[Federal Register Volume 62, Number 128 (Thursday, July 3, 1997)]
[Notices]
[Pages 36045-36047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17397]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-559-001]
Certain Refrigeration Compressors From the Republic of Singapore:
Final Results of Countervailing Duty Administrative Review
AGENCY: International Trade Administration/Import Administration/
Department of Commerce.
ACTION: Notice of Final Results of Countervailing Duty Administrative
Review.
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SUMMARY: On August 29, 1996, the Department of Commerce published the
preliminary results of its administrative review of the agreement
suspending the countervailing duty investigation on certain
refrigeration compressors from the Republic of Singapore.
In our preliminary results of review, we preliminarily determined
that the signatories to the suspension agreement complied with the
terms of the suspension agreement during the period of review. We gave
interested parties an opportunity to comment on our preliminary
results.
We have now completed this review, the twelfth review of this
Agreement, and determine that the Government of the Republic of
Singapore (GOS), Matsushita Refrigeration Industries (Singapore) Pte.
Ltd. (MARIS), and Asia Matsushita Electric (Singapore) Pte. Ltd. (AMS),
the signatories to the suspension agreement, have complied with the
terms of the suspension agreement during the period April 1, 1994
through March 31, 1995. Based on our analysis of the comments received,
we have changed the results from those presented in the preliminary
results of review.
EFFECTIVE DATE: July 3, 1997.
FOR FURTHER INFORMATION CONTACT: Robert Bolling or Jean Kemp, Office of
AD/CVD Enforcement, Group III, International Trade Administration, U.S.
Department of Commerce, Washington, D.C. 20230; telephone: (202) 482-
3793.
SUPPLEMENTARY INFORMATION:
Applicable Statutes and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are in reference to the provisions as they
existed on or after January 1, 1995, the effective date of the
amendments made to the Tariff Act of 1930 (the Tariff Act) in
accordance with the Uruguay Round Agreements Act (URAA).
Background
On August 29, 1996, the Department of Commerce (the Department)
published in the Federal Register (61 FR 45402-04) the preliminary
results of its administrative review of the agreement suspending the
countervailing duty investigation on certain refrigeration compressors
from the Republic of Singapore (48 FR 51167, November 7, 1983). We
received comments from interested parties on our preliminary results.
Also, the Department sent out supplemental questionnaires on December
10, 1996 and January 14, 1997, to obtain additional information on the
Finance and Treasury Center (FTC) program. Petitioner provided comments
to respondents' supplemental questionnaires on January 8 and February
5, 1997. We have now completed this administrative review in accordance
with section 751 of the Tariff Act of 1930.
Scope of the Review
Imports covered by this review are shipments of hermetic
refrigeration compressors rated not over one-quarter horsepower from
Singapore. This merchandise is currently classified under Harmonized
Tariff Schedule (HTS) item number 8414.30.40. The HTS item number is
provided for convenience and Customs purposes. The written description
remains dispositive.
The review covers the period April 1, 1994 through March 31, 1995,
and includes three programs. The review covers one producer and one
exporter of the subject merchandise, MARIS and AMS, respectively. These
two companies, along with the GOS, are the signatories to the
suspension agreement.
Under the terms of the suspension agreement, the GOS agrees to
offset completely the amount of the net bounty or grant (subsidy)
determined by the Department in this proceeding to exist with respect
to the subject merchandise. The offset entails the collection by the
GOS of an export charge applicable to the subject merchandise exported
on or after the effective date of the agreement. See Certain
Refrigeration Compressors from the Republic of Singapore: Suspension of
Countervailing Duty Investigation, 48 FR 51167, 51170 (November 7,
1983).
Analysis of Comments Received
We preliminarily determined that the signatories to the suspension
agreement complied with the terms of the suspension agreement during
the period of review (POR). We invited interested parties to comment on
the preliminary results. We received comments from the respondents,
MARIS and AMS, and the petitioner, Tecumseh Products Company.
Respondents argue that the FTC program is not countervailable for
three reasons: (1) it is associated only with services, not goods; (2)
its benefits are ``tied'' to the provision of financial services to
entities outside Singapore and therefore the subsidy does not benefit
subject merchandise; and (3) it is not specific. We address each of
these arguments as separate comments below.
