NOTICES

                                    DEPARTMENT OF COMMERCE

                                           [C-351-406]

                 Preliminary Affirmative Countervailing Duty Determination; Certain
                                Agricultural Tillage Tools From Brazil

                                       Monday, June 10, 1985

*24270
                                    (Cite as: 50 FR 24270, *24270)

AGENCY: Import Administration, International Trade Administration, Commerce.

ACTION: Notice.

SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the
  countervailing duty law are being provided 
                                    (Cite as: 50 FR 24270, *24270)

to manufacturers, producers, or exporters in Brazil of certain agricultural tillage tools. The estimated net subsidy is
4.33 percent ad valorem. In addition, we have determined that "critical circumstances" exist in this case.

We have notified the United States International Trade Commission (ITC) of our determinations. As a result of our
  preliminary determination that critical circumstances exist, the suspension of liquidation applies to all
unliquidated entries of certain agricultural tillage tools entered, or withdrawn from warehouse, for consumption, on or
after the date which is 90 days before publication of this notice. We have also directed the U.S. Customs Service to require
a cash deposit or bond for each such entry in an amount equal to the estimated net subsidy as described in the "Suspension
of Liquidation" section of this notice.

If this investigation proceeds normally, we will make our final determination by August 19, 1985.

EFFECTIVE DATE: June 10, 1985.

FOR FURTHER INFORMATION CONTACT: Alain Letort or Barbara Tillman, Office of Investigations, Import Administration,
  International Trade Administration, U.S. 
                                    (Cite as: 50 FR 24270, *24270)

Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230; telephone: (202)
377-5050 or 377-1785.

SUPPLEMENTARY INFORMATION:

  Preliminary Determination

Based upon our investigation, we preliminarily determine that there is reason to believe or suspect that certain benefits
which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), *24271
                                    (Cite as: 50 FR 24270, *24271)

are being provided to manufacturers, producers, or exporters in Brazil of certain agricultural tillage tools. For
purposes of this investigation, the following programs are found to confer subsidies to tillage tool manufacturers:
- Preferential Working-Capital Financing for Exports;
- Export Financing Under the CIC-CREGE 14-11 Circular;
- Income Tax Exemption for Export Earnings; and
- Subsidies to Upstream Suppliers of Steel Inputs:
--Government Provision of Equity Capital to USIMINAS
--IPI Tax Rebates for Capital Investment
--Exemption of IPI Tax and Customs Duties on Imported Equipment (CDI)

                                    (Cite as: 50 FR 24270, *24271)

We determine the estimated net subsidy to be 4.33 percent ad valorem.

Case History

On September 28, 1984, we received a petition filed by Ingersoll Products Corporation of Chicago, Ill., Empire Plow
Company of Cleveland, Ohio, and Nichols Tillage Tools, Inc. of Sterling, Colo. 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 agricultural tillage tools receive, directly or indirectly, 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 18, 1984, we initiated such an investigation (49 FR 42971). We stated that we expected to issue a
  preliminary determination by December 22, 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 12,
1984, the ITC preliminarily determined that there is a reasonable indication that these imports materially injure or
threaten material injury to a U.S. industry (49 FR 
                                    (Cite as: 50 FR 24270, *24271)

37856).
We presented a questionnaire concerning the allegations to the government of Brazil in Washington, D.C. on October
29, 1984. On December 6, 1984, we received a response to the questionnaire.
On December 14, 1985, we received information from petitioners which established a reasonable basis to believe or
suspect that the products under investigation benefited from upstream subsidies in the form of subsidized steel inputs. We
therefore extended the due date for a preliminary determination to June 4, 1985 (50 FR 300). On January 25,
1985, we issued an upstream subsidy questionnaire and received a response on February 25, 1985. On April 17, 1985, we
issued a supplementary upstream subsidy questionnaire and received responses on May 17, 22, and 28, 1985.

