Pig Iron From Brazil; Preliminary Results of Countervailing Duty Administrative
Review
AGENCY: International Trade Administration/Import Administration Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty administrative review.
SUMMARY: The Department of Commerce is conducting an administrative review of the countervailing duty
order on pig iron from Brazil. We preliminarily determine the net subsidy to be 0.06 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: January 28, 1992.
FOR FURTHER INFORMATION CONTACT:Dana S. Mermelstein or Maria P. 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 12, 1991, the Department of Commerce (the Department) published in the Federal Register a notice of
"Opportunity to Request Administrative Review" (56 FR 14927) of the countervailing duty order on pig iron
from Brazil (45 FR 23045; April 4, 1980). We received requests for review from Associated Metals and
Minerals Corporation, Sumitomo Corporation of America, Considar, U.S.A., Inc., and SINDIFER, interested
parties within the meaning of 355.2(i). We initiated the review covering the period January 1, 1990 through
December 31, 1990, on May 21, 1991 (56 FR 23271). The Department is now conducting this review in
accordance with section 751 of the Tariff Act of 1930, as amended (the Act). The final results of the last
administrative review of this order were published on May 30, 1991 (56 FR 24174).
Scope of Review
Imports covered by this review are shipments of pig iron of basic, malleable, and low phosphorous grades, from
Brazil. During the review period, such merchandise was classifiable under item numbers 7201.10.00,
7201.30.00, and 7206.10.00 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, nineteen companies, and seven programs.
Hyperinflationary Economics
According to statistics published by the Brazilian government the annual inflation rate 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 as the denominator in the calculation of 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).
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 pig iron are eligible for a reduction in 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 eighteen percent, pursuant to Decree-Law 7988 of December 28, 1989.
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. Eight pig iron exporters claimed this income tax reduction
for export earnings on their tax returns filed in 1990 and invested in the specified companies and funds. Their
effective tax rates were thus lowered below the nominal 30 percent rate during the period of review.
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 reported 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 then determined the tax reduction by multiplying the export profit (converted into BTN) by the difference
between the effective tax rate and the preferential tax rate of eighteen percent. We divided the tax benefit by the
firm's total exports for 1990, which were deflated using the average BTN rate for 1990. We then weight-
averaged each firm's benefit by its share of exports of the subject merchandise to the United States. On this
basis, we preliminarily determine the benefit from this program to be 0.06 percent for all 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 earnings for tax year 1990 (the 1990 tax returns are filed in 1991). See, e.g.,
Final Negative Countervailing Duty Determination: Silicon Metal From
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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 pig iron, 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 23366; May 31, 1989) § 355.50(a) (1) and (2) at page 23385. A. CACEX Preferential Working Capital Financing for Exports. B. FINEX preferential financing under Resolutions 68 and 509. C. Preferential financing from the Banco do Brasil under the EST and EGF.
(2) Programs Not Used and Eliminated
We also examined the following programs and preliminarily determine that the respondents did not use them
during review period and that they were terminated by the Government of Brazil:
This program was terminated effective August
30, 1990, by Central Bank Resolution 1744.
This program was terminated on October 5,
1990 by constitutional provision.
The EST financing was eliminated;
EGF financing is not available to pig iron producers.
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).
(3) Other Programs
We also examined the BEFIEX Reduction of Taxes and Import Duties program, the Accelerated Depreciation on
Brazilian-made Capital Equipment program, and the FINEP preferential financing program
Preliminary Results of Review
As a result of our review, we preliminarily determine the net subsidy to be 0.06 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
then 0.50 percent ad valorem is de minimis.
Upon completion of this review, the Department will instruct the Customs Service to liquidate, without regard to
countervailing duties, all shipments of pig iron from Brazil exported on or after January 1, 1990 and on or before
December 31, 1980.
The Department will also instruct the customs Service to waive cash deposits of estimated countervailing
duties, as provided by section 751(a)(1) of the Act, on all shipments of pig iron 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 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 Act (19 U.S.C. 1675(a)(1))
and 19 CFR 355.22.
Dated: January 17, 1992.
Alan M. Dunn,
Assistant Secretary for Import Administration.