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[C-557-806] 

Extruded Rubber Thread From Malaysia; Final Results of Countervailing 
Duty Administrative Review 

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative 
Review.

SUMMARY: On May 22, 1995, the Department of Commerce (the Department) 
published in the Federal Register its preliminary results of 
administrative review of the countervailing duty order on extruded 
rubber thread from Malaysia for the period January 1, 1993 through 
December 31, 1993. We have completed this review and determine 
the net subsidy to be 1.00 percent ad valorem. We will instruct 
the U.S. Customs Service to assess countervailing duties as 
indicated above.

EFFECTIVE DATE: October 4, 1995.

---- page 51983 ----

FOR FURTHER INFORMATION CONTACT: Judy Kornfeld or Rick Herring, 
Office of Countervailing Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 
14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230; telephone: (202) 482-2786. 

SUPPLEMENTARY INFORMATION: 


Background 

   On May 22, 1995, the Department published in the Federal 
Register (60 FR 27080) the preliminary results of its administrative 
review of the countervailing duty order on extruded rubber thread 
from Malaysia. The Department has now completed this administrative 
review in accordance with section 751 of the Tariff Act of 1930, 
as amended (the Act). 
   We invited interested parties to comment on the preliminary 
results. On June 21, 1995, a case brief was submitted by the 
Government of Malaysia (GOM) and Heveafil Sdn. Bhd., (Heveafil), 
Filmax Sdn. Bhd. (Filmax), Rubberflex Sdn. Bhd. (Rubberflex), 
Filati Lastex Elastofibre Sdn. Bhd., (Filati) and Rubfil Sdn. 
Bhd. (Rubfil), producers of the subject merchandise which exported 
extruded rubber thread to the United States during the review 
period (respondents). The review covers the period January 1, 
1993 through December 31, 1993. The review involves 5 companies 
and 12 programs. 

Applicable Statute and Regulations 

   The Department is conducting this administrative review in 
accordance with section 751(a) of the Tariff Act of 1930, as 
amended (the Act). Unless otherwise indicated, all citations 
to the statute and to the Department's regulations are in reference 
to the provisions as they existed on December 31, 1994. However, 
references to the Department's Countervailing Duties; Notice 
of Proposed Rulemaking and Request for Public Comments, 54 FR 
23366 (May 31, 1989) (Proposed Regulations), are provided solely 
for further explanation of the Department's countervailing duty 
practice. Although the Department has withdrawn the particular 
rulemaking proceeding pursuant to which the Proposed Regulations 
were issued, the subject matter of these regulations is being 
considered in connection with an ongoing rulemaking proceeding 
which, among other things, is intended to conform the Department's 
regulations to the Uruguay Round Agreements Act. See 60 FR 80 
(Jan. 3, 1995). 

Scope of the Review 

   Imports covered by this review are shipments of extruded 
rubber thread from Malaysia. Extruded rubber thread is defined 
as vulcanized rubber thread obtained by extrusion of stable 
or concentrated natural latex of any cross sectional shape; 
measuring from 0.18 mm, which is 0.007 inch or 140 gauge, to 
1.42 mm, which is 0.056 inch or 18 gauge, in diameter. Such 
merchandise is classifiable under item number 4007.00.00 of 
the Harmonized Tariff Schedule (HTS). The HTS item number is 
provided for convenience and Customs purposes. The written description 
is dispositive. 

Calculation Methodology for Assessment and Cash Deposit Purposes 

   We calculated the net subsidy on a country-wide basis by 
first calculating the subsidy rate for each company subject 
to the administrative review. We then weight-averaged the rate 
received by each company using as the weight its share of total 
Malaysian exports to the United States of subject merchandise, 
including all companies, even those with de minimis and zero 
rates. We then summed the individual companies' weight-averaged 
rates to determine the subsidy rate from all programs benefitting 
exports of subject merchandise to the United States. 
   Since the country-wide rate calculated using this methodology 
was above de minimis, as defined by 19 CFR 355.7 (1994), we 
proceeded to the next step, and examined the net subsidy rate 
calculated for each company to determine whether individual 
company rates differed significantly from the weighted-average 
country-wide rate, pursuant to 19 CFR 355.22(d)(3).
   None of the companies had net subsidy rates which were significantly 
different pursuant to 19 CFR 355.22(d)(3). Therefore, all companies 
are assigned the country-wide rate.

