Certain Textile Mill Products From Thailand; Final Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-549-401]

Certain Textile Mill Products From Thailand; Final Results of

Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of the Countervailing Duty

Administrative Review on Certain Yarn Products covered under the

Suspended Investigation on Certain Textile Mill Products from Thailand.

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SUMMARY: On August 2, 1995, the Department of Commerce (the Department)

published in the Federal Register its preliminary results of

administrative review of Certain Yarn Products covered under the

agreement suspending the countervailing duty investigation on Certain

Textile Mill Products from Thailand for the period May 18, 1992 through

December 31, 1993 (suspension agreement). We have completed this review

and have determined that the signatories were not in violation of the

suspension agreement. However, we note that the Department will require

that four signatories repay the Royal Thai Government (RTG), in an

annual adjustment, the amount by which all tax certificates received

exceeded the import duties on physically incorporated inputs.

EFFECTIVE DATE: January 29, 1996.

FOR FURTHER INFORMATION CONTACT: Lisa Yarbrough or Jim Doyle, Office of

Agreements Compliance, Import Administration, International Trade

Administration, U.S. Department of Commerce, Washington, D.C. 20230,

telephone (202) 482-3793.

SUPPLEMENTARY INFORMATION:

Background

On November 23, 1990, the Department published in the Federal

Register (55 FR 48885) a notice terminating in part the suspension

agreement on Certain Textile Mill Products from Thailand (50 FR 9837,

March 12, 1985). On May 9, 1992, the Court of International Trade (CIT)

held that the Department's termination was not in accordance with the

law because the Department failed to strictly follow 19 CFR

355.25(d)(4). The Court of Appeals for the Federal Circuit (CAFC)

affirmed the decision of the CIT on October 12, 1993, and instructed

the Department to reinstate the suspension agreement. Subsequently, on

October 22, 1993, the Department reinstated the suspension agreement,

effective May 18,

[[Page 2798]]

1992, the date the Department published notice of the CIT decision (58

FR 54552).

On March 4, 1994, the Department published in the Federal Register

a notice of ``Opportunity to Request Administrative Review'' (59 FR

10368) of the suspended investigation for the period May 18, 1992 to

December 31, 1993. The Department received requests for an

administrative review of certain yarn products on March 31, 1994, from

the American Yarn Spinners Association (AYSA) and certain individual

yarn producers. On April 15, 1994, the Department initiated a

countervailing duty administrative review on Certain Yarn Products for

the period May 18, 1992 to December 31, 1993 (59 FR 18099, April 15,

1994). The Department verified the responses of the RTG and the Thai

Textile Manufacturers Association (TTMA) from January 16 through

January 25, 1995 pursuant to the administrative review.

On August 2, 1995, the Department published in the Federal Register

(60 FR 39363) the preliminary results of its administrative review of

certain yarn products. We invited interested parties to comment on the

preliminary results. On August 14, 1995, a case brief was submitted by

Economic Consulting Services (ECS), a representative for the AYSA and

individual member companies of the AYSA.

The Department has now completed this administrative review in

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

Act). The review covers nine programs and eight producers/exporters:

Saha Union, Venus Thread, Union Thread, Union Spinning, Thai Melon,

Thai American, Thai Blanket, and Thai Synthetic.

Applicable Statute and Regulations

The Department is conducting this administrative review in

accordance with section 751(a) of the Act. Unless otherwise indicated,

all citations to the statute and to the Department's regulations are in

reference to the provisions as they existed on December 31, 1994.

Scope of Review

Imports covered by this review are shipments of certain yarns from

Thailand. During the period of review, such merchandise was

classifiable under the Harmonized Tariff Schedule (HTS) item numbers

5204.11.0000, 5204.19.0000, 5204.20.0000, 5206.21.0000, 5206.22.0000,

5206.23.0000, 5206.24.0000, 5206.25.0000, 5206.41.0000, 5206.42.0000,

5206.43.0000, 5206.44.0000, 5206.45.0000, 5207.10.0000, 5207.90.0000,

5401.10.0000, 5402.31.3000, 5402.32.3000, 5402.33.6000, 5406.10.0020,

5406.10.0040, 5406.10.0090, 5508.20.0000, 5510.12.0000, 5510.90.4000,

and 5511.30.0000.

Analysis of Programs

Based upon our analysis of the responses to our questionnaire and

verification, we determine the following:

I. Programs Found To Be Used

A. Tax Certificates

Under Section II (c) of the suspension agreement, the producers and

exporters can apply or receive tax certificates on shipments of subject

merchandise exported directly or indirectly to the United States for

import duties paid on items that are physically incorporated into

exported products. If the producers and exporters apply for tax

certificates in excess of the items physically incorporated, the

suspension agreement requires that the producers and exporters repay to

the RTG, in an annual adjustment, the amount by which the tax

certificates exceed the import duties on physically incorporated

inputs.

