NOTICES DEPARTMENT OF COMMERCE [C-614-501] Preliminary Affirmative Countervailing Duty Determination: Low-Fuming Brazing Copper Rod and Wire From New Zealand Thursday, May 23, 1985 *21325 AGENCY: Import Administration, International Trade Administration, Commerce. ACTION: Notice. SUMMRRY: We preliminarily determine that certain benefits which constitute bounties or grants within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters in New Zealand of low-fuming brazing copper rod and wire. The estimated net bounty or grant is 9.46 percent ad valorem for all manufacturers, producers, or exporters in New Zealand of low-fuming brazing copper rod and wire. We are directing the U.S. Customs Service to suspend liquidation of all entries of low-fuming brazing copper rod and wire from New Zealand that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, and to require a cash deposit or bond on entries of these products in the amount equal to the estimated net bounty or grant. If this investigation proceeds normally, we will make our final determination by July 29, 1985. EFFECTIVE DATE: May 23, 1985. FOR FURTHER INFORMATION CONTACT: Jack Davies, Roy Malmrose, or Mary Martin, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, D.C. 20230; telephone: (202) 377-1784, 377-8320, or 377-3464. SUPPLEMENTARY INFORMATION: Preliminary Determination Based upon our investigation, we preliminarily determine that there is reason to believe or suspect 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 in New Zealand of low-fuming brazing copper rod and wire. For purposes of this investigation, the following programs are found to confer bounties or grants: - Export Performance Taxation Incentive (EPTI) - Export Market Development Taxation Incentive (EMDTI) We preliminarily determine the estimated net bounty or grant to be 9.46 percent ad valorem for all manufacturers, producers, or exporters in New Zealand of low-fuming brazing copper rod and wire. Case History On February 19, 1985, we received a petition in proper form from American Brass, Century Brass, and Cerro Metal Products of Rolling Meadows, IL, Waterbury, CT, and Bellefonte, PA, respectively, filed on behalf of the U.S. industry producing low-fuming brazing copper rod and wire. In compliance with the filing requirements of § 355.26 of our regulations (19 CFR 355.26), the petition alleges that manufacturers, producers, or exporters in New Zealand of low-fuming brazing copper rod and wire, directly or indirectly, receive benefits which constitute bounties or grants within the meaning of section 303 of the Act. On May 10, a letter supporting the petition was filed by J.W. Harris Company of Cincinnati, Ohio, another domestic producer of low-fuming brazing copper rod and wire. We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on March 11, 1985, we initiated the investigation (50 FR 11004). We stated that we expected to issue our preliminary determination by May 15, 1985. At the time of our initiation, New Zealand was a "country under the Agreement" within the meaning of section 710(b) of the Act, and an injury determination was required for this investigation. Therefore, we notified the U.S. International Trade Commission (ITC) of our initiation. Effective April 1, 1985, however, the Office of the United States Trade Representative terminated New Zealand's status as a "country under the Agreement" within the meaning of section 701(b)(1) of the Act. Accordingly, the ITC has terminated its investigation and will not determine whether imports of these products cause or threaten material injury to a U.S. industry. Since New Zealand is no longer 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 303(b) of the Act apply to this investigation. On March 22, 1985, we presented a questionnaire to the New Zealand government in Washington, D.C. concerning the petitioners' allegations. On April 26 and 30, 1985, w received responses to our questionnaire from McKechnie Brothers (N.Z.) Ltd. and the government of New Zealand, respectively. McKechnie Metals Products Ltd., a subsidiary of McKechnie Brothers (N.Z.) Ltd., is the sole manufacturer and exporter in New Zealand of the products under investigation. Standing On March 20, 1985, Aufhauser Brothers Corporation (Aufhauser) requested that we rescind our initiation of this investigation, alleging that the petitioners had not filed "on behalf of" the domestic industry, as required by section 702 of the Act. Section 771(4)(A) of the Act defines the industry as domestic producers of all or a major proportion of domestic production of the like product. The petitioners are manufacturers of bare low-fuming brazing rod and wire, at least one of which also flux-coats low-fuming brazing rod and wire. Aufhauser is a domestic company that purchases domestically produced and imported bare low-fuming brazing rod and wire and coats the rod and wire with flux for final sale. Aufhauser challenged a statement in the petition that the petitioners "account for all