Analysis of Programs

   Based upon our analysis of our questionnaire and written 
comments from the interested parties we determine the following:


I. Programs Conferring Subsidies

1. Export Credit Refinancing

   In the preliminary determination we found that this program 
conferred countervailable benefits on the subject merchandise. 
Our analysis of the comments submitted by the interested parties, 
summarized below, has not led us to reconsider our findings 
in the preliminary determination. On this basis, the net subsidy 
for this program is 0.72 percent.

2. Pioneer Status

   In the preliminary determination we found that this program 
conferred countervailable benefits on the subject merchandise. 
Our analysis of the comments submitted by the interested parties, 
summarized below, has not led us to reconsider our findings 
in the preliminary determination. On this basis, the net subsidy 
for this program is 0.28 percent.


II. Programs Found Not to be Used

   In the preliminary determination, we found the following 
programs to be not used:

    1. Investment Tax Allowance
    2. Abatement of Five Percent of Taxable Income Due to Location 
       in a Promoted Industrial Area
    3. Allowance of a Percentage of Net Taxable Income Based 
       on the F.O.B. Value of Export Sales
    4. Double Deduction of Export Credit Insurance Payments
    5. Abatement of Taxable Income of Five Percent of Adjusted 
       Income of Companies Due to Capital Participation and 
       Employment Policy Adherence
    6. Preferential Financing for Bumiputras
    7. Abatement of Income Tax Based on the Ratio of Export 
       Sales to Total Sales
    8. Industrial Building Allowance
    9. Double Deduction for Export Promotion Expenses

Our analysis of the comments submitted by the interested parties, 
summarized below, has not led us to reconsider our findings 
in the preliminary determination.


III. Programs Found to be Terminated

   In the preliminary determination we found the following program 
to be terminated and not to provide any residual benefits:

    - Abatement of Five Percent of the Value of Indigenous Malaysian 
Materials Used in Exports.

   Our analysis of the comments submitted by the interested 
parties, summarized below, has not led us to reconsider our 
findings in the preliminary determination.

Analysis of Comments

   Comment 1: Respondents allege that the Department initiated 
the original investigation pursuant to Section 303(a)(2) of 
the Act, and, therefore, the Department can impose countervailing 
duties under this section only if there is an injury determination 
by the International Trade Commission (ITC). 


