NOTICES DEPARTMENT OF COMMERCE [C-557-401] Final Negative Countervailing Duty Determinations; Certain Textile Mill Products and Apparel From Malaysia Tuesday, March 12, 1985 *9852 AGENCY: Import Administration, International Trade Administration, Commerce. ACTION: Notice. SUMMARY: We determine that no benefits which constitute bounties or grants within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters in Malaysia of certain textile mill products and apparel. The net countervailable benefits are de minimis, and therefore our final determinations are negative. EFFECTIVE DATE: March 12, 1985. FOR FURTHER INFORMATION CONTACT:Loc Nguyen, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230; telephone: (202) 377-0167. SUPPLEMENTARY INFORMATION: Final Determinations For purposes of these investigations, the following programs are found to confer countervailable benefits: - Tax Incentives for Exports. - Preferential Short-Term Financing. The estimated net countervailable benefit is 0.22 percent ad valorem for textile mill products and 0.27 percent ad valorem for apparel. These amounts are de minimis. Therefore, we determine that no benefits which constitute bounties or grants within the meaning of section 303 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Malaysia of certain textile mill products and apparel. Case History On July 20, 1984, we received a petition from the American Textile Manufacturers Institute (ATMI), the Amalgamated Clothing and Textile Workers Union (ACTWU), and the International Ladies' Garment Workers Union (ILGWU), on behalf of the U.S. industries producing certain textile mill products and apparel. In compliance with the filing requirements of § 355.26 of our regulations (19 CFR 355.26), the petition alleged that manufacturers, producers, or exporters in Malaysia of textile mill products and apparel receive, directly or indirectly, benefits which constitute bounties or grants within the meaning of section 303 of the Act. We found that the petition contained sufficient grounds upon which to initiate countervailing duty investigations, and on August 9, 1984, we initiated such investigations (49 FR 32641). These investigations were initiated by the Department under the title "Certain Textiles and Textile Products from Malaysia." Because of the number of products covered, and the differences in those products, the Department determined that it should conduct separate investigations--one of textile and non-apparel textile products, and one of apparel. Because of the potential for confusion, as apparel can also be considered a textile product, we changed the titles of these investigations to "Certain Textile Mill Products and Apparel from Malaysia." The scope of these investigations remains the same as announced in the initiation and the preliminary determinations. We stated that we expected to issue preliminary determinations by October 15, 1984. On September 21, 1984, we determined these investigations to be "extraordinarily complicated," as defined in section 703(c)(1)(B) of the Act. Therefore, we extended the period for making our preliminary determinations by 65 days until December 17, 1984 (49 FR 40198). Since Malaysia is not a "country under the Agreement" within the meaning of section 701(b) of the Act and the merchandise being investigated is dutiable, sections 303 (a)(1) and (b) of the Act apply to these investigations. Accordingly, petitioners are not required to allege that, and the U.S. International Trade Commission is not required to determine whether, imports of these products cause or threaten material injury to U.S. industries. Due to the scope of these investigations, we employed a two-step questionnaire process. We presented a preliminary questionnaire to the government of Malaysia in Washington, D.C., on August 24, 1984. Based on the responses to the preliminary questionnaire, we identified the four textile mill products producers and exporters, and the six apparel producers and exporters who account for at least 60 percent of the textile mill products and apparel exported to the United States. Two additional companies made timely requests for exclusion. These twelve firms were selected to respond to the detailed company questionnaire. On October 24, 1984, we presented the detailed government and company questionnaires to the government of Malaysia in Washingon, D.C. The responses to our detailed questionnaires were received on November 26, 1984. On December 21, 1984, we published our preliminary determinations that benefits constituting subsidies were being provided to manufacturers, producers or exporters in Malaysia of certain apparel, and that no benefits constituting subsidies were being provided to manufacturers, producers, and exporters of certain textile mill products (49 FR 49651). With regard to the two apparel companies, Eastern Garment Mfg. Co. Sdn. Bhd. ("Eastern") and Palace Garment Mfg. Sdn. Bhd. ("Palace"), which had requested exclusion, Eastern's response indicated that it received benefits which were de minimis, and it was, therefore, excluded from the preliminary determination. Palace, however, received countervailable benefts above the de minimis rate of 0.50 percent, and we, therefore, included Palace in the suspension of liquidation pursuant to the preliminary determination. We conducted verification of the questionnaire responses of the government of Malaysia and the textile and apparel companies between January 9 and January 21, 1985, In Malaysia. On February 2, 1985, a proposed suspension agreement was initialed which provided for the renunciation of all subsidies by the producers and exporters accounting for more than 85 percent of the total exports of textile mill products and more than 85 percent of the total exports of apparel from Malaysia to the United States. On March 1, 1985, the Malaysian respondents informed the Department that they no longer wished to enter into a suspension agreement. At the request of both petitioners and respondents, we held a hearing on February 13, 1985, to allow the parties an opportunity to address the issues arising in the investigations. We received pre-hearing briefs from the respondents and petitioners on February 6 and 7, respectively. Post-hearing briefs were received on February 22. Standing of Petitioners The issue of whether the petitioners have standing has been protracted and contentious. We addressed this issue initially in our preliminary determinations. See Textile Mill Products and Apparel from Indonesia, 49 FR 49672 (1984). At that time, we determined that ATMI did not have standing. However, we determined that the eight individual U.S. companies, substituted as petitioners by *9853 amendments to the petitions dated December 3, 1984, did have standing with respect to textile mill products. In addition, we determined that the two unions, ACTWU and ILGWU, had standing with respect to apparel. After the preliminary determinations, various respondents continued to argue that petitioners lack standing, and that the Department should rescind its initiations of these investigations. On January 16, 1985, various respondents in the Philippines, Thailand, Colombia, and Malaysia investigations filed suit in the U.S. Court of International Trade to enjoin the disclosure pursuant to administrative protective order of confidential information to petitioners' counsel. The plaintiffs in these cases argued, inter alia, that disclosure was improper, because the investigations were invalid due to petitioners' alleged lack of standing. The court denied plaintiffs' motions for temporary restraining orders. Plaintiffs subsequently moved for dismissal and the cases were dismissed. In the meantime, the Department had sent questionnaires to petitioners and to those U.S. companies that had expressed opposition to the investigations. The purpose of these questionnaires was to enable the Department to determine the extent of the opposition and whether rescissions of the initiations were appropriate. The Department received very limited responses to these questionnaires from companies that had expressed opposition to the petitions. The Department did receive some additional information from petitioners. For purposes of these final determinations, the Department reaffirms its preliminary decisions concerning standing. ATMI lacks standing as an interested party, because this trade association has failed to establish that a majority of its members produce any of the 152 like products involved in these investigations. 