(Cite as: 51 FR 22099)
NOTICES
DEPARTMENT OF COMMERCE
[Docket No. C-211-602]
Preliminary Affirmative Countervailing Duty Determination: Operators for
Jalousie and Awning Windows from El Salvador
Wednesday, June 18, 1986
*22099 AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters in El Salvador of operators for jalousie and awning windows. The estimated net subsidy is 0.70 percent ad valorem. We also preliminarily determine that critical circumstances do not exist.
We have notified the U.S. International Trade Commission (ITC) and the U.S. Customs Service (Customs) of our determination. We are directing Customs to suspend liquidation of all entries of operators for jalousie and awning windows from El Salvador that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, and to require a cash deposit or bond on entries of this product in the amount equal to the estimated net subsidy.
If this investigation proceeds normally, we will make our final determination on or before August 26, 1986.
EFFECTIVE DATE: June 18, 1986.
FOR FURTHER INFORMATION CONTACT:Steven Morrison 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) 377-1248 or 377-2438.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
We preliminarily determine that certain benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in El Salvador of operators for jalousie and awning windows. For purposes of this investigation, we preliminarily determine that the "Income Tax Exemption for Export Earnings" is countervailable. We preliminarily determine the estimated net subsidy to be 0.70 percent ad valorem.
Case History
On March 19, 1986, we received a petition in proper form from The Anderson Corporation and the Caribbean Die Casting Corporation, manufacturers of operators for jalousie and awning windows in Puerto Rico. In compliance with the filing requirements of s 355.26 of the Commerce Regulations (19 CFR 355.26), the petition alleges that manufacturers, producers, or exporters in El Salvador of operators for jalousie and awning windows receive, directly or indirectly, benefits which constitute subsidies within the meaning of section 701 of the Act, and that these imports materially injure, or threaten material injury to, a U.S. industry. In addition, the petition alleges that "critical circumstances" exist within the meaning of section 703(c)(1) of the Act.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on April 8, 1986, we initiated an investigation (51 FR 12633). We stated that we expected to issue a preliminary determination on or before June 12, 1986.
Since El Salvador is a "country under the Agreement" within the meaning of section 701(b) of the Act, the ITC is required to determine whether imports of the subject merchandise from El Salvador materially injure, or threaten material injury to, a U.S. industry. Therefore, we notified the ITC of our initiation. On May 5, 1986, the ITC determined that there is a reasonable indication that imports from El Salvador of operators for jalousie and awning windows threaten material injury to a U.S. industry (51 FR 17683).
We presented questionnaires concerning the petitioners' allegations to the government of El Salvador in Washington, D.C. on April 18, 1986. We received responses to the questionnaires on May 20, 1986, as amended on May 21, 22, 27, 29, June 2 and 3. According to these responses, Industries Metalicas, *22100 S.A., (IMSA) is the only manufacturer of operators of jalousie and awning windows. Both IMSA and Die Casting Productos S.A de C.V. (DIE CAST), which are owned by a common holding company, sold the subject merchandise in the United Stated during the review period (calendar year 1985). DIE CAST ceased selling after February 1985. Other commonly-owned companies were involved in manufacturing and/or selling the subject merchandise in earlier time periods or in markets other than the United States.
Scope of Investigation
The products covered by this investigation are operators for jalousie and awning windows as provided for in item number 647.0365 of the Tariff Schedules of the United States Annotated (TSUSA).
Analysis of Programs
Throughout this notice, we refer to certain general principles applied to the facts of the current investigation. These principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina: Final Affirmative Countervailing Duty Determination and Countervailing Duty Order," which was published in the April 26, 1984 issue of the Federal Register (49 FR 18006).
Consistent with our practice in preliminary determinations, where a response to an allegation denies the existence of a program, receipt of benefits, 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 are subject to verification. If the response cannot be supported at verification, and the program is otherwise countervailable, the program will be considered a subsidy in the final determination.
