[Federal Register Volume 61, Number 116 (Friday, June 14, 1996)]
[Notices]
[Pages 30366-30373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14737]
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DEPARTMENT OF COMMERCE
[C-489-806]
Final Affirmative Countervailing Duty Determination: Certain
Pasta (``Pasta'') from Turkey
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 14, 1996.
FOR FURTHER INFORMATION CONTACT: Elizabeth Graham or Kristin Mowry,
Office of Countervailing Investigations, Import Administration, U.S.
Department of Commerce, Room 3099, 14th Street and Constitution Avenue,
N.W., Washington, D.C. 20230; telephone (202) 482-4105 and 482-3798,
respectively.
Final Determination
The Department determines that countervailable subsidies are being
provided to manufacturers, producers, or exporters of pasta in Turkey.
For information on the countervailing duty rates, please see the
Suspension of Liquidation section of this notice.
Case History
Since the publication of the preliminary affirmative determination
in the Federal Register (60 FR 53747, October 17, 1995), the following
events have occurred.
On October 21, 1995, we aligned the date of our final determination
with the date of the final determination in the companion antidumping
duty investigation of certain pasta from Turkey (60 FR 54847, October
26, 1995). Subsequently, the final determinations in the antidumping
and countervailing duty determinations were postponed until June 3,
1996 (61 FR 1351, January 13, 1996).
Verification of the responses of the Government of Turkey (GOT),
Filiz Gida Sanayi ve Ticaret (Filiz), Maktas Makarnacilik ve Ticaret
(Maktas), Andas Gida Dagitim ve Ticaret A.S. (Andas), Dogus Holding
A.S. (Dogus), and Aytac Dis Ticaret Yatirim Sanayi A.S. (Aytac) was
conducted between October 30, 1995, and November 10, 1995. We verified
that Aytac did act as the exporter of record for certain of Maktas''
sales of pasta to the United States during 1994 and that Aytac had
transferred its rights to benefits with respect to those exports to
Maktas. Furthermore, we verified that Aytac received no benefits during
the POI. Based on this information, we have not calculated an
individual countervailing duty rate for Aytac. If this company exports
to the United States, it will be subject to the all others rate.
On February 14, 1996, we terminated the suspension of liquidation
of all entries of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after that date (61 FR 3672, February
1, 1996) (see Suspension of Liquidation section, below).
Petitioners and respondents filed case and rebuttal briefs on April
17, 1996 and April 22, 1996. The hearing in this case was held on April
25, 1996.
Scope of Investigation
The product covered by this investigation is certain non-egg dry
pasta in packages of five pounds (or 2.27 kilograms) or less, whether
or not enriched or fortified or containing milk or other optional
ingredients such as chopped vegetables, vegetable purees, milk, gluten,
diastases, vitamins, coloring and flavorings, and up to two percent egg
white. The pasta covered by this investigation is typically sold in the
retail market in fiberboard or cardboard cartons or polyethylene or
polypropylene bags, of varying dimensions.
Excluded from the scope of this investigation are refrigerated,
frozen, or canned pastas, as well as all forms of egg pasta, with the
exception of non-egg dry pasta containing up to two percent egg white.
In the companion countervailing and antidumping duty investigations
involving pasta from Italy, we have excluded imports of organic pasta
that are accompanied by the appropriate certificate issued by the
Associazione Marchigiana Agricultura Biologica (AMAB). The Department
has determined that AMAB is legally authorized to certify foodstuffs as
organic for the Government of Italy (GOI). If certification procedures
similar to those implemented by the GOI are established by the GOT for
exports of organic pasta to the United States, we would consider an
exclusion for organic pasta at that time.
The merchandise under investigation is currently classifiable under
subheading 1902.19.20 of the Harmonized Tariff Schedule of the United
States (HTS). Although the HTS subheading is provided for convenience
and customs purposes, our written description of the scope of this
proceeding is dispositive.
The 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 effective January 1, 1995 (the Act).
References to the Countervailing Duties: Notice of Proposed Rulemaking
and Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed
Regulations), which have been withdrawn, are provided solely for
further explanation of the Department's CVD practice.
Petitioners
The petition in this investigation was filed by Borden, Inc.,
Hershey Foods Corp., and Gooch Foods, Inc.
Period of Investigation
The period for which we are measuring subsidies (the ``POI'') is
calendar year 1994.
Facts Available
Section 776(a)(2)(A) of the Act requires the Department to use the
facts available ``if an interested party or any other person withholds
information that has been requested by the administering authority or
the Commission under this title.'' One of the companies included in
this investigation, Oba, did not respond to our questionnaire. Section
776(b) of the Act provides that the administering authority may use an
inference that is adverse to the interests of such a party in selecting
from among the facts otherwise available. Such adverse inference may
include reliance on information derived from: (1) The petition, (2) a
final determination in the investigation under this title, (3) any
previous review under section 751 or determination under section 753,
or (4) any other information placed on the record. Because the petition
did not provide subsidy rates, we were unable to use the petition as a
source for facts available.
In the absence of verified data concerning benefits received by Oba
during the POI, we have determined that rates based on record data
obtained from similarly situated firms constitute the most appropriate
data available. Therefore, we have used as the facts available for Oba
the sum of the highest
[[Page 30367]]
rate calculated for each program used by any of the companies.
