NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-559-804]
Preliminary Affirmative Countervailing Duty Determination:
Certain Computer
Aided Software Engineering Products from Singapore
Wednesday, January 17, 1990
AGENCY: Import Administration, International Trade
Administration, Department of Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that benefits which
constitute bounties or grants within the meaning of the
countervailing duty law are being provided to manufacturers,
producers, or exporters in Singapore of certain computer aided
software engineering products (CASE software) as described in the
"Scope of Investigation" section of this notice. We are directing the
U.S. Customs Service (Customs) to suspend liquidation of all entries of
CASE software from Singapore that are entered, or withdrawn from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 equal to the estimated net bounties or grants. For further
information, see the "Suspension of Liquidation" section of this notice.
If this investigation proceeds normally, we will make our final
determination on or before March 26, 1990.
EFFECTIVE DATE: January 17, 1990.
FOR FURTHER INFORMATION CONTACT:Ross L. Cotjanle or Roy A.
Malmrose, Office of Countervailing Investigations, Import
Administration, International Trade Administration, U.S.
Department of Commerce, Room 3099, 14th & Constitution Avenue,
NW., Washington, DC 20230; telephone: (202) 377-3534 or
377-5414.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based on our investigation, we preliminarily determine that there is
reason to believe or suspect that 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 Singapore of CASE software. We
preliminarily determine that the following program confers bounties
or grants: Information Technology Institute's (ITI) Development of
CASE Software.
Case History
Since publication of the notice of initiation in the Federal Register (54
FR 37013, September 6, 1989), the following events have occurred.
On September 14, 1989, we presented a questionnaire to the
Government of Singapore in Washington, DC concerning petitioner's
allegations. On October 11, 1989, we received responses to Section 2
of the questionnaire from the Government of Singapore, and
Computer Systems Advisors Research Pte., Ltd. (CSAR). On
November 13, 1989, we received responses to Sections 3 and 4 of our
questionnaire. On November 7, 1989, November 22, 1989, and
December 12, 1989, we issued supplemental questionnaires to the
Government of Singapore and CSAR. We received responses to these
supplemental questionnaires on December 4, 1989, December 18,
1989, December 20, 1989, and December 21, 1989. Because the
responses received by the Department were deficient in certain
critical areas, the Department issued another questionnaire on
December 27, 1989. A response to this questionnaire was recieved on
Janaury 3, 1990.
On October 4, 1989, the petitioner filed a request that the preliminary
determination be postponed for 65 days. Pursuant to section
703(c)(1)(A) of the Act, we postponed the preliminary
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determination until no later than January 8, 1990. See Postponement
of Preliminary Determination: Certain Computer Aided Software
Engineering Products from Singapore, (54 FR 42009, October 13,
1989).
On October 20, 1989, the Government of Singapore submitted a letter
requesting that the Department rescind its initiation of August 29,
1989. We have addressed the Government of Singapore's request in
this notice. The Government of Singapore submitted a second letter
on January 3, 1990, again requesting recission and raising other
issues. We have not had sufficient time to analyze this submission for
purposes of this preliminary determination.
Scope of Investigation
The United States has developed a system of tariff classification based
on the international harmonized system of Customs nomenclature.
On January 1, 1989, the U.S. tariff schedules were fully converted to
the Harmonized Tariff Schedules (HTS), as provided for in section
1201 et seq. of the Omnibus Trade and Competitiveness Act of 1988.
All merchandise entered or withdrawn from warehouse for
consumption on or after this date will be classified solely according to
the appropriate HTS item number(s). The HTS item number(s) are
provided for convenience and customs purposes. The written
description remains dispositive as to the scope of the product
description remains dispositive as to the scope of the product
coverage.
The products covered by this investigation are "front-end" Computer
Aided Software Engineering (CASE) tools, including all updated
versions, which have been imported from Singapore, whether
labelled or unlabelled, on a carrier medium. These software products
are personal computer-based tools which run in the Disk Operating
System (DOS) environment and are designed to automate the various
stages of the software development tasks of defining user
requirements, conducting systems analysis activities, and creating a
detailed design specification for the software system under
development. There are a number of standardized engineering
techniques which front-end CASE tools are designed to automate.
These include techniques of "structured analysis," "structured design,"
and "data modeling," among others. All front-end CASE tools are
designed to produce logically validated and documented systems
specifications, which in turn are used as detailed "blueprints" for the
actual writing of application codes.
