64 FR 14695, March 26, 1999

DEPARTMENT OF COMMERCE

International Trade Administration

[C-560-804]

Final Negative Countervailing Duty Determination:
Extruded Rubber Thread From Indonesia

AGENCY: Import Administration, International Trade Administration,
Department of Commerce.

EFFECTIVE DATE: March 26, 1999.

FOR FURTHER INFORMATION CONTACT: Robert Copyak or Eric B. Greynolds,
Office of CVD/AD Enforcement VI, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
2786.

FINAL DETERMINATION: The Department of Commerce (the ``Department'')
determines that countervailable subsidies are not being provided to
producers or exporters of extruded rubber thread (ERT) in Indonesia.

[[Page 14696]]

Case History

    Since the publication of the preliminary negative determination in
the Federal Register on September 9, 1998, (63 FR 48191) (Preliminary
Determination), the following events have occurred. Between September
23 and October 2, 1998, we conducted verification of the responses of
the Government of Indonesia (GOI) and the respondent companies, P.T.
Swasthi Parama Mulya (Swasthi) and Bakrie Rubber Industries (Bakrie).
Swasthi submitted a case brief on December 1, 1998. No other parties to
this investigation filed case briefs or rebuttal briefs. A public
hearing was not requested by any interested party.

Scope of Investigation

    For purposes of this investigation, the product covered is extruded
rubber thread (ERT) from Indonesia. ERT is defined as vulcanized rubber
thread obtained by extrusion of stable or concentrated natural rubber
latex of any cross sectional shape, measuring from 0.18 mm, which is
0.007 inches or 140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge,
in diameter. ERT is currently classified under subheadings 4007.00.00
of the Harmonized Tariff Schedule (HTS). Although the HTS subheadings
are provided for convenience and customs purposes, the written
description of the scope of this investigation is dispositive.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act effective January 1, 1995 (the Act).
In addition, unless otherwise indicated, all citations to the
Department's regulations are to the regulations codified at 19 CFR 351
and published in the Federal Register on May 19, 1997 (62 FR 27295).

Petitioner

    The petition in this investigation was filed by North American
Rubber Thread Co., Ltd. (the petitioner).

Period of Investigation

    The period for which we are measuring subsidies (the ``POI'') is
calendar year 1997.

De Minimis Countervailable Subsidy

    Pursuant to its authority under section 771(36) of the Act, the
United States Trade Representative (``USTR'') has designated Indonesia
as a ``least developed country.'' See USTR Interim Final Rule:
Developing and Least-Developed Country Designations Under the
Countervailing Duty Law 15 CFR 2013 (63 FR 29945). Consequently, a net
countervailable subsidy rate that does not exceed three percent ad
valorem is considered de minimis, in accordance with section
703(b)(4)(B) of the Act, which implements Article 27 of the Agreement
on Subsidies and Countervailing Measures (``SCM Agreement''). As
discussed below, we determine that the net countervailable subsidy
bestowed on extruded rubber thread from Indonesia is less than three
percent ad valorem, and therefore, de minimis.

Analysis of Programs

    Based upon our analysis of the petition, the responses to our
questionnaires, the information reviewed at verification, and written
briefs submitted by interested parties, we determine the following:

I. Programs Determined to Be Countervailable

A. Bank of Indonesia (BI) Rediscounted Loans

    Under Decree No. 132/MPP/Kep/1996 of June 4, 1996, the Ministry of
Industry and Trade, the Ministry of Finance, and the Bank of Indonesia
(BI) provide support for certain exporters with the goal of achieving
diversification of the Indonesian export base from oil and gas. Under
the program, companies can sell their letters of credit and export
drafts at a discount to the BI through participating foreign exchange
banks, which are commercial banks that have obtained a license to
conduct activities in foreign currencies. In the Preliminary
Determination, we determined that this program was countervailable
because the sale of the letters of credit and export drafts provided
exporters with working capital at lower interest rates than they would
otherwise obtain on the market. Our review of the information on the
record, our findings at verification, and our analysis of the case
brief submitted by Swasthi (see Comment 1) has not led us to change our
preliminary determination that this program is countervailable.
    During the POI, Swasthi obtained rediscounted loans under the BI
rediscount loan program, as well as commercial rediscounted loans that
were not associated with the BI rediscount loan program. Because
Swasthi is a Designated Export Company (PET), it was eligible to obtain
BI rediscounted loans at a rate that was lower than the rate available
to non-PET companies, specifically, at the Singapore Interbank Offering
Rate (SIBOR) rather than SIBOR plus one percentage point.
    For purposes of the Preliminary Determination, we calculated the
benefit to Swasthi under this program as the difference in the interest
that Swasthi would have paid at the non-PET rate and interest it paid
at the PET rate. However, for purposes of this final determination, we
are using a different benchmark. According to section 771(5)(E)(ii) of
the Act, the benefit conferred under a loan program is the difference
between the amount the recipient of the loan pays on the loan under the
government program and the amount the recipient would pay on a
comparable commercial loan that it could actually obtain on the market.
We verified that, during the POI, Swasthi obtained comparable
commercial rediscounted loans outside of the BI rediscount loan
program. Thus, we determine that those company-specific loans provide a
more appropriate benchmark than the benchmark used in the Preliminary
Determination. Therefore, instead of the using a rate established by
the BI, we calculated the benchmark as the weighted-average interest
rate of the non-BI rediscounted loans Swasthi obtained during the POI.
In order to calculate the benefit under the program, we calculated the
difference in the amount of interest Swasthi actually paid on the BI
rediscounted loans during the POI and the amount it would have paid at
the benchmark interest rate. We then divided the calculated benefit
provided from the BI rediscount loan program by Swasthi's total exports
of subject merchandise to the United States during the POI. We used
export of subject merchandise to the United States because the loans
could be segregated by product and destination. On this basis, we
determine the benefit to Swasthi under this program to be 0.18 percent
ad valorem for Swasthi. No other producers/exporters of the subject
merchandise applied for or received loan under this program during the
POI.