Based upon the responses to our questionnaires and the results of
verification, we determine the following:
I. Programs Determined to be Countervailable
A. Pre-Shipment Export Loans
The Export Credit Bank of Turkey (Turk Eximbank) provides short-
term pre-shipment export loans to exporters through intermediary
commercial banks. The program was commenced in March 1989 in order to
meet the financing needs of exporters and overseas contractors. Loans
are made available to certified exporters who commit to a certain value
of exports within a specified time period. Generally, loans are
extended for 180 days, covering between 50 and 75 percent of the FOB
value of the committed export value. During the POI, the food sector
(including pasta) was eligible for pre-shipment export loans amounting
to 75 percent of the committed FOB value of exports, for a maximum of
180 days. These loans were denominated in Turkish lira (TL).
Of the companies investigated, only Maktas received Eximbank Pre-
Shipment Export Loans.
Short-term Loan Benchmark: Due to an average inflation rate in
Turkey of 91 percent during the POI, interest rates have fluctuated
significantly. Hence, we have calculated monthly benchmarks. (See
section 355.44(b)(3)(iii) of the Proposed Regulations.)
As illustrated by section 355.44(b)(3) of our Proposed Regulations,
the Department's practice is to use as its short-term benchmark the
interest rate on the predominant alternative source of short-term
financing in the country in question. Typically, we use national
average benchmarks and not company-specific interest rates. However,
the GOT responded that there is no predominant source of short-term
financing in Turkey and that it does not maintain statistics concerning
short-term interest rates. Moreover, our review of the Annual Report of
the Central Bank of Turkey did not reveal any national average short-
term interest rates.
Therefore, in the absence of our preferred benchmark, we have
turned to company-specific interest rates. Specifically, we have used
the average cost of Maktas' short-term commercial loans outstanding
during each of the months it received Pre-Shipment Export Loans as our
benchmark. We note that because of the way in which Maktas kept its
records we were not able to calculate monthly benchmarks based only on
loans taken out in each month. However, given the information
available, we believe this monthly average cost of borrowing provides
the most accurate measure of what Maktas would pay on a comparable
commercial loan that it could actually obtain on the market. (See
section 771(5)(E)(ii) of the Act.)
Based on our comparison of the benchmark interest rate to the rate
paid by Maktas on its export loans, we have determined that these loans
provide a countervailable subsidy within the meaning of section 771(5)
of the Act. The loans are a direct transfer of funds from the GOT
through commercial banks. They provide a benefit because the interest
rate paid on these loans is less than the amount the recipient would
pay on a comparable commercial loan. Finally, the loans are specific
because their receipt is contingent upon export performance.
We calculated the countervailable subsidy as the difference between
actual interest paid on loans for shipments to the United States during
the POI and the interest that would have been paid using the benchmark
interest rates. This difference was divided by Maktas' total exports to
the United States during the POI. On this basis, we determine the
countervailable subsidy from this program to be 8.82 percent ad valorem
for Maktas.
Respondents argue that the Department should use as its benchmark
the interest rate on Central Bank Rediscount Loans. They point to the
fact that Maktas received such loans during the POI and that this type
of loan was available throughout the POI. Moreover, respondents argue,
if the Department elects to use this benchmark, it must find that
Eximbank Pre-Shipment Export Loans are not countervailable because, in
two of nine months that Maktas received Pre-Shipment Export Loans, the
interest rate on Central Bank Rediscount loans was lower than the rate
for commercial loans obtained by Maktas.
We have not used the Central Bank Rediscount Loan rates as our
benchmark, nor have we included Central Bank Rediscount Loans received
by Maktas in calculating Maktas' average monthly cost of outstanding
loans. Information obtained at verification indicates that the Central
Bank Rediscount Loans are offered to increase liquidity in the economy.
In light of the policy objectives of these loans, and the lack of any
information that would support the conclusion that they were made as
part of the Central Bank's commercial operations (if any), we have
concluded that these loans should not be viewed as commercial loans.
Moreover, while we have information on the terms of the Central Bank
Rediscount Loans (90 days), we do not have information on the lengths
of the other short-term loans Maktas had outstanding. Therefore, we
have no basis to say that the Central Bank Rediscount Loans are more
comparable to the Pre-Shipment Export Loans taken out by Maktas.
Petitioners urge the Department to rely on adverse facts available
and use the highest rate per month from the various sources on the
record (this includes Maktas' own rates, the overnight rates, the sale
of government securities, etc.) as the benchmark rate. Petitioners
believe adverse facts available is justified because they claim Maktas
``manipulated its rates'' and failed to cooperate with the Department's
attempts to find the appropriate company-specific rates.
We disagree that adverse facts available are warranted in this
situation. In seeking short-term loan benchmarks, it is our practice to
request this information of the government. Companies are not asked to
provide any short-term benchmark data. In this case, Maktas provided
its own borrowing rates. As we learned at verification, those rates
included the interest rate on the Eximbank Pre-Shipment Export loans.
We have since verified the correct company specific interest rates and
have used them in our calculation.
B. Pasta Export Grants
During 1994, the Central Bank of Turkey provided cash grants and
government promissory notes or bonds to exporters of pasta. According
to the GOT, the purpose of the program was to develop Turkey's export
potential. In order to receive the grants, exporters were required to
submit applications (including proof of exportation and payment from
the customer) to the local office of the Central Bank. The exporter
received a specified percentage of the FOB U.S. dollar price, subject
to a cap.
We have determined that these export grants and bonds are
countervailable subsidies within the meaning of section 771(5) of the
Act. The grants and bonds are a direct transfer of funds from the GOT
providing a benefit in the amount of the grant. Also, the grants and
bonds are specific because their receipt is contingent upon export
performance.
