[Federal Register Volume 62, Number 149 (Monday, August 4, 1997)]
[Notices]
[Pages 41927-41933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20489]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[C-274-803]
Preliminary Affirmative Countervailing Duty Determination: Steel
Wire Rod From Trinidad and Tobago
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: August 4, 1997.
FOR FURTHER INFORMATION CONTACT: Todd Hansen, Vincent Kane, or Sally
Hastings, Office of Antidumping/Countervailing Duty Enforcement, Group
I, Office 1, Import Administration, U.S. Department of Commerce, Room
1874, 14th Street and Constitution Avenue, NW., Washington, DC 20230;
telephone (202) 482-1276, 482-2815, or 482-3464, respectively.
Preliminary Determination:
The Department preliminarily determines that countervailable
subsidies are being provided to Caribbean Ispat Limited (``CIL''), a
producer and exporter of steel wire rod from Trinidad and Tobago. For
information on the estimated countervailing duty rates, please see the
Suspension of Liquidation section of this notice.
Case History
Since the publication of the notice of initiation in the Federal
Register on March 24, 1997 (62 FR 13866), the following events have
occurred.
On April 1, 1997, we issued countervailing duty questionnaires to
the Government of Trinidad and Tobago (``GOTT'') and to CIL concerning
petitioners' allegations. We received responses to our questionnaires
from CIL and the GOTT on May 27 and May 29, 1997, respectively. We
issued supplemental questionnaires to parties on June 13, 1997, and
received responses on June 30, 1997. On May 2, 1997, we postponed the
preliminary determination in this investigation until July 28, 1997 (62
FR 25172, May 8, 1997).
Scope of Investigation
The products covered by this investigation are certain hot-rolled
carbon steel and alloy steel products, in coils, of approximately round
cross section, between 5.00 mm (0.20 inch) and 19.0 mm (0.75 inch),
inclusive, in solid cross-sectional diameter. Specifically excluded are
steel products possessing the above noted physical characteristics and
meeting the Harmonized Tariff Schedule of the United States (HTSUS)
definitions for (a) Stainless steel; (b) tool steel; (c) high nickel
steel; (d) ball bearing steel; (e) free machining steel that contains
by weight 0.03 percent or more of lead, 0.05 percent or more of
bismuth, 0.08 percent or more of sulfur, more than 0.4 percent of
phosphorus, more than 0.05 percent of selenium, and/or more than 0.01
percent of tellurium; or (f) concrete reinforcing bars and rods.
The following products are also excluded from the scope of this
investigation:
Coiled products 5.50 mm or less in true diameter with an average
partial decarburization per coil of no more than 70 microns in depth,
no inclusions greater than 20 microns, containing by weight the
following: carbon greater than or equal to 0.68 percent; aluminum less
than or equal to 0.005 percent; phosphorous plus sulfur less than or
equal to 0.040 percent; maximum combined copper, nickel and chromium
content of 0.13 percent; and nitrogen less than or equal to 0.006
percent. This
[[Page 41928]]
product is commonly referred to as ``Tire Cord Wire Rod.''
Coiled products 7.9 to 18 mm in diameter, with a partial
decarburization of 75 microns or less in depth and seams no more than
75 microns in depth; containing 0.48 to 0.73 percent carbon by weight.
This product is commonly referred to as ``Valve Spring Quality Wire
Rod.''
The products under investigation are currently classifiable under
subheadings 7213.91.3000, 7213.91.4500, 7213.91.6000, 7213.99.0030,
7213.99.0090, 7227.20.0000, and 7227.90.6050 of the HTSUS. Although the
HTSUS subheadings are provided for convenience and customs purposes,
our written description of the scope of this investigation is
dispositive.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act effective January 1, 1995 (the
``Act'').
Injury Test
Because Trinidad and Tobago is a ``Subsidies Agreement Country''
within the meaning of section 701(b) of the Act, the International
Trade Commission (ITC) is required to determine whether imports of wire
rod from Trinidad and Tobago materially injure, or threaten material
injury to, a U.S. industry. On April 30, 1997, the ITC published its
preliminary determination finding that there is a reasonable indication
that an industry in the United States is being materially injured or
threatened with material injury by reason of imports from Trinidad and
Tobago of the subject merchandise (62 FR 23485).
