[Federal Register Volume 62, Number 92 (Tuesday, May 13, 1997)]
[Notices]
[Pages 26289-26292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12509]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-557-806]
Extruded Rubber Thread from Malaysia; Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of Countervailing Duty
Administrative Review.
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SUMMARY: The Department of Commerce (``the Department'') is conducting
an administrative review of the countervailing duty order on extruded
rubber thread from Malaysia. For information on the net subsidy for
each reviewed company, as well for all non-reviewed companies, see the
Preliminary Results of Review section of this notice. If the final
results remain the same as these preliminary results of administrative
review, we will instruct the U.S. Customs Service (``Customs'') to
collect cash deposits of countervailing duties as detailed in the
Preliminary Results of Review section of this notice. Interested
parties are invited to comment on these preliminary results. (See
Public Comment section of this notice.)
EFFECTIVE DATE: May 13, 1997.
FOR FURTHER INFORMATION CONTACT: Judy Kornfeld or Richard Herring,
Office of CVD/AD Enforcement VI, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-3146 or (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On August 25, 1992, the Department published in the Federal
Register (57 FR 38472) the countervailing duty order on extruded rubber
thread from Malaysia. On August 12, 1996, the Department published a
notice of ``Opportunity to Request Administrative Review'' (61 FR
41768) of this countervailing duty order. We received a timely request
for review, and we
[[Page 26290]]
initiated the review, covering the period January 1, 1995 through
December 31, 1995, on September 17, 1996 (61 FR 48882).
In accordance with 19 C.F.R. 355.22(a), this review covers only
those producers or exporters of the subject merchandise for which a
review was specifically requested. Accordingly, this review covers
Heveafil Sdn. Bhd., Filmax Sdn. Bhd., Rubberflex Sdn. Bhd., Filati
Lastex Elastofibre Sdn. Bhd. (Filati), and Rubfil Sdn. Bhd. Heveafil
and Filmax are affiliated parties. (See Affiliated Parties section
below.) This review also covers 13 programs.
Applicable Statute
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 this administrative review
in accordance with section 751(a) of the Act.
Scope of the Review
Imports covered by this review are shipments of extruded rubber
thread from Malaysia. Extruded rubber thread is defined as vulcanized
rubber thread obtained by extrusion of stable or concentrated natural
latex of any cross sectional shape; measuring from 0.18 mm, which is
0.007 inch or 140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge,
in diameter. Such merchandise is classifiable under item number
4007.00.00 of the Harmonized Tariff Schedule (HTS). The HTS item number
is provided for convenience and Customs purposes. The written
description is dispositive.
Affiliated Parties
Heveafil owns and controls Filmax and both companies produce
subject merchandise. Therefore, we determine them to be affiliated
companies under section 771(33) of the Act and, consistent with prior
reviews of this order, we have calculated a single rate applicable to
both of these companies. See Extruded Rubber Thread From Malaysia;
Final Results of Countervailing Duty Administrative Review (61 FR
55272; October 25, 1996) (Malaysian Rubber Thread 1994 Review). For
further information, see Memorandum to File from Judy Kornfeld
Regarding Status as Affiliated Parties dated March 28, 1997, on file in
the public file of the Central Records Unit, Room B-099 of the
Department of Commerce.
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined to Confer Subsidies
1. Export Credit Refinancing (ECR) Program
The ECR program was established in order to promote: (1) Exports of
manufactured goods and agricultural food products that have significant
value-added and high local content, (2) greater domestic linkages in
export industries, and (3) easy access to credit facilities. In order
to accomplish this, the Bank Negara Malaysia, the central bank of
Malaysia, provides order-based, and pre- and post-shipment financing of
exports through commercial banks for periods of up to 120 and 180 days,
respectively, and certificate of performance (CP)--based pre-shipment
financing. These loans are provided in Malaysian Ringgits. Order-based
financing is provided for specific sales to specific markets. CP-based
financing is a line of credit based on the previous 12 months' export
performance, and cannot be tied to specific sales in specific markets.
