86-307

NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-614-504]

Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order; Carbon Steel Wire Rod From New Zealand

Friday, March 7, 1986

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AGENCY: Import Administration, International Trade Administration,
Commerce.

ACTION: Notice.

SUMMARY: We determine that certain benefits which constitute bounties or grants
within the meaning of the countervailing duty law are being provided to
manufacturers, producers, or exporters in New Zealand of carbon steel wire rod. We
are not including New Zealand Steel Ltd. (NZS) in our countervailing duty order
because benefits received by NZS are de minimis. The estimated net bounty or grant for
Pacific Steel Ltd. (PSL) and for all other manufacturers, producers, or exporters in New
Zealand of carbon steel wire rod, except for NZS, is 25.69 percent ad valorem.

We are directing the U.S. Customs Service to continue to suspend liquidation of all entries
of carbon steel wire rod from New Zealand, except that exported by NZS, that are
entered, or withdrawn from warehouse, for consumption, and to require a cash deposit
on such entries equal to the estimated net bounty or grant.

EFFECTIVE DATE: March 7, 1986.

FOR FURTHER INFORMATION CONTACT: Alain Letort, Ellie Shea, or Barbara Tillman,
Office of Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue,
NW., Washington, DC 20230; telephone: (202) 377-0186 (Letort), 377- 0184 (Shea), or
377-2438 (Tillman).

SUPPLEMENTARY INFORMATION:

FINAL DETERMINATION AND ORDER

Based on our investigation, we determine that certain benefits which constitute bounties
or grants within the meaning of section 303 of the Tariff Act of 1930, as amended (the
Act), are being provided to manufacturers, producers, or exporters in New Zealand of
carbon steel wire rod. For purposes of this investigation, the following programs are
found to confer bounties or grants:
- Export Performance Taxation Incentive (EPTI)
- Export Market Development Taxation Incentive (EMDTI)
- Sales Tax Exemptions or Refunds on Imported Capital Equipment and Machinery
- Crown Loan to New Zealand Steel Ltd.
We determine the estimated net bounty or grant for the review period to be 25.69
percent ad valorem for Pacific Steel Ltd. (PSL) and for all other manufacturers,
producers, or exporters in New Zealand of carbon steel wire rod. New Zealand Steel
Ltd. (NZS) is not included in this countervailing duty order because benefits received
by NZS are de minimis.

Case History

On September 23, 1985, we received a petition in proper form from Atlantic Steel Co.,
Georgetown Steel Corp., North Star Steel Texas, Inc., and Raritan River Steel Co., filed on
behalf of the U.S. industry producing carbon steel wire rod. In compliance with the filing
requirements of section 355.26 of our regulations (19 CFR 355.26), the petition alleges
that manufacturers, producers, or exporters in New Zealand of carbon steel wire rod,
directly or indirectly, receive benefits which constitute bounties or grants within the
meaning of section 303 of the Act.
We found that the petition contained sufficient grounds upon which to initiate a
countervailing duty investigation, and on October 15, 1985, we initiated such an
investigation (50 FR 43590). We stated that we expected to issue our preliminary
determination on or before December 17, 1985.
Since New Zealand is not a "country under the Agreement" within the meaning of
section 701(b) of the Act,

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sections 303(a)(1) and 303(b) of the Act apply to this
investigation. Accordingly, petitioners are not required to allege that, and the U.S.
International Trade Commission is not required to determine whether, imports of the
subject merchandise materially injure, or threaten material injury to, a U.S. industry.
On October 25, 1985, we presented a questionnaire to the Embassy of New Zealand in
Washington, DC concerning the petitioners' allegations. On November 25, 1985, we
received responses to our questionnaire from New Zealand Steel Ltd. (NZS), Pacific
Steel Ltd. (PSL), and the government of New Zealand. We received supplementary
responses from NZS on December 4, 1985, December 12, 1985, and December 13, 1985,
and from PSL on December 13, 1985, and December 17, 1985. On the basis of the
information contained in these responses, we made our preliminary determination on
December 17, 1985 (50 FR 52351). From January 27 to February 3, 1986, we verified the
responses submitted by the government of New Zealand, NZS and PSL.
We received supplemental submissions from NZS on January 16, 1986, and from PSL on
January 14, 1986, February 12, 1986, and February 25, 1986. We afforded interested
parties an opportunity to present oral views in accordance with our regulations (19 CFR
355.35). No public hearing was requested. On February 7, 1986, we received initial briefs
from petitioners and respondents. On February 20, 1986, we received written comments
on the verification reports and rebuttal briefs.