Petitioners
The petition in this investigation was filed by Connecticut Steel
Corp., Co-Steel Raritan, GS Industries, Inc., Keystone Steel & Wire
Co., North Star Steel Texas, Inc. and Northwestern Steel and Wire (the
petitioners), six U.S. producers of wire rod.
Subsidies Valuation Information
Period of Investigation
The period for which we are measuring subsidies (the ``POI'') is
calendar year 1996.
Allocation Period
In the past, the Department has relied upon information from the
U.S. Internal Revenue Service (``IRS'') on the industry-specific
average useful life of assets, in determining the allocation period for
nonrecurring subsidies. See General Issues Appendix appended to Final
Countervailing Duty Determination; Certain Steel Products from Austria
(``General Issues Appendix'') 58 FR 37217, 37226 (July 9, 1993).
However, in British Steel plc. v. United States, 879 F. Supp. 1254 (CIT
1995) (``British Steel''), the U.S. Court of International Trade (the
``Court'') ruled against this methodology. In accordance with the
Court's remand order, the Department calculated a company-specific
allocation period for nonrecurring subsidies based on the average
useful life (``AUL'') of non-renewable physical assets. This remand
determination was affirmed by the Court on June 4, 1996. British Steel,
929 F. Supp. 426, 439 (CIT 1996).
In this investigation, the Department has followed the Court's
decision in British Steel. Therefore, for purposes of this preliminary
determination, the Department has calculated a company-specific AUL.
Based on information provided by respondents, the Department has
preliminarily determined that the appropriate allocation period for CIL
is 15 years.
Equityworthiness
In analyzing whether a company is equityworthy, the Department
considers whether or not that company could have attracted investment
capital from a reasonable, private investor in the year of the
government equity infusion based on information available at that time.
In this regard, the Department has consistently stated that a key
factor for a company in attracting investment capital is its ability to
generate a reasonable return on investment within a reasonable period
of time.
In making an equityworthiness determination, the Department
examines the following factors, among others:
1. Current and past indicators of a firm's financial condition
calculated from that firm's financial statements and accounts;
2. Future financial prospects of the firm including market studies,
economic forecasts, and projects or loan appraisals;
3. Rates of return on equity in the three years prior to the
government equity infusion;
4. Equity investment in the firm by private investors; and
5. Prospects in world markets for the product under consideration.
In start up situations and major expansion programs, where past
experience is of little use in assessing future performance, we
recognize that the factors considered and the relative weight placed on
such factors may differ from the analysis of an established enterprise.
For a more detailed discussion of the Department's equityworthiness
criteria see the
General Issues Appendix at 37244.
Petitioners allege that the Iron and Steel company of Trinidad and
Tobago Limited (``ISCOTT''), the predecessor to CIL, was unequityworthy
from 1980-1995. In our initiation notice (62 FR 13886, 13868; March 24,
1997), we stated that we would investigate ISCOTT's equityworthiness
for the period 1983-1990. We have now undertaken that examination,
consistent with our past practice. See, Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from France,
58 FR 37304 (July 8, 1993) (``Steel from France'').
For this investigation, we have preliminarily determined that
ISCOTT is unequityworthy during the period 1986 through 1994. For a
discussion of this determination, see the section of this notice on
``Equity Infusions.''
Equity Methodology
In measuring the benefit from a government equity infusion to an
unequityworthy company, the Department compares the price paid by the
government for the equity to a market benchmark, if such a benchmark
exists, i.e., the price of publicly traded shares of the company's
stock or an infusion by a private investor at the time of the
government's infusion (the latter may not always constitute a proper
benchmark based on the specific circumstances in a particular case).
Where a market benchmark does not exist, the Department has
determined in this investigation to continue to follow the methodology
described in the General Issues Appendix at 37239. Following this
methodology, equity infusions made into an unequityworthy firm are
treated as grants. Using the grant methodology for equity infusions
into an unequityworthy company is based on the premise that an
unequityworthiness finding by the Department is tantamount to saying
that the company could not have attracted investment capital from a
reasonable investor in the infusion year based on the available
information.
Creditworthiness
When the Department examines whether a company is creditworthy, it
is essentially attempting to determine if the company in question could
obtain commercial financing at commonly available interest rates. If a
company receives comparable long-term financing
[[Page 41929]]
from commercial sources, that company will normally be considered
creditworthy. In the absence of comparable commercial borrowings, the
Department examines the following factors, among others, to determine
whether or not a firm is creditworthy:
1. Current and past indicators of a firm's financial health
calculated from that firm's financial statements and accounts;
2. The firm's recent past and present ability to meet its costs and
fixed financial obligations with its cash flow; and
3. Future financial prospects of the firm including market studies,
economic forecasts, and projects or loan appraisals.
