Certain Castor Oil Products From Brazil: Preliminary Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-351-029]

Certain Castor Oil Products From Brazil: Preliminary Results of

Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 7, 1994.

FOR FURTHER INFORMATION CONTACT: Raphiel Hampton or Vincent Kane,

Office of Countervailing Investigations, U.S. Department of Commerce,

Room B099, 14th Street and Constitution Avenue, N.W., Washington, DC

20230; telephone (202) 482-0176 or 482-2815, respectively.

Preliminary Results

The Department of Commerce is conducting an administrative review

of the countervailing duty order of certain castor oil products from

Brazil. We preliminarily determine the net subsidy to be 0.03 percent

ad valorem, which is de minimis, for the period January 1, 1992,

through December 31, 1992. We invite interested parties to comment on

these preliminary results.

Background

Since the publication of the notice of initiation in the Federal

Register (58 FR 26960, May 6, 1993), the following events have

occurred.

On October 13, 1993, we issued a questionnaire to the Brazilian

Embassy in Washington, D.C., concerning the subsidy programs under

review. We received a response from the Government of Brazil (GOB) on

December 29, 1993, on behalf of itself and the respondent's companies.

After reviewing the GOB's response, we issued a supplemental

questionnaire to the GOB on January 28, 1994. We received a

supplemental response from the GOB on February 23, 1994. From March 7

to 18, 1994, we verified the government and companies' responses in

Brazil.

Scope of Review

The merchandise subject to this review is hydrogenated castor oil

and 12-hydroxystearic acid. Imports of these products are currently

classifiable under the following Harmonized Tariff Schedule (``HTS'')

subheadings: 1516.20.90 and 1519.19.40. Although the HTS subheadings

are provided for convenience and customs purposes, our written

description of the scope of this proceeding is dispositive.

The review covers six companies, the period January 1 through

December 31, 1992, and 12 programs: (1) Preferential Export Financing

under Resolution 950/1009; (2) Income Tax Exemption for Export

Earnings; (3) Preferential Export Financing Under CIC-OPCRE 6-2-6; (4)

Preferential Financing for Industrial Enterprises by the Bank of

Brazil; (5) Reduction of Industrial Products Tax (IPI) and Import

Duties Under Decreto No. 77.065 through BEFIEX; (6) Preferential

Financing for National Trading Companies under Resolution 883 of the

Banco Central do Brasil; (7) Accelerated Depreciation for Brazilian-

Made Capital Goods; (8) Preferential Financing under Resolution 68

through FINEX; (9) Preferential Financing under Resolution 578/83

through FUNPAR; (10) Preferential Financing under Resolution 579/83

through PROEX and PROSIM; (11) Preferential Financing for the Storage

of Merchandise Destined for Export under Resolution 330/Portaria 130 of

the Banco Central do Brasil; and (12) Green Yellow Drawback (Portaria

68/83).

Calculation Methodology for Assessment and Cash Deposit Purposes

In calculating the benefits received during the review period, we

followed the methodology described in 19 CFR 355.20(d)(1) (53 FR 52325,

December 27, 1988). Using this methodology we calculated a country-wide

rate of 0.03 percent which is de minimis.

Analysis of Program

(1) Income Tax Exemption for Export Earnings

Under this program, exporters of the subject merchandise were

eligible for an exemption from income tax on the portion of their

profits attributable to exports. On April 12, 1990, Decree Law 8,034

eliminated this exemption by establishing a 30 percent income tax rate

for export profits, which equaled the normal corporate income tax rate.

Boley, however, was authorized to use the income tax exemption on

export earnings under the terms of a contract with the Commission for

the Granting of Fiscal Benefits to Special Export Programs (BEFIEX)

until its contract expired. Therefore, despite the fact that the income

tax exemption for export earnings was eliminated, Boley received

residual benefits from the program during the review period. No other

company under review used this program.

To calculate the income tax savings realized by Boley during the

review period, we multiplied the income tax deduction taken by the firm

under this program by 30 percent, the corporate income tax rate during

the review period. We then used the amount of Boley's income tax

savings to calculate a country-wide rate. We calculated the country-

wide rate by dividing the total income tax savings realized by Boley by

the total exports of all products by all of the companies under review.

On this basis, we calculated a subsidy rate of 0.03 percent ad valorem,

which is de minimis.

