(Cite as: 51 FR 41516)
NOTICES
DEPARTMENT OF COMMERCE
[C-211-602]
Final Affirmative Countervailing Duty Determination; Operators for Jalousie
and Awning Windows From El Salvador
Monday, November 17, 1986
*41516 AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We determine that certain benefits which constitute subsidies are being provided to manufacturers, producers, or exporters in El Salvador of operators for jalousie and awning windows. The estimated net subsidy is 4.76 percent ad valorem. Industrias Metalicas, S.A. (IMSA), one of the respondents under investigation, did not apply for and did not receive any benefits under the program determined to be countervailable. We are, therefore, not including IMSA from our final determination. We also determine that critical circumstances do not exist with respect to the merchandise under investigation within the meaning of section 705(a)(2) of the Tariff Act of 1930 (the Act), as amended.
We have notified the United States International Trade Commission (ITC) of our determination. If the ITC's final injury determination is affirmative, we will direct the United States Customs Service to suspend liquidation of all entries of operators for jalousie and awning windows from El Salvador, except for those operators exported by IMSA, that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of the countervailing duty order.
EFFECTIVE DATE: November 17, 1986.
FOR FURTHER INFORMATION CONTACT: Steven Morrison or Barbara Tillman, Office of Investigations, Import Administration, International Trade Administration, United States Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone: (202) 377-1248 or 377-2438.
SUPPLEMENTARY INFORMATION:
Final Determination
Based upon our investigation, we determine that certain benefits which constitute subsidies within the meaning *41517 of section 701 of 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, the "Income Tax Exemption for Export Earnings" is the only program that conferred a countervailable subsidy. We determine the estimated net subsidy to be 4.76 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 located in Puerto Rico. In compliance with the filing requirements of s 355.26 of the Commerce Regulations (19 CFR 355.26), the petition alleged 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 United States industry. In addition, the petition alleged that "critical circumstances" exist within the meaning of section 703(e)(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 United States 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 United States industry (51 FR 17683).
We presented questionnaires concerning the petitioners' allegations to the Government of El Salvador in Washington, DC on April 18, 1986. We received responses to the questionnaires on May 20, 1986, and amendments to the responses on May 21, 22, 27, 29, June 2 and 3. The responses stated, and we verified, that IMSA is the only manufacturer of operators for jalousie and awning windows. Both IMSA and Die Casting Products, S.A. de C.V. (DIE CAST), which are owned by a common holding company, sold the subject merchandise to the United States during the review period (calendar year 1985). On June 12, 1986, we issued a preliminary affirmative determination in the countervailing duty investigation on operators for jalousie and awning windows from El Salvador (51 FR 22099). Our notice of preliminary determination gave interested parties an opportunity to submit oral and written views. A public hearing was not held because no interested party requested one in this investigation.
On June 24, 1986, petitioners filed a request for extension of the deadline date for the final determination in the countervailing duty investigation to correspond with the date of the final determination in the antidumping investigation on the same products from El Salvador. In accordance with section 705(a)(1) of the Tariff Act of 1930, as amended by section 606 of the Trade and Tariff Act of 1984, we granted an extension for the final determination to November 10, 1986, to coincide with the deadline for the final determination in the antidumping duty investigation of the same product (51 FR 27232, July 30, 1986).
Verification was conducted in El Salvador from July 8 through July 16, 1986. The company respondents amended their response concerning sales volume and value on July 21, 1986 to reconcile minor differences found on verification.
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, 1986 issue of the Federal Register (49 FR 18006).
For purposes of this final 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, the responses to our questionnaire, the verification, and comments filed by both petitioners and respondents, we determine the following:
I. Program Determined To Confer a Subsidy
We 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. DIE CAST is the only company involved in the export of operators for jalousie and awning windows which was eligible for and which claimed this tax exemption during and after the review period. IMSA did not apply for an income tax exemption for export earning benefits under the 1974 Export Promotion Law. Therefore, it was not eligible to receive and did not receive income tax benefits on its exports.
Because this income tax exemption is limited to income derived from exports, we determine that it confers an export subsidy. 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 the value of DIE CAST's exports of operators for jalousie and awning windows for 1985 that were exported to destination outside the Central American Common Market.
The estimated net subsidy is 4.76 percent ad valorem.
