Certain Welded Carbon Steel Pipe and Tube and Welded Carbon Steel Line Pipe From Turkey; Final Results and Partial Rescission of Countervailing Duty Administrative Reviews

DEPARTMENT OF COMMERCE

International Trade Administration

[C-489-502]

Certain Welded Carbon Steel Pipe and Tube and Welded Carbon Steel

Line Pipe From Turkey; Final Results and Partial Rescission of

Countervailing Duty Administrative Reviews

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of countervailing duty administrative

reviews.

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

SUMMARY: On December 9, 1997, the Department of Commerce published in

the Federal Register its preliminary results of administrative reviews

of the countervailing duty orders on certain welded carbon steel pipe

and tube and welded carbon steel line pipe from Turkey for the period

January 1, 1996 through December 31, 1996 (62 FR 64808). The Department

has now completed these administrative reviews in accordance with

section 751(a) of the Tariff Act of 1930, as amended. For information

on the net subsidy for each reviewed company, and for all non-reviewed

companies, please see the Final Results of Reviews section of this

notice. We will instruct the U.S. Customs Service to assess

countervailing duties as detailed in the Final Results of Reviews

section of this notice.

EFFECTIVE DATE: April 16, 1998.

FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Maria MacKay,

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)

482-3692 or (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

Pursuant to 19 CFR 355.22(a), these reviews cover only those

producers or exporters of the subject merchandise for which a review

was specifically requested. Accordingly, the review of the order on

certain welded carbon steel pipe and tube (pipe and tube) covers

[[Page 18886]]

Borusan Birlesik Boru Fabrikalari A.S. and Borusan Ihracat Ithalat ve

Dagitim A.S. (Borusan Group). The review of the order on welded carbon

steel line pipe (line pipe) covers Mannesmann-Sumerbank Boru Endustrisi

T.A.S. (Mannesmann). These reviews cover the period January 1, 1996

through December 31, 1996, and 21 programs.

The Department also received a timely request from Wheatland Tube

Company and the Maverick Tube Corporation (the petitioners) to conduct

reviews of Erciyas Boru Sanayii ve Ticaret A.S. (Erbosan), Yucel Boru

ve Profil Endustrisi A.S. (Yucel Boru), Bant Boru Sanayii ve Ticaret

A.S. (Bant Boru), Erkboru Profil San ve Tic A.S. (Erkboru). These

companies did not export pipe and tube or line pipe to the United

States during the period of review. Therefore, in the preliminary

results notice, we rescinded the reviews with respect to these

companies.

Since the publication of the preliminary results on December 9,

1997 (62 FR 64808), the following events have occurred. We invited

interested parties to comment on the preliminary results. On January 8,

1997, a case brief was submitted by the Government of the Republic of

Turkey (GRT), Mannesmann, which exported line pipe, and the Borusan

Group, which exported pipe and tube to the United States during the

review period (the respondents). On January 15, 1998, a rebuttal brief

was submitted by the petitioners.

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 (URAA) effective January 1, 1995 (the

Act). The Department is conducting these administrative reviews in

accordance with section 751(a) of the Act. Because these administrative

reviews were initiated on April 24, 1997, 19 CFR Part 355 is

applicable.

Scope of the Reviews

Imports covered by these reviews are shipments from Turkey of two

classes or kinds of merchandise: (1) Certain welded carbon steel pipe

and tube, having an outside diameter of 0.375 inch or more, but not

more than 16 inches, of any wall thickness. These products, commonly

referred to in the industry as standard pipe and tube or structural

tubing, are produced to various American Society for Testing and

Materials (ASTM) specifications, most notably A-53, A-120, A-135, A-

500, or A-501; and (2) Certain welded carbon steel line pipe with an

outside diameter of 0.375 inch or more, but not more than 16 inches,

and with a wall thickness of not less than 0.065 inch. These products

are produced to various American Petroleum Institute (API)

specifications for line pipe, most notably API-L or API-LX. These

products are classifiable under the Harmonized Tariff Schedule of the

United States (HTSUS) as item numbers 7306.30.10 and 7306.30.50. The

HTSUS item numbers are provided for convenience and Customs purposes.

The written description remains dispositive.