Scope of the Investigation

The products covered by this investigation are certain agricultural tillage tools, which are defined for purposes of this
proceeding as ground-engaging metal tools for tillage and cultivating equipment such as cultivators, discers, and harrows.
Tillage tools include round-shaped tools such as colter, furrow- opener blaues, etc., and tools that are not round-shaped
(rectangular, triangular, and other odd shapes) such as points, chisels, sweeps, shovels, 
                                    (Cite as: 50 FR 24270, *24271)

knives, furrowers, tines, drills, lister bottoms, rotary tiller blades, bed- shaping tools as well as plowshares, plowshins,
moldboards, etc. Tillage tools are currently provided for in items 666.0015, 666.0020, 666.0050, 666.0060, 666.0065,
and 666.0075 of the Tariff Schedules of the United States, Annotated (TSUSA).
There are three known producers and exporters in Brazil of certain agricultural tillage tools to the United States for
which we have received information from the government of Brazil. These are Baldan Implementos Agricolas S.A.
(Baldan), Marchesan Implementos e Maquinas Agricolas "TATU" S.A. (Marchesan), and Companhia Semeato de Ac>=9os
(Semeato). In addition, we have identified Companhia Ac>=9os Especiais Itabira S.A. (ACESITA) and Usinas Siderurgicas
de Minas Gerais S.A. (USIMINAS) as the upstream suppliers of steel inputs to the tillage tool manufacturers mentioned
above. For purposes of this preliminary determination, the period for which we are measuring subsidization ("the
review period") is the calendar year 1983.

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- 
                                    (Cite as: 50 FR 24270, *24271)

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).
Consistent with our practice in preliminary determinations, where a response to an allegation denies the existence
of a program, receipt of benefits under a program, or eligibility of a company or industry under a program, and the
Department has no persuasive evidence showing that the response is incorrect, we accept the response for purposes of the 
  preliminary determination. All such responses are subject to rigorous verification. If the response cannot be
supported at verification, and the program is otherwise countervailable, the program will be considered a subsidy in the
final determination.
In its response, the government of Brazil provided data for the applicable period, including financial statements and
debt information for Baldan, Marchesan, and Semeato.
Based upon our analysis of the petition and the responses to our questionnaires, we preliminarily determine the following:

I. Programs Determined To Confer Subsidies

We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Brazil of
certain agricultural tillage tools under 
                                    (Cite as: 50 FR 24270, *24271)

the following programs:

A. Preferential Working-Capital Financing for Exports

The Carteira do Come>=1rcio Exterior (Foreign Trade Department, or CACEX) of the Banco do Brasil administers a
program of short-term working-capital financing for the purchase of inputs. During the review period, these working-
capital loans were provided under Resolution 674 of the Banco Central do Brasil. On January 1, 1984, Resolution 674 was
superseded by Resolution 882, which was itself substantially amended by Resolution 950 on August 21, 1984.
Eligibility for this type of financing is determined on the basis of past export performance or of an acceptable export plan.
The amount of available financing is calculated by making a series of adjustments to the dollar value of exports. During the
review period, the maximum level of eligibility for such financing was 30 percent of the value of exports, and then 22
percent; at present, financing is capped at 20 percent of the value of exports.
Following approval by CACEX of their applications, participants in the program receive certificates representing portions
of the total dollar amount for which they are eligible. The *24272
                                    (Cite as: 50 FR 24270, *24272)

certificates may be presented to banks in return for cruzeiros at the exchange rate in effect on the date of presentation.

                                    (Cite as: 50 FR 24270, *24272)

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.
The interest rate ceiling was raised from 40 to 60 percent on loans obtained under Resolution 674 on June 11, 1983. On
January 1, 1984, Resolution 882 changed the interest rate to full monetary correction plus 3 percent, with the interest and
principal payable in one lump sum at the expiration of the loan. On August 21, 1984, Resolution 950 made this
working-capital financing available from commercial banks, with interest calculated at time of repayment. Under
Resolution 950, the Banco do Brasil pays the lending institution an equalization fee of up to 10 percent of the interest (after
monetary correction). Therefore, if the interest rate charged to the borrower is less than full monetary correction plus 10
percent, the Banco do Brasil pays the lending bank the difference, up to 10 percent.
Information received last month from U.S. Government sources in Brazil and since placed on the public record
indicates that the equalization fee was increased in May 1985 to up to 15 percent of the interest.
Since receipt of working-capital financing is contingent on export performance, and provides funds to participants at
interest rates lower than those available from commercial sources, we preliminarily determine that this 
                                    (Cite as: 50 FR 24270, *24272)

program confers an export subsidy.
Consistent with our stated policy to take into account programwide changes that occur after the review period and before
our preliminary determination, we calculated the benefit by multiplying the current maximum level of eligibility
(20 percent) by the equalization fee plus the Imposto so>=3bre Operac>=9oes Financeiras (Tax on Financial Operations,
or IOF). We allocated the benefit over the total value of all exports by the respondents and calculated an estimated net
subsidy of 3.30 percent ad valorem.

