Certain Refrigeration Compressors From the Republic of Singapore Preliminary Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-559-001]

Certain Refrigeration Compressors From the Republic of Singapore

Preliminary Results of Countervailing Duty Administrative Review

AGENCY: International Trade Administration/Import Administration/

Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty

administrative review.

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SUMMARY: Pursuant to the provisions of section 751 of the Tariff Act of

1930, as amended, and 19 U.S.C. 1675(a)(1)(C), the Department of

Commerce is conducting an administrative review of the agreement

suspending the countervailing duty investigation on certain

refrigeration compressors from the Republic of Singapore. We

preliminarily determine that the signatories have complied with the

terms of the suspension agreement during the period April 1, 1992,

through March 31, 1993. We invite interested parties to comment on

these preliminary results.

EFFECTIVE DATE: November 18, 1994.

FOR FURTHER INFORMATION CONTACT: Rick Johnson or Art Stern, Office of

Agreements Compliance, International Trade Administration, U.S.

Department of Commerce, Washington, DC 20230; telephone: (202) 482-

3793.

SUPPLEMENTARY INFORMATION:

Background

On November 30, 1993, the Government of the Republic of Singapore

(GOS), Matsushita Refrigeration Industries (Singapore) Pte. Ltd.

(MARIS), and Asia Matsushita Electric (Singapore) Pte. Ltd. (AMS),

requested an administrative review of the agreement suspending the

countervailing duty investigation on certain refrigeration compressors

from the Republic of Singapore (48 FR 51167, November 7, 1983). We

initiated the review, covering the period April 1, 1992, through March

31, 1993, on January 18, 1994 (59 FR 2594). The Department of Commerce

(the Department) sent out a questionnaire on January 25, 1994, and

received a joint questionnaire response from the GOS, MARIS, and AMS,

on March 28, 1994. Subsequently, the Department sent out two

supplemental questionnaires, on April 11, 1994, and May 4, 1994, and

received joint supplemental questionnaire responses on April 25, 1994,

and May 11, 1994, respectively. The Department verified the information

provided in these responses, as well as further information submitted

by respondent for the record on May 16, 1994, in Singapore from May 18

through May 20, 1994.

The final results of the last administrative review in this case

were published on October 9, 1992 (57 FR 46539), which is on file in

the Central Records Unit (room B-099 of the Main Commerce Building).

Scope of Review

Imports covered by this review are shipments of hermetic

refrigeration compressors rated not over one-quarter horsepower from

Singapore. This merchandise is currently classified under Harmonized

Tariff Schedule (HTS) item number 8414.30.40. The HTS item number is

provided for convenience and Customs purposes. The written description

remains dispositive.

The review period is April 1, 1992 through March 31, 1993, and

includes five programs. The review covers one producer and one exporter

of the subject merchandise, MARIS and AMS, respectively. These two

companies, along with the GOS, are the signatories to the suspension

agreement.

Under the terms of the suspension agreement, the GOS agrees to

offset completely the amount of the net bounty or grant determined by

the Department in this proceeding to exist with respect to the subject

merchandise. The offset entails the collection by the GOS of an export

charge applicable to the subject merchandise exported on or after the

effective date of the agreement. See Certain Refrigeration Compressors

from the Republic of Singapore: Suspension of Countervailing Duty

Investigation, 48 FR 51167, 51170 (November 7, 1983).

Analysis of Programs

(1) The Economic Expansion Incentives Act--Part VI

The Production for Export Programme under Part VI of the Economic

Expansion Incentives Act allows a 90-percent tax exemption on a

company's export profit if the GOS designates a company as an export

enterprise. In the investigation, the Department preliminarily found

this program to be countervailable because ``this tax exemption is

provided only to certified export enterprises.'' See Preliminary

Affirmative Countervailing Duty Determination: Certain Refrigeration

Compressors from the Republic of Singapore, 48 FR 39109, 39110 (August

29, 1983). MARIS is designated as an export enterprise and used this

tax exemption during the period of review. AMS was not designated an

export enterprise under Part VI of the Economic Expansion Incentives

Act for the period of review.

According to the Export Enterprise Certificate awarded to MARIS in

a letter dated May 12, 1981, MARIS is to receive this benefit on the

production of compressors, electrical parts and accessories for

refrigerators, and plastic refrigerators. At verification, we found

that the benefit claimed by MARIS to the GOS has also been applied to

the export sales of other products outside the scope of this review,

including casting blocks, bearings, and some casting parts for

forklifts. To calculate the benefit, we divided the tax savings claimed

by MARIS under this program by the f.o.b. value of total exports of

products receiving the benefit, for the period of review.

