NOTICES
DEPARTMENT OF COMMERCE
[C-307-804]
Preliminary Affirmative Countervailing Duty Determination: Gray Portland
Cement and Clinker From Venezuela
Wednesday, August 21, 1991
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AGENCY: Import Administration, International Trade Administration,
Commerce.
EFFECTIVE DATE: August 21, 1991.
FOR FURTHER INFORMATION CONTACT:Beth Graham or Larry Sullivan, Office of
Countervailing Investigations, Import Administration, U.S. Department of Commerce,
room B099, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone
(202) 377-4105 or 377-0114, respectively.
PRELIMINARY DETERMINATION:
Case History
Since the publication of the notice of initiation in the Federal Register (56 FR 27498, June
14, 1991), the following events have occurred.
On June 20, 1991, we issued a questionnaire to the Government of Venezuela (GOV) in
Washington, DC, concerning petitioner's allegations. At the GOV's request, the due date for
the questionnaire responses was extended until July 29, 1991 and August 2, 1991. On July
2, 1991, the United States International Trade Commission issued its preliminary
determination that imports of gray portland cement and clinker ("cement") from
Venezuela materially injure, or threaten material injury to, a U.S. industry.
On July 29, 1991 and August 2, 1991, we received responses from the GOV and two
companies: Cementos Caribe C.A. ("Caribe"), and Venezolana de Cementos ("Vencemos"). On
August 5, 1991, we presented the GOV with a supplemental/deficiency questionnaire and
received responses from the GOV, Caribe and Vencemos on August 9, 1991.
Scope of Investigation
The products covered by this investigation are gray portland cement and clinker. Gray
portland cement and clinker are currently classifiable under subheadings 2523.29 and
2523.10 of the Harmonized Tariff Schedule (HTS). Gray portland cement has also been
entered under HTS subheading 2523.90 as "other hydraulic cements." Gray portland
cement is a hydraulic cement and the primary component of concrete. Cement clinker, an
intermediate material produced when manufacturing cement, has no use of other than
grinding into finished cement. Oil well cement is also included within the scope of this
investigation; microfine cement is not included within the scope of this investigation.
Although the HTS subheadings are provided for convenience and customs purposes, our
written description of the scope of this proceeding is dispositive.
Standing
The Department has received letters from National Portland Cement Company, Continental
Cement Company of Florida, Inc., and Charles Redi-Mix Company opposing the petition. We
issued questionnaires to Continental Cement and National Portland Cement Company,
inquiring about their production of cement, in order to determine whether these companies
should be considered part of the domestic industry producing cement and clinker. We did
not issue a standing questionnaire to Charles Redi-Mix Company because it is an importer of
Venezuelan cement. To date, we have only received a response from Continental Cement
Company. We will be analyzing these responses and determining whether or not these
companies have standing to represent the domestic industry by the date of our final
determination.
Analysis of Programs
Consistent with our practice in preliminary determinations, when 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, however, are subject to
verification. If the response cannot be supported at verification, and the program is
otherwise countervailable, 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 1990, which also corresponds to
Caribe's fiscal year. Based upon our analysis of the petition and the responses to our
questionnaires, we preliminarily determine the following:
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I. Programs Preliminarily Determined To Confer Bounties or Grants
We preliminarily determine that bounties or grants are being provided to manufacturers,
producers, or exporters in Venezuela of cement under the following programs:
A. Export Bond Program
The Export Bond Program was established in 1973. The program was designed to provide
partial compensation for the requirement that exporters convert foreign currency export
earnings to bolivars at an official rate significantly lower than the free market rate. The
export bonds can only be used for the payment of taxes; they cannot be redeemed for cash.
However, these bonds are transferable. The value of the export bond is based on a
percentage of the FOB value of the product exported. The applicable export bond
percentage for a company corresponds to that company's national value-added percentage
("VAN"). Gray portland cement and clinker has a VAN percentage of 74 percent.
To receive an export bond, exporters must submit the following export documents to their
commercial bank: (1) Commercial Invoice; (2) Bill of Lading; (3) Certificate of Income on
Foreign Currency; (4) Export Manifest; and (5) Classification de Valor Agregado Nacional
(includes VAN percentage). The application documents are reviewed by the commercial
bank and forwarded to the Central Bank of Venezuela which issues the export bond.
