54 FR 15509
NOTICES
DEPARTMENT OF COMMERCE
[C-508-802]
Final Affirmative Countervailing Duty Determination: Industrial Belts and
Components and Parts Thereof, Whether Cured or Uncured, From Israel
Tuesday, April 18, 1989
AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We determine that certain 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 this notice. The estimated net subsidy is 15.42 percent ad valorem. In addition, we
determine that critical circumstances do exist in this case.
We have notified the United States International Trade Commission (ITC) of our determinations. If
the ITC determines that imports of industrial belts materially injure, or threaten material injury to
a U.S. industry, we will direct the U.S. Customs Service to resume suspension of 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entries of industrial belts from Israel that are entered, or withdrawn from warehouse, for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 our countervailing duty order and to
require a cash deposit on entries of industrial belts in an amount equal to the estimated net
subsidy.
EFFECTIVE DATE: April 18, 1989.
FOR FURTHER INFORMATION CONTACT:Roy A. Malmrose, 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.
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SUPPLEMENTARY INFORMATION:
Final Determination
Based on our investigation, we 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 Israel of industrial belts. For purposes of this
investigation, the following programs are found to confer subsidies:
- Encouragement of Capital Investment Law Grants
- Exchange Rate Risk Insurance
- Long-term Industrial Development Loans
- Encouragement of Research and Development Grants
We determine the estimated net subsidy to be 15.42 percent ad valorem for all manufacturers,
producers, or exporters in Israel of industrial belts.
Case History
Since publication in the Federal Register of the Preliminary Affirmative Countervailing Duty
Determination: Industrial Belts and Components and Parts Thereof, Whether Cured or Uncured,
from Israel (53 Fr 48670, December 2, 1988)
(Preliminary Determination), the following events have occurred. We received requests for a
public hearing from petitioner on December 7, 1988, and from respondents on December 9, 1988.
On December 9, 1988, petitioner filed a request for alignment of the countervailing duty and
antidumping final determinations. This postponement was approved under section 705 of the Act
and published in the Federal Register on February 13, 1989 (54 FR 6562).
On March 29, 1989, in accordance with Article 5, paragraph 3 of the Agreement on Interpretation
and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade
(GATT Subsidies Code), we notified U.S. Customs to terminate the suspension of liquidation in this
investigation as of April 1, 1989. Petitioner withdrew its request for a public hearing on March 3,
1989, and respondents withdrew their requests on March 8, 1989. We received written comments
from petitioner on March 16 and March 20, 1989, and from respondents on February 23 and
March 20, 1989.
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 were
fully converted to the Harmonized Tariff Schedules (HTS), as provided for in section 1201 et seq. of
the Omnibus Trade
and Competitiveness Act of 1988. All merchandise entered, or withdrawn from warehouse, for
consumption on or after that date is now classified solely according to the appropriate HTS
sub-headings. The HTS sub-headings are provided for convenience and Customs purposes.
The products covered by this investigation are industrial belts and components and parts thereof,
whether cured or uncured, formerly 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
3926.9055, 3926.9056, 3926.9057, 3926.9059, 3926.9060, 4010.1010, 4010.1050, 4010.9111,
4010.9115, 4010.9119, 4010.9150, 4010.9911, 4010.9915, 4010.9919, 4010.9950, 5910.0010,
5910.0090, and 7326.2000.
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 Government of Israel (GOI) and Magam United Rubber Industries Ltd. (Magam)
withdrew their questionnaire responses, this determination is based on the best information
available.
For each program found to be countervailable in prior countervailing duty investigations
involving Israel, we used as the best information available the highest rate ever found for that
program in previous countervailing duty determinations or administrative reviews
involving products from Israel. We did not conduct a verification, since respondents withdrew
their responses from the record of the investigation.
Based upon our analysis of the petition, written comments from petitioner and respondents and
prior Israeli cases, we determine the following:
I. Programs Determined to Confer Subsidies
We determine that subsidies are being provided to manufactures, producers, or exporters in
Israel of industrial belts under the following programs:
A. The Encouragement of Capital Investment Law (ECIL) Grants
The purpose of the ECIL is to attract capial investment to Israel. In order to be eligible to
receive various benefits under the ECIL, including investment grants, drawback grants, capital
grants, accelerated depreciation, and reduced tax rates, the applicant must obtain "approved
enterprise" status. (ECIL interest subsidy payments and tax programs are listed below under
"Programs Determined Not to Be Used".) Approved enterprise status is obtained after review of
information submitted to the Ministry of Industry and Trade, Investment Center Division.
