a)(1). We further preliminarily determine that these tax 
credits are contingent upon use of domestic over imported goods and, 
hence, are specific under section 771(5A)(C) of the Act.
    To calculate the benefit, we treated the income tax savings enjoyed 
by Hengyang MPM as a recurring benefit, consistent with 19 CFR 
351.524(c)(1), and divided the company's tax savings by the combined 
total sales of Hengyang Valin, Hengyang MPM, Xigang Seamless, and 
Special Pipe, minus inter-company sales, during the POI. On this basis, 
we preliminarily determine that a countervailable subsidy of 0.34 
percent ad valorem exists for Hengyang under this program.

J. ``Two Free, Three Half'' Program

    Under Article 8 of the FIE Tax Law, an FIE that is ``productive'' 
and is 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. See GOC's 
January 25, 2010, cross-owned companies submission at Exhibit P-1. The 
Department has previously found this program countervailable. See, 
e.g., CFS Decision Memorandum at 10-11.
    Hengyang reported that Special Pipe and Resources Steel used this 
program during the POI.\31\
---------------------------------------------------------------------------

    \31\ See HQR at Volume 5, page 37.
---------------------------------------------------------------------------

    We preliminarily determine that the exemption or reduction of the 
income tax paid by productive FIEs under this program confers a 
countervailable subsidy. The exemption/reduction is a financial 
contribution in the form of revenue 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 
preliminarily determine that the exemption/reduction afforded by this 
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. See CFS Decision Memorandum at Comment 14.

[[Page 9178]]

    To calculate the benefit, we treated the income tax savings enjoyed 
by Special Pipe and Resources Steel as a recurring benefit, consistent 
with 19 CFR 351.524(c)(1). To compute the amount of the tax savings, we 
compared the income tax rate the above companies would have paid in the 
absence of the program with the income tax rate the company actually 
paid. We divided Special Pipe's tax savings during the POI by the 
combined sales of Special Pipe, Xigang Seamless, Hengyang Valin, and 
Hengyang MPM (exclusive of inter-company sales). We divided Resources 
Steel's tax savings during the POI by the combined sales of Resources 
Steel, Special Pipe, and Xigang Seamless (exclusive of inter-company 
sales). On this basis, we preliminarily determine that Hengyang 
received a countervailable subsidy of 0.27 percent ad valorem under 
this program.

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

    Under Article 9 of the FIE Tax Law, the provincial governments have 
the authority to exempt FIEs from the local income tax of three 
percent. See the GOC's January 25, 2010, cross-owned companies 
submission at Exhibit P-1.
    The Department has previously found this program to be 
countervailable. See, e.g., CFS Decision Memorandum at pages 12-13; see 
also Citric Acid Decision Memorandum at page 21.
    Hengyang reported that Seamless Pipe and Resources Steel used this 
program during the POI.\32\
---------------------------------------------------------------------------

    \32\ See HQR at Volume 5, page 39.
---------------------------------------------------------------------------

    We preliminarily determine that the exemption from or reduction in 
the local income tax received by ``productive'' FIEs under this program 
confers a countervailable subsidy. The exemption or reduction is a 
financial contribution in the form of revenue forgone that is otherwise 
due by the government, and it provides a benefit to the recipient in 
the amount of the tax savings, per section 771(5)(D)(ii) of the Act and 
19 CFR 351.509(a)(1). We also preliminarily determine that the 
exemption or reduction afforded by this 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 for Special Pipe and Resources Steel, we 
treated the income tax savings enjoyed by the companies as a recurring 
benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of 
the tax savings, we compared the local income tax rate that the 
companies would have paid in the absence of the program (i.e., three 
percent) with the income tax rate the companies actually paid (i.e., 
zero percent).
    For Special Pipe, we divided the company's tax savings received 
during the POI by the combined POI sales of Special Pipe, Xigang 
Seamless, Hengyang Valin, and Hengyang MPM, minus inter-company sales. 
For Resources Steel, we divided the company's tax savings received 
during the POI by the combined sales of Resources Steel, Special Pipe, 
and Xigang Seamless. On this basis, we preliminarily determine that 
Hengyang received a countervailable subsidy of 0.07 percent ad valorem.