Analysis of Programs

Based upon the responses to our questionnaire and written comments

from the interested parties, we determine the following:

I. Programs Conferring Subsidies

A. Programs Previously Determined to Confer Subsidies

1. Pre-shipment Export Credit. In the preliminary results, we found

that this program conferred countervailable subsidies on the subject

merchandise. We did not receive any comments on this program from the

interested parties. However, a review of the record has led us to

modify the calculations. In the preliminary results, we inadvertently

did not calculate the benefit on two loans for the Borusan Group. We

also amended our calculations of the benefit from all loans of the

Borusan Group to conform with the term of the commercial loans obtained

by the company. Accordingly, the net subsidies for this program have

changed from the preliminary results and are as follows:

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

Rate

Manufacturer/exporter of pipe and tube (percent)

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

Borusan Group................................................ 0.22

Mannesmann................................................... 0.29

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

2. Freight Program. In the preliminary results, we found that this

program conferred countervailable subsidies on the subject merchandise.

Our review of the record and our analysis of the comments submitted by

the interested parties, summarized below (see comments 3 and 4,

Adjustment of the Freight Program Denominator), has led us to modify

our calculations for this program from the preliminary results.

Accordingly, the net subsidies for this program have changed and are as

follows:

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

Rate

Manufacturer/exporter of pipe and tube (percent)

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

Borusan Group................................................ 2.43

Mannesmann................................................... 3.28

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

3. Foreign Exchange Loan Assistance. In the preliminary results, we

found that this program conferred countervailable subsidies on pipe and

tube. We did not receive any comments on this program from the

interested parties, and our review of the record has not led us to

change any findings or calculations. Accordingly, the net subsidy for

this program remain unchanged from the preliminary results and are as

follows:

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

Rate

Manufacturer/exporter of pipe and tube (percent)

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

Borusan Group................................................ 0.43

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

4. Incentive Premium on Domestically Obtained Goods. In the

preliminary results, we found that this program conferred

countervailable subsidies on pipe and tube. We did not receive any

comments on this program from the interested parties, and our review of

the record has not led us to change any findings or calculations.

Accordingly, the net subsidy for this program remain unchanged from the

preliminary results and are as follows:

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

Rate

Manufacturer/exporter of pipe and tube (percent)

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

Borusan Group................................................ 0.01

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

5. Investment Allowance. In the preliminary results, we found that

this program conferred countervailable subsidies on pipe and tube. We

did not receive any comments on this program from the interested

parties, and our review of the record has not led us to change any

findings or calculations. Accordingly, the net subsidy for this program

remain unchanged from the preliminary results and are as follows:

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

Rate

Manufacturer/exporter of pipe and tube (percent)

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

Borusan Group................................................ 0.02

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

B. New Program Determined to Confer Subsidies

Deduction from Taxable Income for Export Revenues. In the

preliminary results, we found that the Deduction from Taxable Income

for Export Revenues conferred countervailable benefits on the subject

merchandise. We did not receive any comments on this program from the

interested parties.

[[Page 18887]]

Accordingly, the net subsidies for this program remain unchanged from

the preliminary results and are as follows:

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

Rate

Manufacturer/exporter of pipe and tube (percent)

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

Borusan Group................................................ <0.005

Mannesmann................................................... 0.16

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

II. Programs Found To Be Not Used

In the preliminary results, we found that the producers and/or

exporters of the subject merchandise did not apply for or receive

benefits under the following programs:

1. Resource Utilization Support.

2. State Aid for Exports Program.

3. Advance Refunds of Tax Savings.

4. Export Credit Through the Foreign Trade Corporate Companies

Rediscount Credit Facility (Eximbank).

5. Past Performance Related Foreign Currency Export Loans

(Eximbank).

6. Export Credit Insurance (Eximbank).

7. Subsidized Turkish Lira Credit Facilities.

8. Subsidized Credit for Proportion of Fixed Expenditures.

9. Fund Based Credit.

10. Export Incentive Certificate Customs Duty & Other Tax

Exemptions.

11. Resource Utilization Support Premium (RUSP).

12. Regional Subsidies.

(a) Additional Refunds of VAT (VAT + 10%).

(b) Postponement of VAT on Imported Goods.

(c) Land Allocation (GIP).

(d) Taxes, Fees (Duties), Charge Exemption (GIP).

We did not receive any comments on these programs from the

interested parties, and our review of the record has not led us to

change our findings from the preliminary results.

