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[C-557-806]
Extruded Rubber Thread From Malaysia; Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of 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. We preliminarily determine
the net bounty or grant to be 1.00 percent ad valorem for all
manufacturers and exporters of Malaysian extruded rubber thread
for the period January 1, 1993 through December 31, 1993. If
the final results remain the same as these preliminary results
of administrative review, we will instruct the U.S. Customs
Service to assess countervailing duties as indicated above.
Interested parties are invited to comment on these preliminary
results.
EFFECTIVE DATE: May 22, 1995.
FOR FURTHER INFORMATION CONTACT: Judy Kornfeld or Richard Herring,
Office of Countervailing Compliance, Import Administration,
International Trade Administration, U.S. Department of Commerce,
14th Street and Constitution Avenue, N.W., Washington, D.C.
20230; telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On August 25, 1992, the Department published in the Federal
Register (57 FR 38472) the countervailing duty order on extruded
rubber thread from Malaysia. On August 3, 1994, the Department
published a notice of ``Opportunity to Request an Administrative
Review'' (59 FR 39543) of this countervailing duty order. We
received a timely request for review from respondents Heveafil
Sdn. Bhd.(Heveafil), Filmax Sdn. Bhd.(Filmax), Rubberflex Sdn.
Bhd.(Rubberflex), Filati Lastex Elastofibre Sdn. Bhd.(Filati),
and Rubfil Sdn. Bhd.(Rubfil).
We initiated the review, covering the period January 1, 1993
through December 31, 1993, on September 16, 1994 (59 FR 47609).
The review covers 5 manufacturers/exporters of the subject merchandise
and 12 programs.
Applicable Statute and Regulations
The Department is conducting this administrative review in
accordance with section 751(a) of the Tariff Act of 1930, as
amended (the Act). Unless otherwise indicated, all citations
to the statute and to the Department's regulations are in reference
to the provisions as they existed on December 31, 1994. However,
references to the Department's Countervailing Duties; Notice
of Proposed Rulemaking and Request for Public Comments, 54 FR
23366 (May 31, 1989) (Proposed Regulations), are provided solely
for further explanation of the Department's countervailing duty
practice. Although the Department has withdrawn the particular
rulemaking proceeding pursuant to which the Proposed Regulations
were issued, the subject matter of these regulations is being
considered in connection with an ongoing rulemaking proceeding
which, among other things, is intended to conform the Department's
regulations to the Uruguay Round Agreements Act. See 60 FR 80
(Jan. 3, 1995).
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 was 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.
Calculation Methodology for Assessment and Deposit Purposes
We calculated the net bounty or grant on a country-wide basis
by first calculating the bounty or grant rate for each company
subject to the administrtative review. We then weight-averaged
the rate received by each company, including those with de minimis
and zero rates, using as the weight its share of total Malaysian
exports to the United States of subject merchandise. We then
summed the individual companies' weighted-average rates to determine
the bounty or grant rate from all programs benefitting exports
of subject merchandise to the United States.
Since the country-wide rate calculated using this methodology
was above de minimis, as defined by 19 CFR 355.7 (1994), we
proceeded to the next step and examined the net bounty or grant
rate calculated for each company to determine whether individual
company rates differed significantly from the weighted-average
country-wide rate, pursuant to 19 CFR 355.22(d)(3). In calculating
the individual company rates described above, only one rate
was calculated for Heaveafil and Filmax because Heveafil and
Filmax are related parties.
None of the companies had net bounty or grant rates which
were significantly different pursuant to 19 CFR 355.22(d)(3).
Therefore, all companies are assigned the country-wide rate.
Analysis of Programs
I. Programs Conferring Subsidies
A. 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
order-based and pre- and post-shipment financing of exports
through commercial banks for periods of up to 120 and 180 days,
respectively, and certificate of performance (CP)-based pre-
shipment financing. Order-based financing is provided for specific
sales to specific markets. CP-based financing is a line of credit
based on the previous 12 months'
---- page 27081 ----
export performance, and cannot be tied to specific sales in
specific markets.
The Department determined that this program was countervailable
in 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)
and Extruded Rubber Thread From Malaysia; Final Results of Countervailing
Duty Administrative Review (60 FR 17515; April 6, 1995) (Final
Results of First Review) because receipt of loans under this
program was contingent upon export performance and the loans
were provided at preferential interest rates. Heveafil, Filmax
and Rubberflex used pre-shipment ECR loans. Filati and Rubfil
used 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. As a benchmark for short-term loans,
it is our practice to select the predominant source of short-
term financing in the country as our benchmark for short-term
loans. See section 355.44(b)(3) of the Department's Proposed
Regulations. In Malaysia, term loans and overdrafts offered
by commercial banks are the most 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. This rate is referred to by banks as the base
lending rate (BLR). Commercial banks then add a 1 to 2 percent
spread to the BLR. Therefore, to determine the commercial benchmark,
we used the average of the commercial BLR rates as published
by Bank Negara, the central bank of Malaysia, plus an average
spread of 1.5 percent. (See Final Results of First Review.)
