(Cite as: 51 FR 42891)
NOTICES
DEPARTMENT OF COMMERCE
[C-583-604]
Final Affirmative Countervailing Duty Determination: Certain Stainless Steel Cooking Ware from Taiwan
Wednesday, November 26, 1986
*42891 AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We determine that certain benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters in Taiwan of certain stainless steel cooking ware as described in the "Scope of Investigation" section of this notice. The estimated net subsidy is 2.14 percent ad valorem.
We have notified the United States International Trade Commission (ITC) of our determination. We are directing the U.S. Customs Service to suspend liquidation of all entries of stainless steel cooking ware from Taiwan that are entered, or withdrawn from warehouse, for consumption, on or after the date of publication of this notice, and to require a cash deposit or bond on entries of these products in the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 subsidy as described in the "Suspension of Liquidation" section of this notice.
EFFECTIVE DATE: November 26, 1986.
FOR FURTHER INFORMATION CONTACT:Jack Davies or Barbara Tillman, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 377-1785 or 377-2438.
SUPPLEMENTARY INFORMATION:
Final Determination
Based upon our investigation, we determine that certain benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Taiwan of certain stainless steel cooking ware. For purposes of this investigation, the following programs are found to confer subsidies:
- 25 Percent Income Tax Ceiling for Big Trading Companies
- Overrebate of Duty Drawback on Imported Materials Physically Incorporated in Export Merchandise
- Duty Drawback on Imported Materials Not Physically Incorporated in Export Merchandise
We determine the estimated net subsidy for certain stainless steel *42892 cooking ware to be 2.14 percent ad valorem.
Case History
On January 21, 1986, we received a petition filed in proper form by the Fair Trade Committee of the Cookware Manufacturers Association on behalf of the U.S. industry which manufactures certain stainless steel cooking ware. In compliance with the filing requirements of section 355.26 of the Commerce Regulations (19 CFR 355.26), the petition alleged that manufacturers, producers, or exporters in Taiwan of certain stainless steel cooking ware receive, directly or indirectly, subsidies within the meaning of section 701 of the Act, and that these imports materially injure, or threaten material injury to, a U.S. industry.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on February 10, 1986, we initiated the investigation (51 FR 6020, February 19, 1986). We stated that we expected to issue a preliminary determination by April 16, 1986.
Since Taiwan is a "country under the Agreement" within the meaning of section 701(b) of the Act, an injury determination is required for this investigation. Therefore, we notified the ITC of our initiation. On March 4, 1986, the ITC determined that there is a reasonable indication that imports of certain stainless steel cooking ware from Taiwan materially injure, or threaten material injury to, a U.S. industry (51 FR 9541, March 19, 1986).
We presented a questionnaire concerning the petitioner's allegations to the American Institute in Taiwan in Washington, DC on February 20, 1986. We received responses to the questionnaire on March 13, 19, and 31, 1986. There are five producers of the subject merchandise in Taiwan which accounted for a majority of the exports to the United States during the review period: Golden Lion Metal Industry Co., Ltd.; Song Far Co., Ltd.; Lyi Mean Industry Co., Ltd.; Crown Manufacturing Co., Ltd.; and First Stainless Steel Industry Co., Ltd. In addition, we selected seven trading companies, which accounted for a majority of the subject merchandise exported by these five producers to the United States during our review period, to respond to our questionnaire: Transmark International Corp.; Fairview International Corp.; Collins Co., Ltd.; Jack-Tom Industrial Co., Ltd.; D & J Industrial Co., Ltd.; Atico Corp.; and Pan-Orient Industrial Corporation.
On the basis of information contained in the responses, we made a preliminary negative countervailing duty determination on April 16, 1986 (51 FR 15520, April 24, 1986). On April 30, 1986, we extended the deadline date for the final determination in this investigation to September 15, 1986, to correspond to the dates of the final determinations in the antidumping duty investigations of the same products from Taiwan and Korea (51 FR 16882, May 7, 1986). This was done at the request of petitioner pursuant to section 705(a)(1) of the Tariff Act of 1930, as amended by section 606 of the Trade and Tariff Act of 1984 (PL 98-573). From May 19 to May 30, and September 1 to September 26, 1986, we conducted verification in Taiwan.