II. Programs Determined To Be Not Used

    Based on the information provided in the responses and the results
of verification, we determine that, during the POI, the producers/
exporters of subject merchandise did not apply for or receive benefits
under the following programs:
    A. Investment Credit for the Expansion of the Rubber Industry.
    B. Corporate Income Tax Holiday.
    C. Import Duty Exemption of Capital Equipment.

[[Page 14697]]

Interest Party Comment

    Comment 1: Benchmark Used in the Calculation of the Bank of
Indonesia (BI) Rediscount Loan Program: Swasthi states that the
Department should continue to use the benchmark interest rate employed
in the Preliminary Determination, (i.e., the interest rate differential
between the BI's PET rate and the non-PET rate). Swasthi further argues
that, when calculating the benefit provided by BI rediscounted loans,
the Department should take into consideration the opportunity costs
that Swasthi incurred as a result of collateral deposits. Swasthi
states that collateral deposits are a typical banking practice in
Indonesia.
    Department's Position: We disagree with Swasthi's argument that the
Department should continue to calculate the benefit to Swasthi using
the BI rate for non-PET companies for comparison purposes. As explained
above, section 771(5)(E)(ii) of the Act states that the benefit from a
government loan program should be based upon comparable commercial
loans that the company could actually obtain on the market. During the
POI, Swasthi obtained comparable commercial rediscounted loans which
are not associated with the BI rediscount loan program. Therefore,
these loans are a more appropriate basis for benchmark purposes than
the BI rediscount rate for non-PET companies.
    Also we disagree that we should factor into our benefit
calculations opportunity costs associated with collateral deposits. In
determining whether particular loans are comparable for benchmark
purposes, the Department normally focuses on the structure of the
loans, the maturities of the loans, and the currencies in which the
loans are denominated. As explained above, we have determined that
Swasthi's commercial rediscounted loans are appropriate for benchmark
purposes. They have comparable structures and maturities and are
denominated in dollars.
    As Swasthi acknowledges, collateral requirements are a typical bank
practice in Indonesia. Both banks that participate in the BI rediscount
loan program and banks that do not participate in the BI rediscount
loan program require collateral. Moreover, collateral requirements vary
across banks and loan types. Based on these facts, there is no basis
for factoring in collateral requirements in determining the effective
interest rates, nor is there a basis for finding that Swasthi's
commercial rediscounted loans are not an appropriate benchmark.

Verification

    In accordance with section 782(i) of the Act, we verified the
information used in making our final determination. We followed our
standard verification procedures, including meeting with government and
company officials, and examining relevant accounting records and
original source documents. Our verification results are outlined in
detail in the public versions of the verification reports, which are on
file in the Central Records Unit (Room B-099 of the Main Commerce
Building).

Summary

    In accordance with section 705(a)(3) of the Act, we determine that
the total net countervailable subsidy rate for Bakrie is zero and that
the total net countervailable subsidy rate for Swasthi is 0.18 percent
ad valorem, which is de minimis. Therefore, we determine that no
countervailable subsidies are being provided to the production or
exportation of extruded rubber thread from Indonesia. Pursuant to
section 705(c)(2) of the Act, this investigation will be terminated
upon the publication of the final negative determination in the Federal
Register.

ITC Notification

    In accordance with section 705(d) of the Act, we will notify the
ITC of our determination.

Return or Destruction of Proprietary Information

    This notice serves as the only reminder to parties subject to
Administrative Protective Order (``APO'') of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 355.34(d). Failure to
comply is a violation of the APO.
    This determination is published pursuant to section 705(d) of the
Act.

    Dated: March 18, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7372 Filed 3-25-99; 8:45 am]
BILLING CODE 3510-DS-P