56 FR 68

                                   NOTICES

                           DEPARTMENT OF COMMERCE

                                  [C-549-503]

   Rice From Thailand; Final Results of Countervailing Duty Administrative Review

                            Wednesday, January 2, 1991

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

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

SUMMARY: On June 25, 1990, the Department of Commerce published the preliminary results of
its administrative review of the countervailing duty order on rice from Thailand.
We have now completed that review and determine the total 
bounty or grant during the period January 27, 1986 through December 31, 1986 to be 0.35 percent
ad valorem. In accordance with 19 CFR 

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355.7, any rate less than 0.50 percent ad valorem is de minimis.

EFFECTIVE DATE: January 2, 1991.

FOR FURTHER INFORMATION CONTACT:Sylvia Chadwick or Maria MacKay, Office of
Countervailing Compliance, International Trade Administration, U.S. Department of
Commerce, Washington, DC 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On June 25, 1990, the Department of Commerce (the Department) published in the Federal Register
(55 FR 25856) the preliminary results of its administrative review of the countervailing duty
order on rice from Thailand (51 FR 12356; April 10, 1986.) The Department has now
completed that administrative review in accordance with section 751 of the Tariff Act of 1930, as
amended (the Tariff Act).

Scope of Review

Imports covered by this review are shipments of Thai rice including rice in the husk (paddy
or rough); husked (brown) rice including basmati and other; semi-milled or wholly-milled
rice, whether or not polished or glazed, inlcuding parboiled and other; and broken rice.
During the review period, such merchandise was classifiable under item numbers 130.5000,
130.5600, 130.5800, 131.3000 and 131.3300 of the Tariff Schedules of the United States
Annotated (TSUSA). This merchandise is currently classifiable under item numbers 1006.10.00,
1006.20.20, 1006.20.40, 1006.30.10, 1006.30.90 and 1006.40.00 of the Harmonized Tariff
Schedule (HTS). The TSUSA and HTS item numbers are provided for convenience and Customs
purposes. The written description remains dispositive.

The review covers the period January 27, 1986 through December 31, 1986 and twelve programs:
(1) Export Packing and Stocking Credits, (2) Public Warehouse Organization, (3) Marketing
Organization for Farmers, (4) Agricultural Cooperative Federation of Thailand, (5) Market
Intervention Program of the Ministry of Interior, (6) Paddy Rice Mortgage Program, (7) Paddy 
Rice Raising Project and Compensatory Interest Payments Program for Millers, (8)
Supplementary Program to Implement the Government's Rice Policy--Preferential Financing to 
Rice Millers, (9) Incentives for International Trading Firms, (10) 
Tax Certificates for Exporters, (11) Export Processing Zones, and (12) Export Promotion Fund.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the preliminary results. We received
written comments from the petitioner and respondent.

Comment 1: The respondent asserts that the Department, by using the domestic value of milled
rice to calculate the benefit, overstated the benefit from the subsidy programs to the millers. By
using domestic prices, the Department failed to account for the fact that the rice does not go
directly from the millers to the U.S. market. To calculate the benefit from these programs, the
respondent proposes that the Department adjust the benefit calculation by using the average price
of rice exported to the United States which includes the trading company's mark-up.

Department's position: We agree. Countervailing duties are assessed on the exported value
of rice. Therefore, we have adjusted our calculations to reflect the difference between the
average domestic price for milled rice (which was the basis of our calculation of the benefit to
the millers) and the average export price of rice to the United States. Consequently, the benefits
from the Compensatory Interest Payments Program for Millers and the 
Preferential Financing Program to Rice Millers are 0.0051 percent ad valorem and 0.0005
percent ad valorem, respectively. See also Comments 4 and 6 of this notice.

Comment 2: The respondent argues that petitioner's claim that higher prices paid to paddy farmers
under the ACFT, MOI and MOF programs provide a subsidy on milled rice is inappropriate. The
respondent asserts that the higher prices paid to paddy farmers did not decrease, but in fact
increased, the cost of milled rice. Therefore, there was no competitive benefit bestowed on
milled rice. Further, the provisions of section 771B of the Tariff Act cannot be applied in this
case because section 771B was not in effect during the review period and the limited-value-added
test is not satisfied.

Department's position: We disagree. The Department determines that these programs provided
benefits to paddy farmers, the producers of the raw agricultural product in this case. There is no
requirement in the countervailing duty law that in this type of situation, the benefit from a
program must result in a lowering of the price of the raw agricultural product in order for the
program to be countervailable. Although section 771B was implemented after the review period,
its purpose was to codify the Department's practice and it constitutes an integral part of the statute
that the Department administers. See House Conf. Rep. No. 100-576, 1988 U.S. Code Cong. Adm.
News, p. 1547, 1621.

