Certain Castor Oil Products From Brazil; Preliminary Results of Countervailing
Duty Administrative Review
AGENCY: International Trade Administration/Import Administration, Department of Commerce. ACTION: Notice of preliminary results of countervailing duty administrative review.
Scope of Review
The United States, under the auspices of the Customs Cooperation Council, has developed a system of tariff
classification based on the international harmonized system of Customs nomenclature. On January 1, 1989, the
United States fully converted to the Harmonized Tariff Schedule (HTS), as provided for in section 1201 et seq.
of the Omnibus Trade and Competitiveness Act of 1988. All merchandise entered, or withdrawn from
warehouse, for consumption on or after that date is now classified solely according to the appropriate HTS item number(s).
(2) Income Tax Exemption for Export Earnings
SUMMARY: The Department of Commerce has conducted an administrative review of the countervailing duty
order on certain castor oil products from Brazil. We preliminarily determine that for the period January 1, 1987
through December 31, 1987 the net subsidy is 0.27 percent ad valorem. We consider any rate below 0.50
percent ad valorem to be de minimis. We invite interested parties to comment on these preliminary results.
EFFECTIVE DATE: July 3, 1989.
FOR FURTHER INFORMATION CONTACT:Jean Carroll Kemp or Ilene Hersher, Office of Countervailing
Compliance, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTAL INFORMATION: On November 2, 1987, the Department of Commerce ("the Department")
published in the Federal Register (52 FR 42025) the final results of its last administrative review of the
countervailing duty order on certain castor oil products from Brazil (41 FR 8634; March 16, 1976). On March
31, 1988, Sociedade Algodeira do Nordeste Brasileiro (SANBRA), an exporter of the merchandise, requested in
accordance with the Commerce Regulations an administrative review of the order. We published the initiation
on April 27, 1988 (53 FR 15083). The Department has now conducted that administrative review in
accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Imports covered by the review are shipments of Brazilian hydrogenated castor oil and 12-hydroxystearic acid.
During the review period, such merchandise was classifiable under items 178.2000, 490.2650, and 490.2670 of
the Tariff Schedules of the United States Annotated. Such merchandise is currently classifiable under HTS
items 1516.10.10, 1516.20.90, 1517.90.40, 1519.11.00, 1519.12.00, 1519.19.40, 2915.70.00, and 2916.19.30.
As with the TSUSA, the HTS numbers are provided for convenience and Customs purposes. The written
description remains dispositive of the scope.
The review covers the period January 1, 1987 through December 31, 1987 and 14 programs: (1) CACEX
preferrential working capital financing for exports; (2) income tax exemption for export earnings; (3) the IPI
export credit premium under BEFIEX; (4) export financing under CIC-OPCRE 6-2-6 (CIC-CREGE 14-11); (5)
industrial enterprise loans (FST and EGF); (6) import duty and tax reductions under BEFIEX and CIEX; (7)
preferential financing for trading companies under Resolution 883; (8) accelerated depreciation for Brazilian-
made capital goods; (9) FINEX export financing; (10) FUNPAR; (11) PROEX; (12) PROSIM; (13) financing for
the storage of merchandise destined for export (Resolution 330); and (14) "Green-Yellow" drawback.
Analysis of Programs
(1) CACEX Preferential Working Capital Financing for Exports
Under this program, the Department of Foreign Commerce ("CACEX") of the Branco do Brasil provides short-term working capital financing to exporters at
preferential rates. The loans have a term of one year or less. Two producers and exporters of the merchandise
during the review period made interest payments on CACEX loans during the review period.
On August 21, 1984, Resolution 950 made CACEX working capital financing available through commercial
banks at prevailing market rates, with interest due at maturity. It authorized the Branco do Brasil to pay the
lending institution an "equilization fee," or rebate, of up to 10 percentage points over the commercial interest
rate, which the lending institution passed on to the borrowers. On May 2, 1985, Resolution 1009 increased the
equalization fee to 15 percentage points.
Since the interest charged on CACEX export financing under Resolutions 950 and 1009 is at prevailing market
rates, this program would not be countervailable absent the equalization fee and the exemption from the IOF (a
tax on financial transactions).
Therefore, the interest differential for those loans is equal to the equalization fee plus the 1.5 percent IOF.
Because this program provides financing at preferential rates only to exporters, we preliminarily determine that it
is countervailable.
We consider the benefit from short-term loans to occur when the borrower makes the interest payments. For
CACEX loans on which interest was paid during the period of review, we multiplied the interest differential by
the length of the loan and the loan principal. We allocated the result over each company's total exports. We then
weight-averaged each company's benefit from this program by the company's proportion of exports to the
United States. On this basis, we preliminarily determine the benefit from this program to be 0.27 percent ad
valorem for the period January 1, 1987 through December 31, 1987.
Under this program, exporters of certain castor oil products are
eligible for an exemption from income tax on the portion of their profits attributable to exports. According to
Brazilian tax law, the tax-exempt fraction of profit is calculated as the ratio of export revenue to total revenue.
Because this program provides tax exemptions that are limited to exporters, we preliminarily determine that it is countervailable.
The two companies under review reported operational losses and claimed no tax exemption benefits on the tax
returns filed during the review period. Therefore, we preliminarily determine the benefit from this program to be
zero for the period January 1, 1987 through December 31, 1987.
s(3) Other Programs
We also examined the following programs and preliminarily determine that producers and exporters of certain
castor oil products from Brazil did not benefit from them during the review period:
(1) The IPI export credit under BEFIEX;
(2) Export financing under CIC-OPCRE 6-2-6 (CIC-CREGE 14-11);
(3) Industrial enterprise loans (FST and EGF);
(4) Import duty and tax reductions under BEFIEX and CIEX;
(5) Preferential financing for trading companies under Resolution 883;
(6) Accelerated depreciation for Brazilian-made capital goods;
(7) FINEX export financing;
(8) FUNPAR;
(9) PROEX;
(10) PROSIM;
(11) Financing for the storage of merchandise destined for export (Resolution 330); and
(12) "Green-Yellow" drawback.