Comment 1: Respondents state that only services provided to
offshore companies can receive preferential tax treatment under the FTC
program. Because the FTC program is tied to these services, they argue,
it is not possible for the subject merchandise to receive
countervailable benefits from AMS's FTC program. Respondents note that
the FTC program approval letter authorizing AMS to be taxed at a
concessionary rate on profits from the provision of these services
states that ``the qualifying network companies shall be the
subsidiaries, branches, associates or related companies outside
Singapore,'' which have received approval from the proper authority in
Singapore for the purposes of the FTC incentive.
Respondents argue that the GOS stated in its questionnaire response
that ``the tax benefits of the program explicitly do not, by law and
under the terms of AMS' FTC approval, benefit either MARIS or the
subject merchandise.'' Respondents note that the Department has found
in previous cases that where a company receives a grant on terms that
prevent any benefit from flowing to the subject merchandise, the
program does not provide a countervailable benefit. See Live Swine from
Canada, Preliminary Results of Countervailing Duty Administrative
Review; 61 FR 26879 (May 29, 1996). Also, respondents point out that
the Department determined that equity infusions which were made to VEW,
a related company that did not produce subject merchandise, were
specifically tied by law to VEW, and
[[Page 36046]]
hence could not benefit the subject merchandise. See, Certain Carbon
Steel Products from Austria, Final Determination (``Austrian Steel); 50
FR 33369 (August 19, 1985). Lastly, respondents state that the
Department determined that where the ``export subsidies are explicitly
tied to non-subject merchandise (i.e., export to third countries), * *
* the subsidies do not benefit subject merchandise,'' and hence are not
countervailable. See Roses and Other Cut Flowers from Colombia:
Miniature Carnations from Colombia, Final Results of Countervailing
Duty Administrative Reviews of Suspended Investigations (``Flowers''),
61 FR 45941 (August 30, 1996).
Petitioner argues that the tax savings received by AMS are not
``tied'' to FTC centers, but rather accrue to the company as a whole
and thus to all goods manufactured, produced or exported by the
company. Petitioner argues that the Department's treatment of the FTC
program (i.e., tax relief) is similar to a grant program countervailed
in Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the
United Kingdom, Final Results, 60 FR 54841 (October 26, 1995). In that
case, the Department stated that ``the grants benefit the entire
operations of the company and are appropriately allocated to total
sales of the company.'' 60 FR at 54841. Additionally, petitioner states
that the administrative decisions cited by respondents are inapplicable
to this case. For example, Live Swine from Canada involved ``interest-
free cash advances on loans'' that are made pursuant to legislation
that ``specifically state[s] that the advances are to be used for crops
that are sold, not used on the farm.'' Petitioner states that this
arrangement tied benefits to specific products, whereas the savings
from the FTC's program's concessionary tax rate flow to the company and
all its products. Although the Department rejected a claim in Austrian
Steel that a specifically tied subsidy program should be countervailed
against the company as a whole, the FTC program, petitioner claims, is
not a specifically tied program. Petitioner maintains that benefits
received by AMS (i.e., increased net income) are not specifically tied
by law, but accrue to the entire company. Finally, petitioner argues
that Flowers is also inapplicable to this case. In Flowers, petitioner
notes, the Department did not allocate tied benefits across the subject
company's total sales; in this case, petitioner claims, the benefits
are untied, and therefore do accrue to the entire company. Thus,
petitioner asserts that the Department correctly applied its
methodology and allocated the benefit received by AMS to that company's
total sales.
Department's Position: The information on the record does not
support a finding that the preferential tax treatment authorized for
certain services performed by AMS' FTC bestows a countervailable
benefit on the production or exportation of the subject merchandise.
The Singapore Income Tax Act, Section 43G (Singaporean law) specifies
that an ``FTC may provide qualifying activities carried out on its own
account as may be prescribed or such prescribed qualifying services as
may be provided to its offices and associated companies where such
offices and associated companies are outside of Singapore.'' All of the
affiliated parties which qualified for these services were located
outside of Singapore. Furthermore, the record indicates that: (1)
Singaporean law does not permit AMS to claim preferential tax treatment
on financial transactions for entities located in Singapore; (2) under
the Singaporean Income Tax Code, it would be tax fraud if AMS attempted
to take a tax benefit for an unqualified transaction involving the
subject merchandise; and (3) the GOS does not permit preferential tax
treatment under the FTC program for any activities conducted with
regard to the sale, production, or export of the subject merchandise or
any merchandise produced in Singapore.
Because preferential tax treatment under the FTC program is
provided solely for income derived from financial services performed
for affiliated companies located outside of Singapore, and because
these types of financial services for which preferential tax treatment
can be claimed are not the types of services applicable to the
production or sale of merchandise, there is no basis for determining
that the preferential tax treatment of FTC income bestows a
countervailable subsidy on the subject merchandise.
