NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-355-001]
Leather Wearing Apparel From Uruguay; Preliminary Results of
Countervailing
Duty Administrative Review
Wednesday, June 25, 1986
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AGENCY: International Trade Administration,
Import Administration, Department of Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty
Administrative Review.
SUMMARY: In response to requests from the Government of
Uruguay and a domestic interested party, the Department of
Commerce has conducted an administrative review of the
countervailing duty order on leather wearing apparel from
Uruguay. The review covers the period April 17, 1982 through
December 31, 1983.
As a result of the review, the Department has preliminarily
determined the bounty or grant to be 1.35 percent ad valorem for
shipments of this merchandise exported directly to the United
States, and 27.57 percent ad valorem for merchandise exported
through intermediate countries, during the period April 17, 1982
through December 31, 1982. For the period January 1, 1983
through December 31, 1983, we have preliminarily determined the
bounty or grant for all shipments to be 0.11 percent ad valorem, a
rate which we consider to be de minimis. We invite interested
parties to comment on these preliminary results.
EFFECTIVE DATE: June 25, 1986.
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FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
Background
On July 16, 1982, the Department of Commerce ("the Department")
published in the Federal Register (47 FR 31032) a countervailing
duty order on leather wearing apparel from Uruguay. We began
this review under our old regulations. After the promulgation of our
new regulations, a domestic interested party (the Amalgamated
Clothing and Textile Workers Union, AFL-CIO) and the Government
of Uruguay, on September 17 and October 9, 1985, respectively,
requested in accordance with § 355.10 of the Commerce
Regulations that we complete the administrative review of this
order. We published the new initiation on November 27, 1985 (50
FR 48825). The Department has now conducted that review, in
accordance with section 751 of the Tariff Act of 1930 ("the Tariff
Act").
Scope of Review
Imports covered by this review are shipments of Uruguayan leather
wearing apparel and parts and pieces thereof. Such merchandise is
currently classifiable under items 791.7620, 791.7640, and
791.7660 of the Tariff Schedules of the United States Annotated.
The review covers the period April 17, 1982 through December 31,
1983 and nine programs: (1) Reintegros; (2) supplementary
reintegros; (3) transitional export payments; (4) Tax Refund
Certificates; (5) bonification payments; (6) uncollected social
security taxes; (7) income tax forgiveness; (8) tanner's subsidy; and
(9) preferential export financing.
Analysis of Programs
(1) Reintegros
Reintegros are tax certificates issued to exporters in amounts which
represent a percentage of the f.o.b. value of the exported
merchandise. The reintegro was ostensibly designed to rebate the
indirect and direct taxes paid by exporters of leather wearing
apparel. In our final determination (46 FR 19288, March 30, 1981),
we found the full amount of the reintegro, less a one percent
processing fee, to be countervailable because the Uruguayan
government did not demonstrate any link between eligibility for
payments on export and indirect taxes paid by manufacturers of
leather wearing apparel.
During the period April 17, 1982 through November 26, 1982 (the
date the Uruguayan government terminated the program), the
amount of reintegros available for various types of leather wearing
apparel ranged from four percent to 21 percent, depending on the
type of leather used and on whether the leather was domestically
produced or imported. However, Uruguayan Decree 245/82 (July
16, 1982) prohibited payment of reintegros on shipments of the
merchandise exported to the United States after that date. In 1981,
the government had instituted an offsetting export tax on exports of
the merchandise to the United States. Rather than pay the export
tax, which was higher than the rate of the reintegro, exporters
simply did not apply for the reintegros or turn in the export
certificates required to receive them. Thus, shipments of the
merchandise which were exported directly to the United States did
not receive benefits under this program during any part of the
period April 17 through December 31, 1982.
Several large shipments were imported into the United States from
intermediate countries during that period. We have no reason to
believe that these shipments, exported through intermediate
countries, did not receive the reintegros. As the best information
available, we have assumed that exporters received a 21 percent
rebate, the highest rate available under this program in 1982. In our
final determination, we found that a one percent deduction from the
reintegro payment was a legitimate offset to the gross bounty or
grant because that deduction was necessary in order to qualify for,
or receive, the benefit. We have therefore reduced the amount of
the reintegro benefit by one percent of the payment.
Accordingly, we preliminarily determine that shipments of the
merchandise exported directly to the United States during the
period of review received no benefits under this program. We
further find, preliminarily, the weighted- average bounty or grant
on merchandise exported to the United States through intermediate
countries to be 17.97 percent ad valorem during the period April
17, 1982 through December 31, 1982.
(2) Supplementary Reintegros
The Uruguayan government instituted a supplementary 10 percent
reintegro on June 2, 1982 (Uruguayan Decree 189/982) for exports
of leather wearing apparel during the period June 2, 1982 through
November 26, 1982, the date the government terminated all
reintegros. Once again, while the government prohibited payment
of these supplementary reintegros on shipments of the merchandise
exported directly to the United States, there was no such restriction
on shipments exported through intermediate countries.
