Ceramic Tile From Mexico; Preliminary Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[C-201-003]

Ceramic Tile From Mexico; Preliminary Results of Countervailing

Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty

administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an

administrative review of the countervailing duty order on ceramic tile

from Mexico. We have preliminarily determined the total bounty or grant

to be 0.48 percent ad valorem for all companies during the period

January 1, 1993, through December 31, 1993. In accordance with 19 CFR

355.7, any rate less than 0.5 percent ad valorem is de minimis. If the

final results remain the same as these preliminary results of

administrative review, we will instruct the U.S. Customs Service to

liquidate, without regard to countervailing duties as indicated above.

Interested parties are invited to comment on these preliminary

results.

EFFECTIVE DATE: May 18, 1995.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Kelly Parkhill,

Office of Countervailing Compliance, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue NW., Washington, DC 20230; telephone:

(202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On May 10, 1982, the Department published in the Federal Register

(47 FR 20012) the countervailing duty order on ceramic tile from

Mexico. On May 4, 1994, the Department published a notice of

``Opportunity to Request Administrative Review'' (59 FR 23051) of this

duty order. We received a timely request for review from the Government

of Mexico (GOM) and Ceramica Regiomontana, S.A., (Ceramica).

On June 15, 1994, we initiated the review, covering the period

January 1, 1993, through December 31, 1993 (59 FR 30770). The review

covers 40 manufacturers/exporters of the subject merchandise and four

programs.

Applicable Statute and Regulations

The Department is conducting this administrative review in

accordance with section 751(a) of the Tariff Act of 1930, as amended

(the Act). Unless otherwise indicated, all citations to the statute and

to the Department's regulations are in reference to the provision as

they existed on December 31, 1994. However, references to the

Department's Countervailing Duties; Notice of Proposed Rulemaking and

Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed

Regulations), are provided solely for further explanation of the

Department's countervailing duty practice. Although the Department has

withdrawn the particular rulemaking proceeding pursuant to which the

Proposed Regulations were issued, the subject matter of these

regulations is being considered in connection with an ongoing

rulemaking proceeding which, among other things, is intended to conform

the Department's regulations to the Uruguay Round Agreements Act. See

60 FR 80 (Jan. 3, 1995).

Partial Revocation

On May 31, 1994, in its request for administrative review, the GOM

submitted a request for partial revocation for 14 companies which

included only the agreements required under 19 CFR 355.25(b)(3)(iii).

On November 14, 1995, in its submission of the questionnaire response,

the GOM submitted company and government certifications as required

under 19 CFR 355.25(b)(3)(i) and (ii) to complete its request for

partial revocation. After examining the record for each of the 14

companies identified in the requests for revocation, the Department has

determined that none of them have met the minimum threshold

requirements to be considered for revocation under 19 CFR

355.25(a)(3)(i). These companies did not participate in five

consecutive administrative reviews in which they were found not to have

received any net subsidy, including the review in which they are

requesting revocation, and with no intervening period in which a review

of the company was not conducted.

Moreover, under 19 CFR 355.25(b)(3), a company must request

revocation in writing and, with its request, submit (1) government and

company certifications that the company neither applied for nor

received any net subsidy during the period of review and will not apply

for or receive any net subsidy in the future; and (2) the agreement

concerning revocation described in 19 CFR 355.25(a)(3)(iii). (According

to 19 CFR 355.25(a)(3)(iii), producers or exporters must agree in

writing to their immediate reinstatement in the order, as long as any

producer or exporter is subject to the order, if the Secretary

concludes that the producer or exporter, subsequent to the revocation,

has received any net subsidy on the merchandise.) In this case,

although the companies filed the agreements required under 19 CFR

355.25(a)(3)(iii) at the time of the revocation request, they did not

submit government and company certifications required under 19 CFR

355.25(b)(3)(i) and (ii) until November 14, 1995, the deadline for

submission of the questionnaire response.

All of the requirements for revocation are fully discussed in

Ceramic Tile From Mexico; Preliminary Results of Countervailing Duty

Administrative Review and Intent To Revoke in Part Countervailing Duty

Order (58 FR 31505; June 3, 1993) and Ceramic Tile From Mexico; Final

Results of Countervailing Duty Administrative [[Page 26718]] Review and

Revocation in Part of the Countervailing Duty Order (59 FR 2823;

January 19, 1994). For the reasons stated above, these 14 companies did

not meet those requirements and are therefore, not eligible for

revocation in this administrative review.

Scope of Review

Imports covered by this review are shipments of Mexican ceramic

tile, including non-mosaic, glazed, and unglazed ceramic floor and wall

tile. During the review period, such merchandise was classifiable under

the Harmonized Tariff Schedule (HTS) item numbers 6907.10.0000,

6907.90.0000, 6908.10.0000, and 6908.90.0000. The HTS item numbers are

provided for convenience and Customs purposes. The written description

remains dispositive.

