The Contents entry for this article reads as follows: International Trade Administration NOTICES Countervailing duties: Extruded rubber thread from- Malaysia, 46392
------------------------------------------------------------ [C-557-806] Extruded Rubber Thread From Malaysia; Preliminary Results of Countervailing Duty Administrative Review AGENCY: Import Administration, International Trade Administration, Commerce. ACTION: Notice of Preliminary Results of Countervailing Duty Administrative Review. SUMMARY: The Department of Commerce (the Department) is conducting an administrative review of the countervailing duty order on extruded rubber thread from Malaysia for the period January 1, 1992 through December 31, 1992. We preliminarily determine the net subsidy to be 3.27 percent ad valorem for all manufacturers and exporters of Malaysian extruded rubber thread. We invite interested parties to comment on these preliminary results. EFFECTIVE DATE: September 8, 1994. FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Chris Jimenez, Office of Countervailing Compliance, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-2786. SUPPLEMENTARY INFORMATION: Background On August 3, 1993, the Department published in the Federal Register a notice of ``Opportunity to Request an Administrative Review'' (58 FR 41239) of the countervailing duty order on extruded rubber thread from Malaysia (57 FR 38472; August 24, 1992). On October 29, 1993, respondents Heveafil Sdn. Bhd. (Heveafil), Filmax Sdn. Bhd. (Filmax), Rubberflex Sdn. Bhd. (Rubberflex), and Filati Lastex Elastofibre Sdn. Bhd. (Filati), requested an administrative review of the order. We initiated the review for the period January 1, 1992 through December 31, 1992, on September 30, 1993 (58 FR 51053). The Department is now conducting this review in accordance with section 751 of the Tariff Act of 1930, as amended (the Act). Scope of Review Imports covered by this review are shipments of extruded rubber thread from Malaysia. Extruded rubber thread is defined as vulcanized rubber thread obtained by extrusion of stable or concentrated natural rubber latex of any cross sectional shape, measuring from 0.18 mm, which is 0.007 inch or 140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge, in diameter. Such merchandise is classifiable under item number 4007.00.00 of the Harmonized Tariff Schedule (HTS). The HTS item number is provided for convenience and Customs purposes. The written description remains dispositive. The period of review is January 1, 1992 through December 31, 1992. This review covers four companies and 13 programs. Two related companies participated in the review. Calculation Methodology for Assessment and Deposit Purposes We calculated the benefits pursuant to section 355.51 of the Department's Proposed Substantive Countervailing Duty Regulations (Proposed Regulations) (54 FR 23366; May 31, 1989). First, we calculated a country-wide rate, weight-averaging the benefits received by the four companies subject to review to determine the overall subsidy from all countervailing programs benefitting exports of subject merchandise to the United States. Because the country-wide rate was above de minimis, as defined by 19 CFR 355.7 (1993), we proceeded to the next step in our analysis and examined the ad valorem rate we calculated for each company for all countervailable programs to determine whether individual company rates differed significantly from the weighted-average country-wide rate. In calculating the individual company rates described above, only one rate was calculated for Heveafil and Filmax because Heveafil and Filmax are related parties. None of the companies received aggregate benefits which were significantly different within the meaning of 19 CFR 355.22(d)(3)(i). Therefore, the country-wide rate is based on the weight-averaged aggregate benefits received by the companies subject to this review. Analysis of Programs 1. Pioneer Status Pioneer status is a tax incentive offered to promote investment in the manufacturing, tourist, and agricultural sectors. Pioneer status was first introduced under the Pioneer Industries (Relief from Income Tax) Ordinance of 1958. This ordinance was replaced by the Investment Incentives Act (IIA) of 1968, which was subsequently replaced by the Promotion of Investment Act (PIA) of 1986. Under the IIA and the PIA, the Minister of International Trade and Industry may determine products or activities to be pioneer status products or activities. Companies petition for pioneer status for products or activities that have already been approved and listed as pioneer products. Once a company receives pioneer status, its profits from the designated product or activity are exempt from the corporate income tax, the development tax, and the dividend tax for a period of five years, with the possibility of an extension for an additional five years. The five-year extension, however, was abolished effective October 1, 1991. Furthermore, the computation of capital allowances, which are normally deducted against the adjusted income, are postponed to the post-tax holiday period. In evaluating a project for pioneer status, the Malaysian Industrial Development Authority (MIDA) will generally consider whether: (1) The product is being produced on a commercial scale suitable to the economic requirements or development of the country, (2) There are prospects for further development, and (3) The product or activity meets the national and strategic