We have also determined that the benefits under this program are
bestowed when the cash is received, in the case of grants, and on
maturity date, in the case of promissory notes or
[[Page 30368]]
bonds. Regarding the bonds, although we note that there are no
restrictions on their transfer or sale, markets have not developed that
would allow exporters to convert their bonds to cash. Therefore, we
have treated the subsidy as being received at the first point in time
when the exporter knows with certainty the amount being received, which
is the date of maturity.
We have further determined that the benefits under the Pasta Export
Grant program are ``recurring.'' Once a company has exported and
provided documentation to the local office of the Central Bank it
becomes eligible for the Pasta Export Grants. The receipt of benefits
is automatic and continues from year to year. (See General Issues
Appendix in Final Affirmative Countervailing Duty Determination:
Certain Steel Products from Austria (58 FR 37217, 37268-69, July 9,
1993) (``General Issues Appendix'').)
To calculate the countervailable subsidy, we divided the total
amount of cash grants received and the value of bonds maturing during
the POI for exports to the United States (denominated in Turkish lira)
by the total exports to the United States denominated in Turkish lira.
On this basis, we determine the countervailable subsidy from this
program to be 1.17 percent ad valorem for Filiz and 3.79 percent ad
valorem for Maktas.
The GOT has stated that this program was terminated for pasta
exports made on or after January 1, 1995, by a confidential government
decree. However, we saw at verification that while this program had
expired, it was reinstated with a new formula for determining the
subsidy amount and a new time line for implementation. This
reinstatement was effective September 29, 1995. Therefore, we do not
view this program as having been terminated.
Respondents further argue that, should the Department value the
benefits on an earned basis, it should then treat this program as
having undergone a program-wide change, and benefits should be adjusted
to reflect the newly-announced formula. As discussed above, we are not
valuing the benefits on an earned basis. Moreover, we are not aware of
any change in the reinstated program that would lead us to value the
benefits on an earned basis. Therefore, because the benefits of the
Pasta Export Grant Program are being valued on a received basis which,
in the case of bonds is the date of maturity, the changes effectuated
in September 1995 are not measurable and do not qualify as a program-
wide change. (See section 355.50 of the Proposed Regulations.)
C. Free Wheat Program
During our verification of Filiz, we discovered that the company
received free wheat under a GOT program. The program, established by
Decree 93/4534, provides free wheat to companies that agree to export
flour, pasta, semolina, or biscuits. The companies sign contracts with
the Turkish Grain Board (TMO) committing to export a certain amount of
their product in return for a pre-determined amount of durum wheat.
Once the company has exported the product, it provides the TMO with
copies of its export documents. The TMO examines the documents, and
upon TMO approval, wheat is delivered to the company. We verified that
the price of wheat is determined on the date of the TMO invoice and
Filiz received seven invoices during 1994.
Filiz argues that it did not receive a benefit under the Free Wheat
Program during the POI. Although the company received wheat in 1994,
Filiz contracted with the TMO in 1993, and knew at the time of the
contract precisely how much wheat it would receive for each ton of
pasta exported. Filiz cites to section 355.48(b)(7) of the Proposed
Regulations in support of its claim that the benefit of the Free Wheat
Program was received in 1995. Petitioners assert that the applicable
section of the Proposed Regulations is 355.48(b)(2), which discusses
the governmental provision of goods or services. According to section
355.48(b)(2), the benefit for governmental provision of goods or
services occurs ``at the time a firm pays, or in the absence of payment
would have paid for the good or service.''
Section 355.48(b)(7) states that, in the case of an export benefit
provided as a percentage of the value of the exported merchandise, the
cash flow effect of the subsidy is deemed to occur on the date of
export. Because the benefit from the Free Wheat program is not provided
as a percentage of the value of the exported merchandise, we agree with
petitioners that section 355.48(b)(7) does not apply to this program.
The benefit from the GOT's provision of free wheat occurred when Filiz
actually received the wheat. Therefore, pursuant to section
355.48(b)(2) we have determined that Filiz benefitted from the Free
Wheat Program during the POI.
We have determined that the provision of free wheat to exporters of
pasta is a countervailable subsidy within the meaning of section 771(5)
of the Act. The program provides goods for less than adequate
remuneration and is specific because its receipt is contingent upon
export performance. To calculate the countervailable subsidy, we
divided the total value of the free wheat provided to Filiz during the
POI by the total value of the company's exports during the POI. On this
basis, we determine the countervailable subsidy from this program to be
1.99 percent ad valorem for Filiz.
We have further determined that the benefits under the Free Wheat
Program are ``recurring.'' Once a company has exported and provided
documentation to the TMO it becomes eligible for the free wheat. The
receipt of benefits is automatic and continues from year to year. (See
Allocation section of the General Issues Appendix.)
Respondents argue that if the Department finds that Filiz received
benefits during the POI, then the Department should treat the program
as terminated and adjust the deposit rate accordingly. They assert that
the GOT's statement that ``the subsidy program that was supposed to end
on October 31, 1993 will be extended until November 28, 1993,'' and the
statement that ``the wheat subsidy program will be terminated''
constitute clear evidence that the program has been terminated.
Petitioners disagree that the Department should consider the Free
Wheat program terminated. They state that the only documentation on the
record refers to the possible termination of the program. As such, the
Department has insufficient evidence on the record to treat the program
as terminated. We agree with petitioners and have not adjusted the
deposit rate.
Respondents further assert that exporters were not allowed to
receive benefits from the Free Wheat and Pasta Export Grant programs
for the same exportation. Consequently, if countervailed, the Free
Wheat program should not be subject to a deposit rate above the rate
for the Pasta Export Grant program. Petitioners rebut respondents'
claim that the Pasta Export Grant program and the Free Wheat program
are mutually exclusive. They claim that respondents have provided no
documentation to that effect.