For purposes of this preliminary determination, the period for which we are measuring subsidies ("the review period") is calendar year 1985, which corresponds to respondents' fiscal year. Based upon our analysis of the petition and the responses to our questionnaire, we preliminarily determine the following:
I. Program Preliminarily Determined To Confer a Subsidy
We preliminarily determine that a subsidy is being provided to manufacturers, producers, or exporters in El Salvador of operators for jalousie and awning windows under the following program:
Income Tax Exemption for Export Earnings
Under Chapters 2, 3 and 4 of the Export Promotion Law of 1974, approved exporting companies do not pay income tax on income earned from exports to destinations outside the Central American Common Market. According to the responses, DIE CAST is the only company involved in the manufacture or export of operators for jalousie and awning windows which was eligible for exemption from income tax and which claimed this exemption during and after the review period. Because this income tax exemption is limited to income derived from exports, we preliminarily determine that it confers a countervailable benefit.
IMSA did not apply for benefits under the 1974 Export Promotion Law. Therefore, unlike DIE CAST, it was not eligible to receive income tax benefits on its exports. However, IMSA and DIE CAST are 99 percent owned by one holding company. Further, DIE CAST's sales to the U.S. are composed entirely of operators supplied by IMSA. Finally, under the 1974 Export Promotion Law, DIE CAST may transfer its benefits to another company.
Because it appears that DIE CAST may be able to transfer the benefits to IMSA, we have included IMSA as a potential beneficiary of the income tax benefits. Accordingly, we calculated the benefit by dividing the amount of the income tax benefit received by DIE CAST, based on the income tax return filed during the review period, by total exports of operators for jalouise and awning windows for 1985 that were exported to destinations outside the Central American Common Market. The estimated net subsidy is 0.70 percent ad valorem.
II. Program Preliminarily Determined Not To Confer a Subsidy
We preliminarily determine that the following program does not confer a subsidy on manufacturers, producers or exporters in El Salvador of operators for jalousie and awning windows:
Exemptions to Exporters of Fiscal Stamp Tax
In El Salvador, a five percent stamp tax is levied on the value of sales and other commercial and legal activity. Export sales are specifically exempt from the stamp tax. Insurance on exports is subject to the stamp tax. The amount of the stamp tax exemption equals the amount of stamp tax due on each export sale.
Under the Act, the non-excessive remission of indirect taxes levied at the final stage is not considered a subsidy. According to the responses, the amount of the exemption is not greater than the amount of stamp tax due. Therefore, we determine that this program does not confer a subsidy on exports of operators for jalousie and awning windows.
III. Programs Preliminarily Determined Not To Be Used
We preliminarily determine that manufacturers, producers or exporters in El Salvador of operators for jalousie and awning windows do not use the following programs:
A. Exemptions to Exporters on the City Tax on Assets
Under parts B, C, and D of the Ley de Validad, municipalities charge a monthly tax on the value of total assets held at the end of each year by corporations, trusts, professionals and sole proprietors. According to the company responses, none of the subject companies have been exempted from this municipal tax.
B. Exemptions from Taxes on Imported Capital Equipment Used for Export Production
Under Chapters 2, 3, and 4 of the 1974 Export Promotion Law, approved exporters are entitled to import duty exemptions for imported capital equipment, including machinery, equipment, spare parts and accessories. The responses state that companies did not import capital equipment during the review period and, consequently received no tax advantage from the program.
C. Duty Exemption on Imported Inputs Not Physically Incorporated into Exported Products
Under chapters 2, 3, and 4 of the 1974 Export Promotion Law, materials used by approved exporters, including raw materials, imtermediate and semi-finished products, containers, packaging, samples, and patterns used in the production of goods for export could be exempt from import duty. We did not initiate an investigation on duty exemptions for items, such as raw materials, which are physically incorporated into exported products. Duty exemptions on physically incorporated imported inputs are not countervailable under Annex I to the Commerce Regulations (19 CFR Part 355, Annex I). We did initiate an investigation on such items as imported samples, patterns and lubricants not physically incorporated into exported *22101 products. The responses stated that the companies did not import any items which are not physically incorporated into the finished operators for jalousie and awning windows.
