NOTICES
DEPARTMENT OF COMMERCE
Leather Wearing Apparel From Uruguay; Preliminary Affirmative
Countervailing
Duty Determination
Wednesday, December 17, 1980
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AGENCY : International Trade Administration, U.S.
Department of Commerce.
ACTION : Preliminary Affirmative Countervailing Duty
Determination.
SUMMARY: With this notice we inform the public that we have
preliminarily determined that the Government of Uruguay grants
benefits to manufacturers, producers or exporters of certain leather
wearing apparel which constitute a subsidy within the meaning of
the countervailing duty law. We will make a final determination
no later than 75 days from the date of this preliminary
determination.
EFFECTIVE DATE: December 17, 1980.
FOR FURTHER INFORMATION CONTACT: Miguel Pardo de Zela,
Import Administration Specialist, Office of Investigations,
International Trade Administration, Department of
Commerce, Washington, D.C. 20230 (202) 377-5050.
SUPPLEMENTARY INFORMATION: On November 12,1980, we
published in the Federal Register (45 FR 74743) an "Initiation of
Countervailing Duty Investigation." This investigation
responded to an October 15th petition from Ralph Edwards
Sportswear, Inc., Cape Girardeau, Missouri which alleges that the
Government of Uruguay provides subsidies to manufacturers,
producers or exporters of leather wearing apparel within the
meaning of section 701, Tariff Act of 1930, as amended (93 Stat.
151, 19 U.S.C. 1671) (hereinafter referred to as "the Act"). The
merchandise covered by this investigation is leather wearing
apparel currently provided for in item number 791.76 of the Tariff
Schedules of the United States. Because Uruguay is a "country under
the Agreement," as defined in section 701(b) of the Act, we referred
this matter to the United States International Trade Commission for
a determination of injury.
On December 1, 1980 the ITC notified the Department of Commerce
that they had arrived at a preliminary determination that there is a
reasonable indication that an industry in the United States is
threatened with material injury because of imports of leather
wearing apparel from Uruguay.
The petitioner alleges that the Government of Uruguay provides
subsidies in the form of a tax certificate for exporters (the
Reintegro), an additional compensation to exporters of tanned
leather products, an income tax exemption for export income,
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preferential financing for exports, and a social security tax
deferral.
The subject of leather wearing apparel from Uruguay first arose in
a countervailing duty petition submitted to the Department of
Treasury (then the responsible agency for administration of the law)
on January 21, 1977 (42 FR 21531). At that time, provisions of the
Generalized System of Preferences entitled the merchandise to duty
free treatment. The case was therefore referred to the International
Trade Commission for an injury determination. Both the ITC and the
Treasury Department made affirmative findings in the case and
Treasury issued a Countervailing Duty Order on June 1, 1978
(43 FR 23710). However, at the same time that Treasury announced
the Order it also waived the imposition of duties on the basis of
commitments made by the Government of Uruguay to eliminate the
subsidy programs which contravened our trade laws. On November
13, 1978 (43 FR 52485) Treasury revoked the waiver and
reimposed the duties when it discovered that the Government of
Uruguay was not acting in compliance with the terms of the waiver.
On March 22, 1979 (44 FR 17485) Treasury revoked the
Countervailing Duty Order on leather wearing apparel from
Uruguay. The conditions of the revocation were the elimination by
the Government of Uruguay of a tanner's subsidy received on
exports to the United States and a decision by that government to
impose an export tax on leather wearing apparel exported to the
United States. This export tax equaled the net amount of the
remaining subsidy after the elimination of the tanner's subsidy. It
amounted to 3.687% ad valorem.
From the information presently available, it appears that the
Government of Uruguay has reintroduced the tanner's subsidy and
removed the export tax on leather wearing apparel exported to the
United States. By this action, the Government of Uruguay has
evidently altered commitments made to the United States
Government commitments which led the United States to a decision
not to impose countervailing duties.
These actions are cause for considerable concern. It would be
unfortunate, to say the least, if foreign governments and their
producers were seen to profit from the violation of commitments
made to the United States. In this case, the nature of the subsidies
involved cash payments and tax exemptions which are linked
directly to export performance give Uruguayan producers of
leather wearing apparel a significant advantage over their
competitors in the United States and could easily have an important
and immediate effect on trade.
Therefore, the reintroduction of direct export subsidies by the
Government of Uruguay, after agreeing to remove such subsidies on
exports to the United States of leather wearing apparel, requires a
prompt response on the part of the United States Government to
fully neutralize their trade distortive effects. In light of these
concerns, I have made this preliminary determination on the
following subsidies alleged in the petition:
(1) Reintegro Program Under this program the Government of
Uruguay grants tax certificates to exporters as a fixed percentage of
the f.o.b. value of the exported item. These certificates are
transferable and may be applied against obligations for both direct
and indirect taxes.
Because the tax certificates are freely transferable and may be
applied against direct as well as indirect taxes, they are clearly
subsidies within the meaning of the countervailing duty law.
In the prior investigation Treasury reduced the amount of the
Reintegro by the amount of indirect taxes which would have been,
but were not, rebated on the export of leather wearing apparel.
Since then the countervailing duty law has been amended to
narrowly restrict the use of offsets in calculating countervailing
duties. Under section 771(6) of the Act, offsets may be allowed
only in the following instances: (a) where costs are incurred in
obtaining the benefit, (b) where a loss of the benefit results from a
Government-mandated delay in the receipt of the benefit or, (c)
where there are export taxes intended to offset the subsidy
received. The offsets granted in the prior investigation are no longer
permitted. [FN1]
FN1 The restrictions in the law on the use of offsets are not intended
to prohibit the Department from determining that export payments
are not subsidies if those payments are reasonably calculated, are
specifically provided as non-excessive rebates of indirect taxes and
are related to the merchandise exported. In this case, no claim has
been made, or evidence presented to show, that the Reintegro is a
bona fide rebate of indirect taxes. For a full discussion of the offset
rules and indirect tax issue, see the recent decisions of the
Department in the investigations involving textiles and textile mill
products (45 FR 55502) and certain iron metal fasteners from India
(45 FR 64611).