B. 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 
                                    (Cite as: 50 FR 24270, *24272)

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 receiving the
working-capital export financing described in section I.A of this notice 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 commercial basis, the government of Brazil did
not supply sufficient data, either in previous cases or in its current response, 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 the best information available. This comparison
shows that the rate on 14-11 loans is below the benchmark. Therefore, we preliminarily determine that this program
confers an export subsidy.
Baldan obtained a loan under this program. To calculate the benefit, we 
                                    (Cite as: 50 FR 24270, *24272)

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 all exports by the respondents, which resulted in an estimated net
subsidy of 0.25 percent ad valorem.

C. Income Tax Exemption for Export Earnings

Under Decree-Laws 1158 and 1721, exporters of agricultural tillage tools are eligible for an 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 preliminarily determine that this exemption confers an export subsidy. Baldan and Marchesan both
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 all exports by the respondents
to calculate an estimated net subsidy of 0.07 percent ad valorem.

D. Subsidies to Upstream Suppliers of Steel Inputs

Under section 771A(a) of the Act, we must apply the following tests in order to determine whether "upstream subsidies" are
being paid or bestowed upon the 
                                    (Cite as: 50 FR 24270, *24272)

products under investigation:
The term "upstream subsidy" means any subsidy described in section 771(5)(B) (1), (ii), or (iii) by the government of a
country that--
(1) Is paid or bestowed by that government with respect to a product (hereafter referred to as an "input product") that is
used in the manufacture or production in that country of merchandise which is the subject of a countervailing duty
proceeding;
(2) In the judgment of the administering authority bestows a competitive benefit on the merchandise; and
(3) Has a significant effect on the cost of manufacturing or producing the merchandise.
Respondents assert that section 771A also requires an analysis of whether the upstream recipient of subsidies limits
benefits to specific downstream users or makes them available to all of its customers. We disagree. Nothing in the statute or
legislative history supports this contention.
1. Domestic Subsidies. As the first step of this test, we preliminarily determine that domestic subsidies are being provided
to ACESITA and USIMINAS, suppliers of hot-rolled carbon steel plate in coil and hot-rolled carbon steel sheet in
coil to the tillage tool manufacturers, under the following programs:
a. Government Provision of Equity Capital to USIMINAS.--Siderurgia Brasileira S.A. (SIDERBRAS) is a
government-controlled corporation under the jurisdiction 
                                    (Cite as: 50 FR 24270, *24272)

of the Ministry of Industry and Commerce. Pursuant to Decree Law No. 6159 of December 6, 1974, SIDERBRAS became the
holding company for the federally owned steel corporations. SIDERBRAS is a majority shareholder of nine Brazilian steel
producers and a minority shareholder of one small Brazilian steel producer.
During 1979-1983, SIDERBRAS made equity infusions into USIMINAS. We have consistently held that government
provision of, or assistance in obtaining, capital does not per se confer a subsidy. *24273
                                    (Cite as: 50 FR 24270, *24273)

Government equity purchases or financial backing bestow a countervailable benefit only when provided on terms
inconsistent with commercial considerations.
For purposes of this preliminary determination, we reviewed the company's financial data and all other factors on
the record relevant to a determination of inconsistency with commercial considerations. In order to determine
whether a company was a reasonable equity investment (a condition we have termed "equityworthiness"), we focused on
the rate of return on equity and long-term prospects for the company in question for the period 1979 through 1983. We
examined financial ratios, profits and losses, and other factors, such as market demand projections and current operating
results, to evaluate a company's current and future ability to earn a reasonable rate of return on equity investments.
Based on these factors, as applied to information on the record, we found 
                                    (Cite as: 50 FR 24270, *24273)