These front-end stages of the software development life cycle are
contrasted with the "back-end" lifecycle stages of coding, testing, and
maintenance. Back-end CASE tools are not covered by this
investigation.
Although front-end CASE tools generally are imported on recorded
floppy disks, they may also be imported on other carrier media. The
subject merchandise is currently classifiable under HTS item numbers
8524.21.30.80, 8524.22.20.00, 8524.23.20.00, and 8524.90.40.80.
Merchandise which is imported duty-free is not included in the scope
of this investigation.
Treatment of CASE Software on a Carrier Medium As Merchandise
One of the fundamental issues before the Department has been
whether software on a carrier medium can be treated as merchandise
subject to the countervailing duty law. Congress provided for the
imposition of duties by Customs on software on a carrier medium,
and determined that the amount of duty to be paid will be determined
by reference to the recording surface area of the carrier medium. See
HTS item numbers 8524.21.30.80, 8524.22.20.00, 8524.23.20.00,
and 8524.90.40.80. Implicit in Congress' treatment and Customs'
practice is the assumption that software on a carrier medium is an
article or merchandise. See U.S. Valuation of Imported Carrier Media
Bearing Data or Instructions for Use in Data Processing Equipment,
T.D. 85-124, 50 FR 30558 (July 26, 1985) (T.D. 85-124).
Furthermore, general headnote 1 to the tariff schedules provides that
"[a]ll goods provided for in this schedule and imported into the
customs territory of the United States from outside thereof are
subject to duty * * * " unless otherwise exempt. Because the HTS
numbers listed above provide for the imposition of duties on software
on a carrier medium, and because it is not otherwise exempt from
Customs' jurisdiction, the Department has determined that CASE
software on a carrier medium is merchandise subject to Customs'
jurisdiction. Thus, based on its treatment under the HTS, we believe it
is reasonable to conclude that CASE software on a carrier medium
may be treated as merchandise for purposes of section 303 of the Act.
The Department also continues to consider the six characteristics of
CASE software on a carrier medium as stated in the notice of initiation
to be essential to its determination that CASE software can be
considered merchandise under the countervailing duty law.
However, given the submissions which have been made in this
investigation by the interested parties regarding the treatment of
software on a carrier medium as merchandise, the Department
believes that it is appropriate to further elaborate upon its analysis
presented in its notice of initiation.
As stated earlier in this notice, the subject of this countervailing
duty investigation is CASE software on dutiable carrier media (e.g.,
diskette, magnetic tape). It is undeniable that software on a carrier
medium exhibits characteristics of both concrete property and
abstract knowledge. These dichotomous aspects of software have
created uncertainty about whether software is merchandise.
Software, or a computer program, begins as an intangible idea for
performing a specific function on a computer. This idea must be
developed into a set of instructions which then must assume a
physical form. The representation of these instructions on a physical
medium enables the computer to perform the various steps to carry
out particular tasks. The metamorphosis of the intangible idea into a
tangible item is essential if the computer is to perform the desired
task. Therefore, these instructions are intangible when in the mind of
the programmer; the embodiment of those instructions, however,
transforms the ideas into tangible merchandise.
The Department, while acknowledging the intangible elements of
software, has focused its analysis on the tangibility of software when it
is contained on a carrier medium. The Department believes that a
tangible object which embodies intellectual property is merchandise.
When the idea is transformed into instructions and written into
source code, processed into machine-readable object code by
computer prorams such as compilers and assemblers, and is
embodied on a carrier medium, merchandise is created. Thus, the
Department believes that it is reasonable to treat software on a
carrier medium as merchandise subject to the countervailing duty
law.
Request to Rescind the Investigation
On October 20, 1989, the Government of Singapore (respondent)
submitted a letter requesting that the Department rescind its
initiation. Respondent bases its request on two broad contentions.
Respondent argues, on the implicit assumption that the subject
merchandise should be analyzed exclusively in terms of its
intellectual property and independent of its carrier medium, that
software is not merchandise under the countervailing
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duty
law. Respondent also argues that, even if the Department were to
continue to consider software to be merchandise, software is not
dutiable and, therefore, countervailing duties cannot be imposed
without a finding of injury.
Most of the specific arguments presented by the respondent
supporting its contention that CASE software does not constitute
merchandise are contingent upon the treatment of software
separately and independently from its carrier medium. Thus,
respondent ignores the embodiment of CASE software on a carrier
medium, which the Department considers determinative of its
treatment as merchandise for purposes of this investigation.
