NOTICES
DEPARTMENT OF COMMERCE
[C-351-056]
Certain Scissors and Shears From Brazil; Preliminary Results of Administrative Review of Countervailing Duty Order
Tuesday, March 26, 1985
*11927
AGENCY: International Trade Administration/Import Administration, Commerce.
ACTION: Notice of Preliminary Results of Administrative Review of Countervailing Duty Order.
SUMMARY: The Department of Commerce has conducted an administrative review of the countervailing duty order on certain scissors and shears from Brazil. The review covers the period March 1, 1981, through February 28, 1982.
As a result of the review, the Department has preliminarily determined the aggregate net subsidy for the period to be 13.60 percent ad valorem. Interesting parties are invited to comment on these preliminary results.
EFFECTIVE DATE: March 26, 1985.
FOR FURTHER INFORMATION CONTACT:Peggy Clarke or Richard Moreland, Office of Compliance, International Trade Administration, U.S. Department of Commerce, Washington, D.C. 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION: .
Background
On April 26, 1983, the Department of Commerce ("the Department") published in the Federal Register (48 FR 18863) the final results of its last administrative review of the countervailing duty order on certain scissors and shears from Brazil (42 FR 8634, February 11, 1977) and announced its intent to conduct the next administrative review. As required by section 751(a)(1) of the Tariff Act of 1930 ("The Tariff Act"), the Department has now conducted that administrative review.
On December 14, 1983, the International Trade Commission ("the ITC") published its determination that an industry in the United States would not be materially injured, or threatened with material injury, by reason of imports of Brazilian scissors and sheares if the order were revoked (48 FR 55644). Consequently, the Department published in the Federal Register (49 FR 7638, March 1, 1984) a revocation of the order with respect to all merchandise
*11928
entered, or withdrawn from warehouse, for consumption on or after July 17, 1981.
Scope of the Review
Imports covered by the review are shipments of Brazilian scissors and shears valued over $1.75 per dozen. Such merchandise is currently classifiable under items 650.9000 and 650.9200 of the Tariff Schedules of the United States Annotated ("TSUSA").
The review covers the period March 1, 1981, through February 28, 1982, and eleven programs: (1) Preferential financing for exports through CACEX; (2) an income tax exemption for export earnings; (3) the export credit premium for the Industrial Products Tax ("IPI"); (4) fiscal benefits for special export programs ("BEFIEX"); (5) preferential financing under CIC-CREGE 14-11; (6) tax reductions on equipment used in export production ("CIEX"); (7) Fundo de Democratizacao do Capital das Empresas ("FUNDECE"); (8) preferential financing for the storage of merchandise destined for export (Resolution 330); (9) preferential export financing under Resolution 68 ("FINEX"); (10) incentives for trading companies (Resolution 643); and (11) partially-indexed long-term loans.
Analysis of Programs
(1) Preferential Financing for Exports
Under this program, the Department of Foreign Commerce of the Banco do Brasil ("CACEX") declares companies eligible to receive working capital loans at preferential rates. These loans have a duration of up to one year. During the period of review, each firm producing scissors and shears could obtain preferential financing for up to 30 percent of the value of its previous year's exports.
During the review period, ZIVI S/A-Cutelaria, a producer of scissors and shears, had loans outstanding under Resolutions 602 (effective March 5, 1980) and 674 (effective January 22, 1981) of the Banco Central do Brasil.
Resolution 602 required that the loans be discounted. Resolutiuon 674 required two interest payments, one 180 days after the loan was granted and one when the principal was repaid.
In past reviews, we calculated the benefit from a loan by prorating the loan amount over the portion of the review period during which the loan was outstanding irrespective of the timing of interest payments. We now believe that the benefit occurs when the cash flow effect occurs. For these loans, that effect occurred when the borrower made the preferential interest payments.
Although we have changed our methodology, in this review we continued to straddle those loans (Resolution 602) that we had straddled in the last review. For new loans (Resolution 674), not included in the last review, we calculated the benefit based on the date of payment. For each new loan with interest payments during the period of review, we divided the number of days each portion of the loan was outstanding (the date of the drawdown to the date of the initial interest payment and the date of the initial interest payment to the date of the final interest payment) by 365 days. We applied the resulting ratio to the interest differential (the difference between the annual commercial benchmark and the relevant Resoltuon 674 interest rate) and multiplied the result by the affected loan principal.
To find the interest differential for our calculations, we compared two effective rates. For our benchmark, we took the national average effective rate for thirty-day discounts of accounts receivable as found in Analise/Business Trends. We then compounded this rate to find the annual commercial benchmark. The effective preferential rates on the straddled loans varied between 26.39 percent and 31.75 percent. The commercial benchmark for these loans ranged from 44.08 percent to 47.96 percent. Therefore, the interest differential ranged, for the straddled loans, from 16.21 to 21.57 percent. The unstraddled loans had an effective preferential rate of 44 percent. The commercial benchmark at the time the borrowers contracted for these loans was 92.23 percent. Thus, the interest differential for the new loans was 48.23 percent. We preliminarily determine the total net subsidy from this program to be 7.01 percent ad valorem.
