Cold-Rolled Carbon Steel Flat-Rolled Products From Argentina; Preliminary Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[C-357-005]

Cold-Rolled Carbon Steel Flat-Rolled Products From Argentina;

Preliminary Results of Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty

administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an

administrative review of the countervailing duty order on cold-rolled

carbon steel flat-rolled products from Argentina. For information on

the net subsidy, see the Preliminary Results of Review section of this

notice. If the final results remain the same as these preliminary

results of administrative review, we will instruct the U.S. Customs

Service to assess countervailing duties as indicated in the Preliminary

Results of Review section of this notice. Interested parties are

invited to comment on these preliminary results.

EFFECTIVE DATE: July 17, 1997.

FOR FURTHER INFORMATION CONTACT: Richard Herring, Office of CVD/AD

Enforcement VI, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-2786.

SUPPLEMENTARY INFORMATION:

Background

On April 26, 1984, the Department published in the Federal Register

(49 FR 18006) the countervailing duty order

[[Page 38258]]

on cold-rolled carbon steel flat-rolled products from Argentina. On May

6, 1992, the Department published a notice of ``Opportunity to Request

an Administrative Review'' (57 FR 19412) of this countervailing duty

order. We received a timely request for review from U.S. Steel Group, a

unit of USX Corporation.

We initiated the review, covering the period January 1, 1991

through December 31, 1991, on June 18, 1992 (57 FR 27212). The review

covers two producers/exporters of the subject merchandise, Sociedad

Mixta Siderurgica Argentina (SOMISA) and Propulsora Siderurgica,

S.A.I.C. (Propulsora), which account for all exports of the subject

merchandise from Argentina, and 20 programs.

On September 17, 1993, petitioners brought timely new allegations

to the Department concerning the provision of tax concessions and

preferential natural gas and electricity tariff rates to steel

producers. Petitioners cited alleged tax concessions provided to the

steel industry under Paragraph 8 of the April 11, 1991 Steel Agreement

between the Government of Argentina (GOA) and Argentine steel

producers, and preferential natural gas and electricity rates provided

under Paragraph 6 of the Steel Agreement. On November 15, 1993, the

Department requested information from the GOA on these alleged subsidy

programs.

On January 1, 1995, the effective date of the Uruguay Round

Agreements Act of 1994 (the URAA), certain countervailing duty orders

involving World Trade Organization (WTO) signatories which had been

issued without an injury determination by the International Trade

Commission (ITC) became entitled to an ITC injury determination under

section 753 of the URAA. The order on cold-rolled carbon steel flat-

rolled products did not receive an ITC injury investigation and

Argentina was a member of the WTO. On May 26, 1995, the Department

published a notice allowing domestic parties an opportunity to seek an

injury test regarding this and other countervailing duty orders. See

Countervailing Duty Order; Opportunity to Request a Section 753 Injury

Investigation, 60 FR 27963. For this order on cold-rolled carbon steel

flat-rolled products from Argentina, no domestic interested parties

requested an injury investigation. As such, the ITC made a negative

injury determination with respect to this order, pursuant to section

753(b)(4) of the URAA. Thus, the Department revoked this countervailing

duty order, effective January 1, 1995, pursuant to section 753(b)(3)(B)

of the URAA. See, Revocation of Countervailing Duty Orders, 60 FR 40568

(August 9, 1995).

The Ceramica Decision by the Court of Appeals for the Federal

Circuit

On September 6, 1995, the Court of Appeals for the Federal Circuit,

in a case involving imports of Mexican ceramic tile, ruled that, absent

an injury determination by the ITC, the Department may not assess

countervailing duties under 19 USC 1303(a)(1) (1988, repealed 1994) on

entries of dutiable merchandise after April 23, 1985, the date Mexico

became ``a country under the Agreement.'' Ceramica Regiomontana S.A. v.

U.S., 64 F.3d 1579 (Fed. Cir., 1995) (Ceramica).

