NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

Certain Castor Oil Products From Brazil; Preliminary Results of Administrative Review of Countervailing Duty Order

Monday, May 16, 1983

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AGENCY: International Trade Administration, Commerce.

ACTION: Notice of Preliminary Results of Administrative Review of Countervailing Duty Order.

The Department of Commerce has conducted an administrative review of the countervailing duty order on certain castor oil products from Brazil. The review covers the period January 1, 1980, through December 31, 1980, As a result of the review, the Department has preliminarily determined the net subsidy to be 2.22 percent ad valorem. Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE: May 16, 1983.

FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Edward Haley, Office of Compliance, International Trade Administration, U.S. Department of Commerce, Washington, D.C. 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On December 24, 1980, the Department of Commerce ("the Department") published in the Federal Register (46 FR 62487) the final results of its last administrative review of the countervailing duty order on certain castor oil products from Brazil (42 FR 8634, March 16, 1976) and announced its intent to conduct the next administrative review. As required by section 751 of the Tariff Act of 1930 ("the Tariff Act"), the Department has now conducted that administrative review.

Scope of the Review

Imports covered by the review are hydrogenated castor oil and 12- hydroxystearic acid, imported directly or indirectly from Brazil. Such imports are currently classifiable under items 178.2000, 490.2650 and 490.2670 of the

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Tariff Schedules of the United States Annotated.

The review covers the period January 1, 1980 through December 31, 1980 and three programs found countervailable in the original investigation: preferential financing for exports, income tax exemptions for export earnings, and an export credit premium for the Industrial Products Tax ("IPI").

There are two known exporters of this merchandise to the United States, Ceralit A.A. Industria E Comercio and Sociedade Algodoeira Do Nordeste Brasil, S.A. ("(Sanbra").

Analysis of Programs

(1) Preferential Financing for Exports. Under this program companies are declared eligible by the Department of Foreign Commerce of the Banco Central do Brasil ("CACEX") to receive working capital loans at preferential rates. These loans have a duration of up to one year. Each firm producing castor oil products can obtain preferential financing for up to 20 percent of the value of its previous year's exports.

We calculated the subsidy under this program by multiplying the value of loans outstanding under the program during the period by the differential between the commercial interest rate and the preferential interest rate for each loan. For loans granted prior to the period, only that portion extending past January 1, 1980 was included in our calculation. We similarly prorated loans extending past December 31, 1980.

The commercial rate for short-term working capital is the rate established by the Banco do Brasil for discounting sales of accounts receivable. We chose this as the benchmark rate because information provided by the Government of Brazil indicates that working capital in normally raised within the Brazilian financial system through the sales of accounts receivable. The commercial rate includes tax on financial transactions, from which loans under the preferential financing program are exempt, and varied from 25.08 to 37.98 percent during the period April 23, 1979 to December 31, 1980. During 1980, Ceralit and Sanbra had loans outstanding under Resolutions 515 (effective February 8, 1979) and 602 (effective March 5, 1980) of the Banco Central do Brasil. The effective annual rate for loans granted under these resolutions ranged from 8.70 percent to 26.39 percent and the differential between the commercial and preferential rates ranged from 16.38 percent to 11.59 percent. We calculated the benefit conferred by the program for 1980 to be 2.09 percent ad valorem.

With the publication of successor Resolution 674, effective January 22, 1981, there was an increase in potential benefits under the program. The effective rate of interest for loans under this resolution is 44 percent. The comparable rate for discounting sales of accounts receivable is now 72 percent plus a 4.60 percent tax on financial transactions. The differential is 32.60 percent.

To estimate the potential benefit and cash deposit of estimated countervailing duties for this program, we summed the prorated value of loans outstanding during 1980 and found an actual use rate of 16.80 percent. We then multiplied the current 32.60 percent differential between the benchmark commercial and preferential interest rates by the loan use rate to fine a potential benefit under this program of 5.48 percent ad valorem.

(2) Income Tax Exemptions for Export Earnings. Exporters of certain castor oil products are eligible under this program for exemption from income tax of the percentage of profit attributable to export revenue. The Brazilian government calculates the tax-exempt fraction of profit as the ratio of export revenue to total revenue. The benefit equals the product of the amount of tax-exempt profit and the prevailing 35 percent corporate income tax rate. We therefore preliminarily determine the benefit from this program to be 0.13 percent ad valorem for 1980.

(3) IPI Export Credit Premium. The Brazilian government eliminated the IPI export credit premium on December 7, 1979, but reinstated it on April 1, 1981. As a result, this program provided no benefit during the review period. Currently, the Government of Brazil collects a tax on exports of certain castor oil products to the United States which fully offsets the benefit received under this program. Therefore, for purposes of the cash deposit of estimated countervailing duties, the potential subsidy under this program is zero percent.

Preliminary Results of the Review

As a result of our review, we preliminarily determine that the net subsidy conferred during 1980 is 2.22 percent ad valorem. Accordingly, the Department intends to instruct the Customs Service to assess countervailing duties of 2.22 percent of the f.o.b. invoice price on all shipments of certain Brazilian castor oil products exported on or after January 1, 1980 and on or before December 31, 1980.

Further, as provided by section 751(a)(1) of the Tariff Act, we intend to instruct the Customs Service to collect a cash deposit of estimated countervailing duties of 5.61 percent of the f.o.b. invoice price on all shipments of this merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of the current review. This deposit requirement shall remain in effect until publication of the final results of the next administrative review. Interested parties may submit written comments on these preliminary results within 30 days of the date of publication of this notice and may request disclosure and/or a hearing within 10 days of the date of publication. Any hearing, if requested, will be held 45 days after the date of publication or the first workday thereafter. Any request for an administrative protective order must be made no later than 5 days after the date of publication. The Department will publish the final results of this administrative review including the results of its analysis of issues raised in such written comments or at a hearing.

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 § 355.41 of the Commerce Regulations (19 CFR 355.41).
Dated: May 7, 1983.

Gary N. Horlick,

Deputy Assistant Secretary for Import Administration.

[FR Doc. 83-13041 Filed 5-13-83; 8:45 am]

BILLING CODE 3510-25-M