52 FR 27444
NOTICES
DEPARTMENT OF COMMERCE
[C-549-701]
Preliminary Affirmative Countervailing Duty Determination: Certain Steel Wire
Nails From Thailand
Tuesday, July 21, 1987
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AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminary 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 Thailand of certain steel wire nails as
described in the "Scope of Investigation" section of this notice. The estimated net bounty or grant is
1.10 percent ad valorem for all manufacturers, producers or exporters in Thailand of certain
steel wire nails.
We are directing the U.S. Customs Service to suspend liquidation of all entries of certain steel wire
nails from Thailand that are entered, or withdrawn from warehouse, for consumption on or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 bounty or grant.
If the investigation proceeds normally, we will make a final determination by September 28, 1987.
EFFECTIVE DATE: July 21, 1987.
FOR FURTHER INFORMATION CONTACT:Roy Malmrose 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) 377-2815 or 377-2438.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based on our investigation, we preliminary determine that there is a 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
Thailand of certain steel wire nails. For purposes of this investigation, the following programs
are preliminarily found to confer bounties or grants:
- Export Packing Credits
- Tax Certificates for Exports
- Assistance to Trading Companies Under the Investment Promotion Act (Double Deduction of
Foreign Marketing Expenses and Foreign Taxes)
We preliminarily determine the estimated net bounty or grant to be 1.10 percent ad valorem for all
manufacturers, producers or exporters in Thailand of certain steel wire nails.
Case History
Since the last Federal Register publication pertaining to this investigation
[the Notice of Initiation (52 FR 18591, May 18, 1987], the following events have occurred. On May
20, 1987, we presented a questionnaire to the Government of Thailand in Washington, DC
concerning petitioners' allegations. On June 22, 1987, we received a response from the government
and responses from two producers, K.Y. Intertrade Co., Ltd. (K.Y.I.) and Thai Nail Works Co., Ltd.
Asoke International Trading Company (Asoke), a trading company through which K.Y.I. exported
steel wire nails to the United States, also responded to our questionnaire.
Scope of Investigation
The products covered by this investigation are certain steel wire nails from Thailand. These
nails are: one-piece steel nails made of round wire, as currently provided for in Tariff Schedules of
the United States Annotated item numbers 646.2500, 646.2610-90, and 646.3040; two-piece steel
wire nails as currently provided for in item number 646.3200; and nails with steel wire shanks and
lead heads, as currently provided for in item number 646.3600. These products are currently
classifiable under Harmonized System
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item numbers 7317.00.55, 7317.00.65, 7317.00.75 and 7616.10.10.
Analysis of Programs
Throughout this notice, we refer to certain principles applied to the facts of the current
investigation. These general 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 (49 FR 18006,
April 26, 1984).
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 are subject to verification. If the response cannot be supported at verification and
the program is otherwise counter-vailable, 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 calendar year 1986, which corresponds to all three companies' most
recently completed fiscal year. Based upon our analysis of the petition and the responses to our
questionnaire, we preliminarily determine the following:
I. Programs Preliminarily Determined To Confer Bounties or Grants
We preliminarily determine that bounties or grants are being provided to manufacturers,
producers and exporters in Thailand of steel wire nails under the following programs.
A. Export Packing Credits
Export packing credits are short-term loans used for either pre-shipment or post-shipment
financing. According to the government response, there have been several changes in this program
since the Department's last investigation involving exports from Thailand [See Final
Affirmative Countervailing Duty Determination and Countervailing Duty Order:
Rice from Thailand, (50 FR 12356, April 10, 1986) (Rice from Thailand)]. Under
the "Regulations Governing the Purchase of Promissory Notes Arising from Exports" (B.E. 2528),
effective January 2, 1986, the Bank of Thailand will repurchase promissory notes issued by
creditworthy exporters through commercial banks. The central bank previously rediscounted
promissory notes under this program.
Under the new regulations, exporters apply to commercial banks for export packing credits; the
banks, in turn, must submit an application to the Bank of Thailand for approval. To qualify for
the repurchase arrangement, promissory notes must be supported by a letter of credit, sales
contract,
purchase order, usance bill or warehouse receipt. The notes are available for up to 180 days, and
interest is paid on the due date of the loan rather than the date of receipt.
