NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-565-001]
Canned Tuna From the Philippines; Final Results of Administrative Review of
Countervailing Duty Order
Thursday, July 25, 1985
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AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of Final results of Administrative Review of Countervailing Duty
Order.
SUMMARY: On March 8, 1985, the Department of Commerce published the preliminary
results of its 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.
We gave interested parties an opportunity to comment on the preliminary results. After
considering all of the comments received, we determine the total bounty or grant during
the period of review to be 0.23 percent ad valorem, a rate the Department considers to be
de minimis.
EFFECTIVE DATE: July 25, 1985.
FOR FURTHER INFORMATION CONTACT:Peggy Clarke or Christopher Beach, Office of
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, D.C. 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On March 8, 1985, the Department of Commerce ("the Department") published in the
Federal Register (50 FR 9474) the preliminary results of its administrative review of the
countervailing duty order on canned tuna from the Philippines (48 FR 50134,
October 31, 1983). The Department has
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now completed that administrative
review, in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Scope of Review
Imports covered by the review are shipments of Philippine tuna packed and preserved in
any manner, not in oil, in airtight containers. Such merchandise is currenly classifiable
under items 112.3020, 112.3040, and 112.3400 of the Tariff Schedules of the United
States Annotated.
The review covers the period August 1, 1983, through December 31, 1983, and 22
pregrams: (1) An exemption from import taxes (Article 48(f) of the Ornibus Investments
Code); (2) an income tax deduction for labor and raw materials (Ariticle 48(b) of the
Code); (3) 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) tax credits for net local content; (14) tax credits for net local
value; (15) preferential loan gruarantees; (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) preferenctial access
to foreign exchange; and (22) World Bank import funding.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the preliminary results. We
received received written comments from the Tuna Canners Association of the
Philippines, the Government of the Republic of the Phlippines, and the Association of
Food Industries Tuna Group ("the respondents"), and from Starkist, Inc., a domestic
producer.
Comment 1: Starkist argues that the Department's chosen benchmark for comparing
export packing credits to the cost of alternative non-subsidized financing is incorrect
because: (1) Apparently without reason, the Department used a short-term interest rate
for lower-cost secured loans; (2) the benchmark rate appears inappropriately to include
subsidized or preferential loans; and (3) the Department's simple average of monthly rates
does not capture the true differential between the preferential and commercial loans,
because the benchmark rates are not weighted to reflect the disproportionate levels of
export packing credits taken in various months.
Department's Position: The Department's practice in establishing a benchmark for
short-term preferential loans is to use a national average of interest rates charged by
banks to borrowers of average creditworthiness for comparible financing. Because export
packing credits are based on exporters' presentation of letters of credit, we compare them
to other short-term secured loans.
In establishing a benchmark, we looked at several alternatives: The weighted- average of
short-term secured loans as reported in the Philippine Central Bank's annual report; an
average of individual banks' prime rates published in Philippine newspapers; and the
prime rate from Morgan Guaranty's World Financial Markets. We rejected the prime rates
because they were not applicable to borrowers of average creditworthiness. The Central
Bank rate is an average from several Philippine banks weighted by the volume of their
individual lendings in each month. Although, we cannot know with certainty that the
banks reported accurate figures to the Central Bank, nor that the reported rates did not
include subsidized loans, our practice is to use a national average of all comparable
commercial financing, preferably from a published source. Given the existing
information, we believe that the rates published by the Central Bank are the most reliable
estimates available of the cost of comparable commercial borrowing.
Finally, we do not agree that we should weight our annual commercial average by the
volume of preferential borrowing in each month. Doing so would make our average
benchmark a hypothetical industry specific, rather than national, average. Further, we
did not find any indication that the exporters took a disproportionate share of the export
packing credits in any particular months of the year.
Comment 2: Starkist argues that the Department's methodology understates the export
packing credits' ad valorem benefit by using as the denominator "five- twelfths of the
exports for the year," instead of the lower actual exports during the period of review.
Department's Position: We disagree. We do not have monthly export figures for the
companies. The available Census Bureau import statistics (from the IM 146s) are not
comparable because they are based on the date of entry into the United States rather than
on the date of export from the Philippines. There may be significant lags between the
two dates. It is therefore reasonable to use our calculated average. Further, the
Department found nothing to indicate that more or less tuna was shipped during the
review period than during the rest of the year.
Comment 3: Starkist argues that the Department has allowed the respondents to skew the
results in their favor by converting their sales in dollars to pesos using an inappropriate
average annual official exchange rate. Starkist explains that the black market rate was
higher than the official exchange rate in 1983, and that to use the average annual official
exchange rate favors the respondents.
Department's Position: The Department used either the exchange rate at which the
companies recorded their sales or, if the companies recorded their exports in dollars, it
used an official average exchange rate for the year. To the extent that we have used an
average rate and the petitioner criticizes that practice, it is true that exchange rates did
fluctuate over the year. However, all programs were allocated over the full year (or a
portion of the year). Therefore, the Department properly used an average exchange rate.
