56 FR 7340
NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-351-406]

Certain Round Shaped Agricultural Tillage Tools From Brazil; Preliminary Results of Countervailing Duty Administrative Reviews

Friday, February 22, 1991

AGENCY: International Trade Administration/Import Administration, Department of Commerce.

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ACTION: Notice of preliminary results of countervailing duty administrative reviews.
SUMMARY: The Department of Commerce has conducted administrative reviews of the countervailing duty order on certain round shaped agricultural tillage tools from Brazil. We preliminarily determine the net subsidy to be zero for one firm and 1.19 percent ad valorem for all other firms for the period January 1, 1987 through December 31, 1987, and zero for one firm and 1.06 percent ad valorem for all other firms for the period January 1, 1988 through December 31, 1988. We invite interested parties to comment on these preliminary results.

EFFECTIVE DATE: February 22, 1991.

FOR FURTHER INFORMATION CONTACT:Anne Driscoll, Elizabeth Levy or Michael Rollin, Office of Countervailing Compliance, International Trade Administration, U.S. Department of Commerce, Washington, DC 20230; telephone: (202) 377-5260.

SUPPLEMENTARY INFORMATION: .

Background

On September 30, 1988, and October 6, 1989, the Department of Commerce (the Department) published in the Federal Register notices of "Opportunity to Request Administrative Review" (53 FR 41317) of the countervailing duty order on certain round shaped agricultural tillage tools (50 FR 42743; October 22, 1985) for the periods January 1, 1987 through December 31, 1987, and January 1, 1988 through December 31, 1988, respectively. On October 31, 1988, Baldan Implementos Agricolas S.A. and Marchesan Implementos e Maquinas Agricolas "TATV" S.A., requested an administrative review covering the period January 1, 1987 through December 31, 1987. We initiated the review on December 5, 1988 (53 FR 48951). On October 31, 1989, Baldan Implementos Agricolas S.A., requested an administrative review for the period January 1, 1988 through December 31, 1988. We initiated the review on November 20, 1989 (54 FR 48010). The Department has now conducted these reviews in accordance with section 751 of the Tariff Act of 1930, as amended (the Tariff Act). These are the first administrative reviews since the publication of the order.

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).
Imports covered by this review are shipments of certain round shaped agricultural tillage tools (discs) with plain or notched edge, such as colters and furrow-opener blades. During the review period, such mechandise was classified under item numbers 666.0015, 666.0020, 666.0050, 666.0060, 666.0065 and 666.0075 of the Tariff Schedules of the United States Annotated (TSUSA). This merchandise is currently classifiable under HTS item numbers 8432.21.00, 8432.29.00, 8432.80.00 and 8432.90.00. The TSUSA and HTS item numbers are provided for convenience and Customs purposes. The written description remains dispositive.
The reviews cover the periods January 1, 1987 through December 31, 1987 and January 1, 1988 through December 31, 1988, and thirteen programs.

Analysis of Programs

(1) CACEX Preferential Working Capital Financing for Exports

Under this program, the Department for 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 borrowers. In addition, the IOF (a general tax on financial transactions) does not apply to these loans.
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. 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 both review periods, three agricultural tillage tool 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 zero for Semeato, and 0.94 percent ad valorem for all other firms for the period January 1, 1987 through December 31, 1987, and zero for Semeato, and 0.99 percent ad valorem for all other firms for the period January 1, 1988 through December 31, 1988.
This program was 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 for all firms.

(2) Income Tax Exemption for Export Earnings

Under this program, exporters of agricultural tillage tools 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 1987 and 1988 was 35 percent. However, Brazilian tax law permits all companies to reduce their income taxes by investing up to 26 percent of their tax liability in specified companies and >funds. These tax credits effectively reduce the nominal 35 percent corporate tax rate. The four agricultural tillage tool exporters that claimed this exemption on their tax returns filed for 1987 and 1988 invested in the specified companies and funds, and their effective tax rate was lower than the nominal 35 percent rate during the periods 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

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the benefit from this program to be zero for Semeato, and 0.25 percent ad valorem for all other firms for the period January 1, 1987 through December 31, 1987, and zero for Semeato, and 0.07 percent ad valorem for all other firms for the period January 1, 1988 through December 31, 1988.
Decree Law 8034 of April 12, 1990 eliminated this tax exemption and established a prevailing 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 for all firms.

(3) Other Programs

We also examined the following programs and preliminarily determine that the exporters of the subject merchandise did not use them during the review periods:
A. Export Credit Premium for IPI/Portaria 176/84.
B. Preferential Export Financing under CIC-OPCRE of the Banco do Brasil.
C. Preferential Financing for Industrial Enterprises by the Banco do Brasil (FST and EGF loans).
D. Reductions of Taxes and Import Duties under Decree Law No. 77.065 through BEFIEX and CIEX.
E. Preferential Financing for National Trading Companies Under Resolution 883 of the Banco Central do Brasil.
F. Accelerated Depreciation for Brazilian-Made Capital Goods.
G. Preferential Financing under Resolution 68 and 509 through FINEX.
H. Preferential Financing under Resolution 578/83 through FUNPAR.
I. Preferential Financing under FINEP.
J. Preferential Financing under Resolution 579/83 through PROEX and PROSIM.
K. Preferential Financing for the Storage of Merchandise Destined for Export under Resolution 330/Portaria 130 of the Banco do Brasil.

Preliminary Results of Review

As a result of our review, we preliminarily determine the net subsidy to be zero for Semeato, and 1.19 percent ad valorem for all other firms for the period January 1, 1987 through December 31, 1987, and zero for Semeato, and 1.06 percent ad valorem for all other firms for the period January 1, 1988 through December 31, 1988.
Therefore, the Department intends to instruct the Customs Service to liquidate, without regard to countervailing duties, shipments of this merchandise from Semeato, and to assess countervailing duties of 1.19 percent of the f.o.b. invoice price on all other shipments of the subject merchandise exported on or after January 1, 1987 and on or before December 31, 1987. The Department also intends to instruct the Customs Service to liquidate, without regard to countervailing duties, shipments of this merchandise from Semeato, and to assess countervailing duties of 1.06 percent of the f.o.b. invoice price on all other shipments of the subject merchandise exported on or after January 1, 1988 and on or before December 31, 1988.
Further, the Department intends to instruct the Customs Service to waive the collection of cash deposits of estimated countervailing duties on all shipments of the subject merchandise from Brazil enterd, 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 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). 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: February 15, 1991.

Marjorie A. Chorlins,

Acting Assistant Secretary for Import Administration.