NOTICES

                        DEPARTMENT OF COMMERCE

                    International Trade Administration

                               [C-557-401]

     Preliminary Affirmative Countervailing Duty Determination; Certain Apparel
    From Malaysia; and Preliminary Negative Countervailing Duty Determination; 
                   Certain Textile Mill Products From Malaysia

                          Friday, December 21, 1984

 *49651

 AGENCY: Import Administration, International Trade Administration,
 Commerce.

 ACTION: Notice.

 SUMMARY: We preliminarily determine that certain benefits which constitute bounties
 or grants within the meaning of the countervailing duty law are being provided to
 manufacturer, producers, or exporters of certain apparel in Malaysia. The estimated net
 bounty or grant is 0.57 percent ad valorem. We also preliminarily determine that no
 benefits which constitute bounties or grants within the meaning of the Act are being
 provided to manufacturers, producers, or exporters in Malaysia of certain textile mill
 products. The net countervailable benefit is de minimis and therefore our preliminary
 determination is negative. Accordingly, we are directing the U.S. Customs Service to
 suspend liquidation of all entries of certain apparel from Malaysia that are entered, or
 withdrawn from warehouse, for consumption after the date of publication of this notice
 and to require a cash deposit or bond on entries of apparel in the amount equal to the
 estimated net bounty or grant.

 These investigations were initiated by the Department under the title "Certain Textiles and
 Textile Products from Malaysia." Because of the number of products covered, and the
 differences in those products, the Department determined that it should conduct separate
 investigations--one of textiles and non-apparel textile products, and one of apparel.
 Because of the potential for confusion, as apparel can also be considered a textile
 product, we are changing the titles of these investigations to "Certain Textile Mill Products
 and Apparel from Malaysia." The scope of these investigations remains the same as
 announced in the initiation.

 If these investigations proceed normally, we will make our final determinations by March
 4, 1985.

 EFFECTIVE DATE: December 21, 1984.

 FOR FURTHER INFORMATION CONTACT: Loc Nguyen or Stuart Keitz, Office of
 Investigations, Import Administration, International Trade Administration, U.S.
 Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C.
 20230.

 SUPPLEMENTARY INFORMATIONS:

 Preliminary Determinations

 For purposes of these investigations, the following programs are preliminarily found to
 confer bounties or grants:
 - Tax Incentives for Exporters; and
 - Preferential Short-Term Financing.
 The estimated net bounty or grant for apparel is 0.57 percent ad valorem. Therefore, we
 preliminarily determine that certain benefits which constitute bounties or grants within
 the meaning of section 303 of the Tariff Act of 1930, as amended (the Act) are being
 provided to manufacturers, producers, or exporters of certain apparel in Malaysia. The
 estimated net countervailable benefit for certain textile mill products is de minimis.
 Therefore, with respect to certain textile mill products, we preliminarily determine that
 there is no reason to believe or suspect that benefits which constitute bounties or grants
 within the meaning of section 303 are being provided to manufacturers, producers, or
 exporters in Malaysia of certain textile mill products.

