[Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
[Notices]
[Pages 7043-7046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2854]
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DEPARTMENT OF COMMERCE
[C-791-001]
Ferrochrome From South Africa; Final Results of Countervailing
Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of Countervailing Duty Administrative
Review.
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SUMMARY: On November 12, 1993, the Department of Commerce (the
Department) published in the Federal Register its preliminary results
of administrative review of the countervailing duty order on
ferrochrome from South Africa for the period January 1, 1991, through
December 31, 1991. We have now completed this review and determine the
bounty or grant to be zero for Consolidated Metallurgical Industries,
Ltd. (CMI), and 0.81 percent ad valorem for all other companies.
EFFECTIVE DATE: February 6, 1995.
FOR FURTHER INFORMATION CONTACT: Dana S. Mermelstein or Maria P.
MacKay, Office of Countervailing Compliance, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue NW., Washington, DC 20230, telephone:
(202) 482-0984/2786.
SUPPLEMENTARY INFORMATION:
Background
On November 12, 1993, the Department published in the Federal
Register the preliminary results of its administrative review of the
countervailing duty order on ferrochrome from South Africa (46 FR
21155, April 9, 1981). The Department has now completed this
administrative review in accordance with section 751 of the Tariff Act
of 1930, as amended (the Act).
We invited interested parties to comment on the preliminary
results. On December 13, 1993, a joint case brief was submitted by
Chromecorp Technology (Pty) Ltd., CMI, Ferralloys Limited, Middleburg
Steel and Alloys (Pty) Ltd. (MS&A), and Samancor, the South African
producers which exported ferrochrome to the United States during the
review period (respondents). We returned respondents' brief because it
contained untimely new factual information. See 19 CFR
355.31(a)(1)(ii). The Department has not considered the rejected new
factual information for these final results of review. See 19 CFR
355.31(a)(3), 355.3(a). On December 21, 1993, respondents resubmitted a
revised case brief. The comments addressed in this notice were
presented in the resubmitted case brief.
At the request of respondents, the Department held a public hearing
on December 28, 1993. On January 14 and January 16, 1994, respondents
submitted two documents containing unsolicited written argument. The
regulations (19 CFR 355.38) require written argument to be submitted in
accordance with the deadlines and requirements for case briefs and
rebuttal briefs. The two submissions in question were made after these
deadlines. These submissions were returned to respondents in accordance
with the regulations (19 CFR 355.38(a)). The Department has therefore
not considered the arguments presented in these two submissions for
purposes of reaching these final results of review.
The review covers the period January 1, 1991 through December 31,
1991. The review involves five companies and the following programs:
(1) Industrial Development Corporation Loans
(2) Export Incentive Program
(3) Regional Industrial Development Incentives
(4) Preferential Rail Rates
(5) Government Loan Guarantees
(6) Beneficiation Allowances--Electric Power Cost Aid Scheme
(7) General Export Incentive Scheme
After consideration of respondents' comments on the preliminary
results of review, the Department has now recalculated the bounties or
grants attributable to the Category D Scheme of the Export Incentive
Program, and to the Industrial Development Corporation long-term loan
program. The Department now determines the bounty or grant attributable
to the Category D Scheme to be zero percent ad valorem for CMI, and
0.29 percent ad valorem for all other companies, and the bounty or
grant attributable to the Industrial Development Corporation loan to be
zero for CMI, and 0.05 percent ad valorem for all other companies.
Accordingly, the Department determines the total bounty or grant from
all programs under review to be zero for CMI, and 0.81 percent ad
valorem for all other companies.
Scope of Review
Imports covered by this review are shipments of ferrochrome, which
is currently classifiable under item 7202.41.00, 7202.49.10 and
7202.49.50 of the Harmonized Tariff Schedule (HTS). The HTS item
numbers are provided for convenience and Customs
[[Page 7044]] purposes. The written description remains dispositive.