requirements of Malaysia. Specifically, MIDA officials consider 12 essential criteria to evaluate whether a particular company should receive pioneer status. Two of these 12 criteria address the export potential of the proposed product or activity: (1) The government considers if the applicant has made a case for export markets to absorb the excess above the existing demand and (2) the government considers whether the project saves foreign exchange through substitution of imports and, alternatively, whether it earns considerable foreign exchange by exporting a substantial part of its output. The other 10 criteria address domestic factors and are, therefore, export ``neutral''. Only in cases where the export criteria carry predominant weight is the program countervailable. Where pioneer status is conferred on a company because it has been determined that the domestic market is saturated and will no longer support additional producers and because that company agrees to export a certain percentage of its production, the program conveys an export subsidy, regardless of the other ``neutral'' criteria the company is required to meet. This is because the company is clearly being approved due to the fact it will export and because receipt of benefits becomes contingent on export performance. In the Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Extruded Rubber Thread From Malaysia (57 FR 38472; August 25, 1992) Malaysian Rubber Thread Final Determination, we determined that pioneer status was granted to Rubberflex based on its obligation to export. Therefore, the Department found the program to be countervailable with respect to that company. Rubberflex continues to hold pioneer status. In this review, we reviewed the pioneer status of Filati and Filmax to determine whether the program is also countervailable with respect to those two companies. (Heveafil's pioneer status expired.) We verified that both of those companies were granted pioneer status based on a commitment that they would export a majority of their production. Therefore, we preliminarily find this program also countervailable with respect to Filati and Filmax. To determine the benefit, we calculated the tax savings from this program during the review period and divided that by total exports. On this basis, we preliminarily determine the net subsidy from this program to be 2.05 percent ad valorem for all manufacturers and exporters in Malaysia of extruded rubber thread. 2. Export Credit Refinancing (ECR) Program The ECR program was established in order to promote: (1) exports of manufactured goods and agricultural food products that have significant value-added and high local content, (2) greater domestic linkages in export industries, and (3) easy access to credit facilities. In order to accomplish this, the Bank Negara Malaysia, the central bank of Malaysia, provides pre-shipment and post-shipment financing. Pre-shipment financing is a line of credit based on the previous 12 months' export performance, and cannot be tied to specific sales in specific markets. Post-shipment financing is order-based which is provided for specific sales to specific markets. The Department determined that this program was countervailable in the Malaysian Rubber Thread Final Determination because receipt of loans under this program was contingent upon export performance, and the loans were provided at preferential interest rates. We verified that all four companies used both pre-shipment and post-shipment ECR loans. In order to determine whether these loans were provided at preferential rates, we compared the interest rate charged to a benchmark interest rate. It is our practice to select the predominant source of short-term financing in the country as our benchmark for short-term loans. See § 355.44(b)(3) of the Proposed Regulations. In Malaysia, overdrafts and term loans offered by commercial banks are the predominant form of short-term financing. The average interest rates for these types of financing, however, are not individually available. Therefore, we have used as our benchmark for ECR loans the average commercial bank lending rate as an estimate of these predominant short-term lending rates. Because the pre-shipment loans were not shipment-specific, we included all loans on which interest was paid during the review period in our calculations. Because the post-shipment ECR loans were shipment-specific, we included in our calculations only those loans used to finance exports of extruded rubber thread to the United States. We calculated the benefit by comparing the amount of interest actually paid on the pre- and post-shipment loans during the review period with the amount that would have been paid at the benchmark rate of 10.83 percent. The difference between those amounts is the benefit. We then divided each company's interest savings by that company's total exports, in the case of pre- shipment loans, because they applied to all exports, or by its exports to the United States, in the case of post-shipment loans, because they applied to specific shipments to the United States. On this basis, we preliminarily determine the net subsidy for pre-shipment loans to be 0.33 percent for all manufacturers or exporters. For post-shipment loans, we preliminarily determine the rate to be 0.30 percent for all manufacturers and exporters in Malaysia of extruded rubber thread. 