87-618

Wool From Argentina; Final Results of Countervailing Duty Administrative
Review

Thursday, June 18, 1987

AGENCY: International Trade Administration, Import Administration,
Commerce.

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

SUMMARY: On February 26, 1987, the Department published the preliminary results of
its administrative review of the countervailing duty order on wool from Argentina.
We determine the bounty or grant for the period January 1, 1985 through December 31,
1985 to be 6.23 percent ad valorem.

EFFECTIVE DATE: June 18, 1987.

FOR FURTHER INFORMATION CONTACT:Sylvia Chadwick or Bernard Carreau, Office of
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On February 26, 1987, the Department of Commerce ("the Department") published in the
Federal Register (52 FR 5807) the preliminary results of its administrative review of the
countervailing duty order on wool from Argentina (48 FR 14423; April 4, 1983). On
April 5, 1986, an importer, C. Dana Draper Company, requested in accordance with 19
CFR 355.10 an administrative review of the order. We published the initiation on May 20,
1986 (51 FR 18475). The Department has not conducted this administrative review in
accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").

Scope of Review

Imports covered by the review are shipments of Argentine wool, currently classifiable
under items 306.3152, 306.3172, 306.3253, 306.3273, 306.3354, and 306.3374 of the
Tariff Schedules of the United States Annotated.
The review covers the period January 1, 1985 through December 31, 1985 and six
programs: (1) Incentives for exports from southern ports; (2) the reembolso, a cash
rebate of taxes; (3) preferential pre-export financing; (4) multiple exchange rates; (5)
government assistance to wool growers in Patagonia; and (6) financial reorganization
aids.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the preliminary results. We
received written comments from the Argentine government, the Argentine Wool
Federation ("the Federation"), and four importers: Draper; Burlington Industries Wool
Company; Hart, Incorporated; and Prouvost, Lefebvre and Company, Inc.
,/a>
Comment 1: The Argentine government, the Federation, and the importers argue that the
additional reembolso for exports shipped from southern ports is not a countervailable
subsidy because wool exporters pay export taxes and duties in excess of the additional
reembolso received. If the Department continues to consider this program
countervailable, it should treat the export taxes and duties as an offset to the additional
reembolso because: (1) The exporters are required to pay export taxes and duties before
they receive the additional reembolso; (2) export taxes and duties levied on wool exceed
the additional reembolso received; and (3) the value of the reembolso is diminished by
the deferred receipt of the additional reembolso. They further claim that both the
additional reembolso and the export taxes and duties programs are related because both
are governed by Law 22.415, and both are administered by the Argentine Treasury
Department.

Department's position: We disagree. The additional reembolso provides a payment to
exporters who ship from the ports south of the Rio Colorado. Section 771(5) of the Tariff
Act provides that the term "subsidy" has the same meaning as the term "bounty or grant"
as that term is used in section 303 of the Tariff Act, and includes, but is not limited to, any
export subsidy described in the Illustrative List of Export Subsidies annexed to the
Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the
General Agreement on Tariffs and Trade. Item (a) of the Illustrative List defines as an
export subsidy "the provision by governments of direct subsidies to a firm or an industry
contingent upon export performance." The statute and the Illustrative List allow
payments upon export only under certain narrowly defined circumstances, such as
payments intended to rebate indirect taxes on physically incorporated inputs, payments
intended to rebate final stage taxes, and payments related to duty drawback. Since the
additional reembolso is in no way linked to any of these types of payments and is a direct
payment that is contingent upon export performance, this program confers a benefit
which constitutes an export subsidy within the meaning of the countervailing duty
law.
Section 771(6) of the Tariff Act identifies an offset as: (1) Any

*23197

application fee,
deposit, or similar payment paid in order to qualify for, or to receive, the benefit of the
subsidy; (2) any loss in the value of the subsidy resulting from its deferred receipt, if the
deferral is mandated by Government order; and (3) export taxes, duties, or other charges
levied on the export of merchandise to the United States specifically intended to offset the
subsidy received. There is no connection between the reembolso program for exports
from southern ports and export taxes and duties. The export taxes and duties and the
additional reembolso programs were enacted under separate laws. There is no provision
in either law that requires a payment be made in order to receive the additional
reembolso, that mandates the deferred receipt of the additional reembolso, or that
specifically provides that the additional reembolso offset the subsidy received. Law
22.415 codified the Argentine customs regulations; it did not establish or modify prior
legislation on either the export taxes and duties or the additional reembolso. Therefore,
the term "offset," as used in section 771(6), does not apply.