Calculation Methodology for Assessment and Cash Deposit Purposes

We calculated the bounty or grant on a country-wide basis by first

calculating the bounty or grant for each company subject to the

administrative review. We then weight-averaged the rate received by

each company, even those with de minimis and zero rates, using as the

weight its share of total Mexican exports to the United States of

subject merchandise. We then summed the individual companies' weight-

averaged rates to determine the bounty or grant from all programs

benefitting exports of subject merchandise to the United States. Since

the country-wide rate calculated using this methodology was de minimis,

as defined by 19 CFR 355.7, no further calculations were necessary.

Analysis of Programs

I. Programs Conferring Subsidies

A. Programs Previously Found to Confer Subsidies BANCOMEXT Financing

for Exporters

Effective January 1, 1990, the Mexican Treasury Department

eliminated the Fondo para el Fomento de las Exportaciones de Productos

Manufacturados (FOMEX) loan program and transferred the FOMEX trust to

the Banco Nacional de Comercio Exterior, S.N.C. (BANCOMEXT). BANCOMEXT

offers short-term financing to producers or trading companies engaged

in export activities; any company generating foreign currency through

exports is eligible for financing under this program. The BANCOMEXT

program operates much like its predecessor, FOMEX. BANCOMEXT provides

two types of financing, both in U.S. dollars, to exporters: working

capital loans (pre-export loans), and loans for export sales (export

loans). In addition, BANCOMEXT may provide financing to foreign buyers

of Mexican goods and services.

The Department has previously found this program to confer an

export subsidy to the extent that the loans are provided at

preferential terms (See Ceramic Tile From Mexico; Preliminary Results

of Countervailing Duty Review (57 FR 5997, February 19, 1992) and

Ceramic Tile From Mexico; Final Results of Countervailing Duty Review

(57 FR 24247, June 8, 1992). In this review the GOM provided no new

information or evidence of changed circumstances that would lead the

Department to alter that determination.

We found that the annual interest rates BANCOMEXT charged to

borrowers for certain loans on which interest payments were due during

the review period were lower than commercial rates. The BANCOMEXT

dollar-denominated loans under review were granted at annual interest

rates ranging from 5.9 percent to 10.0 percent. As discussed in Certain

Steel Products from Mexico; Final Countervailing Duty Determination (58

FR 37357, July 9, 1993), because loans are funded by BANCOMEXT through

commercial banks in dollars and indexed to dollars for repayment, we

used a dollar benchmark. As the benchmark for BANCOMEXT pre-export and

export dollar-denominated loans granted in 1993, we used the average of

the quarterly weighted-average effective interest rates published in

the Federal Reserve Bulletin, which resulted in an annual benchmark of

7.03 percent in 1993.

We consider the benefits from short-term loans to occur at the time

the interest is paid. Because interest on BANCOMEXT pre-export loans is

paid at maturity, we calculated benefits based on loans that matured

during the review period; these were obtained between August 1992 and

October 1993. Interest on BANCOMEXT export loans is paid in advance; we

therefore calculated benefits based on BANCOMEXT loans received during

the review period.

Three exporters of ceramic tile products used BANCOMEXT pre-export

financing and one company used BANCOMEXT export financing. Because we

found that the exporters were able to tie their BANCOMEXT loans to

specific sales, we measured the benefit only from the BANCOMEXT loans

tied to sales of the subject merchandise to the United States. To

determine the benefit for each exporter, we multiplied the difference

between the interest rate charged to exporters for these loans and the

benchmark interest rate by the outstanding principal and then

multiplied this amount by the term of the loan divided by 365. We then

weight-averaged the benefit received by each company using as the

weight its share of total Mexican exports to the United States of the

subject merchandise. On this basis, we preliminarily determine the

benefit from this program to be 0.0002 percent ad valorem for all

companies.

PITEX

The Program for Temporary Importation of Products used in the

Production of Exports (PITEX) was established by a decree published in

the Diario Oficial on May 9, 1985, and amended in the Diario Oficial on

September 19, 1986, and May 3, 1990. The program is jointly

administered by the Ministry of Commerce and Industrial Development

(SECOFI) and the Customs Administration. Under PITEX, exporters with a

proven export record may receive authorization to temporarily import

products to be used in the production of exports for up to five years

without having to pay the import duties normally imposed on those

imports. PITEX allows for the exemption of import duties for the

following categories of merchandise used in export production: raw

materials, packing materials, fuels and lubricants, machinery used to

manufacture products for export, and spare parts and other machinery.

