(Cite as: 48 FR 34997)
NOTICES
DEPARTMENT OF COMMERCE
Bottled Green Olives From Spain; Preliminary Results of Administrative
Review of Countervailing Duty Order
Tuesday, August 2, 1983
*34997 AGENCY: International Trade Administration, Department of 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 bottled green olives from Spain. The review covers the period January 1, 1980 through December 31, 1981. As a result of the review, the Department has preliminarily determined the net subsidy for 1980 to be 2.70 percent ad valorem, and for 1981, 2.44 percent ad valorem. Interested parties are invited to comment on these preliminary results.
EFFECTIVE DATE: August 2, 1983.
FOR FURTHER INFORMATION CONTACT:Lorenza Olivas or Joseph Black, Office of Compliance, International Trade Administration, U.S. Department of Commerce, Washington, D.C. 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On September 12, 1974, the Department of the Treasury ("Treasury") published in the Federal Register (T.D. 74-234, 39 FR 32904) an affirmative final countervailing duty determination on bottled green olives from Spain. The order became effective on October 25, 1974. The notice stated that the Government of Spain had provided bounties or grants on the manufacture, production or exportation of such merchandise within the meaning of section 303 of the Tariff Act of 1930 ("the Tariff Act").
On January 1, 1980, the provisions of title I of the Trade Agreements Act of 1979 ("the TAA") became effective. On January 2, 1980, the authority for administering the countervailing duty law was transferred from Treasury to the Department of Commerce ("the Department"). The Department published in the Federal Register of May 13, 1980 (45 FR 31455) a notice of intent to conduct administrative reviews of all outstanding countervailing duty orders. As required by section 751 of the Tariff Act, the Department has conducted an administrative review of the order on bottled green olives from Spain.
Scope of the Review
Imports covered by the review are bottled green olives, imported directly or indirectly from Spain. Such imports are currently classifiable under items 148.4420, 148.4440, 148.4800, and 148.5020 through 148.5080 of the Tariff Schedules of the United States Annotated.
The review covers the period January 1, 1980 through December 31,1981, and the following programs: (1) A rebate upon exportation of indirect taxes, under the Desgravacion Fiscal a la Exportacion; (2) an operating capital loans program; and (3) a minimum export price program, which the petitioner alleges conferred benefits to Spanish exporters of bottled green olives during the period of review.
Analysis of Programs
(1) Desgravacion Fiscal a la Exportacion ("the DFE"). Spain employs a cascading tax system. Under this system, the government levies a turnover tax ("IGTE") on each sale of a product through its various stages of production, up to (but not including) the final sale in Spain. Upon exportation of the product, the government, under the DFE, rebates both these accumulated IGTE indirect taxes and certain final stage taxes.
Although the Spanish government rabates upon exportation all indirect taxes paid under the cascading tax system, the Tariff Act allows the rebate of only the following: (1) Taxes borne by inputs which 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). If the tax rebate upon export exceeds the total amount of allowable indirect taxes described above, the Department considers the difference to be an overrebate of indirect taxes and, therefore, a subsidy.
Physical incorporation is a question of fact to be determined for each product in each case. In this case, the physically incorporated inputs are the raw materials previously allowed by Treasury. The rebate of two final stage taxes, the parafiscal tax on export licenses and the tax on freight and insurance, is also allowable when calculating whether or not there is an overrebate of indirect taxes under the DFE.
Based upon our analysis of the DFE and the allowable indirect taxes, we preliminarily determine that an overrebate upon export existed in 1980 in an amount equal to 2.25 percent of the f.o.b. invoice price of the merchandise.
As of January 1, 1981, the Spanish government increased the IGTE rate from 2.40 percent while maintaining the previous rate for the export rebate. Based upon our analysis of the indirect taxes on physically incorporated inputs and the two indirect taxes on the final product, we determine that the change in aggregate indirect tax incidence has eliminated the overrebate previously found countervailable; therefore, we preliminarily determine the net subsidy attributable to this program during 1981 to be zero percent.
(2) Operating Capital Loans. The Spanish government requires banks to set aside funds to provide short-term operating capital loans. These loans are granted for a period of less than one *34998 year. In 1980, the Spanish government fixed the interest rate for such loans at 8 percent, which was 1.50 percent below the legally established commercial interest rate of 9.50 percent. Effective March 1, 1981, the Spanish government increased the interest rate on operating capital loans from 8 to 10 percent while eliminating the interest rate ceiling on comparable short-term commercial loans. To determine the interest rate on comparable commercial loans for the remaining ten months in 1981, we took the average national prime interest rate for loans of comparable length, added the prevailing interest charge over prime facing borrowers of average creditworthiness and added the legally established fees and commissions. Comparing this benchmark with the 10 percent interest rate established for the operating capital loans program, we found a differential of 9.45 percent after March 1.
