NOTICES
DEPARTMENT OF COMMERCE
[C-542-401]
Preliminary Affirmative Countervailing Duty Determinations; Certain
Textiles
Mill Products and Apparel From Sri Lanka
Friday, December 21, 1984
*49687
AGENCY: Import Administration, International Trade
Administration, Commerce.
ACTION: Notice.
SUMMARY: 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 Sri Lanka of
certain textile mill products and apparel. The estimated net bounty or grant is
2.79 percent ad valorem for certain textile mill products and 2.79 percent ad
valorem for apparel. We are directing the U.S. Customs Service to suspend
liquidation of all entries of certain textile mill products and apparel products
from Sri Lanka except those produced by Texwood Industries limited, 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entered, or withdrawn from warehouse, for consumption on or after the date of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 bounties or grants.
These investigations were initiated by the Department under the title "Certain
Textiles and Textile Products from Sri Lanka." Because of the number of
products covered, and the differences in those products, the Department
determined that it should conduct separate investigations--one of textiles and
non-apparel textile products, and one of apparel. Because of the potential for
confusion, as apparel can also be considered a textile product, we are changing
the titles of these investigations to "Certain Textile Mill Products and Apparel
from Sri Lanka." The scope of these investigations remains the same as
announced in the notice of initiation.
If these investigations proceed normally, we will make our final determinations
by March 4, 1984.
EFFECTIVE DATE: December 21, 1984.
FOR FURTHER INFORMATION CONTACT: Laura Campobasso, 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) 377-5403 or
377-1785.
SUPPLEMENTARY INFORMATION:
Preliminary Determinations
Based upon our investigations, 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 Sri
Lanka of certain textile mill products and apparel. For purposes of these
investigations, the following programs are preliminarily found to confer a
bounty or grant:
- Investment Promotion Zone;
- Export Development Board; and
- Pre-Shipment Export Refinancing Program.
We estimate the net bounty or grant to be 2.79 percent ad valorem for certain
textile mill products and 2.79 percent ad valorem for apparel.
Case History
On July 20, 1984, we received a petition from the American Textile
Manufacturers Institute, the Amalgamated Clothing and Textile Workers Union,
and the International Ladies' Garment Workers Union, on behalf of the U.S.
industry producing certain textile mill products and apparel. 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 Sri Lanka of
textiles and textile products receive, directly or indirectly, benefits which
constitute bounties or grants within the meaning of section 303 of the Act.
We found that the petition contained sufficient grounds upon which to initiate
countervailing duty investigations, and on August 15, 1984, we initiated such
investigations (49 FR 32646). We stated that we expected to issue preliminary
determinations by October 15, 1984. On September 21, 1984, we determined
these investigations to be "extraordinarily complicated," as defined in section
703(c)(1)(B) of the Act. Therefore, we extended the period for making our
preliminary determinations by 65 days until December 17, 1984 (49 FR 41098).
Since Sri Lanka is not 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 (b) of the Act apply to these investigations. Accordingly,
the domestic industry is not required to allege that, and the U.S. International
Trade Commission is not required to determine whether, imports of these
products cause or threaten material injury to a U.S. industry.
Due to the scope of these investigations, we employed a two-step questionnaire
process. We presented a preliminary questionnaire to the government of Sri
Lanka in Washington, D.C. on August 27, 1984. Based on the responses to the
preliminary questionnaire, we requested responses to supplemental
questionnaires from those producers who account for at least 60 percent of the
apparel exported to the United States. We selected 17 apparel producers and
exporters to respond to the detailed questionnaire, because we
*49688
initially
believed that only apparel was exported from Sri Lanka to the U.S. On October
25, 1984, we presented the detailed government and company questionnaires to
the government of Sri Lanka in Washington, D.C. The responses to our detailed
questionnaires were received on November 26, 1984. During our investigation,
we discovered that some textile mill products also were exported from Sri
Lanka to the U.S.
For purposes of these preliminary determinations, we have used the country-
wide rate for apparel as the best information available for certain textile mill
products. We have requested information from producers who represent over
60 percent of certain textile mill products, and, if verified, we will include the
information in our final determinations.
We received timely requests for exclusion from three companies, Sinotex Lanka
Limited (Sinotex), Texwood Industries Limited (Texwood), and Asiaknit
Limited, to which we sent copies of the detailed questionnaire. Texwood's
response indicates that it receives benefits which are de minimis, and it is
therefore, excluded from these preliminary determinations. Sinotex receives
countervailable benefits above the de minimis rate of 0.50 percent, and Asiaknit
did not respond to our questionnaire. Therefore, we have included Sinotex and
Asiaknit in the suspension of liquidation for these preliminary determinations.
