(Cite as: 50 FR 8755)


                                            NOTICES

                                    DEPARTMENT OF COMMERCE

                                           [C-351-405]

                Final Affirmative Countervailing Duty Determination; Cast-Iron Pipe Fittings
                                          from Brazil

                                     Tuesday, March 5, 1985

*8755
                                     (Cite as: 50 FR 8755, *8755)

February 25, 1985.

AGENCY: Imports Administration, International Trade Administration, Commerce.

ACTION: Notice.

SUMMARY: We determine that certain benefits which constitute subsidies within 
                                     (Cite as: 50 FR 8755, *8755)

the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters in
  Brazil of cast-iron pipe fittings. The net subsidy is 18 percent ad valorem and 14.17 percent ad valorem for bonding
purposes. We have notified the United States International Trade Commission (ITC) of our determination. We are directing
the U.S. Customs Service to continue to suspend liquidation of all entries of cast-iron pipe fittings from Brazil that are
entered or withdrawn from warehouse, for consumption, after December 12, 1984, and to require a cash deposit or
bond on entries of these products in the amount equal to the net subsidy.

EFFECTIVE DATE: March 5, 1985.

FOR FURTHER INFORMATION CONTACT: Laurel LaCivita or Vincent Kane, Office of Investigations, Import
Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution
Avenue, N.W., Washington, D.C. 20230; telephone: (202) 377-3530 (LaCivita) or (202) 377-5414 (Kane).

SUPPLEMENTARY INFORMATION:

Final Determination


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Based upon our investigation, we determine that certain benefits which constitute subsidies within the meaning of section
701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in
  Brazil of cast-iron pipe fittings. For purposes of this investigation, the following programs are found to confer
subsidies:
- IPI Export Credit Premium;
- Exemption for Export Earnings Income Tax;
- Working Capital Financing for Exports (Resolutions 674 and 882/950);
- Export Financing Under the CIC-CREGE 14-11 Circular;
- The CDI Program--Exemption of IPI Taxes and Customs Duties on Imported Equipment;
- The BEFIEX Program;
- The CIEX Program;
- Long-Term Loans under the ADTEN (Apoio ao Desenvolvimento Tecnologico da Empresa Nacional) of FINEP
(Finaciadora de Estudos e Projetos).
We determine the net subsidy to be 18 percent ad valorem and 14.17 percent ad valorem for bonding purposes.

Case History

On September 18, 1984, we received a petition from the Cast-Iron Pipe Fittings 
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Committee, on behalf of the U.S. industry producing certain cast-iron pipe fittings. In compliance with the filing
requirements of § 355.26 of our regulations (19 CFR 355.26), the petition alleged that manufacturers, producers, or
exporters in Brazil of certain cast-iron pipe fittings directly or indirectly receive benefits which constitute subsidies
within the meaning of section 701 of the Act, and that these imports materially injure or threaten material injury to a U.S.
industry.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation,
and on October 9, 1984, we initiated such an investigation (49 FR 28290). We stated that we expected to issue a
preliminary determination by December 12, 1984.
Since Brazil is a "country under the Agreement" within the meaning of section 701(b) of the Act, an injury
determination is required for this investigation. Therefore, we notified the ITC of our initiation. On November 2, 1984,
the ITC determined that there is a reasonable indication that these imports materially injure or threaten material injury to
a U.S. industry (49 FR 37856).
We presented a questionnaire concerning the allegations to the government of Brazil in Washington, D.C. on October
18, 1984.
On November 26, 1984, we received a response to the questionnaire. On the basis of information contained in this
questionnaire response, we made a 
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preliminary determination on December 12, 1984.
We verified the response of the government of Brazil in Rio de Janeiro, from January 14, 1985 to January 23, 1985.
At the request of both petitioner and respondents, we held a hearing on January 28, 1985, to allow the parties an
opportunity to address the issues arising in the investigation. Both petitioner and respondents filed briefs discussing these
issues before and after the hearing.

