(Cite as: 47 FR 15616)


                                               NOTICES

                                       DEPARTMENT OF COMMERCE

                                  International Trade Administration

                     Michelin X-Radial Steel Belted Tires From Canada; Preliminary Results of
                          Administrative Review Of Countervailing Duty Order

                                         Monday, April 12, 1982

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                                       (Cite as: 47 FR 15616, *15616)

AGENCY: International Trade Administration, Commerce.

ACTION: Notice of preliminary results of administrative review of countervailing duty order.

SUMMARY: The Department of Commerce has conducted an administrative review of the countervailing duty order
on Michelin X-radial steel belted tires from 
                                       (Cite as: 47 FR 15616, *15616)

  Canada. The review covers the period January 1, 1980 through December 31, 1980. As a result of the review, the Department
has preliminarily determined to assess countervailing duties equal to the calculated value of the net subsidy, that is, 1.18
percent of the f.o.b. invoice price of the merchandise. Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE: April 10, 1982.

FOR FURTHER INFORMATION CONTACT:

Ms. Josephine Russo or Richard Moreland, Office or Compliance, Import Administration, International Trade
Administration, U.S. Department of Commerce, Washington, D.C. 20230 (202, 377-1168/2786).

SUPPLEMENTARY INFORMATION:

Background

On October 2, 1981, the Department of Commerce ("the Department") published in the Federal Register (46 FR 48737) the final
results of its first administrative review of the countervailing duty order on Michelin X-radial 
                                       (Cite as: 47 FR 15616, *15616)

steel belted tires from Canada (38 FR 1018, January 8, 1973) and announced its intent to conduct the next
  administrative review. As required by section 751 of the Tariff Act of 1930 ("the Tariff Act"), the Department has now
conducted that administrative review.
On October 26, 1981, the Court of International Trade issued its opinion in Michelin Tire Corporation v. United States, Slip. Op.
81-94. The court remanded two issues to the Department. These issues were the redetermination and recalculation of the benefits
from the grants and the recalculation of the interest subsidy on the IEL loan, both for *15617
                                       (Cite as: 47 FR 15616, *15617)

the years 1973 through 1977. On February 23, 1982, the Department forwarded its final results concerning these remanded issues
to the court. The recalculation under the remand order of the subsidy rates for 1973-77 in turn affected those for the current
review. The effects are discussed under Analysis of Programs.

Scope of the Review

Imports covered by the review are X-radial steel belted tires manufactured by Michelin Tires Canada, Limited. Such tires are
currently classifiable under item numbers 772.5109, 772.5127, 772.5136, and 772.5144 through 772.5155 of the Tariff
Schedules of the United States Annotated (TSUSA). The review covers the period January 1, 1980 through December 31, 1980.
The Department reviewed the 
                                       (Cite as: 47 FR 15616, *15617)

three programs found countervailable in the original determination: (1) a $50 million preferential long-term loan from Industrial
Estates Limited ("IEL"); (2) grants from the Department of Regional Economic Expansion ("DREE") and IEL; and (3) preferential
property tax agreements.

Analysis of Programs

(1) IEL Loan

In the final determination, the Department of the Treasury ("Treasury") found countervailable a 1970 $50 million loan agreement
with IEL ("the 1970 agreement") at the preferential interest rate of 6 percent. Treasury ascertained the market rate for comparable
financing to be 8 percent and the differential, 2 percent.
In the section 751 administrative review of this order for the years 1978 and 1979, the Department learned of a
subsequent loan agreement with IEL in 1972 ("the 1972 agreement") that deferred payment of the first seven principal payments,
amounting to approximately $16 million, while financing that principal at higher interest rates. At that time, the Department did
not consider the 1972 agreement to be preferential and calculated the loan interest subsidy on the $34 million believed still
subject to the 6 percent rate.

