(Cite as: 56 FR 58879)
NOTICES
DEPARTMENT OF COMMERCE
[C-351-504]
Certain Heavy Iron Construction Castings From Brazil; Preliminary Results of
Countervailing Duty Administrative Review
Friday, November 22, 1991
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(Cite as: 56 FR 58879, *58879)
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
(Cite as: 56 FR 58879, *58879)
the countervailing duty order on certain heavy iron construction castings from Brazil. We preliminarily
determine the net subsidy to be 0.33 percent ad valorem for all 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: November 22, 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)
377-2786.
SUPPLEMENTARY INFORMATION:
Background
On May 21, 1991, the Department of Commerce (the Department) published in the Federal Register a notice of "Opportunity
to Request Administrative Review" (56 FR 23271) of the countervailing duty order on certain heavy iron
construction castings from Brazil (51 FR 17786; May 15, 1986) for the period January 1, 1990
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through December 31, 1990. On may 31, 1991, the Government of Brazil requested an administrative review of the order.
We initiated the review covering the period January 1, 1990 through December 31, 1990, on June 18, 1991 (56 FR 27943).
The Department has now conducted this review in accordance with section 751 of the Tariff Act of 1930, as amended (the
Tariff Act).
Scope of Review
Imports covered by this review are shipments of certain heavy iron construction castings from Brazil, which are
defined for purposes of this proceeding as manhole covers, rings and frames; catch basin grates and frames; and cleanout
covers and frames. Such castings are used for drainage or access purposes for public utility, water and sanitary systems.
During the review period, such merchandise was classifiable under item number 7325.10.00 of the Harmonized Tariff
Schedule (HTS). The HTS item number is provided for convenience and Customs purposes. The written description remains
dispositive.
The review covers the period January 1, 1990 through December 31, 1990, and six programs. Three companies produced
and exported the subject merchandise to the United States during the reveiw period.
Hyperinflationary Economies
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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 Income Tax Reduction for Export Earnings program were received at the beginning of the review period. Therefore, we
have made a downward adjustment to the nominal values of annual exports used to calculate the benefit from this program.
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 52325; December 27, 1988). First, we calculated a country-wide rate, and then weight- averaged the
benefits received by the three companies subject to review to
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determine the overall subsidy from all countervailable programs benefitting exports of the subject merchandise to the
United States. Because the country- wide rate was de minimis, as defined by 19 CFR 355.7, we determine the rate for all
companies, regardless of the level of benefits to each company, to be zero. See, e.g., 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 certain
heavy iron construction castings are eligible for a reduction from income tax on the portion of their profits
attributable to exports. The exporter calculates the tax-reduction 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
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taxes by investing up to 24 percent of their tax liability in specified companies and funds. One heavy iron construction
castings exporter claimed this income tax reduction for export earnings on its tax returns filed in 1990 and invested in the
specified companies and funds, which lowered its effective tax rate below the nominal 30 percent rate during the period of
review.
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We calculated the effective tax rate for the firm by dividing the net tax liability by net taxable income. In order to adjust for
hyperinflation, the subsequent figures were converted into BTN using the same BTN rate used in the tax returns. We
determined the export profit by multiplying the exports to sales ratio by adjusted operating profits. We went on to determine
the tax reduction by multiplying the export profit by the difference between the effective tax rate and the preferential tax
rate of three percent. We allocated the tax benefit over the firm's total exports. The firm's total exports in New Cruzados for
1990 were deflated using the average BTN rate for 1990. We then weight-averaged the benefit by the 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
0.33 percent ad valorem for Industria de Ferro e Aco Planeta Ltda., and zero for all other firms for the period January 1,
1990 through December 31, 1990.
Decree Law 8034 of April 12, 1990 eliminated this tax reduction and established a prevailing tax rate of 30 percent for
domestic and export
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earnings for tax year 1990 (the 1990 tax returns would be filed in 1991). See, e.g., Final Negative Countervailing Duty
Determination: Silicon Metal From Brazil (56 FR 26988, June 12, 1991). We consider this elimination to be a
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 certain heavy iron construction castings, we have taken this program-wide
change into account in setting our cash deposit rate. Therefore, for the 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)
Section 355.50(a)(1) and (2) at page 23385.
(2) Programs Not Used and Eliminated
We also examined the following programs and preliminarily determine that the respondents did not use them during the
period of review and they have been terminated by the Government of Brazil:
A. CACEX Preferential Working Capital Financing for Exports.
This program was terminated effective August 30, 1990, by Central Bank Resolution 1744.
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B. Preferential Export Financing Under CIC-OPCRE 6-2-6 (formerly CIC-CREGE 14- 11) of the Banco do Brasil.
As of September 20, 1988, interest rates applicable to these loans have been equal to those of market rate loans.
C. Financing for the Storage of Merchandise Destined for Export (Resolution 330 of the Central Bank of Brazil).
This program was terminated by Resolution 1744 on August 30, 1990.
D. Exemption of IPI and Customs Duties on Imported Equipment (CDI)
The Brazilian Ministry of Finance published "Portaria no. 176" on September 12, 1984, eliminating these credit premiums
effective May 1, 1985.
See, e.g., Final Negative Countervailing Duty Determination: Silicon Metal From Brazil (56 FR 26988, June 12,
1991) and Final Affirmative Countervailing Duty Determination; Steel Wheels from Brazil (54 FR 15523; April 18,
1989).
Therefore, for purposes of the cash deposit of estimated countervailing duties, we preliminarily determine the benefits
from these programs to be zero for all firms. See Countervailing Duties; Notice of Proposed Rulemaking and Request
for Public Comment (54 FR 23366, May 31, 1989) Section 355.50(a) (1) and (2) at page 23385.
(3) Other Program
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We also examined the FINEX Export Financing Provided by the Fundo de Financiamento a Exportacao program and
preliminarily determine that the respondents did not use this during the review period.
Preliminary Results of Review
As a result of our review, we preliminarily determine the net subsidy to be 0.33 percent ad valorem for all 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 Brazil for all firms exported on or after January 1, 1990 and on or before
December 31, 1990.
The Department also 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 all shipments of subject merchandise from Brazil entered,
or withdrawn from the 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
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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 section 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: November 15, 1991.
Eric I. Garfinkel,
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Assistant Secretary for Import Administration.
[FR Doc. 91-28149 Filed 11-21-91; 8:45 am]
BILLING CODE 3510-DS-M