19 U.S.C. 1677(9)(E). The eight companies have standing because collectively they are interested parties for all of the like products involved, 19 U.S.C. 1677(9)(C), and because they have filed on behalf of the concerned textile mill products industry. The two unions have standing because they are interested parties, 19 U.S.C. 1677(9)(D), and because they, too, have filed on behalf of the concerned apparel industries. Respondents' arguments that petitioners lack standing challenge the basis of our investigations, and we will address their arguments herein. Although the various respondents expressed their arguments somewhat differently, the gravamen of their respective arguments was the same. 1. The Standing of the Eight Companies With respect to the eight companies, respondents argue that the companies have failed to establish affirmatively that they have filed "on behalf of" the industries involved. Respondents rely on Gilmore Steel Corp. v. United States, 585 F Supp. 670, 676 (Ct. Int'l. Trade 1984), in which the court stated that in order to have standing a petitioner "[m]ust also show that a majority of [the] industry backs its petition." We do not believe that the holding of Gilmore requires petitioners to establish affirmatively that a majority of the relevant industries back their petitions. In Gilmore, unlike the present case, a majority of the U.S. industry affirmatively opposed Gilmore's petitions, and so indicated to the Department. Under these circumstances, the court held that Gilmore lacked standing. However, this holding does not amount to a requirement that a petitioner somehow prove, when a petition is filed, that at least 51 percent of an industry has expressed itself in support of a petition. To the extent that language in Gilmore suggests such a requirements, such language is dictum. Moreover, when the Department promulgated the current countervailing duty regulations, it rejected a proposal "[t]hat petitioners be required to state the position of other industry members on the petition." 45 FR 4935 (1980). We continue to believe that such a requirement is unduly burdensome, is unwarranted, and is not required by the statute. Nothing in the statute or its legislative history indicates that Congress intended that anyone wishing to file a petition be required to poll all of the domestic industry. In the instant investigations, the eight companies continue to receive the support of ATMI, whose members account for over 85 percent of U.S. textile mill products production. Moreover, in light of the inadequacy of information provided by those who expressed opposition to the petitions, the Department cannot presume that a majority of a particular industry opposes the petitions. We cannot presume even that there is any substantial opposition. The other principal argument against the standing of the eight companies is that the amendments to the petitions, substituting the eight companies as petitioners, were untimely, and that petitioners cannot cure an allegedly defective petition by amendment. The statute provides that a "[p]etition may be amended at such time, and upon such conditions, as the [Department] * * * may permit." 19 U.S.C. 1671a(b)(1). This language grants the Department considerable discretion. Moreover, the legislative history does not detract from this discretionary authority. S. Rep. No. 249, 96th Cong., 1st. Sess. 46 (1979); H.R. Rep. No. 317, 96th Cong., 1st Sess. 50 (1979). In seeking guidance on the exercise of this discretionary authority to permit amendments to petitions, we find Zenith Radio Corp. v. United States, 5 C.I.T. 178 (1983), instructive. In that case, a situation analagous to the instant one existed. The court had ruled that COMPACT, an "umbrella" organization, lacked standing to challenge a Department determination, because COMPACT was not an interested party within the meaning of section 771(9). Subsequently, COMPACT moved to substitute as plaintiffs three of its member unions which were interested parties and which the court found had been parties to the administrative proceeding. The Government and defendant-intervenors opposed the motion to substitute on the grounds that it was unjustifiably late and prejudiced their interests. The court ruled in favor of the unions, because it was [i]nclined to exercise its discretion in a lenient manner, where it sees the late emergence of the correct party as understandable in the context of a relatively new and complex field of litigation. id, at 179. Given the circumstances of these investigations, we are inclined at this time to follow the example of leniency set by the court. The standing rules for countervailing duty and antidumping investigations are still in the process of development. Moreover, the acceptance by the Department of ATMI as an interested party in Textiles, Apparel, and Related Products from the People's Republic of China, 48 FR 46600 (1983), although incorrect in hindsight, gave ATMI some reason to believe that the Department would accept it as an interested party for purposes of the instant investigations. As soon as ATMI realized that the Department was likely to correct its error, ATMI substituted the eight companies as petitioners. Thus, under these circumstances, we consider the amendments to the petitions to be timely. As for prejudice to respondents as a result of the amendments, the only real prejudice is that the focus of their standing arguments had to shift from ATMI to the companies. However, these arguments were largely restatements of the same Gilmore-type arguments that respondents had made from the outset *9854 of these investigations. Thus, we cannot conclude that the substitution of the eight companies created any undue hardship for respondents. 2. The Standing of the ACTWU and the ILGWU The question of the standing of the ACTWU and the ILGWU is more difficult. It is an issue of first impression, and the relevant statutory provisions are less than precise. The first issue concerns whether the ACTWU and the ILGWU are "interested parties." Section 771(9)(D) provides that an "interested party" may consist of a certified union or recognized union or group of workers which is representative of an industry engaged in the manufacture, production or wholesale in the United States of a like product.* * * Section 771(4)(A) of the Act, as amended by the Trade and Tariff Act of 1984, defines "industry," in pertinent part, as [t]he domestic producers as a whole of a like product, or those producers whose collective output of the like product constitutes a major proportion of the total domestic production of that product.