USIMINAS to be equityworthy between 1977 and 1979 and unequityworthy from 1980 through 1982 in the case of Certain
Carbon Steel Products from Brazil (49 FR 17988). In addition, we now find USIMINAS to be unequityworthy in 1983.
Accordingly, we preliminary determine that the action of the government in taking an equity position in the company
in those years is inconsistent with commercial considerations and confers a subsidy.
To calculate the benefit, we compared the company's rate of return on equity with the average rate of return in Brazil
for the year in question. We then applied the "rate of return shortfall" methodology to all purchases of equity that we
consider to be inconsistent with commercial considerations. For purposes of this preliminary determination, we
used the nationwide rate of return on equity in Brazil as published by Business Latin America. We calculated an
estimated net subsidy of 8.02 percent to USIMINAS.
b. IPI Tax Rebates for Capital Investment.--Decree-Law 1547, enacted in April 1977, provides funding for capital
investment in approved expansion projects in the Brazilian steel industry through a rebate of the Imposto so>=3bre
Produtos Industrializados (IPI), which is a value-added tax imposed on domestic sales. The IPI tax is an indirect tax and,
as such, is passed on to the consumer. A steel company collects this tax on sales as an agent for the government, and does
not pay the tax itself. Decree-Law 1547 is a mechanism by which a steel company is permitted to collect funds due the
government and then receive a 95 
                                    (Cite as: 50 FR 24270, *24273)

percent tax rebate. The program does not involve the rebate of payments made from the company's own funds.
Originally, the IPI tax applied to all domestic sales transactions. In 1979, the value-added tax was eliminated except for
producers in 14 industry sectors, including tobacco, automobiles, spirits and alcohol, ceramics, rubber, and steel. The tax
rate is different for each of the specified industry sectors; for steel products, the value-added tax is 5 percent.
A Brazilian steel company may deposit 95 percent of the net IPI tax due in a special account with the Banco do Brasil. The
amounts deposited are to be applied to steel expansion projects. When rebated to the firms, they constitute reserves that
must eventually be converted into subscribed capital.
Under the terms of Resolution 68-77 issued by the Conselho de Nao-Ferrosos e Siderurgia (CONSIDER), which implements
Decree-Law 1547, IPI tax rebates are payable only on basic steel products and certain fabricated steel products such as
seamless steel pipes. ACESITA and USIMINAS both received IPI tax rebates as manufacturers of basic steel products.
Because these rebates are provided based on industry-specific criteria, we preliminarily determine that IPI tax rebates
confer a subsidy.
In order to calculate the benefit attributable to this program, we treated the total IPI rebates received in each year as a
grant. We allocated the rebates received from 1977 through 1983 over 15 years, which is the average useful life 
                                    (Cite as: 50 FR 24270, *24273)

of capital assets in the steel industry. In the case of ACESITA, we used as our discount rate the short-term commercial
benchmark for Brazil because we did not have a company-specific or national average cost of long-term debt. In the
case of USIMINAS, we found the company to have been uncreditworthy from 1980 onwards. Therefore, we used as our
discount rate the average annual maximum real cost of trade bill discounts as published by Analise/Business Trends, plus a
risk premium. We calculated an estimated net subsidy of 2.49 percent for ACESITA and 0.45 percent for USIMINAS.
c. Exemption of IPI Tax and Customs Duties on Imported Equipment (CDI).--Under 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 investment project must be deemed to be feasible and the recipient must demonstrate that there
is a need for added capacity in Brazil.
Decree-Law 1726 repealed this program in 1979. Subnsequently, no new projects were eligible for these benefits. However,
companies whose projects were approved prior to the repeal still receive these benefits pending completion of the project.