Scope of Investigation

For purposes of this investigation, the term "carbon steel wire rod" covers a coiled,
semi-finished, hot-rolled carbon steel product of approximately round solid cross
section, not under 0.20 inch in diameter, nor over 0.74 inch in diameter, tempered or
not tempered, treated or not treated, not manufactured or partly manufactured, and
valued over or under 4 cents per pound. Wire rod is currently classifiable under items
607.14, 607.17, 607.22, and 607.23 of the Tariff Schedules of the United States (TSUS).

Analysis of Programs

Throughout this notice, we refer to certain general principles applied to the facts of the
current investigation. These principles are described in the "Subsidies Appendix"
attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina;
Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order," which was published in the April 26, 1984, issue of the Federal Register (49 FR
18006).
For purposes of this final determination, the period for which we are measuring bounties
or grants (the review period) is April 1, 1984 through March 31, 1985. Pacific Steel Ltd.
(PSL) is the only known producer of carbon steel wire rod in New Zealand. Both NZS and
PSL exported wire rod to the United States during the review period. Based upon our
analysis of the petition, the responses to our questionnaire submitted by the government
of New Zealand, NZS, and PSL, our verification, and written comments submitted by
interested parties, we determine the following:

I. Programs Determined to Confer Bounties or Grants

We determine that bounties or grants are being provided to manufacturers, producers, or
exporters in New Zealand of carbon steel wire rod under the following programs:

A. Export Performance Taxation Incentive

Petitioners allege that, under section 156A of the Income Tax Act of 1976, as amended,
the New Zealand wire rod industry receives tax credits under the Export Performance
Taxation Incentive (EPTI) program, based on the f.o.b. value of qualifying goods
exported.
In its response, the government of New Zealand stated that an EPTI tax credit can be
taken as a deduction against income tax payable. If the tax credit exceeds the income tax
payable, the taxpayer receives a cash payment for the difference. The rate of the tax
credit depends on the value-added category or "band" into which a product falls. The
amount of the tax credit is calculated by multiplying the rate corresponding to the
value-added band into which a product falls by the f.o.b. value of export sales of that
product. At verification, we ascertained that carbon steel wire rod falls into value-added
band B, for which the EPTI tax credit rate is 10.5 percent. We also found that the rates
specified under this program will be progressively reduced in the 1986 and 1987 fiscal
years, and that EPTI tax credits will no longer be available starting with the 1988 fiscal
year. We verified that NZS claimed EPTI tax credits on the income tax return it filed
during the review period, but not on its exported carbon steel wire rod. PSL did claim and
EPTI tax credit with respect to exported carbon steel wire rod on the tax return filed
during the review period.
Because eligibility for this program is limited to exporters, we determine that it provides
a bounty or grant within the meaning of the countervailing duty law to manufacturers,
producers and exporters of carbon steel wire rod, except NZS.
Under our tax methodology, we calculate the benefit from this program by dividing the
EPTI tax credit claimed by PSL during the review period on exports of wire rod to the
United States by the value of PSL's exports of wire rod to the United States during the
review period. On this basis, we calculate an estimated net bounty or grant of 24.95
percent ad valorem for PSL.