* * * Relying on a strict approach to statutory construction, one could conclude that in order to have standing, unions must represent companies. The logic would be that under section 881(9)(D), a union must represent an "industry," which the statute arguably defines as companies producing the like product in question. See 19 U.S.C. 1677(4)(D) and 1677(9)(C). However, this approach would conflict with the clear congressional intent to give unions standing if they "[r]epresent workers in the relevant U.S. industry." S. Rep. No. 249, 96th Cong., 1st Sess. 90 (1979) (emphasis added). Because Congress intended only that unions be representative of workers, we conclude that the term "producers," as used in section 771(4)(A), refers to workers, as well as companies, for purposes of determining standing. [FN1] N FN1 In this regard, we note that certain of the statutory criteria for determining injury to a U.S. industry expressly concern the effects of imports on workers, as opposed to companies. 19 U.S.C. 1677(7)(C)(iii)(III). We then must determine how "representative" of workers the union must be, and how this "representative" status can be established. Several respondents have argued that a majority of the workers in each of the apparel industries identified in these investigations must be members of the ACTWU and the ILGWU in order for these unions to be representative of each industry. Respondents derive this 50 percent requirement from the U.S. labor laws, which, according to respondents, provide that a union is not representative of a company unless it represents at least 50 percent of the workers in that company. Respondents argue that there is no reason why a similar 50 percent requirement should not apply for purposes of determining standing under the countervailing duty law. We disagree with respondents' conclusion. In section 771(9), Congress imposed a "majority" requirement three times. 19 U.S.C. 1677(9) (A), (E), and (F). Such a requirement is notably absent from section 771(9)(D). If Congress had intended a "majority representation" requirement for unions, it easily could have used language similar to that used in the other paragraphs of section 771(9). This suggests that Congress did not intend a "majority representation" requirement for purposes of determining a union's status as an "interested party." Moreover, there is no indication in the legislative history that Congress intended to engraft the standards of the labor laws onto section 771(9)(D). Therefore, we conclude that because the ACTWU and the ILGWU have demonstrated that they represent workers producing each of the apparel like products, they have established their status as "interested parties." The remaining question is whether the ACTWU and the ILGWU have filed "on behalf of" the apparel industries. With respect to this question, our discussion of this issue concerning the eight companies, supra, is pertinent. As with the eight companies, we do not believe that the statute or the regulations require the unions to establish affirmatively that they have the majority support of a particular industry. Rather, the question is whether a majority of a particular industry opposes a petition. Here, too, the question of who are the "producers," and thus what constitutes the "industry," is relevant. In the case of apparel products, many leading companies have voiced opposition to the petitions. If these companies, as opposed to the unions, are regarded as the "industries," arguably the unions do not have standing due to the companies' opposition. As indicated supra, we are inclined towards the view that an "industry" can consist of either workers or companies producing a like product. However, we need not resolve this issue here. As discussed supra, the Department sent questionnaires to those companies expressing opposition to the petitions, and received inadequate responses. The Department was not able to determine for any particular apparel like product involved in these investigations that companies accounting for a majority of the domestic production of that product opposed the petitions. Therefore, while there may be opposition to the apparel petitions, there is insufficient evidence to warrant a conclusion that the ACTWU and the ILGWU have not filed "on behalf of" the relevant apparel industries. The Department's Selection of Companies to Receive Questionnaires When this and the other textile mill and apparel products investigations began, the Department immediately realized that, given the tremendous number of foreign companies producing or exporting the subject merchandise, it would be impossible to investigate each of these companies individually within the statutory deadlines. Therefore, the Department decided to use a two-stage questionnaire process. The Department sent an initial set of questionnaires to the concerned foreign governments in order to solicit preliminary information as to the companies and programs involved. The Department anticipated that the information provided in response to this first questionnaire would enable the Department to devise a sample of firms to whom the Department could issue detailed countervailing duty questionnaires. The responses to the first set of questionnaires confirmed the Department's prior conclusion that the number of companies exporting the subject merchandise was so large as to make it administratively impossible to issue detailed questionnaires to each company involved. However, the responses also revealed that the proper application of scientific sampling techniques was not feasible. The Department either would have had to sample a number of companies, once again too large to be administratively possible, or would have been faced with the unacceptably large degree of statistical uncertainty inherent in small sample results. Given this situation, the Department decided to follow its normal practice of obtaining at least 60 percent coverage of the merchandise in question. Thus, the Department issued detailed questionnaires to those companies which accounted for at least 60 percent of textile mill products exported to the United States and at least 60 percent of apparel products exported to the United States from each of the countries involved. This practice is codified in the antidumping regulations in 19 CFR 383.38(a). Although the countervailing duty regulations do not contain a comparable provision, the Department *9855 has followed this 60 percent rule in countervailing duty investigations. See, e.g., Bars and Shapes from Mexico, 49 FR 32887 (1984); and Oil Country Tubular Goods from Mexico, 49 FR 47054 (1984). In their letter of October 23, 1984, petitioners objected to the Department's approach, claiming that the Department's so-called "sampling" was not permitted by law. Petitioners requested that the Department send detailed questionnaires to all firms identified as producers or exporters of the subject merchandise. Alternatively, petitioners requested that the Department use a sampling approach which, presumably in petitioners' view, was "scientific." We considered, but rejected, both of petitioners' requests. With respect to petitioners' suggestion that we examine all companies, as discussed supra, such an approach would have been administratively impossible in these cases. Moreover, the Department is not required to examine 100 percent of exports to the United States in a countervailing duty investigation. During the course of these investigations, Department officials asked, both formally and informally, that counsel for petitioners cite to any authority for their claim that the Department must examine 100 percent of exports. For example, at the hearing on the Peruvian investigations, a Department official asked counsel to "[a]ddress the specific portion of the statute that you feel requires us to look at 100 percent of the exports of the subject merchandise." Transcript, at 