The Department determined that this program was an export subsidy
in Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order; Extruded Rubber Thread From Malaysia (57 FR
38472; August 25, 1992) (Malaysian Rubber Thread Final Determination)
because receipt of loans under this program was contingent upon export
performance. No new information or evidence of changed circumstances
has been submitted in this proceeding to warrant reconsideration of
this finding. During the period of review (POR), Heveafil, Filmax,
Rubberflex and Rubfil used ECR pre-shipment loans; Rubfil and Filati
used ECR post-shipment loans.
Section 771(5)(E)(ii) of the Act states that, in the case of a
loan, if there is a difference between the amount the recipient of the
loan pays on the loan and the amount the recipient would pay on a
comparable commercial loan that the recipient could actually obtain on
the market, then a countervailable benefit is bestowed. In this case,
as the benchmark interest rates, we are using company-specific interest
rates on comparable commercial loans to determine whether there is a
benefit from the ECR pre-shipment and post-shipment loans.
With respect to ECR post-shipment loans, we preliminarily determine
that Banker's Acceptances (BAs) are a comparable form of alternative
short-term commercial financing because both BAs and ECR post-shipment
loans are short-term borrowing instruments used to finance specified
export shipments. Therefore, as the benchmark for ECR post-shipment
loans to Filati and Rubfil, we used each company's average effective BA
rate, inclusive of the cost of commissions for the BA, for all BA loans
taken out during the POR.
BAs, however, are not comparable to ECR pre-shipment loans. The ECR
pre-shipment financing used by the respondents is based on a line of
credit, much like a general short-term loan in the Malaysian market. We
determined in the Malaysian Rubber Thread 1994 Review that term loans
and overdrafts offered by commercial banks are comparable forms of
short-term financing in Malaysia. During the POR, respondents used
revolving lines of credit and overdrafts for short-term commercial
financing. Therefore, we have used as our benchmark for ECR pre-
shipment loans that were taken out by Heveafil, Filmax, Rubfil or
Rubberflex, the average of the commercial bank lending rates charged to
each company during the POR for revolving lines of credit and
overdrafts.
Using these benchmarks, we continue to find these loans
countervailable (except for the ECR post-shipment loans received by
Rubfil because the interest rate charged is equal to or greater than
the benchmark rate) because the interest rate charged is less than the
rate for comparable commercial loans that the company could actually
obtain in the market. To calculate the benefit from ECR loans on which
interest was paid in 1995, we used our short-term loan methodology
which has been applied consistently in previous determinations. (See,
e.g., Certain Iron-Metal Castings from India; Preliminary Results of
Countervailing Duty Administrative Review (61 FR 64669; December 6,
1996). Because the ECR post-shipment loans are shipment-specific, we
included in our calculations only those loans approved to finance or
taken out to finance export shipments of extruded rubber thread to the
United States. Because the pre-shipment loans are not tied to specific
shipments, we included all loans on which interest was paid during the
POR.
To determine the benefit, we compared the amount of interest
actually paid on these loans during the POR with the amount that would
have been paid at each benchmark rate for pre-shipment financing and
post-shipment financing. The difference between those amounts is the
benefit. We then divided each company's interest savings by total
exports, in the case of pre-shipment loans, because
[[Page 26291]]
they applied to all exports, or by exports to the United States, in the
case of post-shipment loans, because they applied to specific shipments
of exports to the United States. On this basis, we preliminarily
determine the ad valorem subsidy from pre-shipment loans to be the
following for each of the reviewed companies:
------------------------------------------------------------------------
Subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Heveafil/Filmax.............................................. 0.15
Rubberflex................................................... .30
Filati....................................................... .00
Rubfil....................................................... .03
------------------------------------------------------------------------
For post-shipment loans, we preliminarily determine the ad valorem
subsidy to be the following for each of the reviewed companies:
------------------------------------------------------------------------
Subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Heveafil/Filmax.............................................. 0.00
Rubberflex................................................... .00
Filati....................................................... .15
Rubfil....................................................... .00
------------------------------------------------------------------------
2. Pioneer Status
Pioneer status is a tax incentive offered to promote investment in
the manufacturing, tourist, and agricultural sectors. Pioneer status
was first introduced under the Pioneer Industries (Relief from Income
Tax) Ordinance, 1958. This ordinance was replaced by the Investment
Incentives Act (IIA) in 1968, which was subsequently replaced by the
Promotion of Investment Act (PIA) of 1986. Under the IIA and the PIA,
the Minister of International Trade and Industry may determine products
or activities to be pioneer products or activities.