On August 1, 1986, the deadline dates for the final determination of the antidumping duty investigations of certain stainless steel cooking ware from Korea and Taiwan were postponed to no later than November 19, 1986. Accordingly, the final determination for the countervailing duty investigation of certain stainless steel cooking ware from Taiwan was also postponed to coincide with the antidumping duty determinations of the same products from Korea and Taiwan (51 FR 28610, August 8, 1986).
Petitioner submitted a request for a hearing, which was subsequently withdrawn with the consent of respondents. Both petitioner and respondents filed briefs discussing the issues arising in this investigation which have been taken into consideration in this determination.
Scope of Investigation
The products covered by this investigation are all non-electric cooking ware of stainless steel which may have one or more layers of aluminum, copper, or carbon steel for more even heat distribution. These products are provided for in item number 653.94 of the Tariff Schedules of the United States (TSUS). The products covered by this investigation are skillets, fry pans, omelette pans, sauce pans, double boilers, stock pots, sauce pots, dutch ovens, casseroles, steamers, and other stainless steel vessels, all for cooking on stove top burners, except tea kettles and fish poachers. Excluded from the scope of investigation are stainless steel oven ware and stinless steel kitchen ware, which are also included under the 653.94 TSUS classification.
Analysis of Programs
Throughout this notice, we refer to certain general principles applied to the facts of the current investigation. These principles are described in the *42893 "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" (49 FR 18006, April 26, 1984).
For purposes of this determination, the period for which we are measuring subsidies (the review period) is calendar year 1985. Based upon our analysis of the petition, the responses to our questionnaires, verification, and comments filed by petitioner and respondents, we determine the following:
I. PROGRAMS DETERMINED TO CONFER SUBSIDIES
We determine that subsidies are being provided to manufacturers, producers, or exporters in Taiwan of certain stainless steel cooking ware under the following programs:
Article 31 of the Statute for Encouragement of Investment (SEI) permits exporters to establish an export loss reserve of up to one percent of the previous year's export exchange settlement to be used exclusively for compensating export losses. Companies treat the export loss reserve as a business expense and deduct it from taxable income in one year, then balance the account and carry the reserve funds forward as taxable income for the next year. Song Far Industry Co., Ltd., a producer of certain stainless steel cooking ware, reported that it used this program during the review period.
Because the export loss reserve is contingent on export sales, we determine that it confers a benefit which constitutes an export subsidy. To calculate the benefits, we treated the tax savings from the export loss reserve as a one- year, interest-free loan. We compared the interest-free rate with the maximum short-term lending rate set by the Central Bank of China, multiplied the difference by the amount of the tax savings, and then allocated the benefit over the total 1985 export sales of all products by the five manufacturers who responded to our questionnaire. The estimated net subsidy is 0.001 percent ad valorem.
B. 25 Percent Income Tax Ceiling for Big Trading Companies
Article 15 of the SEI permits productive enterprises and big trading companies to pay no more than 25 percent corporate income tax on income exceeding
In the "Final Negative Countervailing Duty Determination: Porcelain-on-Steel Cooking Ware from Taiwan" (51 FR 36453, October 10, 1986), we determined that this program was available to only a select number of trading companies based on export performance. In examining the criteria used to determine "big- trading company" status, we learned that to be eligible a trading company had to comply with all of the following: (1) Have a predetermined annual income from exports; (2) maintain outstanding capital in excess of NT$200 million; (3) operate only an export-import business; and (4) maintain overseas subsidiaries in more than three countries. Since the preferential tax treatment extended to big trading companies is based on export performance we determined that this program conferred an export subsidy.
Collins Co., Ltd., a respondent in this investigation, was designated as a big trading company in 1984 and 1985. At verification, we found that Collins Co., Ltd. had calculated its 1984 tax, which was payable during the review period, payable at the 25 percent rate. To calculate the subsidy, we computed Collins' tax savings resulting from the difference in the 25 and 35 percent rates. We allocated a portion of the tax savings to the manufacturers who exported the products under investigation to the United States through Collins. We then divided the benefits allocated to these manufacturers by their 1985 exports of the subject merchandise to the United States. The estimated net subsidy is 0.010 percent ad valorem.
C. Overrebate of Duty Drawback on Imported Materials Physically Incorporated in Export Merchandise
Based on an allegation raised by the petitioner after our preliminary negative countervailing duty determination in this investigation, we examined the duty drawback system in Taiwan regarding exports of stainless steel cooking ware.