 Case History

 On July 20, 1984, we received a petition from the American Textile Manufacturers
 Institute, the Amalgamated Clothing and Textile Workers Union, and the International
 Ladies' Garment Workers Union, on behalf of the U.S. industry producing certain textiles
 and textile products. In compilance with the filing requirements of § 355.26 of our
 regulations (19 CFR 355.26), the petition alleges that manufacturers, producers, or
 exporters in Malaysia of textiles and textile products receive, directly or indirectly,
 benefits which constitute bounties or grants within the meaning of section 303 of the Act.
 We found that the petition contained sufficient grounds upon which to initiate
 countervailing duty investigations, and on August 9, 1984, we initiated such
 investigations (49 FR 32439). We stated that we expected to issue preliminary
 determinations by October 15, 1984. On September 21, 1984, we determined these
 investigations to be "extraordinarily complicated," as defined in section 703(c)(1)(B) of
 the Act. Therefore, we extended the period for making our preliminary determinations by
 65 days until December 17, 1984 (49 FR 40198).
 Since Malaysia is not a "country under the Agreement" within the meaning of section
 701(b) of the Act and the merchandise being investigated is dutiable, sections 303 (a)(1)
 and (b) of the Act apply to these investigations. Accordingly, the petitioners are not
 required to allege that, and the U.S. International Trade Commission is not required to
 determine whether, imports of these products cause or threaten material injury to U.S.
 industries.
 Due to the scope of these investigations, we employed a two-step questionnaire process.
 We presented a preliminary questionnaire to the government of Malaysia in Washington,
 D.C., on August 27, 1984. Based on the responses to the preliminary questionnaire, we
 requested responses from those producers who account for at least 60 percent of the
 textiles and apparel exported to the United States. We selected four textile producers and
 exporters, and six apparel producers and exporters to respond to the detailed
 questionnaire. On October 24, 1984, we presented the detailed government and company
 questionnaires to the government of Malaysia in Washington, D.C. The responses to our
 detailed questionnaires were received on November 26, 1984.
 We received timely requests for exclusion from two companies, Eastern Garment Mfg. Co.
 Sdn. Bhd. ("Eastern"), and Palace Garment Mfg. Sdn. Bhd. ("Palace"), to whcih we also sent
 copies of the detailed questionnaire. Eastern's response indicates that it receives benefits
 which are de minimis, and it is therefore excluded from this preliminary determination.
 Palace, however, receives countervailable benefits above the de minimis rate of 0.50%,
 and we have, therefore, included Palace in the suspension of liquidation.
 Certain respondents in the Certain Textile Mill Products and Apparel investigations have
 raised the issue as to whether petitioners have standing to file these cases. We have
 addressed this issue in our preliminary determination of Certain Textile Mill Products and
 Apparel from Indonesia, published concurrently with this notice. See that notice for our
 comments on the issue of petitioners' standing.

 Scope of the Investigation

 The products covered by these investigations are certain textile mill products and
 apparel, which are described in the appendix to this notice.

 Analysis of Programs

 Throughout this notice, we refer to certain general principles applied to the facts of the
 instant investigation. These principles are described in the "Subsidies Appendix" attached
 to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina; 

*49652


 Final Affirmative Countervailing Duty Determination and Countervailing Duty
 Order", which was published in the April 26, 1984, issue of the Federal Register (49 FR
 18006).
 Consistent with our practice in preliminary determinations, where a response to an
 allegation denies the existence of a program, receipt of benefits under a program, or
 eligibility of a company or industry under a program, and the Department has no
 persuasive evidence showing that the response is incorrect, we accept the response for
 purposes of the preliminary determination. All such responses, of course, are subject to
 verification. If the response cannot be supported at verification, and the program is
 otherwise countervailable, the program will be considered a subsidy in the final
 determination.
 For purposes of these preliminary determinations, the period for which we are measuring
 bounties or grants ("the review period") is calendar year 1983.
 Based upon our analysis of the petition and the responses to our questionnaires, we
 preliminarily determine the following:

 I. Programs Determined to Confer Countervailable Benefits

 We preliminarily determine that countervailable benefits are being provided to
 manufacturers, producers, or exporters in Malaysia of certain textile mill products and
 apparel under the following programs:

 A. Tax Incentives for Exporters

 Petitioners allege that the government of Malaysia uses several tax incentives to promote
 textile exports. First, a double tax deduction is granted for expenses related to export
 sales, including advertising costs outside Malaysia, export market research, participation
 in trade exhibitions and overseas sales offices. Secondly, Malaysian companies can
 deduct from net taxable income eight percent of the FOB value of export sales if
 Malaysian content of the product is more than 50 percent; they can deduct five percent if
 Malaysian content is less than 50 percent.
 In its response, the government of Malaysia stated that section 27 of the Investment
 Incentives Act of 1968 allows exporters to obtain a double deduction of eligible export
 promotion expenses in determining taxable income. In addition section 29 of the same
 act provided (for tax years prior to 1983) a deduction of two percent of the ex-factory
 value of exports from taxable income and a deduction of 10 percent of the increase in
 export value from the preceding year. In 1983, the government of Malaysia amended the
 "export allowance" provisions, i.e., section 29, of the law by eliminating the deductions
 described above and providing only a deduction of five percent of export revenues from
 taxable income.
 Because these special tax deductions are granted on the basis of exports, we preliminarily
 determine that they are countervailable. The benefit from these deductions is equal to
 any tax savings directly attributable to their use. Where we were able to determine the
 exact extent to which a company claiming these deductions actually used them during
 the tax period under investigation, we computed the benefit based on these exact
 amounts. Where we were unable to make this determination, as best information
 available, we assumed that these deductions were used in an amount directly
 proportional to their share of total special deductions claimed. We calculated a net
 benefit of 0.21 percent for apparel. According to the responses, none of the textile mill
 products companies under investigation claimed these special export tax deductions
 during the period of investigation.