L. Government Debt Forgiveness

TPCO
    On pages 26-27 of the TQR, TPCO reported that in 2006 and 2008 it 
settled claims related to loans that continued to be outstanding after 
a debt-to-equity transaction occurring in 2001. TPCO settled debt held 
by China Orient Asset Management Corporation and Cinda. See TPCO 
Calculation Memo.
    We preliminarily determine that through this settlement the GOC 
forgave debt owed by TPCO and, thus, provided a financial contribution 
to TPCO in the form of a direct transfer of funds (section 771(5)(D)(i) 
of the Act). The benefit to TPCO is the amount of the debt forgiven 
(section 771(5)(D)(i) of the Act and 19 CFR 351.508(a)). Additionally, 
we preliminarily determine that this subsidy is de facto specific 
because it is limited to TPCO (section 771(5A)(D)(iii)(I) of the Act).
    Forgiveness of part of the debt occurred in 2006, and approval for 
forgiveness of the remainder of the debt occurred in 2008. To calculate 
the countervailable subsidy for the debt forgiveness approved in each 
year, we used our standard methodology for non-recurring benefits. See 
19 CFR 351.524(b). Because the amount of the 2006 portion of the debt 
forgiveness exceeded 0.5 percent of TPCO's sales in 2006, we have 
allocated the benefit over the 15-year AUL using the discount rate 
described under the Benchmarks and Discount Rates section above. We 
attributed the subsidy amount for the POI to TPCO's consolidated sales. 
On this basis, we preliminarily determine the countervailable subsidy 
to be 0.04 percent ad valorem for TPCO.
    For the debt forgiveness approved in 2008, the benefit was less 
than 0.5 percent of TPCO's consolidated sales during the POI. Thus, we 
have preliminarily expensed the entire amount to the POI. See 19 CFR 
351.524(b)(2). On this basis, we preliminarily determine the 
countervailable subsidy to be 0.11 percent ad valorem for TPCO. The 
Department may seek further information following this preliminary 
determination regarding the extent of forgiveness.
Hengyang
    In the HQR at Volume 5, pages 24-27, Hengyang reported that Xigang 
Group and Resources Steel underwent loan restructurings since December 
11, 2001, through the POI. The information on these loan restructurings 
is business proprietary. Thus, we have addressed the information in the 
Hengyang Calculation Memo.
    We preliminarily determine that through this settlement the GOC 
forgave debt owed by Xigang Group and Resources Steel and, thus, 
provided a financial contribution to Xigang Group and Resources Steel 
in the form of a direct transfer of funds (section 771(5)(D)(i) of the 
Act). The benefit to Xigang Group and Resources Steel is the amount of 
the debt forgiven (19 CFR 351.508(a)). Additionally, we preliminarily 
determine that this subsidy is de facto specific as it is limited to 
Xigang Group and Resources Steel (section 771(5A)(D)(iii)(I) of the 
Act).
    Approval for forgiveness of debt occurred in 2005, 2006, 2007, and 
2008. To calculate the countervailable subsidy for the debt forgiveness 
approved in each year, we used our standard methodology for non-
recurring benefits. See 19 CFR 351.524(b). Because the amount of the 
2005 and 2007 portions of the debt forgiveness exceeded 0.5 percent of 
Xigang Group's sales in 2005 and 2007, respectively, we have allocated 
the benefit for each year over the 15-year AUL using the discount rate 
described under the Benchmarks and Discount Rates section above. We 
attributed the subsidy amount for the POI to Xigang Group's 
consolidated sales.
    For the debt forgiveness approved in 2006, the benefit was less 
than 0.5 percent of Xigang Group's consolidated sales. Thus, we have 
preliminarily expensed the entire amount to 2006. See 19 CFR 
351.524(b)(2).
    For the debt forgiveness approved during the POI, the benefit was 
less than 0.5 percent of Xigang Group's and Resources Steel's 
consolidated sales during the POI. Thus, we have preliminarily expensed 
the entire amount to the POI. See 19 CFR 351.524(b)(2).
    On this basis, we preliminarily determine the countervailable 
subsidy

[[Page 9179]]

to be 2.66 percent ad valorem for Hengyang. The Department may seek 
further information following this preliminary determination regarding 
the extent of forgiveness.

