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the U.S. Customs Service to suspend liquidation of all entries of certain apparel from Malaysia that are entered, or withdrawn from warehouse, for consumption after the date of publication of this notice and to require a cash deposit or bond on entries of apparel in the amount equal to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