Argentina attained the status of ``a country under the Agreement''

on September 20, 1991. Therefore, in consideration of the Ceramica

decision, the Department, on April 2, 1996, initiated changed

circumstances administrative reviews of the countervailing duty orders

on Leather, Wool, Oil Country Tubular Goods (OCTG), and Cold-Rolled

Carbon Steel Flat-Rolled Products (Cold-Rolled Steel) from Argentina,

which were in effect when Argentina became a country under the

Agreement. See Initiation of Changed Circumstances Countervailing Duty

Administrative Reviews: Leather from Argentina, Wool from Argentina,

Oil Country Tubular Goods from Argentina, and Cold-Rolled Carbon Steel

Flat Products from Argentina, 61 FR 14553 (April 2, 1996). These

reviews focused on the legal effect, if any, of Argentina's status as a

``country under the Agreement,'' and whether the Department has the

authority to assess countervailing duties on these orders. Because we

had ongoing administrative reviews of the orders on OCTG and Cold-

Rolled Steel that covered review periods on or after September 20,

1991, we also had to determine whether the Department had the authority

to assess countervailing duties on unliquidated entries of subject

merchandise occurring on or after September 20, 1991, when Argentina

became a ``country under the Agreement'' and before January 1, 1995,

the date that Argentina became a ``Subsidies Agreement country'' within

the meaning of section 701(b) of the URAA.

On April 29, 1997, the Department determined that it lacked the

authority to assess countervailing duties on entries of OCTG and Cold-

Rolled Steel from Argentina made on or after September 20, 1991 and

before January 1, 1995 (62 FR 24639; May 6, 1997). As a result, we

terminated the pending administrative reviews of the countervailing

duty order on OCTG covering 1992, 1993, and 1994, as well as the

pending administrative reviews of the countervailing duty order on

Cold-Rolled Steel covering 1992 and 1993.

However, because the 1991 review covers a period before Argentina

became a ``country under the Agreement,'' we must continue the 1991

administrative review to determine the amount of countervailing duties

to be assessed on entries made between January 1, 1991 and September

19, 1991. Entries of subject merchandise made on or after September 20,

1991 will be liquidated without regard to countervailing duties.

Applicable Statute

The Department is conducting this administrative review in

accordance with section 751(a) of the Tariff Act of 1930, as amended

(the Act). Unless otherwise indicated, all citations to the statute are

in reference to the provisions as they existed on December 31, 1994.

Scope of the Review

Imports covered by the review are shipments of Argentine cold-

rolled carbon steel flat-rolled products, whether or not corrugated or

crimped; whether or not painted or varnished and whether or not

pickled; not cut, not pressed, and not stamped to non-rectangular

shape; not coated or plated with metal; over 12 inches in width and

under 0.1875 inches in thickness whether or not in coils; as currently

provided for under the following item numbers of the Harmonized Tariff

Schedule (HTS):

7209.11.00, 7209.12.00, 7209.13.00, 7209.14.00, 7209.21.00, 7209.22.00,

7209.23.00, 7209.24.00, 7209.31.00, 7209.32.00, 7209.33.00, 7209.34.00,

7209.41.00, 7209.42.00, 7209.43.00, 7209.44.00, 7209.90.00, 7210.70.00,

7211.30.50, 7211.41.70, 7211.49.50, 7211.90.00, 7212.40.50

The HTS item numbers are provided for convenience and Customs purposes.

The written description remains dispositive.

Calculation Methodology for Assessment and Cash Deposit Purposes

We calculated the net subsidy on a country-wide basis by first

calculating the subsidy rate for each company subject to the

administrative review. We then weight-averaged the rates received by

each company using as the weight each companies share of total

Argentine exports to the United States of subject merchandise,

including all companies, even those with de minimis and zero rates. We

then summed the weight-averaged rates to determine the subsidy rate

from all programs benefitting

[[Page 38259]]

exports of subject merchandise to the United States.

Since the country-wide rate calculated using this methodology was

above de minimis, as defined by 19 CFR Sec. 355.7 (1994), we proceeded

to the next step and examined the net subsidy rate calculated for each

company to determine whether individual company rates differed

significantly from the weighted-average country-wide rate, pursuant to

19 CFR Sec. 355.22(d)(3). Propulsora had a significantly different net

subsidy rate during the review period pursuant to 19 CFR

Sec. 355.22(d)(3). Therefore, this company is treated separately for

assessment purposes. All other companies are assigned the country-wide

rate.

Analysis of Programs

I. Programs Conferring Subsidies

A. Programs Previously Determined to Confer Subsidies

1. Rebate of Indirect Taxes (Reembolso/Reintegro)

The Reembolso program provides a cumulative rebate of indirect

taxes paid upon export and is calculated as a percentage of the f.o.b.

invoice price of the exported merchandise. The Department will find

that the entire amount of any such rebate is countervailable unless the

following conditions are met: (1) The program operates for the purpose

of rebating prior stage cumulative indirect taxes and/or import

charges; (2) the government accurately ascertained the level of the

rebate; and (3) the government reexamines its schedules periodically to

reflect the amount of actual indirect taxes and/or import charges paid.