Using our Final Affirmative Countervailing Duty Determination: Potassium Chloride from
Israel (49 FR 35122, September 14, 1984) as the best information available, we 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 from 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
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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 charges 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 determine
that this program confers an export subsidy on exports of industrial belts from Israel.
For the preliminary determination we used the rate calculated for this program in the Final
Affirmative Countervailing Duty Determination: Certain Fresh Cut Flowers from Israel
(52 FR 3316, February 3, 1987) as the best information available with respect to the amount of
the subsidy. For this determination, we are using the rate calculated in Preliminary Results of
Countervailing Duty Administrative Review: Fresh Cut Roses from Israel (54 FR 10395,
March 13, 1989), since it is now the highest rate found for this program in all previous
countervailing duty determinations and administrative reviews. On this basis, we determine
that the estimated net subsidy for all producers and exporters of industrial belts in Israel is
9.18 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 and verified
information, 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 determine that this
program confers a regional subsidy on exports of industrial belts from Israel. Using the rate
calculated in the Final Affirmative Countervailing Duty Determination: Oil Country Tubular
Goods from Israel (52 FR 1651, July 7, 1987) as the best information available, we 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 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 Determined Not to be Used
Using as the best information available the non-use of the following programs in previous
investigations, we determine that the programs below were not used by manufacturers, producers,
or exporters in Israel of industrial belts during the review period. For a full description of these
programs, see the Preliminary Determination.
A. Certain Benefits Under the Encouragement of Capital Investment Law (ECIL)
1. Accelerated Depreciation Under Section 42
2. Direct Reduction of Corporate Tax Under Section 47
3. Interest Subsidy Payments
B. Labor Training Grants from the Ministry of Labor
C. Special Export Marketing Financing from the Bank of Israel
Critical Circumstances
On June 30, 1988, petitioner alleged that "critical circumstances" exist with respect to imports of
the subject merchandise from Israel. Section 705(a)(2) of the Act provides that critical
circumstances exist if we determine that:
A. The alleged subsidy is inconsistent with the Agreement, and
B. There have been massive imports of the class or kind of merchandise which is the subject of the
investigation over a relatively short period.
We generally consider the following factors in determining whether imports have been massive
over a relatively short period of time: (1) The volume and value of the imports; (2) seasonal trends
(if applicable); and (3) the share of domestic consumption accounted for by imports. 19 CFR
355.16(f) (53 FR 52306, 52350)
In our preliminary determination of critical circumstances we used import statistics for the basket
TSUSA categories applicable to industrial belts and determined that imports of the subject
merchandise in the basket TSUSA categories from Israel were not massive over a relatively
short period. For our final determination, however, we decided not to rely on basket-category
import statistics. Instead, we are using an approach adopted in the recent antidumping
determinations on antifriction bearings. In these determinations the Department assumed massive
imports when import statistics were based on basket TSUSA categories and respondents did not
supply information on company- specific exports of the subject merchandise or the information
supplied could not be verified. See, for example, Final Determinations of Sales at Less than Fair
Value: Antifriction Bearings (Other than Tapered Roller Bearings) and Parts Thereof from the
Federal Republic of Germany and Final Determinations of
Sales at Less than Fair Value: Antifriction Bearings (other than Tapered Roller Bearings) and Parts
Thereof from the United Kingdom. The Commerce Department made these final determinations on
March 24, 1989.
In this investigation we have circumstances which are similar to those in the antifriction bearings
investigations. The import statistics are based on basket TSUSA categories and respondents
withdrew their responses. Therefore, as best information available, we are assuming that imports
from Israel have been massive over a relatively short period of time.
As described above, we have determined, on the basis of the best information available, that the
GOI provides export subsidies on the merchandise under investigation. Article 9 of the GATT
Subsidies Code prohibits the use of export subsidies on non-primary products. However, Article 14
provides an exception for developing countries, provided they do not use "export subsidies on
their industrial products * * * in a manner which causes serious prejudice to the trade or
production of another signatory" (Article 14, paragraph 3).
