88-722

NOTICES

DEPARTMENT OF COMMERCE

[C-557-802]

Preliminary Negative Countervailing Duty Determination; Thermostatically
Controlled Appliance Plugs and Internal Probe Thermostats Therefor From
Malaysia

Friday, July 22, 1988

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AGENCY: Import Administration, International Trade Administration,
Commerce.

ACTION: Notice.

SUMMARY: We preliminarily 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 thermostatically controlled
appliance plugs and internal probe thermostats therefor (the subject merchandise) as
described in the "Scope of Investigation" section of this notice. If this investigation
proceeds normally, we will make our final determination on or before October 3, 1988.

EFFECTIVE DATE: July 22, 1988.

FOR FURTHER INFORMATION CONTACT:Rick Herring or Barbara Tillman, Office of
Investigations, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC
20230; telephone: (202) 377-0187 or 377-2438.

SUPPLEMENTARY INFORMATION:

Preliminary Determination

Based on our investigation, we preliminarily 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
the subject merchandise.

Case History

Since the publication of the Notice of Initiation in the Federal Register (53 FR 16753, May
11, 1988), the following

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events have occurred. On May 18, 1988, we presented a
questionnaire to the Government of Malaysia in Washington, DC, concerning petitioner's
allegations. On June 20, 1988, we received a response from the Government of Malaysia
and a response from Power Electronics Sdn. Bhd. (Power Electronics). On July 1, 1988, we
delivered a supplemental/deficiency questionnaire to the Government and the
respondent company, and received a response on July 8, 1988.
On June 16, 1988, the petitioner filed a request that the preliminary determination be
postponed for seven days. Pursuant to section 703(c)(1)(A) of the Act, we postponed the
preliminary determination to no later than July 18, 1988 (53 FR 24990, July 1, 1988).

Scope of Investigation

The products covered by this investigation are thermostatically controlled appliance
plugs and internal probe thermostats therefor. For purposes of this investigation, the
term thermostatically controlled appliance plug refers to any device designed to connect
an electrical outlet (typically a common wall receptacle) with a small cooking appliance of
2,000 watts or less (typically a griddle, deep fryer, fry pan, multicooker, and/or wok) and
regulate the flow of electricity, and thus the temperature, therein; consisting of (1) a
probe thermostat encased in a single housing set with a temperature control knob
(typically a dial calibrated with various temperature settings) and (2) a cord set.
The term internal probe thermostat refers to any device designed to automatically
regulate the flow of electricity, and thus the temperature, in a small heating apparatus of
2,000 watts or less (typically small cooking appliances); consisting of a stainless steel
tube (which connects to the heating apparatus) and other components used for
thermostatic control. The products are currently provided for under Tariff Schedules of
the United States Annotated item numbers 711.7820 and 711.7840 and under
Harmonized System item numbers 9032.10.00, 9032.20.00, 9032.89.60, 9032.90.60,
and 9033.00.00.

Analysis of Programs

Consistent with our practice in preliminary determinations, when a response to an
allegation denies the existence of a program, receipt of benefits under a program, or
eligibility of a company or industry under a program, and the Department has no
persuasive evidence showing that the response is incorrect, we accept the response for
purposes of the preliminary determination. All such responses, however, are subject to
verification. If the response cannot be supported at verification, and the program is
otherwise countervailable, the program will be considered a bounty or grant in the final
determination.
For purposes of this preliminary determination, the period for which we are measuring
bounties or grants ("the review period") is calendar year 1987, which corresponds to the
fiscal year of the respondent company. Based upon our analysis of the petition and the
responses to our questionnaires, we preliminarily determine the following:

I. Programs Preliminarily Determined Not To Be Used

We preliminarily determine that manufacturers, producers, or exporters in Malaysia of
the subject merchandise did not apply for, claim or receive benefits during the review
period for exports of the subject merchandise to the United States under the following
programs:

A. Export Tax Incentives

1. Abatement of Taxable Income Based on the Ratio of Export Sales to Total Sales and an
Abatement of Five Percent of the Value of Indigenous Materials Used in Exports. The
Investment Incentives Act of 1968 provided for an abatement of taxable income based on
the ratio of export sales to total sales. This law was repealed effective January 1, 1986,
and replaced by the Promotion of Investments Act of 1986. Among other incentives, the
new law provides for an abatement of adjusted income for exports. The amount of
adjusted income to be abated is: (a) A rate equivalent to 50 percent of the ratio of export
sales to total sales; and (2) five percent of the value of indigenous Malaysian materials
incorporated in the manufacture of exported products. This program is not available to
companies still participating in programs under the repealed Investment Incentives Act
of 1968, including pioneer status, or to companies granted pioneer status or an
investment tax allowance under the Promotion of Investments Act of 1986.

2. Allowance of Taxable Income of Five Percent for Trading Companies Exporting
Malaysian-made Products. Under the Promotion of Investments Act of 1986, an
allowance of five percent of the F.O.B. value of export revenues is available to trading
companies and agricultural companies exporting Malaysian-made products. This
program is not available to companies still participating in programs under the repealed
Investment Incentives Act of 1968, including Pioneer Status, or to companies granted
pioneer status or an investment tax allowance under the Promotion of Investments Act of
1986.

3. Double Deduction for Export Credit Insurance Payments. The Income Tax Act of 1967,
as amended, provides for a deduction to be taken on a company's tax return for the cost
of export credit insurance in addition to a similar deduction allowed on a company's
financial statement.

4. Double Deduction for Export Promotion Expenses. Section 41 of the Promotion of
Investments Act of 1986 allows companies to deduct expenses related to the promotion
of exports twice, once on the financial statement and again on the income tax form.

5. Allowance of a Percentage of Net Taxable Income Based on the F.O.B. Value of Export
Sales. Effective in 1984, section 29 of the Investment Incentives Act of 1968 was amended
to allow for a flat deduction of five percent of export revenues (based on F.O.B. value)
from taxable income. Due to the enactment of the Promotion of Investments Act of 1986,
this program currently applies only to trading companies and agricultural companies.
This program is not available to companies still participating in programs under the
repealed Investment Incentives Act of 1968, including pioneer status, or to companies
granted pioneer status or an investment tax allowance under the Promotion of
Investments Act of 1986.

6. Industrial Building Allowance. Sections 63-66 of the Income Tax Act of 1967, as
amended, allow an income tax deduction for a percentage of the value of constructed or
purchased buildings used in manufacturing. In 1984, this allowance was extended to
include buildings used as warehouses to store finished goods ready for export or
imported inputs to be incorporated into exported goods.

B. Other Export Incentives

1. Export Credit Refinancing. The Bank Negara Malaysia, the central bank of Malaysia,
provides pre- and post-shipment financing of exports through commercial banks for
periods of up to 120 and 180 days, respectively. The Bank offers order-based financing on
specific shipments, as well as "certificate of performance" financing, which is a credit line
based on the previous 12 months' export performance.

2. Export Insurance Program. Export credit insurance is provided by Malaysian Export
Credit Insurance, Bhd. (MECIB). Established under the Malaysian Companies Act of 1965,

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MECIB is owned jointly by the Government of Malaysia (53. 6 percent) and by
commercial banks and insurance companies (46.4 percent). MECIB provides insurance
only to cover commercial and political risks.

C. Other Tax Incentives

1. Pioneer Status Under the Investment Incentives Act of 1968. Pioneer status under this
Act, as amended, is available to companies producing a product (1) with favorable
prospects for further development, including development for export, or (2) currently
being produced in insufficient quantities to meet the development needs of Malaysia,
including export. Benefits granted under pioneer status include exemptions on the
portion of income derived from sales of the pioneer product from the following: (1) The
40 percent corporate income tax; (2) the five percent development tax; (3) the three
percent excess profits tax; and (4) the 40 percent dividend tax. Pioneer status benefits
are available for a period of up to five years and may be extended for up to an additional
three years. This program is not available to companies granted pioneer status under the
Promotion of Investments Act of 1986.

