NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-565-001]
Canned Tuna Form the Philippines; Preliminary Results of Administrative Review
of Countervailing Duty Order
Friday, March 8, 1985
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AGENCY: International Trade Administration, Import Administration,
Commerce.
ACTION: Notice of Preliminary Results of Administrative Review of Countervailing
Duty Order.
SUMMARY:
The Department of Commerce has conducted an administrative review of the
countervailing duty order on canned tuna from the Philippines. The review covers
the period August 1, 1983, through December 31, 1983, and 22 programs.
As a result of the review, the Department has preliminarily determined the total bounty
or grant for the period to be 0.25 percent ad valorem. Interested parties are invited to
comment on these preliminary results.
EFFECTIVE DATE: March 8, 1985.
FOR FURTHER INFORMATION CONTACT: Peggy Clarke or Richard Moreland, Office of
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, D.C. 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On October 31, 1983, the Department of Commerce ("the Department") published in the
Federal Register (48 FR 50134) a countervailing duty order on canned tuna from the
Philippines and announced its intent to conduct an administrative review of the order.
As required by section 751(a)(1) of the Tariff Act of 1930 ("the Tariff Act"), the
Department has now conducted that administrative review.
Scope of Review
Imports coverd by the review are shipments of Philippine tuna packed and preserved in
any manner, not in oil, in airtight containers. Such merchandise is currently classifiable
under items 112.3020, 112.3040, and 112.3400 of the Tariff Schedules of the United State
Annotated.
The review covers the period August 1, 1983, through December 31, 1983, and 22
programs: (1) An exemption from import taxes (Article 48 (f) of the Omnibus Investment
Code); (2) an income tax deduction for labor and raw materials (Article 48(b) of the
Code); (3) a tax credit for indirect taxes (Article 48(a) of the Code); (4) export packing
credits; (5) an income tax deduction for overseas offices (Article 49(f)); (6) an income tax
deduction for new brand names (Articles 48(e) and 49(g)); (7) an income tax deduction
for export traders (Article 49(d)); (8) an income tax deduction for financial assistance
(Article 49(e)); (9) government bank loans (Article 51); (10) private bank loans (Article
52); (11) equity investment by insurance companies (Article 52); (12) employee equity
investment (Article 53); (13) a tax credit for net local content; (14) a tax credit for net
local value; (15) preferential loan guarantees; (16) government equity investment; (17)
foreign equity investment; (18) various financial services by the Export Credit Insurance
and Guarantee Corporation; (19) various financial and marketing assistance by the
Institute for Export Development; (20) an offsetting export tax; (21) preferential access
to foreign exchange; and (22) World Bank import funding.
Analysis of Programs
(1) Exemption From Import Taxes (Article 48(f))
In 1982, the Philippine government combined most of its existing incentive programs
into the Omnibus Investments Code ("the Code"). To be eligible for benefits under the
Code, a firm must register with the Board of Investments ("the Board"), which administers
the Code. Seven of the eight tuna companies reviewed are registered with the Board.
Article 48(f) of the Code allows only exporters to receive 100 percent exemptions from
import taxes when importing capital equipment and spare parts for seven years following
the firm's registration with the Board. Three of the firms took the exemptions during the
review period.
All registered firms are also eligible for 50 percent exemptions of the same taxes under
Article 45(d) of the Code. The Department determined during its investigation on this
merchandise that Article 45 was generally available and therefore not a countervailable
subsidy. To find the benefit under Article 48(f), we calculated the difference between
exemptions received and exemptions that could be received under Article 45(d) and then
divided by the firm's overall exports for 1983. We then weight-averaged the benefits by
each firm's share to total exports to the U.S. and preliminarily find the benefit from this
program to be 0.04 percent ad valorem.
(2) Income Tax Deduction for labor and Raw Materials (Article 48 (b))
Article 48(b) of the Code allows a Philippine-owned and registered exporter an income
tax deduction for direct labor and local raw materials costs for five years following
registration. One firm used this program during the review period. To calculate the
benefit, we multiplied the amount of the deduction from taxable income by the corporate
tax rate and divided the result by the firm's total exports for 1983. We then
weight-averaged the benefit by the firm's share of total exports to the U.S., and
preliminarily determine the benefit from this program to be 0.05 percent and valorem.
(3) Tax Credit for Indirect Taxes (Article 48(a))
Article 48(a) of the Code allows registered export producers to receive tax credits equal
to the sales, specific taxes, and import taxes paid on the supplies, raw material and
semi-manufactured products used in production.