 B. Perferential Short-Term Financing

 Petitioners allege that the government of Malaysia provides preferential pre- and
 post-export short-term refinancing through the Malaysian banking system. The
 commercial banks allegedly provide loans to exporters at the preferential rate of 4.5
 percent, which the central bank then refinances.
 In its response, the government of Malaysia stated that its central bank maintains an
 export credit refinancing facility for both pre- and post-shipment refinancing. This facility
 allows commercial banks to finance export transactions for a period of up to 92 days.
 Access to these funds is usually limited to 3 million Malaysian dollars for each exporter.
 The annual interest rates on these loans have varied between 5 and 8 percent since 1981.
 Because these loans are granted to finance exports and because the interest rates on these
 loans are lower than those available from commercial sources, we preliminarily
 determine that these loans confer a countervailable benefit upon certain textile mill
 products and apparel from Malaysia. To calculate the benefit, we used as our benchmark
 the average 1983 commercial lending rate of 11.7 percent, as published by Bank Negara
 Malaysia. We then calculated the amount of the benefit using our short-term loan
 methodology. We calculated a benefit of 0.40 percent for textiles and 0.36 percent for
 apparel.

 II. Programs Determined Not To Be Used

 We preliminarily determine that manufacturers, producers or exporters in Malaysia of
 certain textile mill products and apparel did not use the following programs which were
 listed in our notice of initiation:

 A. Export Credit Insurance

 Petitioners allege that exporters benefit from the provision of export credit insurance at
 rates which are inconsistent with commercial considerations and which are inadequate to
 cover the long-term operating risks of the insurance program. According to the responses
 of the government of Malaysia and the companies chosen to respond to our
 questionnaire, none of these companies used export credit insurance during the review
 period.


 B. Preferential Financing for Bumiputras

 Petitioners allege that textile and apparel manufacturers benefit from preferential
 financing and other types of assistance that are especially available to Bumiputras, the
 indigenous people of Malaysia. According to the responses of the government of Malaysia
 and the companies chosen to respond to our questionnaire, none of these companies
 received such financing during the review period.

 C. Labor Utilization

 Petitioners allege that companies in labor-intensive industries such as textiles and
 apparel receive tax relief under the Labor Utilization Relief Program. According to the
 responses of the government of Malaysia and the companies chosen to respond to our
 questionnaire, none of these companies applied for or received benefits under this
 program during the review period of investigation.

 D. Investment Tax Credit.

 III. Programs for Which We Need Additional Information

 A. Free Trade Zones

 Petitioners allege that textile and 

*49653

 apparel exporters located in Free Trade Zones
 receive countervailable benefits from tax and duty exemptions on imports of capital
 equipment and on materials other than those physically incorporated into exported
 products.
 The government of Malaysia responded that companies located in the Free Trade Zones
 do not receive any treatment that differs from the treatment received by similar entities
 not located in the Free Trade Zones. Since 1960, the government of Malaysia has imposed
 no import duties on imports of machinery for new manufacturing enterprises or
 expansion of existing enterprises regardless of their location. Projects which have
 received such exemptions have included textiles, chemicals, electronics, food products,
 metal products, and wood-based products.
 With regard to imported materials, the government of Malaysia stated that section 5 of
 the Free Trade Zone Act permits "goods * * * which would be used directly for the
 manufacture of other goods and are approved by the minister or which are meant for
 export may be brought into a free trade zone without payment of any customs duty,
 excise duty or sales tax." However, the government of Malaysia went on to say that under
 section 99 of the Customs Act of 1967, companies located outside the free trade zones can
 receive a duty drawback for materials that are imported and subsequently exported.
 Therefore, a company does not receive any benefits as a result of being located in a free
 trade zone other than the administrative convenience of not having to apply for
 exemptions and drawbacks from import duties.
 We have no information concerning the import duties on "materials other than those
 physically incorporated into the exported products." Therefore, we will seek more
 information during verification in order to make a decision concerning this program in
 our final determination.