Analysis of Comments

Comment 1: Measurement of Countervailable Benefit: Earned Versus

Receipt Basis

The respondents argue that the Department's preliminary finding

that exporters could not ``predict at the time of export what the

benefit would be'' under the Freight Program was in error and is

contrary to the Department's long-standing practice. The respondents

state that the Department's practice is to measure benefits on the date

of export in cases where the benefit is earned on a shipment-by-

shipment basis, and the exporter knows the amount of the benefit at the

time of export. Thus, because the exporters earned the benefit on a

shipment-by-shipment basis upon exportation, and knew the precise U.S.

dollar amount of the benefit at the time of exportation, the benefit

should be measured on an ``earned basis.''

The respondents also cite, but do not discuss, several cases to

demonstrate the Department's practice of measuring benefits on the date

of export in cases where the benefit is earned on a shipment-by-

shipment basis, and the exporter knows the amount of the benefit at the

time of export. Therefore, since the Freight Program encompasses these

facts, they argue that, in order to apply this rule consistently, the

Department must calculate the benefits under the Freight Program on an

``as earned'' basis, or explain the reason for the methodological

change.

In addition, the respondents claim that in Certain Welded Carbon

Steel Pipes and Tubes and Welded Carbon Steel Line Pipe from Turkey;

Preliminary Results of Countervailing Duty Administrative Reviews, 62

FR 16782, 16787 (April 8, 1997) and Certain Welded Carbon Steel Pipes

and Tubes and Welded Carbon Steel Line Pipe from Turkey; Final Results

of Countervailing Duty Administrative Reviews, 62 FR 43984 (August 18,

1997) (Pipe and Tube and Line Pipe 1995), the Department countervailed

benefits provided under the Export Performance Credit program, which

are similar to those provided under the Freight Program, on the date

the merchandise was exported. The respondents state that the Export

Performance Credit program provided credits to exporters based on a

percentage of the f.o.b. value of their exports, and the Freight

Program provided rebates to exporters in the amount of $50 per ton for

merchandise exported on Turkish vessels, and $30 per ton for non-

Turkish vessels. They argue that the exporters did not know, at the

time of export, the exact rate of exchange that would be used to

convert the dollar amount to Turkish Lira (TL) under either of the

programs and, therefore, the exporters did not know the ``precise''

amount of the benefit in TL that they would receive at a later date.

The respondents also claim that, in designing the Freight Program,

the GRT was well aware that Turkish companies invoice their export

shipments in U.S. dollars. Because both the benefit and the sales value

were expressed in U.S. dollars, they claim that a benefit denominated

in U.S. dollars would directly affect the price Turkish companies

charged their customers. By contrast, a benefit denominated in TL that

would be given at an unspecified later date would, in a

hyperinflationary economy, have been of unknown value at the time of

export and would have had little or no effect on the price or volume of

goods exported. Therefore, they argue that a benefit amount expressed

in U.S. dollars clearly provided the exporters with a far more certain

knowledge of the true ``value'' of the benefit, because U.S. dollars

hold their value, than if the benefit had originally been expressed in

TL because of high inflation in Turkey.

The petitioners argue that, on the date of export, the exporters

knew only the U.S. dollar-denominated amount that would be used to

calculate the TL benefit at some uncertain future date, and that the

participants were not assured that they would ultimately receive the

equivalent of the U.S. dollar-denominated amount in TL. Instead, the

conversion of the benefit into a TL amount was accomplished using an

exchange rate that was not contemporaneous with either the date of

export or the date of payment. Between the exchange rate date and the

date of payment, the real benefit eroded from hyperinflation. As a

result, the amount the exporters received was not the TL equivalent of

the dollar-denominated benefit. The petitioners further argue that, in

fact, the Borusan Group and Mannesmann did not ultimately receive a

benefit of $30/$50 per ton. At the time of payment, the lira-

denominated benefit was worth no more than $17.10/$28.50, respectively.

The petitioners also claim that none of the cases cited by the

respondents argues for a different result from that in the preliminary

determination or the Department's decision in Pipe and Tube and Line

Pipe 1995. The petitioners point to the Final Affirmative

Countervailing Duty Determinations; Certain Welded Carbon Steel Pipe

and Tube Products from Turkey, 51 FR 1268, 1273 (January 10, 1986)

(Final Affirmative 1986) (wherein the Department enunciated its general

rule for assessing benefits on an ``as earned'' basis where the benefit

rebates a fixed proportion of the value of the shipment and is known to

the exporter), noting that the rationale for countervailing amounts

received applies when the recipient could not anticipate precisely how

much would be received and hence could not make business decisions

based upon benefits received at a future date. Thus, they argue that

the Department's position in the Final Affirmative 1986 is consistent

with its treatment of the Freight Program in this review because the

exporters did not know and could not have known precisely the amount of

the benefit at the time of export.

