53 FR 43460

                                   NOTICES

                           DEPARTMENT OF COMMERCE

                      International Trade Administration

                                  [C-401-056]

    Viscose Rayon Staple Fiber from Sweden; Preliminary Results of Countervailing
                           Duty Administrative Review

                            Thursday, October 27, 1988

*43460

AGENCY: International Trade Administration, Import Administration, Department of
Commerce.

ACTION: Notice of preliminary results of countervailing duty administrative review.

SUMMARY: The Department of Commerce has conducted an administrative review of the
  countervailing duty order on viscose rayon staple fiber from Sweden. We preliminarily
determine the net subsidy to be 14.93 percent ad valorem for the period January 1, 1986 through
December 31, 1986. We invite interested parties to comment on these preliminary results.

EFFECTIVE DATE: October 27, 1988.

FOR FURTHER INFORMATION CONTACT:Cynthia Sewell or Paul McGarr, Office of Compliance,
  International Trade Administration, U.S. Department of Commerce, Washington, DC
20230; telephone: (202) 377-3337.

SUPPLEMENTARY INFORMATION:

Background

On August 31, 1987, the Department of Commerce ("the Department") published in the Federal
Register (52 FR 32822) the final results of its last administrative review of the countervailing
duty order on viscose rayon staple fiber from Sweden (48 FR 50914, November 4, 1983). On
May 28, 1987, the petitioner, the 
U.S. Rayon Producers Committee, requested in accordance with § 355.10 of the Commerce
Regulations an administrative review of the order. We published the initiation on June 19, 1987 (52
FR 23330). The Department has now conducted that administrative review in accordance with
section 751 of the Tariff Act of 1930 ("the Tariff Act").

Scope of Review

The United States has developed a system of tariff classification based on the international
harmonized system of Customs nomenclature. We will be providing both the appropriate Tariff
Schedules of the United States Annotated ("TSUSA") item numbers and the appropriate Harmonized
System ("HS") item numbers with our product descriptions. As with the TSUSA, the HS item
numbers are provided for convenience and Customs purposes. The written description remains
dispositive.
We are requesting petitioners to include the appropriate HS item number(s) as well as the TSUSA
item number(s) in all new petitions filed with the Department. A reference copy of the proposed
Harmonized System schedule is available for consultation at the Central Records Unit, Room
B-099, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC
20230. Additionally, all Customs offices have reference copies and petitioners may contact the
Import Specialist at their local Customs office to consult the schedule.
Imports covered by the review are shipments of Swedish regular viscose rayon staple fiber and
high-wet modulus ("modal") viscose rayon staple fiber. Such merchandise is currently classifiable
under TSUSA item numbers 309.4320 and 309.4325. These products are currently classifiable
under HS item numbers 5504.10.00-2 and 5504.90.00-2.
The review covers the period January 1, 1986 through December 31, 1986 and three programs. The
only known Swedish exporter of this merchandise to the United States is Svenska Rayon, AB.

Analysis of Programs

(1) Loans/Grants for Plant Creation

Under three agreements, the Swedish government provided Svenska with interest- free loans for
the creation of a modal fiber plant. The agreements provided that the Swedish government would
forgive the loans in equal amounts over ten years if Svenska maintained its modal fiber production
capacity for ten years. If Svenska eliminated this production capacity prior to the end of the
ten-year period, the agreements also provided that the remaining amount of the outstanding
principal would fall due immediately.

The first agreement, Project 77, was concluded in 1975, and the Swedish government disbursed
the funds between 1975 and 1977. The second agreement, Project 81, was concluded in 1978 and
the funds disbursed between 1978 and 1981. In 1979, the Swedish government provided a final
interest-free loan to Svenska for pollution control improvements to the modal fiber plant.
Forgiveness of these loans began when the equipment purchased went into operation. Although
Svenska had modified its modal fiber plant to produce regular fiber, it maintained the modal fiber
production facilities through the latter part of 1985. Accordingly, the Swedish government forgave
ten percent of the total disbursements to Svenska under Project 77 in each year from 1978 through
1985. Similarly, the Swedish government forgave ten percent of the total disbursement under
Project 81 in each year from 1981 through 1985 and ten percent of the environmental loan in each
year from 1980 through 1985.
In our previous reviews of this order, we treated each ten-percent forgiveness as a grant and
considered the benefit stream from each grant to be the remaining life of the loan. We treated the
unforgiven portions of these loans as contingent liabilities because Svenska's yearly ten-percent
forgiveness was contingent upon its maintaining modal fiber production capacity. (See, the
preliminary results of review on rayon staple fiber from Sweden (51 FR 29145, August 15,
1986).)
In late 1985, however, Svenska permanently discontinued all modal fiber 
production and closed the modal fiber plant designed and developed for production of such fiber.
In 1986, the Swedish Government concluded negotiations with Svenska which resulted in
forgiveness of Svenska's remaining indebtedness from the plant creation and pollution control. The
effective date for forgiveness was May 28, 1986.
If we had known that the contingency for forgiveness originally imposed by the Swedish
government would never actually be enforced (i.e., the Swedish government forgave Svenska's
remaining loan balances even though the company ceased to produce modal fiber), we would have
from the outset considered these "loans" as outright grants, and applied a declining balance
methodology to measure the benefit. That is, we would have allocated the benefits from each grant
over the 10-year average useful life of assets in the rayon fiber industry, according to the "Asset
Guideline Classes" of the Internal Revenue Service, and assessed countervailing duties
accordingly. Since it is now apparent that these loans were in fact grants, we have retrospectively
recalculated the benefit streams using the declining balance methodology. We used as discount
rates the national average corporate bond rates in Sweden for the years in which each grant
was received (obtained from the Monthly Digest of Swedish Statistics, a Swedish government
publication). We consider those rates to be the best information available because we have no
information on Svenska's weighted cost of capital for those years. Because our current and 
prior methodologies produced different benefit streams, we have adjusted our calculations to