From January 2, 1986 to March 26, 1986, commercial banks charged a maximum interest rate of
eight percent per annum for export packing credits, and the Bank of Thailand repurchased
these loans from commercial banks at five percent per annum. Effective March 27, 1986, the
interest rates changed to seven percent and four percent per annum, respectively.
Because only exporters are eligible for these loans, we preliminarily determine that they are
countervailable to the extent that they are provided at preferential rates. As the benchmark for
short-term loans, it is our practice to use the national average commercial interest rate or the most
comparable, predominant commercial interest rate for short-term financing. For purposes of this
determination, we are using the weighted-average interest rate charged by commercial banks on
short-term domestic loans, bills and overdrafts during 1986. The data used to calculate this
weighted-average interest rate was provided in the government response. Comparing this
weighted-average interest rate to the rate charged on export packing credits, we find that the rate
on export packing credits is preferential and, therefore, these loans confer bounties or grants on
the subject merchandise. Applying this weighted-average commercial bank interest rate as the
benchmark, we calculate an estimated net
bounty or grant of 0.50 percent ad valorem for steel wire nails.
B. Tax Certificates for Exports
The Government of Thailand issues tax certificates to exporters to rebate indirect taxes and
import duties on inputs into exported products. This rebate program is provided for in the "Tax and
Duty Compensation of Exported Goods Produced in the Kingdom Act" (hereinafter the Tax and Duty
Act). The rebate rates under the Tax and Duty Act are computed on the basis of an input/output
(I/O) study initially published in 1980, based on 1975 data, and updated in 1985 using 1980 data.
Using the I/O study, the Thai Ministry of Finance computes the value of total inputs (both imports
and local purchases) at ex-factory prices. It also calculates the import duties and indirect taxes on
each input. The Ministry then calculates two rebate rates. The "A" rate includes both import duties
and indirect domestic taxes. The "B" rate includes only indirect domestic taxes. The "B" rate is
claimed when firms participate in Thailand's individual customs duty drawback program, duty
exemption programs on imported raw materials, or when firms do not use imported materials in
their production process. The "A" or "B" rate, as appropriate, is then applied to the FOB value of the
export to determine the amount of rebate that will be provided.
Under the Tax and Duty Act, the rebates are paid to companies through tax certificates which can
be used to pay other tax liabilities. These tax certificates can also be transferred to other companies
which can use them to pay their tax liabilities.
The rebate rates in effect from December 1, 1981 to February 4, 1986 were set forth in the
Notification of the Ministry of Finance No. Or. 1/2524. These rates were based on the I/O study
published in 1980. The "A" and "B" rates for nail exports based on the I/O study published in 1980
were 3.71 percent and 1.96 percent, respectively. A new I/O study based on data collected in 1980
was completed in 1985. New rates announced February 5, 1986 were computed using the study
published in 1985. Since February 1986, the "A" rate is 7.19 percent and the "B" rate is 0.59 percent
for nail exports. According to the responses, Thai Nail Works claimed and received tax certificates
at the "A" rate and K.Y.I. at the "B" rate. Furthermore, all certificates earned by Asoke, a trading
company used by K.Y.I., on exports of K.Y.I. nails, were transferred back to K.Y.I.
To determine whether an indirect tax rebate system which incorporates rebates of import duties
confers a bounty or grant, we must apply the following analysis. First, we examine whether the
system is intended to operate as a rebate of both indirect taxes and import duties. Next, we analyze
whether the government properly ascertained the level of the rebate. This includes a
review of the sample used in the study, including the documentation and the accuracy of the
information gathered from the sample on input coefficients, import prices and rates of duty on
imported inputs, the ratio of imported inputs to domestically produced inputs (when, for a given
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imported input, there is also domestic production of the input), and the exchange rates used to
convert import prices denominated in a foreign currency to the local currency. Finally, we review
whether the rebate schedules are revised periodically in order to determine if the rebate amount
reflects the amount of duty and indirect taxes paid.
When the I/O study upon which the indirect tax and import duty rebate system is based meets
these conditions, the Department will consider that the system does not confer a bounty or grant if
the amount rebated for duties and indirect taxes on physically incorporated inputs does not exceed
the fixed amount set in the rebate schedule for the exported product. When the system rebates
duties and indirect taxes on both physically incorporated and non-physically incorporated inputs,
we would find a bounty or grant exists to the extent that the fixed rebate exceeds the allowable
rebate on physically incorporated inputs.
