92-310a

57 FR 8437

NOTICES

DEPARTMENT OF COMMERCE

(C-549-503)

Rice From Thailand; Preliminary Results of Countervailing Duty Administrative
Review

Tuesday, March 10, 1992

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 rice from Thailand. We preliminarily determine the
total bounty or grant during the period January 1, 1990 through December 31, 1990 to be 0.69
percent ad valorem. We invite interested parties to comment on these preliminary results.

EFFECTIVE DATE: March 10, 1992.

FOR FURTHER INFORMATION CONTACT: Sylvia Chadwick, Dana Mermelstein 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 April 12, 1991, the Department of Commerce (the Department) published in the Federal Register
a notice of "Opportunity to Request an Administrative Review" (56 FR 14927) of the
countervailing duty order on rice from Thailand (51 FR 12356; April 10, 1986). On
April 29, 1991, the original petitioner, the Rice Millers Association, together with the USA Rice
Council, requested an
administrative review of the order. We initiated the review covering the period from January 1,
1990 through December 31, 1990, on May 21, 1991 (56 FR 23271). The Department has now
conducted this review in accordance with section 751 of the Tariff Act of 1930, as amended (the
Act). The final results of the last administrative review in this case were published on January 2,
1991 (56 FR 68).

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, including parboiled and other; and broken rice. During the
review period, such merchandise was 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 HTS item numbers are provided for convenience and Customs purposes. The written
description remains dispositive.

The review covers the period January 1, 1990 through December 31, 1990, and twelve programs.

Analysis of Programs

Export Packing Credits

Export packing credits (EPCs) are short-term loans used for pre-shipment or post-shipment export
financing. The Bank of Thailand (BOT) purchases promissory notes issued to commercial
banks by reliable exporters. The notes must be supported by an irrevocable letter of credit, a sales
agreement, purchase order, warehouse receipt, or usance export bill. The loans are issued in baht
and are available for a maximum of 180 days. Interest is paid on the due date of the loan. On that
date, the BOT debits the commercial bank's account with the principal amount of the loan and the
interest due. If the terms of the loan are not met, the BOT charges the commercial bank a penalty
retroactive to the first day of the loan.
In accordance with BOT regulation 1349/1988, commercial banks may lend up to 100 percent of
the export shipment value but the BOT will rediscount only a maximum of 50 percent of the
promissory note. In accordance with BOT regulation 1329/1988, commercial banks are required to
charge no more than a maximum interest rate of 10 percent per annum on the loan. In case of non-
performance by the exporter on the due date of the loan, the exporter is charged a penalty interest
rate on the entire loan. This penalty is forgiven and the loan receives the EPC preferential
rate if the promissory note issuer
exports or receives payment in foreign currency for his product within 60 days after the due date
of the promissory note. We preliminarily determine that because the EPC program is limited to
exporters, it is countervailable to the extent that the loans are provided at preferential rates.
As the benchmark for short-term financing, we ordinarily use the predominant source of
short-term financing in the country in question. Where there is no single, predominant source of
short-term financing, we may use a benchmark composed of the interest rates for two or more
sources of short-term financing in the country in question, weighted, wherever possible, according
to the value of the financing granted by each source. In Final Affirmative Countervailing Duty
Determination and Countervailing Duty Order; Steel Wire Rope from Thailand
(56 FR 46299; Sept. 11, 1991) (Steel Wire Rope), the Department concluded that the
minimum loan rate (MLR) and the minimum overdraft rate (MOR) as reported in the BOT Quarterly
Bulletin are more representative of the prevailing short-term interest rates in Thailand than
the rates used in previous Thai cases. Based on that determination, we are using the average of the
1990 MCR and MOR rates, as reported in the BOT Quarterly Bulletin for 1990, as the most
appropriate benchmark in this review. The benchmark interest rate, thus calculated, is 14.60
percent.
Of the 40 companies exporting rice to the United States during the review period, 12 received EPCs.
We received specific loan information from eight of
the 12 companies. We did not receive any loan information from four of the 12 companies, as
requested in our original questionnaire and in our supplemental questionnaire of December 3,
1991. To calculate the eight responding companies' benefits from the EPCs during the review
period, we subtracted the amount of interest actually paid on the loan principal from the amount
that would have been paid at the benchmark rate. Because the total interest paid for EPCs exceeded
the interest due at the benchmark rate when penalties were assessed and not refunded, we excluded
from our calculations all loans on which penalties were charged and not refunded during the review
period. However, we included all loans, including loans provided prior to the review period, on
which penalties were refunded during the review period. We then used the highest individual

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company benefit rate, as best information available, for the four companies which did not submit
loan information. We weighted the resulting benefit by each exporter's share of the value of total
country exports of subject merchandise to the United States. On this basis, we preliminarily
determine the benefit from this program to be 0.362 percent ad valorem for the review period.

