NOTICES
DEPARTMENT OF COMMERCE
[C-351-609]
Preliminary Affirmative Countervailing Duty Determination: Certain Forged
Steel Crankshafts from Brazil
Thursday, January 8, 1987
*699
(Cite as: 52 FR 699, *699)
AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that benefits which constitute subsidies within the meaning of the
countervailing duty law are being provided to
(Cite as: 52 FR 699, *699)
manufacturers, producers, or exporters in Brazil of certain forged steel crankshafts. The estimated net subsidy is
4.96 percent ad valorem. We have notified the United States International Trade Commission (ITC) of our determination.
We are directing the United States Customs Service to suspend liquidation of all entries of the subject merchandise which are
entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice. We have also
directed the United States 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 not later than March 18, 1987.
EFFECTIVE DATE: January 8, 1987.
FOR FURTHER INFORMATION CONTACT:Thomas Bombelles or Barbara Tillman, Office of Investigations, Import
Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution
Avenue, NW., Washington, DC 20230; telephone (202) 377-3174 or 377-2438.
(Cite as: 52 FR 699, *699)
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based upon our investigation, we preliminarily determine that certain benefits which constitute subsidies *700
(Cite as: 52 FR 699, *700)
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 certain forged steel crankshafts. For purposes of this investigation, the
following programs are found to confer subsidies:
- Preferential Working Capital Financing for Exports
- Income Tax Exemption for Export Earnings
We preliminarily determine the estimated net subsidy to be 4.96 percent ad valorem.
Case History
On October 9, 1986, we received a petition in proper form from the Wyman- Gordon Company, a domestic manufacturer of
certain forged steel crankshafts. In compliance with the filing requirements of § 355.26 of the Commerce
(Cite as: 52 FR 699, *700)
Regulations (19 CFR 355.26), the petition alleges that manufacturers, producers, or exporters in Brazil of certain forged
steel crankshafts receive, directly or indirectly, subsidies within the meaning of section 701 of the Act, and that these
imports materially injure, or threaten material injury to, United States industry.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and
on October 29, 1986, we initiated such an investigation (51 FR 40240, November 5, 1986). We stated that we expected to
issue a preliminary determination not later than January 2, 1987.
Since Brazil is entitled to an injury determination under section 701(b) of the Act, the ITC is required to determine
whether imports of the subject merchandise from Brazil materially injure, or threaten material injury to, a United States
industry. Therefore, we notified the ITC of our initiation. On November 24, 1986, the ITC determined that there is a
reasonable indication that an industry in the United States is materially injured by reason of imports from Brazil of
certain forged steel crankshafts (51 FR 44537, December 10, 1986).
On November 10, 1986, we presented a questionnaire to the Government of Brazil in Washington, DC, concerning the
petitioner's allegations, and we requested a response by December 10, 1986. On December 10, 1986, we received a response
to our questionnaire.
(Cite as: 52 FR 699, *700)
There are two known manufacturers and producers in Brazil of certain steel forged crankshafts that exported to the
United States during the review period. These are Krupp Metalurgica Campo Limo Ltda. (Krupp), and Sifco S.A. In addition,
Brasifco S.A. (Brasifco), is a trading company which exported the subject merchandise from Brazil to the United States
during the review period. According to the Government of Brazil, Krupp, Sifco and Brasifco account for substantially all
exports of certain forged steel crankshafts to the United States.
Scope of Investigation
The products covered by this investigation are forged carbon or alloy steel crankshafts with a shipping weight of
between 40 and 750 pounds, whether machined or unmachined. These products are currently classified under items
660.6713, 660.6727, 660.6747, 660.7113, 660.7127, and 660.7174 of the Tariff Schedules of the United States Annotated
(TSUSA). Neither cast crankshafts nor forged crankshafts with shipping weights of less than 40 pounds or greater
than 750 pounds are subject to this investigation.
Analysis of Programs
(Cite as: 52 FR 699, *700)
Throughout this notice, we refer to certain general principles which 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).
Consistent with our practice in preliminary determinations, when a response to an allegation denies the existence of a
program or receipt of benefits under a program, and the Department has no persuasive evidence showing that the response is
incorrect, we accept the response for purposes of our preliminary determination. All such responses are subject to
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.
For purposes of this preliminary determination, the period for which we are measuring subsidization ("the review period") is
calendar year 1985. In its response, the Government of Brazil provided data for the applicable period, including financial
statements for Krupp, Sifco and Brasifco.
Based upon our analysis of the petition, and the responses to our questionnaire, we preliminarily determine the following:
I. Programs Preliminarily Determined to Constitute Subsidies
(Cite as: 52 FR 699, *700)
We preliminarily determine that countervailable benefits are being provided to manufacturers, producers, or exporters in
Brazil of certain forged steel crankshafts under the following programs:
A. Preferential Working-Capital Financing for Exports. The Carteria do Comercio Exterior (Foreign Trade Department of
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 loans were provided under Resolutions 882, 883, 950, and 1009.
