NOTICES
DEPARTMENT OF COMMERCE
[C-351-037]
Cotton Yarn From Brazil; Preliminary Results of Countervailing Duty Administrative Review
Thursday, September 19, 1991 *47456
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 cotton yarn from Brazil. We preliminarily determine the net subsidy to be zero for one firm, 0.20 percent ad valorem for one firm, 7.75 percent ad valorem for one firm, and 1.29 percent ad valorem for all other firms for the period January 1, 1990 through December 31, 1990. 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: September 19, 1991.
FOR FURTHER INFORMATION CONTACT: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 March 8, 1991, the Department of Commerce (the Department) published in the Federal Register a notice of "Opportunity to Request Administrative Review" (56 FR 9936) of the countervailing duty order on cotton yarn from Brazil ( 42 FR 14089; March 15, 1977) for the period January 1, 1990 through December 31, 1990. On April 1, 1991, the Government of Brazil requested an administrative review for that period. We initiated the review on April 18, 1991 (56 FR 15856). 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 published in the Federal Register on July 10, 1990 (55 FR 28269).
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 item numbers 5205.11.10, 5205.11.20, 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 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 period January 1, 1990 through December 31, 1990, six programs and the following nine producers/exporters of cotton yarn from Brazil: Cia Industrial e Agricola Boyes, Companhia Brasileira de Fiacao, Filobel S.A.-- Industrias Texteis do Brasil, Fiacao Nordeste do Brasil S.A.--Finobrasa, Cotonificio Guilherme Giorgi S.A., Fiacao e Tecelagem Kanedo do Brasil S.A., Nisshinbo do Brasil Industria Textil Ltda., Toyobo do Brasil Industria Textil, Unitika do Brasil Industria Textil Ltda. These companies accounted for ninety percent of exports of cotton yarn to the United States during the period of review.
Hyperinflationary Economies
According to statistics published by the Brazilian government, the annual inflation in Brazil during the review period was 1,285 percent. Under such circumstances, the clustering of nominal countervailable benefits either at the beginning or at the end of the review period would tend to distort the real value of the benefit bestowed on the firm. In this review, benefits from the SUDENE and Income Tax Reduction for Export Earnings programs were received at the beginning of the review period. Therefore, we have made a downward adjustment to the nominal values of annual exports or sales to calculate the benefit from these programs. This adjustment is based on the price deflator index used by the Brazilian government during the period of review, the Bonus do Tesouro Nacional (BTN). For further explanation of this methodology see Final Negative Countervailing Duty Determination: Silicon Metal From Brazil (56 FR 26988, June 12, 1991).
Calculation Methodology for Assessment and Cash Deposit Purposes
In calculating the benefits received during the review period, we followed the methodology described in the preamble to 19 CFR 355.20(d) (53 FR
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52325; December 27, 1988). First, we calculated a country-wide rate, weighted-averaging the benefits received by the nine companies subject to review to determine the overall subsidy from all countervailing programs benefitting exports of the subject merchandise to the United States. Because the country-wide rate was above de minimis, as defined by 19 CFR 355.7, we proceeded to the next step in our analysis and examined the ad valorem rate we had calculated for each company for all countervailing programs combined, to determine whether individual company rates differed significantly from the weighted-average country-wide rate. Two companies received aggregate benefits which were zero or de minimis (significantly different within the meaning of 19 CFR 355.22(d)(3)(ii)); one company, Fiacao Nordeste do Brasil S.A.--Finobrasa, received aggregate benefits which were otherwise significantly different in accordance with 19 CFR 355.22(d)(3)(i). These three companies must be treated separately for assessment and cash deposit purposes. The remaining six companies received aggregate benefits from all countervailing programs combined which were not significantly different from the weight-average country-wide rate; their rates were used in the calculation to establish the "all other" rate for the review period. See, e.g., Final Results of Countervailing Duty Administrative Review; Certain Apparel from Argentina (56 FR 41823; August 23, 1991) and Final Results of Countervailing Duty Administrative Review; Ceramic Tile from Mexico (56 FR 27496; June 14, 1991).
Analysis of Programs
(1) Income Tax Reduction for Export Earnings
This program was previously named 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 exporter calculates the tax-exempt portion of profit based on the ratio of export revenue to total revenue. Because this program provides tax reductions that are limited to exporters, we preliminarily determine that it is countervailable. The nominal corporate tax rate in Brazil in 1990 was 30 percent, while under this program, profits from export sales were taxed at a rate of three percent. Furthermore, Brazilian tax law permits all companies to reduce their income taxes by investing up to 24 percent of their tax liability in specified companies and funds. Three cotton yarn exporters claimed this income tax reduction for export earnings on their tax returns filed in 1990 and invested in the specified companies and funds, which lowered their effective tax rate below 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. In order to adjust for hyperinflation, the subsequent figures were converted into BTN using the same BTN rate used in the tax returns. 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. Each firm's total exports in new Cruzados for 1990 were deflated using the average BTN rate for 1990. We then weight-averaged the benefits by the 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 Unitika do Brasil Industria Textil Ltda. and Fiacao Nordeste do Brasil S.A.--Finobrasa, 0.01 percent ad valorem for Fiacao e Tecelagem Kanebo do Brasil S.A., and 0.36 percent ad valorem for all other firms for the period January 1, 1990 through December 31, 1990.