In start up situations and major expansion programs, where past
experience is of little use in assessing future performance, we
recognize that the factors considered and the relative weight placed on
such factors may differ from the analysis of an established enterprise.
For a more detailed discussion of the Department's creditworthiness
criteria, see, e.g., Steel from France at 37304, and Final Affirmative
Countervailing Duty Determination; Certain Steel Products from the
United Kingdom 58 FR 37393, 37395 (July 9, 1993).
Petitioners have alleged that ISCOTT was uncreditworthy from 1980-
1995. In our initiation notice (62 FR 13866, 13868; March 24, 1997), we
stated that we would investigate ISCOTT's creditworthiness for the
period 1983-1990. We did not include the years prior to 1983 because we
determined that investments in and loans to the company through 1982
were on terms consistent with commercial considerations in Carbon Steel
Wire Rod From Trinidad and Tobago: Final Affirmative Countervailing
Duty Determination and Countervailing Duty Order 49 FR 480 (January 4,
1984) (``Wire Rod I'') and petitioners did not provide any new evidence
to lead us to change our previous determination.
Regarding the period after 1990, petitioners provided no evidence
in the petition to support their claim that ISCOTT was uncreditworthy.
On June 13, 1997, petitioners supplemented their original allegation
with financial information contained in the GOTT's May 29, 1997
response.
Based on a review of petitioners' June 13, 1997 submission, as well
as the information in the responses, we preliminarily determine that
ISCOTT was uncreditworthy during the period 1985-1994. ISCOTT did not
show a profit for any year during this period and continued to rely
upon support from the GOTT to meet fixed payments. The company's gross
profit ratio was consistently negative in each of the years in which it
had sales. Additionally, the company's operating profit (net income
before depreciation, amortization, interest and financing charges) was
consistently negative. The firm continued to show an operating loss in
each year it was in production, and was never able to cover its
variable costs.
Regarding 1983, 1984, 1995, and 1996, we did not examine ISCOTT's
creditworthiness because ISCOTT did not receive any countervailable
loans, equity infusions, or nonrecurring grants in those years.
Discount Rates
We have calculated the long-term uncreditworthy discount rates for
the period 1985 through 1994, to be used in calculating the
countervailable benefit for nonrecurring grants and equity infusions in
this investigation because the respondent did not incur any debt
appropriate for use as discount rates, following the methodology
described in Final Affirmative Countervailing Duty Determination:
Grain-Oriented Electrical Steel from Italy (``GOES'') 59 FR 18357,
18358 (April 18, 1994). Specifically, we took the highest prime term
loan rate available in Trinidad and Tobago in each year as listed in
the Central Bank of Trinidad and Tobago: Handbook of Key Economic
Statistics and added to this a risk premium of 12% of the median prime
lending rate to establish the uncreditworthy discount rate.
Privatization Methodology
In the General Issues Appendix, we applied a new methodology with
respect to the treatment of subsidies received prior to the sale of a
company (privatization).
Under this methodology, we estimate the portion of the purchase
price attributable to prior subsidies. We compute this by first
dividing the privatized company's subsidies by the company's net worth
for each year during the period beginning with the earliest point at
which nonrecurring subsidies would be attributable to the POI (i.e., in
this case 1981 for CIL) and ending one year prior to the privatization.
We then take the simple average of the ratios. The simple average of
these ratios of subsidies to net worth serves as a reasonable surrogate
for the percent that subsidies constitute of the overall value of the
company. Next, we multiply the average ratio by the purchase price to
derive the portion of the purchase price attributable to repayment of
prior subsidies. Finally, we reduce the benefit streams of the prior
subsidies by the ratio of the repayment amount to the net present value
of all remaining benefits at the time of privatization. In the current
investigation, we are analyzing the privatization of ISCOTT in 1994.