Because this program is limited to exporters, we determine that this program is
countervailable. To calculate the benefit for the review period, we divided the bolivar
amount of bonds earned on export sales of cement to the United States by the export sales
of cement to the United States. On this basis, we calculated estimated net bounties or grants
of 10.77 percent ad valorem.
On April 9, 1990, the export bond percentages for companies with VAN percentages
between 30 and 98 percent were reduced to 15 percent. On August 8, 1990, the export
bond percentages for companies with VAN percentages between 39 and 98 percent were
reduced to five percent. As of June 15, 1991, the export bond percentages for companies
with VAN percentages between 30 and 98 percent were reduced to one percent. On June
13, 1991, the Ministry of Foreign Relations and the Ministry of Finance excluded all
manufactured products, including cement, from eligibility for the Export Bond Program.
Consistent with our policy of taking into account measurable program-wide changes that
occur before the preliminary determination, we are taking into account the latest decrease
in the applicable export bond percentages including the current ineligibility of the cement
industry, for cash deposit purposes. Therefore, for purposes of the preliminary
determination, the cash deposit rate for this program is equal to zero for all manufacturers,
producers and exporters in Venezuela of cement.
B. Corporacion Venezolana de Fomento (CVF)
The CVF was created to improve the national industrial base, including the development
and improvement of industrial and resource-based enterprises. It was authorized to
provide loans and loan guarantees and to invest in shares or other obligations of private
companies. CVF operated through a Board of Directors, coordinating with the Minister of
Development and the President's Central Office for Coordination and Planning. CVF was
dissolved in 1990 and its outstanding assets and liabilities were transferred to the Fondo de
Inversiones de Venezuela ("FIV").
On November 23, 1977, Caribe received from CVF a long-term loan for the funding of
construction of its installations and plant and a loan guarantee for its U.S. dollar long-term
debt. The term of the loan was seven years from 1981, when principal payments began.
Interest payments commenced immediately at a fixed rate of eight and one-half percent.
The loan guarantee was for ten years.
During the economic crisis of 1982-1983, payments on Caribe's loans were delayed.
Through negotiations, the conditions for rescheduling Caribe's debt were agreed upon
between Caribe and its creditors, both domestic and foreign. Unaware of Caribe's
rescheduling of its foreign debt, in 1983 CVF called the loan guarantee, converted it to a
loan, and demanded that Caribe pay CVF under the terms of the loan guarantee, i.e., at a
rate of 12 percent. At this point, the foreign creditors demanded and received payment
from CVF. Caribe took CVF to court for improperly calling the guarantee. The legal
proceeding lasted from 1983 to 1987, at which time CVF negotiated an out-of-court
settlement with Caribe.
As a result of the out-of-court settlement, on June 3, 1987, Caribe and CVF agreed to
consolidate the original loan and the loan guarantee. The amount of the loan guarantee was
restated to reflect the devaluation of the bolivar at the point that CVF had mistakenly paid
the foreign creditors. According to Caribe, the loan terms were restructured to compensate
it for the harm suffered due to CVF's actions. The loan and loan guarantee were consolidated
in June 1987, at which time a down payment was made. Between 1987 and 1990, interest
accrued at a rate of three percent. According to Caribe, it is illegal in Venezuela to charge
interest on interest. Therefore, the principal on which interest accrued at three percent did
not change in value until 1990. At this time, Caribe indicated that accumulated interest was
added to the loan principal, in apparent contradiction with their statement regarding
interest charged on interest. The new loan principal was to be paid in 34 installments,
payable every six months beginning in November 1990. Caribe provided information on
principal payments for November 1990 and May 1991 only. Beginning in May 1990, the
interest rate was fixed at six percent per year. The loan agreement further stipulated that if
Caribe failed to make the loan payments, the interest rate would change to 12 percent per
year. During the review period, Caribe made principal and interest payments on schedule.
We preliminarily determine that Caribe received the CVF loan on terms inconsistent with
commercial considerations. In determining at what point this loan became relevant to our
investigation, we have preliminarily determined that the out-of-court settlement reflected a
fair value of the loan and loan guarantee, including the applicable interest owed. Therefore,
we are calculating any benefit received from this loan from the time the out-of-court
settlement was reached between CVF and Caribe. We plan to carefully examine this
settlement at verification.