The transference of CASE software onto a carrier medium gives the
subject merchandise undeniable characteristics of merchandise. It is
similar to such items as books, newspapers, and magazines. Although
most of the value of these items resides in the intangible component
they contain, they are treated by Customs as merchandise. See
Chapter 49 of the HTS. The classification of these items is not based on
the intellectual property contained on them but according to their
physical manifestation. Similarly, it is reasonable for the Department
to consider software on a carrier medium as merchandise.
Respondent also raises the following issues: (1) Whether various
import entry procedures and requirements, administered by Customs
under which the merchandise as imported from Singapore may
enter the United States, exempts the subject merchandise from the
countervailing duty law, (2) whether there is consistency between
the Department's treatment of the subject merchandise in this
proceeding and the United States Government's treatment of software
in international settings, and (3) the relevance of the six
characteristics of CASE software cited by the Department in its
initiation notice.
1. Import Entry Exemptions Administered by the U.S. Customs
Service
Respondent contends that the imported product from Singapore
qualifies for exemption from entry and, therefore, it is not subject to
the imposition of countervailing duties, pursuant to General Note
5 of the HTS.
In general, Customs has jurisdiction over all merchandise which is
imported. In the General Notes to the HTS, however, Congress has
clearly identified those items which are not merchandise subject to
the provisions of the tariff schedule. The items listed in General Note
5 of the HTS are:
(a) Corpses, together with their coffins and accompanying flowers,
(b) Telecommunications transmissions,
(c) Records, diagrams and other data with regard to any business,
engineering or exploration operation whether on paper, cards,
photographs, blueprints, tapes, or other media, and
(d) Articles returned from space within the purview of section 484a of
the Tariff Act of 1930.
These are the only items that Congress has declared to be intangibles
and not subject to the tariff schedules and entry requirements. See
also 19 CFR 141.4. All other items, if they fall within a tariff category
of the HTS, are merchandise for customs purposes. The subject
merchandise, as described in the "Scope of Investigation" section of
this notice, falls within four specific HTS subheadings. Therefore, it is
merchandise for customs purposes.
Additionally, the CASE software on a carrier medium entering the
United States from Singapore in this investigation does not qualify
under exemption (c) of General Note 5, which exempts records,
diagrams, and other data. This provision applies solely to the
business records or documents of a company. The subject
merchandise is a commercial product imported for the purpose of
duplication and entry into the commerce of the United States for
distribution and sale.
Respondent also argues that software is not dutiable because the U.S.
Customs Service values software on the basis of its carrier medium.
The Customs Service has valued software on the basis of its carrier
medium since the 1960's. By imposing duties on the basis of the
recording area of the carrier medium without regard to its software
component, it treats such imports as merchandise. See T.D. 85-124.
This is one of the two sanctioned methods of valuing software on a
carrier medium accepted by the Committee on Customs Valuation of
the General Agreement on Tariffs and Trade (GATT Committee). See,
GATT, Committee on Customs Valuation: Decision on the Valuation of
Carrier Media Bearing Software for Data Processing Equipment
Adopted By the Committee on Customs Valuation on September 24,
1984 (VAL/8), 31 Supp. GATT Basic Instruments and Documents, 274
(1985). Contrary to respondent's assertion, the United States did not
argue in its proposal to GATT that software on a carrier medium is
something other than merchandise. Rather, it argued that the value of
the software component of an import should be excluded from the
appraised value for customs valuation purposes.
Furthermore, the U.S. Customs Service's policy of valuing software on
the basis of its carrier medium evolved because of the considerable
difficulty it had in determining the value of the data. See, respondent's
submission of December 11, 1989, Exhibit 3: Tariff Classification
Study, Explanatory Materials, U.S. Tariff Commission, Volume I,
Schedule 7, part 2, (November 15, 1960). The practice that was
proposed by the United States and adopted by the GATT Committee
was intended to promote a fair, uniform, and neutral system for the
valuation of goods consistent with the objective of the GATT
Committee. (See, GATT, Committee on Customs Valuation, VAL/W/7
(April 23, 1982).)