Based upon our analysis of the petition and responses to our
questionnaires, we preliminarily determine the following:
I. Programs Preliminarily Determined To Be Countervailable
A. Export Allowance Under Act No. 14
Under the provisions of Act No. 14 of 1976, as codified in Section
8(1) of the Corporation Tax Act, companies in Trinidad and Tobago with
export sales may deduct an export allowance in calculating their
corporate income tax. The allowance is equal to the ratio of export
sales over total sales multiplied by net income. Regardless of the
magnitude of the export allowance, however, companies must pay a
minimum income tax in the amount of the business levy or the corporate
income tax, whichever is greater.
A countervailable subsidy exists within the meaning of section
771(5A) of the Act where there is a financial contribution from the
government which confers a benefit and is specific within the meaning
of section 771(5A) of the Act.
We have determined that the export allowance is a countervailable
subsidy within the meaning of section 771(5) of the Act. The export
allowance provides a financial contribution because in granting it the
GOTT forgoes revenue that it is otherwise due. The export allowance is
specific, under section 771(5A)(B), because its receipt is contingent
upon export performance.
CIL made a deduction for the export allowance on its 1995 income
tax return, which was filed during the POI. Because the export
allowance is claimed and realized on an annual basis in the course of
filing the corporate income tax return, we have determined that the
benefit from this program is recurring. To calculate the
countervailable subsidy from the export allowance, we divided CIL's tax
savings during the POI by the total value of its export sales during
the POI. On this basis, we preliminarily determine the countervailable
subsidy from this program to be 3.45 percent ad valorem.
B. Equity Infusions
In 1978, ISCOTT and the GOTT entered into a Completion and Cash
Deficiency Agreement (``CCDA'') with
[[Page 41930]]
several private commercial banks in order to obtain a part of the
financing needed for construction of ISCOTT's plant. Under the terms of
the CCDA, the GOTT was obligated to provide certain equity financing
toward completion of construction of ISCOTT's plant, to cover loan
payments to the extent not paid by ISCOTT, and to provide cash as
necessary to enable ISCOTT to meet its current liabilities.
During the period from 1983 to 1989, a period of continuing losses,
ISCOTT and the GOTT commissioned several studies to determine the
financially preferable course of action for the company. Options
included a shut-down of the plant, lease or sale of the plant, or
continued GOTT operation of the plant. In 1983, a Committee appointed
by the Cabinet concluded that it would cost ISCOTT more to shut the
plant down than to keep it in operation. In 1985, recognizing that
ISCOTT's management lacked the technical expertise to operate the plant
efficiently, the GOTT signed a training, technical and management
contract with two established international steel producers, Voest
Alpine and Neue Hamburger Stahlwerke (``NHSW''), to increase ISCOTT's
production efficiency. In 1987, the GOTT commissioned the International
Finance Corporation (``IFC'') to evaluate ISCOTT's prospects and
recommend alternatives. The IFC completed its evaluation in August of
1987 and recommended that the GOTT enter into negotiations aimed at
leasing ISCOTT's plant to a private producer.
During 1988, the GOTT conducted lease negotiations with NHSW but
late in that year the negotiations broke down. P.T. Ispat Indo
(``Ispat''), a company affiliated with CIL, then came forward and
expressed an interest in leasing the plant. In a February 13, 1989
letter to the GOTT, the IFC expressed its support for lease of the
plant to Ispat. On April 8, 1989, the GOTT and Ispat reached agreement
on a 10-year lease agreement with an option for Ispat to purchase the
assets after five years.
In December of 1994, CIL, the company created by Ispat to lease and
operate the plant, exercised the purchase option and purchased the
plant. The purchase price was based on an independent evaluation by a
private consultant, as specified in the Plant Lease Agreement, less
credits that CIL received for improvements made in the plant. The Plant
Sale Agreement committed CIL to make additional expenditures on the
plant for environmental and production upgrades.
In Wire Rod I, the Department determined that payments or advances
made by the GOTT to ISCOTT during its start-up years were not
countervailable. In making this determination, the Department took into
consideration the fact that it is not unusual for a large, capital
intensive project to have losses during the start-up years, the fact
that several independent studies forecast a favorable outcome for
ISCOTT, and the fact that ISCOTT enjoyed several important natural
advantages. On these bases, advances to ISCOTT through April of 1983,
the end of the original POI, were found to be not countervailable.
Subsequent to the POI in Wire Rod I, ISCOTT continued to incur
significant losses. In each of the years from 1983 through 1994, it
recorded losses ranging from TT $142,600,000 to TT $376,700,000 with
accumulated losses during this period amounting to TT $1,611,700,000.