[[Page 18888]]

Moreover, all the other cases cited by the respondents, the

petitioners argue, did not deal with hyperinflationary economies. See

Certain Iron-Metal Castings from India (Indian Castings), 60 FR 44843

(August 29, 1995); Cotton Shop Towels from Pakistan (Shop Towels), 61

FR 50273, 50275 (September 25, 1996), (rebates earned on a shipment-by-

shipment basis upon export with no diminution of value due to

hyperinflation). See also, Carbon Steel Butt-Weld Pipe Fittings from

Thailand (Butt-Weld Pipe Fittings), 55 FR 1695 (January 18, 1990)

(benefits under the Tax Certificates for Exports program assessed on

``as earned'' because the benefits were payable on a fixed percentage

of the f.o.b. value of export); Certain Carbon Steel Products from

Brazil, 49 FR 17988 (April 26, 1984). However, the petitioners argue

that in a hyperinflationary economy, a delay in receiving payment can

render the amount of the eventual benefit uncertain, unless it is tied

to a stable currency.

Department's Position: As we have already stated in Pipe and Tube

and Line Pipe 1995, it is the Department's long-standing practice to

countervail an export subsidy on the date of export on an ``earned

basis'' rather than on the date the benefit is received where it is

provided as a percentage of the value of the exported merchandise on a

shipment-by-shipment basis, and the exact amount of the countervailable

subsidy is known at the time of export. Contrary to the respondents'

assertions, we have not departed from our practice. In Pipe and Tube

and Line Pipe 1995 at 16785, and in these preliminary results, we

stated that although the benefit under the Freight Program is

calculated based on export tonnage and not as a percent of the f.o.b.

value, it is possible that the value of a benefit determined by tonnage

could be known at the time of export and, thus, the countervailable

benefit could be earned upon exportation. However, as we previously

determined in Pipe and Tube and Line Pipe 1995, and as the facts in

these reviews establish, with regard to the Freight Program, the

exporter did not know the amount of the benefit at the time of export.

The benefits under the Freight Program were stated in U.S. dollars per

ton at the time of export, and were converted to TLs when they were

paid at a later date. Because the GRT did not commit to use the

exchange rate prevailing on the day the payment was made, as in the

Export Performance Credit Program, the exporter could not have known

the value of the benefit at the time of export, neither in U.S. dollars

nor in TLs. In fact, the GRT announced in February 1995, two months

after the shipments took place, that it would convert the dollar amount

of the freight benefits using the exchange rate that was in effect on

the last day in December 1994. Thus, the exporter ultimately received

in 1996 an amount in TLs that did not correspond to the U.S. dollar

value of the benefit granted by the government in 1994 at the time of

shipment; under the circumstances, it is also obvious that, at the time

of shipment, the exporter was in no position to predict what the amount

of the final payment would be. See Pipe and Tube and Line Pipe 1995 at

43991. Indeed, the respondents concede that ``[h]ad the benefit been

denominated in TL, the value of the ultimate benefit received, as

measured in constant TL, would not have been known at the time of

export due to the high inflation in Turkey at the time.'' Case Brief p.

7-8.

Contrary to the respondents' argument that the Freight Program is

indistinguishable from the Export Performance Credit Program, we found

that the programs are distinguishable. Under the Export Performance

Credit Program, the value of the benefit was tied to the U.S. dollar.

Exporters would receive a percentage of the U.S. dollar value of their

exports in TLs based on the foreign exchange rate prevailing at the

time of payment. Thus, although at the time of receipt the exporters

received more TL than they would have been paid upon exportation,

because the benefit was tied to the U.S. dollar, the value of the TL

amount remained the same in U.S. dollar terms. However, under the

Freight Program, the GRT converted the U.S. dollar value in TL using an

exchange rate that did not reflect the full U.S. dollar value of the

benefit at the time of payment. Therefore, we have determined that in

the case of the Export Performance Program, the value of the benefit

was known at the time of export, and therefore can be calculated on an

``as earned'' basis, but in the case of the Freight Program, the value

of the benefit was not known at the point of export because the

exporters did not know the exchange rate that the GRT would use to

convert the U.S. dollar benefit into TLs. As such, for the Freight

Program, the calculation must be based on an ``as received'' basis.