MARIS' response to the Department's countervailing duty

questionnaire for this review indicated that MARIS deducted export

charges levied pursuant to the suspension agreement in arriving at an

adjusted profit figure, which was then used to calculate exempt export

profit for the review period. In the eighth administrative review, the

Department determined that the amount of the export charge deduction

must be added ``back to MARIS' export profit in calculating MARIS' tax

savings in order to offset the deduction of the export charges in the

review period.'' See Preliminary Results of Countervailing Duty Review:

Certain Refrigeration Compressors from Singapore, 57 FR 31175 (July 14,

1992), affirmed in Final Results of Countervailing Duty Review: Certain

Refrigeration Compressors from Singapore, 57 FR 46539 (October 9,

1992). Therefore, in calculating the benefit from this program, we have

added back this deduction. On this basis, we preliminarily determine

the benefit from this program during the review period to be 2.98

percent of the f.o.b. value of the merchandise.

(2) Finance & Treasury Center (FTC)

The Finance & Treasury Center Program allows for the taxation at a

concessionary rate of 10 percent on certain income earned by companies

providing treasury, investment, or financial services in Singapore for

their subsidiaries/affiliates outside Singapore. The FTC program under

Section 43E of the Singapore Income Tax Act has been in effect since

April 1, 1989 (i.e. Singapore tax ``year of assessment 1991''). At

verification, the Department confirmed that 10 companies currently

participate in the program, including AMS. Every company which has

applied to the program has been accepted. MARIS did not participate in

the program for the period of review. This is the first time that the

Department has examined this program.

When receipt of benefits under a program is not contingent upon

exportation, the Department must determine whether the program is

specific to an enterprise or industry, or group of enterprises or

industries. Under the specificity analysis, the Department examines

both whether a government program is limited by law to a specific

enterprise or industry, or group thereof (i.e., de jure specificity)

and whether the government program is in fact limited to a specific

enterprise or industry, or group thereof (i.e., de facto specificity).

See 19 U.S.C. Sec. 1677(5)(B). In section 355.43(b)(2) of the

Department's proposed regulations (Countervailing Duties; Notice of

Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (May

31, 1989) (Proposed Rules)), the Department has set forth factors which

may be considered in determining whether there is specificity:

(i) The extent to which a government acts to limit the availability

of a program;

(ii) The number of enterprises, industries, or groups thereof that

actually use a program;

(iii) Whether there are dominant users of a program, or whether

certain enterprises, industries, or groups thereof receive

disproportionately large benefits under a program; and

(iv) The extent to which a government exercises discretion in

conferring benefits under a program.

In Final Negative Countervailing Duty Determination: Certain

Granite Products from Italy, 53 FR 27197, 27200 (July 19, 1988), the

Department determined that benefits received under a program de jure

limited to small- and medium-sized firms were not countervailable, as

those were received by companies in virtually every productive sector

of the country. In this case, we are presented with an analogous

situation regarding the extent to which the GOS acts to limit the

availability of the FTC program. According to the May 11, 1994,

supplemental questionnaire response, ``the FTC program is open for

application to any reputable multinational corporation which intends to

establish group treasury operations in Singapore.'' Petitioner argues

that benefits under this program are thus de jure specific, ``in that

they are limited by law to only certain multinational corporations.''

The Department notes that while FTC benefits are de jure restricted to

multinational corporations (MNCs), the thousands of MNCs in Singapore

allow for a large number of potential beneficiaries in numerous

industry sectors. Therefore, the FTC program does not provide

countervailable benefits on the basis of de jure specificity.

However, according to the May 11, 1994, supplementary questionnaire

response, under the terms of the GOS letter granting AMS approval for

FTC status, the applicant ``is required to meet certain minimum levels

in the number of professional staff, total operating costs, and scale

of treasury activities.'' In respondent's own words, this requirement

has effectively limited the availability of the FTC program to a

``small number of multinational corporations (having) sufficiently

large operations in Singapore to support the establishment of an

expensive treasury support office.. . .'' See Supplemental

Questionnaire Response, May 11, 1994, p. 11. Thus, the GOS has in fact

acted to limit the number of companies which can avail themselves of

the FTC program.

Regarding the number of enterprises, industries, or groups thereof

that actually use the FTC program, respondents note that under

Singapore law, benefits for this program are available to all companies

providing treasury, investment, or financial services in Singapore for

their subsidiaries/affiliates outside Singapore. However, the Court of

International Trade has noted that the critical focus of a

determination of specificity must be an analysis of whether a benefit

``has been bestowed on a discrete class of grantees despite nominal

availability, program grouping, or the absolute number of grantee

companies or industries.'' Roses, Inc., California Floral Trade Council

and Floral Trade Council v. United States, 743 F. Supp. 870, 881

(1990). The fact that only 10 companies, representing five industries,

are using a program which is nominally available to thousands of

multinational corporations and has been in effect for five years, is

strong evidence that only a small group of enterprises currently

receives benefit under the FTC program.

