53 FR 48670

                                   NOTICES

                           DEPARTMENT OF COMMERCE

                                  [C-508-802]

      Preliminary Affirmative Countervailing Duty Determination; Industrial Belts
        and Components and Parts Thereof, Whether Cured or Uncured, from Israel

                             Friday, December 2, 1988

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AGENCY: Import Administration, International Trade Administration, Commerce.

ACTION: Notice.

SUMMARY: We preliminarily determine that benefits which constitute subsidies within the
meaning of the countervailing duty law are being provided to 
manufacturers, producers, or exporters in Israel of industrial belts and components and parts
thereof, whether cured or uncured (industrial belts), as described in the "Scope of Investigation"
section of the notice. The estimated net subsidy is 15.11 percent ad valorem. In addition, we
preliminarily determine that critical circumstances do not exist in this case.

We have notified the United States International Trade Commission (ITC) of our determination. We
are directing the U.S. Customs Service to suspend liquidation of all entries of industrial belts from
Israel that are entered, or withdrawn from warehouse, for consumption on or after the date of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 these products in an
amount equal to the duty deposit rate. If this investigation proceeds normally, we will make a final
determination on or before February 13, 1989.

EFFECTIVE DATE: December 2, 1988.

FOR FURTHER INFORMATION CONTACT:Roy Malmrose or Barbara Tillman, Office of
Countervailing Investigations, Import Administration, International Trade Administration,
 U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC
20230; telephone: (202) 377-5414 or 377-2438.

Preliminary Determination

Based on our investigation, we preliminarily determine that 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 Israel of industrial belts. For purposes
of this investigation, the following programs are preliminarily found to confer subsidies:
- Encouragement of Capital Investment Law Grants.
- Exchange Rate Risk Insurance.
- Long-term Industrial Development Loans.
- Encouragesment of Research and Development Law Grants.
We preliminarily determine the estimated net subsidy to be 15.11 percent ad valorem for all
manufacturers, producers, or exporters in Israel of industrial belts.

Case History

Since the publication of the Notice of Intitation in the Federal Register (53 FR 28042, July 26,
1988), the following events have occurred. On August 1, 1988, we issued a questionnaire to the
Government of Israel in Washington, DC, 
concerning petitioner's allegations. On August 26, 1988, petitioner filed a request that the
preliminary determination be postponed for 65 days. Pursuant to section 703(c)(1)(A) of the Act,
on September 7, 1988, we postponed the preliminary determination to no later than November 28,
1988 (53 FR 34570). On October 6, 1988, we received responses from the Government of Israel
(GOI) and Magam United Rubber Industries Ltd. (Magam). On October 21, 1988, we issued
deficiency questionnaires to the Government of Israel and Magam.
On October 28, 1988, we received a letter from counsel for Magam stating that a response to the
deficiency questionnaires would not be submitted and that the company could no longer
participate in the investigation. On November 16, 1988, we received a letter from the GOI stating
that it had decided not to actively participate in the investigation and requesting that the GOI
questionnaire response be returned. On November 22, 1988, we received a letter from counsel for
Magam requesting that the company questionnaire response be returned. The Department has
granted the requests of the GOI and Magam, and will return their respective responses.

Scope of Investigation

The United States has developed a system of tariff classification based on the international
harmonized system of customs nomenclature. On January 1, 1989, 
the U.S. tariff schedules will be fully converted to the Harmonized Tariff Schedule (HTS) and all
merchandise entered or withdrawn from warehouse for consumption on or after this date will be
classified solely according to the appropriate HTS item numbers. Until that time, however, the
Department will be providing both the appropriate Tariff Schedules of the United States Annotated
(TSUSA) item number(s) and the appropriate HTS item number(s) with its product descriptions. As
with the TSUSA, the HTS item numbers are provided for convenience and customs purposes. The
written description remains dispositive as to the scope of the product coverage.
We are requesting petitioners to include the appropriate HTS item number(s) as well as the TSUSA
item number(s) in all petitions filed with the Department through the end of this year. A reference
copy the HTS is available for 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 U.S. Customs offices have reference copies, and petitioners may contact the
import specialist at their local customs office to consult the schedule.
The products covered by this investigation are industrial belts and components and parts thereof,
whether cured or uncured, currently provided for under TSUSA item numbers 358.0210,
358.0290, 358.0610, 358.0690, 358.0800, 358.0900, 358.1100, 358.1400, 358.1600,
657.2520, 773.3510, and 773.3520 and currently 
classifiable under HTS item numbers 5910.00.10, 5910.00.90, 4010.10.10 and 4010.10.50.
The merchandise covered by this investigation includes certain industrial belts for power
transmission. These include V-belts, synchronous belts, round belts and flat belts, 
in part or wholly of rubber or plastic, and containing textile fiber (including glass fiber) 
or steel wire, cord or strand, and whether in endless (i.e., closed loop) belts, or in 
belting in lengths or links. This investigation excludes conveyor belts and automotive 
belts as well as front engine drive belts found on equipment powered by internal combustion 
engines, including trucks, tractors, buses, and lift trucks.