In the Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order; Rice from Thailand (Final Determination), (54 FR 12356; April 10, 1986)), the
Department determined that there is a single, continuous line of production from paddy rice to
milled rice. In this review, the Department established that the difference between paddy rice
and milled rice in terms of price is 30 percent which must include the cost of milling
operations, selling costs, and profits. Milling operations, consisting primarily of parboiling,
removing the rice hulls, and removing the bran layer, do not change the essential character of
the rice. As a result, the Department established that the processing operation itself adds only
limited value to the raw commodity, because the processing has not changed the essential
character of the rice. Therefore, we determine that subsidies found to be provided to paddy
rice are deemed to be provided with respect to the manufacture, production, or exportation of
milled rice in accordance with Department's practice as codified in section 771B of the Tariff
Act.

Comment 3: The petitioner asserts that the Department erred in the calculation of the benefit
bestowed by the Export Packing and Stocking Credit (EPC) program. The petitioner claims that the
questionnaire response (1) Reported loans for shipments made during the review period rather
than loan repayments made during the review period, and (2) that the Department did not consider
the benefit from loans made prior to the review period but repaid 
during the review period.

The respondent argues that the Department correctly calculated the benefit from the EPCs in the
preliminary results because all loans issued prior to the review period had interest prepaid.
Therefore, only loans issued during the review period with interest payments due during the review
period provided a countervailable benefit.

Department's position: The Department considers a benefit from a loan to occur when an interest
payment is due. We verified that under new Bank of Thailand (BOT) regulations dated January
2, 1986, interest on the EPCs is paid on the due date of the loan. Prior to the new regulations,
interest was paid at the time the loan was issued. Therefore, on loans made prior to the review
period, interest was prepaid and no interest payments on them were due
 
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during the review period. In calculating the benefit, we included all loans with interest payments
due during the review period.

Comment 4: The petitioner contends that all three Marketing Organization for Farmers (MOF)
programs operating during the review period provided direct subsidies to the producers of paddy 
rice because the MOF purchased or accepted payment in paddy rice directly from the
producers at above market prices. Pursuant to section 771B of the Tariff Act, the petitioner argues
that these programs must be deemed to have provided subsidies to the production and exportation
of milled rice.

The respondent maintains that because none of the rice purchased under these programs was
exported to the United States, there was no countervailable benefit under this program.
Department's position: We verified that under the Payment-in-Kind Program and the 1:1 Paddy
Rice Purchase Program, the MOF accepted and purchased paddy rice at the prevailing
market price. Therefore, we determine that these programs did not provide countervailable
benefits to milled rice.

Under the Supplemental Program to Purchase Paddy Rice from Farmers, the MOF purchased
paddy rice at about 10 percent above the prevailing market price. We determine that the
producer of paddy rice received a benefit from this program in the form of a higher gate price
for his paddy rice. The Department considers any domestic subsidy provided to producers of
paddy rice to be provided to the production or exportation of milled rice (See Comment 2).
To calculate the benefit from this program, we multiplied the difference between the average farm
gate price and the MOF price for paddy rice by the volume of paddy rice purchased by the
MOF under this program and allocated the result over the value of sales of milled rice during
the review period. We then adjusted this benefit to reflect the difference between the average
domestic price for rice and the average export price of rice to the United States. On this
basis, we determine the benefit from this program to be 0.11 percent ad valorem during the review
period.

Comment 5: The petitioner asserts that the Department erred in its conclusion that the preferential
loans received by the Agricultural Cooperative Federation of Thailand (ACFT) were not used
to purchase paddy rice. Based on data obtained from the questionnaire response, the petitioner
maintains that the loans were used to purchase paddy rice and that the paddy rice
producers received a benefit from this program in the form of a higher gate price for paddy rice.
The respondent states that these loans are not countervailable because none of the loans were due
during the review period. The respondent also maintains that because none of the rice
purchased under these programs was exported to the United States, there was no countervailable
benefit under this program.

Department's position: We disagree with the petitioner. We verified that, during the review period,
none of the ACFT loans were used for purchasing paddy rice. Furthermore, we also verified that
none of the loans were due or repaid during the review period. Therefore, the Department
determines that no countervailable benefit was provided from these loans during the review
period.

Comment 6: The petitioner asserts that the Department erred in not analyzing the preferential loans
made to millers by the Ministry of Interior (MOE). The petitioner maintains that the loans enabled
millers to buy paddy rice at above local market prices and therefore the producers of paddy
rice received a benefit. Therefore, the petitioner argues that the MOI program should be 
deemed to have provided subsidies with respect to the production and exportation of milled rice.

The respondent states that the benefits received by the millers from the preferential loans under
this program were offset by the higher prices paid to paddy rice producers. Respondent implies
that the net subsidy is lower because millers must pay a higher price than the local market price to
participate in the loan program.

Department's position: We agree with the petitioner. Loans were provided by the MOI to
compensate millers for purchasing rice at above market prices from needy paddy farmers who
produced less than 10 tons of paddy rice each year and lived in remote areas of Thailand.
Because this loan program was limited to a specific group and the interest rate was inconsistent
with commercial considerations, we determine that this program provided countervailable benefits
to the rice millers during the review period.