As petitioners point out, the cases cited accord with the

Department's measurement of the benefits for the Freight Program. In

Shop Towels and in Indian Castings, export rebates were earned on a

shipment-by-shipment basis, and the exact amount of the rebate was

known at the time of export because the rebate was set as a percentage

of the f.o.b. value of the exported merchandise. See also, Butt-Weld

Pipe Fittings; Certain Textile Mill Products and Apparel from Colombia;

Certain Textile Mill Products from Thailand; Certain Carbon Steel

Products from Brazil. Further, in Paint Filters and Strainers from

Brazil, 52 FR 19184 (May 21, 1987) (Paint Filters), the Department did

not countervail the benefit from the IPI export credit premium program

because we found that the program was terminated prior to the

initiation of that case, and companies could no longer receive benefits

after the date of termination. We did make a statement in Paint Filters

that, the Department had consistently calculated the benefit under the

IPI export credit premium program in prior cases based on the date the

premium was earned. However, as noted in Certain Carbon Steel Products

from Brazil, the IPI export credit premium was based on the f.o.b.

value of the exported merchandise, and the amount of the benefit was

known at the time of export.

Comment 2: Policy Considerations for Measurement of Benefits

The respondents argue that policy considerations dictate that the

Freight Program should be countervailed based on the date the benefit

was earned because benefits should be countervailed when they will have

the greatest potential effect on a company's export volumes or pricing

to the United States. Since, they argue, the countervailing duty law is

intended to offset export subsidies, it makes no sense to now

countervail benefits under the Freight Program, which was terminated at

the end of 1994, because there were no longer any incentives for

companies to export during the period of review.

In proffering this policy argument, the respondents claim that,

because the benefits under the Freight Program were intended to offset

freight charges incurred on export shipments, the benefit should only

be countervailable on the date of export because the freight charges

were payable immediately after the goods were exported. In support, the

respondents point to section 351.514(b) of the Countervailing Duties:

Notice of Proposed Rulemaking, 62 FR 8818 (February 26, 1997)

(Department's proposed regulations), which deals with freight charges.

The respondents argue that under this proposed regulation, the

Department will consider the benefit to have been received as of the

date on which the firm pays or, in the absence of payment, was due to

pay the

[[Page 18889]]

transport or freight charges. Therefore, because section 351.514(b)

countervails freight benefits when they are actually incurred, they

argue that the Freight Program benefits should be countervailed on the

date the freight charges were incurred, and not when the reimbursements

for these charges were later received.

The petitioners counter that it is incorrect for the respondents to

suggest that there is any support for their position in section

351.514(b) of the Department's proposed regulations. Section 351.514

corresponds to paragraph (c) of the Illustrative List of Export

Subsidies (Illustrative List), annexed to the Agreement on Subsidies

and Countervailing Measures and deals with preferential internal

transport and freight charges on export shipments. The petitioners

argue that neither subsection (c) of the Illustrative List nor section

351.514 can apply to the Freight Program, because the Turkish Freight

Program does not involve the provision of internal transport at

preferential rates. Rather, petitioners claim that the Freight Program

provides a bounty, which may lower the exporter's costs, but the actual

freight charge payable is not altered. They claim that where the

benefit consists of providing freight at preferential rates, the

exporter reaps the benefit at the time of shipment. Therefore, it makes

sense to assess duties on the basis of shipment when there is a

simultaneous discount in a fixed amount. However, it is another matter

to provide a bounty of an indeterminate amount at some later time,

particularly in a hyperinflationary economy.

Department's Position: We disagree with the respondents' argument

that, as a matter of policy, the Department should countervail benefits

under the Freight Program on the date of export because benefits should

be countervailed when they have the greatest potential to affect the

exporters' volume and pricing decisions. The countervailing duty law

does not examine when benefits will have the greatest potential effect

on exports to the United States. Pursuant to section 771(5)(C), ``the

administering authority is not required to consider the effect of the

subsidy in determining whether a subsidy exists * * *.'' Moreover,

under the Act, a benefit that is contingent upon export is an export

subsidy and, thus, countervailable. See section 771(5A)(B). Therefore,

in accordance with section 771(5A)(B), we found the Freight Program to

be a countervailable export subsidy because the benefit is contingent

upon export performance, regardless of whether we measure the benefit

on an earned or received basis.