We agree with respondents that Turkish pasta exporters cannot claim
Pasta Export grants and Free Wheat on the same exportation. (Contrary
to petitioners' assertions, the record evidence is clear on this
point.) We further believe that our methodology appropriately accounts
for this. Regarding Pasta Export grants, we have divided the total
amount of benefit received on U.S. shipments in the POI by the total
U.S. exports during the same period. The fact that export grants were
not received on every shipment is reflected in this calculation. For
the Free Wheat program, we divided the
[[Page 30369]]
value of free wheat received as a consequence of exports to all markets
by total exports. The two rates, when added together, reflect the total
grants and free wheat that were received on exports to the United
States.
D. Payments for Exports on Turkish Ships/State Aid for Exports Program
At verification, GOT officials explained that the Payments for
Exports on Turkish Ships program was instituted to aid industries
producing processed goods. Under the program, exporters applied to the
Central Bank for cash grants or bonds based on the number of tons of
product transported by sea. As with the Pasta Export Grant program,
payments are made to companies in the form of cash grants or bonds.
Filiz reported in its questionnaire response that it did not apply
for, use, or benefit from this program during the POI. However, we
discovered during verification that Filiz had applied for benefits on
shipments made in both 1993 and 1994. We further verified that the
company received payment during 1994 in the form of both cash grants
and maturing bonds for certain of its 1993 applications, and was still
waiting for payment in 1995 for applications filed in both 1993 and
1994. Additionally, contrary to the explanation provided by the GOT,
Filiz officials explained that the program provided the company 15 U.S.
dollars per ton for its exports made using Turkish ships and 7.50 U.S.
dollars per ton for its exports made on non-Turkish ships.
We have determined that these export grants and bonds are
countervailable subsidies within the meaning of section 771(5) of the
Act. The grants and bonds are a direct transfer of funds from the GOT
providing a benefit in the amount of the grant and bonds. Also, the
grants and bonds are specific because their receipt is contingent upon
export performance.
We have further determined that the benefits under the Payments for
Exports on Turkish Ships program are ``recurring.'' Once a company has
exported and provided documentation to the Central Bank it becomes
eligible for the cash grants or bonds. The receipt of benefits is
automatic and continues from year to year. (See Allocation section of
the General Issues Appendix.)
To calculate the countervailable subsidy we divided the total
amount of grants received and bonds maturing during the POI by Filiz's
total exports. On this basis, we determine the countervailable subsidy
from this program to be 0.45 percent ad valorem for Filiz.
Petitioners assert that in light of Filiz's failure to report these
benefits in its questionnaire response, the Department should calculate
an adverse facts available rate by including all transportation subsidy
amounts on the record, regardless of when the amounts were received.
They also state that the benefit should be divided by exports of the
subject merchandise to the United States. We disagree with petitioners.
Although we agree that these benefits should have been included in the
questionnaire response, we collected and verified all of the necessary
data required to calculate a benefit under this program. Therefore,
there is no basis for applying an adverse facts available rate.
Respondents assert that the Freight Premium for Distance Program
should not be countervailed because it has been modified to exclude
pasta products. However, respondents argue if the Department determines
that the program is countervailable, then the benefit should be treated
as having been bestowed when the cash was received (for grants) and on
the maturity date (for bonds). In their view, the benefit should be
allocated over total exports.
We agree with respondents that the program was terminated. We
verified that this program was terminated by confidential government
decree. Although a new transportation program entitled ``State Aid for
Exports'' was instituted on September 29, 1995, we verified that this
program differs from the former program in that it covers sea, air, and
truck transportation, and specifically excludes exports of pasta. We
are calculating the benefit as of the time the cash grant was received
or the date on which the bond matures. Filiz has still not received all
of its payments from applications made in 1993 and 1994. Based on the
fact that residual benefits continue to be bestowed under the program,
we are not adjusting the cash deposit rate for the termination. (See
section 355.50 of the Proposed Regulations.)
E. Incentive Premium on Domestically Obtained Goods
The Incentive Premium on Domestically Obtained Goods is part of the
General Incentives Program (GIP), which is discussed further below.
Although we have analyzed certain of the benefits provided under the
GIP within the context of the GIP as a whole, two types of benefits
merit separate consideration. These are the Incentive Premium on
Domestically Obtained Goods and the Resource Utilization Support Fund,
discussed below. In both instances, the benefit is tied to the purchase
of domestic over imported goods. Therefore, because receipt of both of
these benefits is contingent upon the use of domestically-sourced
inputs, these particular benefits are specific pursuant to section
771(5A)(C) of the Act.
The Incentive Premium program provides companies holding investment
incentive certificates under the GIP with rebates of the 15 percent VAT
paid on locally-sourced machinery and equipment plus a 10 percent
premium. We verified that imported machinery and equipment is subject
to the VAT and is not eligible for the rebate.
Respondents argue that we should not countervail the Incentive
Premium because VAT paid on imported equipment may be deferred, which,
in a hyperinflationary economy, results in the amount of VAT ultimately
paid having a present value substantially less than the amount of VAT
originally incurred. Hence, they argue, there is essentially no
difference between exempting domestically-sourced goods from the VAT
and deferring payment of the VAT on imported goods. Petitioners argue
that the complementarity of the two programs does not eliminate the
benefit provided by the Incentive Premium program. They assert that the
two types of benefits are not identical and that hyperinflationary
pressures would not necessarily nullify the difference between these
two benefits. Additionally, they argue that not all companies receive
the same GIP benefits and, therefore, not all companies would receive
both the Incentive Premium VAT rebates and the VAT deferral.