                                    (Cite as: 50 FR 24270, *24273)

Only USIMINAS received benefits under this program during the review period. In our Final Affirmative
  Countervailing Duty Determination on Certain Carbon Steel Products from Brazil (49 FR 17988), we found
that receipt of this benefit is limited to projects in 14 industries approved by the government of Brazil. Based on the
record of those and earlier Brazilian countervailing duty investigations, we have concluded that these benefits are
limited to specific enterprises or industries. Accordingly, we preliminarily determine the CDI program confers a subsidy
on USIMINAS. We allocated the benefit in the year of receipt, thereby calcuating an estimated net subsidy of 0.10 percent
to USIMINAS.
2. Competitive Benefit. The second step of the test outlined in section 771A of the Act is the determination of
whether the subsidies received by the upstream suppliers bestow a "competitive benefit" on the merchandise under
investigation. Under the terms of section 771A(b)(1).
[a] competitive benefit has been bestowed when the price for the input product * * * is lower than the price that the
manufacturer or producer of merchandise which is the subject of the countervailing duty proceeding would
otherwise pay for the product in obtaining it from another seller in an arms- length transaction.
Pursuant to this statutory language, we would have compared ACESITA's and USIMINAS' prices to prices charged by
unsubsidized Brazilian producers of the 
                                    (Cite as: 50 FR 24270, *24273)

steel inputs used by tillage tool producers. However, we are unaware of any unsubsidized Brazilian producers of these
inputs. Therefore, as the next step, we would have compared ACESITA's and USIMINAS' prices to prices paid for
unsubsidized imported steel used by the tillage tool respondents, or, failing that, to respondents' information on world
market prices for their steel inputs. In the absence of any such information from respondents, we have used the best
information otherwise available to calculate a "benchmark" price with *24274
                                    (Cite as: 50 FR 24270, *24274)

which to compare ACESITA's and USIMINAS' prices.
Lacking the preferred benchmarks, the first "benchmark" price we considered using was the petitioners' estimate of the
1983 price for steel imported into Brazil. Petitioners calculated this by adjusted a 1982 price, obtained from their
sources in Brazil, for inflation. Because this "benchmark" price applied to steel imports generally and not to the specific
inputs used by tillage tool producers, and because it was based on 1982 prices adjusted for inflation, we sought more
accurate information for use as our benchmark.
Secondly, we reviewed the average Japanese f.o.b. price of plate and sheet in 1983 for exports to countries other than the
United States, as reported in Metals Intelligence International, which incorporates data from trade publications such as
Tekko Shinbun, Japan Metal Bulletin, and Japan Steel Journal. To this avarage Japanese price, we added an average ocean
freight and insurance charge derived from U.S. Customs Service Special Summary Steel 
                                    (Cite as: 50 FR 24270, *24274)

Invoices correspondig to shipments of steel coil from Japan to the East Coast of the United States during the period
December 1983 to February 1984.
Respondents state that any customs duties on imported steel inputs can be refunded upon exportation of the finished
product in the form of a duty drawback. Because of this statement, we calculated two surrogate import prices based on the
Japanese f.o.b. price plus freight and insurance: (1) A surrogate price for steel inputs used in the manufacture of tillage
tools for export sales that did not include import duties, and (2) a surrogate price for steel inputs used in the manufacturer
of tillage tools for domestic sales that included an average import duty based on the 1985 edition of the Tarifa Aduaneira
do Brasil. We weighted the first price by the percentage that Brazilian tillage tool exports represent of total sales of tillage
tools, and the second price by the percentage of tillage tools sold for consumption in Brazil. The weighted average of
these two prices is our benchmark price for purposes of comparison with the prices charged by ACESITA and USIMINAS.
We then compared ACESITA's and USIMINAS' prices to the benchmark price, and found they were lower than the
benchmark price. Because both ACESITA's and USIMINAS' prices are below our benchmark price, we preliminarily
determine that the "competitive benefit" test has been met.
3. Significant Effect. The third and final step of the statutory test is to determine whether the subsidy received by the
upstream suppliers has a 
                                    (Cite as: 50 FR 24270, *24274)