Based on a comparison of the ECR rates and the benchmark
rate, we find that ECR loans continue to be provided at preferential
interest rates. To calculate the benefit from ECR loans on which
interest was paid in 1993, we used our short-term loan methodology
which has been applied consistently in previous determinations
and the previous administrative review in this case. (See Final
Affirmative Countervailing Duty Determination and Countervailing
Duty Order: Butt-Weld Pipe Fittings from Thailand (55 FR 1695;
January 18, 1990); the Malaysian Rubber Thread Final Determination
(57 FR 38474; August 27, 1992); and the Final Results of First
Review (60 FR 17515; April 6, 1995). See also section 355.44(b)(3)
of the Proposed Regulations. 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. Because the pre-shipment loans were not
shipment-specific, we included all loans on which interest was
paid during the review period.
To calculate the benefit, we compared the amount of interest
actually paid on these loans during the review period with the
amount that would have been paid at the benchmark rate of 10.53
percent. The difference between those amounts is the benefit.
We then divided total interest savings by total exports, in
the case of pre-shipment loans, because they applied to all
exports, or by exports to the United States, in the case of
post-shipment loans, because they applied to specific shipments
of exports to the United States. On this basis, we preliminarily
determine the net bounty or grant from pre-shipment loans to
be 0.45 percent for all manufacturers or exporters, and from
post-shipment loans, we preliminarily determine the rate to
be 0.27 percent for all manufacturers and exporters in Malaysia
of extruded rubber thread.
B. 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, 1958. This ordinance was replaced
by the Investment Incentives Act (IIA) in 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
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 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 was abolished effective October
1, 1991. Furthermore, the computation of capital allowances,
which are normally deducted against the adjusted taxable income,
is postponed to the post-tax holiday period.
In evaluating a project for pioneer status, the Malaysian
Industrial Development Authority (MIDA) will consider whether:
(1) The product is being produced on a commercial scale suitable
to the economic requirement 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 specifically address the export
potential of the proposed product or activity. Nevertheless,
companies that produce only for the domestic market may also
receive pioneer status. Furthermore, some companies may be rejected
even though their export potential is high. Under certain conditions,
however, companies must agree to an export commitment (i.e.,
they must agree to export a certain percentage of their production)
to receive pioneer status. Furthermore, an export requirement
may sometimes be applied to certain industries after it is determined
that the domestic market is saturated and will no longer support
additional producers.
Considering the implications of this criterion, the Department
views the pioneer program as a two-faceted program. The first
facet comprises those instances where one or more of the 12
criteria applies, including favorable prospects for export,
but where the export criteria do not carry preponderant weight.
The Department found this facet of the program not countervailable
in the Malaysian Rubber Thread Final Determination.
In cases 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 investigation of this case (see
Malaysian Rubber Thread Final Determination), we determined
that pioneer status was granted to Rubberflex based on its obligation
to export. Therefore, we found the program countervailable with
respect to that company. See also Final Results of First Review.
Rubberflex continues to hold pioneer status and claimed pioneer
income during this review period.
---- page 27082 ----
Filmax, Filati, and Rubfil also held pioneer status. However,
these companies experienced a tax loss during the period of
review and, therefore, did not benefit from this program.
To calculate the benefit, we determined the tax savings from
this program during the review period and divided that by total
exports. On this basis, we determine the net bounty or grant
from this program to be 0.28 percent ad valorem during the reveiw
period.
II. Programs Preliminarily Determined Not To Be Used
We also examined the following programs and preliminarily
determine that the exporters of extruded rubber thread did not
use them 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.
- Abatement of Income Tax Based on the Ratio of Export Sales
to Total Sales.
- Industrial Building Allowance.
- Double Deduction for Export Promotion Expenses.
III. Program Preliminarily Found to be Terminated
Abatement of Five Percent of the Value of Indigenous
Malaysian Materials Used in Exports
This program was terminated effective January 1, 1993, and
provided no residual benefits to manufacturers and exporters
in Malaysia of extruded rubber thread. See Final Results of
First Review.
Preliminary Results of Review
For the period January 1, 1993, through December 31, 1993,
we preliminarily determine that the net bounty or grant to be
1.00 percent ad valorem.
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct the
U.S. Customs Service to assess countervailing duties at 1.00
percent of the f.o.b. invoice price on shipments of the subject
merchandise exported on or after January 1, 1993, and on or
before December 31, 1993.
The Department also intends to instruct the Customs Service
to collect a cash deposit of estimated countervailing duties
of 1.00 percent for all firms on shipments of this 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. 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 no later than 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, under section 355.38(c),
are due.
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 brief or at a hearing.
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: May 15, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-12500 Filed 5-19-95; 8:45 am]
BILLING CODE 3510-DS-P
The Contents entry for this article reads as follows:
International Trade Administration
NOTICES
Countervailing duties:
Extruded rubber thread from-
Malaysia, 27080