Concerning whether there are dominant users of the FTC program, or

whether certain enterprises, industries, or groups thereof receive

disproportionately large benefits under this program, the May 11, 1994,

supplemental questionnaire response states that since the benefit is in

the form of a concessionary tax rate, the benefit derived by the

companies ``depends on the income derived from the conduct of treasury

activities and varies from company to company.'' Since there is no

requirement in Singapore for a company to report its benefit under the

program to the GOS, the GOS had no information regarding the level of

benefits actually received by each participating company.

Finally, regarding the extent to which a government exercises

discretion in conferring benefits under the FTC program, the April 26,

1994, supplemental questionnaire response states that the ``Singapore

Government has no discretion in administering this program.'' However,

the April 26, 1994, supplemental questionnaire response also states

that ``the FTC award is granted for a period of 5 to 10 years, with

longer awards granted for applicants who commit more manpower and

financial resources to the FTC operations.'' Therefore, it is apparent

from the response that the GOS may exercise discretion in determining

the length of the awards based on the ability of the applicant company

to commit substantial manpower and financial resources to the FTC

operations. In the case of AMS, benefits have been granted for the

minimum five-year period.

Since only a small group of enterprises, representing only five

industries, are using the FTC program, the Department preliminarily

determines that this program is de facto specific, and is therefore

countervailable. Because it is probable that participation in the FTC

program by MNCs in Singapore could change over time, in future reviews

we may re-examine the circumstances which have led the Department to

find the program de facto specific, should any new information about

the program's specificity arise.

To calculate the benefit, we divided the tax savings attributable

to the subject merchandise under this program by the value of all AMS

product sales for the period of review. On this basis, we preliminarily

determine the benefit from this program during the review period to be

0.02% percent of the f.o.b. value of the merchandise.

(3) The Investment Allowance Program

The Investment Allowance Program under Part X of the Economic

Expansion Incentives Act provides tax allowances for investment in

automated/mechanized systems. The program is available to companies

engaged in the manufacturing of any product, the provision of services,

or any of a wide variety of additional activities. AMS has qualified

for this program for the period of review. MARIS has not qualified for

this program for the period of review.

In Certain Textile Mill Products and Apparel from Singapore: Final

Negative Countervailing Duty Determination, 50 FR 9840-42 (March 12,

1985), the Department verified that the Investment Allowance program

was not limited, either de jure or de facto, to any specific enterprise

or industry and determined that the program did not constitute a bounty

or grant. At verification, we found nothing to suggest that the

operation of the program has changed since 1985. We noted that

thousands of companies in numerous industries have qualified for this

program. Therefore, we preliminarily determine that the Investment

Allowance program is not countervailable. Also, the Department

confirmed at verification that the investment allowance has been

granted with respect to automated/mechanized systems in a warehouse

through which only merchandise other than subject merchandise passes,

and so was not used by AMS for the production or sale of subject

merchandise.

(4) Technical Assistance Fees/Royalty Payments

Under Part IX of the Economic Expansion Incentives Act, payment by

Singaporean companies of license, royalty, and technical assistance

fees to offshore companies is exempted from withholding tax in

Singapore. MARIS receives tax exempt treatment for its payment of

technical assistance fees to its Japanese parent and to another related

party in Japan. At verification, the Department found that 129

companies in numerous manufacturing sectors participate in the program.

AMS did not use this program during the period of review.

Petitioner argues that the program provides an economic benefit to

users because, absent the program's tax exemption, foreign licensors

would charge Singaporean companies higher technical assistance fees.

However, petitioner has provided no evidence for the record to support

this argument.

Petitioner also points out that the certificate granting MARIS

status under the program suggests that benefits are limited to

companies receiving export incentives. They also allege that the

technical assistance fee program may be de jure specific, because it is

limited to companies that pay certain fees to foreign entities.

However, petitioners submitted no evidence that the program is related

to exports, or that participation in the technical assistance fee

program is contingent upon the use of any export incentive program.

Also, the requirement that a company must have dealings with a ``non-

resident person'' does not impose any real limitation on the number and

variety of industries participating in the program.

Moreover, in past administrative reviews, the Department has

reviewed technical assistance fees paid by MARIS, and has determined

that the payments were not excessive (Certain Refrigeration Compressors

from the Republic of Singapore: Suspension of Countervailing Duty

Investigation, 48 FR 51167, 51168 (November 7, 1983)) and were not used

to hide the company's profitability by artificially reducing their tax

liability (Certain Refrigeration Compressors from the Republic of

Singapore: Final Results of Administrative Review of Suspension

Agreement, 50 FR 30494 (July 26, 1985)). Thus, the payment of these

fees did not provide a countervailable benefit to MARIS by allowing the

company to lower its income tax liability by lowering the profit it

reports to the GOS.