(2) Income Tax Exemptions for Export Earnings
Exporters of scissors and shears are eligible under this program for an 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 times the prevailing 35 percent corporate income tax rate. We preliminarily determine the benefit from this program to be 1.58 percent ad valorem for the review period.
Exports of certain scissors and shears are eligible for the maximum IPI export credit premium. The Brazilian government reimburses in cash a percentage of the f.o.b. invoice price of the exported merchandise to exporters through the bank involved in the export transaction.
The Brazilian government eliminated the IPI export credit premium on December 7, 1979, but reinstated it on April 1, 1981. On June 26, 1981, the Brazilian government imposed an export tax to offset the benefit on exports to the U.S. Therefore, scissors and shears exporters received a benefit under this program for three months (April, May, and June 1981) during the period of review. We divided the value of IPI credits received during that period by exports during the period of review and found an ad valorem benefit of 2.33 percent.
During verification in other countervailing duty orders, we found that the government did not begin to collect the tax until December 1982, at which time the back taxes were paid without monetary correction, interest, or penalties. We consider the lag in collection to be a benefit to the exporters equal to an interest free loan in the amount of the tax owed, rolled over monthly, until they actually paid the tax. Under current practice, exporters are to pay the offset tax 45 days after the end of the month in which the shipment earning the premium occurred. To calculate the benefit, we considered the interest free loan to begin on the date the tax was due ( i.e. 45 days after the end of the month of shipment).
As a commercial benchmark, we used the monthly discount rate (described for the Resolution 674 program), compounding for the number of months the hypothetical loan was outstanding during the review period. Adding the benefit from this to the benefit received from the IPI premium itself, we preliminarily find the ad valorem benefit to be 2.66 percent.
(4) Fiscal Benefits for Special Export Programs
Under Decree Law 1219 of May 15, 1972, any firm that produces manufactured products is eligible to receive benefits from the Commission for the Granting of Fiscal Benefits for Special Export Programs ("BEFIEX"), as long as the company makes an appropriate export commitment. Under Decree No. 77,065, a company can receive a reduction of 70 to 90 percent of the import duties and the IPI tax on the import of machinery and equipment necessary to meet the approved export commitment. Scissors and shears exporters are eligible for benefits under
*11929
this program, and one exporter for which we have data received benefits during the period of review. We divided the amount of benefits received by exports and find an ad valorem benefit under this program of 1.98 percent during the review period.
95) Preferential Export Financing Under CIC-CREGE 14-11
CIC-CREGE 14-11 is a program operated by the Banco do Brasil that provides preferential financing to exporters, who are then required to maintain a minimum fixed level of foreign exchange with the Banco do Brasil. Exporters of certain scissors and shears participated in this program during the review period. We calculated the benefit in a manner similar to that used for Resolution 674 financing. There is no maximum interest rate for this program, and interest payments are normally made quarterly with the full principal repaid at the end of the loan term. Only one loan was outstanding during the review period. Since it had not been countervailed previously and three payments fell due during the review period, we calculated the benefit based on the interest payment dates as we did for new loans under Resolution 674. We preliminarily determine the benefit conferred by this program to be 0.37 percent ad valorem.
We also examined the following programs and preliminarily find that exporters of certain scissors and shears did not use them during the review period.
A. Tax reductions on equipment used in export production ("CIEX");
B. Fundo de Democratizacao do Capital das Empresas ("FUNDECE");
C. Preferential financing for the storage of merchandise destined for export (Resolution 330);
D. Preferential export financing under Resolution 68 ("FINEX");
E. Incentives for trading companies (Resolution 643); and
F. Partially-indexed long-term loans.
Preliminary Results of the Review
As a result of our review, we preliminarily determine the aggregate net subsidy to be 13.60 percent ad valorem for the period of review. Accordingly, the Department intends to instruct the Customs Service to assess countervailing duties of 13.60 percent of the f.o.b. invoice price on any shipments (except as noted below) exported on or after March 1, 1981, and entered, or withdrawn from warehouse, for consumption before July 17, 1981 (the day the Department received notification of the request for an injury determination).
Further, as a result of the ITC's negative injury determination, the Department has revoked this order (49 FR 7638, March 1, 1984) with respect to all merchandise entered, or withdrawn from warehouse, for consumption on or after July 17, 1981.
Because Brazil is a signatory to the General Agreement on Tariffs and Trade, section 303 of the Tariff Act provides that countervailing duties may not be imposed on its merchandise entering free of customs duties, unless the ITC has determined that a U.S. industry is materially injured by reason of imports of such merchandise. Entries of pinking shears classifiable under TSUSA number 650.9000 are afforded duty free status under the Generalized System of Preferences. Therefore, the Department intends to instruct the Customs Service to liquidate without regard to countervailing duties all duty-free shipments of pinking shears entered, or withdrawn from warehouse, for consumption on or before July 16, 1981.
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 five 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 § 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: March 20, 1985.
Alan F. Holmer,
Deputy Assistant Secretary Import Administration.