Citing section 321(a)(2)(c) of the Act, 19 U.S.C. 1321, respondent
contends that because the current importations of the subject
merchandise are under five dollars in value, they are specifically
excluded from all customs entry procedures and duties. Application
of section 321(a)(2)(C), however, is at the discretion of the Secretary
of the Treasury. While section 321(a)(2)(C) permits informal entry,
free of duty and tax and without the filing of entry papers of any
importation having a fair retail value in the country of shipment not
exceeding five dollars, the Secretary of the Treasury, or an appointed
delegate, may require otherwise. Even though merchandise valued at
less than five dollars is permitted to enter free of duty, tax, and formal
entry requirements, the U.S. Customs Service retains jurisdiction
over the merchandise and can require, at its discretion, that entry of
any merchandise be made in order to ensure compliance with any
pertinent laws or regulations (e.g., U.S. countervailing duty and
antidumpting duty laws). See, 19 CFR 10.151. As stated in the
"Suspension of Liquidation" section of this notice, we are requesting
the U.S. Customs Service to require formal entry of all merchandise
subject to this investigation.
2. Consistent Treatment of Software By the U.S. Government
Respondent contends that treating CASE software on a carrier
medium as merchandise is inconsistent with the U.S. Government's
treatment of software in international fora.
Assuming arguendo their relevance to the interpretation of section
303 of the Act, the Department has examined the U.S. Government
documents to which
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the respondent referred in its submission
and has consulted with the government agencies which generated the
documents. Most of the statements in the documents and
declarations cited by the respondent either discuss software
independent of a carrier medium or reference such generic and
general terms as "computer-related services" and software
development services."
For example, respondent's submission dated December 11, 1989,
cites a GATT document, compiled by the GATT Secretariat, entitled
"Reference List of Sectors." See, GATT Doc. No. MTN/GNS/W/50
(April 13, 1989). Included under the general heading of "Business
Services" and the subheading, "Professional Services" are
computer-related services and software development. This extensive
list, however, does not provide for software in a carrier medium. It
covers such other activities as travel, interior design, and legal
services. Therefore, the Department sees no conflict or contradiction
between the GATT listing and our treatment of software on a carrier
medium in this investigation. Furthermore, respondent has also
asserted that the U.S. Government included computer software in its
services proposal to the GATT in October 1989. We have reviewed the
proposal made by the U.S. Government and have concluded that
there is no provision in the proposal for software on a carrier medium
and no indication that the Department's treatment of software on a
carrier medium is inconsistent with this proposal.
With respect to the U.S.-Canada Free Trade Agreement (FTA), the
respondent asserts that pre-packaged software is listed as a service in
Chapter 14 of that agreement. However, Annex 1404, Section C,
Article 7 of the FTA refers to the utilization of pre-packaged software
as a computer service. The language of Article 7 clearly suggests that
the term "computer services" encompasses activities such as data
preparation, facility management, programming, design,
maintenance, repair, and rental, not end-products. Thus, Article 7
refers to activities that involve the utilization of pre-packaged
software, rather than to the pre-packaged software itself. Moreover,
pre- packaged software is covered by the duty-reduction provisions
of Chapter 4, which apply to trade in merchandise. Given the
treatment of pre-packaged software in the FTA and our consultations
with other Departmental agencies involved in the negotiation of the
FTA, the Department's treatment of software contained on a carrier
medium is consistent with this agreement.
3. The Six Characteristics of CASE Software Previously Cited By the
Department
Respondent asserts that, since draft evaluation disks containing the
CASE software are imported and not the final pre-packaged product,
the six characteristics of CASE software, discussed in the
Department's notice of initiation and below, are not evidenced by the
merchandise actually imported from Singapore.
In our notice of initiation we stated that CASE software is
merchandise because it is:
(1) A pre-packaged copyrighted software product that can be
purchased off-the- shelf,
(2) Typically contained on a carrier medium,
(3) A pre-written product with broad application, which does not
need additional servicing by the seller of the software prior to use by
the end- user,
(4) Marketed similarly to other types of merchandise,
(5) Maintained in inventory by vendors, and
(6) Treated differently than non-recorded carrier media by the U.S.
Customs Service.
According to the questionnaire responses, draft evaluation disks are
imported from Singapore. They are generally tested and evaluated
for marketability in the United States. Any changes required to be
made to the software itself are made in Singapore. Once a draft
evaluation disk is deemed marketable, it is designated as the master
and subsequently copied and packaged in the United States.
Therefore, the master disk used for the production of the final pre-
packaged merchandise is imported, in fact, from Singapore. This
master disk contains the essence of the final pre-packaged CASE
software merchandise. Consequently, we determine that the six
characteristics of CASE software are still applicable to those entries of
the subject merchandise imported from Singapore.