                                       (Cite as: 47 FR 15616, *15617)

In its October 26, 1981 opinion, the court determined that the appropriate commercial interest rate was 7.56 percent, rather than
8 percent, and directed the Department to recalculate the loan interest subsidy on the full loan amount of $50 million. The court
stated that the principal payment deferrals provided under the 1972 agreement constituted additional funds not derived from the
original $50 million loan amount and, therefore, the full original amount remained subject to countervailing duties.
Therefore, we have calculated the subsidy rate by applying the 1.56 percent interest differential against the loan amount
remaining after subtraction of principal payments actually made, starting in 1976, through 1980 on the original $50 million loan.
We have preliminarily determined that the rate of benefit for this program is 0.17 percent ad valorem.

(2) Federal and Provincial Grants

Since the 1970 loan agreement contained a pledge which tied all grants received to the repayment of the $50 million loan,
Treasury calculated the subsidy for the years 1973 through 1977 by allocating the grants over the same loan repayment
schedule. During the previous section 751 review, the Department found that the 1972 agreement abrogated that pledge. We
therefore allocated the grants over half the accounting useful lives of the acquired 
                                       (Cite as: 47 FR 15616, *15617)

assets.
The court's decision of October 26, 1981, stated that the allocation method used by Treasury in the final determination for the
years 1973 through 1977 was incorrect. In our redetermination and recalculation, we applied the same allocation method as in
our prior review, that is, a straight line basis over half the accounting useful lives of the assets purchased with the grant funds (20
years for buildings; 10 years for equipment) beginning in the year each grant installment was received. Consequently, we
calculated the subsidy rate for 1980 by determining those grant portions attributable to that year. We then divided this amount
by the value of Michelin Canada's producion. We have preliminarily determined that the ad valorem rate of benefit for these
grants is 0.87 percent.

(3) Preferential Property Tax Agreements

The 10-year property tax agreements between IEL and the area taxing authorities provided for a flat rate of 1 percent property
tax based on the actual costs of construction, rather than the appraised values. Although the property tax agreement for Michelin 
  Canada's facility in Granton expired in 1979, its other plant in Bridgewater remained eligible through 1980. We have
calculated the benefit by estimating the normal tax incidence for the 
                                       (Cite as: 47 FR 15616, *15617)

Bridgewater facility, and subtracting from that figure the payments made by Michelin Canada under the 1 percent agreement.
Further, we have included the value of land, paving, and manufacturing equipment in the total value of real property, since these
items are normally included in appraised values. We have preliminarily determined that the rate of subsidy under this program is
0.14 percent ad valorem.
In the calculation of all of the ad valorem net subsidy rates, we divided the total amount of the subsidies by the value of
production of the subsidized facilities. The Department has used the figure submitted by Michelin in its response to our
  countervailing duty questionnaire for its 1980 value of production.
Michelin requested that the Department add to the total value of production and amount for its labor charges for installation and
modification of assets. We have not included this figure, however, since labor costs should already be reflected in the prices
charged on the merchandise. Further, in the calculation of its value of production, Michelin employed exchange rates that differ
from the Federal Reserve rates. Before publication of the final results of this administrative review, the Department intends
to recalculate the value of production using the appropriate rates.

Verification

                                       (Cite as: 47 FR 15616, *15617)


We verified Michelin's submission through access to government and company books and records. Documents examined include
cancelled checks and invoices, approvals of grants, tax records and company production and sales records.

Preliminary Results of the Review

As a result of our review, we preliminarily determine that the aggregate net subsidy conferred by the three programs citied above
during the period of review is 1.18 percent ad valorem.
Accordingly, the Department intends to instruct the Customs Service to assess countervailing duties of 1.18 percent of the
f.o.b. invoice price on unliquidated entries of this merchandise entered, or must be made no later than 5 days after the date of
publication. The Department will publish the final results of the administrative review including the results of its analysis of
any such comments or hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1))
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                                       (Cite as: 47 FR 15616, *15618)

and § 355.41 of the Commerce Regulations (19 CFR 355.41).

Gary N. Horlick,

                                       (Cite as: 47 FR 15616, *15618)


Deputy Assistant Secretary for Import Administration.

April 6, 1982.

[FR Doc. 82-9827 Filed 4-9-82; 8:45 am]

BILLING CODE 3510-25-M