B. Export Market Development Taxation Incentive

Petitioners allege that the New Zealand wire rod industry receives EMDTI tax credits
for certain qualifying export expenditures under the Export Market Development
Taxation Incentive (EMDTI) program, pursuant to section 156F of the New Zealand
Income Tax Act of 1976, as amended.
Under the 1979 Amendment of the Income Tax Act of 1976, export market development
expenditures, such as expenses incurred principally for seeking and developing markets,
retaining existing markets, and obtaining market information, qualify for a tax credit of
67.5 percent of the total expenditure. Any company that has such expenditures may
claim them in calculating taxable income. However, an exporter who takes advantage of
this tax credit may not deduct the qualifying expenditures as ordinary business expenses
in calculating the taxable income. Because the normal corporate tax rate in New Zeland is
45 percent, and exporters may claim a tax credit of 67.5 percent, the net benefit to the
exporters under this program is 22.5 percent of the qualifying expenditure amount.
Because eligibility for this program is limited to exporters, we determine that it confers a
bounty or grant within the meaning of the countervailing duty law.
We verified that both NZS and PSL claimed EMDTI on their tax returns filed during the
review period. To calculate the benefit from this program, we divided 22.5 percent of the
qualifying expenditures which were calimed by each company on their tax returns filed
during the review period by the total f.o.b. value of each company's export sales during
the review period. On this basis, we find an estimated net bounty or grant amount of 0.25
percent ad valorem for NZS and 0.02 percent ad valorem for PSL.

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C. Sales Tax Exemptions or Refunds on Imported Capital Equipment and
Machinery

Petitioners alleged that the New Zeland wire rod industry receives sales tax exemptions
or refunds on machinery and equipment used in the production of goods for export.
At verification, we ascertained that New Zeland exporters may receive sales tax
remissions (exemptions) or refunds on imported machinery and equipment used
principally in the production of export goods. At the company level, we verified that NZS
had been exempted from sales tax on some imported machinery and equipment used in
its pipe mill. Because NZS did not receive during the review period any sales tax
exemptions or refunds on imported machinery and equipment used to produce wire rod,
we determine that no benefit accrues to exports of wire rod by NZS. Although PSL had
stated in its responses that it did not receive sales tax exemptions or refunds during the
review period, we verified that it had, in fact, received a number of these exemptions and
refunds, which it was unable to quantity.
Because information on the record indicates that sales tax exemptions or refunds are
available only on machinery and equipment used principally in export production, we
determine that this program provides a bounty or grant to manufacturers, producers,
and exporters of carbon steel wire rod within the meaning of the countervailing duty
law.
To calculate the benefit, we used the best information available and multiplied the net
increase in the value of PSL's plant and equipment from 1984 to 1985, as reported in the
company's 1985 financial statement, by the sales tax rate for machinery as listed in
Chapter 84 of the New Zealand Customs Tariff. We then divided the benefit by the value
of PSL's export sales during the review period. On this basis, we calculate an estimated net
bounty or grant of 0.72 percent ad valorem for PSL.

