[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17681]
[[Page Unknown]]
[Federal Register: July 20, 1994]
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DEPARTMENT OF COMMERCE
[C-475-815]
Notice of Initiation of Countervailing Duty Investigation: Small
Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and
Pressure Pipe From Italy
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: August 20, 1994.
FOR FURTHER INFORMATION CONTACT: Vincent Kane, Office of Countervailing
Investigations, Import Administration, U.S. Department of Commerce,
Room 3099, 14th Street and Constitution Avenue, NW., Washington, DC
20230; telephone (202) 482-2815.
Initiation
The Petition
On June 23, 1994, Gulf States Tubes, a division of Quanex
Corporation, (hereinafter ``petitioner'') filed with the Department of
Commerce (``the Department'') a countervailing duty petition on behalf
of the United States industry producing small diameter circular
seamless carbon and alloy steel standard, line and pressure pipe
(hereinafter ``seamless pipe''). In accordance with section 701 of the
Tariff Act of 1930, as amended (``the Act''), petitioner alleges that
manufacturers, producers, or exporters of the subject merchandise in
Italy receive countervailable subsidies.
Injury Test
Because Italy is a ``country under the Agreement'' within the
meaning of section 701(b) of the Act, Title VII of the Act applies to
this investigation. Accordingly, the U.S. International Trade
Commission (``ITC'') must determine whether imports of the subject
merchandise from Italy materially injure, or threaten material injury
to, a U.S. industry.
Standing
Petitioner has stated that it has standing to file the petition
because it is an interested party as defined in sections 771(9)(C) and
771(9)(D) of the Act and that it has filed the petition on behalf of
the U.S. industry producing the like product. If any interested party,
as described in sections 771(9)(C), (D), (E), or (F), wishes to
register support for, or opposition to, this petition, such party
should file written notification with the Assistant Secretary for
Import Administration, Room B-099, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, DC 20230.
Scope of the Investigation
For purposes of this investigation, seamless pipes are seamless
carbon and alloy (other than stainless) steel pipes, of circular cross-
section, not more than 114.3 mm (4.5 inches) in outside diameter,
regardless of wall thickness, manufacturing process (hot-finished or
cold-drawn), end finish (plain end, bevelled end, upset end, threaded,
or threaded and coupled), or surface finish. These pipes are commonly
known as standard pipe, line pipe or pressure pipe, depending upon the
application. They may also be used in structural applications.
The seamless pipes subject to this investigation are currently
classifiable under subheadings 7304.10.10.20, 7304.10.50.20,
7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24,
7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60,
7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and
7304.59.80.25 of the Harmonized Tariff Schedule of the United States
(``HTSUS'').
The following information further defines the scope of this
investigation, which covers pipes meeting the physical parameters
described above:
Specifications, Characteristics and Uses: Seamless pressure pipes
are intended for the conveyance of water, steam, petrochemicals,
chemicals, oil products, natural gas and other liquids and gasses in
industrial piping systems. They may carry these substances at elevated
pressures and temperatures and may be subject to the application of
external heat. Seamless carbon steel pressure pipe meeting the American
Society for Testing and Materials (``ASTM'') standard A-106 may be used
in temperatures of up to 1000 degrees fahrenheit, at various American
Society of Mechanical Engineers (``ASME'') code stress levels. Alloy
pipes made to ASTM standard A-335 must be used if temperatures and
stress levels exceed those allowed for A-106 and the ASME codes.
Seamless pressure pipes sold in the United States are commonly produced
to the ASTM A-106 standard.
Seamless standard pipes are most commonly produced to the ASTM A-53
specification and generally are not intended for high temperature
service. They are intended for the low temperature and pressure
conveyance of water, steam, natural gas, air and other liquids and
gasses in plumbing and heating systems, air conditioning units,
automatic sprinkler systems, and other related uses. Standard pipes
(depending on type and code) may carry liquids at elevated temperatures
but must not exceed relevant ASME code requirements.
Seamless line pipes are intended for the conveyance of oil and
natural gas or other fluids in pipe lines. Seamless line pipes are
produced to the API 5L specification.