II. Program Preliminarily Determined Not Countervailable

A. Export Restrictions on Coke

    Petitioners alleged that the GOC imposed export restrictions on 
coke in the form of export quotas, related export licensing and export 
duties. Petitioners maintain that such export restraints had a direct 
and discernible effect on the Chinese domestic prices of coke, thereby, 
artificially lowering them compared to world market prices. 
Accordingly, petitioners asserted that the GOC's export restraints on 
coke provided a countervailable subsidy to Chinese seamless pipe 
producers during the POI.
    The Department has countervailed export restraint allegations in 
only a limited number of cases. In Final Affirmative Countervailing 
Duty Determination and Countervailing Duty Order; Leather From 
Argentina, 55 FR 40212 (October 2, 1990), we found an embargo on hide 
exports to provide a countervailable subsidy to Argentine leather 
producers based on a long-term historical price comparison that 
demonstrated a clear link between the imposition of the embargo and the 
divergence of prices. In Coated Free Sheet Paper from Indonesia: Final 
Affirmative Countervailing Duty Determination, 72 FR 60642 (October 25, 
2007), and accompanying Issues and Decision Memorandum at Comment 24, 
we found that a log embargo provided a countervailable benefit to paper 
producers, in part, based upon independent studies that stated that the 
log embargo provided a subsidy to downstream producers.
    At Exhibit 31 of their February 12, 2010, pre-preliminary 
determination comments, Petitioners submitted an economic study from 
the Brattle Group on the economic effects of export restraints on the 
price of coke in the PRC. Given the relatively recent submission date, 
the Department has not had sufficient time to fully consider the 
information presented in this study. However, based on an initial 
analysis of this study as well as the other record evidence, we 
preliminarily find that the record does not support a finding that this 
program is countervailable. The study provides an economic model that 
explains, in theory, how export restraints might have an impact on 
quantities and prices. The economic model and the other limited data on 
the record do not demonstrate that the GOC is entrusting or directing 
private entities to provide coke to the respondents and, therefore, the 
record does not support a finding of a government financial 
contribution. Moreover, the record evidence does not sufficiently 
demonstrate a link between the particular export restraints pertaining 
to coke and the historic trends in domestic and world coke supply and 
prices, and does not address other possible contributing factors behind 
the trends in those quantities and prices. In particular, the study 
provides data for the period January 2006 through May 2009 for Chinese 
domestic coke prices and Chinese export coke prices. Although the data 
show that domestic Chinese prices have been lower than export prices 
from the PRC, the data do not show a connection between the export 
restraints and this price difference. Therefore, consistent with our 
findings in OCTG from the PRC,\33\ we preliminarily continue to find 
the program to be not countervailable.
---------------------------------------------------------------------------

    \33\ See OCTG from the PRC, and accompanying Issues and Decision 
Memorandum at Comment 32.
---------------------------------------------------------------------------

B. Export Incentive Payments Characterized as ``VAT Rebates''

    The Department's regulations state that in the case of an exemption 
upon export of indirect taxes, a benefit exists only 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.'' See 19 CFR 351.517(a); see also 
19 CFR 351.102 (for a definition of ``indirect tax'').
    To determine whether the GOC provided a benefit under this program, 
we compared the VAT exemption upon export to the VAT levied with 
respect to the production and distribution of like products when sold 
for domestic consumption. On page 39 of the GQR, the GOC reported that 
the VAT levied on seamless pipe sales in the domestic market (17 
percent) exceeded the amount of VAT exempted upon the export of 
seamless pipe (13 percent). There is, therefore, no excess VAT 
exemption. Thus, we preliminarily determine that the VAT exempted on 
the export of seamless pipe is not countervailable.

