48 FR 39273
NOTICES
DEPARTMENT OF COMMERCE
Preliminary Affirmative Countervailing Duty Determination; Forged
Undercariage Components From Italy
Tuesday, August 30, 1983
*39273
AGENCY: International Trade Commission, United States Department of Commerce.
ACTION: Preliminary Affirmative Countervailing Duty Determination.
SUMMARY: We preliminarily determine that certain benefits which constitute
subsidies within the meaning of the countervailing duty law are being
provided to manufacturers, producers, or exporters in Italy of forged
undercarriage components, as described in the "Scope of Investigation" section of
this notice. The estimated net subsidy is 1.02 percent ad valorem. Therefore, we are
directing the U.S. Customs Service to suspend liquidation of all entries of the
merchandise subject to this investigation which are entered, or withdrawn from
warehouse, for consumption, and to require a cash deposit or the posting of a bond
on this merchandise in an amount equal to the estimated net subsidy. If this
investigation proceeds normally, we will make our final determination by October
26, 1983.
EFFECTIVE DATE: August 30, 1983.
FOR FURTHER INFORMATION CONTACT:
Roland MacDonald or Deborah Semb, Office of Investigations, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230,
telephone: (202) 377-5496 or 377-3534.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based upon our investigation, we preliminarily determine that there is reason to
believe or suspect that the government of Italy provides certain benefits which
constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as
amend (the Act), to manufacturers, producers, or exporters in Italy of forged
undercarriage components, as described in the "Scope of Investigation" section of
this notice. We estimate the net subsidy to be 1.02 percent ad volorem.
Case History
On April 29, 1983, we received a petition from counsel for Jernberg Forgings Co.,
Lindell Drop Forge Co., Protec, Inc., Presrite Corp., Presrite of Jefferson, Inc., Walco
Metal Forming Group, and Walker Forge, Inc. filed on behalf of the U.S. industry
producing forged undercarriage components. The petition alleged that certain
benefits which constitute subsidies within the meaning of section 701 of the Act are
being provided, directly or indirectly, to manufacturers, producers, or exporters in
Italy of forged undercarriage components. We found the petition to contain
sufficient grounds upon which to initiate a countervailing duty investigation,
and on May 24, 1983, we initiated an investigation (48 FR 23288). We stated that we
expected to issue a preliminary determination by July 25, 1983. We subsequently
determined that
the case is "extraordinarily complicated" as defined in section 703(c)(1)(B) of the
Act, and postponed our preliminary determination until August 25, 1983 (48 FR
28564).
Since Italy is a "country under the Agreement" within the meaning of section
701(b) of the Act, an injury determination is required for this investigation.
Therefore, we notified the International Trade Commission (ITC) of our initiation.
On June 13, 1983, the ITC determined that there is a reasonable indication that
imports of semifinished forged undercarriage links and rollers are materially
injuring U.S. industries. The ITC also determined that there is no reasonable
indication that semifinished forged undercarriage segments and finished forged
undercarriage links, rollers and
*39274
segments are materially injuring U.S. industries. Since Industria Meccanica e
Stampaggio S.p.A. is the only known exporter to the U.S. of semifinished forged
undercarriage links and rollers, our investigation of the petition's allegations
regarding Italtractor ITM S.p.A. and Berco S.p.A., the manufacturers, producers
and exporters of semifinished forged undercarriage segments and finished forged
undercarriage links, rollers and segments, was terminated.
We presented a questionnaire concerning the allegations to the Embassy of Italy
in Washington, D.C. on June 14, 1983 and requested a response by July 14, 1983. In
a letter dated July 11, 1983, the government of Italy requested a
postponement of the due date of the response; we granted the Italian government a
two-week extension.
The government of Italy submitted a response to our questionnaire on July 28,
1983.
Scope of Investigation
The products covered by this investigation are semifinished forged undercarriage
links and rollers for crawler-mounted machinery (forged undercarriage
components). The merchandise is currently classified under item numbers 664.08,
692.34 and 692.35 of the Tariff Schedules of the United States Annotated (TSUSA).
Industria Meccanica e Stampaggio S.p.A. (IMES) of Sumirago (Varese), Italy is
the only known exporter of the forged undercarriage components which were
exported to the United States. The period for which we are measuring subsidization
is January 1, 1982 through April 30, 1983.
Analysis of Programs
In its response, the government of Italy provided data for the applicable period.