We preliminarily determine the weighted-average benefit from this
program on shipments of leather wearing apparel exported through
intermediate countries to the United States during the period April
17, 1982 through December 31, 1982 to be 8.25 percent ad
valorem. Further, we preliminarily find that there was no benefit
conferred by this program on any shipments of the merchandise
exported directly to the United States during the period of review.
(3) Transitional Export Payments
After terminating the reintegro program, the Government of
Uruguay instituted a five percent transitional payment on all
shipments of leather wearing apparel exported between November
29, 1982 and December 31, 1982 (Decree 442/82). The purpose of
these payments, which, like the reintegros, took the form of tax
certificates, was to prevent disruption of Uruguayan trade after
elimination of the reintegros and prior to implementation of the Tax
Refund Certificate program (see below).
Because the transitional export payments are not linked to the
payment of indirect taxes, we preliminarily determine that this
program constitutes a bounty or grant. We preliminarily find the net
benefit conferred by this program during the period April 17, 1982
through December 31, 1982 to be 0.38 percent ad valorem. We
further find preliminarily that there was no bounty or grant
conferred on leather wearing apparel exports by this program
during 1983.
(4) Tax Refund Certificates
On July 25, 1983, the Government of Uruguay instituted a system of
tax refunds on exports of leather wearing apparel (Resolution
289/983) for all shipments of the merchandise exported on or after
January 1, 1983. The Uruguayan government stated that these
refunds, which again take the form of tax certificates, were rebates
of the indirect taxes borne by the leather garments: The amounts of
these certificates, which ranged from 1.7 to 2.9 percent of the f.o.b.
value of the
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merchandise, depended on the type of leather
used in the garment.
The non-excessive rebate or refund of indirect taxes levied on
exported products and their components is not a subsidy if the
foreign government demonstrates to the Department's satisfaction
(a) that the program operates for the purpose of rebating indirect
taxes, (b) that there is a clear link between eligibility for payments
on exports and indirect taxes paid, and (c) that the government has
reasonably calculated and documented the actual indirect tax
incidence relative to the products concerned and has demonstrated
a clear link between such tax incidence and the amount rebated or
refunded on export.
In this case, the Uruguayan government instituted the program by
first conducting a study of the indirect taxes borne by the leather
wearing apparel. After soliciting affidavits regarding costs of
production of leather garments produced by all major exporters of
the merchandise, the government calculated the indirect tax
incidence for each type of garment and, rather than taking a
weighted average of the individual exporters' tax incidence, elected
a more conservative approach and used the lowest company's
indirect tax incidence for each category of leather garments as the
rate for the refund certificates.
During our verification, we reviewed official and company records
supporting the production costs, the tax incidence and the
methodology used to calculate the rates of refunds established by
the government. Based on that evidence, we preliminarily find that
the requisite linkage exists and that in each instance the amount of
the refund was the same as or less than the actual tax incidence.
Accordingly, we preliminarily find that the Tax Rebate Certificate
program with regard to leather wearing apparel is a remission of
indirect taxes and is not a bounty or grant within the meaning of the
countervailing duty law. We also determine preliminarily that
no overrebate under this program existed during the period of
review.
(5) Bonification Payments
Bonification payments are export refunds of 22 percent of the value
of the processed wool portion of the leather wearing apparel. The
Uruguayan government made such payments on three shipments to
the United States in 1982, and on 15 shipments in 1983. Because
these payments are not linked to the payment of indirect taxes, we
preliminarily determine that this program is countervailable. We
preliminarily find the weighted-average benefit to leather wearing
apparel exports to the United States to be 0.01 percent ad valorem
for the period April 17, 1982 through December 31, 1982, and 0.07
percent ad valorem for the period January 1, 1983 through
December 31, 1983.
(6) Uncollected Social Security Taxes
On May 11, 1982, the Government of Uruguay notified the
Department that it had ceased in its efforts to collect social security
taxes that the leather wearing apparel industry had not paid in
1980.
Because the Government of Uruguay was not able to collect these
taxes, we consider the uncollected taxes to be a grant given on the
date the government officially declared the taxes uncollectable. We
consider the amount of the grant to be the total amount of the
uncollected taxes plus the interest which would have accrued from
June 16, 1981 (the date on which the Uruguayan government agreed
to eliminate all benefits on leather wearing apparel exports to the
United States), to May 11, 1982. We used as our benchmark interest
rate the prime rate of interest available in Uruguay in 1981.