II. Program Determined Not To Confer A Subsidy
We 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:
A. Exemptions to Exporters for Fiscal Stamp Tax
In El Salvador, a five percent stamp tax is levied on the value of sales and other commecial and legal activities. Export sales are specifically exempt from the stamp tax.
Under section 771(5)(A) of the Act, the non-excessive remission or exemption of indirect taxes levied at the final stage of production is not considered a subsidy. See Annex to the Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade (Annex to the Subsidies Code), Note to Article XVI. Since the amount of *41518 the stamp tax is not greater than the amount of stamp tax otherwise due, we determine that this program does not confer a subsidy on exports of operators for jalousie and awning windows.
III. Programs Determined Not To Be Used
We determine that manufacturers, producers, or exporters in El Salvador of operators for jalousie and awning windows do not use the following programs:
A. 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. We verified that the companies did not import capital equipment during the review period and, consequently, received no tax advantage from the program.
B. 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 in the production of goods for export including raw materials, intermediate and semi-finished products, containers, packaging, samples, and patterns, are 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 incorported imported inputs are not countervailable under the Annex to the Subsidies Code and Annex I of 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 products. We verified 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, 3, and 4 of the 1974 Export Promotion Law, exporting companies located in bonded areas are entitled to special duty-free privileges. We verified that no manufacturers, producers or exporters of operators for jalousie or awning windows are operating in bonded areas.
D. Central American 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 30, we requested that the Government of El Salvador address the benefits of this treaty in its responses. In its response, the Government of El Salvador stated that, of the companies subject to the investigation, only IMSA was eligible for benefits during the review period under this treaty. We verified that under the convention, IMSA obtained only import 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 exported product is not considered a subsidy within the meaning of the countervailing duty law. We also verified that IMSA did not use any other provisions of this treaty. The duty exemption terminated on January 1, 1986 with the implementation of a new Central American tariff schedule (NAUCA II).
IV. Programs Determined Not To Exist
A. Pre-Export and Export Loans
Petitioners allege that pre-export loans were provided under Chapter 13 of the 1974 Export Promotion Law. In its response to our questionnaire the Government of El Salvador stated that no pre-export or export loans were extended because there were never any implementing regulations for Chapter 13.
B. Tax Credit Certificate (Del Certificado de Descuento Tributario)
Chapter 14 of the 1974 Export Promotion Law and Chapter 9 of the recently enacted 1986 Export Promotion Law, authorize qualified exporters to receive tax credit certificates, calculated as a percentage of the value of exports which can be used to pay taxes owed. We verified that implementing regulations were not put into effect under the old law, and have not, thus far, been enacted under the new law. Therefore, we determine that no program currently exists under which tax certificates are or were issued.
C. Pre-Export and Export Credit Guarantees
Chapter 13 of the 1974 Export Promotion Law authorizes the provision for pre- export and export guarantees. The Government of El Salvador stated, and we verified, 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. The Government of El Salvador stated and we verified, that an export credit insurance program has not been established and that this provision of the law had not been implemented.
E. Asset Tax Exemption under the 1974 Export Promotion Law
Petitioners allege that 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 taxes on their assets and net capital worth. We verified that IMSA and DIE CAST did not take advantage of this provision as authorized under the Export Promotion Law during the review period. However, neither company paid asset taxes because all companies owned by Salvadorans and domiciled in El Salvador are not required to pay this tax, regardless of whether they exported. Since all domestically owned and operated companies are exempt from this asset tax, this exemption is not countervailable.
We also verified that the asset tax exemption authorized under the Export Promotion Law was not passed through to the individual owners of DIE CAST, the only investigated company that qualified for asset tax exemption under the Export Promotion Law during the review period. We verified that individual stockholders of DIE CAST paid their proportionate share of taxes on DIE CAST's assets on their personal tax returns. Accordingly, we determine that this program was not used by the only eligible company and that benefits from it were not passed through to its stockholders.
F. Exemption of Exporters from the Municipal Tax on Assets
Municipalities charge a monthly tax on the value of total real and personal property. There are no provisions under which exporting companies are exempted. Furthermore, we verified that the subject companies paid this tax.