Tax certificate applications are made on a shipment by shipment

basis after the producer/exporter receives payment for its shipment.

The application can include up to 10 shipments and must be submitted

within one year of the shipment date. Exporters can apply for an

extension if they do not meet the one year deadline.

The law governing this program is the ``Tax and Duty Compensation

of Exported Goods Produced in the Kingdom Act, B.E. 2524 (1981).''

Effective January 1, 1992, new nominal rebate rates were established

for all products by the Committee on Tax and Duty Rebates for Exported

Goods Produced in the Kingdom. The new nominal rates applicable to

signatories are categorized by the following sectors: spinning,

weaving, made-up textile goods, and knitting. Because nominal rates are

in excess of duties pertaining to physically incorporated inputs, the

Department has calculated, and requested that the RTG implement non-

excessive rates. See verification report dated September 15, 1994, and

letter from Roland L. MacDonald to Arthur J. Lafave III dated November

15, 1994.

In the preliminary results, we found that Thai Melon, Thai

American, Thai Synthetic, and Thai Blanket applied for tax certificates

on subject merchandise to the United States at nominal rates during the

POR. Our analysis of the comments submitted by the interested parties,

summarized below, has not led us to change our findings in the

preliminary results. On this basis, the Department will require that

these companies repay the RTG, in an annual adjustment, the amount by

which the tax certificates exceed the import duties on physically

incorporated inputs.

B. Export Packing Credits

Under Section II (a) of the suspension agreement, the producers and

exporters are not to apply for, or receive, Export Packing Credits

(EPCs) from the Bank of Thailand (BOT) that permit the rediscounting of

promissory notes arising from shipments of subject merchandise to the

United States.

EPCs are pre-shipment short-term loans available to exporters for a

maximum of 180 days from the date of issuance. Under the EPC program,

commercial banks issue loans based on promissory notes from

creditworthy exporters. Such notes have to be supported by an

irrevocable letter of credit, a sales contract, a purchase order, or a

warehouse receipt. The commercial bank will then resell 50% of the

promissory note to the BOT at a lower interest rate. The maximum

interest rate a commercial bank can charge the exporter is 10% per

annum.

If an exporter does not fulfill the contract by the due date of the

EPC, the BOT will automatically charge the commercial bank a penalty

interest rate. The commercial bank will then pass this penalty onto the

exporter. The penalty interest rate is 6.5% per annum calculated over

the full term of the loan. However, penalties can be refunded if the

exporter ships the merchandise within 60 days after the due date. If

only a portion of the goods is shipped by the due date, the exporter

receives a partial refund in proportion to the value of the goods

shipped.

In the preliminary results, we found that Thai Melon and Thai

American used this program for exports of subject merchandise to the

United States. Our analysis of the comments submitted by the interested

parties, summarized below, has not led us to change our findings in the

preliminary results. On this basis, the net subsidy received on EPCs

for this administrative review is 0.19%.

C. International Trade Promotion Fund

Under Section II (h) of the suspension agreement, the producers and

exporters are to notify the Department in writing prior to applying for

or accepting any new benefit which is, or is likely to be, a

countervailable bounty or grant on shipments of subject merchandise

[[Page 2799]]

exported, directly or indirectly, to the United States. Although the

Department has never determined this program to be countervailable, we

reviewed this program in the administrative review.

This program, governed by the ``Rule on Administration of the

International Trade Promotion Fund (ITPF), B.E. 2532 (1989),'' promotes

and develops Thai exports worldwide through incoming and outgoing trade

missions. The ITPF provides training and seminars for exporters, and

publicity through public advertisements.

In the preliminary results, we confirmed that Saha Union and its

relateds (Union Spinning, Union Thread, and Venus Thread) participated

in an international trade fair, promoting subject merchandise. However,

Saha Union and its related companies paid their own expenses to

participate in the trade fair. Thus, the signatories were not found to

be in violation of the agreement. Our analysis of the comments

submitted by the interested parties, summarized below, has not led us

to change our findings in the preliminary results.

D. Duty Drawback

Under Section II (c) of the suspension agreement, exporters and

producers are not to apply for, or receive, rebates on shipments of

subject merchandise in excess of the import duties paid on items that

are physically incorporated into exported products.

Under this program, Thai Customs will refund import duties paid on

imported goods used in the production of an exported product. In order

to qualify for duty drawback, the goods must be exported through an

authorized port, the exports must be shipped within one year of the

date of importation of the goods on which drawback is claimed, and the

producer/exporter must request drawback within six months of the date

of exportation of the goods.

