Notice of Initiation of Countervailing Duty Investigations: Oil Country Tubular Goods (``OCTG'') From Austria and Italy

DEPARTMENT OF COMMERCE

[C-433-806, C-475-817]

Notice of Initiation of Countervailing Duty Investigations: Oil

Country Tubular Goods (``OCTG'') From Austria and Italy

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 26, 1994.

FOR FURTHER INFORMATION CONTACT: Gary Bettger (Austria) and Kristin

Heim (Italy), Office of Countervailing Investigations, U.S. Department

of Commerce, Room 3099, 14th Street and Constitution Avenue, N.W.,

Washington, DC 20230; telephone (202) 482-2239 and (202) 482-3798,

respectively.

INITIATION:

The Austria Petition

On June 30, 1994, Koppel Steel Corporation; U.S. Steel Group, a

unit of USX Corporation; and USS/Kobe Steel (hereinafter,

``petitioners'') filed with the Department of Commerce (``the

Department'') a countervailing duty petition on behalf of the United

States industry producing OCTG. Co-petitioners in this investigation

are North Star Steel Company; IPSCO Steel, Inc.; and Maverick Tube

Corporation. In accordance with section 702(b) of the Tariff Act of

1930, as amended (``the Act''), petitioners allege that manufacturers,

producers, or exporters of the subject merchandise in Austria receive

countervailable subsidies.

The Italy Petition

On June 30, 1994, Ipsco Steel, Inc. and Maverick Tube Corporation

(herein after, ``petitioners'') filed with the Department of Commerce

(``the Department'') a countervailing duty petition on behalf of the

United States industry producing OCTG. Co-petitioners in this

investigation are North Star Steel Company; Koppel Steel Corporation;

U.S. Steel Group, a unit of USX Corporation; and USS/Kobe Steel

Company. In accordance with section 702(b) of the Act, petitioners

allege that manufacturers, producers, or exporters of the subject

merchandise in Italy receive countervailable subsidies.

Injury Test

Because Austria and Italy are ``countries under the Agreement''

within the meaning of section 701(b) of the Act, Title VII of the Act

applies to these investigations. Accordingly, the U.S. International

Trade Commission (``ITC'') must determine whether imports of the

subject merchandise from Austria and Italy materially injure, or

threaten material injury to, a U.S. industry.

Standing

Petitioners have stated that they have standing to file the

petition because they are interested parties as defined in sections

771(9) (C) and 771(9)(D) of the Act and that they have 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

The products covered by these investigations are OCTG, which are

hollow steel products of circular cross-section. These products include

oil well casing, tubing, and drill pipe, of iron (other than cast iron)

or steel (both carbon and alloy), whether or not conforming to American

Petroleum Institute (``API'') or non-API specifications, whether

finished or unfinished (including green tubes). These investigations do

not cover casing, tubing, or drill pipe containing 10.5 percent or more

of chromium. The OCTG subject to these investigations are currently

classified in the Harmonized Tariff Schedule (``HTS'') under item

numbers:

7304.20.10.00, 7304.20.10.10, 7304.20.10.20, 7304.20.30.80,

7304.20.10.30, 7304.20.10.40, 7304.20.10.50, 7304.20.10.60,

7304.20.10.80, 7304.20.20.00, 7304.20.20.10, 7304.20.20.20,

7304.20.20.30, 7304.20.20.40, 7304.20.20.50, 7304.20.20.60,

7304.20.20.80, 7304.20.30.00, 7304.20.30.50, 7304.20.30.60,

7304.20.30.80, 7304.20.40.00, 7304.20.40.10, 7304.20.40.20,

7304.20.40.30, 7304.20.40.40, 7304.20.40.50, 7304.20.40.60,

7304.20.40.80, 7304.20.50.10, 7304.20.50.15, 7304.20.50.30,

7304.20.50.45, 7304.20.50.50, 7304.20.50.60, 7304.20.50.75,

7304.20.60.50, 7304.20.60.60, 7304.20.60.75, 7304.20.70.00,

7304.20.80.00, 7304.20.80.30, 7304.20.80.45, 7304.20.80.60,

7305.20.20.00, 7305.20.40.00, 7305.20.60.00, 7305.20.80.00,

7306.20.10.30, 7306.20.10.90, 7306.20.20.00, 7306.20.30.00,

7306.20.40.00, 7306.20.60.10, 7304.20.30.10, 7304.20.30.20,

7304.20.30.30, 7304.20.30.40, 7304.20.60.10, 7304.20.60.15,

7304.20.60.30, 7304.20.60.45, 7306.20.60.50, 7306.20.80.10,

7306.20.80.50

Although the HTS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

proceeding is dispositive.