Finally, respondent argues that we should rescind this investigation
because the merchandise is non-dutiable and the petition did not
contain any allegation or information to support an injury finding.
An injury determination is not required in this investigation because
Singapore is not a "country under the Agreement," within the meaning
of section 701(b) of the Act, and the subject merchandise, CASE
software on a carrier medium, is dutiable. See, Section 303(b) of the
Act, as amended, 19 U.S.C. 1303.
In summary, the Department considers CASE software on a carrier
medium to be dutiable merchandise.
Analysis of Programs
Consistent with our practice in preliminary determinations, when 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,
however, are subject to verification. If the response cannot be
supported at verification, 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 January 1, 1988, to December 31, 1988,
which corresponds to the fiscal year of CSAR. Based upon our analysis
of the petition and the responses to our questionnaires, we
preliminarily determine the following:
I. Program Preliminarily Determined to Confer Bounties or Grants
We preliminarily determine that the following program confers
bounties or grants on the manufacture, production, or exportation of
CASE software from Singapore.
Information Technology Institute (ITI) Development of CASE
Software
According to the Government of Singapore's responses, the
Committee on National Computerization (CNC) was formed in 1980 to
study and recommend a policy for national computerization. This
committee's report, which was completed in October 1980, contained
a series of recommendations, including the creation of a National
Computer Board (NCB), to implement CNC's recommendations. The
three major tasks of the NCB are (1) to promote national
computerization by taking the lead in computerizing the public
sector, (2) to coordinate the training and development of computer
software professionals, and (3) to promote the growth of the
computer software and services industry.
With the launching of the national computerization efforts in 1981,
the NCB and the Singapore Ministry of Defense (MOD) conducted two
parallel and coordinated initiatives in software engineering. The MOD
established the Information Engineering Centre (IEC) to address the
productivity and quality issues in software development life cycles.
The NCB established a Software Engineering Department (SED) to
develop software creation methodologies and productivity tools. The
efforts of the IEC and the SED were combined in 1983 into the Joint
Software Engineering Program (JSEP). In 1985, the JSEP initiated an
effort to develop high performance and graphics-oriented tools
running on personal computers. The result of this initiative was the
CASE product known as Picture Oriented Software Engineering
(POSE).
In April, 1986, the JSEP became the Information Technology
Institute (ITI), as part of the NCB. The ITI undertakes applied
research and development in information technology. According to
the questionnaire responses, ITI has five major functions: (1) To
promote the creative and productive use of information technology
in industry and society, (2) to build an indigenous capability in
exploiting state-of-the-art information technology, (3) to help
achieve the computerization of the Singapore Government ministries,
(4) to transfer technology and expertise from international
technology leaders to both local industry and the computer
community, and (5) to collaborate with companies in all sectors of
the economy, universities, and research organizations in joint
research projects.
In February, 1986, the NCB invited 20 companies in Singapore to bid
for the rights to market the POSE prototypes and join in the continued
development of the product. Of the 20 companies invited, seven
responded. Two responded negatively, indicating that they were not
capable of undertaking such a project. Five responded positively.
Two of the parties that responded did not follow up with any
proposal, one provided only a one-page proposal, and two provided
"comprehensive" proposals. All three of the proposals received by ITI
provided for varying royalty rates. However, according to the
Government of Singapore, only the proposal of Computer Services
Advisors Pte., Ltd. (CSA), the parent company of CSAR, met ITI's
threshold criteria by addressing each factor listed in ITI's "Invitation
to Tender." Therefore, ITI "shortlisted" and entered into negotiations
with CSA.
According to the questionnaire responses, after CSA had been
shortlisted for negotiations, CSA's proposal was rejected in part by
ITI because its proposed marketing efforts were inadequate and its
sales projections were too low to provide for an adequate return to
ITI. Consequently, CSA submitted a revised proposal which
contained an enhanced marketing plan and increased sales
projections. As a result of these changes, CSA's revised proposal
projected a return on ITI's development costs, which was considered
adequte by ITI. Based on CSA's revised proposal, the parties reached
agreement in October 1986 for the worldwide marketing and
continued commercial development of POSE. Subsequently, CSA
assigned its rights and delegated its obligations under the agreement
to its subsidiary, CSAR.