Price Support and Stabilization Programs

The price support and stabilization programs are determined each year by the
Rice Policy and Measures Committee (RPMC) of the Royal Thai Government (RTG). The RPMC is
composed of representatives of the Office of the Prime Minister, the Defense Ministry, the
Agriculture and Cooperative Ministry, the Commerce Ministry and the Interior Ministry. During
the review period, six price stabilization programs provided benefits to producers of rice.
In accordance with Thai law, only milled rice is exported from Thailand. Because there are no
published statistics on the total sales value (both domestic and export sales) of milled rice and
because we are examining benefits on an agggregate basis and not on a company-specific basis, it
was necessary to calculate a value for use as a domestic subsidy denominator in determining the
benefit from these programs. To calculate this denominator, we first estimated the quantity of
milled rice production by multiplying the quantity of paddy rice production by a conversion factor
of 0.66. In our previous review of this order, Rice from Thailand; Final Results of
Countervailing Duty Administrative Review (56 FR 68; Jan. 2, 1991), we verified that the
average yield from 1,000 kilograms of paddy rice is 660 kilograms of milled rice. We then
multiplied the quantity of milled rice production by the yearly average domestic price of milled
rice, to calculate a total value of milled rice production. Finally, because exports are sold
t prices higher than the average domestic milled price, we made an adjustment to account for
the higher sales value derived from exports.

A. Marketing Organization for Farmers (MOF)

The MOF operates under the Ministry of Agriculture and Cooperatives (MAC). During the review
period, MOF administered two programs designed to assist paddy rice farmers:

1. Payment-in-kind Program (PIK)--Under this program, the MOF accepted paddy rice as payment
for farmers' and agricultural organizations' fertilizer debt. For the purposes of this
transaction, the value of the rice per ton was not more than 10 percent higher than the
prevailing local price. MOF then generally sold the paddy rice at a profit of 100 baht
per ton over its purchase price.

2. Paddy Rice Purchase Program--Under this program, the MOF purchased, on the same terms as
the PIK program, additional paddy rice from farmers and agricultural organizations who
settled their fertilizer debts under the payment-in-kind program.

Because the RTG appropriation for these programs did not include a grant for operating
expenses as did appropriations for other government projects, the MOF selling price for
paddy rice to rice millers was higher than the market price. For this reason, few rice
millers agreed to buy paddy rice from the MOF and the project was discontinued on
April 30, 1990.

We preliminarily determine that these two programs are countervailable because they are limited
to producers of paddy rice and because a price premium was paid by MOF for all purchases of
paddy rice.
To calculate the benefit from each of these programs, we subracted the average farm gate price of
paddy rice from the average MOF purchase price and multiplied the difference by the total quantity
of paddy rice purchased by the MOF under each of these two programs. Using the domestic subsidy
denominator and the adjustment described supra, we preliminarily determine the benefit from this
program to be 0.0003 percent ad valorem for the PIK program, and 0.003 percent ad valorem for
the Paddy Rice Purchase program.

B. Agricultural Cooperative Federation of Thailand (ACFT)

ACFT is a private organization that coordinates the activities of agricultural cooperatives on a
national level. During the review period, ACFT received one- year, interest-free loans from the
"linkage project" under the Cooperative Promotion Department (CPD) of the MAC. The "linkage
project" linked credit extension by the CPD to the ACFT's rice marketing service.
ACFT used the government loans to buy rice from member producers at the local market price, mill
the rice and sell the milled rice both in Thailand and abroad. Profits from the ACFT's sales were
later distributed to ACFT member
paddy rice producers, thereby giving them a higher final price for their product. The interest-free
loans were repaid to CPD's circulatory investment fund to be used again for the next year's
marketing activities.
Because the MAC loans were used by the ACFT for its rice marketing service, we preliminarily
determine that this program is countervailable because it is limited to a specific enterprise or
industry, or group of enterprises or industries, and because the interest-free loans are inconsistent
with commercial considerations.
One-third of the funds for these loans was provided from a transnational source; we therefore
calculated the benefit on only two-thirds of the total amount provided. See, Countervailing
Duties; Notice of Proposed Rulemaking and Request for Public Comments (54 FR 23366; May 31,
1991), Section 355.44(o)(1). To calculate the benefit, we multiplied two-thirds of the amount of
interest- free loans repaid during the review period by the 1990 short-term benchmark interest
rate of 14.60 percent. Using the domestic subsidy denonminator and the adjustment described
supra, we preliminarily determine that the benefit from this program is 0.058 percent ad valorem.