In prior investigations and administrative reviews of the Argentine

Reembolso program, the Department determined that these conditions have

been met, and, as such, the entire amount of the rebate has not been

countervailed (see, e.g., Cold Rolled Carbon Steel Flat-rolled Products

from Argentina, Final Results of Countervailing Duty Administrative

Review (56 FR 28527; June 21, 1991); Oil Country Tubular Goods from

Argentina, Final Results of Countervailing Duty Administrative Review

(56 FR 64493; December 10, 1991).

However, once a rebate program meets this threshold, the Department

must still determine in each case whether there is an overrebate; that

is, the Department must still analyze whether the rebate exceeds the

total amount of indirect taxes and import duties borne by inputs that

are physically incorporated into the exported product. If the rebate

exceeds the amount of allowable indirect taxes and import duties on

physically incorporated inputs, the Department will find a

countervailable benefit equal to the difference between the Reembolso

rebate rate and the allowable rate determined by the Department (i.e.,

the overrebate).

To determine whether there was an overrebate during the review

period, the Department requested the GOA to provide information on any

changes to the Reembolso program for cold-rolled steel. According to

the information provided, the program continued to be governed by

Decree 1555/86, which modified the Reembolso program and set precise

guidelines to implement the refund of indirect taxes and import

charges. The decree established three broad rebate levels covering all

products and industry sectors. The rates for levels I, II and III were

10 percent, 12.5 percent, and 15 percent, respectively. Based on the

GOA's 1986 calculation of the tax incidence in the cold-rolled carbon

steel industry, this industry was classified in level I.

In April 1989, the GOA suspended cash payment of rebates under the

Reembolso program. Pursuant to the Emergency Economic Law dated

September 25, 1989 (Law 23,697), the suspension of cash payments was

continued for an additional 180 days. Rebates accrued during the

suspension period were to be paid in export credit bonds. On March 4,

1990, the entire program was suspended for 90 days by Decree 435/90.

Decree 1930/90 suspended payments of the reembolso for an additional

12-month period.

Decree 612/91 dated April 10, 1991, reinstated cash payments of the

indirect tax rebates and import charges and reduced the rate for the

cold-rolled carbon steel industry from 10 percent to 6.7 percent.

Therefore, during the period of review, rebates were suspended from

January through April 10, 1991, and the rebate rate was 6.7 percent

from April 11 through December 31, 1991.

Using the information provided in the questionnaire response, we

calculated the allowable tax incidence for the subject merchandise

based on an updated study which SOMISA provided to the GOA in 1991. We

found that the rebate of taxes did not exceed the total amount of

allowable cumulative indirect taxes and/or import charges paid on

physically incorporated inputs, and prior stage indirect taxes levied

on the exported product at the final stage of production. Therefore, we

preliminarily determine that there was no benefit from this program

during the review period.

2. Equity Infusions

In our final determination in the investigation (see Certain Cold-

Rolled Carbon Steel Flat-Rolled Products from Argentina; Final

Affirmative Countervailing Duty Determination and Countervailing Duty

Order (49 FR 18006; 1984), we found that the GOA provided a series of

countervailable equity infusions to SOMISA under Decree 2887/78. This

decree authorized government reimbursement of debt expenditure,

including payment of interest, commissions and other fees, in exchange

for equity in SOMISA. SOMISA was also found to be unequityworthy from

1978 through 1983.

In our Final Results for the 1987 review (see Certain Cold-Rolled

Carbon Steel Flat-Rolled Products from Argentina; Final Results of

Countervailing Duty Administrative Review (56 FR 120; June 21, 1991),

we found that the Argentine Treasury continued to provide equity

infusions to SOMISA from 1984 through 1987 pursuant to Decree 2887/78,

and that SOMISA continued to be unequityworthy throughout this period.

No new information or evidence of changed circumstances has been

submitted in this proceeding to warrant reconsideration of this

determination.

We have reviewed SOMISA's financial statements for the years 1988

through 1990, and have determined that the Argentine Treasury provided

additional equity infusions pursuant to Decree 2887/78 through 1990. In

order to determine whether SOMISA was equityworthy during this period,

we applied the analysis described in the General Issues Appendix

attached to the Final Affirmative Countervailing Duty Determination:

Certain Steel Products From Austria (GIA) (58 FR 37225; July 9, 1993).