In the Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order: Certain Apparel from Thailand (50 FR 9818, 9820, March 12, 1985) (Apparel from
Thailand), we examined Thailand's rebate system under the Tax and
Duty Act. We found that the program was intended to rebate indirect taxes and import duties and
that the rebate rates had been reasonably calculated. However, to the extent that the program
rebates indirect taxes and import duties on non-physically incorporated inputs, the remissions are
excessive.
In this investigation, to determine whether, and the extent to which, the tax certificates confer an
excessive remission of indirect taxes, we calculated the indirect tax incidence under the most
recent I/O Table on physically incorporated inputs at FOB prices. We then calculated the
percentage amount by which the authorized rebate rate exceeds the allowable rebate. Using this
methodology, the overrebate on the "A" rate is 1.56 percent and the overrebate on the "B" rate is
0.20 percent.
To determine the estimated net bounty or grant, we weight-averaged the overrebates received by
each producer under the current rates by each company's proportion of the value of Thai exports
of steel wire nails to the United States. On this basis, we calculate an estimated net bounty or grant
of 0.26 percent ad valorem.
C. Assistance to Trading Companies Under the Investment Promotion Act: Double Deduction of
Foreign Marketing Expenses and Foreign Taxes.
Pursuant to section 16 of the Investment Promotion Act, the Board of
Investment issued Announcement No. 40/2521. This announcement designated international
trading companies as eligible for promotion. Although this program was terminated for
international trading companies not granted promotion prior to March 2, 1981, companies granted
promotion before the termination continued to be eligible for benefits under the program. Asoke
received its investment incentive license on February 20, 1980, prior to the termination date.
Pursuant to this license, Asoke was eligible to receive each of the benefits listed in the
announcement. These benefits include:
- Duty exemptions for both raw and essential materials used in export production;
- Exemption of certain business taxes;
- Exemption of business taxes for the seller of domestic raw or essential materials to the promoted
trading company;
- Exemption of business taxes to subcontractors;
- Permission to maintain foreign currency bank accounts;
- Entitlement to Export Packing Credits;
- Deduction from taxable income of taxes paid by branch offices outside Thailand; and
- A double deduction from taxable income of foreign marketing expenses.
The import duty exemption, according to the government responses and to previous
investigations, functions in the same way as the duty drawback program
in Thailand which we have determined does not confer a bounty or grant (See Apparel from
Thailand). The second program listed above is discussed below under "Programs Determined
Not To Confer Bounties or Grants." According to the responses, the remaining programs, with the
exception of the last two, were not used.
With respect to the tax deduction programs, we preliminarily determine that both confer bounties
or grants because they provide a benefit contingent upon export performance. The benefit is the
amount of tax savings realized as a result of the additional tax deduction allowed under the
program.
According to the government response, the deductions for taxes paid by foreign branch offices may
also be doubled and subtracted from taxable income. Therefore, we considered both the double
deduction of foreign marketing expenses and the double deduction for taxes paid by foreign branch
offices in the benefit calculation. To calculate the estimated net bounty or grant, we first
determined Asoke's tax savings based on the tax return filed during the review period. We then
multiplied the tax savings by the proportion of Asoke's steel nail exports to the United States over
its total export sales. We divided the resulting amount by total steel wire nail exports to the United
States to derive the estimated net bounty or grant of 0.34 percent ad valorem.
II. Program Preliminarily Determined Not To Confer Bounties or Grants
Assistance to Trading Companies Under the Investment Promotion Act: Exemption From Certain
Business Taxes. Under the Board of Investment Announcement No. 40/2521 discussed above,
business tax exemptions are granted to producers who supply export commodities to promoted
trading companies. Business tax exemptions are also provided on commission fees and export
agency fees of promoted trading companies.
Business taxes in Thailand are excise taxes paid on monthly gross receipts by the seller. As
such, these taxes are indirect taxes. The taxes exempted under this program are also final stage
taxes. Under the Act, the non-excessive remission of, or exemption from, indirect taxes levied at
the final stage is not considered a subsidy [See Final Negative Countervailing Duty
Determination: Oil Country Tubular Goods From Taiwan (51 FR 19583, May 30, 1986)]. Therefore,
we preliminarily determine that exemption from the business taxes described above does not
confer a bounty or grant.