 B. Reinvestment Allowance

 Petitioners allege that textile and apparel manufacturers benefit from a Reinvestment
 Allowance which permits manufacturing companies to deduct 25 percent of their
 expansion costs in plant, equipment and machinery.
 Schedule 7A of the Income Tax Act of 1967 authorizes a reinvestment allowance of 25
 percent of the approved expenditure under the Industrial Coordination Act of 1975. In
 its response, the government of Malaysia stated that the program is not limited to any
 region, product or sector and that according to section 4(3) of the Industrial
 Coordination Act, the approval of a license is based only on whether the project is
 "consistent with the rational economic and social objectives and would promote the
 orderly development of manufacturing activities in Malaysia."
 Because we have no information on what would be considered as "consistent with the
 rational economic and social objectives * * * of manufacturing activities in Malaysia" and
 no knowledge of what industries or kinds of industries besides the textile and apparel
 companies have received benefits under this program, we will seek more information
 during verification in order to make a decision concerning this program in our final
 determination.

 C. Industrial Estates

 Petitioners allege that under this program the government of Malaysia sponsors and
 finances industrial estates which provide real estate and financing at preferential rates to
 export-oriented, resource-based, labor-intensive industries. Petitioners claim the
 purpose of this program is to induce companies to settle away from congested areas.
 According to the government of Malaysia, there are no pre-established conditions for the
 establishment of or location of an industrial estate. The state governments, not the
 central government, control and develop the locations, then lease to companies whose
 operations are compatible with the purpose, size and location of the industrial estates.
 At this time, we have insufficient information to make a determination on this program.
 During verification, we will seek clarification on the financing and administration of, and
 participation in this program in order to make a decision in our final determination.

 Verification

 In accordance with section 776(a) of the Act, we will verify data used in making our final
 determination. As previously stated, we will not accept any statement in the responses
 that cannot be verified in 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 certain apparel which are entered, or withdrawn
 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 such entry of the
 merchandise in the amount of 0.57 percent ad valorem. The entries of certain apparel
 from Eastern will be excluded from this suspension of Liquidation. This suspension will
 remain 

*49654

 in effect until further notice. As discussed above, our preliminary
 determination with respect to certain textile mill products is negative; therefore, we are
 not directing the U.S. Customs Service to suspend liquidation of entries of certain textile
 mill products.

 Public Comment

 In accordance with section 355.35 of our regulations, we will hold a public hearing, if
 requested, to afford interested parties an opportunity to comment on these preliminary
 determinations at 10:00 a.m. on February 13, 1985, at the U.S. Department of Commerce,
 room 6802, 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 B-099, at the above address within
 10 days of the publication of this notice.
 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, pre-hearing briefs in at least 10 copies must be submitted to the
 Deputy Assistant Secretary by February 6, 1985. Oral presentations will be limited to
 issues raised in the briefs. All written views should be filled in accordance with 19 CFR
 355.34, within 30 days of the publication of this notice, at the above address and in at
 least 10 copies.
 This notice is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f).

 Alan F. Holmer,

 Deputy Assistant Secretary for Import Administration.

 December 17, 1984.

 Appendix

 List of TSUSA codes which covered Malaysia's exports of certain textile mill products and
 apparel to the United States in 1983.
   
    
 [Note:  The following TABLE/FORM is too wide to be displayed on one screen.  
 You must print it for a meaningful review of its contents.  The table has been 
 divided into multiple pieces with each piece containing information to help you 
 assemble a printout of the table.  The information for each piece includes: (1) 
 a three line message preceding the tabular data showing by line # and 
 character # the position of the upper left-hand corner of the piece and the 
 position of the piece within the entire table; and (2) a numeric scale 
 following the tabular data displaying the character positions.]  
   
 ******************************************************************************* 
 ******** This is piece 1. -- It begins at character 1 of table line 1. ******** 
 ******************************************************************************* 
    