Programs Preliminarily Found To Be Terminated

We examined the following programs and preliminarily determine

these programs to be terminated. Further, we verified that the

respondents did not receive any residual benefits under them during the

period of review.

a. Preferential Export Financing Under Resolution 950/1009 Through

CACEX (Carteira de Comercio Exterior) of the Bank of Brazil

We verified that this program was terminated on August 30, 1990, by

Banco Central Bank do Brasil Resolution No. 1,744. See, also, Final

Affirmative Countervailing Duty Determination: Silicon Metal from

Brazil, June 12, 1991 (56 FR 26988).

b. Preferential Export Financing Under CIC-OPCRE 6-2-6

We verified that on May 10, 1990, the functions of CACEX of the

Bank of Brazil, which administered these export financing loans, were

absorbed by the Secretariat of Foreign Trade (SECEX). SECEX was not

empowered to perform banking operations and the export financing was

discontinued. See, also, Certain Round-Shaped Agricultural Tillage

Tools from Brazil; Preliminary Results of Countervailing Duty

Administrative Review, March 31, 1992 (57 FR 10885) (Tillage Tools).

c. Reduction of Industrial Products Tax (IPI) and Import Duties Under

Decreto No. 77.065 Through BEFIEX (Comissao par a Concessao de

Beneficios a Programas Especials de Exportacao) and CIEX (Comissao para

Incentivos a Exportacao)

We verified that on April 12, 1990, Decree Law 8,032 limited this

program exclusively to imports made by the federal, state, and

municipal governments, territories, and other political entities, and

scientific institutions, thereby eliminating the benefit to commerical

enterprises. See, also, Tillage Tools.

d. Preferential Financing for National Trading Companies Under

Resolution 883 of the Banco Central do Brasil

We verified that Banco Central do Brasil Resolution 1,744 revoked

Resolution 883 on August 30, 1990, thereby terminating this program.

See, also, Tillage Tools.

e. Preferential Financing Under Resolution 68 Through FINEX

We verified that this program was terminated on April 5, 1988, by

Article 4 of Brazil's new constitution, which provided that all

programs requiring funding from the national treasury had to be

reenacted within a two-year period or cease to exist. Legislation to

reenact preferential financing through FINEX was not passed and the

program ceased to exist.

f. Preferential Financing Under Resolution 579/83 Through PROEX and

PROSIM

We verified that preferential financing through PROSIM was

terminated on February 4, 1985, by BNDES Resolution 607, and that

preferential financing through PROEX was terminated in 1991 by BNDES

Resolution 762.

g. Preferential Financing for the Storage of Merchandise Destined for

Export Under Resolution 330/Portaria 130 of the Banco Central do Brasil

We verified that this program was terminated on August 21, 1984, by

Central Bank Resolution 950.

Programs Preliminarily Found To Be Not Used

We also examined the following programs and preliminarily determine

that the respondents did not use them during the review period:

a. Preferential Financing for Industrial Enterprises by the Bank of

Brazil

b. Preferential Financing Under Resolution 578/83 Through FUNPAR

c. Accelerated Depreciation for Brazilian Made Capital Goods

d. Green Yellow Drawback (Portaria 68/83)

Preliminary Results of Review

As a result of our review, we preliminarily determine the net

subsidy to be 0.03 percent, which is de minimis, for the period January

1, 1992 through December 31, 1992.

If the final results of this review remain the same as these

preliminary results, the Department intends to instruct the Customs

Service not to assess countervailing duties on shipments of the subject

merchandise from all companies, exported on or after January 1, 1992

and on or before December 31, 1992. Further, as provided by section

751(a)(1) of the Act, the Department will instruct Customs not to

collect cash deposits on shipments of this merchandise from all

companies entered or withdrawn from warehouse for consumption on or

after the date of publication of the final results of this

administrative review.

Parties to the proceeding may request disclosure of the calculation

methodology and interested parties may request a hearing not later than

ten days after the 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 agruments raised in case briefs, may be submitted

seven days after the time limit for filing the case brief. Requests for

a hearing should be made within ten days of the publication of these

preliminary results. Any hearing, if requested, will be held within

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 19 CFR 355.38(e) of the Department's

regulations. 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.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

Dated: September 28, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-21549 Filed 11-4-94; 8:45 am]

BILLING CODE 3510-DS-M