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DEPARTMENT OF COMMERCE
[C-557-806]
Extruded Rubber Thread From Malaysia; Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty
administrative review.
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SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty order on extruded
rubber thread from Malaysia. For information on the net subsidy for
each reviewed company, as well as for all non-reviewed companies,
please see the Preliminary Results of Review section of this notice. If
the final results remain the same as these preliminary results of
administrative review, we will instruct the U.S. Customs Service to
assess countervailing duties as indicated in the Preliminary Results of
Review section of this notice. Interested parties are invited to
comment on these preliminary results.
EFFECTIVE DATE: June 11, 1996.
FOR FURTHER INFORMATION CONTACT: Judy Kornfeld or Lorenza Olivas,
Office of Countervailing Compliance, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW., Washington, DC 20230; telephone:
Judy Kornfeld (202) 482-3146, Lorenza Olivas (202) 482-1785 or (202)
482-2786.
SUPPLEMENTARY INFORMATION:
Background
On August 25, 1992, the Department published in the Federal
Register (57 FR 38472) the countervailing duty order on extruded rubber
thread from Malaysia. On August 1, 1995, the Department published a
notice of ``Opportunity to Request an Administrative Review'' (60 FR
39150) of this countervailing duty order. We received a timely request
for review, and we initiated the review, covering
---- page 29535 ----
the period January 1, 1994 through December 31, 1994, on September 15,
1995 (60 FR 47930).
In accordance with section 355.22 of the Department's Interim
Regulations, this review covers only those producers or exporters of
the subject merchandise for which a review was specifically requested
(see Antidumping and Countervailing Duties: Interim Regulations;
Request for Comments, 60 FR 25130 (May 11, 1995) (Interim Regulations).
Accordingly, this review covers Heveafil Sdn. Bhd., Filmax Sdn. Bhd.,
Rubberflex Sdn. Bhd., Filati Lastex Elastofibre Sdn Bhd. (Filati), and
Rubfil Sdn. Bhd. Heveafil and Filmax are affiliated companies. This
review also covers 13 programs.
On May 8, 1996 we extended the period for completion of the
preliminary and final results pursuant to section 751(a)(3) of the
Tariff Act of 1930, as amended (see, Extruded Rubber Thread From
Malaysia; Extension of Time Limit for Countervailing Duty
Administrative Review, 61 FR 20803). As explained in the memoranda from
the Assistant Secretary for Import Administration dated November 22,
1995, and January 11, 1996 (on file in the public file of the Central
Records Unit, Room B-099 of the Department of Commerce), all deadlines
were further extended to take into account the partial shutdowns of the
Federal Government from November 15 through November 21, 1995, and
December 15, 1995, through January 6, 1996. The deadline for the final
results of this review is no later than 120 days from the date on which
these preliminary results are published in the Federal Register.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the
Act). The Department is conducting this administrative review in
accordance with section 751(a) of the Act. References to the
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 URAA. See Advance Notice of Proposed Rulemaking and
Request for Public Comments, 60 FR 80 (January 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.
Verification
As provided in section 782(i) of the Act, we verified information
submitted by the Government of Malaysia and Heveafil, Filmax,
Rubberflex, Filati and Rubfil. We followed standard verification
procedures, including meeting with government and company officials and
examination of relevant accounting and financial records and other
original source documents. Our verification results are outlined in the
public versions of the verification reports, which are on file in the
Central Records Unit (Room B-099 of the Main Commerce Building).
Affiliated Parties
Heveafil owns and controls Filmax and both companies produce
subject merchandise. Therefore, we determine them to be affiliated
companies under section 771(33) of the Act. As such, and consistent
with prior reviews of this order, we have calculated only one rate for
both of these companies. See Extruded Rubber Thread From Malaysia;
Preliminary Results of Countervailing Duty Administrative Review, 59 FR
46392 (September 8, 1994). For further information, see Memorandum to
File from Judy Kornfeld Regarding Status as Affiliated Parties dated
May 22, 1996, on file in the public file of the Central Records Unit,
Room B-099 of the Department of Commerce.
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined To Confer Subsidies
1. Export Credit Refinancing (ECR) Program
The ECR program was established in order to promote: (1) Exports of
manufactured goods and agricultural food products that have significant
value-added and high local content, (2) greater domestic linkages in
export industries, and (3) easy access to credit facilities. In order
to accomplish this, the Bank Negara Malaysia, the central bank of
Malaysia, provides order-based and pre- and post-shipment financing of
exports through commercial banks for periods of up to 120 and 180 days,
respectively, and certificate of performance (CP)-based pre-shipment
financing. These loans are provided in Malaysian Ringgits. Order-based
financing is provided for specific sales to specific markets. CP-based
financing is a line of credit based on the previous 12 months' export
performance, and cannot be tied to specific sales in specific markets.