Despite respondents' assertions, the benefit is not related to the
treatment of imported merchandise. The VAT rebates constitute revenue
foregone by the GOT and provide a benefit in the amount of the rebates.
We have determined that these VAT rebates are countervailable
subsidies within the meaning of section 771(5) of the Act. As stated
above, the rebates constitute revenue foregone by the GOT and provide a
benefit in the amount of the VAT savings to the company. Also, as
discussed above, they are specific because their receipt is contingent
upon the use of domestic goods rather than imported goods. Maktas
received incentive premiums in 1991 and Filiz received incentive
premiums in 1993 and 1994.
We have further determined that the benefits under the Incentive
Premium program are ``recurring.'' Once a company has received an
investment incentive certificate it becomes eligible for the Incentive
Premium benefits. The receipt of benefits is automatic and continues
from year to year. (See
[[Page 30370]]
Allocation section of the General Issues Appendix.)
For the rebates received by Filiz during the POI, we divided the
amount received by the total value of the company's sales during the
POI. On this basis, we determine the countervailable subsidy to be
0.0022 percent ad valorem for Filiz.
F. Resource Utilization Support Fund (GIP)
Filiz reported that it received Resource Utilization Support Fund
(RUSF) rebates during the POI, but failed to identify the nature of the
benefit. Because RUSF payments are made under the GIP, we treated RUSF
benefits like other GIP benefits and we did not consider them to be
countervailable in the preliminary determination. However, during
verification of Filiz, we learned that the RUSF program actually
operates like the Incentive Premium program in that it provides rebates
of the 15 percent VAT paid on domestically-sourced machinery and
equipment.
We have determined that the RUSF rebates are countervailable
subsidies within the meaning of section 771(5) of the Act. The rebates
represent revenue foregone by the GOT and provide a benefit in the
amount of the VAT savings to the company. Also, they are specific
because their receipt is contingent upon the use of domestic goods over
imported goods. Filiz received RUSF rebates during 1993 and 1994.
We have further determined that the benefits under the RUSF program
are ``recurring.'' Once a company has received an investment incentive
certificate it becomes eligible for the RUSF benefits. The receipt of
benefits is automatic and continues from year to year. (See Allocation
section of the General Issues Appendix.)
For the rebates received by Filiz during the POI, we divided the
amount received by the total value of the company's sales during the
POI. On this basis, we determine the countervailable subsidy to be 0.27
percent ad valorem for Filiz.
G. Tax Exemption Based on Export Earnings
Corporate Tax Law 3946, dated December 25, 1993, provided that
companies exporting industrial products valued in excess of
U.S.$250,000 (or the equivalent) were entitled to deduct five percent
of total export revenues from taxable profit. We verified that tax
returns for fiscal year 1993 filed in 1994 provided the last
opportunity for companies to benefit from this program.
We have determined that this tax exemption is a countervailable
subsidy within the meaning of section 771(5) of the Act. The exemption
represents revenue foregone by the GOT and provides a benefit in the
amount of the tax saving to the company. Also, the subsidy is specific
because its receipt is contingent upon export performance. Of the
exporters investigated, only Maktas claimed this tax exemption on the
tax return it filed in 1994.
Petitioners argue that the Department does not have sufficient
evidence on the record to consider this program terminated. They assert
that the GOT is required to do more than just show that the current law
is silent regarding a previous subsidy in order for the Department to
treat the program as terminated. Furthermore, given the GOT's practice
of revising, renaming, and reinstating subsidy programs, petitioners
argue that the Department should treat the program as a suspended
subsidy rather than as a terminated subsidy.
We disagree with petitioners. Although the GOT did not publish a
specific decree describing the termination of this program, through a
detailed review of the Budget Laws (Tax Code) and an examination of the
tax return for fiscal year 1994 filed in 1995, we were able to verify
that the GOT had abolished the Tax Exemption for Export Earnings
program for tax returns for fiscal year 1994 (filed in 1995).
Therefore, based on this information, we have determined that the
termination of the program qualifies as a program-wide change. (See
section 355.50 of the Proposed Regulations.) Moreover, there is no
evidence on the record which would indicate that residual benefits are
being bestowed or that a substitute program has been implemented.
Therefore, we have adjusted the cash deposit rate to account for this
change.
To calculate the countervailable subsidy, we divided the tax
savings realized during the POI by the company's export sales during
the POI. On this basis, we determine the countervailable subsidy from
this program to be 0.50 percent ad valorem for Maktas. For cash deposit
purposes the subsidy rate for Maktas is zero.
II. Benefits Determined to be Not Countervailable
Certain GIP Benefits to Filiz
The GIP is designed to eliminate the developmental differences
between regions in Turkey and to support investments in industry
sectors where the country is lacking investment. The regions and
sectors targeted by the GIP are generally selected by the
Undersecretariat of the Treasury (UT). The UT is also responsible for
issuing investment incentive certificates under the GIP. Investment
incentive certificates identify the types of GIP benefits for which
certificate holders are eligible.
In deciding whether to issue investment incentive certificates, the
UT considers whether the proposed investment project meets certain
criteria and financial thresholds set by the Council of Ministers.
These criteria include whether the project: (1) Provides international
competitiveness; (2) incorporates appropriate advanced technology; and
(3) satisfies at least a minimum of economic capacity or scale
determined on a sectoral basis. We verified that exportation was not a
prerequisite for receiving benefits under this program. Each
application for an investment incentive certificate must be accompanied
by a feasibility study and detailed financial projection. The GOT
stated that approximately 99 percent of the applications for investment
incentive certificates are approved. Those applications which are
rejected are generally revised, resubmitted, and eventually obtain
approval.