Furthermore, the Department has noted that these payments were

``normal commercial transactions between a parent company and its

subsidiary,'' and that the Department had ``no evidence that transfers

of funds to MARIS from its parent companies represent(ed) anything

other than normal commercial transactions'' (Certain Refrigeration

Compressors from the Republic of Singapore; Preliminary Results of

Countervailing Duty; Administrative Review, 51 FR 37055 (October 17,

1986), affirmed in Certain Refrigeration Compressors from Singapore,

Final Results of Countervailing Duty Administrative Review, 52 FR 849

(January 9, 1987). The Department also confirmed that the payments were

thoroughly reviewed by the GOS for compliance with the program (Certain

Refrigeration Compressors from the Republic of Singapore: Final Results

of Countervailing Duty Administrative Review, 53 FR 25648 (July 8,

1988)).

Finally, in the preliminary affirmative countervailing duty

determination of the investigation, the Department noted that

``Singapore law provides that the licensor, not the licensee, is

otherwise liable for taxes owed on such payments.'' See Preliminary

Affirmative Countervailing Duty Determination; Certain Refrigeration

Compressors from the Republic of Singapore, 48 FR 39109 (August 29,

1983). There is no evidence to suggest that MARIS' tax exemptions for

technical assistance fees are accrued any differently now than how they

were accrued in past reviews where the Department found them to be non-

countervailable. Therefore, we preliminarily determine that MARIS has

not received any countervailable benefits under this program.

(5) Financing through the Monetary Authority of Singapore

Under the terms of the suspension agreement MARIS and AMS agreed

not to apply for or receive any financing provided by the rediscount

facility of the Monetary Authority of Singapore for shipments of the

subject merchandise to the United States. We determined during the

review that neither MARIS nor AMS received any financing through the

Monetary Authority of Singapore on the subject merchandise exported to

the United States during the review period. Therefore, we preliminarily

determine that both companies have complied with this clause of the

agreement.

Preliminary Results of Review

The suspension agreement states that the GOS will offset completely

with an export charge the net bounty or grant calculated by the

Department. As a result of our review, we preliminarily determine that

the signatories have complied with the terms of the suspension

agreement, including the payment of the provisional export charges in

effect for the period April 1, 1992 through March 31, 1993. We also

preliminarily determine the net bounty or grant to be 3.00% of the

f.o.b. value of the merchandise for the April 1, 1992 through March 31,

1993 review period. From April 1, 1992, through October 1, 1992, a

provisional export charge rate of 4.05% was in effect, and from October

2, 1992, through March 31, 1993, a rate of 5.52% was in effect.

Following the methodology outlined in section B.4 of the agreement,

the Department preliminarily determines that, for the April 1, 1992,

through October 1, 1992, portion of the review period, and for the

October 2, 1992, through March 31, 1993, portion of the review period,

negative adjustments may be made to the provisional export charge rates

in effect. The adjustments will equal the difference between the

provisional rates in effect during the review period and the rate

determined in this review, plus interest. These rates, established in

the notices of the final results of the seventh and eighth

administrative reviews of the suspension agreement (See Certain

Refrigeration Compressors from the Republic of Singapore; Final Results

of Countervailing Duty Administrative Review, 56 FR 63714 (December 5,

1991); and 57 FR 46540 (October 9, 1992)) are 4.05 and 5.52 percent,

respectively. The GOS may refund or credit, in accordance with section

B.4.c of the agreement, the difference, plus interest, calculated in

accordance with section 778(b) of the Tariff Act, within 30 days of

notification by the Department. The Department will notify the GOS of

these adjustments after publication of the final results of this

review.

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

preliminary results, the Department intends to notify the GOS that the

provisional export charge rate on all exports to the United States with

Outward Declarations filed on or after the date of publication of the

final results of this administrative review shall be 3.00 percent of

the f.o.b. value of the merchandise.

The agreement can remain in force only as long as shipments from

the signatories account for at least 85 percent of imports of the

subject refrigeration compressors into the United States. Our

information indicates that the two signatory companies accounted for

100 percent of imports into the United States from Singapore of this

merchandise during the review period.

Parties to the proceeding may request disclosure of the calculation

methodology and interested parties may request a hearing not later than

10 days after the date of publication of this notice. Pursuant to 19

CFR 355.38(c), interested parties may submit written comments 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 19 CFR 355.38(e).

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 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: November 11, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-28575 Filed 11-17-94; 8:45 am]

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