*41519 VI. Program 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 with dollars obtained at the official exchange rate, which is lower than the parallel market rate, while the returns from their exports are converted at the parallel exchange rate. A two-tier exchange rate system was in effect in El Salvador during the review period. Imports of materials and parts were purchased at a blend of dollars partly purchased at the official exchange rate and partly purchased at the higher parallel rate. Export earnings were also exchanged at a blended rate except that the percentage returned at the parallel rate was higher than that applicable to import purchases. The percentage of dollars that had to be returned at the official rate varied depending on the industry which manufactured the exported product.
As of June 17, 1985, the single exchange rate applicable to all purchases of imported materials and all export earnings was the parallel rate. 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 applicable to all of IMSA's import and export transactions was the parallel rate.
Although IMSA utilized this two-tier exchange rate system during the first half of 1985, we verified that this program ceased to apply to the subject merchandise on June 17, 1985. In accordance with our policy regarding program- wide changes occurring prior to initiation of an investigation, we have determined that this program was terminated prior to initiation, and that IMSA could no longer receive or accrue any benefits under it. Therefore, it is unnecessary for us to determine whether it is countervailable.
Petitioners' Comments
Comment 1: Petitioners argue that the Department's attribution of DIE CAST's benefits to IMSA in the preliminary determination was correct insofar as both companies were commonly owned and the owners could easily shift exports from one company to the other. They further argue that a countervailing duty applied against both companies is the only meaningful penalty that can affect the economic interests of the individuals who own the assets of both companies.
DOC Position: We disagree. In our preliminary determination, we expressed concern that DIE CAST could, under the provisions of Article 81 of the 1974 Export Promotion Law, transfer its benefits to IMSA. The common ownership of the two companies made it even more likely that such a transfer of benefits might occur.
At verification, we learned that a transfer of benefits under Article 81 of the law was not possible between these two companies because IMSA, a domestic seller as well as an exporter, did not occupy the same status under the Export Promotion Law as that occupied by DIE CAST, which only exported the subject merchandise. We verified that IMSA had never qualified under the 1974 Export Promotion Law through transfer or original application. Furthermore, since DIE CAST's benefits were revoked by the Government of El Salvador subsequent to our preliminary determination, there was no possibility of any future transfer of benefits to IMSA.
With regard to petitioners' contention that a countervailing duty applied to both companies is the only meaningful penalty that can affect the economic interests of the individuals who own the assets of both companies, it is not the purpose of the law for us to determine the effects that the imposition of countervailing duties will have on the owners of these two companies. Our primary concerns in a related party situation are, whether the companies, in fact, operate as distinct entities, and whether any benefits are being passed through from one company to another. In this case, IMSA did not benefit from DIE CAST's subsidy.
Respondents' Comments
Comment 1: Respondents argue that since the Government of El Salvador revoked the eligibility of DIE CAST to receive benefits under the Export Promotion Law of 1974 in July 1986, the Department should issue a final negative determination with respect to DIE CAST, in accordance with our policy of taking into account program-wide changes that occur during an investigation. If the Department incorrectly determines that a negative determination is not appropriate, the Department should adjust the final estimated duty deposit rate to take into account this program-wide change. In the case of DIE CAST, this should result in a zero duty deposit rate.
DOC Position: We disagree. The Department's policy is to take program-wide changes into account when they occur prior to the preliminary determination. (See "Final Affirmative Countervailing Duty Determinations and Orders, Certain Textile Mill Products and Apparel from Peru" (50 FR 9871, March 12, 1985)). However, in this case, it was not a program-wide change, but a company specific change. Furthermore, this change did not occur until one month after the preliminary determination and DIE CAST will benefit from this program in calendar year 1986. It is not our policy to take into account a company- specific change that takes place after the preliminary determination. This is particularly true, where as here they are still receiving benefits from that program.
Comment 2: Respondents argue that the dual currency exchange system did not provide a countervailable subsidy to manufacturers, producers or exporters of window operators. The potential currency retention gain on exports is not a countervailable subsidy because it is neither an export subsidy nor a domestic subsidy. A currency gain is not a bonus on exports, which is what an export subsidy is defined as under the Subsidies Code. All Salvadoran manufacturers were eligible to purchase dollars at the official rate to pay for imports. Manufacturers who did not export could repatriate dollars received from other sources at the parallel rate. Because this system provided a better return on imports purchased with official rate dollars to non-exporters than to exporters, it is not an export subsidy. Further, it was not limited to a specific enterprise or industry, or group thereof, and therefore, could not be a domestic subsidy.