C. Bank of Agriculture and Agricultural Cooperatives (BAAC) Paddy Rice Mortgage Program

The BAAC is a state-owned bank that provided low-interest loans to qualifying farmers, farmer
associations and cooperatives. Although the loans are available to farmers producing several
agricultural products including rice, livestock and poultry, tree crops, cassava, maize,
fisheries and others, the BAAC offers "special"low-interest loans under this program to rice
producers in furtherance of the RTG's policy to support and stabilize paddy rice prices. The
purpose of the loans is to allow farmers to hold back sales of paddy rice at the beginning of
the harvest season, when market prices are low, and to sell it later in the season when prices
are more favorable. The BAAC loaned up to 80 percent of the value of the paddy rice pledged,
for a maximum of six months, at a three percent interest rate. If the loan was not repaid in
six months, the interest rate escalated to a commercial overdraft rate.
We preliminarily determine that this program is countervailable because it is limited to a
specific enterprise or industry, or group of enterprises or industries, and because the
three-percent lending rate is inconsistent with commercial considerations.
Because the BAAC made loans to a large number of farmers under this program, we used aggregate
figures from the BAAC to calculate the benefit from

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these loans. We multiplied the short-term benchmark interest rate of 14.60 percent by the total
amount of loans made by the BAAC during the review period, from which we then subtracted the
total actual interest paid during the
review period. Using the domestic subsidy denominator and the adjustment described supra, we
preliminarily determine the benefit from this program to be 0.126 percent ad valorem.

D. Bank of Agriculture and Agricultural Cooperatives Second Crop Paddy Rice Purchasing Program

To supplement the price stabilization effects of the paddy rice mortgage program, the BAAC
implemented a second-crop paddy rice purchasing program. The purpose of this program was to
buy second-crop paddy rice from farmers when prices were low (at harvest time) in order to
stabilize prices over the course of the year. These purchases were made at premium prices,
established at the provincial level by a committee designated by the Governor.
We preliminarily determine that this program is countervailable because it is limited to a specific
enterprise or industry, or group of enterprises or industries, and because a price premium was paid
by the BAAC on its purchases of second-crop paddy rice.
To calculate the benefit from this program, we subtracted the average farm gate price per metric
ton of second-crop paddy rice from the average BAAC purchase price and multiplied the difference
by the quantity of paddy rice purchased by the BAAC. Using the domestic subsidy denominator and
the
adjustment described supra, we preliminarily determine the benefit from this program to be 0.008
percent ad valorem.

E. Paddy Price Raising Project and Compensatory Financing Program for Millers

During the review period, the RPMC mandated a market price intervention program. This program,
implemented by the Ministry of Interior (MOI), required rice millers and traders to purchase paddy
rice from small and poor rice farmers at a price ten percent higher than market prices during peak
harvesting seasons. The MOI allocated funds to the provincial governors who provided
interest-free loans to rice millers and rice traders participating in the program.
We preliminarily determine that the government-mandated price premium of ten percent provides
a countervailable benefit to paddy rice producers. Further, we determine that the interest-free
loans provided by the government to the millers and traders are also countervailable because they
are limited to a specific group of enterprises or industries and are provided on terms inconsistent
with commercial considerations.
To calculate the benefit from the price premium received by the paddy rice producers during the
review period, we subtracted the average farm gate price per metric ton of paddy rice from the MOI
premium purchase price and
multiplied the difference by the total volume of rice purchased by millers and traders under this
program. Using the domestic subsidy denominator and the adjustment described supra, we
preliminarily determine the benefit from the MOI price premium to be 0.014 percent ad valorem
for the review period.
To calculate the benefit from the interest-free loans provided under this program, we multiplied the
total amount of loans repaid during the review period by the short-term benchmark interest rate of
14.60 percent. We then multiplied this amount by the 10-month repayment period for all loans, in
accordance with information provided in the questionnaire response. Using the domestic subsidy
denominator and the adjustment described supra, we preliminarily determine the benefit from
these loans to be 0.022 percent ad valorem for the review period.