The terms of the consolidated loan, as stated above, called for three percent interest to be
accrued between 1987 and 1990. In 1990, interest accrued was capitalized and the interest
rate changed to six percent. Interest and principal payments began in November 1990 on a
semi-annual basis. Despite the apparent contradiction between Venezuelan law regarding
interest on interest and the capitalization of interest in May 1990, we accepted the
outstanding principal amounts stated in Caribe's response for our calculations. Also, due to
a lack of information relating to principal payments after May 1991, we assumed, for
purposes of the preliminary determination, that principal was paid in equal installments
starting in November 1991. To calculate the benefit from this loan, we used our standard
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long-term loan methodology. We used as our benchmark the national average
long-term corporate bond rate for 1987, as quoted by commercial banks, which was 12.87
percent. We determined that the corporate bond rate was most appropriate because (1)
Caribe claimed that they did not take out any long-term loans in 1987; and (2) the GOV
claimed that statistics on national average long-term loan rates were not available.
To calculate the benefit for the review period, we divided the value of the benefit from the
loan in 1990 by the total sales of cement. On this basis, we calculated an estimated net
subsidy of 0.78 percent ad valorem for all manufacturers, producers and exporters in
Venezuela of cement. The duty deposit rate for this program is 3.83 percent ad valorem
for Caribe and all other manufacturers, producers and exporters in Venezuela of cement,
except for Vencemos which has a significantly different aggregate duty deposit rate. The
aggregate duty deposit rate for Vencemos is zero.
II. Programs Determined Not To Confer Bounties or Grants
We determine that bounties or grants are not being provided to manufacturers, producers,
or exporters of cement in Venezuela under the following programs:
A. The Industrial Credit Fund (FONCREI)
FONCREI was established to make long-term credits available to the Venezuelan industrial
sector. FONCREI does not loan to applicant companies directly; it does so through
commercial banks and financing societies. The fund extends credit to industrial businesses
of all types to finance the installation, expansion and relocation of equipment and
manufacturing facilities. FONCREI also purchases at a discount credit documents issued in
connection with the purchase and assembly of machinery and equipment. In 1982, C.A.
Vencemos Mara ("CAVM"), a subsidiary of Vencemos, received a loan from FONCREI for the
purchase of environmental control equipment and to increase plant productivity.
FONCREI loans were found to be not countervailable in Final Countervailing Duty
Determination; Certain Electrical Conductor Aluminum Redraw Rod from Venezuela (53
FR 24763, June 30, 1988). Based on the information provided in the responses, we have no
reason to believe that the program's eligibility criteria have changed. Therefore, because
this loan program is not limited to a specific enterprise or industry, or group of enterprises
or industries, we determine that it is not countervailable.
B. Preferential Tax Incentives
Under Decree 1775, manufacturers of finished or intermediate goods were eligible for tax
credits when acquiring capital equipment. Eligible companies received tax credits of ten
percent of the value of new investments if the acquired asset contained a certain amount of
domestic value-added. According to the responses, as of January 18, 1989, Decree 1775
was replaced by Decree 2707.
Decree 2707 was established on January 18, 1989, to provide tax credits in the amount of
ten percent of any new capital investment in machinery and other equipment for all
industries within the agricultural and industrial sector, as well as the transportation, hotel,
and electricity industries. Qualified firms with qualified investments apply the credit against
their annual income tax liability. The maximum tax credit allowable is the lesser of the
investment or the total tax liability. Companies with losses in a particular year can carry
forward the tax credit for up to two fiscal years.
Because this tax program is not limited to a specific enterprise or industry, or group of
enterprises or industries, we preliminarily determine that it is not countervailable.
C. Banco Industrial de Venezuela
The Banco Industrial de Venezuela (BIV) is owned predominately by the GOV, but is
organized and operated as a private commercial bank. BIV offers both short- and long-term
loans and loan guarantees to a broad array of industries under ordinary commercial terms
and conditions.
On September 17, 1982, Caribe took out a short-term BIV loan to refinance a letter of credit.
In early 1983, due to the economic crisis in Venezuela and the subsequent
government-imposed currency controls, Caribe was not permitted to make payments on its
BIV loan. The GOV required all foreign currency loans to be registered and then be
renegotiated into eight-year loans. Concurrently, the GOV was unable to meet its
obligations of foreign currency supplies. In 1989, the GOV suspended all foreign currency
payments to the private sector. The rules applying to the repayment of foreign currency
loans from 1983 to the present apply to all foreign currency loans held by non-government
Venezuelan entities and are not specific to the cement industry.