Seamless pipes are commonly produced and certified to meet ASTM A-
106, ASTM A-53 and API 5L specifications. Such triple certification of
pipes is common because all pipes meeting the stringent A-106
specification necessarily meet the API 5L and ASTM A-53 specifications.
Pipes meeting the API 5L specification necessarily meet the ASTM A-53
specification. However, pipes meeting the A-53 or API 5L specifications
do not necessarily meet the A-106 specification. To avoid maintaining
separate production runs and separate inventories, manufacturers triple
certify the pipes. Since distributors sell the vast majority of this
product, they can thereby maintain a single inventory to service all
customers.
The primary application of ASTM A-106 pressure pipes and triple
certified pipes is in pressure piping systems by refineries,
petrochemical plants and chemical plants. Other applications are in
power generation plants (electrical-fossil fuel or nuclear), and in
some oil field uses (on shore and off shore) such as for separator
lines, gathering lines and metering runs. A minor application of this
product is for use as oil and gas distribution lines for commercial
applications. These applications constitute the majority of the market
for the subject seamless pipes. However, A-106 pipes may be used in
some boiler applications.
The scope of this investigation includes all multiple-stenciled
seamless pipe meeting the physical parameters described above and
produced to one of the specifications listed above, whether or not also
certified to a non-covered specification. Standard, line and pressure
applications are defining characteristics of the scope of this
investigation. Therefore, seamless pipes meeting the physical
description above, but not produced to the A-106, A-53, or API 5L
standards shall be covered if used in an A-106, A-335, A-53, or API 5L
application.
For example, there are certain other ASTM specifications of pipe
which, because of overlapping characteristics, could potentially be
used in A-106 applications. These specifications include A-162, A-192,
A-210, A-333, and A-524. When such pipes are used in a standard, line
or pressure pipe application, such products are covered by the scope of
this investigation.
Specifically excluded from this investigation are boiler tubing,
mechanical tubing, and oil country tubular goods except when used in a
standard, line or pressure pipe application. Also excluded from this
investigation are redraw hollows for cold-drawing when used in the
production of cold-drawn pipe or tube.
Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the scope of this
investigation is dispositive.
Request for Comments From Interested Parties
The scope contained in this investigation, which has been slightly
clarified in the above ``Scope of the Investigation'' section, contains
the clause that products used in standard, line or pressure pipe
applications be included in the scope, regardless of whether they meet
A-106, A-335, A-53 or API 5L standards. Implementing this clause would
require some type of end-use certification. Given the burden on Customs
and the difficulty involved in administering end-use certifications,
the Department generally avoids end-use as a scope criterion. See Final
Determination of Sales at Less Than Fair Value: Certain Alloy and
Carbon Hot-Rolled Bars, Rods, and Semifinished Products of Special Bar
Quality Engineered Steel from Brazil, 58 FR 31496 (June 3, 1993).
However, because petitioner has alleged that circumvention may occur if
end-use is not part of any order resulting from this investigation, we
are requesting comments regarding end-use as a criterion for the scope
of this investigation. Petitioner has based its allegation on
circumstances that occurred in the investigations of Preliminary
Affirmative Determination of Scope Inquiry on Antidumping Duty Orders
on Certain Circular Welded Non-Alloy Steel Pipe from Brazil, the
Republic of Korea, and Mexico, 59 FR 1929 (January 13, 1994).
Petitioner has identified specific possible substitution products for
the scope merchandise. Petitioner has also indicated that, while it is
not aware at this time of substitution occurring, it may occur in the
future should countervailing duties be assessed on seamless standard,
line and pressure pipe. Therefore, we are including end-use in the
scope for purposes of initiation; however, we intend to consider its
appropriateness further and we invite comments from interested parties
regarding the scope information presented above under the ``Scope of
the Investigation'' section of this notice. Specifically, we will
examine comments that address ``end-use'' as a scope criterion.