Under chapters 2 and 3 of the 1974 Export Promotion Law, exporting companies located in bonded areas were entitled to special duty-free privileges. The response of the government of El Salvador states that there were no manufacturers, producers or exporters of operators for jalousie or awning windows operating in bonded areas.
E. Central America Convention for Fiscal Incentives (Convenio Centro Americano de Incentives Fiscales al Desarrollo Industrial)
After we initiated our investigation and presented our questionnaire, petitioners alleged that subsidies may be provided to manufacturers, producers, or exporters of the subject merchandise under this treaty. On April 30th, we requested that the government of El Salvador address this treaty in its responses. In its response, the government of El Salvador states that, of the companies subject to the investigation, only IMSA was eligible for benefits during the review period under this treaty. The response futher states that under the treaty, IMSA obtained only impot duty exemptions for parts and materials physically incorporated into window operators. As stated previously, the exemption of import duties on items physically incorporated into the export product is not considered a subsidy within the meaning of the countervailing duty law. We note that other provisions of this agreement are similar to the Export Promotion Law; but, according to the government response, these provisions were not used in the review period.
IV. Programs Preliminarily Determined not to Exist
A. Tax Credit Certificate (Del Certificado de Descuento Tributario
Under Chapter 14 of the 1974 Export Promotion Law and Chapter 9 of the 1986 Export Promotion Law, exporters were eligible for certificates, as a percentage of exports, to be used for payment of taxes owed. The responses state that the implementing regulations have not yet been put into effect for either law, and thus, no program exists under which tax certificates are issued.
B. Pre-Export and Export Credit Guarantees
Chapter 13 of the 1974 Export Promotion Law authorizes the provision for pre- export and export guarantees. In its response to our questionnaire, the government of El Salvador states that no such benefits have been conferred because this part of the law was never implemented through applicable regulations.
Chapter 15 of the 1974 Export Promotion Law authorizes the provision of export credit insurance for commercial and political risks. In its response, the government of El Salvador states that an export credit insurance program has not been established and that this provision of the law was never implemented.
V. Programs for Which Additional Information is Needed
Under Chapters 2 and 3 of the 1974 Export Promotion Law, certain persons and companies who qualify because of export activities, are not required to pay this tax on their assets and net capital worth. The responses indicate that the companies did not take advantage of this provision during the review period. In addition, the responses state that all companies are exempt from this tax, regardless of whether the company exports. Although the companies state that they did not take advantage of this provision, we need additional information to determine if the exemption was passed through to the individual owners who are otherwise liable for such taxes under Part A of the Ley de Validad (see section III.A above), and if it was passed through, whether it is provided only to exporters or to all owners.
B. Pre-Export and Export Loans
The petitioners allege that pre-export and export loans were provided under Chapter 13 of the 1974 Export Promotion Law. In its response to our questionnaire, the government of El Salvador states that no pre-export or export loans were extended because there were never any implementing regulations for chapter 13. U.S. Department of Commerce publication FET-85- 107, dated November 1985, states that rediscount rates for pre-export and export loans have been lowered. We will attempt to reconcile this information in our subsequent verification.
VI. Program Preliminarily Determined To be Terminated
Preferential Exchange Rate Treatment for Exporters
Petitioners allege that under El Salvador's two-tier exchange rate system, exporters purchase imports at the lower official exchange rate, while the returns from their exports are converted using the higher parallel exchange rate. According to the responses, a two-tier exchange rate system was in effect in El Salvador until January 21, 1986. Under the two-tier system, imports of raw materials were purchased at a blended rate; fifty percent of the dollars used to pay for the imports were purchased at the official exchange rate, while the other fifty percent were purchased at the higher parallel rate. Exports earnings were also exchanged at a blended rate except that the percentage exchanged at the parallel rate was higher than the percentage at the official rate.