D. Crown Loan to New Zealand Steel Ltd.

At verificiation, we found that NZS had received a direct loan from the Crown in 1974.
This loan was divided into two parts: "Mode A," which was earmarked for the expansion of
the company's steel-making activities, and "Mode B," which was expressly provided for
the construction of worker housing. NZS used Mode B funds to build housing units which
it rents out to its workers.
The terms of the Mode A portion of the loan specify that the interest rate is variable.
From its initial 1974 level, the interest rate was increased in 1977. Pursuant to an
agreement between the Crown and NZS, NZS repaid the principal and all interest accrued
during the life of the loan in July 1985, subsequent to the review period but prior to our
preliminary determination. The interest on the Mode B portion of the loan, which is not
due to be repaid until 1999, has been increased several times since 1974. We verified that
NZS has been paying interest at regular intervals on this portion of the loan.
Given the dual nature of this Crown loan to NZS, we are examining Mode A and Mode B
separately.
With respect to Mode A, neither the government of New Zealand nor NZS has denied
that the Crown loan was limited to a single enterprise or industry, nor has any evidence
been provided that such loans are available to a broad range of enterprise or industries in
New Zealand. Accordingly, we determine that this loan was provided to a specific
enterprise, and is countervailable to the extent that it was given on terms inconsistent
with commercial considerations.
To determine whether this loan was made on terms inconsistent with commercial
considerations, we compared the interest rate on the Mode A portion of the loan for each
year in which the loan was outstanding with the national average short-term commercial
interest rate, as published by the Reserve Bank of New Zealand and quoted in the
government response. We used short-term commercial interest rates as our benchmark
because this is a variable-rate loan, and we have no information on commercial interest
rates for variable-rate long-term loans in New Zealand. Because commercial interest
rates were higher than the interest rates on Mode A, we determine that this portion of the
Crown loan was made on terms inconsistent with commercial considerations, and confers
a countervailable benefit. Using our loan methodology for variable-rate long- term loans,
we calculate a benefit of 0.13 percent ad valorem for NZS.
Because the principal amount of this loan was repaid, along with all interest accrued
during the life of the loan, on July 31, 1985, which is subsequent to the review period but
prior to our preliminary determination, we determine that any benefits to the company
from this loan are not accruing to current exports of wire rod to the United States.
Therefore, we are not including this benefit amount in the cash deposit rate.
With respect to Mode B, the potential countervailability of this portion of the loan raises
the complex issue of whether the loan benefits accrue to NZS or to its workers. Since any
potential benefit to NZS would be 0.02 percent ad valorem, and since this rate, when
combined with the rate found for NZS in the EMDTI program, yields an overall rate which
is de minimis, we believe that it is inappropriate at this time to determine whether, in fact,
this portion of the loan would be countervailable.

II. Programs Determined not to Confer Bounties or Grants

A. Import Duty Exemptions or Refunds

Petitioners allege that the New Zealand wire rod industry receives import duty
exemptions or refunds on machinery and equipment used in the production of goods for
export.
At verification, we found that import duty exemptions and refunds are available to all
importers when no equivalent local product is available on commercially reasonable
terms, and that such import duty exemptions are not contingent upon export
performance. We saw no evidence that such exemptions or refunds were limited to a
specific enterprise or industry, or group of enterprises or industries. Therefore, we
determine that import duty exemptions or refunds do not confer a countervailable
benefit.

B. Technical Assistance from the Department of Scientific and Industrial Research

Petitioners allege that the Department of Scientific and Industrial Research (DSIR)
provides facilities for testing international standards and advice on implementation and
mangement of quality assurance systems to the wire rod industry in New Zealand.
At vertification, we found that DSIR conducts studies and research for a wide variety of
enterprises and industries, the results of which are publicly available. We also ascertained
that such assistance is not contingent upon export performance. Because such assistance
is not limited to a specific enterprise or industry or group of enterprises or industries, we
determine that DSIR technical assistance does not confer a countervailable benefit.

C. Technical Assistance From the Testing Laboratory Registration Council

Petitioners allege that the Testing Laboratory Registration Council (TELARC) provides
audits of export manufacturers' quality assurance systems.

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At verification, we ascertained that TELARC's services to its members are
unrelated to their export perofrmance. Further, we ascertained that any enterprise in
New Zealand may become a member of TELARC on a fee-paying basis in order to use its
services. Because TELACR's services are not limited to a specific enterprise or industry,
or group of enterprises or industries, we determine that TELARC assistance does not
confer a countervailable benefit.

III. Programs Determined not to be Used

Based on our verification of the repsonses of the government of New Zealand, NZS, and
PSL, we determine that manufacturers, producers, and exporters in New Zeland of carbon
steel wire rod did not use the following programs:

A. Export Credits and Development Financing from the Development Finance
Corporation

Petitioners allege that the Development Finance Corporation (DFC) provides export
credits and development financing on preferential terms. At verification, we ascertained
that neither of the respondents had any DFC loans outstanding during the review period.