---- page 51984 ----


(The ITC discontinued its injury determination under Section 
303(a)(2) because the duty-free status of rubber thread from 
Malaysia was terminated.) Respondents contend that without an 
injury determination, the Department had no authority to issue 
a countervailing duty order and to require the payment of cash 
deposits. Respondents further maintain that the Department cannot 
simply transfer the jurisdiction for an investigation from Section 
303(a)(2) to Section 303(a)(1) without issuing a public notice 
that it intends to proceed with the investigation under a different 
statutory provision. See, Certain Textile Mill Products and 
Apparel from Turkey (50 FR 9817; March 12, 1987); Certain Textile 
Mill Products and Apparel from the Philippines (50 FR 1195; 
March 26, 1985 and Certain Textile Mill Products and Apparel 
from Indonesia (50 FR 9861; March 12, 1985). Furthermore, because 
there was no initiation notice or a preliminary determination 
under section 303(a)(1), a final determination under that section 
was not appropriate. If the Department wanted to proceed with 
the investigation, it was required to re-initiate under the 
appropriate provision.
   Department's Position: As the Department pointed out in the 
previous review, respondents' challenge to the Department's 
authority to issue the order is untimely. Challenges to the 
issuance of an order must be filed within 30 days of the date 
the order is published. The countervailing duty order on extruded 
rubber thread from Malaysia was published on August 25, 1992. 
Respondents voluntarily withdrew a timely-filed complaint challenging 
the order on these same grounds. Respondents' attempt to revive 
that challenge in this proceeding is untimely.
   Comment 2: Respondents contend that the Department overstated 
the benefit received under the ECR program in its administrative 
review. They argue that the Department must use the ``cost of 
funds'' to the government as the benchmark as required by item 
``k'' of the Illustrative List of Export Subsidies annexed to 
the Subsidies Code, and the appropriate ``cost of funds'' is 
the 90-day rate for government bonds. Respondents assert that 
if the Department continues to use the cost to the recipient 
as a benchmark, it should also continue its past practice and 
use the bankers' acceptances (BA) rates because they are identical 
to ECR financing in terms of risk, maturity and purpose. Respondents 
further contend that the Department should interpret the ``predominant'' 
form of financing as the most comparable form of financing. 
They assert that it makes no sense to compare trade financing 
to other financing such as short-term loans and overdrafts. 
Furthermore, if the Department uses the weighted-average of 
commercial rates, it should account for the differences in the 
terms of financing.
   Respondents further argue that if the Department does not 
use the BA benchmark, it should use the Average Lending Rate 
(ALR) provided in the Bank Negara Statistical Bulletin rather 
the Base Lending Rate (BLR) plus an estimated spread. If the 
Department, nevertheless, uses this method, then the spread 
should be calculated by deducting the average BLR rate calculated 
by the Department from the ALR published in the Bank Negara 
Statistical Bulletin.
   Department's Position: We disagree with respondents. As explained 
in the previous review, the Illustrative List identifies common 
forms of export subsidies but does not necessarily instruct 
the Department how to value them. The Department has a longstanding 
practice of valuing the benefit to the recipient rather than 
the cost to the government for the purpose of calculating countervailing 
duty rates.
   The Department's practice is to use the rate for the predominant 
form of short-term financing in the country under review as 
the benchmark for short-term loans. See, Proposed Regulations 
(19 CFR 23380; May 31, 1989). Where there is no single predominant 
source of short-term financing in the country in question, the 
Department may use a benchmark composed of the interest rates 
for two or more sources of short-term financing in the country 
in question. See, Final Affirmative Countervailing Duty Determination 
and Countervailing Duty Order; Steel Wire Rope from Thailand 
(56 FR 46299; September 11, 1991). BAs constitute an extremely 
small percentage of short-term financing in Malaysia and, therefore, 
it would be inappropriate to use the BA rates as a benchmark. 
The Bank Negara Statistical Bulletin, provided in Exhibit 4 
to the Government of Malaysia's Questionnaire Response dated 
November 18, 1994, lists the commercial bank BLR rates prevailing 
during the review period. The rates ranged from 8.25 percent 
to 9.50 percent. According to commercial bank officials, the 
banks add a 1.00 to 2.00 percent spread to the BLR. (See Memorandum 
to the File from Chris Jimenez Regarding Conversation With Bank 
of America Official in Malaysia Regarding Spread Used by Commercial 
Banks in 1993 dated May 10, 1995, on file in the public file 
of the Central Records Unit, Room B-099 of the Department of 
Commerce).
   During verification of the 1992 administrative review, we 
found that ALR rates published in the Bank Negara Statistical 
Bulletin included both short-term and long-term rates, while 
the BLR rates are strictly based on short-term loans. (See Memorandum 
to the File from Judy Kornfeld and Lorenza Olivas Regarding 
Extruded Rubber Thread from Malaysia; Benchmark Information 
dated August 15, 1995, on file in the public file of the Central 
Records Unit, Room B-099 of the Department of Commerce). Therefore, 
we disagree with respondents that we should use the ALR rate 
because it would improperly include long-term rates. Rather, 
we have determined that it is appropriate to continue to use 
the average of the commercial BLR rates published in Bank Negara 
Statistical Bulletin, plus an average 1.5 percent spread, as 
a benchmark, in accordance with section 355.44(b)(3)(i) of the 
Department's Proposed Rules. Respondents' argument, that if 
the Department, nevertheless, uses this method, it should calculate 
the spread by deducting the average BLR rate from the average 
of the ALR rates, would again improperly include long-term rates 
in the benchmark calculation.
   Comment 3: Respondents argue that the Department overstated 
the net subsidy for the review period and for the duty deposit 
purposes because the Department failed to take account of the 
exclusion by Heveafil and Filmax of U.S. exports from the calculation 
of eligibility for the pre-shipment export financing. In addition, 
respondents claim that the two companies did not use funds from 
exports to the United States to repay any of the pre-shipment 
loans. They claim that in a similar situation, the Department 
concluded that exports to the United States did not receive 
benefits from short-term financing. See, Suspension of Countervailing 
Duty Investigation; Certain Forged Steel Crankshafts from Brazil 
(52 FR 28177, 28179; July 28, 1987) (Brazilian Crankshafts Suspension 
Agreement). Respondents' claim that in the first administrative 
review, the Department incorrectly rejected this method of eliminating 
the effect of a subsidy. Therefore, respondents maintain that 
Heveafil and Filmax received no benefit with regard to U.S. 
shipments.
   Respondents further assert that the Department found a subsidy 
in this case in part because there was no strict segregation 
of U.S. exports and the 