The importer must post a bond or other security to guarantee the

reexportation of the temporary imports. Because it is only available to

exporters, the Department previously found in Certain Textile Mill

Products From Mexico; Final Results of Countervailing Duty

Administrative Review (56 FR 50859, October 9, 1991) and Ceramic Tile

From Mexico; Final Results of Countervailing Duty Administrative Review

(57 FR 24247, June 8, 1992) that PITEX provides countervailable

benefits to the extent that it provides duty exemptions on imports of

merchandise not physically incorporated into exported products. The GOM

provided no new information or evidence of changed circumstances that

would lead the Department to alter that determination.

During the review period, four companies used the PITEX program for

imports of machinery and spare parts which are not physically

incorporated into exported products. To determine the benefit for each

exporter, we calculated the duties that should have been paid on the

non-physically incorporated items that were imported under the PITEX

program during the [[Page 26719]] review period. We then divided that

amount by each company's total exports and weight-averaged the benefit

received by each company using as the weight its share of total Mexican

exports to the United States of the subject merchandise. On this basis,

we preliminarily determine the benefit from this program to be 0.47

percent ad valorem for all companies.

NAFINSA Long-Term Loans

Two companies received long-term financing from NAFINSA loans

(Nacional Finciera Sociedad Anonima). Until December 31, 1988, NAFINSA

operated as a first-tier bank, which is defined as a commercial bank

that provides financing directly to the public. Since December 31,

1988, NAFINSA has operated as ``second-tier'' bank granting financing

to companies indirectly through the commercial bank, (i.e., first-tier

banks). NAFINSA long-term loans have been found to be specific in past

proceedings because availability was limited to specific geographical

regions of Mexico. See Bars and Shapes from Mexico Final Affirmative

Countervailing Duty Determinations and Countervailing Duty Orders 49 FR

161 (August 17, 1984). The GOM has provided no new information or

evidence of changed circumstances to lead us to conclude that this

program is not limited to companies in specific regions. Therefore, we

preliminarily determine that NAFINSA long-term loans are specific.

Since the GOM did not provide any information on long-term interest

rates, we are using a short-term CPP based rate as our benchmark rate

in accordance with our practices as set forth in section 355.49(b)(iii)

of the Department's regulations. See Countervailing Duties; Notice of

Proposed Rulemaking and Request for Public Comments, 54 FR 23366, 23384

(May 31, 1989). In past Mexican cases, we have used the Costo

Porcentual Promedio (CPP), a short-term interest rate, as the basis for

our benchmark. We have converted the CPP rate into a benchmark rate

using a standard formula that has been used consistently in past

Mexican cases. See Porcelain-on-Steel Cookingware from Mexico; Final

Results of Countervailing Duty Administrative Review, 57 FR 562

(January 7, 1982). Using this methodology, we calculated an annual

average benchmark of 29.79 percent for the peso-denominated loans. A

comparison between the benchmark rate and the NAFINSA loan rates

indicates that these loans are inconsistent with commercial

considerations.

To calculate the benefit, we multiplied the difference between the

benchmark rate and the interest rate in effect for the NAFINSA loan by

the principal outstanding during the review period. We divided the

benefit by the firm's total sales during the review period and then

weight-averaged the benefit received by each company using as the

weight its share of total Mexican exports to the United States of the

subject merchandise. On this basis, we preliminarily determine the

benefit from this program to be 0.01 percent ad valorem for all

companies.

II. Programs Preliminarily Found To Be Not Used

We also examined the following programs and preliminarily

determined that exporters of the subject merchandise did not apply for

or receive benefits under these programs during the review period:

(A) Other BANCOMEXT preferential financing;

(B) Other Dollar-Denominated Financing Programs;

(C) Fiscal Promotion Certificates (CEPROFI);

(D) Import duty reductions and exemptions;

(E) State tax incentives;

(F) Article 15 Loans;

(G) NAFINSA FONEI-type financing; and

(H) NAFINSA FOGAIN-type financing.

Preliminary Results of Review

For the period January 1, 1993, through December 31, 1993, we

preliminarily determined the total bounty or grant to be 0.48 percent

ad valorem for all companies. In accordance with 19 CFR 355.7, any rate

less than 0.5 percent ad valorem is de minimis.

If the final results remain the same as these preliminary results,

the Department intends to instruct the U.S. Customs Service to

liquidate, without regard to countervailing duties, all shipments of

the subject merchandise from Mexico exported on or after January 1,

1993, and on or before December 31, 1993.

The Department also intends to instruct the U.S. Customs Service to

collect a cash deposit of estimated countervailing duties of zero

percent of the f.o.b. invoice price on all shipments of the subject

merchandise from all companies, entered or withdrawn from warehouse,

for consumption on or after the date of publication of the final date

of the publication of the final result of this review.

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 arguments 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, under Sec. 355.38(c), 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 Act (19 U.S.C. 1675(a)(1)) and

19 CFR 355.22.

Dated: May 10, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-12199 Filed 5-17-95; 8:45 am]

BILLING CODE 3510-DS-P