Calculation of Country-Wide Rate
We calculated the bounty or grant on a country-wide basis by first
calculating the bounty or grant for each company subject to the
administrative review. We then weight-averaged the bounty or grant
received by each company using as the weight its share of total South
African ferrochrome exports to the United States, including all
companies, even those with de minimis or zero bounties or grants. We
then summed the individual companies' weight-averaged bounties or
grants to determine the bounty or grant from all programs benefitting
ferrochrome exports to the United States. Since the country-wide rate
calculated using this methodology was above de minimis, as defined by
19 CFR 355.7 (1994), we proceeded to the next step and examined the
total bounty or grant calculated for each company to determine whether
individual company rates differed significantly from the weighted-
average country-wide rate, pursuant to 19 CFR 355.22(d)(3). One
company, CMI, had a bounty or grant of zero during the review period,
which is significantly different pursuant to 19 CFR 355.22(d)(3). This
company is treated separately for assessment purposes. All other
companies are assigned the country-wide rate.
Analysis of Comments
Comment 1: Respondents argue that the Department incorrectly
calculated Category D benefits because it was demonstrated at
verification that Category D benefits were tied to exports to countries
other than the United States. Respondents argue that their Category D
benefits were tied in one of the following three ways: (1) There were
no exports to the United States of the subject merchandise during the
tax year covered by the tax return filed during the review period;
therefore, there could be no expenses (and no tax deduction) relating
to marketing U.S. exports; (2) marketing expenses were segregated as
they were incurred, and only expenses relating to non-U.S. exports were
claimed as a tax deduction; or (3) expenses were apportioned on a pro-
rata basis, therefore the tax deduction had been adjusted downward as a
result of the removal of the portion of marketing expenses determined
to relate to U.S. exports. Respondents argue that, in accordance with
the proposed regulations, the Department cannot countervail benefits
which do not relate to exports of the subject merchandise to the United
States. See, Notice of Proposed Rulemaking and Request for Public
Comments (54 FR 23366, 23384; May 31, 1989) (Proposed Regulations) at
Sec. 355.47(b).
Department's Position: We recognize that to the extent that
respondents segregated their marketing expenses as they were incurred,
and claimed the Category D deduction only on expenses related to non-
U.S. exports, Category D benefits do not benefit exports of ferrochrome
to the United States. Since we were able to verify that some companies
did segregate their expenses in this manner, for certain expense items
claimed, we did not include in our calculations benefits attributable
to these expense items.
We do not agree, however, that solely because a company did not
export to a specific market during a particular period, one can
necessarily conclude that the company did not incur marketing expenses
related to that market. In the instant case, however, the company in
question demonstrated at verification that the expenses that it claimed
under this program consisted only of commissions and warehousing
expenses, which can be tied to sales to a particular export market.
Therefore, we agree that, in this particular case, where the company
did not export the subject merchandise to the United States during the
tax year, it also did not incur or claim any marketing expenses with
respect to the U.S. market for subject merchandise. As such, we
conclude that Category D was not used by this company with respect to
its U.S. exports of ferrochrome.
In the absence of a Government of South Africa mandate prohibiting
Category D claims for marketing expenses tied to U.S. exports, the pro-
rata apportionment of expenses which are not directly tied to specific
export sales or markets is not an adequate substitute for the direct
tying of the expenses to specific sales or markets for the purpose of
the Department's analysis. Therefore, we do not recognize pro-rated
expenses as being tied to particular markets, or markets other than the
United States. We also note that some respondents did not pro-rate or
otherwise adjust certain expenses, to exclude expenses directly
incurred for the U.S. market, before claiming the expenses, in their
entirety, as a tax deduction under Category D. Therefore, we have
included all such expenses in our calculations.
Accordingly, we have adjusted our preliminary calculations to
include only those Category D benefits which arose from marketing
expenses which were either pro-rated or not adjusted by the companies
in making their Category D claims on the tax return filed during the
review period. For further discussion of the Department's position on
the tying of benefits, see Memorandum for the File, dated December 16,
1994; ``Tying of Benefits,'' which is on file in the Central Records
Unit (Room B099 of the Main Commerce Building). We now determine the
bounty or grant attributable to Category D to be zero percent ad
valorem for CMI and 0.29 percent ad valorem for all other companies.
Comment 2: CMI argues that it could not have derived any benefit
from the Category D program because it was in a tax loss position
during the period of review (POR). Therefore, the company could not
have experienced any cash-flow effect from the deduction of export
marketing expenses claimed under Category D. CMI argues that the
Department has previously held that a company in a tax loss position
cannot benefit from an otherwise countervailable tax deduction. See,
Preliminary Negative Countervailing Duty Determinations; Certain Steel
Products from South Africa (58 FR 47865, September 13, 1993); Final
Negative Countervailing Duty Determinations; Certain Steel Products
from South Africa (58 FR 62100, November 24, 1993).