Scope of the Investigation

The products covered by this investigation are certain cast-iron pipe fittings, which are defined for purposes of this
proceeding as: cast-iron fittings, not malleable, other than alloy cast iron and other than for use with cast-iron soil pipe; or
cast-iron fittings, malleable, advanced in condition by operations or processes subsequent to the casting process, or if not
advanced, of other than alloy cast-iron as currently provided for in items 610.6240, 610.6500, 610.7000 and 610.7400
of the Tariff Schedules of the United States, Annotated (TSUSA).
The only known producer and exporter in Brazil of certain cast-iron pipe fittings to the United States is Fundicao Tupy
S.A., for which we have received information from the government of Brazil. For purposes of this final 
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determination, the period for which we are measuring subsidization ("the review period") is Fundicao Tupy *8756
                                     (Cite as: 50 FR 8755, *8756)

S.A.'s 1984 fiscal year--April 1, 1983, to March 31, 1984.

Analysis of Programs

Throughout this notice, we refer to certain general principles applied to the facts of the current investigation. These
principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled
Products from Argentina; Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order," which was published in the April 26, 1984, issue of the Federal Register (49 FR 18006).
Based upon our analysis of the petition, the response to our questionnaire, our verification, and comments filed by
petitioners and respondents, we determine the following:

I. Programs Determined to Confer Subsidies

We determine that subsidies are being provided to manufacturers, producers, or exporters in Brazil of cast-iron pipe
fittings under the following programs:
A. IPI Export Credit Premium and Export Tax. Brazilian exporters of 
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manufactured products are eligible for a tax credit on the Imposto so>=3bre Produtos Industrializados (Industrialized
Products Tax, or IPI). The IPI export credit premium, a cash reimbursement paid to the exporter upon the export of
otherwise taxable industrial products, has been found to confer a benefit in previous countervailing duty
investigations. After suspending this program in December 1979, the government of Brazil reinstated it on April 1,
1981, in accordance with Ministry of Finance "Portaria" (Notice) No. 270 (amended by Portaria No. 252 on November 29,
1982).
Subsequent to April 1, 1981, this export credit premium was partially phased out in accordance with Brazil's
commitment pursuant to Article 14 of the Agreement on Interpretation and Application of Articles VI, XVI and XXIII of
the General Agreement on Tariffs and Trade ("the Subsidies Code"). The government of Brazil gradually reduced the
benefit from 15 percent in 1981 to 11 percent on September 30, 1982.
Fundicao Tupy S.A. received benefits under this program. We divided the credits earned in fiscal year 1984 over the
value of its cast-iron pipe fittings exports in that year, and calculated a net subsidy of 10.53 percent ad valorem.
It is our policy to take into account program-wide changes announced before the preliminary determination. On
September 12, 1984, the government of Brazil instituted Portaria No. 176 which reduced the IPI Export Credit
Premium to 7 
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percent effective on December 1, 1984. We verified that these changes occurred, and determine that the rate shall be
6.70 percent ad valorem for cash deposit or bonding purposes.

B. Income Tax Exemption for Export Earnings. Under Decree-Laws 1158 and 1721, exporters of cast-iron pipe fittings are eligible for exemption from income tax on a portion of profits attributable to export revenue. Because this exemption is tied to exports and is not available for domestic sales, we determine it to confer a subsidy. Fundicao Tupy S.A. took an exemption from income tax payable in 1983 on a portion of export profits earned in 1982. We multiplied that portion by the nominal corporate tax rate, and allocated the benefit over the total value of fiscal 1984 exports to calculate a subsidy rate of 0.48 percent ad valorem.

C. Working Capital Financing for Exports (Resolutions 674 and 882/950). Resolution 882 financing, administered by the Carteira do Come.1rcio Exterior (CACEX) of the Banco do Brasil, provides short-term working capital to purchase inputs for the production of goods destined for export. On January 1, 1984, Resolution 882 superseded Resolution 674, under which such financing was previously granted. On August 21, 1984, Resolution 882 was modified by Resolution 950. Eligibility for 674/882/950 financing is based on the company's past export performance or on an acceptable export plan. The amount available for financing is calculated by making a series of adjustments to the (Cite as: 50 FR 8755, *8756) dollar value of exports. Following CACEX approval of their applications, participants receive certificates which represent portions of the total dollar amount for which they are eligible. Exporters may present the certificates to banks in return for cruzeiro loans at the exchange rate in effect on that date. Use of a certificate establishes a loan obligation with a term of up to one year (360 days). Certificates must be used within 12 months of the date of issue, and loans incurred as a result of their use must be repaid within 18 months of that date. During the review period, the interest ceiling on loans obtained under the program was raised from 40 to 60 percent. Resolution 882 changed the interest rate to full monetary correction plus three percent, with the interest and principal payable on the expiration date of the loan. Resolution 950 changed the interest ceiling again to full monetary correction plus an interest rate such that the maximum difference between that interest rate and the prevailing interest rate is 10 percent. Since 674/882/950 financing is contingent on export performance, and provides funds to participants at interest rates lower than those available from commercial sources, we determine that this program confers an export subsidy. To calculate the benefit, we compared the interest rates charged with the appropriate benchmark (the compounded minimum discount rate on accounts (Cite as: 50 FR 8755, *8756) receivable) and applied the difference to the principal amounts, based on the date that interest was paid. We allocated the benefit over the total value all exports, and calculated a subsidy rate of 3.20 percent ad valorem.

