50 FR 26397
NOTICES
DEPARTMENT OF COMMERCE
[C-351-020]
Non-Rubber Footwear From Brazil; Preliminary Results of Administrative Review of Countervailing Duty Order
Wednesday, June 26, 1985
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AGENCY: International Trade Administration/Import Administration, Department of 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 non-rubber footwear from Brazil. The review covers the period January 1, 1981, through October 28, 1981, and ten programs.
As a result of the review, the Department has preliminarily determined the aggregate net subsidy for the period to be 5.89 percent ad valorem. Interested parties are invited to comment on these preliminary results.
EFFECTIVE DATE: June 26, 1985.
FOR FURTHER INFORMATION CONTACT:Lorenza Olivas or Peggy Clarke, Office of Compliance, International Trade Administration, U.S. Department of Commerce, Washington, D.C. 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On April 19, 1985, the Department of Commerce ("the Department") published in the Federal Register (50 FR 15597) the final results of its last administrative review of the countervailing duty order on non-rubber footwear from Brazil (39 FR 32903, September 12, 1974) and announced its intent to conduct the next review. As required by section 751(a)(1) of the Tariff Act of 1930 ("the Tariff Act"), the Department has now conducted that review.
On June 2, 1983, the International Trade Administration ("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 non-rubber footwear if the order were revoked (48 FR 24796). Consequently, the Department published in the Federal Register (48 FR 28310, June 21, 1983) a revocation of the order with respect to all merchandise entered, or withdrawn from warehouse, for consumption on or after October 29, 1981, the date of the ITC's notification to the Department of the request by the Brazilian government for such an injury determination.
Scope of the Review
Imports covered by the review are shipments of Brazilian non-rubber footwear currently classifiable under Part 1A, Schedule 7 of the Tariff Schedules of the United States Annotated, excluding items 700.5100 through 700.5400, 700.5700 through 700.7100, and 700.9000.
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The review covers the period January 1, 1981, through October 28, 1981, and ten programs: (1) Preferential financing for exports through CACEX; (2) an income tax exemption for export earnings; (3) preferential financing under CIC-CREGE 14-11; (4) BEFIEX; (5) CIEX; (6) incentives for trading companies (Resolution 643); (7) the export credit premium for the IPI; (8) preferential financing for the storage of merchandise destined for export (Resolution 330); (9) FINEX; and (10) Gold Draft of Exportation.
Analysis of Programs
(1) Preferential Financing for Exports Through CACEX
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 non-rubber footwear could obtain preferential financing for up to 40 percent of the value of its previous year's exports.
During the period of review, companies had loans outstanding under Resolution 641 (effective October 22, 1980) and Resolution 674 (effective January 22, 1981) of the Banco Central do Brasil. We determine that the benefit from these loans occurs when the cash flow effect occurs. That effect occurred when the borrower made the preferential interest payments. Under Resolution 641, the interest was deducted in advance. Resolution 674 required two interest payments, one 180 days after the loan was granted and the other at the maturity of the loan.
To calculate the subsidy for Resolution 641 loans, for each loan granted during the review period, we divided the number of days each loan was outstanding by 365 days and multiplied that ratio by the interest differential. Then we multiplied the result by the full loan principal for each loan. For Resolution 674 loans, we calculated the subsidy for loans with interest payments that fell due within the period of review by dividing the number of days of each interest period by 365 days. We then multiplied the result by the interest differential and then multiplied that ratio by the full loan principal. To find the interest differential for our calculations, we compared two effective rates. For our benchmark, we took the national average rate for thirty-day discounts of accounts receivable as reported in Analise/Business Trends. (This rate includes the tax on financial transactions, from which loans for the preferential financing were exempt.) We then compounded this rate to find the effective annual commercial benchmark. The resulting commercial benchmark for these loans was 91.64 percent. The effective preferential rate was 28.71 percent for Resolution 641 loans. For Resolution 674 loans, the rates ranged from 23.55 percent to 44 percent. We preliminarily determine the benefit from this program to be 1.98 percent ad valorem.
(2) Income Tax Exemption for Export Earnings
Exporters on non-rubber footwear are eligible under this program for an exemption for 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 1.77 percent ad valorem.
(3) Preferential Export Financing Under CIC-CREGE 14-11
CIC-CREGE 14-11 is a progam 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 non-rubber footwear participated in this program during the period of review.