In the preliminary results, we found that Saha Union, Union

Spinning, Union Thread, Venus Thread, and Thai Melon used duty drawback

on exported goods of subject merchandise to the United States. Based on

verification, we determined that the amount of drawback received was

not in excess of the items physically incorporated into the exported

products. Hence, the signatories were not found to be in violation of

the agreement. Our analysis of the comments submitted by the interested

parties, summarized below, has not led us to change our findings in the

preliminary results.

II. Programs Found Not To Be Used

In the preliminary results we found that the producers/exporters of

the subject merchandise did not apply for or receive benefits under the

following programs:

A. Electricity Discounts

B. Repurchase of Industrial Bills

C. Investment Promotion Act: Section 28, 31, 35, and 36

D. Export Processing Zones

E. Double Deduction for Foreign Marketing Expenses

Our analysis of the comments submitted by the interested parties,

summarized below, has not led us to change our findings in the

preliminary results.

Analysis of Comments

Comment 1

ECS argues that the Department verified the continued existence of

numerous subsidy programs and the continued receipt by several Thai

yarn producers and exporters of benefits from several of the subsidy

programs. They further claim that these subsidy benefits found by the

Department are distinct from and are above and beyond the large subsidy

benefits that were given to the Thai yarn industry under the Investment

Promotion Act. ECS maintains that the large subsidy benefits received

by the Thai yarn industry under the Investment Promotion Act were

instrumental in the massive expansion of the capacity of the Thai yarn

industry several years ago.

Department's Position

The Department disagrees with the arguments raised by ECS. As

described in the preliminary results (60 FR 39363), the programs found

to be used did not confer a subsidy which violated the terms of the

agreement. Due to the unusual circumstances surrounding this case and

the reinstatement of the suspension agreement, the Department does not

consider the calculation of EPCs in this POR to constitute a violation

of the agreement within the meaning of 19 CFR 355.19 (d)(1994).

However, we note that Section II (a) of the suspension agreement

prohibits participation by any signatory in the EPC program at

noncommercial rates and terms for subject merchandise. Thus, in future

reviews, the signatories shall follow Section II (a) of the suspension

agreement or they will be found in violation of the agreement.

In regard to the tax certificates received by signatories during

the POR, under Section II (c) of the suspension agreement, the

producers and exporters can apply or receive tax certificates on

shipments of subject merchandise exported directly or indirectly to the

United States for import duties paid on items that are physically

incorporated into exported products. However, if the producers and

exporters apply for tax certificates in excess of the items physically

incorporated, the suspension agreement requires that the producers and

exporters repay to the RTG, in an annual adjustment, the amount by

which the tax certificates exceed the import duties on physically

incorporated inputs.

The Department will require that the signatories repay to the RTG,

in an annual adjustment, any amount by which the tax certificate

exceeds the amount of import duties on physically incorporated inputs.

The annual adjustment shall be calculated in accordance with Section

IIc (i) and (ii) of the suspension agreement.

With respect to the use of duty drawback, the Department verified

that the amount received was not in excess of the import duties paid on

physically incorporated inputs. Thus, the signatories were not in

violation. (See verification report dated June 1, 1995).

Finally, the participation in the international trade promotion

fund by four signatories does not confer a benefit because the

Department verified that the signatories paid their own expenses.

Furthermore, the Department has never determined this program to be

countervailable.

Comment 2

ECS wants assurance that any benefits found by the Department

during the period of review are repaid to the RTG in order to reverse

any benefits received by the Thai yarn producers during the POR.

Department's Position

As stated above, the Department will require that the signatories

repay the amount in which the tax certificates exceed import duties on

physically incorporated inputs. If the signatories fail to comply with

the Department, we will determine that the signatories have violated

the agreement.

Comment 3

ECS urges the Department to maintain close scrutiny over the

administration of the agreement so that the U.S. industry can be

assured that the subsidies found by the Department will be repaid to

the RTG and that such benefits will not continue in the future.

Department's Position

The Department will continue to closely monitor the administration

of

[[Page 2800]]

the agreement in order to ensure that the excess amounts of the tax

certificates are repaid and that the signatories do not receive any

benefits in the future that would constitute a violation of the

agreement.

Final Results of Review

For the period May 18, 1992 through December 31, 1993, we determine

that the signatories were not in violation of the suspension agreement.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 C.F.R. 355.34(d). Timely written notification

of return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)(1994)) and 19 C.F.R.

355.22(1994).

Dated: December 14, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 96-1454 Filed 1-26-96; 8:45 am]

BILLING CODE 3510-DS-P