The results of this analysis have been filed on the official record of

this review. See Memorandum to Barbara E. Tillman, Director Office of

CVD/AD Enforcement VI, Regarding Certain Cold-Rolled Carbon Steel Flat-

Rolled Products from Argentina: Equityworthiness of Somisa During 1988,

1989 and 1990 dated April 4, 1997 on file in the Central Records Unit,

Room B099 of the Main Commerce Building. Based on this evaluation of

the financial statements, SOMISA continued to be unequityworthy

throughout this period.

We have determined that these equity infusions are nonrecurring

benefits and have allocated them over time. See GIA (58 FR 37226-27).

Also, consistent with

[[Page 38260]]

our equity methodology as stated in the GIA at 58 FR 27239-44, we have

treated these infusions as grants in order to determine the subsidy

conferred from these infusions. The benefit from each of the equity

infusions was then calculated using the declining balance methodology

as described in the GIA at 58 FR 37227, and used in prior

investigations and reviews.

In addition, consistent with the prior administrative review of

this order, we have converted the equity infusions into U.S. dollars

because of the periods of hyperinflation in Argentina and the changes

in the Argentine currency during this time period. This methodology has

also been used in other countries where hyperinflation and changes in

currency were an issue. See, e.g., Final Affirmative Countervailing

Duty Determination: Certain Steel Products from Brazil, 58 FR 37295

(July 9, 1993). Because we have converted the equity infusions into

dollars to account for hyperinflation and changes in national currency,

we must use a long-term discount rate in dollars. For our discount

rates, we have used the interest rates for long-term U.S. dollar

lending in Argentina for private creditors as published in the World

Bank Debt Tables: External Debt of Developing Countries. Long-term U.S.

dollar rates were also used from this World Bank source in Certain

Steel Products from Brazil.

When this review was initiated and until recently, our allocation

periods were determined by using the average useful life of a firm's

renewable physical assets as set forth in the U.S. Internal Revenue

Service's 1977 Class Life Asset Depreciation Range System. Based on

this IRS table, the average useful life of assets in the steel industry

is 15 years. However, based on a recent decision by the Court of

International Trade, we have modified our policy and we now base the

allocation period on company-specific average useful life of assets

(AUL). See British Steel et al. vs. United States et al., 929 F. Supp.

426, (1996 CIT). Therefore, we provided SOMISA an opportunity to submit

its company-specific AUL. SOMISA stated that due to the difficulty in

calculating a company-specific AUL due to the periods of

hyperinflation, it requested that the 15 year period specified in the

IRS tables be used as the allocation period. In light of the periods of

hyperinflation, we find that it would be unduly burdensome to require

the company to submit actual AUL data. Therefore, in circumstances such

as here where company-specific AUL is not reasonably available, we are

basing the allocation period on the 15 year AUL listed in the IRS tax

tables for this administrative review.

Using the above-described methodology, we determined the benefit to

SOMISA from each of these equity infusions during the review period. We

totaled these amounts to arrive at the total benefit received by SOMISA

from all of these infusions during the review period. We then divided

this amount by total sales during 1991 to calculate a subsidy of 1.54

percent ad valorem for the review period for all companies except

Propulsora which had a significantly different net subsidy rate for the

review period pursuant to 19 CFR 355.22(d)(3). The program-specific

rate for Propulsora under this program is 0.00 percent.

B. New Program Preliminarily Found to Confer Subsidies

Regional Tariff Zones for Natural Gas

While investigating the allegation of preferential natural gas

rates to the steel industry, we discovered that companies located in

different regions of the country paid different prices for natural gas.

During the period of review, Argentina was divided into nine tariff

zones for the purposes of determining the actual price of natural gas

paid by the consumer. Within each zone, a separate coefficient was

established to reflect the costs of transportation of natural gas

within the country. This coefficient was applied against the published

tariff rates to determine the actual price of natural gas for the

consumer. For example, in Zone I which covers Buenos Aires and the

surrounding countryside, the coefficient was 100 percent. Therefore, a

consumer of natural gas in Zone I paid 100 percent of the published

tariff rate for natural gas, while in Zone IX, the coefficient was 45

percent; therefore, a consumer located in Zone IX paid 45 percent of

the published tariff rate.