domestic production, manufacture, and sales of low-fuming brazing rod and wire," and identified three other domestic companies which, like itself, flux-coat the rod and wire but do not manufacture bare low- fuming brazing rod and wire, and one, J.W. Harris, which both manufactures and flux-coats low-fuming brazing rod and wire. Aufhauser did not indicate whether these other firms oppose the petition. J.W. Harris now supports the petition. Neither the Act nor the regulations require a petitioner to establish affirmatively that it has the majority *21326 support of a particular industry. Thus, the ITA is entitled to rely on petitioners' representations that they have, in fact, filed on behalf of the domestic industry, until it is affirmatively shown that they have not done so. See, "Final Negative Countervailing Duty Determinations: Certain Textile Mill Products and Apparel from Malaysia," 50 FR 9852 (1985), interpreting the requirements of Gilmore Steel Corp. v. United States, 585 F. Supp. 670, 676 (Ct. Int'l Trade 1984). Aufhauser's letter raised questions as to the nature of the industry. Almost all low-fuming brazing rod and wire imported into the U.S. is bare, yet the scope of the investigation covers both bare and flux-coated merchandise. The petition expressly included flux-coated as well as bare low-fuming brazing rod and wire because a potential countervailing duty order covering only bare low-fuming brazing rod and wire could be circumvented by importation of the product after flux-coating. Although not required to do so, the Department sent a questionnaire to Aufhauser on April 2, 1985, in order to elicit further information about the nature of the industry. We received an answer to the questionnaire on April 18. Even as supplemented by its questionnaire response, the information provided by Aufhauser, the only company that has expressed opposition to the petition, has not rebutted the evidence of record that the petition was, in fact, filed on behalf of the U.S. industry. Scope of the Investigation The products covered by this investigation are low-fuming brazing copper rod and wire, principally of copper and zinc alloy ("brass"), of varied dimension in terms of diameter, whether cut-to-length or coiled, whether bare or flux- coated, currently classified in the Tariff Schedules of the United States, Annotated (TSUSA) under items 612.6205, 612.7220, and 653.1500. The chemical composition of the products under investigation is defined by Copper Development Association (CDA) standards 680 and 681. Analysis of Programs Throughout this notice, we refer to certain general principles applied to the facts of the current investigation. These principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina; 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 a response cannot be supported at verfication, and the program is otherwise countervailable, the program will be considered a bounty or grant in the final determination. For purposes of this preliminary determination, the period for which we are measuring bounties or grants (the review period) is the 1984 company fiscal and tax year (August 1, 1983 to July 31, 1984). Based upon our analysis of the petition and the responses submitted by the government of New Zealand and McKechnie Brothers (N.Z.) Ltd. to our questionnaire, we preliminarily determine the following. I. Programs Preliminarily Determined To Confer Bounties or Grants We preliminarily determine that bounties or grants are being provided to manufacturers, producers, exporters in New Zealand of low-fuming brazing copper rod and wire under the following programs. A. Export Performance Taxation Incentive (Section 156A, Income Tax Act 1976) Under the 1979 Amendment of the Income Tax Act 1976, exporters receive a tax credit based on the f.o.b. value of qualifying goods exported. Credits are available as a deduction against income tax payable. It the tax credit exceeds the income tax payable, the remainder is paid to the taxpayer in cash. The rate of the tax credit is dependent upon the government predetermined value- added category into which the product falls. The amount of the tax credit is calculated by multiplying the rate corresponding to the value-added category into which the product falls by the f.o.b. value of export sales. The products covered by this investigation fall into value-added category C for which the corresponding rate is 9.1 percent. According to the company response, benefits under this program will be completely phased out beginning in tax year 1988 (that is, after August 1, 1987). However, we preliminarily determine that McKechnie Metals Products Ltd., a subsidiary of McKechnie Brothers (N.Z). Ltd., received benefits under this program during the review period. Because eligibility for this program is limited to exporters, we preliminarily determine that it provides a bounty or gant within the meaning of the countervailing duty law. To calculate tax benefits, we examine the amount of tax savings received