NOTICES
DEPARTMENT OF COMMERCE
[C-351-807]
Preliminary Negative Countervailing Duty Determination: Silicon Metal From
Brazil
Tuesday, November 27, 1990
AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that no benefits which constitute countervailable subsidies are being provided to
manufacturers, producers, or exporters in Brazil of silicon metal as described below. If this investigation
(Cite as: 55 FR 49322)
proceeds normally, we will make a final determination on or before February 4, 1990.
EFFECTIVE DATE: November 27, 1990.
FOR FURTHER INFORMATION CONTACT:Mi-Yong Kim or Ross Cotjanle, Office of Countervailing Investigations, Import
Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution
Avenue NW., Washington, DC 20230; telephone: (202) 377-0189 or (202) 377- 3534, respectively.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based on our investigation, we preliminarily determine that de minimis benefits which constitute subsidies within the
meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or
exporters of silicon metal in Brazil. We preliminarily determine that the following programs confer subsidies:
- Income Tax Exemption for Export Earnings
(Cite as: 55 FR 49322)
- Preferential Working Capital Financing for Exports Provided by the Department of Foreign Commerce of the Central Bank of
Brazil (CACEX)
We determine the estimated net subsidy to be 0.36 percent ad valorem for all manufacturers, producers, or exporters in
Brazil of silicon metal. Since this rate is de minimis, and therefore not countervailable, our preliminary
countervailing duty determination is negative.
Case History
Since the publication of the notice of initiation in the Federal Register (55 FR 38729, September 20, 1990), the following
events have occurred.
On September 25, 1990, we issued a questionnaire to the Government of Brazil (GOB) in Washington, DC, concerning
petitioners' allegations. On October 16, 1990, we presented the GOB with a supplemental questionnaire. At the GOB's request,
the due date for the questionnaire responses was extended until November 2, 1990. On November 2, 1990, we received
responses from the GOB and six companies: Camargo Correia Metais S.A. (CCM); Companhia Brasileira Carbureto de Calcio
(CBCC); Companhia Ferroligas Minas Gerais (Minas Ligas); Eletroila S.A.; Ligas de Aluminio S.A. (LIASA); and RIMA
Electrometalurgia S.A. (RIMA).
On November 7, 1990, we issued a supplemental/deficiency questionnaire and
(Cite as: 55 FR 49322)
received responses on November 14, 1990. In this response, the GOB stated that Cia Industrial Fluminense (CIF) ceased
production of silicon metal in 1989.
On September 27, 1990, one of the respondents, CCM, alleged that petitioners lacked standing. For further discussion of this
issue, see the Standing section, below.
On October 3, 1990, the petition was amended to include the following interested parties as petitioners: Oil, Chemical and
Atomic Workers, Local 3- 89; International Union of Electronics, Electrical, Machine, and Furniture Workers, AFL-CIO Local
693; Textile Processors, Service Trades, Health Care Professional and Technical Employees International Union, Local 60;
United Steelworkers of America, Local 5171; United Steelworkers of America, Local 8538; and United Steelworkers of
America, Local 12646.
On October 9, 1990, petitioners submitted additional information on programs on which we did not initiate. We determined
that the additional information submitted by petitioners did not provide sufficient information to warrant initiation on these
programs. Our reasoning is outlined in a memorandum to the file.
On October 11, 1990, the U.S. International Trade Commission preliminarily found that imports of silicon metal from
Brazil materially injure, or threaten material injury to, a U.S. industry (55 FR 42079, October 17, 1990).
(Cite as: 55 FR 49322)
Scope of Investigation
The merchandise covered by this investigation is silicon metal containing at least 96.00 percent but less than 99.99
percent of silicon by weight. The subject merchandise is used primarily as an alloying agent from aluminum and in the
chemical industry as a precursor to silicons. Silicon metal is currently provided for in subheadings 2804.69.10 and
2804.69.50 of the Harmonized Tariff Schedule (HTS) as a chemical product, but is commonly referred to as a metal.