As noted above, these zones were established to take into account

the costs of transportation of natural gas within the country. Thus,

zones located further from the natural gas fields would have a higher

coefficient and, therefore, would have paid a higher price for natural

gas than those located closer to the natural gas fields. Propulsora was

located in Zone I, therefore, it paid 100 percent of the published

tariff rate, while SOMISA was located in Zone II and paid 95 percent of

the published tariff rate.

These tariff zones were established during 1981 and 1982 and were

based upon a study conducted by Gas del Estado (GdE), the state-owned

utility company. There was no follow-up to the original study and the

zones have remained consistent since that time except for some slight

modifications in two of the zones. We verified this program during our

concurrent 1991 administrative review of OCTG, which covered the same

allegations of preferential pricing of natural gas to the steel

industry. During verification, we requested to review the original

study which led to the creation of the zones and the coefficients. We

were informed by GdE officials that because of the age of the study and

the fact that it contained only historical data, the study was no

longer available. (See the report of the Verification of the Government

of Argentina's Response in the 1991 Administrative Review of Oil

Country Tubular Goods from Argentina (public version), which has been

put in the public file for the instant review, and can be found in the

Central Records Unit, Room B099 of the Main Commerce Building.)

Under longstanding Department practice, programs which provide

subsidies on a regional basis are countervailable. See, e.g., Final

Affirmative Countervailing Duty Determination: Fresh and Chilled

Atlantic Salmon from Norway, 56 FR 7678 (February 25, 1991) and Final

Affirmative Countervailing Duty Determination; Certain Fresh Atlantic

Groundfish from Canada, 51 FR 10041 (March 24, 1986). Because the

original study establishing the tariff zones in Argentina was done 10

years prior to our period of review, was never subsequently up-dated,

and because the GOA could not document the criteria used to establish

these tariff zones, we preliminarily determine that the lower rates

charged in zones other than Zone I constitute regional subsidies.

Because Propulsora was located in Zone I and paid the full 100

percent of the published rate, we find that it did not benefit from

this program. SOMISA was located in Zone II and paid only 95 percent of

the established tariff rate for natural gas, therefore, we

preliminarily determine that it received a countervailable benefit

under this program. To determine the amount of the benefit received by

SOMISA during this review period, we calculated the amount the company

would have paid during 1991 for natural gas if it were required to pay

the full 100 percent of the published natural gas tariff rates. We then

deducted from this amount the amount for natural gas that it actually

did pay during 1991. We then divided the difference by total sales in

1991, and calculated a subsidy of 0.30 percent ad valorem for the

review period for all companies, except Propulsora which

[[Page 38261]]

had a significantly different net subsidy rate for the review period

pursuant to 19 CFR 355.22(d)(3). The program-specific rate for

Propulsora under this program is 0.00 percent.

II. Program Preliminarily Found Not to Confer Subsidies

Preferential Natural Gas Tariffs Under Resolution 192/91

At the end of 1990, Argentina was emerging from an extended period

of hyperinflation. The GOA believed that deregulating and privatizing

the large, state-owned utility companies would lead to price stability

by introducing competition in the market. The beginning of this

deregulation can be found with the passage of Decree 633. Also, within

this context, the GOA entered into sectoral agreements with Argentine

industries in order to secure commitments from industries that they

would hold down prices charged to their customers in order to stabilize

the inflation rate within the economy. In exchange for this commitment,

the GOA committed itself to broad based economic reforms, including the

maintenance of stable energy prices.

In early 1991, the GOA began the first steps toward deregulating

the natural gas market in Argentina. Up until April 1991, the GOA set

and regulated the tariff rates for natural gas in the country. Prices

for natural gas could not deviate from those prices set by the Economy

Minister. In April 1991, with the enactment of Decree 633, two separate

markets for natural gas were created. The first market was the

wholesale market which covered transactions between producers and

distributors as well as between producers and large users of natural

gas. The other market created by Decree 633 was the retail market which

covered sales to residential and other commercial consumers. Under

Decree 633, companies in the wholesale market were permitted to engage

in negotiations and to enter into individual contracts for natural gas.