D. Export Financing Under the CIC-CREGE 14-11 Circular. Under its CIC-CREGE 14-11 circular ("14-11"), the Banco do Brasil provides 180- and 360-day cruzeiro loans for export financing, on the condition that companies applying for these loans negotiate fixed-level exchange contracts with the bank. Companies obtaining a 360-day loan must negotiate exchange contracts with the bank in an amount equal to twice the value of the loan. Companies obtaining a 180-day loan must negotiate an exchange contract equal to the amount of the loan. In addition to requiring exchange contracts, the Banco do Brasil requires that these loans be fully secured by collateral in the form of tangible property. The bank normally requires that the value of collateral equal at least 130 percent of the amount of the loan. The bank also charges a commission on all such loans. All exporters of manufactured products with production cycles of less than 180 days may apply for these loans. The maximum level of eligibility is based on the value of the applicant's exports in the previous year. Companies that also receive Resolution 882 financing have a maximum eligibility of 10 percent; all others have a maximum eligibility of 15 percent. Although this program does in certain aspects appear to operate on a (Cite as: 50 FR 8755, *8756) commercial basis, the government of Brazil did not supply sufficient data to support its assertion that commissions, exchange contract requirements and collateral requirements serve to raise the effective rates on these loans to a level of comparability with those on short-term loans from other commercial sources. Without sufficient information with which to quantify these additional charges, we must compare unadjusted nominal rates on 14-11 loans with our commercial benchmark, i.e., the nominal discount rate of accounts receivable, as *8757 (Cite as: 50 FR 8755, *8757) the best information available. This comparison shows that the rate on 14-11 loans is below the benchmark. Fundicao Tupy S.A. obtained loans under this program. To calculate the benefit, we compared the interest rates charged with the appropriate benchmark and applied the difference to the principal amounts. We then allocated the benefit over the total value of Fundicao Tupy's exports, which resulted in a subsidy rate of 2.40 percent ad valorem.

E. The CDI Program--Exemption of IPI Tax and Customs Duties on Imported Equipment. Under Decree-Law 1137 and its successor Decree-Law 1428, the Conselho do Desenvolvimento Industrial (Industrial Development Council, or CDI) provides for the exemption of 80 to 100 percent of the customs duties and 80 to 100 percent of the IPI tax on certain imported machinery for projects approved by the CDI. The recipient must demonstrate that the machinery or equipment for which an exemption is sought was not available from a Brazilian producer. The (Cite as: 50 FR 8755, *8757) investment project must be deemed feasible and the recipient must demonstrate that there is a need for added capacity in Brazil. CDI Resolution 22 of October 24, 1972, extended these benefits to "pilot industries" and permitted the CDI to recommend pilot industrial projects for financing by the National Economic Development Bank (FUNTEC), the Financier of Studies and Projects (FINEP), and by the National Fund for Scientific and Technological Development (FNDCT). Resolution 1428 extended the right to grant exemptions from customs duties and from the IPI tax on imported equipment to other agencies within the government (CIEX among them). Decree Law 1726 of December 7, 1979 repealed this program. Subsequently, no new projects were eligible for these benefits. However, companies whose projects were approved prior to repeal still receive these benefits pending completion of the project. In prior cases (Certain Carbon Steel Products from Brazil; Final Affirmative Countervailing Duty Determination (49 FR 17988), it was determined that the CDI exemption from customs duties and the IPI tax on imported equipment is limited to projects in fourteen industries approved by the government. Based on the record of this and earlier Brazilian countervailing duty investigations, we have no evidence that this requirement does not allow the government to target benefits to particular companies. For this reason, we determine that the CDI program confers a subsidy on the products under investigation. Neither the (Cite as: 50 FR 8755, *8757) government of Brazil nor Fundicao Tupy S.A. provided sufficient evidence to establish that benefits were not provided to Fundicao Tupy S.A. under the CDI program during the review period. Therefore, we used the best information available, which in this case is information supplied by petitioner, to determine a subsidy of 0.38 percent ad valorem.