In fact, the company did not show a profit in any of its years of
operation.
Yet, despite these negative results and a worldwide downturn in the
steel industry, the GOTT continued to invest in ISCOTT. In each of the
years from 1983 to 1994, the GOTT made advances to ISCOTT ranging from
TT $33,027,000 to TT $433,633,000 with an overall total for these years
of TT $1,787,466,000. These advances were made in accordance with the
terms of the CCDA, which obligated the GOTT to cover loan payments and
meet current operating expenses to the extent that ISCOTT was unable to
meet these obligations.
Given the Department's decision in Wire Rod I that the GOTT's
initial decision to invest in ISCOTT and its additional investments
through the first quarter of 1983 were consistent with commercial
considerations, the issue presented in this investigation is whether
and at what point the GOTT ceased to behave as a reasonable private
investor. In our view, despite the favorable factors underlying the
earlier investment decisions, at some point in a succession of heavy
losses such as those incurred by ISCOTT, a private investor would have
reached the conclusion that further investment in the company was not
warranted. For the reasons explained below, we determine that the
advances made to ISCOTT after 1985 were inconsistent with the usual
investment practice of a private investor.
As detailed in Wire Rod I, ISCOTT started operations in 1981.
According to studies supporting the initial decision to invest, it was
reasonable to expect that the company would experience difficulties in
start-up. In a developing country such as Trinidad and Tobago,
personnel with the skill and expertise required to operate a large
steel plant were not readily available. Thus, the learning curve for
the management and operation of the plant was expected to be prolonged.
Despite the fact that the expectations for these early years were
low, the GOTT demonstrated its continuing concern about the viability
of the venture. In 1983, in light of ISCOTT's deteriorating financial
condition and changing market expectations, the GOTT established a
Committee to study several options for the future of the company,
including liquidation of ISCOTT. While the Committee's report mentions
factors that likely would not have been taken into consideration by a
private investor, such factors do not appear to have influenced the
Committee's recommendation. (Since the report and the recommendation of
the Committee are business proprietary, they are not discussed here.
The Department's review of the report is contained in a July 24, 1997,
business proprietary memorandum from team to Richard W. Moreland,
Acting Deputy Assistant Secretary for AD/CVD Enforcement, Group I
(``Equityworthiness Memorandum''), the public version of which is in
the public file of the Central Records Unit, HCHB Room B-099 of the
Department of Commerce.)
Consistent with the recommendations made in the report, the GOTT
continued to support ISCOTT's operations. In 1984, although the company
still operated at a loss, revenues and cash flow from operations both
improved. However, that trend was shortlived. In 1985, ISCOTT suffered
significant losses. These losses were of such a magnitude that a
reevaluation of the company's prospects was warranted before committing
further funds to ISCOTT. By the end of 1985, the company had
accumulated losses of TT $1,331,842,000 and outstanding debt of TT
$1,277,845,000 of which TT $718,122,000 was owed to the GOTT. A private
investor considering investment in ISCOTT at this time would have
concluded that acceptable returns on investment were not likely to
occur within a reasonable period of time. It is our opinion that any
investment in ISCOTT after 1985 would not have been consistent with the
usual investment practice of private investors.
Further, we are not persuaded by the GOTT's claim that a default on
the loan would have resulted in an acceleration of the loan. In view of
certain provisions in the CCDA, the GOTT apparently could have avoided
an acceleration of
[[Page 41931]]
the loan in the event of default. (Because these provisions are
business proprietary, however, we have not included them in this
notice. Relevant details of the Department's discussion of these
provisions are recorded in the Equityworthiness Memorandum.)
Therefore, in view of the large and continued losses in the years
prior to 1986, we preliminarily determine that GOTT's advances to
ISCOTT in 1986 and in the years that followed through 1994 constitute
countervailable subsidies under section 771(5) of the Act. These
advances were inconsistent with the usual investment practice of
private investors and constituted specific financial contributions in
which a benefit was conferred.
To calculate the benefit, we followed the ``Equity Methodology''
described above. The benefit allocated to the POI was adjusted
according to the ``Privatization Methodology'' described above. The
adjusted amount was divided by CIL's total sales of all products during
the POI. On this basis, we calculated a subsidy of 11.37 percent.