III. Program for Which More Information Is Required

Deed Tax Exemption for SOEs Undergoing Mergers or Restructuring

    In Hengyang's February 16, 2010, supplemental questionnaire 
response at page 14, Hengyang reported that Hengyang Valin received a 
one-time benefit from this program. Because Hengyang did not report 
this potential subsidy until its February 16, 2010, submission, we did 
not have enough time to request further information from the GOC 
regarding this program. Further, to determine whether any potential 
benefit from this program exceeded 0.5 percent of Hengyang's sales in 
the year of approval, we requested Hengyang's 2003 sales figures.\34\ 
We granted Hengyang an extension until February 22, 2010, to submit 
this information.\35\ Because we lack necessary information from the 
GOC and Hengyang, we intend to address the countervailability of this 
program in a post-preliminary determination.
---------------------------------------------------------------------------

    \34\ See the Department's February 16, 2010, letter to Hengyang, 
``Third Supplemental Questionnaire.''
    \35\ See the Department's February 17, 2010, letter to Hengyang, 
``Request for Extension of Time to File a Response to the 
Department's Supplemental Questionnaire.''
---------------------------------------------------------------------------

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

A. Sub-central Government Programs To Promote Famous Export Brands and 
China World Top Brands

    TPCO reported that it received a grant under this program in 2007. 
On page 50 of the TQR, TPCO stated that the program relates to TPCO's 
trademark and does not relate to any specific merchandise.
    We preliminarily determine that the total amount of the grant was 
less than 0.5 percent of TPCO's consolidated and unconsolidated sales 
in 2007. Thus, without prejudice to whether this is a countervailable 
subsidy, we preliminarily have allocated the benefit exclusively to 
2007 pursuant to 19 CFR 351.524(b)(2). As a result, we preliminarily 
determine that TPCO received no benefit from this program during the 
POI.

B. Exemptions for SOEs From Distributing Dividends to the State

    In the HQR at Vol. 5, page 23, Hengyang reported a potential 
exemption under this program. All of the details of this potential 
exemption, including the Hengyang company that received the benefit, 
are business proprietary. Thus, we have addressed the information in 
the Hengyang Calculation Memo.
    We preliminarily determine that the benefit from this potential 
exemption was less than 0.5 percent of the appropriate sales 
denominator in the year of approval, which was prior to the

[[Page 9180]]

POI. Thus, without prejudice to whether this is a countervailable 
subsidy, we preliminarily have allocated any benefit exclusively to the 
year of approval pursuant to 19 CFR 351.524(b)(2). As a result, we 
preliminarily determine that Hengyang received no benefit from this 
program during the POI.

C. Other Programs

    Based upon responses by the GOC, TPCO, and Hengyang, we 
preliminarily determine that TPCO and Hengyang did not apply for or 
receive benefits during the POI under the programs listed below.

    1. Preferential Loan Programs
    a. Treasury Bond Loans to Northeast
    b. Preferential Loans for State-Owned Enterprises
    c. Preferential Loans for Key Projects and Technologies
    d. Preferential Lending to Seamless Pipe Producers and Exporters 
Classified as ``Honorable Enterprises''
    e. Loans and Interest Subsidies Provided Pursuant to the Northeast 
Revitalization Program
2. Equity Programs
    a. Debt-to-Equity Swap for TPCO
    b. Equity Infusion in TPCO
    c. Exemptions for SOEs From Distributing Dividends to the State
    d. Loan and Interest Forgiveness for SOEs \36\
---------------------------------------------------------------------------

    \36\ We have found company-specific debt forgiveness for TPCO 
and Hengyang under the Government Debt Forgiveness program, as 
described above.
---------------------------------------------------------------------------