The Department determined that this program was countervailable in
Final Affirmative Countervailing Duty Determination and Countervailing
Duty Order; Extruded Rubber Thread From Malaysia (57 FR 38472; August
25, 1992) (Malaysian Rubber Thread Final Determination) because receipt
of loans under this program was contingent upon export performance and
the loans were provided at preferential interest rates. No new
information or evidence of changed circumstances has been submitted in
this proceeding to warrant reconsideration of this finding. Heveafil,
Filmax, Rubberflex and Rubfil used pre-shipment ECR loans. Rubfil and
Filati used post-shipment ECR loans.
In order to determine whether these loans were provided at
preferential rates during the review period, we compared the interest
rate charged on these loans to a benchmark interest rate. As a
benchmark for short-term loans, it is our practice to select the
predominant source of short-term financing in the country as our
benchmark for short-term loans. See, section 355.44(b)(3) of the
Department's Proposed Regulations. In Malaysia, term loans and
overdrafts offered by commercial banks are the most predominant form of
short-term financing. The average interest rates for these types of
financing, however, are not individually available. Therefore, we have
used as our benchmark for ECR loans the average commercial bank lending
rate as an estimate of these
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predominant short-term lending rates. This rate is referred to by banks
as the base lending rate (BLR). Commercial banks then add a one to two
percent spread to the BLR. Thus, to determine the commercial benchmark,
we used the average commercial BLR rates as published by Bank Negara,
the central bank of Malaysia, plus an average spread of 1.5 percent.
This is consistent with the benchmark methodology used in the last two
administrative reviews. (See, e.g., Extruded Rubber Thread from
Malaysia; Final Results of Countervailing Duty Administrative Review)
(Final Results of 1992 Review) (60 FR 17515; April 6, 1995).
Based on a comparison of the ECR rates and the benchmark rate, we
find that ECR loans continue to be provided at preferential interest
rates. To calculate the benefit from ECR loans on which interest was
paid in 1994, we used our short-term loan methodology which has been
applied consistently in previous determinations. (See, e.g., Final
Affirmative Countervailing Duty Determination and Countervailing Duty
Order: Butt-Weld Pipe Fittings from Thailand (55 FR 1695; January 18,
1990); and the Malaysian Rubber Thread Final Determination in this case
(57 FR 38474; August 27, 1992). See also section 355.44(b)(3) of the
Proposed Regulations. Because the post-shipment ECR loans were
shipment-specific, we included in our calculations only those loans
used to finance exports of extruded rubber thread to the United States.
Because the pre-shipment loans were not shipment-specific, we included
all loans on which interest was paid during the review period.
To calculate the benefit, we compared the amount of interest
actually paid on these loans during the review period with the amount
that would have been paid at the benchmark rate of 8.98 percent. The
difference between those amounts is the benefit. We then divided each
company's interest savings by total exports, in the case of pre-
shipment loans, because they applied to all exports, or by exports to
the United States, in the case of post-shipment loans, because they
applied to specific shipments of exports to the United States. On this
basis, we preliminarily determine the ad valorem net subsidy from pre-
shipment loans to be the following for each of the reviewed companies:
------------------------------------------------------------------------
Net subsidy
Net subsidies--producer/exporter rate %
------------------------------------------------------------------------
Heveafil/Filmax............................................ 0.22
Rubberflex................................................. 0.19
Filati..................................................... 0.00
Rubfil..................................................... 0.15
------------------------------------------------------------------------
For post-shipment loans, we preliminarily determine the ad valorem
net subsidy to be the following for each of the reviewed companies:
------------------------------------------------------------------------
Net subsidy
Net subsidies--producer/exporter rate %
------------------------------------------------------------------------
Heveafil/Filmax............................................ 0.00
Rubberflex................................................. 0.00
Filati..................................................... 2.59
Rubfil..................................................... 0.23
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2. Pioneer Status
Pioneer status is a tax incentive offered to promote investment in
the manufacturing, tourist, and agricultural sectors. Pioneer status
was first introduced under the Pioneer Industries (Relief from Income
Tax) Ordinance, 1958. This ordinance was replaced by the Investment
Incentives Act (IIA) in 1968, which was subsequently replaced by the
Promotion of Investment Act (PIA) of 1986. Under the IIA and the PIA,
the Minister of International Trade and Industry may determine products
or activities to be pioneer products or activities.
