NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-351-037]
Certain Cotton Yarn Products From Brazil; Preliminary Results of Countervailing Duty Administrative Review
Friday, May 11, 1990
AGENCY: International Trade Administration/Import Administration, Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty Administrative Review.
SUMMARY: The Department of Commerce has conducted an administrative review of the countervailing duty order on certain cotton yarn products from Brazil for the period January 1, 1987 through December 31, 1987. The Department has preliminarily determined the net subsidy to be zero or de minimis for four firms and 2.36 percent ad valorem for all other firms. We invite interested parties to comment on these preliminary results.
EFFECTIVE DATE: May 11, 1990.
FOR FURTHER INFORMATION CONTACT: Philip Pia or Paul McGarr, Office of Countervailing Compliance, International Trade Administration, U.S. Department of Commerce, Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On February 1, 1990, the Department of Commerce ("Department") published in the Federal Register (55 FR 3442) the final results of its last administrative review of the countervailing duty order on certain cotton yarn products from Brazil (42 FR 14089; March 15, 1977). On March 29, 1988, the petitioner, the American Yarn Spinners Association, requested an administrative review of the order. We published the initiation on April 27, 1988 (53 FR 15084). The Department has now conducted that administrative review in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Scope of Review
Imports covered by this review are shipments of Brazilian yarn, carded but not combed, wholly of cotton. During the review period, such merchandise was classifiable under items 301.01 through 301.98, inclusive, and under item 302.--with statistical suffixes 20, 22, and 24 of the Tariff Schedules of the United States. This merchandise is currently classifiable under Harmonized Tariff Schedule (HTS) items 5205.11.10, 5202.11.20, 5205.12.10, 5205.12.20, 5205.13.10, 5205.13.20, 5205.14.10, 5205.14.20, 5205.15.10, 5205.15.20, 5205.31.00, 5205.32.00, 5205.33.00, 5205.34.00, and 5205.35.00. The HTS items are provided for convenience and Customs purposes. The written description remains dispositive.
The review covers the period January 1, 1987 through December 31, 1987 and sevel programs: (1) CACEX export financing; (2) an income tax exemption for export earnings; (3) BEFIEX; (4) the IPI export credit premium; (5) CIC- OPCRE 6-2-6 financing; (6) Price Equalization Program; and (7) FST financing.
Analysis of Programs
(1) CACEX Preferential Working Capital Financing for Exports
Under this program, the Department of Foreign Commerce ("CACEX") of the Banco do Brasil provides short-term working capital financing to exporters at preferential rates. The loans have a term of one year or less.
On May 2, 1985, Resolution 1009 made CACEX working capital financing available through commercial banks at prevailing market rates, with interest due at maturity. It authorized the Banco do Brasil to pay the lending institution an "equalization fee," or rebate, of up to 15 percentage points of the commercial interest rate, which the lending institution could pass on to the borrowers.
Since the interest charged on CACEX export financing under Resolution 1009 is at prevailing market rates, this program would not be countervailable absent the equalization fee and the exemption from the IOF (a general 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. During the period of review, four cotton yarn exporters made interest payments on CACEX loans.
We consider the benefit from 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 loan principal. We allocated the result over each firm's total exports and then weight-averaged the benefits by each
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firm's share of exports of the subject merchandise to the United States. On this basis, we preliminarily determine the benefit from this program to be 0.84 percent ad valorem for all firms except those with zero or de minimis aggregate benefits.
On November 30, 1988, CACEX reduced the equalization fee to 7.5 percentage points. For purposes of the cash deposit of estimated countervailing duties, we preliminarily determine the benefit from this program to be 0.46 percent ad valorem for all firms except those with zero or de minimis aggregate benefits.
(2) Income Tax Exemption for Export Earnings
Under this program, exporters of cotton yarn are eligible for an exemption from income tax on the portion of their profits attributable to exports. The Brazilian government calculates the tax-exempt fraction of profit 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 nominal corporate tax rate in Brazil in 1987 was 35 percent. However, Brazilian tax law permits companies to reduce their income taxes by investing up to 26 percent of their tax liability in specified companies and funds. This tax credit effectively reduces the nominal 35 percent corporate tax rate. The six cotton yarn exporters that claimed this exemption on their tax returns filed in 1987 invested in the specified companies and funds, and their effective tax rate was lower than the nominal 35 percent rate during the period of review.
We calculated the effective tax rate for each firm by dividing the net tax liability by taxable profit. We calculated the benefit by multiplying the amount of tax-exempt profit by the effective tax rate and allocating the result over each firm's total exports. We then weight-averaged the benefits by each firm's share of exports of the subject merchandise to the United States. On this basis, we preliminarily determine the benefit from this program to be 0.42 percent ad valorem for all firms except those with zero or de minimis aggregate benefits.
The Commission for the Granting of Fiscal Benefits to Special Export Programs ("BEFIEX") allows Brazilian exporters, in exchange for export commitments, to take advantage of several types of benefits, such as import duty reductions and accelerated depreciation for machinery used in the production of exports. Two cotton yarn exporters received import duty and IPI tax reductions by virtue of their BEFIEX contracts during the review period.
To calculate the benefit, we divided the amount of import duty and IPI tax reductions received in 1987 by that firm's total exports in 1987. Then weight- averaged the benefits by each firm's share of exports of the subject merchandise to the United States. On this basis, we preliminarily determine the benefit to be 1.10 percent ad valorem for all firms except those with zero or de minimis aggregate benefits.
We examined the following programs and preliminarily determine that exporters of cotton yarn did not use them during the review period:
a. CIC-OPCRE 6-2-6 financing; and
b. FST financing.
We verified that the Price Equalization Program and the IPI export credit premium were terminated in 1985.
Preliminary Results of Review
As a result of our review, we preliminarily determine the net subsidy to be zero or de minimis for the four firms listed below and 2.36 percent ad valorem for all other firms:
(1) Unitika do Brazil Industria Textil Ltda.;
(2) Cia. Industrial e Agricola Boyes;
(3) Minasa Trading S.A.; and
(4) filobel Comercial Ltda.
The Department intends to instruct the Customs Service to liquidate, without regard to countervailing duties, shipments of Brazilian carded cotton yarn from the four firms listed above, and to assess countervailing duties of 2.36 percent of the f.o.b. invoice price on shipments from all other firms exported on or after January 1, 1987 and on or before December 31, 1987.
The Department also intends to instruct the Customs Service to waive cash deposits of estimated countervailing duties on shipments of this merchandise from the four firms listed above and, as a result of the reduction in the equalization fee for CACEX export financing, to collect a cash deposit of estimated countervailing duties of 1.98 percent of the f.o.b. invoice price on shipments from all other firms entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this administrative review. Parties to the proceeding may request disclosure of the calculation methodology and interested parties may request a hearing not later than 10 days after date of publication of this notice. Interested parties may submit written arguments in case briefs on these preliminary results within 30 days of the date of publication. Rebuttal brief, limited to arguments raised in case briefs, may be submitted seven days after the time limit for filing the case brief. Any hearing, if requested, will be held seven days after the scheduled date for submission of rebuttal briefs. Copies of case briefs and rebuttal briefs must be served on interested parties in accordance with 19 CFR 355.38(e). Any request for disclosure under 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 any case or rebuttal brief 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 19 CFR 355.22.
Dated: May 3, 1990.
Lisa B. Barry,
Acting Assistant Secretary for Import Administration.
[FR Doc. 90-10986 Filed 5-10-90; 8:45 am]
BILLING CODE 3510-DS-M