Moreover, we disagree with the respondents' argument that once a

program is terminated, benefits received thereafter should not, as a

matter of policy, be countervailed because the effect of such benefits

on the exporters' decision to export has passed. Under the logic of the

respondents' argument, the Department would never be able to

countervail export subsidies unless the benefit from such subsidies

could be measured at the time of shipment. Clearly this proposal

conflicts with the statute and our long-standing practice. Our standard

methodology is to countervail subsidies at the time the subsidy affects

the cash flow of the company. See, e.g., Ferrochrome from South Africa;

Final Results of Countervailing Duty Administrative Review, 56 FR

33254, 33255 (July 19, 1991). Generally, that can only be determined

when the subsidy is paid or received by the company. The only exception

to this general proposition has been when export subsidies are paid as

a percentage of the f.o.b. value of the exported merchandise. See the

Department's Position on Comment 1. Only in these situations does the

company know with precision at all times what the benefit from the

subsidy is. Only under these circumstances is the Department able to

determine the subsidy rate on an ``as earned'' basis.

Because the respondents received benefits during the period of

review, we have properly included these benefit amounts in our subsidy

calculations. The fact that the program was terminated prior to the

period of review is not material. It is the Department's practice to

countervail residual benefits from a terminated program. See, e.g.,

Live Swine from Canada; Notice of Preliminary Results of Countervailing

Duty Administrative Reviews; Initiation and Preliminary Results of

Changed Circumstances Review and Intent to Revoke Order in Part, 61 FR

26879, 26889 (May 29, 1996) and Live Swine from Canada; Final Results

of Countervailing Duty Administrative Reviews, 61 FR 52408 (October 7,

1996); Pipe and Tube and Line Pipe 1995 at 43991. Furthermore, we note

that, in the instant case, because the benefits were provided in cash

and bonds with a two-year maturity, benefits will continue to accrue

beyond this period of review.

Finally, the respondents also argue that the Department should

countervail the benefits under the Freight Program on the date the

freight charges for exportation were payable and not when the

reimbursements for these charges were received. In support of their

argument, the respondents cite to section 351.514 of the Department's

proposed regulations. First, we note that the proposed regulations have

not yet been finalized, and, thus, are not controlling in these

reviews. However, even in citing to those proposed regulations, the

respondents have erred in their interpretation. Section 351.514(b) of

the Department's proposed regulations corresponds to paragraph (c) of

the Illustrative List, and deals with preferential internal transport

and freight charges on goods destined for export. Paragraph (a)(1)

restates the general principle that a benefit exists to the extent that

a firm pays less for the internal transport of goods destined for

export than it would for the transport of goods destined for domestic

consumption. Therefore, the financial contribution is provided when the

payment for the freight charges occurs. Consequently, we would

countervail the benefit at the time of payment of the reduced freight

charges. As stated in the proposed regulations, ``the Secretary

normally will consider the benefit as having been received by the firm

on the date the firm paid, or in the absence of payment, was due to

pay, the charges.''

The Freight Program, on the other hand, does not involve the

provision of transport services at preferential rates. Rather,

according to the enabling legislation, the Freight Program was a

freight bonus, i.e., a benefit contingent upon export. See,

Questionnaire Response, Volume II--Exhibit 9, dated June 30, 1997.

Therefore, we continue to countervail this benefit at the time the

financial contribution affects the cash flow of the company, which is

when the company receives the payment of the subsidy to which it is

entitled as a result of prior exportations.

Comment 3: Adjustment of Sales Values for Foreign Exchange Difference

(Kur Farki)

The respondents argue that the Department's decision to adjust the

sales value by the amount of the foreign exchange difference (kur farki

account) reduced the export sales amount in the denominator, which led

to an erroneous increase of the countervailable benefit for each

company under review.

The respondents state that the Department specifically requested

that the respondents provide total sales as booked and recorded in

their accounting records, which included the sales revenue account plus

the sum of the values in the kur farki account. This accounting

practice is consistent with the standardized Turkish accounting

principles. They state that the Department's explanation for deducting

[[Page 18890]]

the foreign exchange difference from the sales value is based on a

fundamental misunderstanding of what the kur farki account actually

represents. They argue that it does not represent an inflation

adjustment, but actual revenue earned on export sales. They claim that

the Department incorrectly assumes that the benefits initially

denominated in dollars are received precisely on the date of export and

are converted to TL on that date, whereas the income from the sale is

converted at a later date and is therefore ``inflation adjusted.''