To calculate the benefits, we applied the grant methodology
outlined in the Subsidies Appendix to the notice of "Final
Affirmative Countervailing Duty Order" on certain cold-rolled
carbon steel flat-rolled products from Argentina (49 FR 18006,
April 26, 1984) ("the Subsidies Appendix"). We allocated the grant
over 11 years, the average useful life of assets in the leather wearing
apparel industry, according to the Asset Guideline Classes of the
Internal Revenue Service. We used as the discount rate the
short-term 1982 interest rate, as published by the Central Bank of
Uruguay, because we have no information on long-term interest
rates or on the weighted cost of capital in the leather wearing
apparel industry for that year. On this basis, we preliminarily
determines the benefit from this program to be 0.09 percent ad
valorem for the period April 17, 1982 through December 31, 1982,
and 0.04 percent ad valorem for the 1983 period.
(7) Income Tax Forgiveness
The Government of Uruguay forgave a percentage of the tax liability
on income derived from the domestic value-added content of
leather wearing apparel exporting during calendar years 1979,
1980 and 1981. Even though the program ended in 1981, benefits
continued into the review period for firms that filed their income
taxes in 1982 for the period ending December 31, 1981.
Accordingly, we preliminarily determine the benefit on exports of
leather wearing under this program during the period April 17,
1982 through December 31, 1982 to be 0.87 percent ad valorem.
Further, we preliminarily find no benefit under this program during
the period January 1, 1983 through December 31, 1983.
(8) Tanner's Subsidy
The petitioner alleged that a tanner's subsidy had been reinstituted
and that benefits from this program were passed through to leather
wearing apparel manufacturers. The tanner's subsidy was an export
subsidy granted to domestic manufacturers of leather wearing
apparel to allow for the added cost of using domestic tanned leather
in their production.
The Government of Uruguay rescinded the tanner's subsidy on April
16, 1980, incorporating it into the system of reintegros. Further,
there were no separate reintegros available for raw or tanned hides
during the period April 17, 1982 through November 26, 1982, the
date the reintegro program ended. We reviewed official and
company documents and applications for other types of export
rebates and found no applications for, or documents indicating
issuance of, reintegros or any other type of export refund or rebate
on leather. Accordingly, we preliminarily determine that there was
no tanner's subsidy on leather during the period of review.
(9) Preferential Export Financing
The Central Bank of Uruguay suspended, but did not terminate, the
preferential pre-export financing program on March 28, 1979.
During our verification we determined that exporters who used
financing for their exports obtained these loans from private banks
at commercial rates and did not use the Central Bank program.
Accordingly, we preliminarily find no bounty or grant under this
program during the period of review.
Preliminary Results of Review
As a result of our review, we preliminarily determine the total
bounty or grant to be 1.35 percent ad valorem for Uruguayan
shipments of leather wearing apparel exported directly to the
United States for the period April 17, 1982 through December 31,
1982, and 27.57 percent ad valorem for Uruguayan leather wearing
apparel exported to the United States through intermediate
countries for that period. For all Uruguayan leather wearing apparel
exported to the United States during the calendar year 1983, we
preliminarily determine the bounty or grant to be 0.11 percent ad
valorem. The Department
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considers any rate less than 0.5
percent to be de minimis.
The Department therefore intends to instruct the Customs Service
to assess countervailing duties in the following amounts:
1. For all shipments exported directly to the United States and
entered, or withdrawn from warehouse, for consumption on or after
April 17, 1982 and exported on or before December 31, 1982, 1.35
percent of the f.o.b. invoice price of the merchandise.
2. For all shipments exported from Uruguay on or after April 17,
1982 and on or before December 31, 1982, to intermediate
countries and entered, or withdrawn from warehouse, for
consumption in the United States on or after April 17, 1982, 27.57
percent of the f.o.b. invoice price of the merchandise.
3. For all shipments exported from Uruguay to the United States
on or after January 1, 1983 and on or before December 31, 1983,
zero percent of the f.o.b. invoice price.
Further, the Department intends to instruct the Customs Service to
waive cash deposits of estimated countervailing duties, as
provided by section 751(a)(1) of the Tariff Act, on all shipments of
the merchandise entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results
on this review. This deposit waiver shall remain in effect until
publication of the final results of the next administrative review.
Interested parties may submit written comments on these
preliminary results within 30 days of the date of publication of this
notice and may request disclosure and/or a hearing within 10 days
of the date of publication. Any hearing, if requested, will be held 55
days after the date of publication or the last workday preceding.
Any request for an administrative protective order must be made
no later than five days after the date of publication. The Department
will publish the final results of this administrative review including
the results of its analysis of issues raised in any such written
comments or at a hearing.
This notice is published in accordance with section 751(a)(1) of the
Tariff Act (19 U.S.C. 1675(a)(1)) and § 355.10 of the Commerce
Regulations (19 CFR 355.10; 50 FR 32566, August 13, 1985).
Dated: June 17, 1986.
Gilbert B. Kaplan,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 86-14341 Filed 6-24-86; 8:45am]
BILLING CODE 3510-DS-M