Interested parties are invited to comment on the following: (1) Whether
or not end-use is an appropriate criterion for the merchandise
described in the ``Scope of the Investigation'' section of this notice;
(2) how the Department would be informed when substitution is
occurring, i.e., a trigger mechanism; (3) at what point the Department
should implement suspension of liquidation and use of end-use
certificates for products meeting the physical parameters described in
the scope other than those stenciled A-106, A-335, A-53 and/or API 5L;
(4) what specific characteristics or factors the Department should
evaluate regarding end-use as a scope criterion; (5) what information
should be provided on an end-use certificate; (6) precise details as to
how the Department and Customs should administer any countervailing
duty orders that result from this investigation given end-use as a
scope criterion; and (7) the universe of products that could possibly
be substituted for the subject merchandise.
Finally, we invite comments from parties on whether the products
within the scope of this investigation constitute more than one class
or kind of merchandise. Parties should include an analysis using the
following factors: (1) The physical characteristics of the merchandise;
(2) the expectations of the ultimate purchaser; (3) the channels of
trade; (4) the ultimate use of the product; and (5) the cost.
Parties interested in commenting on the items mentioned above
should submit their comments no later than close of business October
21, 1994. Rebuttal comments will be accepted no later than close of
business October 31, 1994.
Allegation of Subsidies
Section 702(b) of the Act requires the Department to initiate a
countervailing duty proceeding whenever an interested party files a
petition, on behalf of an industry, that (1) alleges the elements
necessary for an imposition of a duty under section 701(a), and (2) is
accompanied by information reasonably available to petitioner
supporting the allegations.
Initiation of a Countervailing Duty Investigation
The Department has examined the petition on seamless pipe from
Italy and found that it complies with the requirements of section
702(b) of the Act. Therefore, in accordance with section 702 of the
Act, we are initiating a countervailing duty investigation to determine
whether manufacturers, producers, or exporters of seamless pipe from
Italy receive subsidies.
We are including in our investigation the following programs
alleged in the petition to have provided subsidies to producers of the
subject merchandise in Italy:
1. 1988/89 Equity Infusion.
2. Subsidized Loans under Law 675/77.
3. Grants under Law 193/84.
4. Retraining Grants.
5. Preferential Export Financing under Law 227/77.
6. Exchange Rate Guarantee Program under Law 796/76.
7. European Coal and Steel Community (``ECSC'') Loans and Interest
Rebates.
We are not including the following programs alleged to be
benefitting producers of the subject merchandise in Italy:
1. ``Indirect'' Equity Infusion
Petitioner has named Dalmine S.p.A. (``Dalmine'') as the producer
in Italy of the subject merchandise. Until 1989, Dalmine owned 51
percent of a subsidiary, Tubificio Dalmine Italsider S.p.A.
(``Tubificio''). The remaining 49 percent was owned by Dalmine's parent
company ILVA S.p.A. (``ILVA''), which is a government-owned steel
producer. In 1989, Dalmine sold its shares in Tubificio to ILVA.
Petitioner alleges that in return, Dalmine received a cash payment from
ILVA which should be treated as an ``indirect'' equity infusion. The
reasons cited by petitioner are that (1) Tubificio was essentially a
worthless company because it made losses in the three years immediately
prior to the sale, and (2) the cash paid by ILVA served as an indirect
pass-through of illegal subsidies received by ILVA.
In previous cases involving the Italian steel industry, we have
treated capital infusions into unequityworthy companies by government-
owned holding companies such as Finsider S.p.A. (``Finsider'') and the
Istituto per la Ricostruzione Industriale (``IRI'') as countervailable
equity infusions. However, in those cases, the recipient companies were
offering their own shares in exchange for cash. (See, e.g., Final
Affirmative Countervailing Duty Determination: Grain-Oriented
Electrical Steel from Italy, (``Electrical Steel''), 59 FR 18357 (April
18, 1994).)
In the instant case, however, Dalmine sold shares in its
subsidiary, Tubificio, to ILVA, Dalmine's parent and the other owner of
Tubificio. ILVA's holding in Dalmine did not increase (absolutely or
relatively) as a result of this transaction. Therefore, we do not view
this as a direct or indirect equity infusion into Dalmine. Moreover,
ILVA is not a holding company like IRI or Finsider, but an operating
company. While the Department found in Electrical Steel and Final
Affirmative Countervailing Duty Determinations: Certain Steel Products
from Italy, (``Certain Steel from Italy''), 58 FR 37327 (July 9, 1993),
that ILVA benefitted from subsidies, those subsidies were allocated to
ILVA S.p.A.'s operations and not to its subsidiaries. Beyond its simple
claim that the cash paid by ILVA served as an indirect pass-through of
illegal subsidies received by ILVA, petitioner has provided no basis
for believing that ILVA was channelling government funds to Dalmine.