Therefore, I preliminarily determine the whole amount of the
Reintegro, 9% of the f.o.b. value of the exported merchandise, to be
a subsidy.
(2) Tanner's Subsidy The Government of Uruguay grants an 8% ad
valorem subsidy on exports to domestic manufacturers of leather
wearing apparel to allow for the added cost of using domestic
tanned leather in their production. I preliminarily determine the
full amount of the subsidy, 8% of the f.o.b. value of exported
merchandise, is countervailable.
(3) Export Financing At the time of the earlier investigation we
found that the export financing program did not provide a subsidy
since no differential existed between the government and
commercial interest rates. The current status of this program is in
question, however, and will thus continue to be investigated. At this
time, based on the finding in the most recent investigation, I
preliminarily determine that there is no subsidy benefit derived
from this program.
(4) Social Security Tax Deferral This program was inadvertently
included in the notice of "Initiation of Countervailing Duty
Investigation" (45 FR 74743). The Treasury Department
determined in the earlier investigation that this was a one-time
subsidy benefit which was abolished at the end of 1978. I hereby
determine that no subsidy is involved and that in light of the
inadvertant inclusions of this program in the notice of initiation, no
further investigation will be made into this allegation.
(5) Tax Exemption for Export Income As the export tax which was
designed to eliminate the subsidy effect of this program and others
has been removed, I preliminarily determine the current benefit is
equal to that which was found to exist in the earlier investigation,
0.387% of the f.o.b. value.
We estimate that the total value of the benefits of these programs to
Uruguayan exporter's is 17.387% ad valorem.
The petitioner also notes that on or about June 1, 1980, the
Government of Uruguay not only removed the export tax but
announced it would rebate the value of the tax which it had
collected since January 1, 1980. Further, the tanner's subsidy was
reinstated and paid retroactive to the time at which it was removed
on January 10, 1979. We will assume, until it is proven otherwise,
that both type of retroactive payment were made in one cash grant
on June 1, 1980.
Accordingly, we have allocated the benefits of this grant over a
twelve month period beginning on June 1, 1980. Our preliminary
calculations yield on average monthly benefit of 8.63% ad valorem.
When the benefits of this retroactive payment of the export tax
rebate and tanner's subsidy are added to the subsidies described
above, the total benefit of the subsidy programs which, in our
preliminary investigation,
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we find granted by the
government of Uruguay amounts to 26.017% ad valorem.
Petitioner also alleges that critical circumstances exist within the
meaning of section 703(e) of the Act. However, available
information does not provide a reasonable basis to believe that
there have been massive imports of subject merchandise from
Uruguay over a relatively short period. The value of leather
wearing apparel from Uruguay fell from a peak of $34.2 million in
1978 to $12.3 million in 1979. For the period January through
August of 1980 the value of Uruguayan imports fell to $4.6 million
compared to $9.4 million for the same period in 1979. While import
penetration from all countries has remained constant despite a
declining U.S. market in recent years, import penetration from
Uruguay has fallen from a peak of 8.3% in 1978 to 3.3% in 1979. I
therefore determine that critical circumstances do not apply at this
time.
Administrative Procedures
In accordance with § 355.34 of the Commerce Department
Regulations (19 CFR 355.34, 45 FR 4946), interested parties may
submit information or written views concerning this proceeding to
the Deputy Assistant Secretary for Import Administration in at least
10 copies, not later than January 19, 1981. The mailing address is
room 2800, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, D.C. 20230.
The Department will afford interested parties an opportunity to
present oral views in accordance with § 355.35 of the Commerce
Department Regulations. This hearing is scheduled to be held, if
requested, at the U.S. Department of Commerce, Room 3817, 14th
Street and Constitution Avenue, NW., Washington, D.C. 20230
beginning at 10:00 a.m. on January 22, 1981. Interested parties
who wish to have such a conference should submit a written request
to the Office of Deputy Assistant Secretary for Import
Administration, Room 2800 at the address shown above. These
requests should contain (1) the name, address and telephone
number of the requester (2) the number of participants and (3) a
statement outlining the issues to be discussed. The Deputy Assistant
Secretary must receive the requests no later than January 2, 1981.
Interested parties must submit pre-hearing briefs no later than
January 16, 1981 to the Office of the Deputy Assistant Secretary at
the address noted above. Oral presentations by persons submitting
pre-hearing briefs will be limited to those issues raised in the briefs.
All written views must be filed in accordance with section 355.43 of
the Department of Commerce Regulations.
In accordance with section 703(d) of the Act (19 U.S.C. 1671b(d)),
Customs officers will be advised to suspend liquidation of all entries,
or withdrawals from warehouse, for consumption of the subject
merchadise on or after the date of publication of this notice in the
Federal Register . This suspension of liquidation shall remain in
effect until further notice. The posting of a cash deposit in the
amount of 26.017 percent ad valorem, will be required as of that
date.
We will issue a final determination no later than February 25, 1981.
(Section 703(f) of the Act (19 U.S.C. 1671b(f)))
December 12, 1980.
John D. Greenwald ,
Deputy Assistant Secretary for Import Administration .
[FR Doc.80-39165 Filed 12-16-80; 8:45 am]
BILLING CODE 3510-25-M