[C-201-001]
Leather Wearing Apparel From Mexico; Preliminary Results of Countervailing Duty Administrative Review
Wednesday, August 19, 1987
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AGENCY: International Trade Administration, Import Administration, Commerce.
ACTION: Notice of preliminary results of Countervailing Duty Administrative Review.
SUMMARY: The Department of Commerce has conducted an administrative review of the countervailing duty order on leather wearing apparel from Mexico. We preliminarily determine the total bounty or grant to be zero for 19 firms and 3.35 percent ad valorem for all other firms during the period July 1, 1984 through December 31, 1984. We preliminary determine the total bounty or grant to be zero for 20 firms and 2.96 percent ad valorem for all other firms during the period January 1, 1985 through December 31, 1985. We invite interested parties to comment on these preliminary results.
EFFECTIVE DATE: August 19, 1987.
FOR FURTHER INFORMATION CONTACT:Stephen Nyschot or Paul McGarr, Office of Compliance, International Trade Administration, U.S. Department of Commerce, Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On August 8, 1986, the Department of Commerce ("the Department") published in the Federal Register (51 FR 28611) the final results of its last administrative review of the countervailing duty order on leather wearing apparel from Mexico (46 FR 21357, April 10, 1981). On April 30, 1986, a domestic interested party, the Amalgamated Clothing and Textile Workers Union, AFL-CIO, requested in accordance with 19 CFR 355.10 an administrative review of the order. We published the initiation of the administrative review on May 20, 1986 (51 FR 18475). The Department has now conducted this administrative review in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Scope of Review
The United States has developed a system of tariff classification based on the international harmonized system of Customs nomenclature. Congress is considering legislation to convert the United States to this Harmonized System ("HS") by January 1, 1988. In view of this, we will be providing both the approppriate Tariff Schedules of the United States Annotated ("TSUSA") item numbers and the appropriate HS item numbers with our product descriptions on a test basis, pending Congressional approval. As with the TSUSA, the HS item numbers are provided for convenience and Customs purposes. The written description remains dispositive.
We are requesting petitioners to include the appropriate HS item number(s) as well as the TSUSA item number(s) in all new petitions filed with the Department. A reference copy of the proposed Harmonized System schedule is available for consultation at the Central Records Unit, Room B-099, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230. Additionally, all Customs offices have reference copies, and petitioners may contact the Import Specialist at their local Customs office to consult the schedule.
Imports covered by this review are shipments of Mexican leather wearing apparel, currently classifiable under TSUSA item numbers 791.7620, 791.7640, and 791.7660. These products include leather coats and jackets for men, boys, women, girls and infants, and other leather apparel products including leather vests, pants and shorts. Also included are outer leather shells and parts and pieces of leather wearing apparel. These products are currently classifiable under HS item number 4203.10.40--0. We invite comments from all interested parties concerning this HS number. The review covers the periods July 1, 1984 through December 31, 1984 ("the 1984 period"), and January 1, 1985 through December 31, 1985 ("the 1985 period") and 12 programs.
Analysis of Programs
The Fund for the Promotion of Exports of Mexican Manufactured Products ("FOMEX") is a trust of the Mexican Treasury Department, with the National Bank of Foreign Trade acting as trustee for the program. The National Bank of Foreign Trade, throuhg financial institutions, makes FOMEX loans available at preferential rates to Mexican exporters and U.S. importers for two purposes: Pre-export financing and export financing. We consider both pre-export and export FOMEX loans to confer export bounties or grants since these loans are given only on merchandise destined for export. We found that the annual interest rate financial institutions charged leather wearing apparel manufacturers for peso-denominated FOMEX pe-export financing outstanding during the period of review ranged from 17.50 to 39.60 percent. The annual interest rate for dollar-denominated FOMEX export financing was 8.50 percent to the one leather wearing apparel manufacturer that received such a loan during the period of review.
We consider the benefit from loans to occur when the interest is paid. Interest on FOMEX pre-export loans is paid at
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maturity, and interest on FOMEX export loans is pre-paid.
We have sufficient information to measure effective interest rates for the peso-denominated loans. (See final results of administrative review on fabricated automotive glass from Mexico (51 FR 44652, December 11, 1986).) To determine the effective interest rate benchmark for peso loans obtained in 1984, we calculated an average annual effective rate from data published by the Banco de Mexico in its monthly publication, Indicadores Economicos (I.E.). In 1985, the Banco de Mexico stopped publishing data on nominal and effective interest rates. Therefore, we calculated the average spread between the Costo Porcentual Promedio (CPP) rates, i.e., the average cost of short-term funds to banks, and the I.E. effective rates for the period 1982 through 1984, the only period for which we have I.E. rates. The effective interest rate benchmark for 1985 is the sum of this average spread and the average CPP rate for 1985. In this way, we calculated a benchmark of 73.78 percent for pre-export peso loans obtained in 1984, and 86.31 percent for per-export peso loans obtained in 1985.
We had no available data to measure effective interest rates on dollar- denominated loans for 1984. Therefore, for our 1984 dollar benchmark (used for the one FOMEX export loan), we compared a nominal interest rate benchmark to the nominal preferential interest rate. We used as our benchmark a rate of 13.97 percent, which was published in the Federal Reserve Bulletin.
Two of the 22 known exporters of this merchandise used this program during the period of review. For the FOMEX export loan, we found that the exporter was able to tie the loan to exports to the United States. Therefore, we allocated this FOMEX benefit over U.S. shipment, excluding those firms with zero benefits. FOMEX pre-export loans were not tied to leather wearing apparel exports to specific countries, so for each firm that used these loans we measured the benefit from all FOMEX pre-export loans for leather wearing apparel and allocated benefits over exports of leather wearing apparel to all countries. We then weight-averaged the resulting benefits by each firm's proportion of total exports to the United States, excluding those firms with zero benefits. We preliminarily determine the benefit from FOMEX to be 3.23 percent ad valorem for the 1984 period, and 1.92 percent ad valorem for the 1985 period.