B. Export Suspensory Loan Scheme

Petitioners allege that the Development Finance Corporation provides financing under
the Export Suspensory Loan Scheme (ESLS) for up to 40 percent of actual expenditures
on plant and machinery used in the manufacture of designated products. The export
suspensory loans are repayable at commercial rates but can become grants if the
exporter meets predetermined export sales targets. At verification, we ascertained that
neither of the respondents had any ESLS loans outstanding during the review period.

C. Export Programme Grants Scheme

The Export Programme Grants Scheme (EPGS) was superseded by the EPSLS in June
1982. However, petitioners allege that grants under EPGS could continue until June 1985.
Grants under EPGS were given to exporters to encourage marketing research in targeted
foreign markets. The grants, amounting to 64 percent of budgeted expenditures, were
available for up to three years. At verification, we ascertained that neither of the
respondents participated in this program.

D. Export Programme Suspensory Loan Scheme

Petitioners allege that loans are available under the Export Programme Suspensory Loan
Scheme (EPSLS) for up to 40 percent of eligible expenditures to established exporters
who increase their net foreign exchange earnings through the marketing of specific goods
or services in a designated foreign market. If a predetermined export sales forecast is
met, the suspensory loan is converted to a grant; if the forecast is not met, the exporter
must repay the loan with interest. At verification, we ascertained that neither of the
respondents had received any EPSLS loans or grants.

E. Export Marketing Assistance from the New Zealand Export-Import Corporation

Petitions allege that the New Zealand Export-Import Corporation (EIC) provides export
marketing assistance such as the arrangement of overseas promotion displays,
negotiations of overseas sales, and assistance to smaller companies that lack the
resources or skills to export. At verification, we ascertained that neither of the
respondents used EIC's services in exporting carbon steel wire rod to the United States
during the review period.

F. Technical Assistance from the Standards Association of New Zealand

Petitioners allege that the Standards Association of New Zealand (SANZ) provides
service which include translation of technical documents and assistance in obtaining
foreign standards, regulations, and testing requirments. At verification, we found that
SANZ provides such assistance to companies in New Zealand on a fee-paying basis.
However, SANZ also receives operating assistance in the form of a government grant.
We ascertained that neither NZS nor PSL purchased standards, specifications, or other
services from SANZ pertaining to carbon steel wire rod during the review period.

G. Technical Help to Exporters

Petitioners allege that SANZ also provides information often free of charges, regarding
technical specifications incident to overseas marketing under the Technical Help to
Exporters (T*H*E) program. At verification, we ascertained that neither of the
respondents had participated in this program during the review period.

H. Technical Assistance from the Building Research Association of New Zealand

Petitioners allege that the Buidling Research Assocation of New Zealand (BRANZ)
provides research and testing assistance to New Zealand exporters. At verification, we
learned that BRANZ, a private research organization, provides research and testing
services on a fee-paying basis to members of the building industry. These services are not
contingent upon export performance. We ascertained that neither NZS nor PSL used the
services offered by BRANZ during the review period.

I. Export Marketing Assistance from the Department of Trade and Industry

Petitioners allege that the Department of Trade and Industry (DTI) provides financial and
organizational support for participation in overseas trade fairs, advice on foreign market
conditions, advice and assistance on transportation to foreign markets, and help in
placing advertisements free of charge in overseas trade publications. At verification, we
ascertained that neither of the respondents participated in this program during the
review period.

J. Preferential Treatment to Exporters in Granting Import Licenses

Petitioners allege that import licensing concessions are provided to companies which
import materials for incorporation in goods to be exported. Such concessions may
include additional availability of import licenses on components for incorporation in
goods to be exported. At verifications, we ascertained that neither of the respondents
participated in this program.

K. Research and Development Incentives

Petitioners allege that the New Zealand wire rod industry receives research and
development incentives under the Applied Technology Program (ATP) administered by
the DFC and under the previous Industrial Research and Development Grants Advisory
Committee of the Department of Trade and Industry. At verification, we ascertained that
neither of the respondents participated in this program.