3. Tax Benefit Programs
    a. Preferential Income Tax Policy for Enterprises in the Northeast 
Region
    b. Forgiveness of Tax Arrears For Enterprises in the Old Industrial 
Bases of Northeast China
    c. Reduction in or Exemption from Fixed Assets Investment 
Orientation Regulatory Tax
    d. Preferential Tax Programs for Foreign-Invested Enterprises 
Recognized as High or New Technology Enterprises
    e. Income Tax Reductions for Export-Oriented Foreign-Invested 
Enterprises
4. Tariff and Indirect Tax Programs
    a. Stamp Exemption on Share Transfers Under Non-Tradable Share 
Reform
    b. Export Incentive Payments Characterized as ``VAT Rebates''
5. Land Grants and Discounts
    a. Provision of Land to SOEs for Less Than Adequate Remuneration
6. Provision of Inputs for Less than Adequate Remuneration
    a. Provision of Electricity and Water at Less than Adequate 
Remuneration to Seamless Pipe Producers Located in Jiangsu Province
    b. Provision of Coking Coal for Less than Adequate Remuneration
7. Grant Programs
    a. Foreign Trade Development Fund (Northeast Revitalization 
Program)
    b. Export Assistance Grants in Zhejiang Province
    c. Program to Rebate Antidumping Fees in Zhejiang Province 
Subsidies for Development of Famous Export Brands and China World Top 
Brands
    d. Grants to Loss-Making SOEs
    e. Export Interest Subsidies in Liaoning Province
8. Other Regional Programs
    a. High-Tech Industrial Development Zones

Verification

    In accordance with section 782(i)(1) of the Act, we will verify the 
information submitted by the respondents prior to making our final 
determination.

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated a rate for each individually investigated producer/exporter 
of the subject merchandise. Section 705(c)(5)(A)(i) of the Act states 
that for companies not investigated, we will determine an ``all 
others'' rate equal to the weighted average countervailable subsidy 
rates established for exporters and producers individually 
investigated, excluding any zero and de minimis countervailable subsidy 
rates, and any rates determined entirely under section 776 of the Act.
    Notwithstanding the language of section 705(c)(1)(B)(i)(I) of the 
Act, we have not calculated the ``all others'' rate by weight averaging 
the rates of TPCO and Hengyang, because doing so risks disclosure of 
proprietary information. Therefore, we have calculated a simple average 
of the two responding firms' rates. Since both TPCO and Hengyang 
received countervailable export subsidies and the ``all others'' rate 
is a simple average based on the individually investigated exporters 
and producers, the ``all others'' rate includes export subsidies.
    We preliminarily determine the total estimated net countervailable 
subsidy rates to be:

------------------------------------------------------------------------
                                                             Net subsidy
                   Exporter/manufacturer                        rate
------------------------------------------------------------------------
Tianjin Pipe (Group) Co., Tianjin Pipe Iron Manufacturing          11.06
 Co., Ltd., Tianguan Yuantong Pipe Product Co., Ltd.,
 Tianjin Pipe International Economic and Trading Co.,
 Ltd., and TPCO Charging Development Co., Ltd.............
Hengyang Steel Tube Group Int'l Trading, Inc., Hengyang            12.97
 Valin Steel Tube Co., Ltd., Hengyang Valin MPM Tube Co.,
 Ltd., Xigang Seamless Steel Tube Co., Ltd., Wuxi Seamless
 Special Pipe Co., Ltd., Wuxi Resources Steel Making Co.,
 Ltd., and Jiangsu Xigang Group Co., Ltd..................
All Others................................................         12.02
------------------------------------------------------------------------

    In accordance with sections 703(d)(1)(B) and (d)(2) of the Act, we 
are directing U.S. Customs and Border Protection (``CBP'') to suspend 
liquidation of all entries of seamless pipe 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. Moreover, in accordance with section 
703(e)(2)(A) of the Act, for Hengyang and ``all other'' Chinese 
exporters of seamless pipe, we are directing CBP to apply the 
suspension of liquidation to any unliquidated entries entered, or 
withdrawn from warehouse for consumption, on or after the date 90 days 
prior to the date of publication of this notice in the Federal 
Register.

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

[[Page 9181]]

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, NW., 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 submit a written request to the Acting 
Assistant Secretary for Import Administration, U.S. Department of 
Commerce, Room 1870, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230, 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: February 22, 2010.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2010-4192 Filed 2-26-10; 8:45 am]
BILLING CODE 3510-DS-P