*43461

account for benefits previously countervailed to ensure that those benefits will not be
countervailed in this or subsequent reviews.
We allocated the benefits attributable to the review period over the value of Svenska's net sales
during the review period. On this basis, we preliminarily determine the benefit from this program
to be 10.58 percent ad valorem.

(2) Elderly Employment Compensation Program 

The Swedish government provided a subsidy to certain companies within the textile and clothing
industries through a special employment contribution for older workers. This program provided
compensation to a company based upon the number of hours worked by employees over 50 years
of age. A company participating in the program had to agree not to dismiss or release redundant
employees of any age for any reason other than normal attrition. Payments were calculated on the
basis of 28 kronor per hour for employees over age 50 who wer involved in production. The
payments could not exceed 15 percent of the compnay's total labor costs.
Svenska received its last payment under this program in July 1982. In January 
1983, the Swedish government excluded the rayon fiber industry, including Svenska, from this
program. Using the declining balance methodology referred to above, we calculated Svenka's
benefit by allocating the 1982 payment over ten years, the average useful life of assets in the rayon
fiber industry. We used Svenska's 1982 weighted cost of capital as the discount rate.
We allocated the benefit attributable to the review period over the value of Svenska's net sales
during the review period. On this basis, we preliminarily determine the benefit from this program
to be 0.46 percent ad valorem.

(3) Grant for Manpower Reduction and Conditional Loan 

The Swedish government concluded an agreement with Svenska in 1980 consisting of two parts: a
grant for manpower reduction and a conditional loan to cover operating losses. The grant was
intended to compensate the company for maintaining redundant employees longer than collective
agreements and employment protection laws required, and for retraining employees to work
elsewhere within the KF Industri group (the group of firms, including Svenska, owned directly or
indirectly by Kooperativa Forbundet). The grant was paid through the National Labor Market
Board in two installments, one in December 1980, and the other in July 1981. Svenska received no
new manpower production grants during the period of review.

Using the declining balance methodology, we allocated each grant over ten years, the average
useful life of assets in the rayon fiber industry. We used as a discount rate the national average
corporate bond rate in Sweden for 1980, the year in which the agreement was reached.
We allocated the benefit attributable to the review period over the value of Svenska's net sales
during the review period. On this basis, we preliminarily determine the benefit from this grant to be
0.59 percent ad valorem.
For the conditional loan part of the 1980 agreement, the terms (including the length) and
conditions depended on the company's profit levels. The conditional loan was disbursed in three
installments between 1980 and 1982. Under the original agreement, the Swedish government
would forgive portions of the outstanding principal and interest of the loan if Svenska did not make
a sufficient profit (as determined by a confidential formula concluded between the Swedish
government and Svenska). If Svenska attained the requisite level of profit, it would have to repay a
certain portion of the loan, including interest. Svenska did not make a sufficient profit in any year
between 1983 and 1985, and the Swedish government forgave the yearly repayment of the loan in
1983, 1984 and 1985. On May 28, 1986, in conjuntion with the forgiveness of the loans/grants for
plant creation, the Swedish government forgave the total outstanding balance of this loan.
Because Svenska never made any payments on this loan, which was forgiven 
in its entirely over four years, we have reconsidered our methodology and are treating each of the
three loan installments as grants given in the year of receipt. As with the loans/grants for plant
creation program, we have applied the declining balance methodology, allocating benefits from
each grant over the 10-year average useful life of assets in the rayon fiber industry, and have
adjusted our calculations to account for benefits previously countervailed.
We allocated the benefit attributable to the review period over the value of Svenska's net sales
during the review period. On this basis, we preliminarily determined the benefit from the
conditional loan to be 3.30 percent ad valorem.

Preliminary Results of Review

As a result of our review, we preliminarily determine the net subsidy to be 14.93 percent ad
valorem for the period January 1, 1986 through December 31, 1986.
The Department intends to instruct the Customs Service to assess countervailing duties of
14.93 percent of the f.o.b. invoice price on all shipments of this merchandise exported on or after
January 1, 1986 and on or before December 31, 1986.
Further, the Department intends to instruct the Customs Service to collect a cash deposit of
estimated countervailing duties, as provided by section 
751(a)(1) of the Tariff Act, of 14.93 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 this administrative review. This deposit requirement shall remain
in effect until publication of the final results of the next administrative review.
Interested parties may submit written comments on these preliminary results within 30 days of the
date of publication of this notice and may request disclosure and/or a hearing within 10 days of the
date of publication. Any hearing, if requested, will be held 30 days after the date of publication or
the last workday preceding. 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 this
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 19 CFR 355.10.

Jan W. Mares,

Assistant Secretary, Import Administration.

Date: October 17, 1988.

[FR Doc. 88-24879 Filed 10-26-88; 8:45 am]

BILLING CODE 3510-DS-M