2. Pioneer Status Under the Promotion of Investments Act of 1986. As stated above, the
Promotion of Investments Act of 1986 replaced the Investment Incentives Act of 1968.
The primary changes in the pioneer status program under the new law are as follows: (1)
The initial grant of pioneer status is five years for all companies, regardless of their level
of investment; (2) the product must be on the "promoted product" or "promoted
activities" list; (3) specific one-year extensions for location, priority products, and
Malaysian content have been eliminated; (4) extensions are now granted for five years if
the product is on the "promoted product" list for extensions and the company meets
certain investment, employment, or development criteria; and (5) pioneer status may
also be provided to non-corporate entities such as cooperative societies, associations,
etc. This program is not available to companies granted pioneer status under the
Investment Incentives Act of 1968.

3. Investment Tax Allowance. The Promotion of Investments Act of 1986 provides for an
investment tax allowance, limited by the amount of actual expenses, for qualifying capital
expenditures. This program is not available to companies granted pioneer status under
the Investment Incentives Act of 1986 or under the Promotion of Investments Act of
1986.

4. Accelerated Depreciation Allowance. The Income Tax Act of 1967, as amended in
1979, provides for an accelerated depreciation allowance of 40 percent for qualifying
expenditures. This program is not available to companies granted pioneer status under
the Investment Incentives Act of 1968 or under the Promotion of Investments Act of
1986.

5. Reinvestment Allowance. The Income Tax Act of 1967, as amended in 1979, provides
for a reinvestment allowance of 25 percent for capital expenditures on a factory, plant or
machinery. This program is not available to companies granted pioneer status under the
Investment Incentives Act of 1968 or under the Promotion of Investments Act of 1986.

D. Medium- and Long-term Government Financing

Medium- and long-term financing is provided by the following institutions:
- The Industrial Development Bank of Malaysia (IDBM).
- The Development Bank of Malaysia (DBM).
- The Borneo Development Corporation (BDC).
- The Sabah Development Bank (SDB).
IDBM, which is wholly owned by the Government of Malaysia, provides financing
primarily to the shipping industry, whereas the main objective of DBM is to promote
businesses owned by Bumitputras (native Malaysians not of Chinese or Indian descent).
BDC was established to promote industrial development in the Sabah and Sarawak states;
each state has a 50 percent ownership in the bank. SDB, wholly owned by the State of
Sabah, was established to promote economic development in that state.

E. Reduction in the Cost of State Land for New Industry

Certain states may reduce the price of state land in order to attract investment and
development.

F. Preferential Financing for Bumiputras

The DBM provides medium- and long-term financing as well as guarantees for industrial
equipment loans to Bumiputras.

Verification

In accordance with section 776(a) of the Act, we will verify the information used in
making our final determination.

Public Comment

In accordance with 19 CFR 355.35, we will hold a public hearing, if requested, to afford
interested parties an opportunity to comment on this preliminary determination on
September 7, 1988, at 1:00 p.m. at the U.S. Department of Commerce, Room 3708, 14th
Street and Constitution Avenue, NW., Washington, DC 20230. lndividuals who wish to
participate in the hearing must submit a request to the Assistant Secretary for Import
Administration, Room B-099, at the above address within ten days of the publication of
this notice in the Federal Register.
Requests should contain: (1) The party's name, address, and telephone number; (2) the
number of participants; (3) the reason for attending; and (4) a list of the issues to be
discussed. In addition, ten copies of the business proprietary version and seven copies of
the nonproprietary version of the pre-hearing briefs must be submitted to the Assistant
Secretary by August 31, 1988. Oral presentations will be limited to issues raised in the
briefs. In accordance with 19 CFR 355.33(d) and 355.34, written views will be considered
if received not less than 30 days before the final determination is due or, if a hearing is
held, within seven days after the hearing transcript is available.
This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).
July 18, 1988.

Jan W. Mares,

Assistant Secretary for Import Administration.

[FR Doc. 88-16566 Filed 7-21-88; 8:45 am]

BILLING CODE 3510-DS-M