56 FR 24058

NOTICES

DEPARTMENT OF COMMERCE

[C-351-406]

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

Tuesday, May 28, 1991

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

ACTION: Notice of preliminarily results of countervailing duty administrative review.

SUMMARY: The Department of Commerce has conducted an administrative review of the countervailing duty order on certain round shaped agricultural tillage tools from Brazil. We preliminarily determine the net subsidy to be 0.25 percent ad valorem for one firm and 1.15 percent ad valorem for all other firms for the period January 1, 1989 through December 31, 1989. 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: May 28, 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 October 5, 1990, the Department of Commerce (the Department) published in the Federal Register a notice of "Opportunity to Request Administrative Review" (55 FR 40931) of the countervailing duty order on certain round shaped agricultural tillage tools from Brazil (50 FR 42743; October 22, 1985) for the period January 1, 1989 through December 31, 1989. On October 31, 1990, Marchesan S.A. requested an administrative review for that period. We initiated the review on December 10, 1990 (55 FR 50739). The Department has now conducted this review in accordance with section 751 of the Tariff Act of 1930, as amended (the Tariff Act). The final results of the last administrative review of this order were

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published in the Federal Register on April 18, 1991 (56 FR 15862).

Scope of Review

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 merchandise was classifiable under item numbers 8432.21.00, 8432.29.00, 8432.80.00 and 8432.90.00 of the Harmonized Tariff Schedule (HTS). The HTS item numbers are provided for convenience and Customs purposes. The written description remains dispositive.
The review covers the periods January 1, 1989, through December 31, 1989 and nine 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 only provides financing at preferential rates 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, 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 0.25 percent ad valorem for Semeato, and 0.22 percent ad valorem for all other firms for the period January 1, 1989 through December 31, 1989.
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 1989 was 30 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 30 percent corporate tax rate. The four agricultural tillage tool 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 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 zero for Semeato, and 0.93 percent ad valorem for all other firms for the period January 1, 1989 through December 31, 1989.
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 period:
A. Preferential Export Financing under CIC-OPCRE of the Banco do Brasil
B. Preferential Financing for Industrial Enterprises by the Banco do Brasil (FST and EGF loans)
C. Reductions of Taxes and Import Duties under Decree Law No. 77.065 through BEFIEX and CIEX
D. Preferential Financing for National Trading Companies under Resolution 883 of the Banco Central do Brasil
E. Accelerated Depreciation for Brazilian-Made Capital Goods
F. Preferential Financing under Resolution 68 and 509 through FINEX
G. Preferential Financing under FINEP

Preliminary Results of Review

As a result of our review, we preliminarily determine the net subsidy to be 0.25 percent ad valorem for Semeato, and 1.15 percent ad valorem for all other firms for the period January 1, 1989 through December 31, 1989. In accordance with 19 CFR 355.7, any rate less than 0.50 percent ad valorem is de minimis.
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 1.15 percent of the f.o.b. invoice price on all other shipments of the subject merchandise exported on or after January 1, 1989 and on or before December 31, 1989.
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 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

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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: May 17, 1991.

Marjorie A. Chorlins,

Acting Assistant Secretary for Import Administration.