The rice millers received preferential loans for the purpose of buying paddy at a price decreed
by the government to be higher than market prices. There is no provision in the Tariff Act which
allows an offset such as that claimed by respondent. The millers paid no application fee, deposit, or
similar payment to receive the loans; there was no deferred receipt mandated by the government;
and there were no export taxes, duties, or other charges levied on the export of this merchandise
specifically intended to offset the subsidy 
received. See section 771(6) of the Tariff Act. Therefore, no offset was made.
To calculate the benefit of the preferential loans to the millers from this program, we used as our
benchmark the verified weighted-average interest rate of 12.27 (Preliminary Results of
Countervailing Duty Administrative Review; Rice From Thailand), (55 JR 25856;
June 25, 1990)). We allocated the interest due at the benchmark rate over the value of milled rice
and then adjusted this benefit to reflect the difference between the average domestic price for
rice and the average export price of rice to the United States. On this basis, we determine
the benefit from this program to be 0.01 percent ad valorem during the review period.
We also determine that the producer of paddy rice received a benefit from this program in the
form of a higher gate price for his paddy rice. As noted in Comment 2, the Department
considers any domestic subsidy provided to producers of paddy rice to be provided to the
production or exportation of milled rice.

To calculate the benefit to the paddy rice producers from this program, we multiplied the
difference between the average farm gate price and the MOI price for paddy rice by the volume
of paddy rice purchased by the MOI under this program and allocated the result over the value
of sales of milled rice during the review period. We then adjusted this benefit to reflect the
difference between the average export price of rice to the United States. On this basis, we
determine the benefit from this program to be 0.0005 percent ad valorem 
during the review period.

Comment 7: The petitioner alleges that the Department erred in the Final Determination that the
construction of irrigation facilities by the Thai government did not provide a countervailable
benefit to the producers of rice. The petitioner asserts that documentation submitted in this
review shows that other crops benefit only incidentally from using facilities that were built almost
exclusively for the use of rice producers and argues that the government-subsidized irrigation
system: (1) Was intended to benefit rice production; (2) was targeted to areas primarily suitable
for rice production; and (3) was used primarily (95 percent) for rice production. Therefore,
the Department should determine that the construction of irrigation facilities 

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conferred a countervailable benefit on the producers and exporters of rice.

The respondent contends that the petitioner presented no new data on changed circumstances with
respect to these programs that would warrant the Department to change its position from the Final
Determination.

Department's position: The Department does not reexamine programs previously found out
countervailable unless there is evidence of a change in the program or its application. The
documentation submitted by the petitioner presented no new information regarding the Thai
government's irrigation programs. Therefore, the Department continues to uphold its position in
the Final Determination that this program is not countervailable.

Comment 8: The petitioner submits that the Department erred in not reexamining the fertilizer
programs determined not to be countervailable in the Final Determination. The petitioner contends
that the documentation submitted during the review period demonstrates that the principal
purpose of the MOF, the BAAC and the ACFT fertilizer programs is to benefit rice production by
providing fertilizer at below market prices.

The respondent contends that the petitioner presented no new data on changed circumstances with
respect to these programs that would warrant the Department to change its position from the Final
Determination.

Department's position: We disagree with the petitioner. The documentation submitted by petitioner
presented no new information regarding the Thai government's fertilizer programs. Therefore, the
Department continues to uphold its position in the Final Determination that these programs are not
countervailable.

Comment 9: The petitioner argues that the deposit rate should be adjusted to reflect the
activation/reactivation of programs immediately after the review period. The petitioner points out
that the questionnaire response states that the MOF Supplementary Program, the MOF
Payment-in-Kind and 1:1 programs, the ACFT credit for cooperative program, and the MOI
program to assist paddy farmers were all extended into 1987 and the Paddy Rice Mortgage
Program was reactivated.

The respondent argues that adjustments to the duty deposit rate are made only in cases in which
program-wide changes have occurred prior to the preliminary results and where the changes are
verifiable.

Department's position: The Department will adjust the duty deposit rate in cases where (1)
Program-wide changes have occurred subsequent to a review period but before the issuance of the
preliminary results of review, and (2) where the changes are quantifiable. Because we have no basis
for quantifying the future benefit from these programs, we have followed our long-standing practice
of determining the deposit rate based upon the total bounties or grants found during the review
period.

Final Results of Review

After considering the comments received, we determine the total bounty or grant during the period
January 27, 1986 through December 31, 1986 to be 0.35 percent ad valorem. In accordance with
19 CFR 355.7, any benefit less than 0.50 ad valorem is de minimis.
Therefore, the Department will instruct the Customs Service to liquidate, without regard to
countervailing duties, all shipments of this merchandise entered, or withdrawn from
warehouse, for consumption on or after January 27, 1986 and exported on or before December 31, 1986.

Further, the Department will instruct the Customs Service to waive the collection of cash deposits
of estimated countervailing duties on shipments of this merchandise entered, or withdrawn
from warehouse, for consumption on or after the date of publication of this notice. This waiver shall
remain in effect until publication of the final results of the next administrative review.
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 355.22.
Dated: December 24, 1990.

Francis J. Sailer,

Acting Assistant Secretary for Import Administration.

[FR Doc. 90-30604 Filed 12-31-90; 8:45 am]

BILLING CODE 3510-DS-M