significant effect on the cost of manufacturing or producing the merchandise. We multiplied the ad valorem subsidy rates
calculated for ACESITA and USIMINAS by the percentage that the government of Brazil claims the subsidized steel
inputs account for in the cost of producing tillage tools. In both cases, we found that the estimated net subsidy accounted
for more than one percent of the cost of manufacturing or producing the merchandise. For purposes of this preliminary
determination, we consider that the "significant effect" test has been met. Nevertheless, since this is the first
  determination under section 771A of the Act, we welcome comments on the threshold for, and the measurement of,
"significant effect."
All three tests outlined in section 771A(c) having been met, we preliminarily determine that benefits bestowed upon
ACESITA and USIMINAS confer an upstream subsidy upon the products under investigation.
4. Measurement of Upstream Subsidization. Under section 771A(c) of the Act,
The administering authority shall include in the amount of any countervailing duty imposed on the merchandise an
amount equal to the amount of the competitive benefit . . . except that in no event shall the amount be greater than the
amount of subsidization determined with respect to the upstream product.
Pursuant to this statutory language, we added the estimated net subsidy received by ACESITA and USIMINAS to each
company's average price in 1983 in 
                                    (Cite as: 50 FR 24270, *24274)

order to compare each company's domestic price (including subsidies) for the steel inputs used by Brazilian tillage tool
manufacturers to the benchmark price. We compared the domestic prices (including subsidies) of both ACESITA and
USIMINAS to our benchmark price, and found that both companies' prices were lower than our benchmark price. Since
these prices (including subsidies) were below our benchmark price, the subsidy bestowed upon ACESITA and USIMINAS is
passed through in totality to the tillage tool respondents.
We calculated the overall subsidy passed through to tillage tool producers by weighting the net subsidy per ton received
by ACESITA and USIMINAS by the tonnage each steel company sold to the respondents in 1983. We then expensed the
overall subsidy thus calculated over the total value of tillage tools sold by the three respondents in 1983, and calculated an
estimated net upstream subsidy of 0.71 percent ad valorem.

II. Programs Determined Not To Be Used

We preliminarily determine that manufacturers, producers or exporters in Brazil of certain agricultural tillage tools
did not use the following programs which were listed in our notice of "Initiation of a Countervailing Duty
Investigation: Agricultural Tillage Tools from Brazil" (49 FR 40431).


                                    (Cite as: 50 FR 24270, *24274)

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.
The government of Brazil stated in its response that tillage tool producers are not eligible for IPI rebates under
Decree-Law 1547. Accordingly, we preliminarily determine that this program was not used.

B. Resolution 330 of the Banco Central do Brasil

Resolution 330 provides financing for up to 80 percent of the value of the merchandise placed in a specific bonded
warehouse and destined for export. Exporters of agricultural tillage tools would be eligible for financing under this
program. However, the government of Brazil stated in its response that none of the tillage tool producers participated
in this program during the review period; therefore, we preliminarily determine that this program was not used.

C. Exemption of IPI Tax and Customs Duties on Imported Equipment (CDI)


                                    (Cite as: 50 FR 24270, *24274)

Under 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 investment project must be deemed to be feasible
and the recipient must demonstrate that there is a need for added capacity to Brazil.
The government of Brazil stated in its response that none of the tillage tool producers received incentives under this
program during the review period. Accordingly, we preliminarily determine that this program was not used.

*24275
                                    (Cite as: 50 FR 24270, *24275)

D. The BEFIEX Program

The Comissao para a Concessao de Beneficios Fiscais a Programas Especiais de Exportac>=9ao (Commission for the
Granting of Fiscal Benefit 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 
                                    (Cite as: 50 FR 24270, *24275)

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 for 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.
In its response, the government of Brazil stated that tillage tool producers did not participate in this program.
Accordingly, we preiminarily determine that this program was not used.

E. 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. In its
response, the government of Brazil stated that none of the tillage tool producers received any benefits under this
program. Accordingly, we preliminarily determine that this program was not used.

F. Accelerated Depreciation for Brazilian-Made Capital Equipment

                                    (Cite as: 50 FR 24270, *24275)


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.
In its response, the government of Brazil stated that none of the respondents availed itself of this program during the
review period. Therefore, we preliminarily determine that this program was not used.

G. Incentives for Trading Companies

Under Resolution 643 of the Banco Central do Brasil, trading companies can obtain export financing similar to that
obtained by manufacturers under Resolutions 674, 882, and 950. In its response, the government of Brazil stated that
tillage tool producers were ineligible for participation in this program because such participation is precluded by receipt of
working-capital export financing. Accordingly, we preliminarily determine that this program was not used.