Eligibility for this type of financing is determined on the basis of past export performance or 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 the subject merchandise for such financing was 20 percent of the adjusted value
of exports.
Following approval by CACEX of their applications, participants in the program receive certificates representing the total
dollar amount for which they are eligible. The certificates are presented to banks in return for cruzeiros at the exchange rate
in effect on the date of presentation. Loans provided through this program are made for a term of up to one year.
The interest rate on Resolution 882 and 883 loans was one hundred percent of
(Cite as: 52 FR 699, *700)
monetary correction, plus three percent. We compared this interest rate to our short-term benchmark, which is the discount
rate on accounts receivable as published in Analise/Business Trends, a Brazilian financial publication. The interest rate
charged on these loans is below our benchmark.
On August 21, 1984, Resolutions 882 and 883 were amended by Resolution 950. Resolution 950 loans are made by
commercial banks, with interest paid at the time of principal repayment. Under Resolution 950, the Banco do Brasil paid the
lending institution an equalization fee of up to 10 percentage points in interest (after monetary correction). Resolution 950
was amended in May 1985 by Resolution 1009 and the equalization fee was increased to 15 percentage points in interest
charged (after monetary correction). Therefore, if the interest rate charged to the borrower is less than full monetary
correction plus 15 percent the Banco do Brasil pays the lending bank an equalization fee, of up to 15 percentage points.
According to the response, the lending bank passes the equalization fee on to the borrower in the form of a reduction of the
interest due. Thus, the equalization fee reduces the interest rate on these working *701
(Cite as: 52 FR 699, *701)
capital loans below the commercial rate of interest. These loans are also exempt from the Imposto sobre Operacoes
Financieras (Tax on Financial Operations or IOF), a tax charged on all domestic financial transactions in Brazil.
Since receipt of working-capital financing under Resolutions 882, 883,
(Cite as: 52 FR 699, *701)
950 and 1009 is contingent on export performance, and provides funds to participants at preferential rates, we preliminarily
determine that this program confers an export subsidy. In order to calculate the benefit, we multiplied the value of all those
loans repaid in 1985 by the sum of the difference between the applicable interest rates and our benchmark, plus the IOF. We
then allocated the benefit over the total value of the 1985 exports, resulting in an estimated net subsidy of 3.59 percent ad
valorem.
B. Income Tax Exemption for Export Earnings. Under Decree-Laws 1158 and 1721, Brazilian exporters are eligible for an
exemption from income tax on the 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.
The two producers and one trading company under investigation took an exemption from income tax payable in 1985 on a
portion of income earned in 1984. We multiplied that portion of income exempt from taxation by the companies' effective tax
rates, and allocated the benefit over the total value of their 1985 exports to calculate an estimated net subsidy of 1.37
percent ad valorem.
II. Programs Preliminarily Determined Not to be Used
(Cite as: 52 FR 699, *701)
We preliminarily determine that manufacturers, producers, or exporters in Brazil of certain forged steel crankshafts
did not use the following programs, which were listed in our notice of "Initiation of a Countervailing Duty
Investigation: Certain Forged Steel Crankshafts from Brazil."
A. Resolution 330 of the Banco Central do Brasil. Resolution 330 provides financing for up to 80 percent of the value or the
merchandise placed in a specified bonded warehouse and destined for export. Exporters of certain forged steel
crankshafts would be eligible for financing under this program. However, the Government of Brazil stated in its
response that none of the respondents borrowed, or had outstanding, loans under this program during the review period;
therefore, we preliminarily determine that this program was not used.
B. Exemption of IPI Tax and Customs Duties on Imported Capital 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 Imposto sobre Produtos Industrializados (Tax on Industrial Products or IPI) 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
(Cite as: 52 FR 699, *701)
for added capacity in Brazil. The Government of Brazil stated in its response that none of the forged steel crankshaft
producers subject to the investigation received incentives under this program during the review period.
C. The BEFIEX Program. The Comissao para a Consessao de Beneficios Fiscais a Programs Especiais de Exportacao
(Commission for the Granting of Fiscal Benefits to Special Export Programs or BEFIEX) grants at least four categories of
benefits to Brazilian exporters:
- First, under Decree-Law 77.065, BEFIEX may reduce by 70 to 90 percent import duties on the importation of machinery,
equipment, apparatus, insturments, 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 on imports of components, raw materials and
intermediary products;
- Second, under Article 13 of Decree No. 72.1219, BEFIEX may extend the carry- forward period for tax losses from to six
years;
- Third, under Article 14 of the same decree, BEFIEX may allow special amortization of pre-operational expenses related to
approved products; and
- Fourth, the Government of Brazil may continue to provide the IPI export credit premium to approved exporters
pursuant to long-term BEFIEX contracts.
In the response, the Government of Brazil stated that the forged steel crankshaft producers under investigation did not
participate in this program during the review period.