The Tariff Act and the Commerce Regulations allow the rebate of only the following: (1)
Indirect taxes borne by inputs that are physically incorporated in the exported product
(see Annex 1.1 of part 355 of the Commerce Regulations) and (2) indirect taxes levied at
the final stage (see Annex 1.2 of part 355 of the Commerce Regulations).
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We found that two firms did use these tax credits during the review period.
However, during verification, we found that their credits were based on the import duties
paid on imported packing materials, i.e., physically incorporated goods. We preliminarily
determine that the tax credits used by the two firms meet the first criterion, and were
equal to the import duties paid. Therefore they provide no countervailable benefit duirng
the review period.
(4) Export Packing Credits
The Philippine Central Bank offers a rediscounting program through the commercial
banks. Upon receipt of a letter of credit from a foreign purchaser, an exporter may
negotiate an "export packing credit," a pre-export loan, with a commercial bank based on
the letter of credit. The commercial bank may then rediscount the packing credit with the
Central Bank. Until November 18, 1983, Central Bank Circular 784 set the maximum
interest rate the banks could charge under the program to "non-traditional" exporters
(canned tuna exporters are included in this category) at 12 percent. Under the same
circular, the Central Bank charged the commercial banks 3 percent for the rediscounting.
On November 18, 1983, Circular 981 changed the maximum rate of 12 percent to the
90-day Manila Reference Rate minus two points, and for the rediscounting to 7 percent. If
the commercial banks do not rediscount the loans, they may charge a commercial rate of
interest on the loans.
We based our calculations on the actual interest paid rather than the maximum rates. For
our benchmark interest rate, we took the weighted average interest rates for secured
loans of one year or less in duration as found in the annual report of the Central Bank. To
find the benefit for each loan, we took the difference between the actual interest paid and
the interest the firm would have paid using our benchmark interest rate. We totaled the
difference for each firm's loans and divided by that firm's exports during the review
period. We then weight-averaged the benefit by the firm's share of total exports to the U.S.
and preliminarily find the total benefit under this program to be 0.16 percent ad valorem.
(5) Other Programs
We also examined the following programs and preliminarily find that exporters of canned
tuna did not use them during the review period.
A. Income tax deduction for overseas offices (Article 49(f) of the Ominbus Investments
Code);
B. Income tax deduction for new brands names (Articles 48(e) & 49 (g));
C. Income tax deduction for export traders (Article 49(d));
D. Income tax deduction for financial assistance (Article 49(e));
E. Government bank loans (Article 51);
F. Private Bank loans (Article 52);
G. Equity investment by insurance companies (Article 52);
H. Employee equity investment (Article 53);
I. Tax credits for net local content;
J. Tax credits for net local value;
K. Preferential loan guarantees;
L. Government equity investment;
M. Foreign equity investment;
N. Various financial services by the Export Credit Insurance and Guarantee Corp.;
O. Various financial and marketing assistance by the Institute for Export Development;
P. Offsetting export tax;
Q. Preferential access to foreign exchange; and
R. World Bank import funding
Preliminary Results of Review
As a result of our review, we preliminarily determine the total bounty or grant to be 0.25
percent ad valorem for the period of review. The Department considers any rate less than
0.50 percent ad valorem to be de minimis.
Section 707 of the Tariff Act provides that the difference between the deposit of
estimated countervailing duties and the final calculation of the duty under a
countervailing duty order shall be disregarded to the extent that the estimated duty is
less than the final duty, and refunded to the extent that the estimated duty is higher than
the final duty, for merchandise entered, or withdrawn from warehouse, for consumption
before (for non-signatories) the date of the countervailing duty order. The
Department therefore intends to instruct the Customs Service not to assess
countervailing duties for shipments of the merchandise entered, or withdrawn from
warehouse, for consumption on or after August 16, 1983, the date of the preliminary
affirmative determination (48 FR 37051), and before October 31, 1983 (the date of the
order), or entered, or withdrawn from warehouse, for consumption on or after October
31, 1983, and exported on or before December 31, 1983.
The Department intends to instruct the Customs Service to waive deposits of estimated
countervailing duties, as provided by section 751(a)(1) of the Tariff Act, on all
shipments of the merchandise entered, or withdrawn from warehouse, for consumption
on or after the date of publication of the final results of this administrative review. This
deposit 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 45 days
after the date of publication or the first workday thereafter. 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 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 section 355.41 of the Commerce Regulations (19 CFR
355.41).
Dated: March 4, 1985.
Alan F. Holmer,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 85-5609 Filed 3-7-85; 8:45 am]
BILLING CODE 3510-DS-M