38. In response to this request, in their post-hearing briefs petitioners merely cited, without any explanation, section 702(b) of the Act, 19 U.S.C. 1671a(b). We do not see anything in the cited provision which supports petitioners' theory. Petitioners have cited repeatedly section 777A of the Act, as amended by the Trade and Tariff Act of 1984. Section 777A provides that under certain circumstances, the Department may use "generally recognized sampling techniques" in antidumping proceedings and countervailing duty administrative reviews under section 751 of the Act, 19 U.S.C. 1675. According to petitioners, this express grant of authority to sample in countervailing duty administrative reviews implies a lack of authority to sample in a countervailing duty investigation. We are not sure exactly what point petitioners are trying to make with this argument. To the extent that petitioners argue that the Department may not use generally recognized sampling techniques in countervailing duty investigations, we disagree. However, this argument is irrevelant here, because the Department's 60 percent approach was not, and never purported to be, a scientific sample as envisaged by section 777A. Indeed, it was because the Department concluded that it could not devise a scientific sampling method that it chose to proceed with its standard 60 percent coverage approach. To the extent that petitioners argue that section 777A requires the Department to examine 100 percent of exports in countervailing duty investigations, we also disagree. We do not find in section 777A, its legislative history, or in administrative or judicial precedent support for the proposition that the Department must examine 100 percent of exports. Moreover, nothing in the statute requires the Department to examine any particular percentage of exports or companies. Cf., American Spring Wire Corp. v. United States, 590 F. Supp. 1273 (Ct. Int'l Trade 1984), appeal filed, Sept. 10, 1984. The statute expressly provides that the Department may estimate the amount of the net subsidy. 19 U.S.C. 1671e(a)(1). In addition, with respect to the suspension agreement provisions of section 704(b) of the Act, 19 U.S.C. 1671c(b), Congress provided that an agreement signed by exporters accounting for less than 100 percent of exports is sufficient to suspend an investigation. With respect to petitioners' alternative request that we devise a "scientific" sampling approach, we note again that the Department believes that in the instant investigations, application of such an approach would either have been administratively impossible, or have yielded unacceptably uncertain results. Petitioners' specific suggestions would not result in an unbiased, statistically valid sample, but merely would produce a sample biased in favor of petitioners and against respondents. Subsequent to their October 23 letter, petitioners raised additional objections to the Department's approach. In their pre-hearing briefs, petitioners argued that the Department's approach violates section 776(a) of the Act, 19 U.S.C. 1677e(a). Section 776(a) requires the Department to verify information relied upon by it in its final determinations. According to petitioners, implicit in any sampling approach is the assumption that the distribution and level of benefits among companies not sampled would yield a rate the same as for the nonsampled companies. Because the Department has not verified this assumption, petitioners argue, the Department's methodology violates section 776(a) Again, petitioners have missed the point. As Department officials informed counsel on numerous occasions, the Department's methodology is not a scientific or statistical sampling approach, and therefore is not based on the assumption cited by petitioners. The Department has not "assumed" anything regarding the 40 percent of exports not covered by its questionnaires. All the Department sought to do was to ensure accurate subsidy rates for the covered exports. As stated supra, petitioners have not provided any authority for their theory that the Department must investigate 100 percent of exports and all alleged subsidy programs. In their pre-hearing briefs, petitioners also argued that the Department should have sent questionnaires to those companies accounting for 60 percent of each of the 152 like products preliminarily found by the Department to exist for purposes of determining petitioners' standing to file the subject petitions. Here, petitioners are confusing two basic statutory terms of art: "class or kind" and "like product." "Class or kind," which is not defined in the statute, governs the scope of the Department's investigations. 19 U.S.C. 1671(a)(1), 1671a(c)(2). "Like product," which is defined in section 771(10) of the Act, 19 U.S.C. 1677(10), governs the definition of "industry" for purposes of determining injury and the standing of petitioners. 19 U.S.C. 1671(a)(2), 1671a(b)(1), 1677(4). It is not unusual in a particular case that "like product" is defined differently than "class or kind," as is the case here. See, e.g., Oil Country Tubular Goods from Brazil, Korea, and Spain, USITC Publication No. 1633 (Jan. 1985), in which the ITC divided the Department's single class or kind of merchandise, oil country tubular goods, into more than one like product. Given the different purpose of the term "like product," it would have been inappropriate for the Department to send questionnaires on the basis of its 152 "like product" categories. Instead, the Department acted correctly and in accordance with prior practice by basing its questionnaires upon the "class or kind" of merchandise in these investigations. Petitioners also argue that the Department should use the best information available with respect to those companies to which the Department did not send questionnaires. We also disagree with this argument. Section 776(b) of the Act provides, inter alia, for the use of the best information otherwise available in making a determination "whenever a party or any other person refuses or is unable to *9856 produce information requested in a timely manner and in the form required. * * * " We do not believe that this provision mandates the use of the best information available where we have received the information we requested, we have been able to verify that information, and the information provides a sufficient basis for our final determinations. Finally, petitioners also alleged in their letter of October 23, 1984, that they were "[e]xcluded from meaningful participation in the development and formulation of the staff's 'sampling' plan." We object to this statement, and in order to clarify the record, we note that staff of Import Administration and the Office of the General Counsel met with counsel for petitioners prior to a decision as to the methodology to be used in these investigations. Counsel's views were considered fully, and, in fact, the Department did adopt petitioners' suggestion to send questionnaires to all foreign companies requesting exclusion. Petitioners also were able to review the detailed questionnaires and make numerous suggestions, many of which the Department adopted. The fact that the Department did not adopt petitioners' other suggestions does not mean that petitioners were "excluded from meaningful participation"; it simply means that the Department reached different conclusions. Scope of the Investigation The products covered by these investigations are certain textile mill products and apparel which are described in Appendix A attached to this notice. Analysis of Programs Throughout this notice, we refer to certain general principles applied to the facts