C. Benefits Associated With the 1994 Sale of ISCOTT's Assets to CIL
In December 1994, after all of ISCOTT's manufacturing activities
had been sold, ISCOTT was nothing but a shell company with liabilities
exceeding its assets. CIL, on the other hand, had purchased most of
ISCOTT's assets without being burdened by ISCOTT's liabilities.
The liabilities remaining with ISCOTT after the sale of productive
assets to CIL had to be repaid, assumed, or forgiven. In 1995, the
National Gas Company of Trinidad and Tobago Limited (``NGC'') and the
National Energy Corporation of Trinidad and Tobago Limited (``NEC''), a
wholly owned subsidiary of NGC, wrote off loans owed to them by ISCOTT
totaling TT $77,225,775. Similarly, Trinidad and Tobago National Oil
Company Limited (``TRINTOC'') wrote off debts owed by ISCOTT totaling
TT $10,492,830 as bad debt. While no specific act eliminated this debt,
indeed ISCOTT still had a residual accounts payable balance on its
books in 1996, CIL (and consequently the subject merchandise) received
a benefit as a result of the debt being left behind in ISCOTT.
Treating these liabilities as a subsidy to CIL is consistent with
the Department's determination in GOES at 18359. In that case, the GOI
liquidated Finsider and its main operating companies in 1988 and
assembled the group's most productive assets into a new operating
company, ILVA S.p.A. In GOES, a substantial portion of the liabilities
and the losses associated with the assets were not distributed to ILVA.
Instead, they remained behind in Terni Acciai Speciali, a main
operating unit of Finsider.
In this case, to calculate the benefit during the POI, we used our
standard grant methodology and applied an uncreditworthy discount rate.
The debt outstanding after the December 1994 sale of assets to CIL
(adjusted as described below) was treated as grants received at the
time of the sale of the assets.
After the 1994 sale of assets, certain non-operating assets (e.g.,
cash and accounts receivable) remained in ISCOTT. These assets have
been used to fund repayment of ISCOTT's remaining accounts payable. In
order to account for the fact that certain assets, including cash, were
left behind in ISCOTT, we have subtracted this amount from the
liabilities outstanding after the 1994 transfer sale of assets.
The benefit allocated to the POI was adjusted according to the
``Privatization Methodology'' described above. The adjusted amount was
divided by CIL's total sales of all products during the POI. On this
basis, we determine the estimated net subsidy to be 1.22 percent ad
valorem for CIL.
II. Programs Preliminarily Determined To Be Not Countervailable
A. Import Duty Concessions Under Section 56 of the Customs Act
Section 56 of the Customs Act of 1983 provides for full or partial
relief from import duties on certain machinery, equipment, and raw
materials used in an approved industry. The approved industries that
may benefit from this relief are listed in the Third Schedule to
Section 56. In all, 76 industries are eligible to qualify for relief
under Section 56.
Companies in these industries that are seeking import duty
concessions apply by letter to the Tourism and Industries Development
Company, which reviews the application and forwards it with a
recommendation to the Ministry of Trade and Industry. If the Ministry
of Trade and Industry approves the application, the applicant receives
a Duty Relief License, which specifies the particular items for which
import duty concessions have been authorized. CIL received import duty
exemptions under Section 56 of the Customs Act during the POI.
In its June 30, 1997, supplemental response, the GOTT provided a
breakdown of the number of licenses issued by industry during the first
six months of the POI. During the POI, the Ministry of Trade and
Industry issued a large number of licenses to a wide cross section of
industries. Some of the licenses were new issuances and others were
renewals of licenses previously issued. Thus, the recipients of the
exemption were not limited to a specific industry or group of
industries. The breakdown of licenses by industry also indicated that
the steel industry was not a predominant user of the subsidy nor did it
receive a disproportionate share of benefits under this program. For
these reasons, we preliminarily determine that import duty concessions
under Section 56 of the Customs Act are not limited to a specific
industry or group of industries, hence, are not countervailable.
B. Point Lisas Industrial Estates Lease
The Point Lisas Industrial Port Development Company (``PLIPDECO'')
owns and operates Point Lisas Industrial Estate. Prior to 1994,
PLIPDECO was 98 percent government-owned. Since then, PLIPDECO's issued
share capital has been held 43 percent by the government, 8 percent by
Caroni Limited, a wholly-owned government entity, and 49 percent by
2,500 individual and corporate shareholders whose shares are traded on
the Trinidad and Tobago Stock Exchange.