Duty drawback in Taiwan is given on certain imported materials used to produce certain export products. Duty drawback is refunded on a shipment-by-shipment basis and is calculated by applying a pre-established duty drawback rate to the net weight of the finished product in each export shipment. The duty drawback rate is approved by the Taiwan authorities for each export product based on raw material usage and production yield data submitted by manufacturers of the export product.
For the stainless steel cooking ware under investigation, the Taiwan authorities established an authorized loss rate for raw materials used in the manufacture of exported goods. Duty drawback includes the amount of duty remitted on the loss or wastage for the raw material. For stainless steel sheet or coil used in the production of cooking ware, the input ratio imputed in Taiwan duty drawback rate is 1.48. For example, to claim duty drawback on an exported pot weighing 1 kilogram, 1.48 kilograms of stainless steel is assumed to be physically-incorporated in the exported pot. These allowable loss rates include material which may later be sold as scrap.
We have determined that a duty drawback program which includes some amount for loss or wastage in the calculation of the amount to be remitted on raw materials used in the manufacture of exported goods is not necessarily countervailable. The rates only become countervailable when they are unreasonable or excessive. We consider duty drawback received on recoverable scrap to constitute an unreasonable or excessive rebate of customs duties. Therefore, when loss or wastage rates include an amount for recoverable scrap, we would find that the rates are excessive and, thus, countervailable.
During the verification, we reviewed summary worksheets used by the Taiwan authorities to calculate the loss rate. However, because the loss rates calculated by the Taiwan authorities were not based directly on stainless steel cooking ware, but rather on other stainless steel kitchenware that are grouped and classified by the Taiwan authorities in the same duty drawback category as is cookware we considered it necessary to examine the companies' information concerning loss rates.
In this case, we compared the loss rate approved by the Taiwan authorities to the loss rate of Song Far, excluding from our comparison the loss attributable to recoverable scrap. Making this comparison, we find that the Taiwan authorities' established loss rate is excessive. As such, we find that in this case, a portion of the duty drawback is countervailable. To calculate the benefit from the excessive drawback, we multiplied the percentage of the excessive duty drawback by the total amount of duty drawback for Golden Lion, Song Far, and Lyi Mean (the only companies for which we had information concerning duty drawback). Dividing by total exports of those producers, we calculated an estimated net subsidy of 2.128 percent ad valorem.
*42894 D. Rebate of Import Duties and Indirect Taxes on Imported Materials Not Physically Incorporated in Export Merchandise
At verification, we found that Song Far had received duty drawback on two types of liquid polish used to polish stainless steel metal in the subject merchandise. Since it was not demonstrated at verification that such liquid metal polishes are physically incorporated in the exported product, we determine that the duty drawback of import duties and indirect harbor taxes on imported liquid polish constitutes a countervailable benefit to manufacturers and producers of standless steel cooking ware.
Duty drawback on these two types of liquid metal polish was received by Song Far only on export shipments of the subject merchandise made on or after November 26, 1985. For those export shipments made after this date and during the review period, we computed the amount of duty drawback attributable to the liquid metal polish and divided this amount by total 1985 exports of Song Far, Golden Lion, and Lyi Mean to arrive at a net subsidy of 0.002 percent ad valorem.
II. PROGRAM DETERMINED NOT TO CONFER SUBSIDIES
We determine that subsidies are not being provided to manufacturers, producers, or exporters in Taiwan of certain stainless steel cooking ware under the following program:
A. Development Loans under Article 84 of the SEI for the Purchase of Local Taiwan-made Machinery
At verification, we found that Golden Lion had received development loans under Article 84 of the SEI for the Medium Business Bank of Taiwan (MBBT) for the purchase of local Taiwan-made machinery.
Under Article 84 of the SEI, the Executive Yuan Development Fund provides funds from the Taiwan budget for certain development purposes to different agencies, one of which is the MBBT. The MBBT is owned by the Taiwan authorities and is operated as a profit making bank. The bank is required to provide at least 70 percent of its lending to small- and medium-size businesses in Taiwan. MBBT makes three types of development loans under Article 84 of the SEI: (1) Purchase of local Taiwan-made machinery, (2) purchase of automated machinery, and (3) manufacture of strategic products. Approximately 25 percent of the funds for these development loans are provided by the Executive Yuan Development Fund.