Companies petition for pioneer status for products or activities
that have already been approved and listed as pioneer products. Once a
company receives pioneer status, its profits from the designated
product or activity are exempt from the corporate income tax for a
period of five years, with the possibility of an extension for an
additional five years. The five-year extension was abolished for
companies which applied for pioneer status on or after November 1991.
Further, the computation of capital allowances, which are normally
deducted against the adjusted taxable income, is postponed to the post-
tax holiday period.
Under certain conditions, companies must agree to an export
commitment (i.e., they must agree to export a certain percentage of
their production) to receive pioneer status. Furthermore, an export
requirement may sometimes be applied to certain industries after it is
determined that the domestic market is saturated and will no longer
support additional producers.
In the investigation of this case (see Malaysian Rubber Thread
Final Determination), we determined that pioneer status was granted to
Rubberflex based on its obligation to export. Therefore, we found that
the program constitutes an export subsidy with respect to that company.
In addition, in past administrative reviews, we reviewed the pioneer
status of Filati, Filmax and Rubfil and found the program
countervailable with respect to all of these companies because pioneer
status was granted to each based on a commitment that they would export
a majority of their production. See Extruded Rubber Thread from
Malaysia; Final Results of Countervailing Duty Administrative Review
(60 FR 17515; April 6, 1995). See also Malaysian Rubber Thread 1994
Review. No new information or evidence of changed circumstances has
been submitted in this proceeding to warrant reconsideration of these
findings. Rubberflex, Filati, Filmax and Rubfil continued to hold
pioneer status during the POR, but only Rubberflex and Filmax claimed
pioneer income on the income tax return filed during the POR. Filati
did not file a tax return during the POR and Rubfil reported a loss on
the tax return filed during the POR. Therefore, these two companies did
not use this program.
To calculate the benefit to Rubberflex and Filmax, we calculated
the amount of tax that would have been paid absent the program and
compared that to the amount of tax actually paid. The difference equals
the tax savings received by each company. Dividing the tax savings by
total exports, we preliminarily determine the ad valorem subsidy from
this program to be the following for each of the reviewed companies:
------------------------------------------------------------------------
Subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Heveafil/Filmax.............................................. 0.74
Rubberflex................................................... .77
Filati....................................................... .00
Rubfil....................................................... .00
------------------------------------------------------------------------
3. Industrial Building Allowance
Sections 63 through 66 of the Income Tax Act of 1967, as amended,
allow an income tax deduction for a percentage of the value of
constructed or purchased buildings used in manufacturing. In 1984, this
allowance, which had been limited to manufacturing facilities, was
extended to include buildings used as warehouses to store finished
goods ready for export or imported inputs to be incorporated into
exported goods. This program includes a 10 percent initial and a 2
percent annual tax allowance (i.e., 12 percent in the first year and 2
percent thereafter). The program effectively reduces a company's
taxable income, and the tax allowance can be carried forward to future
tax years until fully exhausted. Rubber-based exporters are eligible
for this program. We found this program countervailable in the
Malaysian Rubber Thread Final Determination because use of this
allowance is limited to exporters. No new information or evidence of
changed circumstances has been submitted in this proceeding to warrant
reconsideration of this program's countervailability.
Heveafil claimed allowances under this program on the tax return
filed during the POR. To determine the benefit, we calculated the tax
savings from this program during the review period for Heveafil and
divided the savings amount by Heveafil/Filmax's total exports, because
these benefits applied to all exports. On this basis, we preliminarily
determine the ad valorem subsidy from this program to be the following
for each of the reviewed companies:
------------------------------------------------------------------------
Net subsidies--producer/exporter Subsidy rate (percent)
------------------------------------------------------------------------
Heveafil/Filmax........................... Less than 0.005.
Rubberflex................................ 0.00.
Filati.................................... 0.00.
Rubfil.................................... 0.00.
------------------------------------------------------------------------
4. Double Deduction for Export Promotion Expenses
Section 41 of the Promotion of Investments Act allows companies to
deduct expenses related to the promotion of exports twice, once in
calculating net income on the financial statement and again in
calculating taxable income. We found this program countervailable in
the Malaysian Rubber Thread Final Determination because its use is
limited to exporters. No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this finding.