Petitioner's claim, that the benefits from the FTC tax program are
not tied to FTC centers, is based on the theory that any tax savings
accrue to the company as a whole, and thus, in part, to subject
merchandise. Petitioner appears to be arguing that a subsidy provided
to certain specified service activities of a firm, as opposed to
certain specified production activities of a firm, must always be
attributed to the merchandise produced and sold by a firm, and must,
therefore always be countervailed.
We do not disagree with petitioner that there are financial
services that are undertaken during the course of producing and selling
merchandise (such as financing of input purchases, financing of sales,
financing the purchase of capital equipment among many others).
Specific benefits bestowed for the performance of these types of
services could certainly be attributed to production and sales of
merchandise. However, as noted above, the concessionary tax rate
authorized for AMS's FTC income does not include preferential tax
treatment of financial services with respect to production or sale of
merchandise produced in Singapore. Because the GOS does not allow
preferential tax treatment of any AMS' FTC services provided in
connection with companies producing or selling merchandise in
Singapore, we find that the FTC program does not confer a
countervailable subsidy on the production or export of subject
merchandise.
Comment 2: Respondents argue that the suspension agreement, U.S.
law, and the WTO Agreements all provide that countervailing duties only
may be imposed with regard to goods, and not services, and that thus
the FTC program is not countervailable because it pertains to services,
and not manufactured goods.
Petitioner argues that the statute requires the Department to
countervail benefits received by a company in the form of reduced
taxation, without regard to whether those benefits are provided for
production. Thus, petitioner asserts, current U.S. law allows the
Department to countervail benefits such as those conferred by the FTC
program. Therefore, petitioners argue, the Department can countervail
tax savings AMS derives from its income received from the FTC program.
Department's Position: We agree that benefits associated with
certain financial services may bestow a countervailable subsidy on
subject merchandise under certain conditions. However, in this case,
there is no countervailable benefit on subject merchandise, as
explained in the Department's Position on Comment 1 above.
Comment 3: Respondents argue that the Department should revisit its
earlier determination regarding the specificity of the FTC program and
find the program not specific based on the greater number of companies
receiving tax benefits under the FTC program in the tenth review, on
the extent of diversification of economic activities within the
jurisdiction of the authority providing the subsidy, and the length of
time during which the subsidy program has been in operation.
[[Page 36047]]
Petitioner cites section 1677(5A) of the Act and section 355.43(b)
of the Department's proposed regulations, and affirms that the FTC
program is specific and countervailable by virtue of being used by what
is still a limited number of companies and industries.
Department's Position: The Department previously found benefits
from the FTC program to be specifically provided. See, Certain
Refrigeration Compressors from the Republic of Singapore; Final Results
of Countervailing Duty Administrative Review, 61 FR 10315 (March 13,
1996) and Certain Refrigeration Compressors from the Republic of
Singapore; Final Results of Countervailing Duty Administrative Review,
61 FR 44296 (August 28, 1996). However, because we have found that the
program does not bestow a countervailable subsidy on the subject
merchandise, we need not address the comments on specificity raised by
respondents and petitioner in this review. Please see Department's
Position on Comment 1 above.
Final Results of Review
We determine that the signatories to the suspension agreement have
complied with the terms of the suspension agreement, including the
payment of the provisional export charge for the review period. From
April 1, 1994, through March 31, 1995, a rate of 5.52 percent was in
effect.
We determine the net subsidy to be 1.80 percent of the f.o.b. value
of the merchandise for the April 1, 1994 through March 31, 1995 review
period. Following the methodology outlined in section B.4 of the
agreement, the Department determines that, for the period of review, a
negative adjustment may be made to the provisional export charge rate
in effect. The adjustment will equal the difference between the
provisional rate in effect during the review period and the rate
determined in this review, plus interest. For this period the GOS may
refund or credit, in accordance with section B.4.c of the agreement,
the difference to the companies, plus interest, calculated in
accordance with section 778(b) of the Tariff Act.
The Department intends to notify the GOS that the provisional
export charge rate on all exports of the subject merchandise to the
United States with Outward Declarations filed on or after the date of
publication of the final results of this administrative review shall be
1.80 percent of the f.o.b. value of the merchandise.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 355.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and section
355.22 of the Department's regulations (19 CFR 355.22(1994)).
Dated: June 25, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-17397 Filed 7-2-97; 8:45 am]
BILLING CODE 3510-DS-P