Comment 2: The Argentine government and the Federation claim that only 50 percent of
total wool production could possibly be eligible for the additional reembolso because (a)
only wool produced or processed in Patagonia can receive the additional reembolso, and
(b) only 50 percent of all wool is produced or processed in Patagonia. Since the rate
established for Madryn and San Antonio, the only southern ports from which wool was
exported to the United States, is 7 percent, the maximum possible countervailable
subsidy is 50 percent of 7 percent, or 3.5 percent.

Department's position: We disagree. Wool exporters must meet two conditions in order to
receive the additional reembolso: (1) The wool must be shipped from the ports south of
the Rio Colorado, and (2) the wool must have been produced or processed in the regions
south of the Rio Colorado. Even if it is true that only 50 percent of all wool is produced or
processed in Patagonia, we have no information on where the wool that is exported to the
United States is produced or processed. We have assumed, as the best information
available, that all wool exported to the United States from southern ports was produced
or processed in the regions south of the Rio Colorado. The Federation's own statistics
show that 89 percent of total wool exports to the United States during the period of
review were shipped from southern ports. Therefore, the net subsidy from this program is
89 percent of 7 percent, or 6.23 percent.

Comment 3: The Argentine government, the Federation and the importers object to the
Department's use of the simple average of all additional reembolso rates as the best
information available to calculate the benefit. Such a calculation overstates the benefit
because it includes high additional reembolso rates for ports from which no wool was
exported to the United States during the review period. They submitted information,
gathered by the Federation, listing total wool exports to the United States by company
and by port during the period of review. These statistics show that the only southern
ports from which wool was exported to the United States during the review period were
Madryn and San Antonio, both of which provided an additional reembolso of only 7
percent.

Department's position: Because the Argentine government did not respond to our
questionnaire, we preliminarily used as best information the simple average of the rates
established by Law 23.018 for all southern ports. We now find the Federation's statistics,
published in the "Exportacion de Lanas y sus Manufacturas" and the "Boletin de
Informaciones Laneras," Argentine trade publications for the wool industry, to be the
best information available. The total of these statistics, which the Argentine government
accepts as official, correlates to our import figures. We have revised our calculations
accordingly. We determine the benefit from the additional reembolso to be 6.23 percent
ad valorem during the period of review.

Comment 4: Draper questions the legality of imposing countervailing duties
retroactively, particularly when based on old data.

Department's position: Section 751(a)(1) of the Tariff Act provides for review of
countervailing duty orders to determine the amount of any net subsidy to be
assessed. In Ambassador Division of Florsheim Shoe v. United States, 748 F.2d 1560
(Fed. Cir. 1984), the Court of Appeals for the Federal Circuit ruled that the Department
has the authority to assess duties retroactively based on section 751 reviews. We base
our assessment rate on data from the period of review. See also, the final results of
countervailing duty administrative review on non-rubber footwear from Brazil (52 FR
843, January 9, 1987).

Final Results of Review

After considering all the comments received, we determine the total bounty or grant to
be 6.23 percent ad valorem for the period of review. The Department will instruct the
Customs Service to assess countervailing duties of 6.23 percent of the f.o.b. invoice
price on any shipments of this merchandise exported on or after January 1, 1985 and on
or before December 31, 1985.
The Department will instruct the Customs Service to collect cash deposits of estimated
countervailing duties, as provided by section 751(a)(1) of the Tariff Act, of 6.23
percent of the f.o.b. invoice price on all shipments of this merchandise entered, or
withdrawn from warehouse, for consumption on or after the date of publication of this
notice. This deposit requirement shall remain in effect until publication of the final results
of the next administrative review.
This administrative review and notice are in accordance with section 751(a)(1) of the
Tariff Act (19 U.S.C. 1675(a)(1)) and § 355.10 of the Commerce Regulations (19 CFR
355.10).
Dated: June 12, 1987.

Gilbert B. Kaplan,

Deputy Assistant Secretary, Import Administration.

[FR Doc. 87-13918 Filed 6-17-87; 8:45 am]

BILLING CODE 3510-DS-M