There is no maximum interest rate for this program and interest payments by the exporters are normally made quarterly with the full principal to be repaid at the end of the loan term. The preferential interest rates ranged from 24 percent to 55 percent for loans with interest payments in the period of review. We calculated the benefit in a manner similar to that used for Resolution 674 financing, based on the interest payment date of such loans. We preliminarily determine the benefit conferred by this program to be 0.55 percent ad valorem.
Decree Law No. 77,065 of January 20, 1976, authorizes the Commission for Granting of Fiscal Benefits to Special Export Programs ("BEFIEX") to provide a reduction of up to 90 percent of the import duty and the Industrial Product Tax ("IPI") on equipment, machinery, apparatus, instruments, accessories, and tools imported by a company that makes minimum export commitments. One footwear exporter received benefits under this program in 1981. Dividing the benefits by total exports onf non-rubber footwear in 1981, we preliminarily determine an ad valorem benefit of 0.04 percent from this program.
Decree Law No. 1428 of December 2, 1975, authorizes the Commission for Export Incentives ("CIEX") to provide a reduction of up to 90 percent of the import duty and IPI tax on equipment, machinery, apparatus, instruments, accessories, and tools imported by a company that makes minimum export commitments. This program serves the same purpose as the BEFIEX program, but is aimed at small companies with low production and trade volumes. One footwear exporter received benefits under this program in 1981. Dividing these benefits by total exports of non-rubber footwear in 1981, we preliminarily determine an ad valorem benefit of 0.05 percent from this program.
(6) Incentives for Trading Companies (Resolution 643)
Under this program, CACEX declares trading companies eligible to receive loans at preferential rates. Eligible firms have access to a line of credit which can be drawn down to purchase goods for export. The trading companies use the loan principal as advance payment for the goods purchased. These loans are subject to the same interest constraints as Resolution 674 loans. Normally, the term of the loan is not to exceed 180 days but the actual length varies, running from the date of receipt of the loan to the date of shipment of the goods. The interest is paid in full at the end of the loan term. During the period of review, one firm received benefits under this program for the purchase of non-rubber footwear for export. However, we did not receive the full information we requested on these loans, in particular, amounts, dates of receipt, and interest payments. Therefore, using the best information available we calculated the benefit by multiplying the estimated loan amount by the estimated preferential interest rate differential. We estimated the loan amount to be the amount of exports that the footwear exporter shipped through the trading company. For the interest rate differential, we used the weighted average differential for 1981 loans under both Resolutions 641 and 674 (55.45 percent).
Using the same calculation method as for Resolution 674 loans, we preliminarily determine the ad valorem
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benefit under this program to be 0.04 percent.
(7) The Export Credit Premium for the IPI
Exporters of non-rubber footwear 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. Effective May 4, 1981, the Brazilian government imposed an export tax to offset the benefit of the premium on exports to the United States. However, we found that no firms paid this tax before December 1982 at which time they paid it without 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 the tax was actually paid. Under current practice, the offset tax is to be paid 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 compounded monthly discount rate (described for the Resolution 674 program). Using this, we preliminarily determine the ad valorem benefit to be 1.46 percent.
(8) Other Programs
We also examined the following programs and preliminary find that exporters of non-rubber footwear did not use
them during the period of review.
a. Preferential Financing for the Storage of Merchandise Destined for Export (Resolution 330)
b. Preferential Export Financing under Resolution 68 ("FINEX");
c. Gold Draft of Exploration.
Preliminary Results of the Review
As a result of our review, we preliminarily determine the aggregate net subsidy to be 5.89 percent ad valorem for the period of review. Accordingly, the Department intends to instruct the Customs Service to assess countervailing duties of 5.89 percent of the f.o.b. invoice price on any shipments exported on or after January 1, 1981, and entered, or withdrawn from warehouse, for consumption on or before October 28, 1981. As mentioned earlier, as a result of the ITC's negative injury determination, the Department revoked this order (48 FR 24796, June 21, 1983) with respect to all merchandise entered, or withdrawn from warehouse, for consumption on or after October 29, 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 after the date of publication. Any hearing, if requested, will be held 45 days after the date of publication or the first workday thereafter. Any request for an administrative protective order must be made no later than 5 days after the date of publication. The Department will publish the final results of this administrative review, including the results of its analysis of issues raised in such written comments or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1))
and § 355.41 of the Commerce Regulations (19 CFR 355.41).
Dated: June 20, 1985.
Alan F. Holmer,
Deputy Assistant Secretary, Import Administration.