by the company during the review period. The amount of tax savings received by McKechnie Metals Products Ltd. should be based on the tax credit claimed by the company on its 1983 tax return (covering the period August 1, 1982 to July 31, 1983). Therefore, the estimated net bounty or grant should be equal to the amount of the tax credit claimed for brazing copper rod and wire exports by McKechnie on its 1983 tax return divided by the total amount of brazing copper rod and wire exports during the review period. However, because we do not have the company's 1983 tax return, we are using the 1984 tax return (covering the period August 1, 1983 to July 31, 1984) which specifies the tax credit rate for category C goods into which brazing copper rod and wire fall. Based on the 1984 tax return and the specified tax credit rate, we determine that the estimated net bounty or grant is 9.1 percent ad volorem. B. Export Market Development Taxation Incentive (Section 156F, Income Tax Act 1976) Under the 1979 Amendment of the Income Tax Act 1976, export market development expenditures include expenses incurred principally for seeking and developing markets, retaining existing markets, and obtaining market information. These exporter expenditures may qualify for a tax credit of 67.5 percent of the total expenditure. If the exporter takes advantage of section 156F, however, he may not deduct the qualifying expenditures as ordinary business expenses in calculating his assessable income. Because the normal corporate tax rate is 45 percent, the net benefit to the exporter under this program is 22.5 percent of the qualifying expenditure amount. According to the company response, this program will end on March 31, 1986, and the company will no longer receive benefits under the program as of July 31, 1986. However, in its response McKechnie Metals Products Ltd. reported receiving benefits under this program during the review period. Because eligibility for this program is limited to exporters, we preliminarily determine that it is a bounty or grant *21327 within the meaning of the countervailing duty law. The amount of the bounty or grant is the net benefit of the tax credit resulting specifically from U.S. related expenditures for marketing brazing copper rod and wire divided by the amount of brazing copper rod and wire exported to the U.S. Because we do not have the 1983 tax return, which is needed under out tax benefits methodology explained above, we calculate the amount of the bounty or grant by dividing 22.5 percent of the U.S. related qualifying expenditures taken by McKechnie in the 1984 tax year by the amount of 1984 exports of the subject merchandise to the U.S. We find an estimated net bounty or grant amount of 0.36 percent ad valorem. II. Program Preliminarily Determined Not To Confer Bounties or Grants We preliminarily determine that bounties or grants are not being provided to manufacturers, producers, or exporters in New Zealand of low-fuming brazing copper rod and wire under the following program. A. Export Credit Insurance From the Export Guarantee Office (EXGO) Established by the Export Guarantee Act of 1964, EXGO is a government agency which provides export credit insurance for goods and services sold outside of New Zealand. McKechnie Metals Products Ltd. has been a policyholder of EXGO since July 2, 1969, and has obtained export credit insurance for export shipments to the United States throughout the review period. The Export Guarantee Act mandates that EXGO secure revenues sufficient to cover all its expenses. The response of the government indicates that the premiums charged by EXGO have been sufficient to cover operating costs and the payment of claims in five of the last seven years. Because the premiums charged for export credit insurance are not manifestly inadequate to cover the long-term operating costs and losses of the program, we preliminarily determine that the EXGO export credit insurance program does not confer a bounty or grant upon McKechnie Metals Products Ltd. III. Programs Preliminarily Determined Not To Be Used In accordance with our practice of accepting a response to an allegation which denies the receipt of benefits under a program, we preliminarily determine, subject to verification, that manufacturers, producers, or exporters in New Zealand of low-fuming brazing copper rod and wire did not use the following programs which were listed in our notice of initiation. A. Export Programme Suspensory Loan Scheme (EPSLS) Petitioners allege that suspensory loans for up to 40 percent of eligible expenditures are available to established exporters who increase their net foreign exchange earnings through the marketing of specific goods or services in a designated foreign market. If a predetermined sales forecast is accomplished, the suspensory loan is converted into a grant; if the forecast is not met the exporter must repay the loan with interest. B. Export Programme Grant Scheme (EPGS) The EPGS was superseded by