On this basis, we are not including the ``indirect'' equity
infusion in the investigation.
2. Secured and Unsecured Loans From Italian Banks
Petitioner maintains that Dalmine was uncreditworthy from 1978
through 1992. According to petitioner, all secured and unsecured loans
obtained by Dalmine from Italian banks during these years are,
therefore, countervailable. Petitioner states that, while it cannot
outline the terms of the financing provided, the loans are
countervailable because they were provided at interest rates lower than
the rates that should have been charged to an uncreditworthy company.
Petitioner has not specified under which laws or programs the
secured and unsecured loans are being provided, nor has petitioner
provided information as to how this funding is specific to the steel
industry (see the petition requirements in Sec. 355.12(b)(7) of the
Department's regulations). On this basis, we are not including the
secured and unsecured loans in our investigation.
3. Debt Forgiveness in Connection With the 1981 and 1988 Restructuring
Plans
Petitioner claims that in Certain Steel from Italy, the Department
found that Finsider (the government-owned holding company for the steel
industry until 1989) benefitted from government assumption of debt in
connection with the 1981 and 1988 restructurings of the state-owned
steel industry. Because Dalmine was a subsidiary of Finsider in those
years, petitioner alleges that Dalmine benefitted from the debt
forgiveness provided to Finsider in connection with these
restructurings.
Regarding the 1981 debt forgiveness, the Department established in
Certain Steel from Italy that Finsider assumed the debts of its
subsidiary Italsider which we treated as a countervailable subsidy to
Italsider. In the present case, however, petitioner has not provided
any evidence that Dalmine benefitted from this debt forgiveness or that
Finsider forgave Dalmine's debts.
With respect to the 1988 debt forgiveness, we found in Certain
Steel from Italy that a portion of Finsider's liabilities was forgiven
in connection with another restructuring of the state-owned steel
industry undertaken from 1988-1990. We treated this forgiveness as a
countervailable subsidy to ILVA, which was the respondent company in
that investigation. However, in Electrical Steel, we focused our
investigation on subsidies provided directly to the producer of the
subject merchandise, rather than subsidies received by its parent
company. Therefore, we did not treat the debt forgiveness provided to
Finsider as a countervailable benefit in Electrical Steel.
In this case, petitioner has not shown that any debt forgiveness
was provided directly to Dalmine or that a portion of the debt forgiven
to Finsider in 1988 can be attributed to Dalmine. On this basis, we are
not including the 1981 or 1988 instances of debt forgiveness provided
to Finsider in our investigation.
4. European Investment Bank (``EIB'') Loans
Petitioner claims that Dalmine received loans from the EIB in the
early 1980s. While petitioner has not alleged that the EIB loan program
itself represents a countervailable subsidy, petitioner contends that
Dalmine received EIB loans at interest rates below the rates that
should have been applied to an uncreditworthy company.
The Department has previously found EIB loans to be not
countervailable (see, e.g., Certain Steel Products from Belgium, 58 FR
37273 at 37285 (July 9, 1993)). Because petitioner has not provided any
new information that would cause us to change our earlier
determination, we are not including the EIB loans in our investigation.
5. European Regional Development Fund (``ERDF'') Subsidies
Petitioner claims that some loans obtained by Dalmine from the EIB
and ECSC may have been subsidized by the ERDF, but has not presented
any evidence in support of this allegation.
At verification of the responses submitted by the European
Community (``EC'') in Certain Steel from Italy, we found that ERDF
grants are provided to regions whose development is lagging behind and
to regions seriously affected by industrial decline. In addition, we
found that rural regions with certain development problems are eligible
for ERDF aid. In the instant case, however, petitioner has not
demonstrated that Dalmine has production facilities in the regions that
are eligible for ERDF assistance. Moreover, there is no evidence in the
petition or in previous investigations that ERDF grants are used to
subsidize ECSC or EIB loans. For these reasons, we are not including
the ERDF grants in our investigation.