F. The BEFIEX Program. The Comissao para a Concessao de Beneficios Fiscais a Programas Especiais de Exportacao (Commission for the Granting of Fiscal Benefits to Special Export Programs, or BEFIEX) grants at least three categories of benefits to Brazilian exporters: - Under Decree-Law 77.065, BEFIEX may reduce by 70 to 90 percent import duties and the IPI tax on the importation of machinery, equipment, apparatus, instruments, accessories and tools necessary for special export programs approved by the Ministry of Industry and Trade, and may reduce by 50 percent import duties and the IPI tax on imports of components, raw materials and intermediary products; - Under article 13 of Decree No. 72.1219, BEFIEX may extend the carry-forward period of tax losses from 4 to 6 years; and - Under article 14 of the same decree, BEFIEX may allow special amortization of pre-operational expenses related to approved projects. This program has been found to confer a subsidy in the past, and neither the government of Brazil nor Fundicao Tupy S.A. provided sufficient information to (Cite as: 50 FR 8755, *8757) establish that this program was not used. Therefore, we used the best information available, which in this case is information supplied by petitioner, to determine a subsidy of 0.50 percent ad valorem.

G. The CIEX Program. Decree-Law 1428 authorized the Comissao para Incentivos a>=2 Exportac>=9ao (Commission for Export Incentives, or CIEX) to reduce import taxes and the IPI tax up to 10 percent on certain equipment for use in export production. This program has been found to confer a subsidy in previous investigations. Because neither the government of Brazil no Fundicao Tupy S.A. provided sufficient information to verify that this program was not used, we used the best information available, which in this case is information supplied by petitioner, to determine subsidy of 0.25 percent ad valorem.