The responses state that as of June 17, 1985, the exchange rate applicable to all purchases of imported materials and all export earnings was the parallel rate. Then on January 21, 1986, the official rate was abolished and a new unified rate was set that currently applies to all commercial and financial transations involving foreign currency. Of the companies subject to this investigation, only IMSA purchased imports and made exports under the two- tier system. However, as of June 17, 1985, the only exchange rate appolicable to all of IMSA's import and export transactions was the parallel rate. Furthermore, since January 21, 1986, IMSA's exchange transactions have been subject to the new unified rate.
Although IMSA may have benefitted during the first half of 1985 from the two- tier exchange rate system for its import purchases, any benefits arising from this program would have been used on a current basis. Therefore, since June 1985, when IMSA was required to exchange all foreign currency for both import and export transactions at a single rate, no benefits could have been accorded to exports of operators for jalouise and awning windows. Furthermore, with the implementation of the unified exchange rate system in January 1986, the two- tier exchange rate system was terminated.
We note, however, that under the unified exchange rate system, all foreign currency accounts are prohibited except for exporters that need to import raw materials. During verification, we intend to examine whether this provision *22102 provides countervailable benefits to exporters.
Preliminary Negative Determination of Critical Circumstances
The petitioners allege that "critical circumstances" exist within the meaning of section 703(e)(1) of the Act, with respect to imports of operators for jalousie and awning windows from El Salvador. In determining whether critical circumstances exist, we must examine whether there is a reasonable basis to believe or suspect that:
(a) The alleged subsidy is inconsistent with the Agreement and
(b) There have been massive imports of the subject merchandise over a relatively short period.
In determining whether imports have been massive over a relatively short period of time, we have considered the following factors:
1. Whether recent imports have increased significantly;
2. Whether recent import penetration ratios have increased significantly; and
3. Whether recent imports are significantly above average import levels calculated over the last three years.
A review of the information indicates that imports from El Salvador have not been massive over a relatively short period of time. In 1986, they have decreased substantially from imports in the review period.
Since we have not found massive imports over a relatively short period of time, we need not determine whether the alleged subsidies are inconsistent with the Agreement. Therefore, we preliminarily determine that critical circumstances do not exist.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of operators for jalousie and awning windows from El Salvador, which are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register and to require a cash deposit or bond for each entry of this merchandise in the amount of the estimated net subsidy. The estimated net subsidy is 0.70 percent ad valorem for all manufacturers, producers, or exporters in El Salvador of operators for jalousie and awning windows. This suspension will remain in effect until further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non- privileged and non-confidential information relating to this investigation. We will allow the ITC access to all privileged and confidential information in our files, provided the ITC confirms that it will not disclose such information, either publicy or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Import Administration.
If our final determination is affirmative, the ITC will determine whether these imports materially injure, or threaten material injury to, a U.S. industry within 45 days after the Department makes its final affirmative determination.
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 s 355.35 of the Commerce Regulations, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination at 10:00 a.m. on July 28, 1986, at the U.S. Department of Commerce, Room 3708, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to participate in the hearing must submit a request to the Deputy Assistant Secretary for Import Administration, Room B-099, at the above address within ten days of the publication of this notice. 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, pre-hearing briefs with at least ten copies of the confidential version and seven copies of the non- confidential version must be submitted to the Deputy Assistant Secretary by July 21, 1986. Oral presentation will be limited to issues raised in the briefs.
In accordance with 19 CFR 355.33(d) and 19 CFR 355.34, written views will be considered if received not less than 30 days before the final determination or, if a hearing is held, within ten days after the hearing transcript is available.
This notice is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).
Gilbert B. Kaplan,
Deputy Assistant Secretary for Import Administration.
June 12, 1986.
[FR Doc. 86-13790 Filed 6-17-86; 8:45 am]
BILLING CODE 3510-DS-M