In addition, a response was provided by IMES through the government of
Italy. Based upon our analysis to date of the petition and the responses to our
questionnaire, we have preliminarily determined the following:
I. Programs Preliminarily Determined To Confer Subsidies
We preliminarily determine that subsidies are being provided to manufacturers,
producers, or exporters in Italy of forged undercarriage components under the
programs described below.
A. Rebates of Indirect Taxes
The stated purpose of Italian Law 639 is to rebate customs duties and certain
indirect taxes upon the export of products containing iron and steel. The law sets
forth the value of the rebate which is expressed in lire per kilogram. Rebate values
have remained unchanged since enactment of the law in 1964. Granting of the rebate
is automatic provided all the proper information is supplied to and verified by the
government of Italy.
Respondents did not provide the Department with information on the criteria for
establishing the rebate value and on the indirect taxes which were subject to rebate.
No evidence was presented by the respondents to demonstrate the requisite linkage
between the amount of the rebate and the incidence of
customs duties and certain indirect taxes on various inputs of forged undercarriage
components.
Since the requisite linkage was not demonstrated and since this rebate is contingent
upon export performance and operates to stimulate export sales over domestic
sales, we preliminarily determine that the rebate of indirect taxes provided to IMES
under Italian Law 639 confers an export subsidy upon the manufacturers,
producers, or exporters in Italy of forged undercarriage components.
We calculated the benefit received under this program by allocating the value of the
rebates received between January 1, 1982 and April 30, 1983 over the value of its
1982 and January-April 1983 exports of forged undercarriage components. On this
basis, we calculated a net subsidy in the amount of 0.99 percent ad valorem.
B. Preferential Financing
Italian Law 623 provided for government loans at preferential rates to small and
medium-sized companies which are located in designated "depressed areas." These
below market rate loans were granted for the construction of new industrial plants
or the renewal, redesign or expansion of existing industrial plants.
In 1974, IMES obtained an 8 year loan from Mediocredito Regionale Lombardo at
the commercial market rate of interest. In February 1976, IMES received a
reduction in the interest rate of the loan under law 623.
Because these loans are limited to companies which are located in specified regions
and because the terms of these loans are inconsistent with commercial
considerations, we preliminarily determine that the financing provided under law
623 confers a domestic subsidy upon the manufacturers, producers or exporters in
Italy of forged undercarriage components.
We used the quarterly financial statistics published by the Organization for
Economic Cooperation and Development (OECD) to determine the benchmark for
the commercial lire rate of interest for the first quarter of 1976. We used the
Department's standard methodology for calculating the benefit arising from a
preferential loan. As this program conferred a domestic subsidy, we allocated the
benefit over IMES' total 1982 sales. On this basis we calculated a subsidy in the
amount of 0.03 percent ad valorem.
II. Programs Preliminarily Determined Not To Confer Subsidies
We preliminarily determined that the Italian government is not providing subsidies
to manufacturers, producers or exporters of forged undercarriage components
included in this investigation under the following programs:
A. Pricing on Forging Quality Steel Purchased
According to its response, IMES has no relationship with any of the steel suppliers
from which it purchased steel. Two of IMES's suppliers were private Italian
enterprises, two were government-owned Italian enterprises and one was a
company located in the United Kingdom. IMES attempted to purchase forging
quality steel from a company in the Federal Republic of Germany but the
transaction was never completed because IMES rejected the steel due to its quality.
IMES purchased nearly twice as much steel from private suppliers in 1982 as it did
from publicly owned suppliers. The weighted average price of steel purchased from
private suppliers was lower than the weighted average price of steel purchased from
publicly owned suppliers. Thus, IMES did not benefit from preferential prices on
steel purchased from government-owned steel suppliers.
Moreover, IMES stated in its response that all its purchases of steel were at arm's
length. Further, IMES stated that it received no discounts on steel prices contingent
upon export of forged undercarriage components.
Because IMES has purchased all its steel in arm's length transactions and received
no discounts contingent upon export performance, we preliminarily determine that
it did not receive a countervailable benefit through its steel purchases.
B. Convertible Debt
IMES issued convertible debt in 1977. This debt was converted to capital stock in
November, 1982. According to its response, IMES is 100 percent privately
*39275
owned and there was no government participation in the debt conversion.
Therefore, we preliminarily determine that conversion of IMES' debt to capital stock
did not confer a countervailable benefit.