III Program Preliminarily Determined Not To Be Used
We preliminarily determine that the programs described below were not used by manufacturers,
producers or exporters of steel wire nails from Thailand.
A. Repurchase of Industrial Bills
Petitioners alleged that producers and exporters of steel wire nails received preferential financing
under "Regulations Governing the Rediscount of Promissory Notes Arising from Industrial
Undertakings." According to the government response, this program has been changed since our
last investigation involving exports from Thailand in which we examined this program (See
Rice from Thailand).
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Effective January 2, 1986, the "Regulations Governing the Purchase of Promissory Notes Arising
from Industrial Undertakings" (B.E. 2528) institute several changes in this program. Under the new
regulations, the Bank of Thailand purchases short-term promissory notes for certain industrial
activities from producers through commerical banks. Commercial banks may charge their
industrial customers a maximum of 7 percent per annum, while the rate charged to commercial
banks by the Bank of Thailand for these notes is 5 percent per annum. Interest is paid on the
due date of the loan rather than on the date of receipt.
B. Electricity Discounts for Exporters
Electricity authorities in Thailand provide discounts on electricity rates to exporters. The
manufacturers, producers and exporters of steel wire nails in
Thailand have never applied for or received such discounts.
C. Investment Promotion Act (Sections 31, 33, 34 and 36)
The Investment Promotion Act of 1977 (B.E. 2520) provides incentives for investment to
encourage development of the Thai economy. Companies deemed eligible by the Board of
Investment ("promoted companies") are granted various tax and customs duty exemptions under
this program. The exact benefits a company is eligible for are indicated on the investment incentive
license issued to the company.
Although K.Y.I. and Thai Nail Works received investment incentive licenses, according to the
responses, neither company claimed or received any benefits under the program during the review
period.
D. Export Processing Zones
In 1979, Export Processing Zones were authorized through the "Industrial Estates Authority of
Thailand Act" (B.E. 2522). According to the responses, none of the manufacturers, producers
or exporters of certain steel wire nails in Thailand are located in an export processing zone.
E. International Trade Promotion Fund
This program was alleged by petitioners under "Export Promotion Fund." Administered by the
Department of Commercial Relations, this program is aimed at promoting Thai exports. The fund
assists in the financing of export promotion activities such as marketing research and trade fairs.
According to the responses, the companies under investigation did not claim or receive benefits
under this program during the review period.
IV. Program Preliminarily Determined Not To Exist
According to the government response, the following program does not exist.
Business Tax Exemption for Manufacturers of Construction Materials. Petitioners alleged that
manufacturers supplying construction materials to the Thai Contractors Consortium and Thai
subcontractors of the Consortium are exempt from business taxes under this program.
Suspension of Liquidation
In accordances with section 703(d) of the Act, we are directing the U.S. Customs Service to
suspend liquidation of all entries of the subject
merchandise from Thailand 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 entry of this merchandise equal to 1.10 percent ad valorem. This
suspension will remain in effect until further notice.
Verification
In accordance with section 776(a) of the Act, we will verify the information used in making our
final determination.
Public Comment
In accordance with 19 CFR 355.35, we will hold a public hearing, if requested, to afford interested
parties an opportunity to comment on this preliminary determination on September 1, 1987, at
2:30 P.M. at the U.S. Department of Commerce, Room 3708, 14th Street and Constitution Avenue,
NW., Washington, DC 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 ten days of the publication of this notice in the Federal Register. Request 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 seven
copies of the nonproprietary version of the pre-hearing briefs must be submitted to the Deputy
Assistant Secretary by August 25, 1987. Oral presentations will be limited to issues raised in the
briefs. In accordance with 19 CFR 355.33(d), written views will be considered if received not less
than 30 days before the final determination is due or, if a hearing is held, within ten days after the
hearing transcript is available.
This determination is published pursuant to section 703(f) of the Act [19 U.S.C. 1671b(f)].
Gibert B. Kaplan,
Deputy Assistant Secretary for Import Administration.
July 14, 1987.
[FR Doc. 87-16543 Filed 7-20-87; 8:45 am]
BILLING CODE 3510-DS-M