For purposes of the GIP, Turkey is divided into four types of
regions: (1) Developed; (2) normal; (3) priority regions of the second
degree; and (4) priority regions of the first degree. The level of
investment needed to obtain an investment incentive certificate for the
priority regions is lower than the level needed for normal and
developed regions (e.g., the minimum investment requirement during 1994
in priority regions was 1 billion TL and the minimum investment in
normal and developed regions was 5 billion TL). Moreover, we learned on
verification that companies located in the developed region are
required to utilize a greater percentage of their own funds and less
bank financing in connection with the investment than companies located
in any of the other three regions. Finally, we discovered that there
are distinctions between the amounts granted in the different regions
for the Fund-Based Credit and Investment Allowance benefits.
Filiz, located in a normal region, received the following benefits
under the GIP during the POI: (1) Customs duty exemptions on imported
machinery and equipment, (2) VAT deferrals on imported machinery and
equipment, (3) Resource Utilization Support Fund Rebates, and (4)
Incentive Premiums on Domestically-Obtained
[[Page 30371]]
Goods. Maktas, located in a developed region, only received Incentive
Premiums on Domestically-Obtained Goods. As discussed above, we have
determined that the Incentive Premiums on Domestically-Obtained Goods
and RUSF rebates are countervailable. Therefore, the following analysis
is limited to customs duty exemptions and VAT deferrals on imported
machinery and equipment.
For these two types of benefits, the amount does not vary by
region. Hence the issues before us are: (1) Whether the different
eligibility requirements for each region render the program regionally
specific, and (2) if not, whether the benefits received by Filiz under
the GIP are otherwise specific. Regarding the first issue, although
Filiz is located in the normal region and, thus, is subject to more
lenient eligibility requirements than the developed region (which has
the strictest requirements), Filiz surpassed the eligibility
requirements for the developed region. Hence, Filiz's location did not
affect its eligibility for benefits during the POI and we need not
reach the issue of whether differing eligibility criteria by region
make these benefits under the GIP specific.
Since Filiz would have qualified to receive benefits under the
strictest eligibility requirements, we went on to analyze whether the
customs duty exemptions and VAT deferrals granted under the GIP are
being provided to a specific industry or enterprise or group thereof
within the meaning of section 771(5A)(D) (i)-(iii).
In our original questionnaire, we asked the GOT to provide
specificity information for each type of GIP benefit. In response to
this request, the GOT stated that it did not maintain its records in
such a way as to easily provide the requested information. Accepting
their claim about the difficulty posed by our request, we asked the GOT
to provide instead the total number of qualified applicants for
investment incentive certificates by region. We relied on this data for
our preliminary determination. At verification, we examined the GIP
database and confirmed the enormous burden of retrieving the
specificity information by type of benefit. Therefore, we have
continued to rely on program-wide information for purposes of analyzing
the specificity of customs duty exemptions and VAT deferral benefits
under the GIP.
There are no de jure limitations on the types of industries that
are eligible for benefits under the GIP. Regarding de facto
specificity, we consider the following four factors, in accordance with
section 771(5A)(D)(iii) of the Act: (1) The number of enterprises,
industries or groups thereof which actually use a subsidy; (2)
predominant use of a subsidy by an enterprise, industry, or group; (3)
the receipt of disproportionately large amounts of a subsidy by an
enterprise, industry, or group; and (4) the manner in which the
authority providing a subsidy has exercised discretion in its decision
to grant the subsidy.
We verified the statistics provided by the GOT for the period 1991-
1994 concerning the awarding of investment incentive certificates to
the various sectors of the economy. For 1994, these statistics indicate
that during the POI, thirty-four industries, within the agriculture,
mining, manufacturing, energy, and services sectors, received
investment incentive certificates. We consider this distribution of
industries sufficiently broad. We further verified that during the POI,
the food and beverages industry received 7.5 percent of the investment
incentive certificates issued. Pasta producers received less than 3.8
percent of the investment incentive certificates issued to the food
sector. During the same period, the textiles and clothing industry
received 24.6 percent and the transportation industry received 14.8
percent of the investment incentive certificates issued. Each of the
thirty-one other industries accounted for 4.8 percent or less of the
total investment incentive certificates issued. The statistics for the
period 1991-1993 indicate a similar distribution of investment
incentive certificates.
Based on this distribution of certificates (including the fact that
pasta accounts for a fraction of the certificates issued to the food
and beverage industry), we determine that the pasta industry was
neither a dominant user of the program nor did it receive a
disproportionate amount of the investment incentive certificates.
Moreover, if the actual users of the subsidy are too large in number to
reasonably be considered a specific group, and if there is no evidence
of dominant or disproportionate use, the fact that a foreign authority
administering a subsidy program may have exercised discretion in
selecting the recipients of the subsidy is insufficient for a finding
of de facto specificity. (See, SAA p. 261.) Therefore, we determine
that customs duty exemptions and VAT deferrals on imported machinery
and equipment are not specific and do not confer countervailable
subsidies on Filiz.
Petitioners argue that because the Fund-Based Credit and the
Investment Allowance programs provide different levels of benefits for
each region, the Department cannot conclude that all GIP programs are
not countervailable. They state further that the Department verified
that GIP regulations issued in 1995 provide that no new investment
certificates will be issued to companies located in developed regions.
They conclude that because certain regions will no longer be able to
receive benefits, a regional subsidy exists.
Because Filiz did not benefit from the Fund-Based Credit and
Investment Allowance programs during the POI, we have not made a
determination as to the countervailability of these programs. With
respect to the new regulations, they pertain to investment incentive
certificates issued after our POI and, hence, are not relevant to our
analysis.