MBBT authorities stated that any productive enterprise as defined under Article 3 of the SEI, is eligible to apply for a development loan to purchase local Taiwan-made machinery. We examined MBBT loan records and found that a variety of industry sectors had received development loans to purchase local Taiwan-made machinery, including electric fans, plastic injection molds, rubber foam sponge, automobile parts, sewing machines, wood furniture, unfinished textiles, cardboard, cotton weaving, lanolin for cosmetics, floor tiles, surgical bandages, plastic pipe, glass molding machines, steel castings, plumbing equipment, general hardware equipment, vacuum cleaner parts, and printed circuit boards.
We have determined in previous final countervailing duty determinations that the term "productive enterprises" as defined in Article 3 of the SEI, does not limit application to a specific enterprise or industry or a group of enterprises or industries. Furthermore, the MBBT loan records show that development loans for the purchase of local Taiwan-made machinery are not provided to a specific enterprise or industry, or group of enterprises or industries. Therefore, we determine that development loans under Article 84 of the SEI for the purchase of local Taiwan-made machinery are not countervailable.
III. PROGRAMS DETERMINED NOT TO BE USED
We determine that manufacturers, producers, or exporters in Taiwan of certain stainless steel cooking ware did not use the following programs.
A. Preferential Export Financing
The Export Loan Discount Regulations of the Central Bank of China permit registered exporters to apply for low-cost export loans upon presentation of a letter of credit. Authorized commercial banks provide export loans at normal commercial rates, then apply for interest rate reductions from the Central Bank. If the Central Bank approves the reduction, commercial banks correspondingly reduce the lending rate to the exporters. With the exception of Trans World Prosperity, none of the companies under investigation obtained export financing under this program during the review period.
Trans World Prosperity is a trading company related to Transmark International Company, a respondent in this investigation. At verification, we found that Trans World Prosperity had used export loans during the review period which had interest rates at the export loan interest rate approved by the Central Bank of China. We verified that none of these export loans were used to finance exports of the products under investigation to the United States during the review period.
B. Duty Exemptions and Deferrals on Imported Equipment
Article 21 of the SEI allows productive enterprises to pay import duties and dues on selected capital equipment in a series of installments beginning one year from the date of importation. In addition, qualified enterprises are exempt from import duties on selected machinery and equipment used for the establishment or expansion of an approved project or for research and development. None of the companies under investigation used duty exemptions or deferrals on imported equipment during the review period.
C. 22 Percent Income Tax Ceiling
Article 15 of the SEI permits capital-intensive and/or technology-intensive enterprises engaged in the basic metal production industry, heavy machinery industry, or petrochemical industry to use a marginal tax rate of 22 percent, instead of the 35 percent rate required by Taiwan's income tax law. None of the companies under investigation claimed the 22 percent income tax rate during the review period.
D. Accelerated Depreciation and Tax Holiday
Article 6 of the SEI allows newly established "productive enterprises" either to use accelerated depreciation on fixed assets, machinery, and equipment or to select a five-year holiday on corporate income taxes. In addition, expanding firms may participate in a four-year tax holiday on increased profits from expansion or a rapid depreciation of newly purchased buildings or equipment. None of the companies under investigation applied for or received benefits under Article 6 of the SEI during the review period.
Petitioner's Comments
Comment 1: Petitioner argues that rebates of import duties and taxes levied on imported raw materials not physically incorporated in exported merchandise are countervailable.
DOC Position: We agree. (See actions I.C and I.D above.)
Comment 2: Petitioner argues that the system of deferred payment of import duties and harbor taxes applicable to producers of stainless steel cooking ware is countervailable because the system allows deferred payment of *42895 import duties and harbor taxes until after the raw materials have been used to produce cooking ware for export. The benefit is equal to the value of an interest free loan for the amount of duties and taxes which should have been paid at the time of importation of the raw materials.
DOC Position: This allegation was brought to our attention late in the investigation. We therefore were unable to gather sufficient information at verification upon which to make a determination. This issue will be addressed in any eventual administrative review under section 751 of the Act, if requested.
Comment 3: Petitioner maintains that the long-term development loans received by Golden Lion for purchase of local Taiwan-made machinery are preferential in nature of thus are countervailable.
DOC Position: We disagree. As stated in section II.A. above, we have determined that these loans are not limited to a specific enterprise or industry or group thereof, and are therefore not countervailable.
Comment 4: Petitioner argues that the preferential export financing received by Trans World Prosperity and Collins Co., Ltd., under the Export Discount Regulation of the CBC is countervailable.