---- page 51985 ----


materials used in their manufacture from materials and exports 
to other markets financed with ECR loans. However, according 
to the respondents, the Department was presented with exactly 
the same issue in Crankshafts from Brazil and in that case the 
Department did not require that the exporters segregate raw 
materials purchased with export financing.
   Department's Position: The GOM provides ECR financing based 
on export performance. The explicit purpose of this program 
is to promote the export of manufactured and approved agricultural 
products. Two types of ECR financing are available: pre-shipment 
and post-shipment financing. There is no evidence that the GOM 
limits these ECR loans to increase exports to markets other 
than the United States, nor is there evidence of a provision 
that prevents exporters from receiving ECR loans for exports 
to the United States. 
   During the review period, both Heveafil and Filmax applied 
for and used pre-shipment financing based on certificates of 
performance (CP). Pre-shipment financing based on CPs is a line 
of credit based on previous exports and, when received, cannot 
be tied to specific sales in specific markets. Because pre-shipment 
loans were not shipment-specific, we included all loans in calculating 
the country-wide duty rate. By excluding exports to the United 
States from their application for export financing, the companies 
merely reduced the amount of financing they received. 
   We disagree with respondents that in similar circumstances 
the Department has concluded that the exclusion of U.S. exports 
from applications in the manner described by respondents eliminates 
any countervailable subsidy that would otherwise be present. 
Where a benefit is not tied to a particular product or market, 
it is the Department's practice to allocate the benefit to all 
products exported by a firm where the benefit is received pursuant 
to an export program. See 19 C.F.R. 355.47(c) of the Proposed 
Regulations (54 FR 23375, May 31, 1989). A benefit is tied to 
a particular product or market at the time of receipt. Respondents 
cannot demonstrate that, at the time of receipt, ECR loans were 
tied solely to non-U.S. exports. Further, respondents' reliance 
on the Crankshafts from Brazil suspension agreement is misplaced. 
Suspension agreements are unusual, negotiated arrangements in 
which parties to a proceeding agree to renounce countervailable 
subsidies. As such, unlike final determinations, they do not 
serve as administrative precedent. Moreover, the Crankshafts 
from Brazil suspension agreement is consistent with our allocation 
practice, as described in the Proposed Regulations. 
   Comment 4: Respondents argue that the Department previously 
found the Pioneer Status Program not countervailable. See, Carbon 
Steel Wire Rod from Malaysia; Final Results of Countervailing 
Duty Administrative Review (Wire Rod from Malaysia) (56 FR 14927; 
April 12, 1991). Respondents assert that it is not countervailable 
because tax benefits under this program are not limited to any 
sector or region of the Malaysian economy, nor is the program 
exclusively available to exporting companies. They contend that 
the Department confirmed in the first administrative review, 
both the de jure and de facto availability of this program to 
the entire Malaysian economy, and that the pioneer status tax 
benefits are not targeted to specific industries or companies 
in a discriminatory manner. Furthermore, the Department verified 
in the original investigation that the internal guidelines used 
to grant pioneer status are characterized by neutral criteria 
unrelated to exports, location or any other factors that could 
require a determination that the program is countervailable. 
   Respondents further argue that the Department verified in 
the first administrative review that the GOM does not require 
export commitments, or view them as preponderant, in evaluating 
applications; that export potential is merely one of 12 factors 
considered in granting status; and that a product will not be 
accepted based on export potential alone. Furthermore, respondents 
argue that the Department verified in the first administrative 
review that the GOM commonly approves companies who do not make 
export commitments as well as some who do make them. Therefore, 
export performance is not viewed as a preponderant factor, but 
as one of many neutral criteria. 
   Department's Position: We addressed this identical argument 
in the previous review. In Wire Rod from Malaysia, we concluded 
that benefits were not used by a specific industry or group 
of industries and that no industry or group of industries used 
the program disproportionately and found the program not to 
be countervailable. That determination, however, did not specifically 
address situations where companies had a specific export condition 
attached to their pioneer status approval. In the Wire Rod investigation, 
petitioner raised the issue of an export requirement. Although 
the requirement per se is not new, it was not at issue with 
the companies investigated in Wire Rod. 
   As stated in the Final Affirmative Countervailing Duty Determination 
and Countervailing Duty Order; Extruded Rubber Thread from Malaysia, 
57 FR 38472 (August 25, 1992) (Malaysian Final Determination), 
we continue to view the ``domestic'' side of the Pioneer Statue 
Program to be not countervailable. However, in this instance, 
recipients of the tax benefits conferred by this program can 
be divided into two categories: industries and activities that 
will find market opportunities in Malaysia and elsewhere, and 
those that face a saturated domestic market. At verification 
of the first administrative review, we established that an export 
requirement may sometimes be applied to certain industries after 
it is determined that the domestic market will no longer support 
additional producers. The extruded rubber thread industry is 
among these industries. 
   The combination of the necessary export orientation of the 
industry due to lack of domestic market opportunities and the 
explicit export condition attached to pioneer status approval 
in the rubber thread industry lead us to conclude that the ``export'' 
side of the Pioneer Status Program constitutes an export subsidy 
to the rubber thread industry, Whether or not the commitment 
was voluntary, as respondents suggest, the company has obligated 
itself to export a very large portion of its production, and 
that commitment was a condition for approval of benefits. For 
further information, see Malaysian Final Determination. 
   Comment 5: Respondents argue that the Department overstated 
the benefit from the Pioneer Status Program because it fails 
to deduct normal capital allowance that would have been allowed 
if the program had not been used. Respondents claim that Rubberflex, 
in fact, received no cash benefits from this program. Furthermore, 
they claim, the Department incorrectly allocated pioneer status 
tax benefits over only export sales even though pioneer status 
tax benefits are also applicable to profits on domestic sales. 
According to the respondents, this is consistent with the Department's 
practice to allocate benefits over total sales to which they 
are ``tied.'' 
   Department's Position: We disagree with respondents. When 
a company receives pioneer status, it is allowed to accumulate 
normal capital allowance for use in future years. Thus, these 
allowances were not used to offset 