Department's Position: The Department's ``Proposed Regulations,''
at Sec. 355.41(i)(1), state: ``[a] countervailable benefit exists to
the extent the Secretary determines that the taxes paid by a firm are
less than the taxes it otherwise would have paid * * *'' (54 FR 23336,
23382, May 31, 1989). Because CMI was in a tax loss position, no taxes
were due during the POR. In addition, the magnitude of the tax loss
alone shows that it was not created during the POR by the use of the
Category D program. Therefore, we agree with respondent that CMI
derived no benefit from the Category D tax deduction it took during the
POR.
Comment 3: Two respondents, Samancor and Ferralloys, Ltd., argue
that the Department erroneously countervailed benefits from Category A
and B promissory notes issued prior to the review period which matured
during the review period. Respondents claim that because these notes
were discovered during the verification in discussions with government
officials, and after verification at the companies' offices, the
Department must request and consider information from the companies.
Respondents claim that this information would reveal that one of these
promissory notes does not exist and that the other two are not fully
attributable to exports of subject merchandise to the United States.
[[Page 7045]]
Department's Position: Section 776 of the Act provides that if the
Department ``is unable to verify the accuracy of the information
submitted, it shall use the best information available (BIA) to it as
the basis for its action.'' During verification, the Department
verifiers learned of a government practice of paying benefits under
Categories A and B of the General Export Incentive Scheme with
promissory notes. The Department verified the promissory note practice
both at the companies and the government. However, after completing
verification at the companies' offices, the verifiers discovered at the
government offices several promissory notes which had been issued to
Samancor and Ferralloys in accordance with this practice as payment of
benefits under Categories A and B of the General Export Incentive
Scheme. Although the Department had previously found the Categories A
and B programs countervailable (see Ferrochrome from South Africa;
Final Results of Countervailing Duty Administrative Review (56 FR
33254; July 19, 1991)), these notes had been neither reported in the
questionnaire responses nor presented at verification by the companies
as Categories A and B benefits.
While the Department has determined that the omission from the
questionnaire responses of information about the promissory note
practice is not a sufficient basis to question the reliability of the
entire response, with regard to benefits from the Categories A and B
programs, the inconsistencies at verification between the information
presented by the government and the information presented by the
companies is a sufficient basis for Department to rely on BIA. Since
the only information on the record regarding these promissory notes is
the information collected at verification at the government, the
Department decided to use it as BIA in the preliminary results, and has
not changed that determination for these final results.
With regard to the respondents' request that the Department solicit
additional information about the promissory notes, the appropriate time
for submission of information on benefits received was in the
questionnaire responses, or prior to the deadline for the timely
submission of factual information (the earlier of 180 days from
initiation of the administrative review or issuance of the preliminary
results of review)(see 19 CFR 355.31(a)(1)(ii)). In this instance, that
information could have been presented even at verification, when the
Department accepted newly- presented information about the promissory
note practice and the benefits conferred by these promissory notes in
particular. The purpose of verification is to determine that submitted
information has been completely and accurately reported. Further
explanation of these notes after verification would involve
consideration by the Department of information that the Department did
not have the opportunity to verify.
Comment 4: Samancor argues that the Department should not treat the
Industrial Development Corporation (IDC) loan that Middleburg Steel and
Alloys (MS&A) received as a long-term loan, but as a short-term loan of
nine months' duration because Barlow Rand, Ltd., the parent company of
MS&A, sold the ferrochrome operation to Samancor during the review
period, but retained the loan obligation. Samancor further argues that
in the calculation of benefits from the fixed-rate portion of the loan,
the Department should have used as its benchmark the 3-year Eskom rate,
rather than the Company Loan Securities rate. Respondent argues that if
the appropriate benchmark and short-term loan methodology are used, no
countervailable benefit results from the fixed-rate portion of the
loan. Respondent argues further that, if the Department persists in
using the long-term loan methodology and the company loan securities
rate as the benchmark, the Department must correct significant errors
made in the calculations.