3. Abatement of Income Tax Based on the Ratio of Export Sales to Total Sales The IIA provided for an abatement of income tax based on the ratio of export sales to total sales. This law was repealed effective January 1, 1986, and replaced by the PIA. Among other incentives, the new law also provides an abatement of income tax based on export performance. Specifically, a portion of income, equal to 50 percent of the ratio of export sales to total sales, is exempt from income tax. This program is not available to companies still participating in programs under the repealed IIA or to companies granted pioneer status or an investment tax allowance under the PIA. Because this program is limited to exporters, we determined this program to be countervailable in the Malaysian Rubber Thread Final Determination. We verified that only Heveafil claimed this tax abatement on its income tax return filed during the review period. Heveafil contends that this tax abatement did not benefit exports of the subject merchandise to the United States. This contention is based on the fact that the company did not include U.S. sales in the calculation of the ratio used to determine the amount of the tax abatement. The amount of the tax abatement is calculated using a ratio of total exports divided by total sales. This ratio is then multiplied by total adjusted income to calculate the claimed tax abatement. In calculating this ratio, Heveafil deducted the amount of U.S. exports from both the numerator and denominator, i.e., from both total exports and total sales. Therefore, in the company's calculation there was no significant change in the calculated ratio which was applied to the adjusted income. Thus, the calculation methodology used by Heveafil in its tax return did not eliminate the benefit attributable to sales of U.S. exports conferred from the use of this program. Therefore, we preliminarily determine that this program provides a countervailable benefit with respect to exports of the subject merchandise. To calculate the benefit, we calculated the tax savings from this program during the review period and divided that by total exports, because these benefits applied to all exports. On this basis, we preliminarily determine the net subsidy from this program to be 0.38 percent ad valorem for all manufacturers and exporters in Malaysia of extruded rubber thread. 4. Abatement of Five Percent of the Value of Indigenous Malaysian Materials Used in Exports In addition to the income tax abatement based on exports which is discussed above, the PIA provides for an abatement of income tax in the amount of five percent of the ratio of export sales to total sales times the value of indigenous Malaysian materials used in the manufacture of exported products. This program is not available to companies still participating in programs under the repealed IIA or to companies granted pioneer status or an investment tax allowance under the PIA. We found this program countervailable in the Malaysian Rubber Thread Final Determination because use of this program is contingent upon export performance. We verified that only Heveafil claimed this tax abatement on its income tax return filed during the review period. Heveafil contends that this tax abatement did not benefit exports of the subject merchandise to the United States. This contention is based on the fact that the company did not include U.S. sales in the calculation of the ratio used to determine the amount of the tax abatement. The amount of the tax abatement is calculated using a ratio of total exports divided by total sales. This ratio is then multiplied by five percent of the value of indigenous materials to calculate the claimed tax abatement. In calculating this ratio, Heveafil deducted the amount of U.S. exports from both the numerator and denominator, i.e., from both total exports and total sales. Therefore, in the company's calculation there was no significant change in calculated ratio which was applied to the value of indigenous materials to determine the amount of the tax abatement. Thus, the calculation methodology used by Heveafil in its tax return did not eliminate the benefit attributable to sales of U.S. exports conferred from the use of this program. Therefore, we preliminarily determine that this program provides a countervailable benefit with respect to exports of the subject merchandise. To calculate the benefit, we calculated the tax savings from this program during the review period and divided that by total exports, because these benefits applied to all exports. On this basis, we preliminarily determine the net subsidy from this program to be 0.12 percent ad valorem for all manufacturers and exporters in Malaysia of extruded rubber thread. 5. Industrial Building Allowance Sections 63 through 66 of the Income Tax Act of 1967, as amended, allow an income tax deduction for a percentage of the value of constructed or purchased buildings used in manufacturing. In 1984, this allowance, which had been limited to manufacturing facilities, was extended to include buildings used as warehouses to store finished goods ready for export or imported inputs to be incorporated into exported goods. This program includes a 10 percent initial tax allowance and an additional 2 percent annual tax allowance (i.e., 12 percent in the first year and 2 percent thereafter). The program effectively reduces a company's taxable income, and the tax allowance can be carried forward to future tax years until fully exhausted. Rubber-based exporters are eligible for this program. We found this program countervailable in the Malaysian Rubber Thread Final Determination because use of this allowance is limited to exporters. We verified that Heveafil used this program during the review period. To calculate the benefit, we calculated the tax savings from this program during the review period for Heveafil and divided the savings amount by total exports, because these benefits applied to all exports. On this basis, we preliminarily determine the net subsidy from this program to be less than 0.005 percent ad valorem for all manufacturers and exporters in Malaysia of extruded rubber thread. 