NOTICES
DEPARTMENT OF COMMERCE
[C-427-016]
Industrial Nitrocellulose From France; Preliminary Results of Countervailing
Duty Administrative Review and Tentative Determination To Revoke Countervailing
Duty Order
Thursday, March 10, 1988
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AGENCY: International Trade Administration/Import Administration
Department of Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty Administrative Review
and Tentative Determination to Revoke Countervailing Duty Order.
SUMMARY: The Department of Commerce has conducted an administrative review of the
countervailing duty order on industrial nitrocellulose from France. We preliminarily
determine the net subsidy to be 0.26 percent ad valorem for the period January 1, 1984
through December 31, 1984 and 0.10 percent ad valorem for the period January 1, 1985
through December 31, 1985, rates we consider de minimis. We also tentatively determine
to revoke the countervailing duty order. We invite interested parties to comment on
these preliminary results.
EFFECTIVE DATE: March 10, 1988.
FOR FURTHER INFORMATION CONTACT:Lorenza Olivas or Bernard Carreau, Office of
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTAL INFORMATION:
Background
On January 9, 1987, the Department of Commmerce ("the Department") published in the
Federal Register (52 FR 833) the final results of its last administrative review of the
countervailing duty order on industrial nitrocellulose from France (48 FR 28521,
June 22, 1983). On June 27, 1986, a foreign exporter, Societe Nationale des Poudres et
Explosifs ("SNPE"), requested an administrative review of the order in accordance with 19
CFR 355.10. We published the initiation on July 17, 1986 (51 FR 25923). The Department
has now conducted that administrative review, in accordance with section 751 of the
Tariff Act of 1930 ("the Tariff Act").
Scope of Review
The United States has developed a system of tariff classification based on the international
harmonized system of customs nomenclature. Congress is considering legislation to
convert the, United States to this Harmonized System ("HS"). In view of this, we will be
providing both the appropriate Tariff Schedule of the United States Annotated ("TSUSA")
item numbers and the appropriate HS item numbers with our product descriptions on a
test basis, pending Congressional approval. As with the TSUSA, the HS item numbers are
provided for convenience and Customs purposes. The written description remains
dispositive.
We are requesting petitioners to include the appropriate HS item numbers as well as the
TSUSA item numbers in all new petitions filed with the Department. A reference copy of
the proposed HS schedule is available for
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consultation in the Central Records Unit,
Room B-099, U.S. Department of Commerce, 14th Street and Constitution Avenue NW.,
Washington, DC 20230. Additionally, all Customs offices have reference copies, and
petitioners may contact the import specialists at their local Customs office to consult the
schedule.
Imports covered by the review are shipments of French industrial nitrocellulose
containing between 10.8 percent and 12.2 percent nitrogen, not explosive grade
nitrocellulose which contains over 12.2 percent nitrogen. Industrial nitrocellulose is a
dry, white, amorphous, synthetic chemical produced by the action of nitric acid on
cellulose. Industrial nitrocellulose comes in several viscosities and is used to form films
in lacquers, coatings, furniture finishes and printing ink. Such merchandise is currently
classifiable as, cellulosic plastic materials, other than cellulose acetate, under TSUSA item
445.2500. This product is currently classifiable under HS item 3912.2000. We invite
comments from all interested parties on this HS classification.
The review covers the period January 1, 1984 through December 31, 1985, and nine
programs: (1) A grant from the Ministry of Defense; (2) a grant from DATAR; (3) the
assumption of labor costs for civil servants; (4) a government equity infusion; (5)
research and development assistance; (6) financing from the Fonds de Development
Economique et Social; (7) loans from Credit National; (8) financing from the Caisse des
Depots et Consignations; and (9) loans from the Ministry of Research and Industry. SNPE
is the only known French producer and exporter of this merchandise to the United States.
Analysis of Programs
(1) Grant from the Ministry of Defense
The Ministry of Defense provided a grant to SNPE in 1975 to modernize the company's
Bergerac plant, where industrial nitrocellulose (among other products) is produced.
Because this grant was limited to a specific industry, we preliminary determine that it
constitutes a subsidy.
To calculate the benefit, we applied the grant methodology outlined in the Subsidies
Appendix to the notice of Cold-Rolled Carbon Steel Flat-Rolled Products From Argentina:
Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order (40 FR 18006, April 26, 1984). We allocated the grant over 10 years, the average
useful life of assets in the nitrocellulose industry, according to the Asset Guideline Classes
of the Internal Revenue Service. We used as the discount rate the 1975 national average
corporate bond rate in France (as reported in Morgan Guaranty Trust Company's World
Financial Markets) because we have no information on SNPE's weighted cost of capital for
that year. On this basis, we preliminary determine the benefit from this program to be
0.17 percent ad valorem for the period January 1, 1984 through December 31, 1984. For
1985, there is no benefit from this program because the stream of benefits from the 1975
grant ended in 1984.
(2) DATAR Grant
The Delegation a l'Amenagement du Territoire et a l'Action Regionale ("DATAR")
coordinates the programs of various government agencies that provide incentives to
establish or expand businesses in certain regions of France. SNPE received a grant from
DATAR in 1979 to improve the production facilities and general infrastructure of the
Bergerac plant. Because grants received from DATAR provide benefits to specific regions,
we preliminarily determine that this program constitutes a subsidy.