H. The PROEX Program

Short-term credits for exports are available under the Programa de 
                                    (Cite as: 50 FR 24270, *24275)

Financiamento a>=2 Produc>=9ao para a Exportac>=9ao (PROEX), previously referred to as the Apo>=3io a>=2
Exportac>=9ao program. In its response, the government of Brazil stated that none of tillage tool producers
participated in this program during the review period. Accordingly, we preliminarily determine this program was not used.

I. Income Tax Deductions for Foreign Selling Expenses

The government of Brazil offers income tax deductions for foreign selling expenses, although such deductions are not
allowed for equivalent domestic expenses.
The government of Brazil stated in its response that tillage tool producers had not taken these deductions.
Accordingly, we preliminarily determine this program was not used.

J. Programs Not Used by Upstream Suppliers of Steel Inputs

1. Special Tax Deductions. In its response, the government of Brazil states that USIMINAS did not use losses of other
companies in the SIDERBRAS group to offset profits during the review period. Neither company benefits from any local tax
incentives which minimize their tax liability. Accordingly, we 
                                    (Cite as: 50 FR 24270, *24275)

preliminarily determine that this program was not used by either ACESITA or USIMINAS.
2. Accelerated Depreciation for Brazilian-Made Capital Equipment. According to the government of Brazil, ACESITA
participated in this program, but recaptured more accelerated depreciation than it claimed during the review period,
thereby cancelling out any benefit that would have accrued to ACESITA. Accordingly, we preliminarily determine that this
program was not used.

III. Programs Preliminarily Determined to Require Additional Information

A. IPI Export Credit Premium

Until very recently, Brazilian exporters of manufactured products were eligible for a tax credit on the Imposto so>=3bre
Produtos Industrializados (Tax on Industrialized Products, or IPI). The IPI export credit premium, a cash reimbursement
paid to the exporter upon the export of otherwise taxable industrial products, was found to confer a subsidy in previous
  countervailing duty investigations involving Brazilian products. After having suspended this program in December
1979, the government of Brazil reinstated it on April 1, 1981.
Subsequent to April 1, 1981, the credit premium was gradually phased out in 
                                    (Cite as: 50 FR 24270, *24275)

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"). Under the terms of
"Portaria" (Notice) of the Ministry of Finance No. 176 of September 12, 1984, the credit premium was eliminated effective
May 1, 1985. Consistent with our stated policy of taking into account program-wide changes that occur prior to our
  preliminary determination, we are not including this program in calculating the deposit/bonding rate. However,
we intend to ascertain at verification that no exports declared eligible for the credit premium before May 1, 1985, were still
receiving it after that date.

B. Resolution 68 (FINEX) Financing

Resolution 68 of the Conselho Nacional do Come>=1rcio Exterior (CONCEX) provides that CACEX may draw upon the
resources of the Fundo de Financiamento a>=2 Exportac>=9ao (FINEX) to extend dollar-denominated loans to foreign
buyers of Brazilian goods. Financing is granted on a transaction-by-transaction basis.
In its response, the government of Brazil stated that the respondents did not receive Resolution 68 financing on
transactions with the United States during the review period. We intend at verification to obtain complete and accurate 
                                    (Cite as: 50 FR 24270, *24275)

information from the administrators of the FINEX program as to the level of financing (if any) received by United States
importers of agricultural tillage tools from Brazil.

C. Loan Guarantees to Upstream Suppliers on Foreign-Denominated Debt

In its upstream subsidy response, the government of Brazil stated that USIMINAS received no government loan
guarantees on foreign-denominated debt during the review period. We have no evidence that such guarantees have been
provided to ACESITA. We have asked respondents for complete information with respect to these guarantees. We will
review this program fully at verification.