ISCOTT, the predecessor company to CIL, entered into a 30-year
lease contract for a site at Point Lisas in 1983, retroactive to 1978.
The 1983 lease rental was revised in 1988. In 1989, the site was
subleased to CIL at the revised rental fee. In 1994, ISCOTT and
PLIPDECO signed a novation of the lease whereby ISCOTT's name was
replaced on the lease by CIL's. During the POI, CIL paid the 1988
revised rental fee for the site.
Under section 771(5) of the Act, in order for a subsidy to be
countervailable it must, inter alia, confer a benefit. In the case of
goods or services, a benefit is normally conferred if the goods or
services are provided for less than adequate remuneration. The adequacy
of remuneration is determined in relation to prevailing market
conditions for the good or service provided in the country of
exportation.
In establishing lease rates for sites in the industrial estate,
PLIPDECO uses a standard schedule of lease rates as a starting point
for negotiating with prospective tenants. The standard lease rates
reflect PLIPDECO's evaluation of the market value of land in the
estate. Negotiated rates differ from the standard rates based on
various factors, such as the size of the lot, the type of business,
[[Page 41932]]
the attractiveness of the tenant, and the date on which the lease rate
was signed.
Because the rates are negotiated individually with each tenant, the
rate paid by CIL (and other tenants) is specific. Therefore, it is
necessary to examine whether PLIPDECO is receiving adequate
remuneration for the land it leases to CIL.
The site leased by ISCOTT in 1983 and now occupied by CIL is the
largest site in the Point Lisas Industrial Estate with an overall area
that is considerably more than double the size of the next largest
site. Nevertheless, during the POI, CIL's lease fee per square meter
for this site appears to have been in line with the lease fees for
other sites. This fact indicates that CIL's lease rate is consistent
with prevailing market conditions, at least in the Point Lisas
Industrial Estate. A further indication that the rates paid by tenants
of the estate, including CIL, provide adequate remuneration is the
substantial private participation in PLIPDECO since 1994. On these
bases, we preliminarily determine that CIL's lease rates have provided
adequate remuneration for its site in the Point Lisas Industrial
Estate.
At this time, we have no information regarding whether other
industrial estates are in operation in Trinidad and Tobago and, if so,
what rates are charged by these estates. For our final determination,
we will attempt to obtain any available information on lease rates for
other industrial estates that may be located in Trinidad and Tobago.
C. Preferential Natural Gas Prices
NGC is the sole supplier of natural gas to industrial and
commercial users in Trinidad and Tobago. NGC provides gas pursuant to
individual contracts with each of its customers. Natural gas prices to
small consumers are fixed with an annual escalator. Prices to large
consumers are negotiated individually based on annual volume, contract
duration, payment terms, use made of the gas, any take or pay
requirement in the contract, NGC's liability for damages, and whether
new pipeline is required. Prices must be approved by NGC's Board of
Directors. The GOTT indicates that none of the current members of the
board is a government official nor do any government laws or
regulations regulate the pricing of natural gas.
The price paid by CIL for natural gas during the POI was
established in a January 1, 1989 contract between ISCOTT and NGC, which
ISCOTT assigned to CIL on April 28, 1989. Average price data submitted
by the GOTT for large industrial users of natural gas indicate that the
price paid by CIL during the POI was in line with the average price
paid by large industrial users overall.
Based on the same analysis described above regarding the lease at
Point Lisas Industrial Estate, we have preliminarily determined that
the prices paid by CIL to NGC provide adequate remuneration for the
natural gas supplied to CIL. Therefore, we have preliminarily
determined that NGC's provision of natural gas to CIL is not a
countervailable subsidy under section 771(5) of the Act.
III. Program for Which More Information Is Needed
A. Preferential Electricity Prices
The Trinidad and Tobago Electric Commission (``TTEC''), which is
wholly-owned by the GOTT, is the sole supplier of electric power in
Trinidad and Tobago. Prior to December 23, 1994, TTEC generated the
power, which it sold. But on and after this date, TTEC divested its
power generating assets to the Power Generating Company of Trinidad and
Tobago Limited (``PowerGen''), which is now the sole producer of power
in the country. PowerGen is owned 51 percent by TTEC, 39 percent by
Southern Electric International Trinidad Inc., and 10 percent by Amoco
Power Resources Corporation.