Specifically, they claim that the kur farki account reflects the

difference between the estimated TL amount recorded on the invoice

date, when the sale is booked, and the TL amount actually received upon

receipt of payment from the customer. Depending on the date that the

payment is received, the exchange difference can increase or decrease

the invoice value. Therefore, the total amount in the kur farki account

and the sale revenues account represents total actual income received

from export sales transactions.

Finally, the respondents argue that if the Department insists on

reducing the total export value by the foreign exchange difference,

then it must compute and deduct from the numerator (the countervailable

benefit) the foreign exchange difference included in the benefit

calculated from the date of exportation generating the benefit until

the date the benefit was converted to TL. The respondents conclude that

such an adjustment would more than offset the adjustment to the

denominator.

The petitioners counter that the issue is not whether the foreign

exchange difference amounts are actual revenue; the issue is how to

treat an adjustment that is made solely to reflect differences in the

relative value of currencies over time in a highly inflationary

economy. The initial invoice price represents the true price in terms

of the currency as it was valued on the date of the invoice, while the

foreign exchange difference represents the true price in terms of the

currency as it was valued on a different date. Both prices are

``actual'' prices but are expressed in currencies having different

values. Thus, they argue that the Department would not wish to use

dollar-denominated benefits in the numerator and lira-denominated

benefits in the denominator, it also cannot allow the differing values

of the TL over time to distort the results of its calculations.

Department's Position: The same arguments were discussed in the

prior review. Although there was further explanation of the accounting

system in this review, basically, the facts are the same and our

position remains unchanged. See Pipe and Tube and Line Pipe 1995. We do

not agree with the respondents that the amounts in their kur farki

account are actual sales revenue. When the exporter makes a sale, the

invoice amount in TL is recorded in the company's sales ledger. Payment

of the invoice is subsequently received in U.S. dollars which are

converted into TL based on the exchange rate prevailing on that date.

Any difference between the invoice amount in TL and the actual payment

in TL is recorded in the kur farki account. Therefore, we conclude that

the adjustment recorded in the kur farki account is income derived from

fluctuations of the relative value of the dollar versus the TL, rather

than additional sales revenue, as respondents claim.

Such foreign exchange difference becomes particularly significant

in Turkey's highly inflationary economy. As such, it is inappropriate

to include it in the denominator. We understand that the amounts in the

kur farki account are included in the companies' total revenue figures,

in accordance with Turkey's generally accepted principles. However,

although the amounts recorded in the kur farki account may be included

in the companies' income statement as part of the total revenue figure

for tax purposes, this does not detract from our finding. See Price

Waterhouse, Doing Business in Turkey, Chapter 11 (1992) (lack of

clearly defined commercial accounting principles and the predominance

of tax law mean that Turkish law should be treated with extreme

caution, and international accounting standards are preferred).

Therefore, it is proper for the Department to exclude the amounts in

the kur farki account from the sales figures (denominators).

We also disagree with the respondents' argument that the Department

must compute and deduct from the numerator the foreign exchange

difference included in the benefit calculated from the date of export

until the benefit was converted to TL. As discussed in the Department's

Position on Comment 1, the countervailable benefit under the Freight

Program is the actual amount of TL measured at the time of receipt.

Therefore, benefits from this program in the numerator reflect the TL

received at that time. For these reasons, the Department's position

remains unchanged from the preliminary results.

Comment 4: Adjustments of the Freight Program Denominator

The respondents contend that the Department made a clerical error

in calculating the denominator used to determine benefits received by

the Borusan Group under the Freight Program. The respondents also argue

that, if the Department continues to incorrectly adjust the sales

values by the foreign exchange difference, then the Department must

correct a clerical error it made in calculating the ``adjusted'' value

of Mannesmann's total exports of the subject merchandise to the United

States. The respondents state that Mannesmann reported a negative

foreign exchange difference in connection with export sales of the

subject merchandise to the United States, and because the value is

negative, they argue that the Department should have added the negative

foreign exchange difference to the original sales value rather than

subtracting it.