For a developing country like Israel, then the issue is whether we find that export subsidies are
causing "serious prejudice" to U.S. trade or production of industrial belts. Under section
771(7)(c)(iii) of the Act, the ITC evaluates all relevant economic factors
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bearing on the state of the industry, including actual and potential decline in output, sales, market
share, profits, productivity, return on investment, and capacity utilization.
Thus, in making its preliminary and final injury determinations, the ITC considers trade and
production in the United States. We conclude that, in principle, serious prejudice can exist where
material injury to a U.S. industry occurs by reason of imports benefiting from export subsidies.
Based upon the information in the record and the ITC's affirmative preliminary determination of
August 14, 1988, we conclude that serious prejudice exists within the meaning of Article 14,
paragraph 3. Therefore, we find that Israel's export subsidies on industrial belts are
inconsistent with the GATT Subsidies Code.
For the reasons discussed above, we find that critical circumstances exist within the meaning of
section 705(a)(2) of the Act. If the ITC's final determination should be negative, our critical
circumstance finding will become moot; in any event, under section 705(a)(4)(A) of the Act, the
ITC must make its own affirmative determination of critical circumstances.
Comments
Comment 1: Petitioner claims that the Department should countervail all subsidy programs found
to be used in prior Israeli cases at the highest rate calculated for each program, including programs
subsequently found to have been discontinued. In making its determination on the basis of the best
information
available, the Department must adversely infer that respondents failed to supply information on
possible new programs that may have been created to replace the discontinued programs. The
Department should use the subsidy rates applicable to the discontinued programs as the best
information available for the new programs that may have been established.
DOC Position: Since respondents withdrew their responses from the record in this investigation, the
Department made its final determination on the basis of the best information available, using as the
best information its findings from past countervailing duty determinations or administrative
reviews concerning products from Israel. In addition, to calculate a countervailing duty
rate in this investigation, the Department used the highest countervailing duty rate
previously found in any final countervailing duty determination or administrative review
for each of the programs.
In so doing, the Department has adversely inferred that respondent has used each of the ongoing
programs previously found countervailable, and that respondent has realized from each program a
benefit equal to the highest benefit found in any countervailing duty determination or
administrative review. Petitioner has not provided any evidence of new programs that may have
been established to replace the programs discontinued. Therefore, the Department sees no reason
to make additional adverse inferences.
Comment 2: Petitioner claims that the Department should recognize the
existance of a new program granting a partial risk guarantee for unsuccessful export marketing
activities and should determine that this program is countervailable. (This program was briefly
mentioned in the government response, which, as noted above, was subsequently withdrawn.)
Petitioner suggests using the exhange rate risk insurance scheme as a proxy for quantifying the
benefit of the program.
DOC Position: We disagree. Both the GOI and Magam withdrew their responses from the record of
this investigation. Consequently, the Department made its determination on the basis of the best
information available. As the best information available, the Department used the conclusions
reached in past Israeli cases. The Department considers it inappropriate to use a portion of the
withdrawn response concerning an export market risk guarantee while disregarding the remainder
of the responses. As set out in our response to Comment 3, we have refused to consider
information from the withdrawn response concerning respondent's location within the Central
Zone. It would be inconsistent and inappropriate for the Department to pick and choose
information from the withdrawn response, using information unfavorable to respondents but not
using information favorable to respondent. Furthermore, we note that petitioner has not supplied
any substantive information with respect to this possible other program, nor has it described how
it might be countervailable.
Comment 3: Respondents maintain that the Department failed to use the best information available
in its preliminary determination for two of the programs under investigation: ECIL Grants and
Long-Term Industrial Development Loans. Respondents indicate that benefits under these
programs vary by zone and that no benefits are received by firms located in the Central Zone.
Respondents state that Magam is located in Central Zone and have supplied a letter from the
Government of Israel attesting to this statement. Respondents conclude that the Department
should find that Magam has received no benefits under these programs, since it is located in the
Central Zone.
Petitioner claims that the Department should not accept incomplete information submitted by
Magam indicating that it may be within the Central Zone and, therefore, may be precluded from
receiving preferential interest rates under the ECIL.
DOC Position: The GOI and Magam chose to withdraw their questionnaire responses in this
investigation. Therefore, we were unable to verify any of the information needed to make this final
determination. Under the provisions of the Act, we must verify all information used in our final
determination. Because we were unable to verify any information in this investigation, it was
necessary to make this final determination on the basis of the best information available.