The rates and tariffs for the sale of electricity are set by the
Public Utilities Commission (``PUC''), an independent authority. In
setting rates, the PUC takes into account cost of service studies done
by TTEC. Rates are comprised of a flat rate based on energy consumption
and a flat demand charge. Adjustments are made for fuel costs and
movements in exchange rates between the Trinidad and Tobago dollar and
the U.S. dollar.
For billing purposes, TTEC classifies electricity consumers into
one of the following categories: residential, commercial, industrial,
and street lighting. Industrial users are further classified into one
of four categories depending on the voltage at which they take power
and the size of the load taken. CIL is the sole user in the very large
load category taking its power at 132 kV for loads over 25,000 KVA.
Other large industrial users take power at 33 kV or 66 kV and at loads
from 199 to 25,000 KVA.
In its June 30, 1997, supplementary response, the GOTT supplied a
cost of service study incorporating 1996 data. The GOTT recently
informed us that the study is only provisional and a final study, with
revised figures, will be issued soon. Given the relevancy of this study
to our analysis, we are requesting that the GOTT supply us with a copy
of the final study when it is becomes available. We will consider the
results of this study as well as all other information on the record
regarding TTEC's provision of electricity to CIL in making our final
determination.
IV. Programs Preliminarily Determined To Be Not Used
A. Export Promotion Allowance
B. Corporate Tax Exemption
V. Program Preliminarily Determined Not To Exist
A. Loan Guarantee From the Trinidad and Tobago Electricity Commission
By 1988, ISCOTT had accumulated TT $19,086,000 in unpaid
electricity bills owed to TTEC. To manage this debt, TTEC obtained a
loan from the Royal Bank in the amount of TT $19,000,000, which enabled
TTEC to more readily carry the receivable due from ISCOTT. By 1991,
ISCOTT extinguished its debt to TTEC.
At no time during this period did TTEC provide a guarantee to
ISCOTT which enabled ISCOTT to secure a loan to settle the outstanding
balance on its account. The financing obtained by TTEC from the Royal
Bank benefitted TTEC rather than ISCOTT because it allowed TTEC to have
immediate use of funds that otherwise would not have been available to
it. On this basis, we preliminarily determine that TTEC did not provide
a loan guarantee to ISCOTT for purposes of securing a loan to settle
the outstanding balance owed to TTEC. Therefore, we preliminarily
determine that this program did not exist.
Verification
In accordance with section 782(i) of the Act, we will verify the
information submitted by 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 subsidy rate for CIL, the one company under investigation.
We are also applying CIL's rate to any companies not investigated or
any new companies exporting the subject merchandise.
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of steel
wire rod from Trinidad and Tobago which 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 the
[[Page 41933]]
merchandise in the amounts indicated below. This suspension will remain
in effect until further notice.
Company Ad Valorem Rate
CIL--16.04 percent
All Others--16.04 percent
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 nonprivileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
If our final determination is affirmative, the ITC will make its
final determination within 45 days after the Department makes its final
determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if
requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing will be held on September
22, 1997, at the U.S. Department of Commerce, Room 3708, 14th Street
and Constitution Avenue, N.W., Washington, D.C. 20230. Individuals who
wish to request a hearing must submit a written request within 30 days
of the publication of this notice in the Federal Register to the
Assistant Secretary for Import Administration, U.S. Department of
Commerce, Room 1874, 14th Street and Constitution Avenue, N.W.,
Washington, DC 20230. Parties should confirm by telephone the time,
date, and place of the hearing 48 hours before the scheduled time.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; (3) the
reason for attending; and (4) a list of the issues to be discussed. In
addition, eight copies of the business proprietary version and three
copies of the nonproprietary version of the case briefs must be
submitted to the Assistant Secretary no later than September 8, 1997.
Eight copies of the business proprietary version and three copies of
the nonproprietary version of the rebuttal briefs must be submitted to
the Assistant Secretary no later than September 15, 1997. An interested
party may make an affirmative presentation only on arguments included
in that party's case or rebuttal briefs. Parties who submit an argument
in this proceeding are requested to submit with the argument (1) a
statement of the issue and (2) a brief summary of the argument. Written
arguments should be submitted in accordance with 19 CFR 351.309 and
will be considered if received within the time limits specified above.
If this investigation proceeds normally, we will make our final
determination by October 14, 1997.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: July 28, 1997.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-20489 Filed 8-1-97; 8:45 am]
BILLING CODE 3510-DS-P