Semiconductor-grade silicon (silicon metal containing by weight not less than 99.99 percent of silicon and provided for
in subheading 2804.61.00 of the HTS) is not subject to this investigation. The HTS item numbers are provided for
convenience and U.S. Customs Service purposes. The Department's written description of the merchandise under
investigation remains dispositive.
Standing
As stated in the Case History section above, CCM alleges that petitioners lack standing. CCM cites Suramerica de Aleaciones
Laminadas, C.A. v. U.S., Slip. Op. 90-79 at 32 (CIT Aug. 22, 1990) in which the Court of International Trade held that the
Department cannot presume industry support for a petition. The Department has appealed this decision to the Court of
Appeals for the Federal
(Cite as: 55 FR 49322)
Circuit because there is nothing in the Act, its legislative history, or our regulations which requires petitioners to
affirmatively establish that they have the support of a majority of their industries. In many cases, such a requirement would
be so onerous as to preclude access to import relief under the countervailing and antidumping duty laws. Therefore,
consistent with our past practice, we have preliminarily determined that petitioner does not lack standing. See Frozen
Concentrated Orange Juice from Brazil: Final Determination of Sales at Less than Fair Value (52 FR 8324, March 17,
1987); Final Affirmative Countervailing Duty Determination: Certain Stainless Steel Hollow Products from Sweden (52
FR 5794, February 26, 1987); and, Final Affirmative Countervailing Duty Determination: Certain Fresh Atlantic
Groundfish From Canada (51 FR 10041, March 24, 1986).
Analysis of Programs
We received a response from the GOB and six producers or exporters (CCM, CBCC, Minas Ligas, Eletroila, LIASA, and RIMA).
We did not receive a response from CIF. For CIF, we used as the best information available, the highest calculated rate for
each program *49323
(Cite as: 55 FR 49322, *49323)
found to be countervailable in this investigation.
Consistent with our practice in preliminary determinations, when a response to
(Cite as: 55 FR 49322, *49323)
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 respondents have fully cooperated in the questionnaire process and the Department has no precise
evidence showing that the response is incorrect, we accept the response for purposes of the preliminary determination. All
such responses, however, 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 subsidies ("the review period") is
calendar year 1989, which corresponds to the most recently completed fiscal year for all of the respondent companies.
Based upon our analysis of the petition and the responses to our questionnaires, we preliminary determine the following:
I. Programs Preliminarily Determined To Be Countervailable
We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Brazil of
silicon metal under the following programs:
A. Income tax exemption for export earnings. Under this program, exporters of
(Cite as: 55 FR 49322, *49323)
silicon metal are eligible for a lower income tax rate on that portion of their profits attributable to exports. Companies
using this program calculate the fraction of profit eligible for this lower rate as the ratio of export revenue to total revenue.
Because this program provides a lower income tax rate which is limited to exporters, we preliminarily determine that it is
countervailable.
The nominal corporate tax rate in Brazil in 1989 was 30 percent for profits attributable to domestic sales and three
percent for profits attributable to export sales. Additionally, Brazilian tax law permits companies to reduce their income
taxes by investing up to 26 percent of their tax liability in special companies and funds designated by the GOB. This tax credit
effectively reduces the normal corporate tax rate. The five silicon metal exporters that claimed this reduction on their
tax returns filed in 1989 invested in the specified companies and funds, and their effective tax rate was lower than the
nominal rate during the review period.
We calculated the benefit for each company by subtracting the tax actually paid from the tax that would have been paid by
that firm absent the lower tax rate for export profits. In order to calculate the tax that would have been paid, we multiplied
total taxable profit by the 30 percent corporate tax rate and then deducted the 26 percent of tax liability derived from
domestic profits which was invested in the specially designated companies and funds. We then divided each company's
benefit by its total exports. Next, we weight-averaged
(Cite as: 55 FR 49322, *49323)
the benefit by each company's proportionate share of total exports of the subject merchandise to the United States. On this
basis, we preliminarily determie the benefit from this program to be 0.25 percent ad valorem for all manufacturers,
producers, and exporters of silicon metal in Brazil.