DOC Position: Since the dual exchange rate system was terminated prior to our initiation of this countervailing duty investigation and since we verified that no benefits were received or accrued under the program after its termination in June 1985, it is not necessary to determine whether El Salvador's dual exchange rate system constituted a subsidy.
Comment 3: Respondents content that if the Department (erroneously) attributes DIE CAST's income tax benefit to IMSA, it should recognize that IMSA had to sell the operators to DIE CAST in order to receive the subsidy and pay stamp taxes to the Government of El Salvador on those sales. IMSA would not have had to pay stamp taxes if they had exported the merchandise directly to the United States. Thus, any gross subsidy imputed to IMSA, should be reduced by stamp taxes paid.
DOC Position: Since we did not attribute the income tax exemption for export earnings to IMSA, this issue is moot.
*41520 Final Negative Determination of Critical Circumstances
The petitioners alleged that "critical circumstances" exist within the meaning of section 705(a)(2) of the Act, with respect to imports of operators for jalousie and awning windows from El Salvador. In order to find that critical circumstances exist, we must determine 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.
Pursuant to section 705(a)(2)(B), we generally consider the following data in order to determine whether massive imports have taken place: (1) The volume and value of the imports; (2) seasonal trends; and (3) the share of domestic consumption accounted for by the imports.
To determine whether imports have been massive over a relatively short period, we analyzed recent trade statistics on import levels for this merchandise for equal periods immediately preceding and following the filing of the petition, the first and second quarters of 1986. While there was an increase in imports in/during the second quarter over those for the first quarter of 1986, the average monthly imports in the second quarter of 1986, the average monthly imports in the second quarter of 1986 were less than half the monthly average of imports in 1985, and second quarter 1986 imports are part of an overall decline in imports since the beginning of 1986.
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 determine that critical circumstances do not exist.
Verification
In accordance with section 776 (a) of the Act, we verified the data used in making our final determination. We conducted the verification in El Salvador from July 8 through July 16, 1986.
During verification, we followed normal verification procedures, including meeting with government officials, inspecting government documents and inspecting the accounting and financial records of the companies producing and exporting the merchandise under investigation to the United States.
Suspension of Liquidation
In accordance with our preliminary countervailing duty determination (51 FR 22099, June 18, 1986) we directed the U.S. Customs Service to suspend liquidation of the products under investigation and to require that a cash deposit or bond be posted equal to the estimated final net subsidy. However the due date for the countervailing duty determination was extended to coincide with the final antidumping duty determination (51 FR 27233, July 30, 1986). Under Article 5, paragraph 3 of the Subsidies Code, provisional measures cannot be imposed for more than four months. Thus, we could not impose a suspension of liquidation on the subject merchandise for more than four months without final determinations of subsidization and injury. Therefore, we instructed the U.S. Customs Service to discontinue the suspension of liquidation on the subject merchandise entered after October 18, 1986.
Currently, liquidation is not being suspended pending the outcome of the ITC's injury determination on window operators from El Salvador. If we issue a final countervailing duty order, we will instruct the U.S. Customs Service to collect a cash deposit of 4.76 percent ad valorem, on all exports of operators for jalousie and awning windows from El Salvador, except for those exported by IMSA.
ITC Notification
In accordance with section 705(c) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all privileged and proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without consent of the Deputy Assistant Secretary for Import Administrative.
The ITC will determine whether these imports materially injure, or threaten material injury to, a United States industry within 45 days after the date of publication of this notice. If the ITC determines that injury, or the threat of material injury, does not exist, this proceeding will be terminated and all estimated duties deposited or securities posted as a result of the suspension of liquidation will be refunded or cancelled. If, however, the ITC determines that injury exists, we will issue a countervailing duty order, directing Customs officers to resume the suspension of liquidation and collect cash deposits on entries of operators for jalousie and awning windows from El Salvador that are entered, or withdrawn from warehouse, for consumption as described in the "Suspension of Liquidation" section of this notice.
This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)).
Lee W. Mercer,
Acting Assistant Secretary for Trade Administration.
[FR Doc. 86-25884 Filed 11-14-86; 8:45 am]
BILLING CODE 3510-DS-M