DEPARTMENT OF COMMERCE

(C-351-406)

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

Tuesday, March 31, 1992

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 ofthe countervailing duty order on certain round shaped agricultural tillage tools from Brazil. We preliminarily determine the net subsidy to be 0.05 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: March 31, 1992.

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 October 2, 1991, the Department of Commerce (the Department) published in the Federal Register a notice of "Opportunity to Request Administrative Review" (56 FR 49878) 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, 1990 through December 31, 1990. On October 15, 1991, the respondent Marchesan S.A. requested an administrative review of the order. We initiated the review covering the period January 1, 1990 through December 31, 1990, on November 22, 1991 (56 FR 58878). The Department has now conducted this review in accordance with section 751 of the Tariff Act of 1930, as amended (the Act).

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 four manufacturer/exporters and nine programs for the period January 1, 1990 through December 31, 1990.

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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 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 four companies subject to review 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 round shaped agricultural tillage tools 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 have determined that it is countervailable in the original investigation (August 26, 1985, 50 FR 34525) and subsequent administrative reviews (April 18, 1991, 56 FR 15862 and July 16, 1991, 56 FR 32403).
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. Furthermore, under this program profits from export sales were taxed at a rate of eighteen percent in 1990 instead of the nominal corporate tax rate of 30 percent. Three agricultural tillage tool manufacturers/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 to eighteen percent during the period of review.
We calculated the effective tax rate for the firms 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 eighteen 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 firms' 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 CIA. Semeato de Acos and 0.05 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 reduction and established a prevailing tax rate of 30 percent of 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 Brazil (56 FR 26988, June 12, 1991). We consider this elimination to be a programwide change. Because it occurred prior to the issuance of these preliminary results and there are no residual benefits to the manufacturers/exporters of certain round shaped agricultural tillage tools, we have take 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) Programs Not Used and Eliminated

We also examined the following programs and preliminary determine that the respondents did not use them during the period of review and that they have been terminated by the Government of Brazial:
A. CACEX Preferential Working Capital Financing for Exports. This program was terminated effective August 30, 1990, by Central Bank Resolution 1744.
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. Reductions of Taxes and Import Duties under Decree Law No. 77.065 through BEFIEX and CIEX.
This program was eliminated effective April 12, 1990, by Decree-Law 8.032.
D. Preferential Financing for National Trading Companies under Resolution 883 of the Banco Central do Brasil.
This program was terminated effective August 31, 1990, by Central Bank Resolution 1.744.
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) § 355.50(a)(1) and (2) at page 23385.

(3) Other Programs

We also examined the following programs and preliminary determine that the respondents did not use them during the review period:
A. Preferential Financing for Industrial Enterprises by the Banco do Brasil (FST and EGF loans).
B. Accelerated Depreciation for Brazilian-Made Capital Goods.
C. Preferential Financing under PROEX (Formerly under Resolution 68 and 509 through FINEX).
D. Preferential Financing under FINEP.

Preliminary Results of Review

As a result of our review, we preliminarily determine the net subsidy

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to be 0.05 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 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 Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: March 25, 1992.

Marjorie A. Chorlins.
Acting Assistant Secretary for Import Administration.