F. Bank of Thailand Agricultural Purchase Project

According to BOT regulations effective November 11, 1988, commercial banks may provide
short-term loans for up to 100 percent of the amount of a promissory note issued by rice traders or
millers against the value of their stocked paddy rice. The commercial bank then discounts 50
percent of the face value of the promissory note with the BOT. The maximum interest charged by
the commercial bank to the borrower is 10 percent; the principal and interest are due either
at the end of 90 days or up to three days after the paddy is sold, whichever is earlier.
If repayment of the loan is not made when due or if other terms of the loan are violated,
a penalty interest amount is imposed by the BOT on 50 percent of the face value of the
promissory note over the term of the loan. This penalty is then passed on to the borrower
by the commercial bank. During the review period, this penalty interest rate was five
percent through May 1990 and 6.5 percent beginning in June 1990. There is no penalty refund.
Because only rice traders and millers are eligible for these loans, we preliminarily determine
that this program is countervailable because it is limited to a specific enterprise or
industry, or group of enterprises or industries, and because the lending rate is
inconsistent with commercial considerations.
Because commercial banks made over a thousand loans under this program, we used aggregate
figures from the BOT to calculate the benefit from these loans. We calculated the interest due on the
loans at the preferential rate of 10 percent; we then adjusted this amount for penalty interest which
was paid at an annual rate of either 2.5 or 3.25 percent over the total amount of the loan. We then
subtracted interest and penalties actually paid from the amount that would have been paid at the
short-term benchmark interest rate of 14.60 percent. Using the domestic subsidy denominator and
the adjustment described supra, we preliminarily determine the benefit to be 0.087 percent ad
valorem for the review period.

G. Department of Agricultural Extension (DAE) Loans to Farmer Associations

Although the DAE provides a wide variety of extension services for all of the Thai agricultural
sectors, during the review period the DAE provided a special interest-free short-term loan program
to farmer associations for the purpose of buying paddy rice at harvest when prices are low, storing
it, and selling it when prices are rising. We preliminarily determine that this loan program is
countervailable because it is limited to a specific enterprise or industry, or group of
enterprises and industries, and because the interest-free loans are provided on terms
inconsistent with commercial considerations.
To calculate the benefit from this program, we calculated the difference between the interest
actually paid and the interest that would have been paid at the 14.60 short-term benchmark
interest rate. Using the domestic subsidy denominator and the adjustment described supra, we
preliminarily determine the benefit to be 0.011 percent ad valorem for the review period.

H. Programs Preliminarily Determined To Be Not Used

We also examined the following programs and preliminarily determine that producers and
exporters of rice did not apply for or receive benefits under these programs during the review
period.
1. Public Warehouse Organization (PWO)
2. Department of Foreign Trade (DFT) Purchase of Milled Rice

*8440

3. Export Processing Zones
4. Incentives for International Trading Firms
5. Export Promotion Fund
6. Tax Certificates for Exports

Preliminary Results of Review

As a result of our review, we preliminarily determine the net bounty or grant to be 0.69 percent ad
valorem during the period January 1, 1990 through December 31, 1990.
Therefore, the Department intends to instruct the Customs Service to assess countervailing
duties of 0.69 percent of the f.o.b. invoice price on all shipments of this merchandise exported
on or after January 1, 1990 and on or before December 31, 1990.
The Department also intends to instruct the Customs Service to collect 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 at the rate of 0.69 percent ad valorem.
Parties to the proceeding may request disclosure of the calculations methodology and interested
parties may request a hearing not later than 10 days after date of publication of this notice.
Interested parties may submit written arguments in case briefs on these preliminary results within
30 days of the date of publication. Rebuttal briefs, limited to arguments raised in case briefs, may
be submitted seven days after the time limit for filing the case brief. Any hearing, if
requested, will be held seven days after the scheduled date for submission of rebuttal briefs.
Copies of case briefs and rebuttal briefs must be served on interested parties in accordance
with � 355.38(e) of the Commerce Regulations.
Representatives of parties to the proceeding may request disclosure of proprietary information
under administrative protective order no later than 10 days after the representative's client or
employer becomes a party to the proceeding, but in no event later than the date the case briefs,
under � 355.38(c), are due.
The Department will publish the final results of this administrative review including the results
of its analysis of issues raised in any case or rebuttal brief 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 355.22.
Dated: March 3, 1992.

Marjorie A. Chorlins,

Acting Assistant Secretary for Import Administration.

(FR Doc. 92-5581 Filed 3-9-92; 8:45 am)

BILLING CODE 3510-DS-M