Using the same methodology as described for the Ministry of Defense grant, we allocated
the grant over 10 years and used as the discount rate the 1979 national average
corporate bond rate in France. On this basis, we preliminarily determine the benefit
from this program to be 0.03 percent ad valorem for the period January 1, 1984 through
December 31, 1984 and 0.03 percent ad valorem for the period January 1, 1985 through
December 31, 1985.
(3) Assumption of Labor Costs for Civil Servants
Some employees of SNPE retain government civil service status ("status employees") as a
result of the company's change from a government agency to a government-owned
private corporation in 1971. SNPE is responsible for paying the wages and benefits of all
its employees. In general, SNPE's contribution for certain nonwage benefits, such as
health insurance, pensions, and unemployment insurance, is lower for its status
employees than for other employees. Because the French government assumes part of
SNPE's contributions for status employees, we preliminarily determine that this program
constitutes a subsidy.
To calculate the benefit, we took the average annual difference between SNPE's nonwage
benefits for status employees and those for other employees and multiplied that amount
by the number of status employees involved in industrial nitrocellulose production. We
allocated the result over total sales of industrial nitrocellulose during the period of
review. On this basis, we preliminarily determine the benefit from this program to be 0.06
percent ad valorem for the period January 1, 1984 through December 31, 1984 and 0.07
percent for the period January 1, 1985 through December 31, 1985.
(4) Government Equity Infusion in SNPE
In 1984, the Government of France increased its equity holdings in SNPE by a small
amount. In the final determination (48 FR 11971, March 22, 1983) and the final results of
our last administrative review in this case, we found that the creation of SNPE in 1971 and
the government's equity infusion between 1972 and 1983 were consistent with
commercial considerations. To determine whether the purchase of additional shares by
the French government was made in accordance with commercial considerations, we
examined SNPE's financial statements for 1983, the most recent information available at
the time of the 1984 infusion.
As in previous years, SNPE had a positive cash flow and earned a profit in 1983. The
company's profitability ratios (return on equity, return on sales), leverage ratios (equity
as a percentage of debt, capitalization ratio), and liquidity ratios (current ratio, quick
ratio, times interest earned) all remained healthy in 1983. Given SNPE's favorable
financial data at the time of the French government's equity infusion, we preliminarily
determine that the government's 1984 equity infusion in SNPE does not constitute a
subsidy. Since the French government made no new equity investments in SNPE in 1985,
we preliminarily determine that there were no benefits received from this program in
1985.
(5) Other Programs
We also examined the following programs and preliminarily determine that SNPE did not
use them during the period of review:
(a) Research and development assistance;
(b) Financing from the Fonds de Developpement Economique et Social;
(c) Preferential loans from Credit National;
(d) Financing from the Caisse des Depots et Consignations; and,
(e) Loans from the Ministry of Research and Industry.
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Preliminary Results of Review and Tentative Determination
As a result of our review, we preliminarily determine the net subsidy to be 0.26 percent
ad valorem for the period January 1, 1984 through December 31, 1984, and 0.10 percent
ad valorem for the period January 1, 1985 through December 31, 1985. The Department
considers any rate less than 0.50 percent ad valorem to be de minimis.
The Department therefore intends to instruct the Customs Service to liquidate, without
regard to countervailing duties, all entries of this merchandise exported on or after
January 1, 1984 and on or before December 31, 1985.
Further, the Department intends to instruct the Customs Service to waive deposits of
estimated countervailing duties, as provided by section 751(a)(1) of the Tariff Act, on
all shipments of this merchandise entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results of this administrative
review.
SNPE has requested that the Department revoke the countervailing duty order based
on the absence of a net subsidy for at least two years, as provided in 19 CFR 355.42(b).
Furthermore, in accordance with 19 CFR 355.42(e), SNPE has agreed in writing to an
immediate suspension of liquidation and reinstatement of the order if circumstances
develop which indicate that the merchandise thereafter imported into the United States is
benefiting from a net subsidy on its manufacture, production, or exportation. We have
found de minimis benefits for reviews covering the period March 1, 1983 through
December 31, 1985. In addition, the benefits declined in each year during this period and,
based on our grant methodology, would continue to decline if we conducted further
administrative reviews. We therefore tentatively determine to revoke the
countervailing duty order.
If the revocation is made final, it will apply to all unliquidated entries of this merchandise
entered, or withdrawn from warehouse, for consumption on or after the date of
publication of this notice. The revocation will not become final until the completion of an
administrative review establishing no net subsidy for the period January 1, 1986 through
the date of publication of this notice.
Interested parties may submit written comments on these preliminary results and
tentative determination to revoke within 30 days of the date of publication of this notice
and may request disclosure and/or a hearing within 10 days of the date of publication.
Any hearing, if requested, will be held 30 days from the date of publication, or the first
workday afterwards. Any request for an administrative protective order must be made no
later than five days after the date of publication. The Department will publish the final
results of this administrative review, including the results of its analysis of issues raised in
any such written comments or at a hearing.
This administrative review, tentative determination to revoke, and notice are in
accordance with sections 751(a)(1) and (c) of the Tariff Act (19 U.S.C. 1675(a)(1)) and (c)
and §§ 355.10 and 355.42 of the Commerce Regulations (9 CFR 355.10 and 355.42).
Gilbert B. Kaplan,
Acting Assistant Secretary Import Administration.
DATE: March 4, 1988
[FR Doc. 88-5309 Filed 3-9-88; 8:45 am]
BILLING CODE 3510-DS-M