6. Early Retirement Under Law 193/84
Petitioner alleges that Dalmine has used the early retirement
provisions under Law 193/84 and that this program provided a
countervailable subsidy to Dalmine. Petitioner requests that the
Department treats benefits under Law 193/84 as non-recurring grants.
Dalmine's Annual Reports show that the company used early
retirement pursuant to Law 193/84 in 1984 through 1987. In Certain
Steel from Italy, the Department found early retirement, including the
program provided under Law 193/84, to be countervailable. Because early
retirement is a program we typically consider to be recurring (see the
General Issues Appendix to Final Affirmative Countervailing Duty
Determination: Certain Steel Products from Austria, 58 FR 37217 at
37226 (July 9, 1993), we countervailed the program as a recurring grant
in Certain Steel from Italy.
At verification in Electrical Steel, Italian government officials
explained that there were two laws providing for early retirement in
1992: Law 223/91 and Law 406/92. We found early retirement under Law
223/91 to be not countervailable in our final determination. We did not
make a determination with respect to any other early retirement laws,
including Law 193/84, because these laws were not used by the
Electrical Steel respondent in the period of investigation. Petitioner
has requested that, because the Department did not make a determination
with respect to Law 193/84 in Electrical Steel, we should investigate
whether Dalmine used early retirement under Law 193/84. However,
information collected in Electrical Steel suggests that Law 193/84 has
been superseded and petitioner has not presented any evidence to the
contrary. There is no evidence in the petition that Dalmine used early
retirement under Law 193/84 after 1987. Rather, petitioner apparently
believe that we should change our practice and treat early retirement
as a non-recurring benefit.
The last year for which we have been able to establish that Dalmine
used early retirement is 1991. The Annual Report for that year shows
that Dalmine used the early retirement program under Law 223/91, which
we found to be not countervailable in Electrical Steel. Moreover,
petitioner has not presented any information that would cause us to
change our earlier determination that early retirement, if found
countervailable, should be treated as a recurring grant. For these
reasons, we are not including early retirement in our investigation.
7. Grants From the Cassa per il Mezzogiorno
Petitioner alleges that Dalmine has received grants from the Cassa
per il Mezzogiorno (``Cazmez'') which are directed to southern Italy.
In Certain Steel, we found such grants to be countervailable because
they were provided on a regional basis. Petitioner is not aware of any
Dalmine plants outside of Bergamo, which is in the North, but points to
Dalmine's Annual Reports which show that the company received Cazmez
grants in the early and mid-1980s. Based on this finding, petitioner
states that Dalmine must have a plant located in the South. Therefore,
petitioner requests that the Department, in addition to the Cazmez
grants, investigate a large number of other subsidy programs directed
to the South, should we find that Dalmine maintains production
facilities there.
From Dalmine's Annual Reports, we have found that the company
formerly had two production facilities in the South, both of which
produced welded pipe. Apart from these two plants, which were spun off
in 1989, we have not found any other production facilities in the
South. Because both the plants in the South produced welded pipe, which
is not included in the scope of this investigation, we are not
including the Cazmez grants or any other programs directed to the South
in our investigation.
ITC Notification
Pursuant to section 702(d) of the Act, we have notified the ITC of
this initiation.
Preliminary Determination by the ITC
The ITC will determine by August 8, 1994, whether there is a
reasonable indication that an industry in the United States is being
materially injured, or is threatened with material injury, by reason of
imports from Italy of seamless pipe. Any ITC determination which is
negative will result in the investigation being terminated; otherwise,
the investigation will proceed according to statutory and regulatory
time limits.
This notice is published pursuant to 702(c)(2) of the Act and 19
CFR 355.13(b).
Dated: July 13, 1994.
Barbara R. Stafford,
Deputy Assistant Secretary for Investigations.
[FR Doc. 94-17681 Filed 7-19-94; 8:45 am]
BILLING CODE 3510-DS-P