Companies petition for pioneer status for products or activities
that have already been approved and listed as pioneer products. Once a
company receives pioneer status, its profits from the designated
product or activity are exempt from the corporate income tax for a
period of five years, with the possibility of an extension for an
additional five years. The five-year extension was abolished for
companies which applied for pioneer status on or after November 1991.
Furthermore, the computation of capital allowances, which are normally
deducted against the adjusted taxable income is postponed to the post-
tax holiday period.
Under certain conditions, companies must agree to an export
commitment (i.e., they must agree to export a certain percentage of
their production) to receive pioneer status. Furthermore, an export
requirement may sometimes be applied to certain industries after it is
determined that the domestic market is saturated and will no longer
support additional producers.
In the investigation of this case (see, Malaysian Rubber Thread
Final Determination), we determined that pioneer status was granted to
Rubberflex based on its obligation to export. Therefore, we found the
program to constitute an export subsidy with respect to that company.
In addition, in past administrative reviews, we reviewed the pioneer
status of Filati and Filmax and found the program countervailable with
respect to both of these companies because pioneer status was granted
to each based on a commitment that they would export a majority of
their production. (See Final Results of 1992 Review.) No new
information or evidence of changed circumstances has been submitted in
this proceeding to warrant reconsideration of these findings.
Rubberflex, Filati and Filmax continued to hold pioneer status during
the review period. However, no benefits were provided to any of these
companies because either the company (1) did not file a tax return, or
(2) had a tax loss during this review period.
Rubfil was the only company to claim the tax exemption under
pioneer status during the review period. However, in the original
investigation and in prior administrative reviews of this order, Rubfil
either did not use this program or did not participate in the review.
Therefore, a determination as to the countervailability of this program
with respect to Rubfil has not been made.
During verification of this review we examined the application
process which led to the granting of Rubfil's pioneer status. We
verified that in its pioneer agreement, Rubfil committed to export a
majority of its production. Therefore, since pioneer status was
conferred upon Rubfil contingent upon its export commitment, we
determine this program constitutes an export subsidy with respect to
that company.
To calculate the benefit, we determined the tax savings from this
program during the review period and divided those savings by total
exports. On this basis, we preliminarily determine the ad valorem net
subsidy from this program to be the following for each of the reviewed
companies:
------------------------------------------------------------------------
Net subsidy
Net subsidies--producer/exporter rate %
------------------------------------------------------------------------
Heveafil/Filmax............................................ 0.00
Rubberflex................................................. 0.00
Filati..................................................... 0.00
Rubfil..................................................... 0.15
------------------------------------------------------------------------
3. Industrial Building Allowance
Sections 63 through 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, which had been limited to manufacturing facilities, was
extended to include buildings used as warehouses to store finished
goods
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ready for export or imported inputs to be incorporated into exported
goods. This program includes a 10 percent initial and a 2 percent
annual tax allowance (i.e., 12 percent in the first year and 2 percent
thereafter). The program effectively reduces a company's taxable
income, and the tax allowance can be carried forward to future tax
years until fully exhausted. Rubber-based exporters are eligible for
this program. We found this program countervailable in the Malaysian
Rubber Thread Final Determination because use of this allowance is
limited to exporters. No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this program's countervailability.
Heveafil used this program during the review period. To calculate
the benefit, we determined the tax savings from this program during the
review period for Heveafil and divided the savings amount by Heveafil/
Filmax's total exports, because these benefits applied to all exports.
On this basis, we preliminarily determine the ad valorem net subsidy
from this program to be the following for each of the reviewed
companies:
------------------------------------------------------------------------
Net subsidy
Net subsidies--producer/exporter rate %
------------------------------------------------------------------------
Heveafil/Filmax............................................ Less than
0.005
Rubberflex................................................. 0.00
Filati..................................................... 0.00
Rubfil..................................................... 0.00
------------------------------------------------------------------------
4. Double Deduction for Export Promotion Expenses
Section 41 of the Promotion of Investments Act allows companies to
deduct expenses related to the promotion of exports twice, once in
calculating net income on the financial statement and again in
calculating taxable income. We found this program countervailable in
the Malaysian Rubber Thread Final Determination because its use is
limited to exporters. No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this finding.
Heveafil used this program during the review period. To calculate
the benefit, we calculated the tax savings from this program during the
review period for this company and divided those savings by Heveafil/
Filmax's total exports, because these benefits applied to all exports.