Analysis of Programs

Because the GOI and Magam have withdrawn their questionnaire responses, this determination is
based on the best information available. For 

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each program upon which we initiated an investigation, we used as the best information available
the highest rate ever found for the program in previous Israeli cases. Based upon our analysis of
the petition and prior Israeli cases, we preliminarily determine the following:

I. Programs Preliminarily Determined to Confer Subsidies 

We preliminarily determine that subsidies are being provided to manufacturers, producers, or
exporters of industrial belts in Israel under the following programs:

A. The Encouragement of Capital Investment Law (ECIL) Grants

The purpose of the ECIL is to attract capital investment to Israel. In order to be eligible to
receive various benefits under the ECIL, including investment grants, interest subsidy payments,
accelerated depreciation, and reduced tax rates, the applicant must obtain "approved enterprise"
status. (We discuss ECIL interest subsidy payments and tax programs below under "Programs
Preliminarily Determined Not to be Used".) Approved enterprise status is obtained after review of
information submitted to the Israel Ministry of Industry and Trade, Investment Center
Division.

Using our Final Affirmative Countervailing Duty Determination: Potassium Chloride from
Israel (49 FR 36122, September 14, 1984) as the best information available, we preliminarily
determine that the provision of investment grants under this program confers a subsidy on exports
of industrial belts from Israel and that the estimated net subsidy for all producers and
exporters of industrial belts in Israel is 1.18 percent ad valorem.

B. Exchange Rate Risk Insurance

The Exchange Rate Risk Insurance Scheme (EIS), operated by the Israel Foreign Trade Risk
Insurance Corporation Ltd. (IFTRIC), is aimed at insuring exporters against losses which result
when the rate of inflation exceeds the rate of devaluation and the New Israeli Shekel (NIS) value of
an exporter's foreign currency receivables does not rise enough to cover increases in local costs.
The EIS scheme is optional and open to any exporter willing to pay premiums to IFTRIC.
Compensation is based on a comparison of the change in the rate of devaluation of the NIS against a
basket of foreign currencies with the change in the consumer price index. If the rate of inflation is
greater than the rate of devaluation, the exporter is compensated by an amount equal to the
difference between these two rates multiplied by the value-added of the exports. If the rate of
devaluation is higher than the change in the domestic price index, however, the exporter must
compensate IFTRIC. The premium is calculated for all participants as a percentage of the
value-added sales value of exports. IFTRIC changes this percentage rate periodically; but at any
given time, it is the same for all exporters.

In determining whether an export, insurance program provides a countervailable benefit, we
examine whether the premiums and other changes are 
adequate to cover the program's long-term operating costs and losses. In the last Israeli
investigation, Final Affirmative Countervailing Duty Determination: Industrial
Phosphoric Acid from Israel (52 FR 25447, July 7, 1987) (Phosphoric Acid), we
found that this program conferred a countervailable benefit. Using our determination in
Phosphoric Acid as the best information available, we preliminarily determine that this
program confers an export subsidy on exports of industrial belts from Israel.
Using the rate calculated in Final Affirmative Countervailing Duty Determination: Certain
Fresh Cut Flowers from Israel (52 FR 3316, February 3, 1987) (Flowers) as the best
information available with respect to the amount of the subsidy, we preliminarily determine that
the estimated net subsidy for all producers and exporters of industrial belts in Israel is 8.87
percent ad valorem.

C. Long-term Industrial Development Loans

Prior to July 1985, approved enterprises were eligible to receive long-term industrial development
loans funded by the GOI. In Phosphoric Acid, we determined that loans under this program
are provided to a diverse number of industries. However, the interest rates charged on these loans
vary depending on the development zone location of the borrower. The interest rates on loans 
to borrowers in Development Zone A are lowest, while those on loans to borrowers in the Central
Zone are highest.