Ascertaining the existence and degree of any benefit to CSAR under
these circumstances presents the Department with a number of novel
issues. Essentially, the Government of Singapore has undertaken
research and has sold the right to commercialize that research
through a tendering process. Recognizing this, the Department sought
information from the Government of Singapore and CSAR about the
nature of the bidding process and whether the government of
Singapore acted reasonably from a commercial standpoint in entering
into the agreement with CSA. Despite our repeated requests,
respondents have failed to supply certain critical information.
Specifically, respondents have failed to provide adequate information
on: (a) The analysis ITI performed in evaluating all proposals,
especially those presented by CSA, (b) the basis for shortlisting CSA
and the nature and chronology of the subsequent negotiations with
CSA, (c) the basis for CSA's revised proposal, (d) the basis for
accepting that revised proposal, (e) other bid proposals received by
ITI concerning the POSE program, and (f) the terms and conditions of
other licensing agreements between ITI and private industry.
Because the Department has not received the above information, we
have relied on the best information available for purposes of this
preliminary determination. See 19 CFR 355.37. Since respondents
failed to explain adequately the basis for CSA's revised proposal and
its acceptance, we have been forced to rely upon CSA's initial
proposal for analyzing whether and to what extent CSAR has
benefitted from the agreement with ITI.
On the basis of CSA's initial proposal, ITI was in a position to evaluate
the total expected royalties it would earn under the agreement and
the total costs it would incur. The discounted value of expected
revenues was less than the discounted value of expected future costs
plus the actual costs already incurred. On this basis we preliminarily
conclude, using the best information available, that no sound
commercial basis existed for ITI to enter into the agreement with
CSA.
To calculate the benefit to CSAR from the agreement, we calculated
the royalty rate that would have been necessary under the initial
proposal to make the discounted value of total expected royalties
equal to the discounted value of total past and expected future costs.
The difference between this royalty rate and the rate actually offerred
in the initial proposal is 15.25 percent. Since royalties are expressed
as a percentage of the sales value of the merchandise, this difference
in royalty rates constitutes the net estimated bounty or grant. (For
further information regarding the Department's instructions to
Customs, see the "Suspension of Liquidation" section of this notice.)
II. Program Preliminarily Determined not To Confer Bounties or
Grants
We preliminarily determine that the following program does not
confer bounties or grants on the manufacture, production, or
exportation of CASE software in Singapore.
Operational Subsidy
Petitioner alleged that the Government of Singapore provided a $15
million grant to CSAR and loaned government employees to CSAR, at
no cost to CSAR, for the purpose of launching POSE software in the
U.S. market. According to the responses, no monetary grant was
provided to the respondent company. However, for a period of one
year, commencing in November, 1987, one ITI staff member worked
for CSAR's U.S. subsidiary providing training and technical support.
According to the responses, the employee's work at CSAR was
intended to contribute to ITI staff development, the continued
technical development of the product, and the overall coordination
of the venture between CSAR and ITI. According to the responses, the
employee remained on the payroll of the NCB during the assignment
to CSAR.
However, under the terms of a memorandum of understanding, CSAR
agreed to reimburse the NCB for the employee's remuneration and all
benefits to which the employee was entitled as an employee of the
NCB. We received as part of a response, a listing of the expenses CSAR
was billed for by the NCB and the date of payment by CSAR. Since
CSAR reimbursed the NCB
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for all expenses associated with the
employee who worked on its behalf, the Department has preliminarily
determined that this program is not countervailable.
II. Programs Preliminarily Determined not To Be Used
We preliminarily determine that the following programs were not
used by maufacturers, producers, or exporters in Singapore of CASE
software during the review period.
A. Double Deduction of Research and Development Expenses
This program was established under section 14(e) of the Income Tax
Act. It allows manufacturing companies to take a double deduction
for approved research and development expenses. According to the
responses, CSAR did not participate in this program during the review
period.
B. Expansion of Established Enterprises
This program was established under part IV of the Economic
Expansion Incentives Act of 1985 (EEIA). It provides a tax
exemption to established and approved manufacturing enterprises
incurring new capital expenditures of at least $10 million for
increased production. Any profits in excess of the pre- expansion
level are exempted from income tax during the tax relief period. The
tax relief is provided for a period not exceeding five years. According
to the responses, CSAR did not participate in this program during the
review period.
C. Investment Allowance
This program was established under Part X, section 67(1) of the EEIA.