On this basis, we preliminarily determine the ad valorem net subsidy
from this program to be the following for each of the reviewed
companies:
------------------------------------------------------------------------
Net subsidy
Net subsidies--producer/exporter rate %
------------------------------------------------------------------------
Heveafil/Filmax............................................ 0.02
Rubberflex................................................. 0.00
Filati..................................................... 0.00
Rubfil..................................................... 0.00
------------------------------------------------------------------------
II. Programs Preliminarily Determined to be Not Used
We examined the following programs and preliminarily find that the
producers and/or exporters subject to review did not apply for or
receive benefits under these programs during the period of review:
- Investment Tax Allowance,
- Abatement of a Percentage of Net Taxable Income Based on
the F.O.B. Value of Export Sales,
- Abatement of Five Percent of Taxable Income Due to
Location in a Promoted Industrial Area,
- Abatement of Taxable Income of Five Percent of Adjusted
Income of Companies due to Capital Participation and Employment
Policy Adherence,
- Double Deduction of Export Credit Insurance Payments,
- Abatement of Taxable Income of Five Percent of Adjusted Income of
Companies Due to Capital Participation and Employment Policy
Adherence, and
- Preferential Financing for Bumiputras.
Preliminary Results of Review
In accordance with section 355.22(c)(4)(ii) of the Department's
Interim Regulations, we have calculated an individual subsidy rate for
each producer/exporter subject to this administrative review. For the
period January 1, 1994 through December 31, 1994, we preliminarily
determine the ad valorem net subsidies to be as follows:
------------------------------------------------------------------------
Net subsidy
Net subsidies--producer/exporter Rate %
------------------------------------------------------------------------
Heveafil/Filmax............................................ 0.24
Rubberflex................................................. 0.19
Filati..................................................... 2.58
Rubfil..................................................... 0.52
------------------------------------------------------------------------
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct the U.S.
Customs Service to assess countervailing duties as indicated above. The
Department also intends to instruct the U.S. Customs Service to collect
cash deposits of estimated countervailing duties as indicated above of
the f.o.b. invoice price on all shipments of the subject merchandise
from reviewed companies, entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results of
this review. As provided for in the Act, any rate less than 0.5 percent
ad valorem in an administrative review is de minimis. Accordingly, for
those companies no countervailing duties will be assessed or cash
deposits required.
The URAA replaced the general rule in favor of a country-wide rate
with a general rule in favor of individual rates for investigated and
reviewed companies. The procedures for countervailing duty cases are
now essentially the same as those in antidumping cases, except as
provided for in section 777(e)(2)(B) of the Act. Requests for
administrative reviews must now specify the companies to be reviewed.
See Sec. 355.22(a) of the Interim Regulations. The requested review
will normally cover only those companies specifically named. Pursuant
to 19 CFR 355.22(g), for all companies for which a review was not
requested, duties must be assessed at the cash deposit rate, and cash
deposits must continue to be collected, at the rate previously ordered.
As such, the countervailing duty cash deposit rate applicable to a
company can no longer change, except pursuant to a request for a review
of that company. See Federal-Mogul Corporation and The Torrington
Company v. United States, 822 F.Supp. 782 (CIT 1993) and Floral Trade
Council v. United States, 822 F.Supp. 766 (CIT 1993) (interpreting 19
CFR 353.22(e), the antidumping regulation on automatic assessment,
which is identical to 19 CFR 355.22(g)). Therefore, the cash deposit
rates for all companies except those covered by this review will be
unchanged by the results of this review.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit
rates that will be applied to non-reviewed companies covered by this
order are those established in the most recently completed
administrative proceeding. See Extruded Rubber Thread from Malaysia;
Final Results of Countervailing Duty Administrative Review (60 FR
17515; April 6, 1995). These rates shall apply to all non-reviewed
companies until a review of a company assigned these rates is
requested. In addition, for the period January 1, 1994 through December
31, 1994, the assessment rates applicable to all non-reviewed companies
covered by this order are the cash deposit rates in effect at the time
of entry.
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Public Comment
Parties to the proceeding may request disclosure of the calculation
methodology and interested parties may request a hearing not later than
10 days after the date of publication of this notice. Interested
parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
seven days after the time limit for filing the case brief. Parties who
submit argument in this proceeding are requested to submit with the
argument (1) a statement of the issue and (2) a brief summary of the
argument. Any hearing, if requested, will be held seven days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 355.38.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 355.38, are due. The Department will
publish the final results of this administrative review including the
results of its analysis of issues raised in any case or rebuttal brief
or at a hearing.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: May 29, 1996.
Paul L. Joffe,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-14741 Filed 6-10-96; 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, 29534