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 petitioners

supporting the allegations.

Initiation of Countervailing Duty Investigations

The Department has examined the petitions on OCTG from Austria and

Italy and found that they comply with the requirements of section

702(b) of the Act. Therefore, in accordance with section 702 of the

Act, we are initiating countervailing duty investigations to determine

whether manufacturers, producers, or exporters of OCTG from Austria and

Italy receive subsidies.

A. Austria

We are including in our investigation the following programs which

we believe, based on the petition and the record in the Countervailing

Duty Investigation of Certain Steel Products from Austria (Certain

Steel), to have provided subsidies to producers of the subject

merchandise in Austria:

1 Equity (Capital) Infusions to Voest-Alpine AG (VAAG): 1983, 1984, and

1986

2 Pre-Restructuring Grants to VAAG

3 Assumption of Losses at Restructuring by VAAG

4 Equity Infusions to certain VAAG subsidiaries under Law 298/1987

5 Post-Restructuring Equity Infusions to VAAG

6 Post-Restructuring Grants to VAAG

7 Post-Restructuring Grants to Voest-Alpine Stahl AG (VAS)

Allegation of Upstream Subsidies

Petitioners have alleged that Kindberg, the producer of OCTG,

receives upstream subsidies through its purchase of steel blooms from a

related company, Voest-Alpine Donawitz GmbH (Donawitz). In order to

initiate on an upstream subsidy allegation, the Department's

regulations require that petitioners submit ``factual information

reasonably available'' regarding the following: 1) domestic subsidies

that the government provides to the upstream supplier; 2) the

competitive benefit the subsidies bestow upon the subject merchandise;

and, 3) the significant effect the subsidies have on the cost of

producing the subject merchandise (19 CFR 355.12(b)(8)). Petitioners

have met the three criteria set forth above as described below.

1. Domestic Subsidies

In order to satisfy the first criterion, petitioners have alleged

that Donawitz benefitted from the programs outlined above. We have

analyzed these programs in accordance with section 702(b) of the Act

and found that all programs meet the requirements stated therein.

2. Competitive Benefit

For the purposes of initiation, in determining whether petitioners

have provided sufficient evidence of competitive benefit, the

Department will determine whether a petitioner has provided a

reasonable basis to believe or suspect that:

``(i) The supplier of the input product controls the producer of

the merchandise, the producer controls the supplier, or the supplier

and the producer are both controlled by a third person;

(ii) The price for the input product is lower than the price that

the producer otherwise would pay for the input product in obtaining it

from an unsubsidized seller in an arm's length transaction; or

(iii) The government sets the price of the input product so as to

guarantee that the benefit provided with respect to the input product

is passed through to producers of the merchandise'' (See, Section

355.45(b) of the Department's proposed regulations (54 FR 23366, 23383

(May 31, 1989) (Proposed Regulations)).

It is clear from the petition and the record in Certain Steel that

the condition expressed in (i) has been met. Since 1987, Kindberg and

Donawitz have been separately incorporated and, during this time, they

have been either both controlled by the same third party or Donawitz

controlled Kindberg.

3. Significant Effect

The Department considers that subsidies to the upstream supplier

may have a significant effect if the ad valorem subsidy rate on the

input product multiplied by the proportion of the total production

costs of the merchandise accounted for by the input product is equal

to, or greater than, one percent (see, Proposed Regulations Section

355.45(b)).

Petitioners have provided calculations with respect to subsidies

received by Donawitz for the programs listed above. The alleged

benefits are 10.64 percent. Petitioners additionally provided

information regarding the percentage that steel blooms account for in

the cost of producing OCTG. The alleged benefit to Donawitz multiplied

by the percentage of the cost of production accounted for by the input

exceeds one percent. Therefore, petitioners have provided information

sufficient to support a claim of significant effect.

Therefore, we are initiating an upstream subsidy investigation with

respect to any subsidies received by Donawitz.

We invite interested parties to provide comments with respect to

the methodological approach that the Department plans to follow in its

investigation of subsidies provided on the production of OCTG in

Austria.