the EPSLS as of June, 1982. However, petitioners allege that grants under the EPGS could continue until June, 1985. Grants under the EPGS were given to exporters to encourage marketing research in targeted foreign markets. The grants, amounting to 64 percent of budgeted expenditures, were available for up to three years. C. Industrial Development Investment Allowance (IDPIA) Petitioners allege that an export investment allowance of up to 40 percent of the cost of new manufacturing plants and machinery is available to industries which have a significant export performance but whose products do not qualify for the increased exports taxation incentive. D. Extraordinary Depreciation Allowance Petitioners allege that, to encourage export production, the standard rate for the first year depreciation allowance on new and second-hand plant and machinery used for export production is 25 percent. After the first year, the rate is 10 percent or higher if approved by the Inland Revenue Department. E. Export Suspensory Loans (ESL) Petitioners allege that the New Zealand Development Finance Corporation makes suspensory loans for up to 40 percent of actual expenditures on plants and machinery used in the manufacturing of designated products. The suspensory loans are repayable at commerical rates but can become grants if the borrower meets predetermined export sales targets. F. Regional Development Investment Incentives Petitioners allege that the New Zealand governments offers companies a variety of regional development incentives for regions classified as either priority regions or slow-growth regions. G. Flexible Incentives Under the Investment Unit of the Department of Trade and Industry Petitioners allege various flexible incentives are available to industries through the Investment Unit of the Department of Trade and Industry. Exemption From Import Duties and Sales Taxes Petitioners allege that full or partial waiver of import duties on imports of capital equipment and qualifying raw materials used to manufacture exports can be received if such items are not available domestically. Petitioners also allege sales tax paid on equipment and intermediate goods used to produce goods for export may be refunded. I. Export Production Assistance Scheme Petitioners allege that import licensing concessions are provided to companies which import materials for incorporation in goods to be exported. Such concessions may include additional availability of import licenses on components for incorporation in goods to be exported. J. Export Promotion From the Export-Import Corporation Petitioners allege that the Export-Import Corporation, created by the New Zealand government, assists exporters with marketing overseas, negotiating contracts, arranging for the importation of goods, and generally promoting New Zealand exports. K. Research and Development Assistance Petitioners allege that the New Zealand government provides grants and investment financing for research and development through the Industrial Research and Development Grants Advisory Committee and the Applied Technology Program (ATP) administered by the Development Finance Corporation (DFC). L. Export Credits From the Development Finance Corporation Petitioners allege that the Development Finance Corporation provides credits for exporters below commercial rates. *21328 IV. Program Preliminarily Found Not To Exist According to the government response, industry investment allowances are only available under IDPIA (see Section III. C. above) and the following program does not exist. A. Industry Study Investment Allowance Petitioners allege that when a company participates in an industry study which results in a plan for the industry it is eligible for an investment allowance for a percentage of the costs incurred for projects approved under the industry plan. 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 low-fuming brazing copper rod and wire from New Zealand 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 entry of this merchandise in the amount of the estimated ad valorem rate. The estimated net bounty or grant is 9.46 percent ad valorem for all manufacturers, producers, or exporters in New Zealand of low-fuming brazing copper rod and wire. This suspension will remain in effect until further notice. 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 1:30 p.m. on July 1, 1985, at the U.S. Department of Commerce, room 1851, 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 for a hearing 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 June 25, 1985. Oral presentations will be limited to issues raised in the briefs. In accordance with 19 CFR 355.33(d) and 19 CFR 355.34, written views will be considered if received not less than 30 days before the final determination or, if a hearing is held, within 10 days after the hearing transcript is available. 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. May 15, 1985. [FR Doc. 85-12372 Filed 5-22-85; 8:45 am] BILLING CODE 3510-DS-M