                                        A. Textile Mill Products        
                                            Yarns and Threads           
          310.4047     310.5049                                         
                                              Woven Fabrics             
          320.0002     320.0008     320.0036     320.0058     320.1008  
          320.1058     320.2038     321.1054     322.1054     322.1094  
          323.1092     325.1054     325.8092     325.8094     327.3042  
          326.6028     327.1044     327.2092     327.3054     327.3058  
          328.1058     328.1064     328.1092     328.2044     328.2058  
          328.2094     328.3018     328.3028     328.3046     328.3092  
          328.4094     328.5058     328.5068     328.9088     328.9092  
          331.2092     331.4092     331.7094     338.5009     338.5010  
          338.5032     338.5035     338.5036     338.5039     338.5041  
          338.5045     338.5046     338.5054     338.5069  -----------  
                                           Textile Furnishings          
          366.4700     366.6550                                         
                                              Miscellaneous             
          389.6265                                                      
                                               B. Apparel               
          370.0800     372.1540     372.1560     372.7520     374.4000  
          376.5408     376.5412     378.0550     378.1535     379.0240  
          379.0645     379.2320     379.2360     379.2630     379.2650  
          379.3930     379.4020     379.4030     379.4040     379.4050  
          379.4330     379.4615     379.4620     379.4650     379.4660  
          379.5510     379.5520     379.5525     379.5530     379.5535  
          379.5555     379.5560     379.5565     379.5800     379.6210  
          379.6230     379.6240     379.6250     379.6260     379.6270  
          379.6470     379.7400     379.7610     379.7620     379.7630  
          379.8355     379.8635     379.8915     379.8930     379.8940  
          379.9030     379.9035     379.9040     379.9250     379.9505  
          379.9535     379.9540     379.9545     379.9550     379.9555  
          383.0210     383.0215     383.0221     383.0225     383.0335  
          383.0506     383.0520     383.0605     383.0610     383.0615  
          383.0805     383.0841     383.0856     383.1807     383.1820  
          383.1910     383.1935     383.1940     383.2040     383.2052  
          383.2210     383.2220     383.2352     383.2356     383.2365  
          383.2709     383.2720     383.2725     383.2730     383.2731  
          383.2810     383.2820     383.2830     383.2835     383.2836  
          383.3030     383.3040     383.3050     383.3060     383.3065  
          383.3415     383.3435     383.3445     383.3448     383.3450  
          383.3466     383.4200     383.4300     383.4702     383.4704  
          383.4709     383.4711     383.4720     383.4721     383.4730  
          383.4753     383.4755     383.4757     383.4761     383.4763  
          383.4825     383.5035     383.5052     383.5072     383.5086  
          383.6200     383.6310     383.6340     383.6360     383.6371  
          383.7882     383.8002     383.8003     383.8004     383.8005  
          383.8045     383.8047     383.8073     383.8110     383.8117  
          383.8660     383.8663     383.8669     383.8670     383.9010  
          383.9030     383.9035     383.9040     383.9050     383.9051  
          383.9210     383.9215     383.9225     383.9270     383.9290  
                                              Miscellaneous             
          702.1200     703.1600     704.3220     704.4010     704.4025  
          704.4506     704.4508     704.8520     704.8550     705.8520  
          706.3900     706.4106                                         
 1...+...10....+...20....+...30....+...40....+...50....+...60....+...70          
    
 ******************************************************************************* 
 ******* This is piece 2. -- It begins at character 71 of table line 1. ******** 
 ******************************************************************************* 
    
                                   
                                   
                                   
                                   
     320.1038     320.1040  ------ 
     322.4028     323.1054  ------ 
     326.3046     326.4092  ------ 
     327.4092     328.0092  ------ 
     328.2064     328.2092  ------ 
     328.4058     328.4092  ------ 
     330.2092     331.1092  ------ 
     338.5021     338.5024  ------ 
     338.5043     338.5044  ------ 
  -----------  -----------         
                                   
                                   
                                   
                                   
                                   
     374.5020     376.2425  ------ 
     379.0620     379.0640  ------ 
     379.3120     379.3905  ------ 
     379.4060     379.4070  ------ 
     379.4670     379.5220  ------ 
     379.5545     379.5550  ------ 
     379.6215     379.6220  ------ 
     379.6280     379.6450  ------ 
     379.7640     379.8311  ------ 
     379.9010     379.9020  ------ 
     379.9525     379.9530  ------ 
     379.9560     379.9565  ------ 
     383.0350     383.0505  ------ 
     383.0616     383.0632  ------ 
     383.1841     383.1842  ------ 
     383.2056     383.2205  ------ 
     383.2706     383.2708  ------ 
     383.2750     383.2751  ------ 
     383.2910     383.2920  ------ 
     383.3070     383.3200  ------ 
     383.3452     383.3465  ------ 
     383.4705     383.4707  ------ 
     383.4747     383.4749  ------ 
     383.4765     383.4821  ------ 
     383.5090     383.5830  ------ 
     383.6372     383.7550  ------ 
     383.8043     383.8044  ------ 
     383.8140     383.8160  ------ 
     383.9015     383.9025  ------ 
     383.9065     383.9070  ------ 
     383.9291  -----------         
                                   
     704.4502     704.4504  ------ 
     706.3640     706.3680  ------ 
                                   
 71..+...80....+...90....+....0...                                               
   

 *49655

 [FR Doc. 84-33243 Filed 12-20-84; 8:45 am]

 BILLING CODE 3510-05-M