Certain respondents in the certain textile mill products and apparel
investigations have raised the issue as to whether petitioners have standing to
file these cases. We have addressed this issue in our preliminary determinations
of Certain Textiles Mill Products and Apparel from Indonesia, published
concurrently with this notice. See that notice for our comments on the issue of
petitioners' standing.
Scope of the Investigation
The products covered by these investigations are certain textile mill products
and apparel from Sri Lanka, as described in Appendix A, attached to this
notice.
Analysis of Programs
Throughout this notice, we refer to certain general principles applied to the facts
of the instant investigations. 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 the response cannot be
supported at verification, and the program is otherwise countervailable, the
program will be considered a subsidy in the final determination.
For purposes of these preliminary determinations, the period for which we are
measuring bounties or grants ("the review period") is April 1983 through March
1984, which corresponds to the most recent fiscal year of the producers selected
to respond to our questionnaire.
Based upon our analysis of the petition and the responses to our questionnaires,
we preliminarily determine the following:
I. Programs Determined To Confer Bounties or Grants
We preliminarily determine that bounties or grants are being provided to
manufacturers, producers, or exporters in Sri Lanka of certain textile mill
products and apparel under the following programs.
A. Investment Promotion Zones
Petitioners alleged that the government of Sri Lanka provides benefits to
producers and exporters of the subject merchandise through an Investment
Promotion Zone (IPZ). They alleged that benefits received under this program
by firms that locate in the IPZ include exemptions from taxes on corporate and
personal income, exemptions from taxes on royalties and dividends for up to 10
years, availability of developed factory sites at nominal charges, and
exemptions from paying import duties on machinery, equipment, and materials.
Law No. 4 of 1978 amended by Act No. 43 of 1980 and Act No. 21 of 1983
establishes an IPZ, operated by the Greater Colombo Economic Commission
(GCEC) in Sri Lanka. The entire production from the firms located in the IPZ
must be marketed abroad. As specified in the responses, firms locating in the
zone may receive the following benefits from the GCEC: (1) Exemptions from
payment of corporate income taxes; (2) exemption from payment of import
duties; (3) exemptions from payments of withholding taxes on dividends; and (4)
exemptions from payment of withholding taxes on royalties paid to non-resident
persons/companies.
According to the responses, the GCEC does not build factories within the zone for
lease to investors. All investors must build their own factories and no
government financial assistance is provided for construction. Factory sites that
are available to producers are provided on a commercial basis.
Of the firms who responded to our questionnaire, ten are located in the IPZ.
These firms receive the following: corporate tax exemptions or tax holidays, and
import duty exemptions on machinery, equipment, and materials. We find no
countervailable benfits with respect to duty exemptions on imported raw
materials, because duty exemptions on raw materials that are physically
incorporated in the final exported products are not considered bounties or
grants under the Act. We preliminarily determine, regarding these exemptions
of corporate taxes and of import duties on plant and equipment, that these
exemptions are countervailable because the IPZ program operates to stimulate
export sales over domestic sales.
To calculate the benefits from the exemption of corporate taxes for the period in
which we are measuring bounties or grants (April 1983 to March 1984), we
determined the tax savings received during the review period. The amount of
tax savings received under this program was divided by the total value of
exports in the review period to determine an estimated bounty or grant of 1.95
percent ad valorem for certain textile mill products and 1.95 percent ad valorem
for apparel.
To calculate the benefits from exemptions on import duties, we treat these
exemptions as grants under the grant methodology outlined in the Subsidies
Appendix. Using this methodology, we calculate a bounty or grant of 0.27
percent ad valorem for certain textile mill products and 0.27 percent ad
valorem for apparel.
B. Export Development Board
Petitioners alleged that the producers and exporters of the subject merchandise
receive benefits from the Export Development Board (EDB). The EDB allegedly
provides tax-free export expansion grants for exporting firms with net foreign
exchange earnings equal to 20 percent or more of export value,
export-marketing services to export ventures, and financial aid to export
ventures.
*49689
The Export Development Act No. 40 of May 1979 created the Sri
Lanka Export Council of Ministers and established the Sri Lanka EDB.
According to the responses, the EDB created an original Export Expansion Grant
Scheme in 1981, and devised another Export Expansion Grant Scheme in 1983.
Through this 1983 Scheme, firms may apply for grants to be used for export-
oriented projects. Funding for the Export Development Grant Scheme comes
from the Export Development Fund (EDF), which is administered by the EDB.
