Notice of Initiation of Countervailing Duty Investigation: Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe From Italy

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]

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