H. Long-Term Loans Under the ADTEN (Apoio ao Desenvolvimento Technologico da Empresa Nacional) of FINEP (Financiadora de Estudos e Projetos). During the course of the investigation, we discovered and verified that Fundicao Tupy S.A. received a number of long-term loans from FINEP, a government agency charged with promoting scientific and technological development in Brazil. FINEP works in conjunction with the CNPq of (Conselho Nacional de Desenvolvimento Cientifico e Technologico) to approve and grant loans through state-owned regional development banks in conformity with the Secretaria de Planejamento (SEPLAN) and to implement the objectives of the Third Basic Plan of Scientific and Technological Development (III BPDCT). FINEP has a number of (Cite as: 50 FR 8755, *8757) loan programs, the largest of which is ADTEN. ADTEN grants loans for projects which: develop new products; adapt and absorb new technology; train human resources to absorb new technology; commercialize new products and implement management techniques to employ new technology; develop quality control techniques; establish new research and development centers in the country; and engage in pure research. Companies negotiate the terms of each loan with the regional development banks with whom they deal. They must submit to the terms of the loan imposed by the bank and by FINEP, which disburses the funds in allotment, and maintains project oversight throughut the life of the loan. These loans are granted at preferential rates of interest and are partially indexed to inflation. Moreover, the Brazilian government was unable to demonstrate that these loans were not provided to specific enterprises, industry or group of enterprises or industries. Therefore, we determine that these loans are countervailable. Fundicao Tupy S.A. had a number of commercial loans which were fully indexed to inflation and granted at rates of interest that were higher than those charged on FINEP loans. We used these as our benchmark. We calculated the reductions in: (1) The rate of interest payable and (2) the increase in principal outstanding resulting from the partial indexation, and found a subsidy of 0.26 percent ad valorem. (Cite as: 50 FR 8755, *8757) II. Programs Determined not to Confer Subsidies A. Income Tax Deductions for Foreign Selling Expenses. Petitioner alleged that the govenment of Brazil offers companies income tax deductions for selling expenses incurred or export sales. but does not offer comparable deductions for domestic selling expenses. At verification we found that *8758 (Cite as: 50 FR 8755, *8758) income tax deductions for foreign selling expenses are granted under the same general criteria as equivalent domestic expenses; such expenses are deductible regardless of whether the expense was for domestic or export purposes. Therefore, we determine this program not to confer a subsidy. III. Programs Determined not To Be Used We determine that manufacturers, producers or exporters in Brazil of certain cast-iron pipe fittings did not use the following programs listed in our notice, Initiation of a Countervailing Duty Investigation: Cast-Iron Pipe Fittings from Brazil (49 FR 40431): A. IPI Tax Rebates for Capital Investment. Decree-Law 1547, enacted in April 1977, provides funding for approved expansion projects in the Brazilian steel industry through a rebate of the IPI, a value-added tax imposed on domestic sales. (Cite as: 50 FR 8755, *8758) We verified that producers of pipe fittings are not eligible for IPI rebates under Decree-Law 1547. Accordingly, we determine that this program was not used by the producer of the products under investigation. B. Resolution 330 of the Banco Central do Brasil. Resolution 300 provides financing for up to 80 percent of the value of the merchandise placed in a specified bonded warehouse and destined for export. Exporters of cast-iron pipe fittings would be eligible for financing under this program. However, we verified that Fundicao Tupy S.A. did not participate in this program during the review period. C. Resolution 68 (FINEX) Financing. Resolution 68 of the Conselho Nacional do Comercio Exterior (COCEX) provides that CANCEX may draw upon the resources of the Fundo de Financiamento a Exportacao (FINEX) to extend dollar-denominated loans to foreign buyers of Brazilian goods. Financing is granted on a transaction-by-transaction basis. We verified that Fundicao Tupy S.A. did not receive Resolution 68 financing on transactions with the United States during the review period. D. Accelerated Depreciation for Capital Goods Manufactured in Brazil. Pursuant to Decree-Law 1137, any company which purchases Brazilian-made capital equipment and has an expansion project approved by the CDI may depreciate this equipment at twice the rate normally permitted under Brazilian tax laws. We verified that Fundicao Tupy S.A. did not participate in this program during the (Cite as: 50 FR 8755, *8758) review period. E. Local Tax Incentives. Petitioner alleges that the respondent benefited from certain unspecified local tax measures and incentives in Brazil. We verified that Fundicao Tupy S.A. did not receive any local tax benefits. F. Incentives for Trading Companies. Petitioner alleges that the respondent distributes its export sales through such intermediaries as trading companies, and that under Resolution 643 of the Banco Central do Brasil, trading companies can otbain export financing similar to that obtained by manufacturers under Resolution 674/882. We verified that Fundicao Tupy S.A. did not use this program. G. Government Guarantees on Long-Term Loans. Petitioner alleges that the respondents benefited from certain government guarantees on long-term foreign- currency loans. We verified that Fundicao Tupy S.A. did not use this program. H. The PROEX Program. Petitioner alleges that short-term credits for exports were established under the Programa de