(Cite as: 52 FR 699, *701)
D. The CIEX Program. Decree-Law 1428 authorized the Comissao para Incentivos a Exportacao (Commission for Export
Incentives or CIEX) to reduce import taxes and the IPI by up to ten percent on certain equipment for use in export
production. In its response, the Government of Brazil stated that none of the forged steel crankshaft producers under
investigation participated in this program during the review period.
E. Accelerated Depreciation for Brazilian-Made Capital Equipment. 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 the response, the Government of Brazil
stated that none of the forged steel crankshaft producers under investigation used this program during the review period.
F. 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 Resolution 950. In the response, the Government of
Brazil stated that the trading company respondent did not borrow, or have outstanding, any loans under this program
during the review period.
G. The PROEX Program. Short-term credits for exports are available under the Programa de Financiamento a Producao para a
Exportacao (Export Production Financing Program or PROEX), a loan program operated by Banco Nacional do
(Cite as: 52 FR 699, *701)
Desenvolvimento Economico e Social (National Bank of Economic and Social Development or BNDES). In the response, the
Government of Brazil stated that none of the forged steel crankshaft producers or exporters under investigation received
loans or had loans outstanding under this program during the review period.
H. Resolutions 68 and 509 (FINEX) Financing. Resoultions 68 and 509 of the Conselho Nacional do Comercio Exterior
(National Foreign Trade Council or CONCEX) provide that CACEX may draw upon the resources of the Fundo de
Financiamento a Exportacao (Export Financing Fund or FINEX) to extend dollar- denominated loans to both exporters and
United States buyers of Brazilian goods. Financing is granted on a transaction-by-transaction basis. In its response, the
Government of Brazil stated that neither the companies under investigation nor United States buyers of the subject
merchandise received Resolution 68 or 509 financing or had outstanding loans during the review period.
I. Loans Through the Apoio o Desenvolvimento Tecnologica a Empresa Nacional (ADTEN). Petitioner alleges that the
Government of Brazil maintains, through the Financiadora de *702
(Cite as: 52 FR 699, *702)
Estudos Projectos (Financing of Research Projects or FINEP), a loan program, ADTEN (Support of the Technological
Development of National Enterprises), that provides long-term loans on terms inconsistent with commerical considerations
to encourage the growth of industries and development
(Cite as: 52 FR 699, *702)
of technology. In the response, the Government of Brazil stated that none of the companies under investigation received,
or had outstanding, loans through this program during the review period.
J. 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. According to the response of the Government of Brazil, none of the
companies under investigation had loans under this program during the review period.
K. IPI 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. According
to the response of the Government of Brazil, the companies under investigation are not eligible to participate in this
program.
III. Program Preliminary Determined to Require Additional Information
(Cite as: 52 FR 699, *702)
Articles 13 and 14 of Decree-Law 2303. According to information submitted on the record of this investigation after we
issued our questionnaire, on November 21, 1986, the Government of Brazil passed Decree-Law 2303, authorizing certain
changes in the tax code. Article 13 of this Decree-Law changes the method of calculating export profits for the purpose of
granting certain fiscal incentives. Article 14 exempts, wholly or partially, firms which export manufactured products from
the excess profits tax if exports account for more than a designated amount of total revenue. We intend to obtain as much
information as possible regarding the effects of these changes in the tax law at verification.
Verification
In accordance with section 776(a) of the Act, we will verify the data used in making our final determination. We will not
accept any statement in a response that cannot be verified for our final determination.
Suspension of Liquidation
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
(Cite as: 52 FR 699, *702)
forged steel crankshafts from Brazil entered or withdrawn from warehouse, for consumption, on or after the date of
publication of this notice in the Federal Register, and to require a cash deposit or bond for each such entry of this
merchandise of 4.96 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 all nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all
privileged and proprietary 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 United States industry 120
days after the Department makes its preliminary affirmative determination or 45 days after its final affirmative
determination, whichever is latest.
In accordance with § 355.35 of the Commerce Regulations (19 CFR 355.35) we
(Cite as: 52 FR 699, *702)
will, if requested, hold a public hearing to afford interested parties an opportunity to comment on this preliminary
determination. The hearing will be held at 10:00 a.m. on February 13, 1987, at the United States Department of Commerce,
Room 3708, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to participate in the
hearing must submit a request to the Deputy Assistant Secretary, Import Administration, Room B-099, at the above address
within 10 days of the publication of this notice in the Federal Register.
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 the proprietary version and
seven copies of the nonproprietary version of the prehearing briefs must be submitted to the Deputy Assistant Secretary by
February 6, 1987. Oral presentations will be limited to issues raised in the briefs. In accordance with 19 CFR 353.33(d) and 19
CFR 355.34, written views will be considered if received not less than 30 days before the final determination or, if a hearing is
held, within 10 days after the hearing transcript is available.
This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f).
(Cite as: 52 FR 699, *702)
Gilbert B. Kaplan,
Deputy Assistant Secretary for Import Administration.
January 2, 1987.
[FR Doc. 87-376 Filed 1-7-87; 8:45 am]
BILLING CODE 3510-DS-M