of the instant investigations. These principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina; Final Affirmative Countervailing Duty Determination and Countervailing Duty Order," which was published in the April 26, 1984 issue of the Federal Register (49 FR 18006). For purposes of these determinations, the period for which we are measuring bounties or grants ("the review period") is calendar year 1983. Based upon our analysis of the petition, the responses to our questionnaires, our verification, and comments submitted by interested parties, we determine the following: I. Programs Determined To Confer Countervailable Benefits We determine that countervailable benefits are being provided to manufacturers, producers, or exporters in Malaysia of certain textile mill products and apparel under the following programs. A. Tax Incentives for Exports The government of Malaysia uses several tax incentives to promote textile exports. First, a double tax deduction is granted for expenses related to export sales, including advertising costs outside Malaysia, export market research, participation in trade exhibitions and overseas sales offices. Secondly, Malaysian companies can deduct from net taxable income eight percent of the FOB value of export sales if Malaysian content of the product is more than 50 percent; they can deduct five percent if Malaysian content is less than 50 percent. We verified that section 27 of the Investment Incentives Act of 1968 allows exporters to obtain a double deduction of eligible export promotion expenses in determining taxable income. In addition, section 29 of the same act provided (for tax years prior to 1983) a deduction of two percent of the ex-factory value of exports from taxable income and a deduction of 10 percent of the increase in export value from the preceding year. In 1983, the government of Malaysia amended the "export allowance" provisions, i.e., section 29 of the law, by eliminating the two types of deductions provided under that section and by providing only a deduction of five percent of export revenues from taxable income. Because these special tax deductions are granted on the basis of exports, we determine that they confer a subsidy. To calculate the benefit from these deductions, we determine the tax savings directly attributable to their use and allocated that amount over the total value of export sales in 1983. We calculated a net benefit of 0.09 percent for apparel. We verified that none of the textile mill products companies under investigation claimed these special export tax deductions during the review period. B. Preferential Short-Term Financing Petitioners allege that the government of Malaysia provided preferential pre- and post-export short-term refinancing through the Malaysian banking system. The commercial banks allegedly provide loans to exporters at the preferential rate of 4.5 percent, which the central bank then refinances. We verified that Bank Negara Malaysia, Malaysia's central bank, maintains an export credit refinancing facility for both pre- and post-shipment refinancing. This facility allows commercial banks to finance export transactions for a period of up to 92 days. Access to these funds is usually limited to 3 million Malaysian dollars for each exporter. The annual interest rates on these loans varied between 4.5 and 6 percent in 1983. Because these loans are granted to finance exports and because the interest rates on these loans are lower than those available from commercial sources, we determine that these loans confer a countervailable benefit upon certain textile mill products and apparel from Malaysia. To calculate the benefit, we used as our benchmark the average Banker's Acceptance rate for 1983 of 8.9 percent. The Banker's Acceptance is the most comparable and commonly used alternative source of short-term financing. We then calculated the amount of the benefit using our short-term loan methodology. We calculated a benefit of 0.22 percent for textile mill products and 0.18 percent for apparel. II. Programs Determined Not To Confer Bounties or Grants We determine that bounties or grants are not being provided to manufacturers, producers, or exporters in Malaysia of certain textile mill products and apparel under the following programs: A. Free Trade Zones Petitioners allege that textile and apparel exporters located in Free Trade Zones (FTZ's) receive countervailable benefits from tax and duty exemptions on imports of capital equipment and on other materials not physically incorporated into exported products. We verified that companies located in the FTZ's do not receive treatment that differs from the treatment received by similar entities located outside the FTZ's. Since 1960, the government of Malaysia has imposed no import duties on imports of machinery for new manufacturing enterprises or expansion of existing enterprises regardless of a company's location. Companies which have received such exemptions have included the producers of textiles, chemicals, electronics, food products, metal products, and wood-based products. As for import duties on "materials other than those physically incorporated into the exported products," we verified that companies located in the FTZ's like other companies, have to pay import duties on these materials. *9857 Because companies located in the FTZ's do not receive preferential treatment vis-a-vis companies located outside the FTZ's, we determine that this program does not constitute a bounty or grant. B. Reinstatement Allowance Petitioners allege that textile and apparel manufacturers benefit from a Reinvestment Allowance which permits manufacturing companies to deduct 25 percent of their expansion costs in plant, equipment and machinery. Schedule 7A of the Income Tax Act of 1967 authorizes a reinvestment allowance of 25 percent of the approval expenditure under the Industrial Coordination Act of 1975. In its response, the government of Malaysia stated that the program is not limited to any region, product or sector, and that according to section 4(3) of the Industrial Coordination Act, the approval of a license is based only on whether the project is "consistent with the rational economic and social objectives and would promote the orderly development of manufacturing activities in Malaysia." During verification, we found that all kinds of companies involved in every industrial sector are eligible for and have received benefits from a reinvestment allowance. We also found that the approval process regarding expansion projects is merely a monitoring devide for the government to keep abreast of the industrial capacity of the country. Because the program is not limited, either de jure or de facto, to a specific enterprise or industry, or groups of enterprises or industries, we determine that the program does not constitute a bounty or grant. Industrial Estates Petitioners allege that under this program the government of Malaysia sponsors and finances industrial estates which provide real estate and financing at preferential rates to export-oriented, resource-based, labor-intensive industries. Petitioners claim the purpose of this program is to induce companies to settle away from congested areas. We verified that the industrial estates in Malaysia are under the control of the state authorities. These industrial estates are a means of restricting commercial activities to certain areas, much the same as local U.S. zoning laws do. We also verified that there are industrial estates scattered throughout Malaysia and that a very wide and diversified range of industrial and commercial users are located in these estates. We found no evidence that there are restrictions