In the absence of government and company questionnaire responses, we assume, as the best
information available, that the producers and exporters of industrial belts in Israel are not
located in the Central Zone. Therefore, we preliminarily determine that this program confers a
regional subsidy on exports of industrial belts from Israel. Using the rate calculated in Final
Affirmative Countervailing Duty Determination: Oil Country Tubular Goods from Israel (
52 FR 1651, July 7, 1987) as the best information available, we preliminarily determine that the
estimated net subsidy for all producers and exporters of industrial belts in Israel is 5.02
percent ad valorem.

D. Encouragement of Research and Development Law (ERDL) Grants

Petitioner alleges that research and development grants equal to 50 percent of approved project
costs are available under ERDL where such activity is directed at export expansion. Using as the
best information available our determination in Phosphoric Acid, we preliminarily determine
that this program confers a subsidy on exports of industrial belts from Israel and that the
estimated net subsidy for all producers and exporters of industrial belts in Israel is 0.04
percent ad valorem.

II. Programs Preliminarily Determined Not to be Used 

Using as the best information available the non-use of the following programs in previous
investigations, we preliminarily determine that the programs described below were not used by
manufacturers, producers, or exporters in Israel of industrial belts:

A. Benefits Under the Encouragement of Capital Investment Law (ECIL)

1. Accelerated Depreciation Under Section 42. Section 42 provides that approved enterprises,
located in development zones established by the ECIL, are entitled to twice the usual rate of
depreciation on machinery and equipment and four times the usual rate of buildings.

2. Direct Reduction of Corporate Tax Under Section 47. Under section 47 of the ECIL, a company
which has obtained approved enterprise status is eligible for a special corporate tax rate of 30 to
40 percent rather than the usual rate of 61 percent and income from approved investments is
subject to a minimum rate of 25 percent. In addition to the regionally-based qualifying criteria,
these tax benefits have been conditioned on export performance since 1978.

3. Interest Subsidy Payments. The Government of Israel rebates in the form of 
grants interest paid on loans from commercial banks. The amount of the 

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grants depends on the development zone in which a company is located.

B. Labor Training Grants from the Ministry of Labor

Petitioner alleges that manufacturers, producers or exporters in Israel of industrial belts
benefit from refunds for worker training costs for periods of up to six months and up to 80 percent
of trainee wages.

C. Special Export Marketing Financing from the Bank of Israel

Petitioner alleges that loans under this program are provided for specific marketing expenses such
as penetrating new markets, special marketing drives and establishing sales offices abroad.

Critical Circumstances

Petitioner alleges that "critical circumstances" exist within the meaning of section 703(e)(1) of the
Act, with respect to imports of industrial belts from Israel. In determining whether critical
circumstances exist, we must examine 
whether there is a reasonable basis to believe or suspect that: (1) The alleged sudsidy is
inconsistent with the Agreement, and (2) 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
consider the following factors: (1) The volume and value of the imports; (2) seasonal trends; and (3)
the share of domestic consumption accounted for by the imports. Examination of the import
statistics with respect to industrial belts from Israel indicates that the value and volume of
imports from Israel are small and declining. 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 industrial belts from Israel which are entered, or writhdrawn 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 equal to 15.11
percent ad valorem. This suspension will remain in effect until further notice.

Verification

In accordance with section 776(b) of the Act, we will verify the information used in making our
final determination.

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 nonprivileged and nonproprietary information
relating to this investigation. We will allow the ITC access to all privileged and business 
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 the 
written consent of the 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 determination.

Public Comment

In accordance with 19 CFR 355.35, we will hold a public hearing, if requested, to afford interested
parties an opportunity to comment on this preliminary determination. Individuals who wish to
participate in the hearing must submit a request within ten days of the publication of this notice in
the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of
Commerce, Room B-099, 14th Street and Constitution Avenue, NW., Washington, DC 20230.
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, ten copies of the business proprietary version and seven copies of the nonproprietary 
version of the pre-hearing briefs must be submitted to the Assistant Secretary at least seven 
days prior to the scheduled date of the public hearing. Oral presentations will be limited to 
issues raised in the briefs. Written views should be submitted in accordance with 19 CFR 355.33(d) 
and 355.34, and will be considered if received not less than 30 days before the final determinations 
are due or, if a hearing is held, within ten days after the hearing transcript is available.
This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).
November 28, 1988.

Jan W. Mares,

Assistant Secretary for Import Administration.

[FR Doc. 88-27817 Filed 12-1-88; 8:45 am]

BILLING CODE 3510-DS-M