Financiamento a Producao para a Exportacao (PROEX), previously referred to as the Apoio a Exportacao program during the review period. We verified that Fundicao Tupy S.A. did not use this program. IV. Programs Determined Not To Exist (Cite as: 50 FR 8755, *8758) A. The Foundry Plan. Petitioner alleges that Fundicao Tupy S.A. receives incentives under the "Foundry Plan" of the Third Basic Plan of Scientific and Technological Development--1980-1985 (III-PBDCT). That plan calls for the "strengthening of indigenous foundries with the active participation of the government." We verified that the III-PBDCT provides neither financial benefits nor any other types of assistance. It is simply a policy statement intended to stimulate the use of available public sector resources for scientific and technological development. Funds are provided through on-going programs of various Brazilian government ministries and agencies. An example of this is the long-term financing through FINEP which we have found to be countervailable in this determination. We found no evidence to the contrary at verification and therefore determine that this program, as alleged, does not exist. Petitioner's Comments Comment 1: Petitioner claims that, based on information in the petition, the Department should not have accepted the Brazilian government's response that the Foundry Plan does not provide benefits for purposes of the preliminary determination. Petitioner contends that the Department's practice of accepting this type of response rewards evasive and otherwise uncooperative respondents. (Cite as: 50 FR 8755, *8758) DOC Position: Unless we have persuasive evidence to the contrary, we accept a foreign government's denial that a program exists or its statement that a particular firm does not receive benefits under a program for purposes of the preliminary determination. In the case of the Foundry Plan, we requested further information to explain the discrepancy between petitioner's claims and the Brazilian government's response. For the final determination, we have verified that the Foundry Plan, as alleged, does not exist. Comment 2: With regard to any grant or loan received by Fundicao Tupy S.A. for research and development, petitioner contends that these benefits are not generally available, that the results of the R&D would not have broad applicability, and should be considered countervailable. Respondents rebut petitioner's contention by arguing that the research and development assistance received by Fundicao Tupy S.A. is not countervailable because it is for research and development of a product unrelated to cast iron pipe fittings. However, even if the benefits could be tied to the product under investigation, similar assistance is provided to a variety of industries and the results of the research and development will have wide application and be available to the public. Finally, they contend that no commercial benefit is conferred by this program. DOC Position: We have countervailed against those partially-indexed FINEP loans which we found to be related to cast iron products. We did not receive (Cite as: 50 FR 8755, *8758) sufficient evidence that these loans were generally available or that the results of the R&D projects have been disseminated to the public. Comment 3: Petitioner argues that program-wide changes, such as those effected by the phase-out of the IPI export credit premium, should not be taken into account if they occur after the period of investigation. Moreover, should the Department accept the program-wide change, petitioner believes that the November and December 1984 reductions cannot be documented because of the delay of receipt of the IPI payment. DOC Position: As a general rule, we take into account program-wide changes that occur after the period of investigation and prior to a preliminary determination if we have verified information on the change and the *8759 (Cite as: 50 FR 8755, *8759) magnitude of the resulting subsidy. Our practice reflects our concern that bonding/deposit rates correspond as nearly as possible to the eventual duty liability and that the petitioners have an opportunity to make comments on the program-wide changes during the investigation. Therefore, when a program- wide change occurs after the period of review and before the preliminary determination and where that change is verifiable, our net subsidy calculation is adjusted to reflect the change. With regard to the November and December 1984 IPI reductions, our practice is to calculate the benefit on the basis of the IPI that is applied for or earned, not on the amount of IPI received. We verified that the amounts applied for in November and December 1984, were (Cite as: 50 FR 8755, *8759) consistent with the announced reductions. Comment 4: Petitioner claims that the Department should have investigated the upstream subsidy allegedly conferred on producers of cast-iron pipe fittings through purchases of subsidized pig iron. In particular, petitioner contends that because Brazilian pig iron producers receive domestic subsidies, the price paid for the pig iron should be adjusted upwards to reflect these subsidies. Also, petitioner objects to the Department's test of the effect of the pig iron subsidy on the cost of producing cast iron pipe fittings. DOC Position: We declined to initiate an investigation of upstream subsidies in this case because we determined that petitioners did not demonstrate that domestic subsidies to Brazilian pig iron producers conferred a competitive benefit on Brazilian cast-iron pipe fittings or that the subsidies to the pig iron producers had a significant effect on the cost of producing cast-iron pipe fittings. In the first instance, the mere existence of a domestic subsidy is not sufficient to demonstrate that this subsidy is passed on, i.e., that it confers a competitive benefit. With regard to the significant effect test, we have