in eligibility to become a tenant, nor did we find that the ability to locate in the industrial estates is in any way dependent upon export objectives or performance. Because the program is not designed to promote exports, is not limited to any specific regions of the states or the country, and is not limited, either de jure or de facto, to a specific enterprise or industry, or group of enterprises or industries, we determine that the program does not constitute a bounty or grant. III. Programs Determined Not To Be Used We determine that manufacturers, producers, and exporters in Malaysia of certain textile mill products and apparel did not use the following programs which were listed in our notice of initiation: A. Export Credit Insurance Petitioners allege that exporters benefit from the provision of export credit insurance at rates which are inconsistent with commercial considertions and which are inadequate to cover the long-term operating risks of the insurance program. We verified that none of these companies used export credit insurance during the review period. B. Preferential Financing for Bumiputras Petitioners allege that textile and apparel manufacturers benefit from preferential financing and other types of assistance that are especially available to Bumiputras, the indigenous people of Malaysia. We verified that none of these companies received such financing or assistance during the review period. C. Labor Utilization Relief Program Petitioners allege that companies in labor-intensive industries such as textiles and apparel receive tax relief under the Labor Utilization Relief Program. We verified that none of these companies applied for or received benefits under this program during the review period. D. Investment Tax Credits Petitioners allege that exporters benefit from investment tax credits of at least 25 percent of capital expenditures on factories, machinery and equipment for use on a government-approved project. We verified that none of these companies has been approved for receipt of the investment tax credit during the review period. E. Increased Capital Allowance Petitioners allege that textile and apparel exporters benefit from an increased capital allowance for deductions on new equipment and modernization costs. We verified that none of these companies received the increased capital allowance during the review period. F. Locational Incentives Program Petitioners allege that exporters may benefit from a Locational Incentives Program, which provides up to 10 years of tax relief to companies which are located away from congested areas, and which have been deemed by the government to be a priority industry or whose products contain a certain percentage of Malaysian content. We verified that none of these companies received locational incentives benefits during the review period. G. Industrial Building Allowance Petitioners allege that exporters benefit from an Industrial Building Allowance, instituted by the government, which provides exporters with deductions from the cost of acquisition of warehouses and facilities. We verified that none of these companies claimed a deduction for the special building allowance for export-related warehouse and storage facilities during the review period. H. Accelerated Depreciation for Exports Petitioners allege that the Malaysian manufacturers benefit from accelerated depreciation on equipment used to build, modernize or expand plant facilities when their exports total more then 20 percent, by value, of total production. We verified that none of these companies used the special accelerated depreciation available to exporters during the review period. Comments Comment 1: Petitioners argue that respondents failed to submit certain documents such as income tax returns, lists of short-term and long-term loans and annual reports and statistical publications of the Central Bank Malaysia. Therefore, the Department must reject respondents' questionnaire responses for purposes of its final determinations and must instead base its findings with respect to preferential financing and tax benefits on the best available information. DOC Position: During verification, we received and verified all information necessary to make the final determinations. In addition, the documents mentioned are ordinarily received during verification rather than included with questionnaire responses. They are in the nature of verification *9858 exhibits, and do not themselves constitute a questionnaire response. Comment 2: Petitioners allege that Malaysian producers of textiles and apparel located in Free Trade Zones benefit from preferential exemption of customs duties and taxes on imported capital equipment and other goods not physically incorporated into exported textiles and apparel. They argue that it is not apparent whether all imports of machinery listed as "eligible for exemption" are automatically exempted from the payment of all customs duties and sales taxes. They also argue that, unless respondents can prove that goods, other than those physically incorported in exported products, imported by companies not located in FTZ's are actually exempted from duties and taxes to the same extent as goods imported by companies located in the FTZ's and, unless respondents can prove that the exemption of goods outside of the zones does not benefit specific industries, these programs must be considered as countervailable benefits. Respondents argue that location in an FTZ does not confer any countervailable benefit because there are no cash savings that result from being located in an FTZ. DOC Position: With regard to duties on imports of machinery and equipment, Malaysian law has exempted all machinery for new manufacturing enterprises or expansion of existing enterprises from import duties since 1980. We verified through checking the Trade Classification Customs Tariff, 1978, and Related Customs Regulations that non-payment of import duties on machinery and equipment is not limited to a specific enterprise or industry or a group of enterprises or industries. With regard to duties on goods other than those physically incorporated in exported products, we verified that all companies, whether located in an FTZ or not, have to pay import duties on these goods. Comment 3: Petitioners argue that the rates for land and services provided to companies in industrial estates are inadequate to cover the costs incurred by the administering entities in developing and administering the estates and are less than the rates charged for similar land and services outside of the industrial estates. Therefore, this program is a subsidy. Respondents argue that location in an industrial estate does not confer any countervailable benefits because "nothing in the laws indicate any preferential treatment of companies in an industrial estate." Moreover, even if there were some benefits derived from locating in an industrial estate, these benefits are generally available and, therefore, not countervailable. DOC Position: We verified that this program does not promote exports or regional development and that eligibility to become a tenant in the industrial estates is not limited to a specific enterprise or industry or group of enterprises or industries. Therefore, we determine that this program does not confer countervailable benefits. In view of the finding of no limitation, the issue of whether the rates for the land and services provided to companies in industrial estates are inadequate to cover the costs incurred by the administering entities or whether they are less than the rates charged for similar land and services outside of the industrial estates is not relevant. Comment 