L. Regional Development Investment Incentives

Petitioners allege that New Zealand wire rod producers receive a variety of regional
development incentives based on their location in regions classified as either priority or
slow-growth.

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Petitioners also allege that the wire rod industry recieves
concessions on electricity, water rights, and rail freight for any facilities located on the
South Island. At verification, we ascertained that neither company has any facilities in
the classified regions or on the South Island.

M. Special Industrial Development Allowances

Petitioners allege that the New Zealand wire rod industry receives tax benefits from the
Industrial Develoment Plan Investment Allowance (IDPIA) under section 121 or the High
Priority Investment Allowance (HPIA) under section 121A of the New Zealand Income
Tax Act of 1976, as amended. At verification, we ascertained that neither of the
respondents had claimed any tax benefits under these programs on the tax return filed
during the review period.

N. Goverment Loan Guarantees to New Zealand Steel Develoment Ltd.

At verification, we discovered that New Zealand Steel Development Ltd. (NZSD), a joint
venture in which the government of New Zealand owns 60 percent of the stock and NZS
40 percent, had received guarantees from the New Zealand Treasury on a number of
loans and bond issues denominated in foreign currencies. The proceeds from these loans
and bond issues are being used to finance the expansion of NZS's steel-making facilities.
We verified that the expanded steel mill is not scheduled to come on stream until 1988
and is intended to produce flat-rolled steel products, rather than round steel products
such as carbon steel wire rod.

IV. Programs Determined to be Terminated

Based on our verification of the responses of the New Zealand Government, New
Zealand Steel Ltd. and Pacific Steel Ltd., we determine that the following programs have
been terminated:

A. Increased Exports Taxation Incentive

Under the Increased Exports Taxation Incentive (IETI) program, an exporter can claim
an income tax deduction proportionate to the exporter's increased export earnings. We
verified that the IETI program was terminated on March 31, 1983, and that neither NZS
nor PSL claimed IETI tax credits on their tax returns filed during the review period.

B. New Markets Increased Exports Taxation Incentive

Petitioners allege that the New Zealand wire rod industry is eligible to receive tax
benefits under the New Markets Increased Exports Taxation Incentive (NMIETI)
program, pursuant to section 157 of the New Zealand Income Tax Act of 1976, as
amended. We verified that the NMIETI program was terminated on March 31, 1983, and
that neither NZS nor PSL claimed tax benefits under this program on their tax returns
filed during the review period.

C. Export Investment Allowances

Petitioners allege that the New Zealand wire rod industry receives tax benefits under
the Export Investment Allowance program, which was terminated on March 31, 1983,
and the Export Manufacturing Investment Allowance program. We verified that these tax
programs were terminated on March 31, 1983, and that neither NZS nor PSL claimed tax
benefits under these programs on their tax returns filed during the review period.

D. Research and Development Incentives from the Industrial Research Grants Advisory
Committee

Petitioners allege that the Industrial Research Grants Advisory Committee on the
Department of Trade and Industry provides research and development incentives to the
wire rod industry in New Zealand. At verification, we ascertained that this program was
terminated in 1974.