The petitioners claim that the ``error'' in calculating

Mannesmann's denominator could not have been ministerial unless the

Department was clearly informed previously that a negative amount in

the ``kur farki'' account was intended to reflect the fact that

Mannesmann received payment from the customer prior to the date that

the invoice was issued. The sole source cited by Mannesmann for this

alleged factual information is a letter submitted to the Department on

November 20, 1997, one month after the deadline for submissions of

factual information. Therefore, the petitioners argue that because

Mannesmann's factual information is untimely, the Department should not

consider it in its final results.

Department's Position: We agree with the respondents that a

clerical error was made in calculating the benefit to the Borusan Group

from the Freight Program. In calculating the ``adjusted'' denominator,

the Department did make a typographical error. We have now corrected

the error and calculated a benefit of 2.43 percent ad valorem for the

Borusan Group.

We also agree with the respondents that we incorrectly calculated

the denominator for total exports of the subject merchandise to the

United States for Mannesmann. In instances where the foreign exchange

difference was a positive amount it was deducted, therefore, in

instances where the foreign exchange difference is denoted as a

negative amount, which was the case for Mannesmann, the amount should

be added back to the total sales figure. See Pipe and Tube and Line

Pipe 1995. We

[[Page 18891]]

disagree with the petitioners that the respondents' comment is an

untimely submission of factual information. The calculations were based

on information that was requested by the Department. We have now

corrected the calculation and obtained a net countervailable subsidy

under the Freight Program of 3.28 percent ad valorem for Mannesmann.

Final Results of Reviews

In accordance with 19 CFR 355.22(c)(4)(ii), we calculated an

individual subsidy rate for each producer/exporter subject to these

administrative reviews. For the period January 1, 1996 through December

31, 1996, we determine the net subsidy to be as follows:

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

Rate

Manufacturer/exporter of pipe and tube (percent)

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

Borusan Group................................................ 3.10

Mannesmann................................................... 3.73

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

We will instruct the U.S. Customs Service (``Customs'') to assess

countervailing duties as indicated above. The Department will also

instruct Customs to collect cash deposits of estimated countervailing

duties in the percentages detailed above of the f.o.b. invoice price on

all shipments of each class or kind of merchandise from reviewed

companies, entered, or withdrawn from warehouse, for consumption on or

after the date of publication of the final results of these reviews.

Because the URAA replaced the general rule in favor of a country-

wide rate with a general rule in favor of individual rates for

investigated and reviewed companies, the procedures for establishing

countervailing duty rates, including those for non-reviewed companies,

are now essentially the same as those in antidumping cases, except as

provided for in Sec. 777A(e)(2)(B) of the Act. The requested review

will normally cover only those companies specifically named. See 19 CFR

355.22(a). Pursuant to 19 CFR 355.22(g), for all companies for which a

review was not requested, duties must be assessed at the cash deposit

rate, and cash deposits must continue to be collected at the rate

previously ordered. As such, the countervailing duty cash deposit rate

applicable to a company can no longer change, except pursuant to a

request for a review of that company. See Federal-Mogul Corporation and

The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993);

Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)

(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic

assessment, which is identical to 19 CFR 355.22(g)). Therefore, the

cash deposit rates for all companies except those covered by these

reviews will be unchanged by the results of these reviews.

We will instruct Customs to continue to collect cash deposits for

non-reviewed companies at the most recent company-specific or country-

wide rate applicable to the company. Accordingly, the cash deposit

rates that will be applied to non-reviewed companies covered by this

order will be the rate for that company established in the most

recently completed administrative proceeding conducted under the URAA.

If such a review has not been conducted, the rate established in the

most recently completed administrative proceeding pursuant to the

statutory provisions that were in effect prior to the URAA amendments

is applicable. See Certain Welded Carbon Steel Pipe and Tube Products

from Turkey; Final Results of Countervailing Duty Administrative

Reviews, 53 FR 9791. These rates shall apply to all non-reviewed

companies until a review of a company assigned these rates is

requested. In addition, for the period January 1, 1996 through December

31, 1996, the assessment rates applicable to all non-reviewed companies

covered by this order are the cash deposit rates in effect at the time

of entry.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 355.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

These administrative reviews are issued and published in accordance

with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C.

1675(a)(1)).

Dated: April 8, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-10168 Filed 4-15-98; 8:45 am]

BILLING CODE 3510-DS-P