CCM stated that they did not benefit from the preferential tax rate for export earnings because their taxable profit was not
attributable to sales revenue. However, they did not provide an explanation for their claim. Therefore, as best information
available, we used the highest calculated company rate as CCM's rate, which is 0.43 percent ad valorem.
According to the response, on December 28, 1989, by Law No. 7988, the tax rate on income attributable to export sales
increased to 18 percent for the 1990 tax year. On April 12, 1990, by Law No. 8034, the tax rate or income attributable to
export sales increased by 30 percent for the 1991 tax year, thereby taxing all income at the same rate.
B. Preferential working capital financing for exports provided by the Department of Foreign Commerce of the Central Bank of
Brazil (CACEX). Under this program, the CACEX 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 Central Bank of Brazil to pay the lending
(Cite as: 55 FR 49322, *49323)
institution an "equalization fee," or rebate of up to 15 percentage points, which the lending institution could pass on to the
borrowers. On December 1, 1988, by Resolution 1538, CACEX reduced the equalization fee to 7.5 percentage points.
In addition, CACEX short-term loans are exempt from the "Imposto Sobre Operacoes Financieras" (IOF) tax. The IOF tax is a
general tax of 1.5 percent imposed on the principal of all financial transactions in Brazil.
Since the interest charged on CACEX financing under Resolution 1009 and 1538 is at prevailing market rates, this program
would not be countervailable absent the equalization fee and the exemption from the IOF.
Therefore, the benefit from these 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 exporters made interest payments on CACEX loans.
To calculate the benefit from CACEX loans on which interest was paid during the review period, we followed the short-term
loan methodology which has been applied consistently in our past determinations and which is described in more detail 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, 49 FR 18006 (April 26, 1984);
(Cite as: 55 FR 49322, *49323)
see also, Alhambra Foundry v. United States, 626 F. Supp. 402 (CIT, 1985).
We consider the benefit from a short-term loan to occur when the borrower makes an interest payment. For CACEX loans on
which interest was paid during the period of review, we multiplied the interest rate differential plus the amount of the IOF tax
exemption by the loan principal. We divided the benefit by each firm's total exports. We then weight-averaged the benefit by
each company's proportionate share of total exports on the subject merchandise to the United States. On this basis, we
preliminarily determine the benefit from this program to be 0.08 percent ad valorem for all manufacturers, producers, and
exporters of silicon metal in Brazil.
According to the response, on August 30, 1990, Resolution 1744 terminated this program.
II. Programs Preliminarily Determined To Be Not Used
Based on the responses, we preliminarily determine that manufacturers, producers, or exporters of silicon metal in
Brazil did not apply for, claim or receive benefits during the review period for exports of silicon metal to the United
States under the following programs:
A. Provision of electricity at preferential rates to silicon metal producers located in Minas Gerais. CEMIG, the
state-owned electrical utility in Minas
(Cite as: 55 FR 49322, *49323)
Gerais, provides reduced power rates in exchange for *49324
(Cite as: 55 FR 49322, *49324)
reduced power usage during peak periods. According to the response, CEMIG did not grant power rate reductions to any
companies in the silicon metal industry; no silicon metal producers in Minas Gerais received or petitioned to
receive reductions in power rates; and all silicon metal producers in Minas Gerais purchase power at the country-wide
tariff rate applicable to their usage classification. Therefore, we preliminarily determined that none of the companies under
review utilized this program during the period of review.