In general, the Department prefers to use, as we did in this case, an exchange rate that
reflects actual commercial practice in the country under examination. Moreover, using
the official rate for calculating the average rate does not favor the respondents. The black
market rate was higher (i.e., more pesos to the dollar). Thus, if we used this to convert the
sales figures to pesos those peso sales would be larger. Since these sales figures are our
denominators when calculating the ad valorem benefit, a larger peso figure would lower
the ad valorem benefit, not increase it as Starkist believes.
Comment 4: Starkist argues that the Department inadaquately examined the
priority-access foreign exchange program instituted in 1983 by the Philippine
government. The Department should have gone beyond merely aksing whether or not the
program was used in the review period, and determined that the program provided a
countervailable benefit in a later period. The Department should have included the
program in establishing a deposit rate in this review for future entries.
Department's Position: The Department did examine the foreign
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exchange
program and found that canned tuna exporters did not use the program during the review
period. While the program came into existence in 1983, it was not in effect until 1984.
Further, Circular 1030, effective October 15, 1984, repealed the program. Since the
program was not used during the review period and no longer exists, there is no reason to
consider it for either assessment or cash deposit purposes in this review. We will consider
the program in any review of 1984, if one is requested.
Comment 5: Starkist argues that because the Government of the Philippines no longer
collects an export tax of 2 percent ad valorem, tuna exporters receive a de facto subsidy
which the Department should countervail.
Department's Position: The Philippine government's asserted purpose for this export tax,
specifically for canned tuna, was to offset any potential countervailable subsidy received
by exporters. However, we did not accept the tax as an offset to our calculated net
subsidy, and therefore are not concerned with its non-collection.
Comment 6: Starkist argues that the Department's review of only a five month period is
inappropriate and should be expanded to cover a full year of entries. The five months
covered by the review took place during the height of a financial crisis in the
Philippines. The atypical nature of the period would lead to the establishment of an
inappropriate duty deposit rate.
Department's Position: Neither the Congress, in the Tariff Act, nor the Department, in the
Commerce Regulations, has stipulated the length of a review period. Generally, the
Department attempts to review a 12 month period because company books and
government statistics are maintained on that basis. However, because the first review
period begins with a particular event (suspension of liquidation) the Department may
review less that 12 months to ensure that the time period established for that review and
future reviews will coincide with respondents' books and records.
Comment 7: The respondents argue that the Department erred is using, as a benchmark
for the export packing credits, the weighted/average interest rate for secured loans of one
year or less published by the Philippine Central Bank (see also Comment 1). The rate is
based on data from only eight of the country's 34 banks. The loan portfolios of those eight
may not be representative of all 34. The reported data may not be reliable even for those
eight. Further, the published rate is an average for all types of loans with maturities of less
than one year to all borrowers. Such an average neither reflects that fact that export
packing credits have an initial maturity of 90 days, nor that banks establish commercial
lending rates based on their experience with particular borrowers. In the absence of a
representative national average rate, the Department must use the average interest rate
on all short-term loans, other that export packing credts, for all tuna companies verified
during the review period. The Department has already verified all necessary information.
Department's Position: We disagree. It is the Department's policy to use a national average
interest rate whenever possible for short-term loans. In the original investigation, the
Department used an industry-specific rate because a national average interest rate was
not available. The benchmark interest rate now selected by the Department is based on
the most reliable information available. Further, we note that the rate published in the
Central Bank's Annual Report is consistent with the other available published interest
rates. Since there is no consistency in the terms of the export packing credits, the
Department believes that the weighted-average interest rate for all short-term secured
loans is the most comparable benchmark available.
Comment 8: Respondents argue that the Department erroneously included Purefoods in
its calculation of the benefit from the exemption from import taxes (Article 48(f) of the
Code). As the Department verified, the benefit Purefoods received under this program
was for meat processing, not tuna canning. Therefore, the Department should adjust its
calculations for this program accordingly.
Department Position: We agree and have corrected our calculations. The Department now
finds the benefit from this program to be 0.02 percent ad valorem.
Final Results of Review
After considering all of the comments received, we determine the total bounty or grant to
be 0.23 percent ad valorem for the period of review. The Department considers any rate
less than 0.50 percent ad valorem to be de minimis.
The Department will 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 exported on or before December 31, 1983.
The Department will instruct the Customs Service to waive cash 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 this notice. This deposit waiver shall remain in effect
until publication of the final results of the next administrative review.
This administrative review and notice are in accordance with section 751(a)(1) of the
Traffic Act (19 U.S.C. 1675(a)(1)) and § 355.41 of the Commerce Regulations (19 CFR
355.41).
Dated: July 19, 1985
C. Christopher Parlin,
Acting Deputy Assistant Secretary, Import Administration.
[FR Doc. 85-17655 Filed 7-24-85; 8:45 am]--
BILLING CODE 3510-DS-M