In April 1991, while the GOA was deregulating the prices of natural

gas in the wholesale market, the GOA also began to reduce the tariff

rates for natural gas in the retail market with the passage of

Resolution 192/91. Resolution 192/91 established new tariff rates which

were approximately 20 percent lower than the prior published rates in

Resolution 29/91. The rates established under Resolution 192/91 were

effective from April 1, 1991 through December 31, 1992. We were

informed by the GOA during the verification of the concurrent 1991

administrative review of OCTG, that not all companies in Argentina

received the reduced rates under Resolution 192/91. (See the report of

the Verification of the Government of Argentina's Response in the 1991

Administrative Review of Oil Country Tubular Goods from Argentina

(Public Version), which has been put in the public file for the instant

review, and can be found in the Central Records Unit, Room B099 of the

Main Commerce Building.) The tariff rates for natural gas in Argentina

were announced in resolutions published by the Economy Minister. In

order to qualify for the reduced rates, certain companies had to

provide documentation to the government that they voluntarily avoided

price increases and thus contributed to the avoidance of inflation and

currency devaluation in the country. These companies were listed in

Resolution 71/91.

By April of 1991, companies in Argentina could seek to obtain

reduced natural gas prices by two means. If the company qualified as a

large consumer of natural gas, it could seek to negotiate its own rate

with the utility company, or it could seek to qualify for the reduced

rates which were published in Resolution 192/91. Neither SOMISA nor

Propulsora negotiated individual contracts for natural gas during the

period. In addition, SOMISA did not qualify for the reduced tariff

rates published under Resolution 192/91, and it continued to pay the

higher tariff rates established under Resolution 29/91 for the rest of

1991. Propulsora did qualify for the reduced rates under Resolution

192/91 and it paid the reduced tariffs from April 1991 through December

31, 1991. Therefore, we must determine whether the reduced tariffs

under Resolution 192/91 provided Propulsora with a countervailable

benefit.

On March 27, 1991, the Ministry of Economy published Resolution

192/91, which set the new tariff rates for natural gas. These new rates

became effective on April 1, 1991. These revised rates under Resolution

192/91 applied to both home and non-home consumption of natural gas.

Under Section 4 of Resolution 192/91, the tariff rate listed in Annex V

applied to businesses, official agencies, and industries. However,

Section 17 of Resolution 192/91 stated that in order to be entitled to

the tariff rates listed in the resolution, corporations listed in

Resolution 71/91 had to submit evidence that they met the obligations

listed in Resolution 71/91. Companies listed in Resolution 71/91 had to

get a certification in order to qualify for the tariff rates published

in Resolution 192/91. A certification meant that the company was

assisting in maintaining price stability in the country by holding down

prices. Companies not listed in Resolution 71/91 automatically

qualified for the revised tariff rates published in Resolution 192/91.

Resolution 71/91 was published by the Ministry of Economy on

February 22, 1991. In the period leading up to the publication of

Resolution 71/91, there was high wholesale and retail inflation in

Argentina. According to the GOA, it was, therefore, necessary to

implement a policy for the domestic market to assist in price

stabilization to deal with the self-perpetuating hedging based on the

future expectation of inflation. In this environment, companies would

raise prices in expectation of the next month's inflation. Resolution

71/91 was published in order to dampen this price escalation.

The list of companies published in Resolution 71/91 was compiled

using three sources: (1) Large taxpayers as determined by the Direccion

General Impositiva, the Argentine tax collection agency; (2) price

setting enterprises as determined by the Commerce Secretary; and (3)

companies known by the Banco Nacional de la Republica Argentina to have

a significant amount of indebtedness. There were a total of 1,566

companies listed in Resolution 71/91. Companies named in this list had

to provide the GOA with information that they ``voluntarily avoided

price increases'' during the months of February and March 1991, thereby

contributing to the avoidance of price inflation and currency

devaluation.

If companies listed in Resolution 71/91 demonstrated to the

government that they ``voluntarily avoided price increases,'' they were

provided with a certificate from the Ministry of Economy which could be

presented to GdE. With the presentation of this certificate, GdE would

then allow the company to use the reduced tariff rates for natural gas

published in Resolution 192/91.

Propulsora was listed in Resolution 71/91 and had to provide

evidence demonstrating that it ``voluntarily avoided price increases.''

Based on the information it provided to the government, it was provided

with a certification which made it eligible for the reduced tariff

rates under Resolution 192/91. Effective April 1, 1991, Propulsora's

natural gas tariff rates were based on those set in Resolution 192/91.