Petitioners also assert that for certain GIP programs, e.g., the
Tax, Duty, and Charge Exemptions program, companies cannot receive
benefits without pledging to meet a certain export commitment. They
cite Extruded Rubber Thread from Malaysia (Rubber Thread), 57 FR
38,472, 38,476 (August 25, 1992), where the Department determined that
a program may be ``two-faceted'' in the sense that certain companies
receive benefits under any number of eligibility criteria, but others
receive it based on less neutral criteria (e.g., export). As with the
Fund-Based Credit and the Investment Allowance, Filiz did not receive
benefits under the Tax, Duty, and Charge Exemptions program. Therefore,
we have not determined whether the Tax, Duty, and Charge Exemptions
program is specific.
Finally, petitioners claim that the GOT uses discretion in its
distribution of GIP benefits, by designating certain projects as
``particularly worthwhile.'' These are projects in sectors targeted by
the GOT and that are not subject to the normal GIP requirements.
Additionally, petitioners point out that companies do not always
receive the same array of benefits under the GIP, as the GOT determines
which benefits will be provided to which companies. Respondents claim
that petitioners' assertion that government discretion is used in the
distribution of GIP benefits is without merit, as the Department found
no evidence at verification to this effect.
We verified that the GOT did not designate pasta as a
``particularly worthwhile'' industry during the POI. Furthermore, as
stated above, and in the SAA, if the actual users of the subsidy are
too large in number to reasonably be considered as a specific group,
and if there is no dominant or disproportionate use of the program, the
[[Page 30372]]
fact that a government may have exercised discretion in selecting the
recipients of a subsidy is insufficient to justify a finding of de
facto specificity. Such is the case here. Moreover, we saw no evidence
that the GOT in anyway used its discretion to award benefits to
selected companies and to deny them to others.
III. Programs Determined to be Terminated
A. Support and Price Stabilization Program (SPSF)
Petitioners argue that despite the Department's preliminary
determination that this program was not used, and the GOT's claim that
the program was terminated in 1992, the Department should countervail
Filiz's reported SPSF payment. Respondents assert that they did not
benefit from the SPSF program during the POI. It is simply a matter of
nomenclature that the SPSF appears on Filiz's application for pasta
export grants.
During verification, we reviewed the Official Gazette dated August
20, 1991, which discusses the termination of the SPSF. The Gazette
states that the SPSF program was terminated effective February 1, 1992.
Furthermore, we are confident that the term SPSF on Filiz's application
for pasta export grants was simply an error on the company's part.
Because this program was administered pursuant to a confidential
government decree, companies were not aware which agency was providing
the grants. Filiz mistakenly believed that the SPSF was providing the
grants. However, during verification, we confirmed that the Central
Bank and not the SPSF was the provider of the pasta export grants. We
found no evidence during the verification of Filiz that the company
received benefits from the SPSF.
B. Wharfage Fee Exemption (GIP)
During verification, we reviewed the Official Gazette dated July
11, 1992, which discusses the termination of the Wharfage Fee
Exemption. The Gazette states that the Wharfage Fee Exemption program
was terminated effective January 1, 1993. We saw no evidence during
verification that companies could receive residual benefits or that the
program had been reinstated.
IV. Programs Determined to be Not Used
Based on the information provided in the responses and the results
of verification, we determine that the following programs were not
used.
1. Advance Refunds of Tax Savings
2. Export Credit Through the Foreign Trade Corporate Companies
Rediscount Credit Facility
3. Normal Foreign Currency Export Loans
4. Performance Foreign Currency Export Loans
5. Export Credit Insurance
6. Regional Subsidies
a. Investment Allowances
b. Mass Housing Fund Levy Exemptions
c. Customs Duty Exemptions
d. Rebate of VAT on Domestically-Sourced Machinery and Equipment
e. Additional Refunds of VAT
f. Postponement of VAT on Imported Goods
g. Other Tax Exemptions
h. Payment of Certain Obligations of Firms Undertaking Large
Investments
i. Corporate Tax Deferral
j. Subsidized Turkish Lira Credit Facilities
k. Subsidized Credit for Proportion of Fixed Expenditures
l. Subsidized Credit in Foreign Currency
m. Land Allocation
7. Exemption from Mass Housing Fund Levy (Duty Exemptions)
8. Direct Payments to Exporters of Wheat Products to Compensate for
High Domestic Input Prices
9. Interest Spread Return Program (GIP)
V. Programs Determined Not To Exist
Based on the information provided in the responses and the results
of verification, we determine that the following programs do not exist.
1. Export Promotion Program
2. Export Credit Program
3. Interest Rebates on Export Financing (GIP)
4. Foreign Exchange Allocation Program (GIP)
Interested Party Comments
Comment 1: Petitioners argue that because there is no evidence on
the record concerning certain tax programs discussed at verification,
the Department should conclude that its subsidy calculations understate
the tax benefits, and identify these other programs as subsidies to be
examined in future proceedings. Petitioners also assert that the
Department should not treat the Advanced Refund for Tax Savings program
as terminated in the final determination. They state that the program
is still in existence and that the Department verified this.
Respondents assert that the Department verified that neither Filiz
nor Maktas received benefits under the Advance Refund of Tax Savings
program. Hence, this program should not be included in any
countervailing duty order issued in this case. Respondents also assert
that the Department has no record evidence with which to conclude that
the other tax exemptions listed on the Turkish corporate income tax
form constitute countervailable subsidies.