B. Benefits provided by the Commission for granting of fiscal benefits to special export programs (BEFIEX). BEFIEX allows
Brazilian exporters, in exchange for export commitments, to take advantage of several types of benefits, such as import duty
reductions, an increased IPI export credit premium, and tax exemptions or tax credits. According to the response of the
GOB, none of the companies under review utilized this program during the period of review.
C. Export financing provided by the Fundo de Financiamento a Exportacao (FINEX). Resolutions 68 and 509 of the Conselho
Nacional do Comercio Exterior (CONEX) provide that CACEX may draw upon the resources of FINEX to subsidize short- and
long-term loans for both Brazilian exporters (Resolution 68) and foreign importers (Resolution 509) of Brazilian goods.
CACEX pays the lending banks an "equalization fee" that makes up the difference between the subsidized
(Cite as: 55 FR 49322, *49324)
interest rate and the prevailing commercial rate. CACEX also provides the lending bank with a "handling fee" equal to two
percent of the loan principal in order to encourage foreign bank participation in the program. According to the response of
the GOB, none of the companies under review utilized this program during the period of review.
III. Programs Preliminarily Determined To Be Terminated
We preliminarily determine that the following programs were terminated prior to the period of our review:
A. Financing for the storage of merchandise destined for export (Resolution 330 of the Central Bank of Brazil). According
to the response of the GOB, this program was terminated on August 21, 1984, by Resolution 950.
B. Export promotion financing provided under the Programa de Financiamento a Producao para a Exportacao (PROEX).
According to the response of the GOB, this program was terminated on July 2, 1985, by National Bank for Economic and
Social Development ("BNDES") Resolution 613.
Verification
In accordance with section 776(b) of the Act, we will verify the information
(Cite as: 55 FR 49322, *49324)
used in making our final determination.
Critical Circumstances
Petitioner alleges that "circumstances" exist with respect to imports of silicon metal from Brazil. Section 703(e)(1)
of the Act provides that critical circumstances exist if there is a reasonable basis to believe or suspect that:
(A) The alleged subsidy is inconsistent with the Agreement, and
(B) There have been massive imports of the class or kind of merchandise which is the subject of the investigation over a
relatively short period.
Because we preliminarily determined that no benefits which constitute counteravailable subsidies are being provided to
manufacturers, producers, or exporters in Brazil of silicon metal, no subsidies exist which are inconsistent with the
Agreement. Therefore, in accordance with section 703(e)(1) and (2) of the Act, we preliminarily determine that critical
circumstances do not exist with respect to all manufacturers, producers, or exporters of silicon metal from Brazil.
Suspension of Liquidation
Due to the fact that the estimated net subsidy rate is de minimis, we are not
(Cite as: 55 FR 49322, *49324)
directing the U.S. Customs Service to suspend liquidation on entries of silcicon metal from Brazil at this time.
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 business 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 Investigations, Import Administration.
If our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes
its final determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if requested, not later than 10 days after the date of
publication of our preliminary
(Cite as: 55 FR 49322, *49324)
determination. Such a hearing will be held at 10 a.m. on Tuesday, January 22, 1991, at the U.S. Department of Commerce,
Room 3708, 14th Street and Constitution Avenue NW., Washington, DC 20230.
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, ten copies of the business proprietary version and five
copies of the nonproprietary version of the case briefs must be submitted to the Assistant Secretary no later than January 9,
1991. Ten copies of the business proprietary version and five copies of the nonproprietary version of the rebuttal briefs must
be submited to the Assistant Secretary no later than January 16, 1991. An interested party may make an affirmative
presentation only on arguments included in that party's case or rebuttal briefs. Written arguments should be submitted in
accordance with section 355.38 of the Commerce Department's regulations and will be considered if received within the time
limits specified above.
This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).
Dated: November 19, 1990.
Marjorie A. Chorlins,
(Cite as: 55 FR 49322, *49324)
Acting Assistant Secretary for Import Administration.
[FR Doc. 90-27852 Filed 11-26-90; 8:45 am]
BILLING CODE 3510-DS-M