determined that a potential cost savings of less than 1 percent on an input that accounts for only 30-40 percent of the value of the final product is not significant. Comment 5: Petitioner contends that there is sufficient evidence on the record on which to make a determination that imports of certain cast-iron pipe (Cite as: 50 FR 8755, *8759) fittings have been massive over a relatively short period of time. Hence, the Department should make a final affirmative determination of critical circumstances in this case. DOC Position: IM-146 statistics demonstrate that the volume of cast- iron pipe fittings from Brazil declined 8.5 percent in the three-month period following the filling of the petition and was 35 percent lower in the second half of 1984 than in the second half of 1983. Expressed as a percentage of total U.S. cast-iron pipe fittings imports, imports from Brazil dropped 51 percent in the same period. On the basis of that data, we determine that imports were not massive over a relatively short period of time, and therefore, that critical circumstances do not exist. Comment 6: Petitioner argues that exemption of export credits and export insurance from indirect taxes constitutes a countervailable subsidy, because only indirect taxes on physically incorporated inputs may be rebated. DOC Position: The IOF tax is included in the benchmark for short-term export financing and hence captures the additional benefit conferred by the tax exemption. Respondents' Comments Comment 1: Respondents claim that, based on its verification, the Department (Cite as: 50 FR 8755, *8759) should conclude that Fundicao Tupy S.A. receives no benefits under the Basic Plan of Scientific and Technological Development (the Foundry Plan). They further contend that even if benefits were available they would not be countervailable because they are provided to more than a specific industry, enterprise or group of industries or enterprises. DOC Position: See section IV(A) and Petitioner's Comment 1 of this notice. Comment 2: Respondents argue that in its final determination, the Department should provide for decreases in the bonding/deposit rate corresponding to reductions in the IPI export credit premium rate scheduled for January 1, 1985 through May 1, 1985. They claim that it is not lawful to continue to assess duties or require deposits at levels in effect before the date of any reduction. DOC Position: We cannot take into account program-wide changes that have not yet been implemented. As stated in our response to Petitioner's Comment 3, we calculate the bonding/deposit rate to correspond as closely as possible to the eventual assessment rate. Nevertheless, we must balance the desire for accuracy with the need to base our final determination on verified information and the need to allow petitioners an opportunity to comment on the alleged program-wide range. As a result, our "cut-off" date for taking into account program-wide changes has been the date of the preliminary determination. Verified post-preliminary program-wide changes will be taken into account in (Cite as: 50 FR 8755, *8759) any administrative review that may occur under section 751 of the Act. Comment 3: Respondents claim that the value of the subsidy arising from the IPI export credit premium should be based on the firm's actual utilization of the program rather than on the total amount available. DOC Position: We agree. The bonding/deposit rate reflects the amount of the IPI export credit premium for which Fundicao Tupy S.A. applied. Comment 4: Fundicao Tupy S.A. argues that in calculating the net subsidy conferred by the IPI export credit premium the Department should deduct the loss in value resulting from the government-mandated delay in receipt of the payment. DOC Position: Under section 771(6)(B) of the Act, an offset is allowed for "any loss in the value of the subsidy resulting from its deferred receipt if the deferral is mandated by Government order." In the case of the IPI export credit premium, no such government mandate exists. Delays in a company's receipt of IPI credits are administrative, the result of a lengthy application and approval process. No offset is allowed in this case. Comment 5: Respondents argue that the effective rather than the nominal corporate tax rate should be used in valuing the benefit from the income tax exemption for export earnings. DOC Position: We verified that Fundicao Tupy S.A.'s effective tax rate is the same as its nominal tax rate, 35 percent. (Cite as: 50 FR 8755, *8759) Comment 6: Respondents claim that for short-term export financing the Department should calculate the benefit based on the changes effected by Resolutions 882 and 950, which came into force on January 1, 1984, and August 21, 1984, respectively. DOC Position: As discussed elsewhere in this notice, we attempt to take into account program-wide changes that occur prior to our preliminary determination when the changes can be verified. However, for certain types of programs this is not possible. For example, modifications in short-term financing regimes can result in changed utilization rates and changed benchmarks. The effects of these changes are not easily quantified, nor do they occur immediately. A mechanical computation of benefits, based on assumptions such as those suggested by respondents, is unacceptable in these circumstances. Moreover, Fundicao Tupy S.A.'s experience under Resolution 950 is extremely limited and therefore does not form an adequate basis for calculating a bonding/deposit rate. Therefore, we have calculated the *8760 (Cite as: 50 FR 8755, *8760) subsidy based on Fundicao Tupy S.A.'s actual experience during the period of investigation. If the level of benefit has changed as a result of Resolution 950, this will be taken into account in any eventual 751 review. Comment 7: Respondents argue that the benefits from Resolution 674/882/950 short-term export