Heveafil claimed deductions under this program on the tax return
filed during the POR. To determine the benefit, we calculated the tax
savings
[[Page 26292]]
from this program during the review period for this company and divided
those savings by Heveafil/Filmax's total exports, because these
benefits applied to all exports. On this basis, we preliminarily
determine the ad valorem subsidy from this program to be the following
for each of the reviewed companies:
------------------------------------------------------------------------
Subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Heveafil/Filmax.............................................. 0.01
Rubberflex................................................... 0.00
Filati....................................................... 0.00
Rubfil....................................................... 0.00
------------------------------------------------------------------------
II. Programs Preliminarily Determined to be Not Used
We examined the following programs and preliminarily determine that
the producers and/or exporters of the subject merchandise did not apply
for or receive benefits under these programs during the period of
review:
Investment Tax Allowance,
Abatement of a Percentage of Net Taxable Income Based on
the F.O.B. Value of Export Sales,
Abatement of Five Percent of Taxable Income Due to
Location in a Promoted Industrial Area,
Abatement of Taxable Income of Five Percent of Adjusted
Income of Companies due to Capital Participation and Employment Policy
Adherence,
Double Deduction of Export Credit Insurance Payments, and
Preferential Financing for Bumiputras.
Preliminary Results of Review
In accordance with 19 C.F.R. Sec. 355.22(c)(4)(ii), we calculated
an individual subsidy rate for each producer/exporter subject to this
administrative review. For the period January 1, 1995 through December
31, 1995, we preliminarily determine the subsidy for the following
companies to be:
------------------------------------------------------------------------
Net
subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Heveafil/Filmax.............................................. 0.90
Rubberflex................................................... 1.07
Rubfil....................................................... 0.03
Filati....................................................... 0.15
------------------------------------------------------------------------
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct Customs to
collect cash deposits as indicated above.
This countervailing duty order was determined to be subject to
section 753 of the Act. Countervailing Duty Order; Opportunity to
Request a Section 753 Injury Investigation, 60 FR 27,963 (May 26,
1995), amended 60 FR 32,942 (June 26, 1995). In accordance with section
753(a), domestic interested parties have requested an injury
investigation with respect to this order with the International Trade
Commission (ITC). Pursuant to section 753(a)(4), liquidation of entries
of subject merchandise made on or after January 1, 1995, the date
Malaysia joined the World Trade Organization (WTO), is suspended until
the ITC issues a final injury determination. Therefore, we will not
issue assessment instructions for any entries made on or after January
1, 1995; however, we will instruct Customs to collect cash deposits in
accordance with the final results of this administrative review. As
provided for in the Act, any rate less than 0.5 percent ad valorem in
an administrative review is de minimis. Accordingly, for those
companies with de minimis rates, no cash deposits will be required.
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 section 777A(e)(2)(B) of the Act. The requested review
will normally cover only those companies specifically named. See 19
C.F.R. Sec. 355.22(a). Pursuant to 19 C.F.R. Sec. 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) and Floral Trade Council v. United States, 822
F.Supp. 766 (CIT 1993) (interpreting 19 C.F.R. Sec. 353.22(e), the
antidumping regulation on automatic assessment, which is identical to
19 C.F.R. Sec. 355.22(g)). Therefore, the cash deposit rates for all
companies except those covered by this review will be unchanged by the
results of this review. However, as noted above, pursuant to section
753(a)(4), we will not issue assessment instructions for these
unreviewed companies, unless and until the ITC issues a final injury
determination.
Public Comment
Parties to the proceeding may request disclosure of the calculation
methodology and interested parties may request a hearing not later than
10 days after the date of publication of this notice. Interested
parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
seven days after the time limit for filing the case brief. Parties who
submit argument in this proceeding are requested to submit with the
argument (1) A statement of the issue and (2) a brief summary of the
argument. Any hearing, if requested, will be held seven days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs
and rebuttal briefs must be served on interested parties in accordance
with 19 C.F.R. Sec. 355.38.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 C.F.R. Sec. 355.38, are due. The Department
will publish the final results of this administrative review, including
the results of its analysis of issues raised in any case or rebuttal
brief or at a hearing.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: May 5, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-12509 Filed 5-12-97; 8:45 am]
BILLING CODE 3510-DS-P