III. Programs Preliminarily Determined Not To Be Used
We preliminarily determine that the programs listed below which were listed in the
notice of "initiation of Countervailing Duty Investigation--Forged
Undercarriage Components from Italy" (48 FR 23288) are not being used by the
manufacturers, producers or exporters in Italy of forged undercarriage
components.
A. Government Equity Infusions Inconsistent with Commercial Considerations
According to its response, IMES is a 100 percent privately owned, family
operated company which has not received any government equity infusions.
B. Regional Development Incentives
The petition alleges that IMES receives regional development benefits provided by
the government of Italy under the following laws or programs: Law 908 which
provides subsidized loans at below market rates and on preferential terms to
qualifying industrial projects in northern and central Italy; Law 614 which
provides tax incentives, including a ten-year total exemption from local taxes, to
certain industrial enterprises establishing or expanding in areas of northern and
central Italy; and Law 902 which assists small and medium-sized businesses in
northern and central Italy with selective investments, particularly for
modernizing existing plants to save labor costs.
According to its response, IMES has neither received any benefits from, nor
participated in, any of these regional development programs.
IV. Program for Which Additional Information Is Needed
We will seek additional information on the following program before reaching our
final determination in this investigation.
A. Export Credit Financing
Part IV of Italian Law 227 establishes medium-term credit financing to promote the
exportation of goods and services. The Istituto Centrale per il Credito a Medio
Termine (Mediocredito Centrale) administers the export credit financing through
"special medium and long-term credit institutions." The Minister of the Treasury,
after consulting the Interministerial Committee for Credit and Savings, establishes
the requirements, terms and conditions of the export credit financing. The financing
is denominated in Italian lire or in any foreign currency acceptable to the
Mediocredito Centrale and the special medium and long-term credit institutions.
In November and December 1982, medium-term export credit financing,
denominated in U.S. dollars, at preferential rates was provided under this program
for the export of the forged undercarriage components manufactured by IMES.
In its response, the government of Italy stated: "It is the opinion of the Italian
government (according to Paragraph K of the Illustrative List of Export Subsidies
annexed to the agreement on the interpretation of articles 6 and 16 of the General
Agreement on Tariff and Trade) that export financing programs cannot be
considered as countervailable subsidies when provided at the terms and conditions
of the OECD 'consensus'."
Since the export credit financing may have provided loans for export related
purposes at interest rates significantly less than those for comparable commercially
available loans, the export credit financing provided under Part IV of Italian Law
227 may have conferred a subsidy upon the company under investigation. Item K of
the Illustrative List is not necessarily dispositive of the counteravailability of
particular export credit financing. However, the Department needs more complete
information on the terms and conditions of this loan before it can determine
whether the loan confers a countervailable subsidy. The Department will seek that
information before the final determination in this case.
Verification
In accordance with section 776(a) of the Act, we will verify all data used in making
our final determination.
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 forged undercarriage components
from Italy which are entered, or withdrawn from warehouse, for
consumption, on or before the date of publication of the notice in the Federal
Register, and to require a cash deposit or the posting of a bond for each entry of the
merchandise in the amount of 1.02 percent ad valorem.
This suspension shall remain in effect until further notice.
ITC Notification
In accordance with section 703(d)(3) and (f) of the Act, we will notify the ITC of our
determination. In addition, we are making available to the ITC all nonprivileged and
nonconfidential information relating to this investigation. We will allow the ITC
access to all privileged and confidential 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 Deputy Assistant
Secretary for Import Administration.
Public Comment
In accordance with § 355.35 of the Commerce Regulations, if requested, we will hold
a public hearing to afford interested parties an opportunity to comment on this
preliminary determination at 10 a.m. on September 27, 1983, at the U.S.
Department of Commerce, Room 3708, 14th Street and Constitution Avenue, NW.,
Washington, D.C. 20230. Individuals who wish to participate in the hearing must
submit a request to the Deputy Assistant Secretary for Import Administration,
Room 3099B, at the above address within 10 days of this notice's publication.
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, prehearing briefs must be submitted to the Deputy
Assistant Secretary by September 20, 1983. Oral presentations will be limited to
issues raised in the briefs.
All written views should be filed in accordance with 19 CFR 355.34, within 30 days
of this notice's publication, at the above address and in at least 10 copies.
Dated: August 24, 1983.
Alan F. Holmer,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 83-23825 Filed 8-29-83; 8:45 am]
BILLING CODE 3510-25-M