financing should be allocated by product and market because the bulk of Fundicao Tupy S.A's exports are to Europe and Southwest Asia. (Cite as: 50 FR 8755, *8760) DOC Position: While it is possible to tie the amount of financing a company qualifies for to its export of a specific product, it is not possible to attribute the use of working capital loans to a specific product destined for a specific market. Therefore, we allocate the benefit received from all loans over the value of all exports. Comment 8: Respondents contend that the Department should use Fundicao Tupy S.A.'s monthly receivable discount rate as the benchmark for short-term export financing. DOC Position: As stated in the Subsidies Appendix, we do not calculate company-specific benchmarks for short-term financing programs. Comment 9: Respondents argue that the Department should use the effective interest rates on 674/882/950 loans, reflecting partial payment of interest during the term of the loan. DOC Position: We agree. Comment 10: For short-term export financing under Resolution 674/882/950 and CIC-CREGE 14-11, respondents claim that the Department erred in considering 1984 loans in calculating the subsidy. DOC Position: The period of investigation is April 1, 1983 through March 31, 1984. Therefore, any loans on which interest was paid during the period are properly included in our calculations. Comment 11: Respondents claim that the Department should allocate the benefits (Cite as: 50 FR 8755, *8760) under CIC-CREGE 14-11 over the value of total exports. DOC Position: We agree and have allocated the benefits over Fundicao Tupy S.A.'s fiscal 1984 export sales. Comment 12: Respondents ask that the Department take into account any collateral requirements, foreign exchange contracts and the related costs of financing in computing the effective cost of CIC-CREGE 14-11 loans. DOC Position: We could not verify these costs and hence did not include them. Comment 13: Respondents have made additional comments claiming that: (1) The exemption from the IOF tax on export loans is not a countervailable subsidy, (2) the use of unweighted, average benchmarks is incorrect, and (3) the CIC- CREGE 14-11 financing is not countervailable because it is not a government program, and because it operates on a commercial basis, consistent with the standards enunciated in the Subsidies Code. DOC Position: The Department's positions on these issues were most recently stated in the Final Affirmative Countervailing Duty Determination on Oil Country Tubular Goods from Brazil. Respondents have provided no new information which would cause us to change those positions. Verification In accordance with section 776(a) of the Act, we verified all the information (Cite as: 50 FR 8755, *8760) used in making our final determinations. Suspension of Liquidation In accordance with section 703(d) of the Act, on December 12, 1984, we instructed the U.S. Customs Service to suspend liquidation of all entries of cast-iron pipe fittings from Brazil (49 FR 49319). As of the date of publication of this notice in the Federal Register, the liquidation of all entries, or withdrawals from warehouse, for consumption of this merchandise will continue to be suspended and the Customs Service shall require an ad valorem cash deposit or bond for each such entry of this merchandise as follows: ------------------------------------------------------------------------------- Manufacturers, producers and exporters Ad valorem rate (percent) ------------------------------------------------------------------------------- Fundicao Tupy S.A ....................................................... 14.17 All other manufacturers/producers/exporters ............................. 14.17 ------------------------------------------------------------------------------- This suspension will remain in effect until further notice. (Cite as: 50 FR 8755, *8760) Final Negative Determination of Critical Circumstances Petitioner alleged that critical circumstances exist within the meaning of section 705(a)(1) of the Act, with respect to cast-iron pipe fittings from Brazil. In determining whether critical circumstances exist, we examine whether: (a) The alleged subsidy is inconsistent with the agreement, and (b) There have been massive imports of the subject merchandise over a relatively short period. In the case, information on the record does not indicate that there have been massive imports of the merchandise under investigation over a relatively short period of time within the meaning of section 705(a)(1) of the Tariff Act of 1930. Therefore, we determine that critical circumstances do not exist with regard to cast-iron pipe fittings from Brazil. 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 non- privileged and non-confidential information relating to this investigation. We will allow the ITC access to all privileged and confidential 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 (Cite as: 50 FR 8755, *8760) written consent of the Deputy Assistant Secretary for Import Administration. The ITC will determine whether these imports materially injure or threaten material injury to, a U.S. industry within 45 days of the publication of this notice. If the ITC determines that material injury or the 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 cancelled. If, however, the ITC determines that such injury does exist, we will issue a countervailing duty order, directing Customs officers to assess a countervailing duty on cast-iron pipe fitings from Brazil entered, or withdrawn from warehouse, for consumption after the suspension of liquidation, equal to the net subsidy amount indicated in the "Suspension of Liquidation" section of this notice. This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671(d)). February 25, 1985. William T. Archey, Acting Assistant Secretary for Trade Administration. [FR Doc. 85-5271 Filed 3-4-85; 8:45 am]