On November 30, 1990, the GOV issued new foreign currency debt rules, which required
negotiations between creditors and debtors of foreign currency loans. Currently, Caribe and
BIV are still negotiating the terms of the loan; however, interest has accrued on the BIV
loan in accordance with its terms.
We compared the BIV loan to other long-term loans received by Caribe in order to
determine if it was given at preferential terms. (Although the BIV loan was originally a
short-term loan, we compared it to long-term loans, since it has been outstanding for nine
years.) However, Caribe did not take out any long-term loans in 1982. The interest rate
charged on the BIV loan was tied to LIBOR (London Interbank Offered Rate) and Caribe did
take out long-term loans between 1979 and 1990 which were also tied to LIBOR. Therefore,
despite the fact that Caribe did not take out any long-term loans in 1982, we considered it
appropriate to compare the terms of this loan to other long-term loans which were also
based on LIBOR. We found that the terms and interest rate of the BIV loan were comparable
to other long-term loans received by Caribe. Because the BIV loan was not made on terms
inconsistent with commercial considerations, we preliminarily determine that it is not
countervailable.
III. Programs Preliminary Determined Not To Be Used
We preliminarily determine that producers or exporters in Venezuela of the subject
merchandise did not receive benefits during the review period for exports of the subject
merchandise to the United States under the following programs:
A. Short-Term FINEXPO Financing
Under this program, FINEXPO, in conjunction with Venezuelan commercial banks, provides
short-term loans to Venezuelan exporters. FINEXPO provides up to 60 percent of the loan
principal for these loans at five percent interest to the participating commercial bank. The
commercial bank provides the remaining loan principal amount and is required to charge
the exporter an average of the FINEXPO rate and its own commercial rate.
B. Preferential Export Financing
Under this program, FINEXPO provides eligible companies financing for operations or
capital needs such as feasibility studies, market research, promotional expenses, fixed
capital investment, working capital, inventory financing, and financing of services rendered
abroad.
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C. The Financing Company of Venezuela (FIVCA)
FIVCA was established in 1974, as a vehicle for the implementation of government
investment in Venezuelan industries. FIVCA, a subsidiary of the Industrial Bank of
Venezuela, provides long-term financing to the Venezuelan industrial sector in
accordance with the economic policies of the Government of Venezuela.
Verification
In accordance with section 776(b) of the Act, we will verify the information used in making
our final determination.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to
suspend liquidation of all entries of cement from Venezuela 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 all entries of this
merchandise equal to 3.83 percent ad valorem for Caribe and all other manufacturers,
producers and exporters in Venezuela of cement, except Vencemos which, because its
aggregate duty deposit rate is significantly different, has a zero duty deposit rate. This
suspension will remain in effect until further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In
addition, we are making available to the ITC all nonprivileged and nonproprietary
information relating to this investigation. We will allow the ITC access to all privileged and
business proprietary information in our files provided the ITC confirms that it will not
disclose such information, either publicly or under an administrative protective order,
without the written consent of the Deputy Assistant Secretary for Investigations, Import
Administration.
If our final determination is affirmative, the ITC will make its final determination within 45
days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if requested, to afford
interested parties an opportunity to comment on this preliminary determination on
October 18, 1991 at 10 a.m. at the U.S. Department of Commerce, room 3708, 14th Street
and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to request a
hearing must submit such a request within ten days of the publication of this notice in the
Federal Register to the Assistant Secretary for Import Administration, U.S. Department of
Commerce, room B099, 14th Street and Constitution Avenue, NW., Washington, DC 20230.
Parties should confirm by telephone the time, date, and place of the hearing 48 hours before
the scheduled time.
Requests 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 five copies of the
nonproprietary version of the case briefs must be submitted to the Assistant Secretary no
later than October 7, 1991. Ten copies of the business proprietary version and five copies of
the nonproprietary version of the rebuttal briefs must be submitted to the Assistant
Secretary no later than October 14, 1991. An interested party may make an affirmative
presentation only on arguments included in that party's case or rebuttal briefs. Written
arguments should be submitted in accordance with § 355.38 of the Commerce Department's
regulations and will be considered if received within the time limits specified above.
This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f))
and 19 CFR 355.15.
Dated: August 4, 1991.
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
[FR Doc. 91-19962 Filed 8-20-91; 8:45 am]
BILLING CODE 3510-DS-M