*24276
                                    (Cite as: 50 FR 24270, *24276)

  Preliminary Affirmative Determination of Critical Circumstances

Petitoners alleged that imports of certain agricultural tillage tools from Brazil present "critical circumstances." Under
section 703(e)(1) of the Act, critical circumstances exist when the Department has a reasonable basis to believe or suspect
that: (1) The alleged subsidy is inconsistent with the Agreement on Interpretation and Application of Articles VI, XVI and
XXIII of the General Agreement on Tariffs and Trade ("the Subsidies Code"), and (2) 
                                    (Cite as: 50 FR 24270, *24276)

there have been massive imports of the class or kind of merchandise which is the subject of the investigation over a
relatively short period.
In our preliminary determination, we have found that the government of Brazil confers export subsidies on
certain agricultural tillage tools. Although Article 9 of the Subsidies Code provides a general prohibition on the use of
export subsidies on non-primary products, Article 14 provides an exception under which export subsidies maintained by a
developing country are not automatically considered to be a violation of Article 9. Article 14 is applicable to Brazil as
a developing country.
However, Article 14 does set limits on the exception otherwise provided in that article. The paragraph which sets out these
limitations reads as follows:
Developing country signatories agree that export subsidies on their industrial products shall not be used in a manner
which causes serious prejudice to the trade or production of another signatory.
The Department must determine whether there is sufficient positive evidence on the record that provides a reasonable
basis to believe or suspect that, in this case, export subsidies maintained by the government of Brazil cause serious
prejudice to the trade or production in the Unitd States within the meaning of Article 14§3 and, hence, are inconsistent
with the Agreement. Evidence on the record in this case includes import volume, information on material injury included
in the petition, and more importantly, the preliminary determination 
                                    (Cite as: 50 FR 24270, *24276)

by the ITC (49 FR 37856) that there is a reasonable indication that the U.S. domestic industry is being threatened with
material injury by reason of subsidized imports.
On the basis of this information, we preliminarily determine that there is a reasonable basis to believe or suspect that these
subsidized imports have caused serious prejudice to the production of certain agricultural tillage tools in the United States.
In preliminarily determining whether there is a reasonable basis to believe or suspect that there have been massive
imports over a relatively short period, we considered the following factors: (1) Whether imports have surged recently, (2)
whether recent imports are significantly above the average calculated over several years (1980-1984), (3) whether the
patterns of imports over that four- year period may be explained by seasonal swings. Based upon our analysis of the
information, we preliminarily determine that imports of the products covered by this investigation appear massive over a
relatively short period.
For the reasons described above, we preliminarily determine that "critical circumstances" exist with respect to certain
agricultural tillage tools from Brazil.

Suspension of Liquidation


                                    (Cite as: 50 FR 24270, *24276)

In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all
unliquidated entries of certain agricultural tillage tools from Brazil entered, or withdrawn from warehouse, for
consumption, on or after the date which is 90 days before the date of publication of this notice in the Federal Register, and
to require an ad valorem cash deposit or bond for each such entry of this merchandise of 4.33 percent ad valorem. This
suspension of liquidation will remain in effect until further notice.

ITC Notification

In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making
available to the ITC 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 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 120 days after
the Department makes its preliminary affirmative determination or 45 days after its final affirmative 
                                    (Cite as: 50 FR 24270, *24276)

  determination, whichever is latest.

Public Comment

In accordance with § 355.35 of our regulations, we will hold a public hearing, if requested, to afford interested parties an
opportunities to comment on this preliminary determination on July 19, 1985 at 10:00 a.m. at the U.S.
Department of Commerce, room 3706, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230.
Individuals who wish to participate in the hearing must submit a request to the Deputy Assistant Secretary for Import
Administration, room B-099, at the above address within 10 days of the publication of this notice.
Requests should contain: (1) The party's name, address, and telephone number; (2) the number of participants; (3) the
reason for attending; and (4) a list of the issues to be discussed. In addition, at least 10 copies of pre-hearing briefs must be
submitted to the Deputy Assistant Secretary by July 12, 1985.
Oral presentations will be limited to issues raised in the briefs. All written views should be filed in accordance with 19 CFR
355.34, within 30 days of the publication of this notice, at the above address and in at least 10 copies.

                                    (Cite as: 50 FR 24270, *24276)

This notice is published pursuant to section 703b(f) of the Act (19 U.S.C. 1671(f)).

Alan F. Holmer,

Deputy Assistant Secretary for Import Administration.