Under this program, companies are granted tax exemption on profits
equal to a percentage of the investment in plant and equipment in a
specific project. All manufacturing and manufacturing-related service
companies investing in new plant and machinery, including those for
research and development, are eligible for benefits under this
program. According to the responses, CSAR did not participate in this
program during the review period. Respondents have also indicated
in its response that this program was found not countervailable in the
Final Negative Countervailing Duty Determination: Carbon Steel
Wire Rod from Singapore (Wire Rod) (53 FR 16304, May 6, 1988).
Contrary to respondents' claim, the Department stated in Wire Rod
that this program was not used. While Part VI A of the original
Economic Expansion Incentives Act (EEIA) had been previously
found not countervailable in Certain Textile Mill Products and
Apparel from Singapore, (50 FR 9840, March 12, 1985), (Textiles),
Part VI A, as amended by Part X, includes a new research and
development provision. In Wire Rod, Part VI A was investigated due
to the substantial amendments in the law. Because it was later
determined not to have been used, it left open the question of
countervailability because the program, as amended, was not further
investigated. We will continue to investigate Part X, as amended,
although, as discussed above, respondents have stated that CSAR did
use this program during the review period.
D. Initiatives in New Technologies
This program was established under and is administered by the
Economic Development Board (EDB). It provides grants that are
based on 50 percent, 70 percent, or 90 percent of total allowable
manpower costs for a specific period of up to five years. It encourages
investments in new technologies through the provision of manpower
training and start-up assistance. According to the responses, CSAR
did not participate in this program during the review period.
E. Software Development Assistance Scheme
This program was established as part of the National Information
Technology Plan. It is jointly administered by the NCB and the EDB.
The aim of the program is to encourage the development of
indigenous software. It provides grants for certain software
development expenses with at least 30 percent ownership by
Singaporeans to carry out software development programs.
According to the responses, CSAR did not participate in this program
during the review period.
F. Product Development Assistance Scheme
This program was established under and is administered by the EDB.
The aim of this program is to encourage local companies to develop
and design new products and processes, or improve existing ones. It
confers grants, allows companies to deduct research and
development expenditures for tax purposes, provides funding to
defray costs of marketing and technical studies, and provides funds
for the purchase of equipment to be used to develop new products
and processes. According to the responses, CSAR did not participate
in this program during the review period.
G. Capital Assistance Scheme
This program was established under and is administered by the EDB.
It offers long-term, fixed-rate loans at favorable interest rates,
secured by bank guarantees, to companies investing in new
productive activities in Singapore. According to the responses, CSAR
did not participate in this program during the review period.
H. Research and Development Assistance Scheme
This program, administered by the Singapore Science Council,
confers grants for public, private, and joint research that have
national and technological significance with a specific mission and
time frame. Research manpower, equipment, and consumable costs
are also eligible for financing. According to the responses, CSAR did
not participate in this program during the review period.
I. Skills Development Fund
This program was established under and is administered by the EDB.
It provides grants to employers undertaking to upgrade employee
skills or increase efficiency of production. Petitioner included this
program in its petition and we included it in our initiation in this
investigation. Respondents have stated that although this program
was not used, it was previously found not countervailable.
Department practice requires that we not initiate on programs
previously found not to be countervailable, unless changes in the
program or its administration justify further investigation. In
Textiles, we determined that this program did not confer a bounty or
grant. We have received no new information justifying a change in the
Textiles determination. Therefore, we are rescinding the investigation
as it relates to this program.
J. OHQ Operational Headquarters Program
This program, administered by the EDB and approved by the Minister
of Finance, provides up to ten years of tax concessions on income
arising from overseas subsidiaries of companies with headquarters
based in Singapore. Income from the provision of qualifying services
by the headquarters company would be subject to a tax rate of ten
percent. According to the responses, CSAR did not participate in this
program during the review period.
*1602
K. Double Deduction of Export Promotion Expenses
This program was established under sections 14 (b) and (c) of the
Income Tax Act. It is administered by the Trade Development Board
and the Inland Revenue Department (IRD). The program provides a
double deduction for approved overseas and domestic market trade
fair expenses, overseas trade office maintenance, approved
publications and advertising, foreign market development, and trade
missions. Any unused deduction may be carried forward to be used
against income of subsequent years. According to the responses,
CSAR did not participate in this program during the review period.
L. Production for Export
This program was established under part VI of EEIA and administered
by the EDB and the IRD. It is available to any manufacturing company
whose export sales are not less than 100,000 Singapore dollars (S$)
and the export sales must not be less than 20 percent of the value of
its total sales. Under this program, 90 percent of a qualifying
company's incremental export profit above a predetermined export
base is exempt from corporate income tax. According to the
responses, CSAR did not participate in this program during the review
period.