Department's Position: The IDC loan in question is a long-term loan
because, when issued, the loan had a term of 7 years. The type of
bounty or grant did not change as a result of events affecting the
company's corporate structure. As a result of the sale of MS&A during
the POR, and the retention of this loan liability by MS&A's parent
after the sale, MS&A was only responsible for making interest and
principal payments on the loan for 9 months during the review period;
however, this does not change the terms of the loan, from a long-term
loan to a short-term loan. Therefore, we apply the long-term loan
methodology (as outlined in the Proposed Regulations (54 FR 23366,
23384)) to measure the benefit to MS&A for those nine months.
In the absence of contemporaneous commercial borrowing by the
company, and consistent with the Proposed Regulations
(Sec. 355.44(b)(4)(iv), 54 FR at 23380), the Department used as the
benchmark the Company Loan Securities rate, a national average long-
term rate as reported in the Quarterly Bulletin of the South African
Reserve Bank. With regard to the use of the 3-year Eskom rate as a
benchmark, the Department did not adopt it for two reasons. First, this
rate is only a 3-year rate, and the loan's term is 7 years. Second,
this rate does not represent the cost of commercial borrowing in South
Africa, but the rate at which the government-owned power company raises
capital by issuing 3-year bonds. Therefore, it is an inappropriate
benchmark for purposes of this analysis.
We have, however, corrected the calculations for the errors noted
by respondents. As a result, we determine the bounty or grant
attributable to the IDC loan program to be zero for CMI and 0.09
percent ad valorem for all other companies.
In our preliminary results, we found that the corporate
restructuring resulted in the loan no longer being subject to review
and stated we would not include in our calculation of the rate of cash
deposit of estimated countervailing the bounty or grant conferred by
this loan. However, in these final results, we have determined that
neither the corporate restructuring, nor the subsequent repayment of
the loan during the period of review, meet the requirements for a
program-wide change as articulated in Sec. 355.50 of the Department's
Proposed Regulations. The Proposed Regulations define a program-wide
change as ``(1) [n]ot limited to an individual firm or firms; and (2)
[e]ffectuated by an official act such as the enactment of a statute,
regulation, or decree, or contained in the schedule of an existing
statute, regulation, or decree''(54 FR at 23385). Because the
Department has no verified information indicating that the Industrial
Development Corporation loan program has been terminated, there is no
reason to remove this amount from the cash deposit rate. Accordingly,
no adjustment has been made to the cash deposit rate for this program
in these final results. However, since we verified that Categories A
and B have been terminated, and there are no residual benefits, we are
adjusting the cash deposit rate to reflect this program-wide change.
Final Results of Review
As a result of our review, we determine the total bounty or grant
to be zero for CMI, and 0.81 percent ad valorem for all other companies
for the period January 1, 1991 through December 31, 1991. The bounty or
grant attributable to each program is as follows:
[[Page 7046]]
------------------------------------------------------------------------
Ad
Program valorem
rate
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Category D.................................................... 0.29
Category A & B (Promissory Notes)............................. 0.44
Regional Incentives:
Labor Program............................................... 0.01
Interest Program............................................ 0.01
Housing Program............................................. 0.01
DC Loan Program............................................... 0.05
---------
Total................................................... 0.81
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Therefore, the Department will instruct the Customs Service to
assess countervailing duties of zero for shipments from CMI, and 0.81
percent ad valorem on all other shipments from South Africa of the
subject merchandise exported on or after January 1, 1991 and on or
before December 31, 1991.
Further, as a result of removing from the countervailing duty rate
the bounty or grant conferred by the Category A and B programs, we
determine the cash deposit rate of estimated countervailing duties to
be 0.37 percent ad valorem. This rate is de minimis as defined by 19
CFR 355.50. Therefore, as provided for by section 751(a)(1) of the Act,
the Department will instruct the Customs Service to collect cash
deposits of estimated countervailing duties of zero for all shipments
of the subject merchandise from South Africa entered, or withdrawn from
warehouse, for consumption on or after the date of publication of this
notice. This deposit requirement shall remain in effect until
publication of the final results of the next administrative review.
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: January 31, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-2854 Filed 2-3-95; 8:45 am]
BILLING CODE 3510-DS-P