4: Petitioners argue that the reinvestment allowance benefits a specific enterprise or group of enterprises as a result of administrative discretion, and, therefore, is a subsidy. Respondents argue that the reinvestment allowance is generally available, and, therefore, does not confer countervailable benefits. DOC Position: We verified that the reinvestment allowance is not discretionary and does not benefit a specific enterprise or industry or a group of enterprises or industries. For more detailed discussion of this program see Section II B. Comment 5: Petitioners argue that the accelerated depreciation deduction available under section 28 of the Investment Incentives Act which allows Malaysian enterprises to depreciate in one year the entire value of equipment purchased between January 1, 1981 and January 1, 1986, is not available equally to all industries or for all types of equipment, and, therefore, must be considered a subsidy. DOC Position: We verified that the accelerated depreciation on factory machinery and equipment (ADA) is not limited to a specific enterprise or industry or group of enterprises or industries. All businesses are eligible for accelerated depreciation unless they are exempt from taxation under such programs as pioneer status, labor utilization, etc. At the expiration of their domestic tax holidays, these companies, too, can claim the ADA. Comment 6: Petitioners argue that the Department should adjust the short-term financing benchmark used in its preliminary determination (1) to factor out preferential financing, and (2) to include sources of commercial financing other than commercial banks. Respondents argue that the benchmark used in the preliminary determination does not accurately reflect the true cost of commercially available trade financing in Malaysia and that it vastly overstates the benefit received by exporters from Bank Negara Malaysia financing. They argue that the most comparable commercial financing is the Bankers Acceptance rate. DOC Position: According to the 1983 annual report of Bank Negara Malaysia, Bankers Acceptances account for nearly 60 percent of all trade bill financing in Malaysia. Thus, it is clearly the predominant form of commercially available financing comparable to the preferential pre- and post-shipment financing examined in these investigations. For this reason, we believe that the Bankers Acceptance rate is a much more accurate measure of comparable commercially available financing than the weighted-average benchmark used in the preliminary determination--however adjusted--which included all types of financing such as long-term loans and consumer loans. Comment 7: Petitioners argue that, in calculating the benefit conferred by the export allowance and the export deductions, the Department should not permit the deduction from taxable income of the reinvestment allowance or the reinvestment carried forward, prior to calculating the countervailable benefit from the export allowance and export deductions. It is petitioners' understanding that the export allowance must be used in the year it is incurred, while the reinvestment allowance may be carried forward to future years if the company has more reinvestment allowance than it has net taxable income. Therefore, the reinvestment allowance carried forward would not be available to offset taxable income of the responding companies, absent the export allowance and the export deductions claimed in 1982, and is therefore countervailable. The reinvestment allowance for 1983 will presumably not be used by the responding companies in 1983, and will be carried forward again because of the export allowance available in 1983. The reinvestment allowance should thus not be credited against taxable income in 1983, and the benefit from the export allowance and export deductions should be increased accordingly. DOC Position: We verified that both the reinvestment allowance and the export deductions, as well as all other deductions, can be carried forward from year to year. Therefore, the companies are free to use any deductions they are eligible for in the year of their choice. We have determined that the reinvestment allowance is not *9859 countervailable (see section IIB). Therefore, we are treating it as we would treat any normal deduction and have allowed the total reinvestment allowance claimed as an offset against taxable income for 1983 and see no reason to increase the value of the export deduction as if the reinvestment allowance were not used. Verification In accordance with section 776(a) of the Act, we verified the data used in making our final determinations. During this verification, we followed normal procedures, including meetings with government officials and inspection of documents and on-site inspection of accounting records of certain companies exporting the merchandise under investigation to the United States. Administrative Procedures We afforded interested parties an opportunity to present information and written views in accordance with Commerce regulations (19 CFR 355.34). A hearing was held and written views have been received and considered in reaching these final determinations. Suspension of Liquidation Pursuant to section 705(c)(2) of the Act, the suspension of liquidation of all entries entered, or withdrawn from warehouse, for consumption of certain apparel from Malaysia effective December 21, 1984, as directed in our notice of "Preliminary Affirmative Countervailing Duty Determination: Certain Apparel from Malaysia", (49 FR 49651) is hereby terminated. Any cash deposits on entries of certain apparel from Malaysia pursuant to that suspension of liquidation shall be refunded and any bonds shall be released. This notice is published pursuant to sections 303 and 705 of the Act (19 U.S.C. 1303, 1671d). William T. Archey, Acting Assistant Secretary for Trade Administration. March 4, 1985. [Note: The following TABLE/FORM is too wide to be displayed on one screen. You must print it for a meaningful review of its contents. The table has been divided into multiple pieces with each piece containing information to help you assemble a printout of the table. The information for each piece includes: (1) a three line message preceding the tabular data showing by line # and character # the position of the upper left-hand corner of the piece and the position of the piece within the entire table; and (2) a numeric scale following the tabular data displaying the character positions.] ******************************************************************************* ******** This is piece 1. -- It begins at character 1 of table line 1. ******** ******************************************************************************* Appendix A.--List ----------- 320.0012 320.0045 320.0077 320.1038 320.4028 323.1022 323.1057 325.1051 325.8024 325.8065 326.3071 326.4042 326.4080 327.1045 327.3085 327.4022 327.4057 328.0022 328.0057 328.1051 328.2021 328.2045 328.2065 328.2089 328.3023 328.3067 328.4021 328.4054 328.4094 328.9031 328.9066 330.2024 330.2065 331.1024 331.1065 331.2024 331.2065 331.4024 331.4065 331.7022 331.7065 338.5021 338.5041 ----------- ----------- 370.0800 376.5408 379.0642 379.3905 379.4070 379.5220 379.5550 379.6219 379.6450 379.8311 379.8930 379.9250 379.9550 383.0213 383.0335 383.0603 383.0657 383.1841 383.2040 383.2229 383.2230 383.2718 383.2732 383.2807 383.2842 383.3038 383.3445 383.4300 383.4720 383.4753 383.4765 383.5090 383.6372 383.7546 383.8007 383.8028 383.8110 383.8663 383.9029 383.9070 702.1200 704.4010 704.8550 1...+...10....