It would be contrary to the provisions of the Act and Department practice to
use partial information provided by respondents in the absence of complete and accurate
questionnaire responses which were subject to verification. If the Department were to follow such a
practice, potential respondents would have no reason to respond to the Department's
questionnaire and would, instead, provide only information favorable to their case. Obviously, this
would be an unacceptable result. See Association Colombiana de Exportadores de Flores v. United
States, Slip op. 89-3 (Ct. Int'1 Trade, January 6, 1989).
Comment 4: Respondents claim that the Department should not make an affirmative determination
of critical circumstances, since imports from Israel account for a small percentage of U.S.
consumption of the subject merchandise.
DOC Position: Because the Department's import data on the subject merchandise are based on
basket TSUSA categories, we would normally look to respondents for accurate data on exports of
the subject merchandise to the U.S.
In this case, however, respondents have withdrawn their responses, thus eliminating our usual
alternative source of import statistics. Therefore, as best information available, we are assuming
that imports from Magam have been massive over a relatively short period. Since, in this case,
there are also export subsidies inconsistent with the agreement, as explained in the critical
circumstances section of this
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determination, we have made an affirmative determination of critical circumstances. See our
discussion of this issue in the section of this notice on critical circumstances.
Comment 5: Petitioner asserts that, in the scope of investigation at the preliminary determination,
the Department listed only four of the 18 HTS items corresponding to the nine TSUSA numbers.
Petitioner requests that the Department list all 18 numbers in its final determination.
DOC Position: The scope of this investigation has not changed since the initiation. The petition
included nine TSUSA item numbers and four HTS sub- headings that petitioner believed
corresponded to the TSUSA numbers.
The Harmonized Tariff Schedule went into effect on January 1, 1989. Based on a January 1989 ITC
publication, petitioner requested that the Department expand the four HTS sub-headings to
eighteen sub-headings.
We consulted with the respondents in each country subject to concurrent countervailing and
antidumping investigations involving industrial belts and received no objections to the petitioner's
request.
In our preliminary, as now, we note that the written description of the products covered by the
investigation is dispositive. The HTS numbers are provided for convenience and customs purposes
as to the scope of the product coverage.
Verification
As noted above, the questionnaire responses in this investigation were
withdrawn. Therefore, we did not conduct a verification. In accordance with section 776(c) of the
Act, we made our final determination on the basis of the best information available.
Suspension of Liquidation
In accordance with our preliminary affirmative countervailing duty determination
published on December 2, 1988, we directed the U.S. Customs Service to suspend liquidation on
the products under investigation and to require a cash deposit or bond equal to the duty deposit
rate. This final countervailing duty determination was extended to coincide with the
companion final antidumping determinations, pursuant to section 606 of the Trade and Tariff Act
of 1984 (section 705(a)(1) of the Act). Under Article 5, paragraph 3 of the GATT Subsidies Code,
provisional measures cannot be imposed for more than 120 days without final affirmative
determinations of subsidy and injury. Therefore, on March 29, 1989, we instructed the U.S.
Customs Service to discontinue the suspension of liquidation on the subject merchandise entered
on or after April 1, 1989, but to continue the suspension of liquidation of all entries, or withdrawals
from warehouse, for consumption of the subject merchandise entered between December 2, 1988,
and March 31, 1989. Since we are now making a final affirmative determination of critical
circumstances, the
suspension of liquidation becomes retroactive to September 3, 1988, which is 90 days prior to the
date on which liquidation was first suspended. We shall instruct the U.S. Customs Service also to
suspend liquidation on all unliquidated entries made between September 3, 1988, and December 1,
1988. If the ITC issues a final affirmative injury determination, we will reinstate suspension of
liquidation under section 705 of the Act on the date of publication of the countervailing duty
order and again require a cash deposit on all entries of the subject merchandise in an amount
equal to 15.42 percent ad valorem.
ITC Notification
In accordance with section 705(d) 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 the ITC determines that material 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 such injury does exist, we will issue a countervailing duty order,
directing Customs officers to assess countervailing duties on all entries of industrial belts
from Israel entered, or withdrawn from warehouse, for consumption, as described in the
"Suspension of Liquidation" section of this notice.
This determination is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)).
Timothy N. Bergan,
Acting Assistant Secretary for Import Administration.
April 7, 1989.
[FR Doc. 89-9296 Filed 4-17-89; 8:45 am]
BILLING CODE 3510-DS-M