SOMISA did not receive a certification and, therefore, was not eligible

for the reduced tariff rates. It continued to pay the higher tariff

rates from the previous tariff schedule under Resolution 29/91. In

order to determine whether the tariff rates announced in Resolution

192/91

[[Page 38262]]

provided a countervailable benefit to Propulsora, we must first

determine whether the rates provided in that resolution are limited to

a specific enterprise or industry, or to a group of enterprises or

industries as required under section 771(5) of the Act.

Under Resolution 192/91, all companies and businesses are

automatically eligible for tariff rates set forth in this Resolution

unless the company or business is listed in Resolution 71/91. Companies

listed in Resolution 71/91 had to be certified by the government to

qualify for the reduced tariffs in Resolution 192/91. Eighty-five

percent of the companies that applied for certification for the tariffs

in Resolution 192/91 (462 companies) were approved for the reduced

natural gas rates. In deciding whether to approve an application, the

GOA uniformly applied the criteria specified in Resolution 71/91 to

each applicant.

All companies and businesses in Argentina that were not listed in

Resolution 71/91, and 462 companies and businesses listed in Resolution

71/91 which received certifications paid the Resolution 192/91 tariff

rate for natural gas. These companies and businesses represent

virtually all industries in Argentina. Therefore, we preliminarily

determine that the published tariff rates listed in Resolution 192/91

are not limited, by law, or in fact, to an enterprise or industry or to

a group of enterprises or industries as required under section 771(5)

of the Act. As such, we preliminarily determine the rates under

Resolution 192/91 to be non-countervailable.

III. Programs Preliminarily Found Not To Be Used

We examined the following programs and preliminarily find that the

producers and/or exporters of the subject merchandise did not apply for

or receive benefits under these programs during the period of review:

Preferential Electricity Tariff Rates

Until April 1991, the tariff rates for electricity were set by the

government. On April 17, 1991, the GOA published Decree 634/91, which

provided for the deregulation of the electricity industry in Argentina.

This decree created two market levels for electricity in Argentina, the

wholesale market and the retail market. The wholesale market was

comprised of the producers, generators, and distributors of electricity

as well as the large individual consumers of electricity. Under Decree

634, the producers and generators would sell electricity through a

central dispatch agency. The distributors would then purchase the

electricity from this central dispatch agency for delivery to the

individual consumer. In order to encourage competition within the

wholesale market, a large individual consumer could negotiate a

contract with any utility company within the country. Although large

consumers could negotiate contracts for electricity in the wholesale

market, the tariff rates charged to individual consumers in the retail

market were still set by the government.

During the review period, both SOMISA and Propulsora continued to

purchase electricity at the published tariff rates for businesses and

companies in Argentina, and they did not negotiate individual contracts

with utility companies. Therefore, we preliminarily determine that this

program was not used during the period of review and need not reach the

issue of whether the program is otherwise countervailable.

Privatization Assistance Under Law 23696 and Decree 1144/92

In 1989, the GOA embarked upon a reform program designed to

restructure the economy, stabilize the currency, refinance the public

debt and reduce the public sector. A central element of this program

was the privatization of large public enterprises. The general

privatization law, Chapter II of Law 23696, published on August 17,

1989, established procedures for the transfer of state assets to the

private sector. Among other provisions, it provides that the Executive

Branch may (1) decide which assets will be privatized; (2) reorganize

going concerns and transfer assets and liabilities from those concerns

prior to privatization; and (3) assume the debt of public enterprises

undergoing privatization.

Law 23696 requires that before an entity may be privatized, the

Executive Branch must declare it subject to privatization and an Act of

Congress must be promulgated. SOMISA was one of twenty-six companies

under the aegis of the Ministry of Defense that were declared subject

to privatization on July 23, 1990. Congress ratified that declaration

in Act 24045 on December 31, 1991. As stated above, Law 23696 allows

the GOA to reorganize state-owned companies which are to be privatized

and to also assume the debt of state-owned companies undergoing

privatization. Although SOMISA was not privatized until November 1992,

we must examine whether SOMISA received any countervailable benefits

under this GOA program during 1991, our period of review. Propulsora is

a privately-held company and, therefore, did not fall under the purview

of Law 23696.

In order to qualify for the treatment of debt specified under Law

23696, a company must be partially or wholly-owned by the government,

and be the subject of either privatization or liquidation. Under Law

23696, any type of liability, whether derived from labor or social

security obligations, customs duties, lawsuits, contract disputes,

fines or penalties, or liabilities that arose from the normal

functioning of business could be assumed directly by the government.