In February 1987, the Banco de Mexico changed the interest rates on FOMEX peso loans to 95.00 percent and on FOMEX dollar loans to 6.40 percent. To calculate the FOMEX benefit for cash deposit purposes, we followed the same methodology used in calculating assessment rates for the 1985 period. Leather wearing apparel manufacturers only received benefits from peso loans in 1985, and we used as our benchmark the sum of the most recent CPP rate, i.e., February 1987, and the average 1982-1984 spread between the CPP and the I.E. effective rates. On this basis, we preliminarily find, for purposes of cash deposits of estimated countervailing duties, a FOMEX benefit of 0.70 percent ad valorem.
The Guarantee and Development Fund for Medium and Small Industries (FOGAIN) is a program that provides long-term loans to all small and medium-size firms in Mexico. The interest rates available under the program vary depending on whether a small or medium-size business has been granted priority status, and whether a business is located in a zone targeted for industrial growth. Although FOGAIN loans are available to all small and medium-size firms in Mexico, regardless of the type of industry or location, some firms receive more beneficial rates than others. Therefore, to the extent that this program provides financing at rates below the least beneficial rate available under FOGAIN, we consider it be countervailable.
One firm had FOGAIN loans on which interest payments were due during the period of review. Because the interest rates are variable, we treated each loan as a series of short-term loans. To determine the benefit, we used as our benchmark the least beneficial interest rate in effect during the period of review and compared it to the interest rate for each FOGAIN loan payment. We allocated the benefit from each loan over this firm's total sales to all markets. We then weight-averaged the resulting benefit by the firm's proportion of exports to the United States, excluding exports from firms with zero benefits. We preliminarily determine the benefit from FOGAIN loans to be 0.12 percent ad valorem for the 1984 period and 1.04 percent ad valorem for the 1985 period.
Another firm that had zero benefits during the review period was found to have received a FOGAIN loan in early 1986. As a result, a cash deposit of estimated countervailing duties will be required on exports from that firm.
(3) Other Programs
We also examined the following programs and preliminarily find that exporters of leather wearing apparel did not use them during the review period:
(A) Certificates of Fiscal Promotion (CEPROFI);
(B) Fund for Industrial Development (FONEI);
(E) Import duty reductions and exemptions;
(G) NDP preferential discounts;
(H) Delay of payments on loans;
(I) Delay of payments to PEMEX of fuel charges; and
(J) Certificado de Devolucion de Impuesto (CEDI).
Firms Not Receiving Benefits
We preliminarily determine that the following 19 firms received zero benefits during the 1984 and 1985 periods:
(1) Antonio Huratado
(2) Confecciones de Piel Reno, S.A.
(3) Creaciones Italianas de Mexico, S.A.
(4) Elegance de Baja California, S,A.
(5) Fernando Nila
(6) Fidel Ruiz
(7) Hector Garcia
(8) Jesus Hernandez
(9) Jesus Jasso
(10) Jesus Rivera
(11) Jose Mora
(12) Jose Salcedo
(13) Jose Sotelo
(14) Juan Manuel Hernandez
(15) Karen Internacional, S.A. de C.V.
(16) Manaufacturas Industriales de Nogales, S.A.
(17) Raymundo Diaz
(18) Rocio Gallardo
(19) Rosa Ramos
In addition, the rate for Manufacturera Baja de Articulos de Piel was zero during the 1985 period.
Preliminary Results of Review
As a result of our review, we preliminarily determine the total bounty or grant during the 1984 period to be zero for 19 firms and 3.35 percent ad valorem for all other firms. We preliminarily determine the total bounty or grant during the 1985 period to be zero for the same 19 firms as well as Manufacturera Baja de Articulos de Piel, and 2.96 percent ad valorem for all other firms.
The Department intends to instruct the Customs Service to liquidate, without regard to countervailing duties, shipments of this merchandise from the 19 firms listed above and to assess countervailing duties of 3.35 percent of the f.o.b. invoice price on shipments from all other firms exported on or after *31061 July 1, 1984 and on or before December 31, 1984, and to liquidate, without regard to countervailing duties, shipments of this merchandise from Manufacturera Baja de Articulos de Piel and the 19 firms and to assess countervailing duties of 2.96 percent of the f.o.b. invoice price on shipments from all other firms exported on or after January 1, 1985 and on or before December 31, 1985.
The Department intends to instruct the Customs Service to waive cash deposits of estimated countervailing duties, as provided by section 751(a)(1) of the Tariff Act, on shipments of this merchandise from Manufacturera Baja de Articulos de Piel and 18 of the 19 firms listed above (with the exception of Creaciones Italianas de Mexico, S.A.), and, due to the change in the FOMEX interest rates and a FOGAIN loan to Creaciones Italianas de Mexico, S.A., to collect a cash deposit of estimated countervailing duties of 1.74 percent of the f.o.b. invoice price on shipments from Creaciones Italianas de Mexico, S.A. and all other firms entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this review. This deposit requirement and waiver shall remain in effect until publication of the final results of the next administrative review.
Interested parties may submit written comments on these preliminary results within 30 days of the date of publication of this notice and may request disclosure and/or a hearing within 10 days of the date of publication. Any hearing, if requested, will be held 30 days after the date of publication or the first workday following. Any request for an administrative protective order must be made no later than five days after the date of publication. The Department will publish the final results of this administrative review including the results of its analysis of issues raised in any such written comments or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.10.
Gilbert B. Kaplan,
Deputy Assistant Secretary, Import Administration.
Date: August 12, 1987.