+... ******************************************************************************* ******* This is piece 2. -- It begins at character 19 of table line 1. ******** ******************************************************************************* of TSUSA Codes Which Covered Malaysia's Exports of Certain Textile and Apparel to the United States in 1983 A. Textile Mill Products Yarns and Threads ----------- 310.4047 ----------- 310.5049 Woven Fabrics 320.0013 320.0032 320.0033 320.0034 320.0043 320.0050 320.0051 320.0052 320.0062 320.0063 320.0085 320.0089 320.0091 320.0095 320.1019 320.1045 320.1054 320.1071 320.1077 320.1094 322.1050 322.1051 322.1052 322.1087 322.1093 323.1024 323.1031 323.1038 323.1042 323.1049 323.1065 323.1072 323.1074 323.1080 323.1098 325.1052 325.1087 325.1093 325.8003 325.8021 325.8031 325.8038 325.8042 325.8049 325.8054 325.8072 325.8074 325.8080 325.8098 326.3034 326.3077 326.4021 326.4022 326.4024 326.4031 326.4049 326.4054 326.4057 326.4065 326.4072 326.4098 326.6016 326.6023 326.6069 326.6073 327.1071 327.1077 327.2092 327.3050 327.3051 327.3087 327.3089 327.3091 327.3093 327.3095 327.4024 327.4031 327.4038 327.4042 327.4049 327.4065 327.4072 327.4074 327.4080 327.4098 328.0024 328.0031 328.0038 328.0042 328.0049 328.0065 328.0072 328.0074 328.0080 328.0098 328.1052 328.1089 328.1091 328.1095 328.1085 328.2022 328.2024 328.2031 328.2034 328.2038 328.2049 328.2050 328.2051 328.2052 328.2054 328.2071 328.2072 328.2074 328.2077 328.2080 328.2091 328.2094 328.2095 328.2098 328.3014 328.3038 328.3034 328.3035 328.3039 328.3046 328.3069 328.3071 328.3073 328.3077 328.3078 328.4022 328.4024 328.4031 328.4038 328.4042 328.4057 328.4058 328.4065 328.4072 328.4074 328.4098 328.5058 328.5068 328.9021 328.9022 328.9038 328.9042 328.9049 328.9054 328.9057 328.9072 328.9074 328.9080 328.9098 330.2021 330.2031 330.2038 330.2042 330.2049 330.2054 330.2072 330.2074 330.2080 330.2098 331.1021 331.1031 331.1038 331.1042 331.1049 331.1054 331.1072 331.1074 331.1080 331.1098 331.2021 331.2031 331.2038 331.2042 331.2049 331.2054 331.2072 331.2074 331.2080 331.2098 331.4021 331.4031 331.4038 331.4042 331.4049 331.4054 331.4072 331.4074 331.4080 331.4098 331.7003 331.7024 331.7038 331.7042 331.7049 331.7054 331.7072 331.7074 331.7080 331.7098 338.5009 338.5024 338.5030 338.5031 338.5035 338.5036 338.5043 338.5044 338.5045 338.5046 338.5054 Textile Furnishings ----------- 366.4700 ----------- 366.6550 Miscellaneous ----------- ----------- 389.6265 B. Apparel 372.1540 372.1560 372.7520 374.4000 374.5020 376.5412 378.0550 378.1535 379.0240 379.0620 379.0646 379.2320 379.2360 379.2630 379.2650 379.3930 379.4020 379.4030 379.4040 379.4050 379.4330 379.4615 379.4620 379.4650 379.4660 379.5510 379.5520 379.5525 379.5530 379.5535 379.5555 379.5560 379.5565 379.5800 379.6210 379.6230 379.6240 379.6250 379.6260 379.6270 379.6470 379.7400 379.7610 379.7620 379.7630 379.8356 379.8357 379.8358 379.8359 379.8635 379.8940 379.9010 379.9020 379.9030 379.9035 379.9505 379.9525 379.9530 379.9535 379.9540 379.9555 379.9560 379.9562 379.9564 379.9566 383.0219 383.0222 383.0226 383.0228 383.0232 383.0350 383.0505 383.0506 383.0507 383.0509 383.0604 383.0606 383.0622 383.0631 383.0608 383.0805 383.0841 383.0856 383.1807 383.1822 383.1843 383.1846 383.1848 383.1910 383.1935 383.2052 383.2056 383.2205 383.2210 383.2227 383.2231 383.2232 383.2233 383.2234 383.2236 383.2352 383.2356 383.2365 383.2706 383.2715 383.2721 383.2722 383.2724 383.2726 383.2728 383.2736 383.2738 383.2750 383.2752 383.2754 383.2809 383.2820 383.2826 383.2828 383.2835 383.2844 383.2910 383.2920 383.3030 383.3040 383.3060 383.3069 383.3070 383.3200 383.3415 383.3448 383.3450 383.3452 383.3465 383.3466 383.4702 383.4704 383.4705 383.4707 383.4709 383.4721 383.4724 383.4726 383.4747 383.4748 383.4654 383.4756 383.4757 383.4761 383.4762 383.4821 383.4825 383.5027 383.5041 383.5051 383.5830 383.6200 383.6310 383.6340 383.6360 383.7532 383.7534 383.7536 383.7538 383.7542 383.7548 383.7552 383.7887 383.7888 383.7892 383.8009 383.8011 383.8012 383.8005 383.8024 383.8030 383.8045 383.8048 383.8050 383.8052 383.8117 383.8141 383.8143 383.8162 383.8164 383.8669 383.8670 383.9010 383.9015 383.9025 383.9035 383.9040 383.9050 383.9051 383.9068 383.9210 383.9215 383.9225 383.9270 383.9290 Miscellaneous 703.1610 703.1620 703.1630 703.1640 703.1650 704.4025 704.4502 704.4504 704.4506 704.4508 704.8520 704.3640 704.3680 704.3900 704.4106 19....+...30....+...40....+...50....+...60....+...70....+...80....+ ******************************************************************************* ******* This is piece 3. -- It begins at character 86 of table line 1. ******** ******************************************************************************* Mill products 320.0044 320.0071 320.1034 320.2038 323.1021 323.1054 325.1050 325.8022 325.8057 326.3042 326.4038 326.4074 327.1034 327.3052 327.4021 327.4054 328.0021 328.0054 328.1050 328.1092 328.2042 328.2057 328.2085 328.3016 328.3064 328.3092 328.4049 328.4080 328.9024 328.9065 330.2022 330.2057 331.1022 331.1057 331.2022 331.2057 331.4022 331.4057 331.7021 331.7057 338.5010 338.5039 338.5069 376.2425 379.0640 379.3120 379.4060 379.4670 379.5545 379.6217 379.6280 379.7640 379.8915 379.9040 379.9545 379.9568 383.0234 383.0601 383.0616 383.1824 383.1940 383.2228 383.2237 383.2716 383.2730 383.2758 383.2838 383.3037 383.3435 383.4200 383.4711 383.4750 383.4764 383.5086 383.6371 383.7544 383.8002 383.8026 383.8073 383.8660 383.9027 383.9069 383.9291 704.3220 704.8520 86.......+....0. ******************************************************************************* ******* This is piece 4. -- It begins at character 1 of table line 99. ******** ******************************************************************************* Note.--For the woven cotton fabric under investigation the U.S. Department of 1...+...10....+...20....+...30....+...40....+...50....+...60....+...70....+.. ******************************************************************************* ******* This is piece 5. -- It begins at character 78 of table line 99. ******* ******************************************************************************* Commerce, in preparing 78.....+...90....+....0. ******************************************************************************* ******* This is piece 6. -- It begins at character 1 of table line 100. ******* ******************************************************************************* the Appendices for these investigations, has parallel the TSUSA numbers. For example U.S. 1...+...10....+...20....+...30....+...40....+. ******************************************************************************* ****** This is piece 7. -- It begins at character 47 of table line 100. ******* ******************************************************************************* used the U.S. Import Statistical Numbers which closely Import Statistical Number 320.0012 represents TSUSA 47......+...60....+...70....+...80....+...90....+....0. ******************************************************************************* ******* This is piece 8. -- It begins at character 1 of table line 102. ******* ******************************************************************************* numbers 320.0112 through 320.0912 and 331.7098 represents TSUSA The fourth and fifth digits of these TSUSA numbers are the yarn 1...+...10....+...20....+...30....+...40....+...50....+...60....+ ******************************************************************************* ****** This is piece 9. -- It begins at character 66 of table line 102. ******* ******************************************************************************* numbers 331.7098 through 331.7998. count numbers. 66.......+...80....+...90....+....0. [FR Doc. 85-5830 Filed 3-11-85; 8:45 am] BILLING CODE 3510-DS-M