DOC Position: We agree with petitioners that the Advanced Refund
for Tax Savings program is still in existence and, therefore, should
not be treated as a terminated program. However, we disagree with
petitioners' contention concerning the other tax programs. We found no
evidence during verification which would lead us to believe that these
programs should be considered countervailable subsidies. Therefore, we
are not including them in our final determination.
Comment 2: Petitioners assert that the Department should allocate
the benefits from the Pasta Export Grants to pasta exports to the
United States. Petitioners also assert that certain subsidies
attributed to Maktas appear in the company's ``Other Income'' account,
which is a component of total sales. These subsidies should be
subtracted from total sales so that they are not included in the
denominator. Finally, petitioners argue that the Department should
exclude from the denominator Filiz's sales of bulk pasta, because pasta
sold in bulk is not subject merchandise.
Respondents agree with petitioners that where it is clear that the
benefit is tied to sales of pasta to the United States, the denominator
should be total exports to the United States. However, they assert that
for certain invoices, it was impossible for respondents to separate
benefits between retail and bulk pasta sales. Therefore, the Department
should not adjust for bulk sales.
DOC Position: We have followed our standard practice of allocating
countervailable benefits according to whether the benefit is tied to a
particular product or market, or is untied. See, section 355.47 of the
Proposed Regulations. Consequently, we have allocated the export grants
received by Filiz for shipments to the U.S. to the company's exports to
the United States. Because we were unable to distinguish between the
pasta export grants received on bulk and those received on retail
sales, we have included both retail and bulk sales in Filiz's total
export sales. Finally, only the amount of foreign exchange gains from
Maktas' ``Other Sales'' is included in the Maktas denominators used to
calculate the benefit of the used subsidy programs.
[[Page 30373]]
Comment 3: Petitioners assert that because Maktas reported that it
applied for Normal Foreign Currency loans during the POI, the
Department should not treat this program as not used, but rather as
countervailable without benefit during the POI. Respondents state that
Maktas did not apply for or use Normal Foreign Currency loans during
the POI, and therefore, the Department should only consider this
program in any future review.
DOC Position: We found no evidence during verification of Maktas
that the company had benefitted from the Normal Foreign Currency Loan
program during the POI. Therefore, we will follow our standard practice
of categorizing the program as not used. We may consider this program
in future reviews.
Comment 4: Petitioners argue that the Department should use
effective interest rates when calculating the benefit in the Eximbank
loan program.
DOC Position: We agree with petitioners and have calculated the
benefit from this program by comparing the effective Eximbank rates to
the effective benchmark rates. Both the Eximbank and benchmark rates
include legally-mandated commissions and fund surcharges.
Comment 5: Petitioners argue that the Department should countervail
the two additional grants received in 1994 that were discovered at the
Filiz verification.
Petitioners also argue that Filiz failed to establish that it did
not use the Eximbank loan program. Therefore, the Department should use
adverse facts available and apply to Filiz the rate calculated for
Maktas under this program. Respondents state that the Department did,
in fact, verify that Filiz did not benefit from the Eximbank loan
program.
DOC Position: The additional grants described by petitioners were
Pasta Export Grants for shipments to third countries. As they can be
tied to other markets, we have not included these two additional grants
in our calculations.
With respect to the Eximbank loan program, we agree with
respondents that there is no evidence on the record to support the
claim that Filiz benefitted from the Eximbank loan program. We examined
Filiz's Chart of Accounts, General Ledger, and various accounts within
each of these records, and found no evidence that Filiz had received
loans through any GOT programs.
Suspension of Liquidation
In accordance with section 705(c)(1)(B)(i) of the Act, we have
calculated an individual subsidy rate for each company investigated.
For companies not investigated, we have determined an ``all others''
rate by weighting individual company subsidy rates by each investigated
company's exports of the subject merchandise to the United States, if
available, or pasta exports to the United States. The all others rate
does not include zero or de minimis rates, or any rates based solely on
the facts available.
Based on our affirmative preliminary determination, we instructed
the U.S. Customs Service to suspend liquidation of all entries of pasta
from Turkey which were entered, or withdrawn from warehouse, for
consumption on or after October 17, 1995, the date of publication of
our preliminary determination in the Federal Register. In accordance
with section 703(d) of the Act, we instructed the U.S. Customs Service
to terminate the suspension of liquidation for merchandise entered on
or after February 14, 1996, but to continue the suspension of
liquidation of entries made between October 17, 1995, through February
13, 1996. We will reinstate suspension of liquidation under section
706(a)(1) of the Act, if the ITC issues a final affirmative injury
determination, and will require a cash deposit of estimated
countervailing duties for such entries of merchandise in the amounts
indicated below.
------------------------------------------------------------------------
Ad Cash
Company valorem deposit
rate rate
------------------------------------------------------------------------
Filiz............................................... 3.87 3.87
Maktas.............................................. 13.12 12.61
Oba................................................. 15.82 15.82
All Others.......................................... 9.70 9.38
------------------------------------------------------------------------
If the ITC determines that material injury, or threat of material
injury, does not exist, this proceeding will be terminated and all
estimated duties deposited or securities posted as a result of the
suspension of liquidation will be refunded or canceled.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all nonprivileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Deputy Assistant Secretary for Investigations, Import
Administration.
Return or Destruction of Proprietary Information
This notice serves as the only reminder to parties subject to
Administrative Protective Order (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 355.34(d). Failure to
comply is a violation of the APO.
This determination is published pursuant to section 705(d) of the
Act.
Dated: June 3, 1996.
Paul L. Joffe,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-14737 Filed 6-13-96; 8:45 am]
BILLING CODE 3510-DS-P