Petitioners' Comments

Comment 1: Petitioners contend that, in calculating the value of the benefit to the
respondents from the EPTI program, the Department should divide total EPTI credits
taken by the respondents by the value of exports that are eligible for this program, rather
than by the value of total exports.
DOC Position: We believe that the most accurate way to calculate the benefit accruing to
exports of wire rod to the United States under the EPTI program is to divide the value of
the EPTI credits claimed by PSL on the tax return filed during the review period for its
exports of wire rod to the United States by the value of it wire rod exports to the United
States during the review period.
Comment 2: Petitioners contend that the Department should countervail EPTI tax credits
taken by NZS on exported products other than carbon steel wire rod.
DOC Position: We disagree. We verified that NZS did not claim EPTI credits on exports of
carbon steel wire rod. Therefore, no countervailable benefit accrues to carbon steel wire
rod exported by NZS.
Comment 3: Petitoners suggest that the Department should compute separate benefit
rates for each respondent with respect to the EPTI and EMDTI programs or, alternatively,
use PSL's rate as the country-wide rate since PSL is the only manufacturer, and the only
regular exporter, of carbon steel wire rod in New Zealand.
DOC Position: We have, in fact, calculated separate rates for each company. Because
benefits provided to NZS are de minimis, NZS is excluded from this determination.
Therefore, PSL's rate is the countrywide rate.
Comment 4: Petitioners claim that the discrepancy between the amount of EMDTI benefit
received by PSL as reported in the questionnaire response and in the company's financial
statement has not adequately been explained.
DOC Position: As stated in the verification report, although the tax benefit is calculated by
taking 67.5 percent of total qualifying expenditures, the actual benefit from the EMDTI
program is 22.5 percent of total qualifying expenditures. The corporate tax rate in New
Zealand is 45 percent. Absent EMDTI, these expenditures would qualify as normal
business deductions at the 45 percent rate. Thus, PSL's annual report for fiscal 1984
shows the total export tax savings which includes EPTI tax credits and the 67.5 percent
of the total qualifying expenditures. In PSL's questionnaire response, however, the
benefit under EMDTI is appropriately reported as 22.5 percent of the qualifying
expenditures.
Comment 5: Petitioners argue that, in calculating the benefits received from sales tax
exemptions or refunds on imported machinery and capital equipment, the Department
should include all such exemptions and refunds received by NZS and discovered at
verification.
DOC Position: We excluded sales tax exemptions and refunds received by NZS because
NZS was able to demonstrate at verification that all sales tax exemptions and refunds it
received were tied to its pipe mill, so that no such benefits were tied to exports of carbon
steel wire rod.
Comment 6: Petitioners argue that sales tax exemptions and refunds received by PSL and
discovered at verification should be multiplied by two to reflect the fact that records for
the first six months of the review period were unavailable.
DOC Position: Because PSL could not provide complete and accurate data on the sales tax
exemptions or refunds it received, as best information available *7976 we are assuming
that all machinery and capital equipment purchased during the review period were
imported and were exempted from sales tax (see section I.C above).
Comment 7: Petitioners contend that the Crown loan received by NZS was made on terms
inconsistent with commercial considerations, and that, although the interest rate on
Mode A increased, the increase was merely partial compensation for the time value of the
interest payments which were deferred over the span of the loan without compounding or
penalty. Petitioners contend that this deferral of interest payments confers an additional
benefit to the company.
DOC Position: Although we agree with petitioners that this loan confers a bounty or grant
and that the deferral of interest payments confers an additional benefit upon NZS, we
determine that any benefits to the company from the Mode A portion of this loan are not
accruing to current exports of wire rod to the United States because this portion of the
loan was repaid prior to our preliminary determination.