DOC Position: During verification at Trans World Prosperity and Collins Co., Ltd., we examined company accounting records and export documents on each of the export loans provided under the Export Loan Discount Regulations. We found that all of the export loans received were used to finance exports of merchandise other than that under investigation.
Comment 5: Petitioner contends that the tax benefits received by Collins Co., Ltd., as a result of being designated a "big trading company" in 1984 and 1985 are countervailable.
DOC Position: We agree. (See section I.B. above.)
Comment 6: Petitioner argues that all benefits received by Song Far as a result of the export loss reserve are contervailable.
DOC Position: We calculated the tax savings achieved by Song Far based on the actual amount of the export loss reserve deduction claimed on Song Far's 1984 income tax return which was filed during the review period. See our discussion in Section I.A. above.
Comment 7: Petitioner argues that stainless steel cooking ware producers in Taiwan receive a countervailable overrebate of duty drawback because the Taiwan duty drawback system appears to grant rebates based, in part, on the weight of packing materials purchased in the home market.
DOC Position: At verification, we found that duty drawback was calculated by applying the duty drawback rate for stainless steel cooking ware to the net weight, not gross weight, listed on the export declaration. Therefore, the duty drawback rate did not include the weight of packing materials.
Respondents' Comments
Comment 1: Respondents argue that the wastage factor necessary to account for the amount of raw materials required to produce the finished export product is not countervailable.
DOC Position: We agree that loss or wastage rates used in the determination of duty drawback rates are not necessarily countervailable. However, when the wastage rates are excessive, the excess is countervailable. (See sections I.C. and I.D. above.)
Comment 2: Respondents contend that the deferral of payment on import duties and taxes does not confer a countervailable benefit on Taiwan producers of stainless steel cooking ware.
DOC Position: This issue will be addressed in any eventual administrative review under section 751 of the Act, if requested. (See DOC Position to Petitioner's Comment 2 above.)
Comment 3: Respondents maintain that the long-term development loans received by Golden Lion under article 84 of the SEI are available to a wide selection of industries and are not targeted to any specific enterprise or industry, or group of enterprises or industries.
DOC Position: We agree. (See section II.A. above.)
Comment 4: Respondents argue that export financing received by Trans World Prosperity and Collins Co., Ltd. is not countervailable because none of the export loans under consideration were made for shipments of the merchandise under investigation.
DOC Position: We agree. (See section III.A. above.)
Comment 5: Respondents contend that the benefits received by Collins Co., Ltd. as a big trading company are not countervailable because the 25 percent income tax ceiling is available to an enormous number and variety of enterprises in Taiwan.
DOC Position: We disagree. (See section I.B. above.)
Verification
In accordance with 776(a) of the Act, we verified the data used in making our final determination. We conducted verification in Taiwan during May 19 to 30, and a follow-up verification during September 1 to 26, 1986. During verification, we followed normal verification procedures, including meeting with government officials and inspection of documents, as well as on-site inspection of the accounting and financal records of the companies producing and exporting the merchandise under investigation to the United States.
Administrative Procedures
We afforded interested parties an opportunity to present information and written views in accordance with Commerce regulations (19 CFR 355.34(a)). Petitioner, after requesting a hearing, withdraw his request with the consent of respondents. Therefore, a hearing was not held in this investigation. Written views have been received and were considered in reaching this final determination.
Suspension of Liquidation
In accordance with section 705(c)(1)(B) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of the subject merchandise from Taiwan 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 equal to 2.14 percent ad valorem for each entry of this merchandise.
ITC Notification
In accordance with section 705(c) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all privileged and proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Import Administration.
The ITC will determine whether these imports materially injure or threaten material injury to a U.S. industry within 75 days after the date of this determination. If the ITC determines that material injury, or the threat of material injury, does not exist, this proceeding will be terminated and all estimated duties deposited or securities posted as a result of the suspension of liquidation will be refunded or *42896 cancelled. If, however, the ITC determines that such injury exists, we will issue a countervailing duty order, directing the Customs officers to continue suspension of liquidation and to collect cash deposits on all entries of certain steel cooking ware from Taiwan entered, or withdrawn from warehouse, for consumption, as described in the " Suspension of Liquidation" section of this notice.
This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)).
November 19, 1986.
Paul Freedenberg,
Assistant Secretary for Trade Administration.
[FR Doc. 86-26663 Filed 11-25-86; 8:45 am]
BILLING CODE 3510-DS-M