The maximum loan principal available to a given exporter is determined as a percentage of the firm's previous year's exports. This amount may be increased if the firm holds a government-issued Exporter's Card. In the case of bottled green olives, maximum eligibility until November 1981 was 35 percent. Effective November 21, 1981, the Spanish government decreased the maximum eligibility (including Exporter's Card eligibility) to 28 percent. Because we have no information on actual use of this program, we assumed that the maximum allowable amount was borrowed. After prorating the interest rate differentials and eligibility levels prevailing in 1981, we preliminarily determine the net subsidy conferred under this program to be 0.45 percent ad valorem for 1980, and 2.44 percent ad valorem for 1981.
The Spanish government is currently phasing out its operating capital loans program. Since 1981, the maximum annual amount bottled green olive producers can borrow under this program has been reduced to 17.50 percent of their previous year's exports. Using the interest rate differential prevailing in 1982 (9.38 percent), and assuming, in the absence of knowledge of current usage levels, that the Spanish producers borrowed the maximum amount to which they were legally entitled as of January 1, 1983, we preliminarily determine, for purposes of cash deposits of estimated countervailing duties, that the net subsidy attributable to this program is 1.64 percent ad valorem.
(3) Minimum Export Price. On November 1, 1979, the Government of Spain imposed a minimum price support program on exports of olives, bottled or in bulk. The program was terminated at the end of 1980.
The petitioner, Green Olive Trade Association, contends that Spanish bottlers were able to purchase Spanish olives in bulk at a price lower than that available to U.S. bottlers which import Spanish olives in bulk, and that by mandating this price differential the Spanish government indirectly provided a countervailable domestic subsidy on the manufacture of bottled olives in Spain.
The Department does not consider a minimum price scheme which has the effect of increasing the export price of the article in question, in this case bottled olives, a countervailable subsidy.
Moreover, the fact that the government imposed a price floor on exports of olives shipped in bulk, which resulted in a higher price to U.S. bottlers, does not confer a subsidy on the production of Spanish bottled green olives. The cost inputs to a U.S. producer is not relevant here to the determination of whether a particular practice of a foreign government constituted a subsidy.
The petitioner also contends that the fact that Spanish bottlers were able to purchase bulk olives at the unregulated domestic price enabled them to reap large profit margins on their export sales. We fail to see how any countervailable benefit was conferred by these purchases of bulk olives since the prices were set without government direction and without any export preference.
The petitioner further asserts that most Spanish bottlers are subsidiaries of U.S. multinational corporations and that these corporations, using their large 1980 profits, have sold Spanish bottled green olives in the United States at very low prices in 1981. The issue raised here by the petitioner involves pricing behavior which is not properly examined in the context of a countervailing duty proceeding.
Accordingly, the Department preliminarily determines that the Spanish minimum export price support program did not confer a countervailable benefit upon the production or exportation of bottled green olives from Spain.
Verification
We verified data regarding the DFE program through inspection of government documents, on-site examination of company books and records and discussions with government and trade association officials. As for the operating capital loans program, the Spanish government denied us access to company-specific records for verification and did not permit trade association officials to discuss the program with us. Consequently, as mentioned above, we assume that the maximum allowable amount of operating capital loans was borrowed. We have calculated the benefit under this program using the best information available.
Preliminary Results of the Review
As a result of our review, we preliminarily determine that the aggregate net subsidy conferred during 1980 by the two programs is 2.70 percent ad valorem. For 1981, we preliminarily determine that the aggregate net subsidy conferred is 2.44 percent ad valorem.
Accordingly, the Department intends to instruct the Customs Service to assess countervailing duties of 2.70 percent of the f.o.b. invoice price on all shipments of Spanish bottled green olives entered or withdrawn from warehouse, for consumption on or after January 1, 1980 and exported on or before December 31, 1980 and 2.44 percent of the f.o.b. invoice price on all shipments exported on or after January 1, 1981 and on or before December 31, 1981.
The provisions of T.D. 74-234, T.D. 78-167 or T.D. 79-22 and section 303(a)(5) of the Tariff Act, prior to the enactment of the TAA, apply to all entries made prior to January 1, 1980. Accordingly, the Department intends to instruct the Customs Service to assess countervailing duties on all unliquidated entries of bottled green olives from Spain entered, or withdrawn from warehouse, for consumption prior to January 1, 1980, at the applicable rates set forth in T.D. 74-234, T.D. 78-167, or T.D. 79-22.
Further, as provided for by section 751(a)(1) of the Tariff Act, the Department intends to instruct the Customs Service to collect a cash deposit of estimated countervailing duties of 1.64 percent of the f.o.b. invoice price on all shipments of this merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of the current review. This deposit requirement shall remain in effect until the 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 *34999 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 5 days after the date of publication. The Department will publish the final results of the administrative review including the results of its analysis of issues raised in any such written comments or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and s 355.41 of the Commerce Regulations (19 CFR 355.41).
Dated: July 26, 1983.
Alan F. Holmer,
Deputy Assistant Secretary for Import Administration.