NOTICES

56 FR 5401

DEPARTMENT OF COMMERCE

[C-351-062]

Pig Iron From Brazil; Preliminary Results of Countervailing Duty Administrative Review

Monday, February 11, 1991

*5401

AGENCY: International Trade Administration/Import Administration, Department of 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 pig iron from Brazil for the period January 1, 1989 through December 31, 1989. We preliminarily determine the net subsidy to be 0.24 percent ad valorem. In accordance with 19 CFR 355.7, any rate less than 0.50 percent ad valorem is de minimis. We invite interested parties to comment on these preliminary results.

EFFECTIVE DATE: February 11, 1991.

FOR FURTHER INFORMATION CONTACT:Mark Spellum or Maria MacKay, Office of Countervailing Compliance, International Trade Administration, U.S. Department of Commerce, Washington, DC 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On April 10, 1990, the Department of Commerce (the Department) published in the Federal Register a notice of "Opportunity to Request Administrative Review" (55 FR 13302) of the countervailing duty order on pig iron from Brazil (45 FR 23045; April 4, 1980). On April 26, 1990, one of the original petitioners, Shenango Inc., requested an administrative review of the order.

We published the initiation on June 1, 1990 (55 FR 22386). The Department has now conducted that administrative review in accordance with section 751 of the Tariff Act of 1930, as amended (the Tariff Act). The Department published the amended final results of the last administrative review on April 22, 1987 (52 FR 13269).

Scope of Review

Imports covered by this review are shipments of Brazilian pig iron of basic foundry, malleable, and low phosphorous grades. This merchandise is currently classifiable under Harmonized Tariff Schedule (HTS) item numbers 7201.10.00, 7201.20.00, 7201.30.00 and 7206.10.00. The HTS item numbers are provided for convenience and Customs purposes. The written description remains dispositive.
The review covers the period January 1, 1989 through December 31, 1989 and ten programs.

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. CACEX also provides comparable short-term working capital financing to trading companies under Resolution 883. 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 countervailabe 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.
We consider the benefit from loans to occur when the borrower makes the interest payments. During the review period, nine pig iron exporters made interest payments on CACEX loans. For those loans, 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 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 0.09 percent ad valorem.
This program was suspended, effective February 22, 1989, by Central Bank Resolution 1583 and terminated, effective August 30, 1990, by Central Bank Resolution 1744. For purposes of the cash deposit of estimated countervailing duties, we preliminarily determine the benefit from this program to be zero.

(2) Income Tax Exemption for Export Earnings

Under this program, exporters of pig iron are eligible for an exemption from income tax on the portion of their profits attributable to exports. The exporter calculates the tax-exempt portion of profit based on 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 1989 was 30 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 30 percent corporate tax rate. The eight pig iron exporters that claimed this exemption on their tax returns filed in 1989 invested in the specified companies and funds, and their effective tax rate was lower than the nominal 30 percent rate during the review period.
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 0.15 percent ad valorem. Decree Law 8034 of April 12, 1990 eliminated this tax exemption and established a prevailing corporate tax rate of 30 percent for domestic and export earnings for year of assessment 1991 (year basis 1990). For purposes of the cash deposit of estimated countervailing duties, we preliminarily determine the benefit from this program to be zero.

(3) Other Programs

We examined the following programs and preliminarily determine that exporters of pig iron did not use them during the review period:
a. BEFIEX and CIEX
b. PROEX and PROSIM
c. Preferential financing for the storage of merchandise
d. FST and EGF financing
e. Accelerated depreciation for Brazilian-made capital goods
f. FINEX
g. FUNPAR
h. FINEP

Preliminary Results of Review

As a result of our review, we preliminarily determine the net subsidy to be 0.24 percent ad valorem during the period January 1, 1989 through December 31, 1989. In accordance with 19 CFR 355.7, any benefit less than 0.50 ad valorem is de minimis.
Therefore, the Department intends to instruct the Customs Service to liquidate, without regard to countervailing duties, all shipments of Brazilian pig iron exported on or after January 1, 1989 and on or before December 31, 1989. Furthermore, the Department will instruct the Customs Service to waive the collection of cash deposits of estimated countervailing duties on all shipments of this merchandise 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 the 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 briefs, 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 submisson of rebuttal briefs. Copies of case briefs and rebuttal briefs must be served on interested parties in accordance with 19 CFR 355.38(e). Representatives of parties to the proceeding may request disclosure of proprietary information under administrative protective order no later than 10 days after the representative's client or employer becomes a party to the proceeding, but in no event later than the date the case briefs, under § 355.38(c), are due. 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: January 31, 1991.

Francis J. Sailer,
Acting Assistant Secretary for Import Administration.