6. Double Deduction for Export Promotion Expenses Section 41 of the Promotion of Investments Act allows companies to deduct expenses related to the promotion of exports twice, once in calculating net income on the financial statement and again in calculating taxable income. Because this program is limited to exporters, we found this program countervailable in the Malaysian Rubber Thread Final Determination. We verified that Heveafil and Filmax used this program during the review period. To calculate the benefit, we calculated the tax savings from this program during the review period for each company and divided that by total exports, because these benefits applied to all exports. On this basis, we preliminarily determine the net subsidy from this program to be 0.09 percent ad valorem for all manufacturers and exporters in Malaysia of extruded rubber thread. 7. Rubber Discount Scheme We verified that this program was terminated effective January 1, 1992, and that the last date exports were eligible for rebates under this program was December 31, 1991. In the Malaysian Rubber Thread Final Determination, we determined that benefits from this program were conferred when the product was exported. Therefore, we preliminarily determine that this program is terminated and provides no residual benefit. Other Programs We preliminarily determine that the exporters of extruded rubber thread did not use the programs listed below with respect to exports of the subject merchandise to the United States during the review period: - Investment Tax Allowance. - Abatement of Five Percent of Taxable Income Due to Location in a Promoted Industrial Area. - Allowance of a Percentage of Net Taxable Income Based on the F.O.B. Value of Export Sales. - Double Deduction of Export Credit Insurance Payments. - Abatement of Taxable Income of Five Percent of Adjusted Income of Companies Due to Capital Participation and Employment Policy Adherence. - Preferential Financing for Bumiputras. Preliminary Results of Review We preliminarily determine the net subsidy for the period January 1, 1992 through December 31, 1992, to be 3.27 percent. If the final results of this review remain the same as these preliminary results, the Department intends to instruct the Customs Service to assess countervailing duties at 3.27 percent of the f.o.b. invoice price on shipments of the subject merchandise exported on or after April 1, 1992, and on or before December 31, 1992. Pursuant to the International Trade Commission's termination of its injury determination on Malaysian extruded rubber thread in light of the revocation of duty free status under the Generalized System of Preferences, effective March 31, 1992, the Department previously issued instructions to Customs to liquidate entries of the subject merchandise entered, or withdrawn from warehouse, for consumption prior to March 31, 1992. Therefore, those entries are not subject to assessment of countervailing duties (See Amended Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Extruded Rubber Thread from Malaysia (58 FR 41084; August 2, 1993)). The Department also intends to instruct the Customs Service to collect a cash deposit of 3.27 percent on all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this administrative review. Parties to this proceeding may request disclosure of the calculation methodology and interested parties may request a hearing not later than 10 days after date of publication of this notice. In accordance with 19 CFR 355.38(c)(1)(ii), interested parties may submit written arguments in case briefs on these preliminary results within 30 days of the date of publication. Rebuttal briefs, limited to arguments raised in case briefs, may be submitted seven days after the time limit for filing the case brief. Any hearing, if requested, will be held seven days after the scheduled date for submission of rebuttal briefs. Copies of case briefs and rebuttal briefs must be served on interested parties in accordance with 19 CFR 355.38(e). Representatives of parties to the proceeding may request disclosure of proprietary information under administrative protective order up until 10 days after the representative's client or employer becomes a party to the proceeding, but in no event later than the date the case briefs are due under 19 CFR 355.38(c). The Department will publish the final results of this administrative review, including the results of its analysis of issues raised in any case or rebuttal briefs. This administrative review and notice are in accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22. Dated: August 30, 1994. Joseph A. Spetrini, Acting Assistant Secretary for Import Administration. [FR Doc. 94-22176 Filed 9-7-94; 8:45 am] BILLING CODE 3510-DS-M
The Contents entry for this article reads as follows: International Trade Administration NOTICES Countervailing duties: Extruded rubber thread from- Malaysia, 46392