---- page 51986 ----


current benefits during the review period. Moreover, export 
sales should form the denominator because receipt of pioneer 
status tax benefits for the companies under review is contingent 
upon exportation. Accordingly, we have not overstated the benefit 
from the Pioneer Status Program. See section 355.47(a)(2) of 
the Proposed Rules. See also Final Affirmative Countervailing 
Duty Determination; Oil Country Tubular Goods From Brazil (49 
FR 46570; November 27, 1984) and Final Affirmative Countervailing 
Duty Determination; Certain Agricultural Tillage Tools From 
Brazil (50 FR 34525; August 26, 1985). 

Final Results of Review 

   For the period January 1, 1993 through December 31, 1993, 
we determine the net subsidy to be 1.00 percent ad valorem for 
all companies. 
   The Department will instruct the U.S. Customs Service to 
assess a countervailing duty rate of 1.00 percent. 
   This countervailing duty order was determined to be subject 
to section 753 of the Act (as amended by the Uruguay Round Agreements 
Act of 1994). Countervailing Duty Order; Opportunity to Request 
a Section 753 Injury Investigation, 60 FR 27,963 (May 26, 1995), 
amended 60 FR 32,942 (June 26, 1995). In accordance with section 
753(a), domestic interested parties have requested an injury 
investigation with respect to this order with the International 
Trade Commission (ITC). Pursuant to section 753(a)(4), liquidation 
of entries of subject merchandise made on or after January 1, 
1995, the date Malaysia joined the World Trade Organization, 
is suspended until the ITC issues a final injury determination. 
We will not issue assessment instructions for any entries made 
after January 1, 1995; however, we will instruct Customs to 
collect cash deposits in accordance with the final results of 
this administrative review. 
   Therefore, the Department will instruct the U.S. Customs 
Service to collect a cash deposit of estimated countervailing 
duties of 1.00 percent of the f.o.b. invoice price on all shipments 
of the subject merchandise from Malaysia entered, or withdrawn 
from warehouse, for consumption on or after the date of publication 
of the final results of this administrative review. 
   This notice also serves as a reminder to parties subject 
to administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed 
under APO in accordance with 19 CFR 355.43(d). Timely written 
notification of return/destruction of APO materials or conversion 
to judicial protective order is hereby requested. Failure to 
comply with the regulations and the terms of an APO is a sanctionable 
violation. 
   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: September 26, 1995. 

Susan G. Esserman, 
Assistant Secretary for Import Administration. 

[FR Doc. 95-24685 Filed 10-3-95; 8:45 am] 
BILLING CODE 3510-DS-P 


The Contents entry for this article reads as follows: International Trade Administration NOTICES Countervailing duties: Extruded rubber thread from- Malaysia, 51982