M. Warehousing and Servicing Incentives
This program was established under part XI of EEIA and is
administered by the EDB and the IRD. Any company intending to
incur fixed capital expenditures not less than S$2 million for
warehousing facilities for the purpose of providing technical or
engineering services to persons outside Singapore may be eligible to
apply for benefits under this program. The program allows a five-year
tax exemption on 50 percent of qualifying export profits in excess of
a fixed base. According to the responses, CSAR did not participate in
this program during the review period.
N. Small Industries Technical Assistance Scheme
This program, which is administered by the EDB, is designed to
encourage and assist small- and medium-sized local enterprises in
seeking external expertise for modernizing their operations.
Assistance is provided through funding to cover selected costs of
engaging external consultants and manpower, and training costs
directly related to the consultancy project. According to the
responses, CSAR did not participate in this program during the review
period.
O. Small Industries Finance Scheme
Under this program the EDB provides fixed interest rates to financial
institutions participating in the program for onward lending to
qualifying small companies. Petitioner included this program in its
petition and we included it in our initiation in this investigation.
Respondents have stated that although this program was not used, it
was previously found not countervailable. Department practice
requires that we not initiate on programs previously found not to be
countervailable, unless changes in the program or its administration
justify further investigation. In Textiles, we determined that this
program did not confer a bounty or grant. We have received no new
information justifying a change in the Textiles determination.
Therefore, we are rescinding the investigation as it relates to this
program.
P. Accelerated Depreciation
This program was established under section 19A of the ITA and is
administered by the IRD. It allows a company a three-year write-off
for capital expenditures on plant and machinery, except automobiles,
and a one-year write-off for capital expenditures on computers,
proscribed automation equipment and robotics. Respondents have
stated that although this program was not used, it was previously
found not countervailable. Petitioner included this program in its
petition and we included it in our initiation of this investigation.
Department practice requires that we not initiate on programs
previously found not to be countervailable, unless changes in the
program or its administration justify further investigation. In Wire
Rod, we determined that this program did not confer a bounty or
grant. We have received no new information justifying a change in the
Wire Rod determination. Therefore, we are rescinding the
investigation as it relates to this program.
Verification
In accordance with section 776(b) of the Act, we will verify the
information used in making our final determination.
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 CASE
Software from Singapore (as described in the Scope of
Investigation section of this notice) which are entered, or withdrawn
from warehouse, for consumption on or after the date of publication
of this notice in the Federal Register. We are also requesting that the
U.S. Customs Service require all importations of the subject
merchandise into the United States from CSA, CSAR, and any of their
affiliates, be subjected to formal entry requirements to ensure
compliance with the countervailing duty law in accordance with
section 311(a)(2)(C), 19 U.S.C. 1321. We are instructing U.S. Customs,
pursuant to T.D. 85-145 (September 5, 1985), to require a
countervailing duty continuous entry bond sufficient to cover the
lump sum estimated net bounty or grant we determined to have been
granted by the Government of Singapore to CSAR. Such a bound
should be wholly or partially applicable to each entry made after
publication of this notice in the Federal Register, depending upon the
number of entries made prior to publication in the Federal Register of
our notice of final determination. The lump sum amount of the
required cash deposit or bond will be US $42,891.57.
Public Comment
In accordance with 19 CFR 355.38 of the Code of Federal Regulations,
we will hold a public hearing, if requested, to afford interested parties
an opportunity to comment. For the date of this hearing please
contact those persons listed under the "For Further Information
Contact" section of this notice. Individuals who wish to participate in
the hearing must submit a request within ten days of the publication
of this notice in the Federal Register to the Assistant Secretary for
Import Administration, Room B-099, U.S. Department of Commerce,
14th and Constitution Avenue, NW., Washington, DC 20230.
Requests 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, ten
copies of the business proprietary version and five copies of the
nonproprietary version of the case griefs and rebuttal briefs must be
submitted. An interested party may make an affirmative presentation
only on arguments included in that party's case or rebuttal briefs.
Written arguments should be submitted in accordance with § 355.38
of the Department Regulations.
*1603
This determination is published pursuant to section 703(f) of
the Act (19 U.S.C. 1671b(f)).
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
January 8, 1990.
[FR Doc. 90-1026 Filed 1-16-90; 8:45 am]
BILLING CODE 3510-DS