The EDB has the authority to assist firms with export marketing by sponsoring
participation in international trade fairs and trade missions abroad. However,
the EDB has not provided any such sponsorship to exporters of the subject
merchandise to the United States. Based on the responses of the producers and
exporters selected to respond to our questionnaires, the only benefits they have
received from the EDB are tax-free export expansion grants. Producers and
exporters have not received export-marketing services or financial aid to export
ventures.
We preliminarily determine that the tax-free export expansion grants stimulate
the production for export of the subject merchandise and therefore, provide a
countervailable benefit. To calculate the benefits from the tax-free export
expansion cash grants we used the grant methodology outlined in the Subsidies
Appendix and found the bounty or grant to be 0.39 percent ad valorem for
certain textile mill products and 0.39 ad valorem for apparel.
C. Pre-Shipment Export Financing Program
Petitioners alleged the Central Bank of Sri Lanka provides loans through the
Export Development Fund at preferential interest rates to finance export-
oriented investment. The benefits alleged include long-term refinancing and
short-term working capital loans. The Export Development Fund (EDF)
administered by the EDB was established to finance the operations and programs
of the EDB. The EDF, according to the response, has never provided medium-
and long- term financing to exporters and does not act as a financing facility.
The Cental Bank of Sri Lanka operates a refinancing program for medium- and
long-term loans provided by development and commercial banks. Development
and commercial banks may apply for refinancing of medium- and long-term
loans for export-related investments under the Government's Medium- and
Long-Term Credit Fund (MLCF) program. The Central Bank conducts its own
independent evaluation of each loan application. The risk of default is borne by
the commercial bank. None of the companies selected to respond to the
questionnaire receive any medium- or long-term loans under the MLCF
programs.
The government response further states that exporting firms receive short-term
working capital loans under the pre-shipment export refinancing program.
Commercial banks determine which loans will be submitted for refinancing. Only
exporters are eligible for such refinancing. The amount of refinancing available
from each individual commercial bank is subject to aggregate limits established
by the Central Bank. The companies selected to respond to the questionnaires
received pre-shipment export loans under this program.
Because these loans are intended to stimulate exports, we preliminarily
determine that they confer bounties or grants if they are provided at preferential
rates. As specified in the Subsidies Appendix, the benchmark rate for short-term
loans is the most appropriate national average commercial method of
short-term financing. The government of Sri Lanka provided weighted-average
lending rates of commercial banks published in the "Central Bank Annual
Surveys of Bank Deposits and Advances" interest rates on short-term
commercial bank loans. Because this bench mark rate is higher than the rates on
the pre- shipment export loans, we preliminarily determine that these loans
confer bounties or grants on the products under investigation. Applying this
benchmark rate we calculate a bounty or grant of 0.18 percent ad valorem for
certain textile mill products and 0.18 percent ad valorem for apparel.
II. Program Determined Not To Confer Bounties or Grants
We preliminarily determine that bounties or grants are not being provided to
manufacturers, producers, or exporters in Sri Lanka of certain textile mill
products and apparel under the following program.
Textile Self-Sufficiency Program
Petitioners alleged that the government of Sri Lanka provides the producers
and exporters of the subject merchandise with the following benefits under a
textile self-sufficiency program: modernization projects for mills that produce
fabrics and man-made fiber textile products, construction of new mills and
assistance to the powerloom sector. According to the responses, the
government of Sri Lanka does not administer a textitle self-sufficiency
program. The government, through the Ministry of Textile Industries, owns a
number of textile mills engaged in the production and sale of cotton and
synthetic textile products; however, none of the output of these mills is
exported to the United States. None of the producers and exporters selected to
respond to our questionnaire purchased the output of government-owned mills.
In addition to owning certain textile mills, the government of Sri Lanka
operator the State Trading Corporation of Sri Lanka, which is called Salusala.
Salusala was established to import textile products and distribute them in the
local market. The company also purchases from local mills, both private and
government-owned. According to the response, Salusala is not required to
purchase from government-owned mills and it sells all merchandise at market
prices.
The response also states that private companies exporting to the U.S. during
1983 have never received government assistance directed at improving mills or
constructing new ones.
Based on our review of the information on the record to date, we preliminarily
determine that no countervailable benefits are being provided to the selected
producers and exporters of the subject merchandise through
government-owned mills or through Salusala and that the government has not
provided any assistance to the selected producers and exporters for
improvement of existing mills or construction of new mills.