Respondents' Comments

Comment 1: Respondents argue that the Department should not calculate the EPTI benefit
on the basis of EPTI tax credits received for exports made prior to the review period,
since the government of New Zealand has reduced the level of EPTI benefits subsequent
to the review period. Rather, the Department should calculate the value of the EPTI
benefit received by the respondents based on the EPTI credit rate for exports made
during the review period.
DOC Position: We disagree. We believe that benefits from tax programs accrue when a
company actually receives the benefits, rather than when a company becomes eligible to
receive them. Tax law changes, such as the EPTI phase-out schedule, cannot be
considered to be in effect until fully implemented by the government and used by the
respondent. We verified that PSL claimed and received a 10.5 percent EPTI tax credit on
carbon steel wire rod in its most recently completed tax return, filed in March 1985 and
covering the company's 1984 tax year. NZS did not claim an EPTI tax credit for its
exports of carbon steel wire rod on its tax return filed during the review period. We also
verified that NZS and PSL will be eligible to claim a 10.5 percent EPTI credit on their 1986
tax returns, which are scheduled to be filed later this year.
The EPTI tax credit rate will not be lowered until the company's 1986 fiscal year, and,
under our tax methodology, these benefits are not effectively realized until the year in
which the 1986 tax return is filed. If the scheduled EPTI changes are claimed in future tax
returns, we will consider these changes in any future administrative review requested
under section 751 of the Act.
Comment 2: Respondents contend that the Department erroneously excluded export
sales of NZS from its denominator in calculating the EPTI benefit received by the
respondents during the review period.
DOC Position: To calculate the EPTI benefit received by PSL, we have divided the EPTI tax
credit claimed by PSL on its tax return filed during the review period for its exports of
wire rod to the United States by the value of such exports during the review period. Since
NZS did not claim any EPTI benefits on exports of carbon steel wire rod, and since NZS
and PSL received materially different benefits, we have calculated company-specific rates
for each program. Because the overall rate for NZS is de minimis, PSL's company- specific
rate becomes the country-wide rate and NZS is not included in the countervailing
duty order.
Comment 3: Respondents contend that no bounty or grant should be calculated as a
result of sales tax exemptions received by NZS, as none of the sales tax exemptions were
for goods used to make wire rod or billets, which are the major input into wire rod.
DOC Position: We agree. Because sales tax exemptions received by NZS were for
machinery and equipment not used to produce wire rod or billet, we do not find this
program to confer a bounty or grant on the subject merchandise sold by NZS.
Comment 4: Respondents contend that no bounty or grant should be calculated as a
result of sales tax exemptions received by PSL since all items purchased for which sales
tax exemptions and refunds were available fall under specific codes of the Schedule of
Goods Exempt from Sales Tax in New Zealand Customs Tariff, and were not dependent
upon actual or projected export performance.
DOD Position: We disagree. At verification, we were unable to examine PSL's complete
records on sales tax exemptions and refunds on imported capital equipment and
machinery. Files were available for the last six months of the review period only. At the
Sales Tax Division of the Auckland Customs office, we were unable to verify that items
purchased by PSL for which sales tax exemptions and refunds were received fall under
specific codes of the Schedule of Goods Exempt from Sales Tax. Furthermore, the laws on
sales tax exemptions and refunds clearly tie such exemptions and refunds to export
performance.

Verification

In accordance with section 776(a) of the Act, we verified the information and data used
in making our final determination. During verification, we followed normal verification
procedures, including meetings with government officials and inspection of documents,
as well as on-site inspection of the accounting records of NZS and PSL, the companies
producing and exporting the merchandise under investigation to the United States.

Administrative Procedures

We afforded interested parties an opportunity to present oral views in accordance with
our regulations (19 CFR 355.35). No public hearing was requested. In accordance with
the Department's regulations [19 CFR 355.34(a)], written views were received on
February 7 and 20, 1986, and were considered in this determination.

Suspension of Liquidation

Suspension of liquidation ordered in our preliminary affirmative countervailing duty
determination will remain in effect until further notice, except with respect to carbon
steel wire rod exported by NZS. The estimated net bounty or grant for PSL and for all
other manufacturers, producers, or exporters in New Zeland of carbon steel wire rod,
except for NZS, is 25.69 percent ad valorem.
In accordance with section 706(a)(3) of the Act, we are directing the U.S. Customs
Service to require a cash deposit in the amount indicated above for each entry of the
subject merchandise from New Zealand, other than that exported by NZS, which is
entered, or withdrawn from warehouse, for consumption on or after the date of
publication of this notice in the Federal Register and to assess countervailing duties in
accordance with sections 706(a)(1) and 751 of the Act.
This notice is published pursuant to section 705(d) of the Act [19 U.S.C. 1671d(d)].
Dated: March 3, 1986.

Paul Freedenberg,

Assistant Secretary for Trade Administration.

[FR Doc. 86-5033 Filed 3-6-86; 8:45 am]

BILLING CODE 3510-DS-M