Under Law 23696, SOMISA's public sector debt acquired before April 1,

1991, was eligible for consolidation and assumption by the GOA.

Although the debt acquired by SOMISA before April 1, 1991 was covered

under Law 23696, the actual assumption of SOMISA's debt by the

government was not authorized until 1992, under Decree 1144/92. Decree

1144/92, which was enacted July 15, 1992, also (1) canceled all of

SOMISA's debt acquired from April 1, 1991 until January 1, 1992; (2)

exempted SOMISA from the stamp tax and from other taxes which are

imposed on the transfer of assets and land; and (3) stated that the GOA

would assume SOMISA's labor-related obligations incurred prior to its

privatization.

Decree 1144/92, which authorized SOMISA's debt consolidation and

assumption was not enacted until after the period of review and there

was no debt assumption or forgiveness during the period of review.

Therefore, we preliminarily determine that SOMISA did not receive any

benefits during the period of review from the debt consolidation and

assumption under Law 23696, nor did it receive benefits under Decree

1144/92 during the period of review.

The following programs also were not used during the review period:

Medium- and Long-Term Loans.

Capital Grants.

Income and Capital Tax Exemptions.

Government Trade Promotion Programs.

Exemption from Stamp Taxes Under Decree 186/74.

Incentives for Trade (Stamp Tax Exemption Under Decree

716).

Incentive for Export.

Export Financing Under OPRAC 1, Circular RF-21.

Pre-Financing of Exports Under Circular RF-153.

Loan Guarantees.

Post-Export Financing Under OPRAC 1-9.

Debt Forgiveness.

[[Page 38263]]

Tax Deduction Under Decree 173/85.

IV. Program Preliminarily Found Not to Exist

1. Tax Concessions for the Steel Industry

Petitioners alleged that, under Paragraph 8 of the April 11, 1991

Steel Agreement between the GOA and Argentine steel producers, the GOA

provides the steel industry with tax concessions. According to the

response of the GOA, Paragraph 8 of the Steel Agreement does not

provide tax concessions to the steel industry but merely states that

the industry's Reembolso level will be studied taking into account the

tax incidence of steel producers. For information on the Reembolso/

Reintegro program, see the section ``Rebate of Indirect Taxes,'' above.

Therefore, we preliminarily determine that there were no new tax

concessions provided to the steel industry under the Steel Agreement.

Preliminary Results of Review

For the period January 1, 1991 through December 31, 1991, we

preliminarily determine the net subsidy to be 0.00 percent ad valorem

for Propulsora and 1.84 percent ad valorem for all other companies.

If the final results of this review remain the same as these

preliminary results, the Department intends to instruct the U.S.

Customs Service to assess the following countervailing duties:

------------------------------------------------------------------------

Rate

Manufacturer/exporter (percent)

------------------------------------------------------------------------

Propulsora................................................. 0.00

All Other Companies........................................ 1.84

------------------------------------------------------------------------

The Department also intends to instruct the U.S. Customs Service to

assess these countervailing duties on entries of the subject

merchandise covered by this administrative review for the period

January 1, 1991 through September 19, 1991, and to liquidate all

entries made on or after September 20, 1991, without regard to

countervailing duties. This countervailing duty order was revoked

effective January 1, 1995. As such, no further instructions will be

sent to Customs regarding cash deposits.

Parties to the proceeding may request disclosure of the calculation

methodology and interested parties may request a hearing no later than

10 days after the date of publication of this notice. Interested

parties may submit written arguments in case briefs on these

preliminary results within 30 days of the date of publication. Rebuttal

briefs, limited to arguments raised in case briefs, may be submitted

seven days after the time limit for filing the case brief. Parties who

submit 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. Any hearing, if requested, will be held seven days after the

scheduled date for submission of rebuttal briefs. Copies of case briefs

and rebuttal briefs must be served on interested parties in accordance

with 19 CFR 355.38(e).

Representatives of parties to the proceeding may request disclosure

of proprietary information under administrative protective order no

later than 10 days after the representative's client or employer

becomes a party to the proceeding, but in no event later than the date

the case briefs, under section 355.38(c), are due.

The Department will publish the final results of this

administrative review including the results of its analysis of issues

raised in any case or rebuttal brief or at a hearing.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

Dated: July 10, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-18871 Filed 7-16-97; 8:45 am]

BILLING CODE 3510-DS-P