Verification
In accordance with section 776(a) of the Act, we will verify the data used in
making our final determination. As previously stated, we will not accept any
statement in the response that cannot be verified in 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 certain textiles and textile
products from Sri Lanka except for those of Texwood Industries, 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 such entry of this merchandise in the amount of 2.79 percent ad
valorem for certain testile mill products and 2.79 percent ad
*49690
valorem
for apparel. This suspension will remain in effect until further notice.
Public Comment
In accordance with § 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 2:00 on February 15, 1985, at the U.S.
Department of Commerce, Room 3708, 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 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 February 11, 1985. Oral
presentations will be limited to issues raised in the briefs. All written views
should be filed in accordance with 19 CFR 355.34, within 30 days of the
publication of this notice, at the above address and in at least 10 copies.
This notice is published pursuant to section 703(f) of the Act (19 U.S.C.
1671b(f)).
Dated: December 17, 1984.
Alan F. Holmer,
Deputy Assistant Secretary for Import Administration.
Appendix
List of TSUSA Codes Which Covered Sri Lanka's Exports of Certain Textile Mill
Products and Apparel to the United States in 1983.
[Note: The following TABLE/FORM is too wide to be displayed on one screen.
You must print it for a meaningful review of its contents. The table has been
divided into multiple pieces with each piece containing information to help you
assemble a printout of the table. The information for each piece includes: (1)
a three line message preceding the tabular data showing by line # and
character # the position of the upper left-hand corner of the piece and the
position of the piece within the entire table; and (2) a numeric scale
following the tabular data displaying the character positions.]
*******************************************************************************
******** This is piece 1. -- It begins at character 1 of table line 1. ********
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A. Textile Mill Products
Textile Furnishings
3630520 3633040 3635015 3635115 3635130 3641800
3661880 3662740 3662760 3662780 3664660 3667925
Miscellaneous
3855300 3865045
B. Apparel
Wearing Apparel
3762430 3762830 3765408 3765609 3765612 3765630
3790620 3790630 3790640 3790645 3792320 3792350
3793905 3794020 3794030 3794050 3794060 3794140
3794650 3794660 3794670 3795220 3795520 3795530
3795545 3795550 3795560 3795565 3796210 3796220
3796250 3796260 3796270 3796445 3796470 3797250
3798340 3798735 3799030 3799035 3799220 3799520
3799540 3799550 3799555 3799575 3799580 3799585
3830210 3830215 3830233 3830260 3830505 3830506
3830611 3830615 3830616 3830620 3830805 3830820
3830860 3832005 3832052 3832205 3832225 3832305
3832360 3832706 3832707 3832708 3832709 3832720
3832731 3832750 3832820 3832830 3832835 3833040
3833405 3833415 3833435 3833445 3833446 3833448
3833465 3833466 3833770 3834015 3834300 3834702
3834709 3834711 3834715 3834720 3834721 3834730
3834753 3834755 3834761 3834763 3834765 3834818
3835036 3835038 3835039 3835047 3835049 3835052
3835078 3835082 3835086 3835088 3835090 3835304
3836360 3836371 3836640 3837210 3837540 3837550
3838002 3838004 3838005 3838043 3838045 3838073
3838145 3838160 3838620 3838665 3839010 3839015
3839030 3839035 3839040 3839041 3839050 3839051
3839070 3839071 3839225 3839235 3839245 3839270
3839290 3839291
Gloves
7044010 7044025 7044504 7044506 7044508 7045015
709000
Luggage and Hand Bags
7063640 7064111
1...+...10....+...20....+...30....+...40....+...50....+...60....+...70....+....
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******* This is piece 2. -- It begins at character 80 of table line 1. ********
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3657865 3661855 ------
3676040
3790215 3790615 ------
3793110 3793120 ------
3794330 3794610 ------
3795535 3795540 ------
3796230 3796240 ------
3797620 3797630 ------
3799525 3799530 ------
3799643 3799650 ------
3830520 3830610 ------
3830841 3830850 ------
3832340 3832352 ------
3832725 3832730 ------
3833050 3833200 ------
3833450 3833460 ------
3834704 3834705 ------
3834747 3834749 ------
3834825 3835035 ------
3835062 3835072 ------
3835830 3836345 ------
3837560 3837708 ------
3838110 3838114 ------
3839020 3839025 ------
3839060 3839065 ------
3839273 3839276 ------
7048520 7048550 ------
80..+...90....+....0....+...1
[FR Doc. 84-33277 Filed 12-20-84; 8:45 am]
BILLING CODE 3510-DS-M