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 tax year 1990 (which is filed in 1991). We consider this elimination to be program wide change. Because it occurred prior to the issuance of these preliminary results and there are no residual benefits to the producers/exporters of cotton yarn, we have taken this program-wide change into account in setting our cash deposit rate. Therefore, for purposes of the cash deposit of estimated countervailing duties, we preliminarily determine the benefit from this program to be zero for all firms. See Countervailing Duties; Notice of Proposed Rulemaking and Request for Public Comment (54 FR 23366, May 31, 1989) § 355.50(a) (1) and (2) at page 23385.
(2) Reductions of Taxes and Import Duties through BEFIEX
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. Because this program provides tax reductions that are limited to exporters, we preliminarily determine that it is countervailable. Seven cotton yarn exporters received import duty tax reductions by virtue of their BEFIEX contracts during the review period.
To calculate the benefit, we divided the amount of each firm's import duty reductions received in 1990 by that firm's total exports in 1990. 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 to be zero for Unitika do Brasil Industria Textil Ltda., 0.19 percent ad valorem for Tiacao e Tecelagem Kanebo do Brasil S.A., 5.94 percent ad valorem for Fiacao Nordeste do Brasil S.A.--Finobrasa, and 0.93 percent ad valorem for all other firms.
Brazilian Law 8.032 of April 12, 1990 eliminated this program for new projects. However, the Department has not adjusted the cash deposit to take into account elimination of this program since we have determined that residual benefits may continue due to outstanding BEFIEX contracts. See Countervailing Duties; Notice of Proposed Rulemaking and Request for Public Comment (54 FR 23366, May 31, 1989) § 355.50(a) (1) and (2) at page 23385.
According to Brazilian Law Number 4239 of June 27, 1963, as amended, and under Decree Number 64214 of March 18, 1969, as amended, companies located in the Northeast of Brazil are eligible for exemption from income tax for production attributable to SUDENE-approved projects. The intent of this program is to encourage development of this region of Brazil. Because this exemption is only available to companies located in a specific region of Brazil, we find this to be countervailable domestic subsidy.
One cotton yarn exporter is located in the Northeast of Brazil and received a tax exemption for production attributable to its SUDENE-approved projects. The amount of the tax exemption due to this program can be found on a company's tax returns denominated in BTN. The benefit is equal to the amount of the exemption.
We divided the benefit received by the company by its total sales in order to calculate the company's ad valorem subsidy. Since the benefit from this program was received near the beginning of the review period, the company's total sales in New Cruzados
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were deflated using the average BTN rate for 1990. The individual benefits for each company were weight-averaged by the company's share of total exports of the subject merchandise to the United States. On this basis, we determined the benefit from this program to be 1.81 percent ad valorem for Fiacao Nordeste do Brasil S.A.--Finobrasa and zero for all other firms.
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. CACEX Preferential Working Capital Financing for Exports,
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).
Preliminary Results of Review
As a result of our review, we preliminarily determine the net subsidy to be zero for Unitika do Brasil Industria Textil Ltda., 0.20 percent ad valorem for Fiacao e Tecelagem Kanedo do Brasil S.A., 7.75 percent ad valorem for Fiacao Nordeste do Brasil S.A.--Finobrasa, and 1.29 percent ad valorem for all other firms for the period January 1, 1990 through December 31, 1990. In accordance with 19 CFR 355.7, any rate less than 0.5 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 Fiacao e Tecelagem Kanebo do Brasil S.A. and Unitika do Brasil Industria Textil Ltda. exported on or after January 1, 1990 and on or before December 31, 1990. The Department also intends to instruct the Customs Service to liquidate and assess countervailing duties of 7.75 percent of the f.o.b. invoice price for Fiacao Nordeste do Brasil S.A.--Finobrasa, and 1.29 percent of the f.o.b. invoice price on all other shipments of the subject merchandise exported on or after January 1, 1990 and on or before December 31, 1990.
The Department intends to instruct the Customs Service to waive cash deposits of estimated countervailing duties, as provided by section 751(a)(1) of the Tariff Act, on shipments of this merchandise from Fiacao e Tecelagem Kanebo do Brasil S.A. and Unitika do Brasil Industria Textil Ltda., and to collect a cash deposit of 7.75 percent of the f.o.b. invoice price from Fiacao Nordeste do Brasil S.A.--Finobrasa. The elimination of the Income Tax Reduction for Export Earnings program on April 12, 1990 decreases the total estimated duty deposit rate for all other firms to 0.93 percent ad valorem. These deposit rates are effective for all shipments 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 within 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: September 13, 1991.
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
[FR Doc. 91-22636 Filed 9-18-91; 8:45 am]