B. Italy

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 Into Dalmine

Petitioners have named Dalmine S.p.A. (``Dalmine'') and Acciaierie

Tubificio Arvedi S.p.A. (``Arvedi'') as the producers in Italy of the

subject merchandise. The alleged receipt of an ``indirect'' infusion

concerns only Dalmine; petitioners do not allege that Arvedi received

any such infusion.

Petitioners claim that Dalmine owned 51 percent of a subsidiary,

Tubificio Dalmine Italsider S.p.A. (``Tubificio''), until 1989. 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. Petitioners allege that

in return, Dalmine received a cash payment from ILVA which should be

treated as an ``indirect'' equity infusion. The reasons cited by

petitioners 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 those of its subsidiaries. Beyond

their simple claim that the cash paid by ILVA served as an indirect

pass-through of illegal subsidies received by ILVA, petitioners have

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 to Dalmine

Petitioners maintain that Dalmine was uncreditworthy from 1978

through 1992. According to petitioners, all secured and unsecured loans

obtained by Dalmine from Italian banks during these years are,

therefore, countervailable. Petitioners state that, while they 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.

Petitioners have not specified under which laws or programs the

secured and unsecured loans are being provided, nor have petitioners

provided information as to how this funding is specific to the steel

industry (see the petition requirements in section 355.12(b)(7) of the

Department's regulations).

Regarding Arvedi, petitioners have not alleged that the company

received countervailable benefits from secured and unsecured loans, nor

have petitioners alleged that Arvedi was uncreditworthy.

For these reasons, we are not including the secured and unsecured

loans in our investigation.

3. Debt Forgiveness to Dalmine in Connection With the 1981 and 1988

Restructuring Plans

Petitioners claim 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, petitioners allege that Dalmine benefitted from the debt

forgiveness granted to Finsider in connection with these

restructurings. Petitioners have not alleged that Arvedi benefitted

from either instance of debt forgiveness provided to Finsider.

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, petitioners have not provided

any evidence that Dalmine or Arvedi benefitted from this debt

forgiveness, or that Finsider forgave Dalmine's or Arvedi'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, petitioners have not shown that any debt forgiveness

was provided directly to Dalmine or Arvedi, or that a portion of the

debt forgiven to Finsider in 1988 can be attributed to Dalmine or

Arvedi. 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 to Dalmine

Petitioners maintain that Dalmine received loans from the EIB in

the early 1980s. Petitioners do not claim that Arvedi received EIB

loans. While petitioners do not allege that the EIB loan program itself

represents a countervailable subsidy, they contend 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 petitioners have 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

Petitioners claim that some loans obtained by Dalmine from the EIB

and ECSC may have been subsidized by the ERDF, but have not presented

any evidence in support of this allegation. Petitioners do not allege

that Arvedi received ERDF subsidies.

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, petitioners have not

demonstrated that Dalmine or Arvedi have 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 Benefits for Dalmine Under Law 193/84

Petitioners allege that Dalmine has used the early retirement

provisions under Law 193/84 and that this program provided a

countervailable subsidy to Dalmine. Petitioners request that the

Department treat benefits under Law 193/84 as non-recurring grants.

Petitioners have not provided any details regarding Arvedi's use of

early retirement.

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. Petitioners

have 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 petitioners have 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,

petitioners want us to 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,

petitioners have 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 to Dalmine From the Cassa per il Mezzogiorno

Petitioners allege 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. Petitioners are not aware of

any Dalmine plants outside of Bergamo, which is in the North, but point

to Dalmine's Annual Reports which show that the company received Cazmez

grants in the early and mid-1980s. Based on this finding, petitioners

state that Dalmine must have a plant located in the South. Therefore,

petitioners request 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.

Regarding Arvedi, petitioners have not alleged that the company

received Cazmez grants or that it benefitted from any other subsidy

programs directed to the South. On the contrary, petitioners maintain

that Arvedi is located in Cremona which is in the north of Italy.

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

these initiations.

Preliminary Determination by the ITC

The ITC will determine by August 15, 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 Austria and Italy of OCTG. Any ITC determination which is

negative will result in the investigations being terminated; otherwise,

the investigations 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 20, 1994.

Barbara R. Stafford,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-18171 Filed 7-25-94; 8:45 am]

BILLING CODE 3510-DS-P