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

DEPARTMENT OF COMMERCE

International Trade Administration

[C-559-001]

Certain Refrigeration Compressors From the Republic of Singapore:

Final Results of Countervailing Duty Administrative Review

AGENCY: International Trade Administration/Import Administration/

Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative

Review.

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SUMMARY: On August 29, 1996, the Department of Commerce published the

preliminary results of its administrative review of the agreement

suspending the countervailing duty investigation on certain

refrigeration compressors from the Republic of Singapore.

In our preliminary results of review, we preliminarily determined

that the signatories to the suspension agreement complied with the

terms of the suspension agreement during the period of review. We gave

interested parties an opportunity to comment on our preliminary

results.

We have now completed this review, the twelfth review of this

Agreement, and determine that the Government of the Republic of

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

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

the signatories to the suspension agreement, have complied with the

terms of the suspension agreement during the period April 1, 1994

through March 31, 1995. Based on our analysis of the comments received,

we have changed the results from those presented in the preliminary

results of review.

EFFECTIVE DATE: July 3, 1997.

FOR FURTHER INFORMATION CONTACT: Robert Bolling or Jean Kemp, Office of

AD/CVD Enforcement, Group III, International Trade Administration, U.S.

Department of Commerce, Washington, D.C. 20230; telephone: (202) 482-

3793.

SUPPLEMENTARY INFORMATION:

Applicable Statutes and Regulations

Unless otherwise indicated, all citations to the statute and to the

Department's regulations are in reference to the provisions as they

existed on or after January 1, 1995, the effective date of the

amendments made to the Tariff Act of 1930 (the Tariff Act) in

accordance with the Uruguay Round Agreements Act (URAA).

Background

On August 29, 1996, the Department of Commerce (the Department)

published in the Federal Register (61 FR 45402-04) the preliminary

results of its 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

received comments from interested parties on our preliminary results.

Also, the Department sent out supplemental questionnaires on December

10, 1996 and January 14, 1997, to obtain additional information on the

Finance and Treasury Center (FTC) program. Petitioner provided comments

to respondents' supplemental questionnaires on January 8 and February

5, 1997. We have now completed this administrative review in accordance

with section 751 of the Tariff Act of 1930.

Scope of the 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 covers the period April 1, 1994 through March 31, 1995,

and includes three 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 (subsidy)

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 Comments Received

We preliminarily determined that the signatories to the suspension

agreement complied with the terms of the suspension agreement during

the period of review (POR). We invited interested parties to comment on

the preliminary results. We received comments from the respondents,

MARIS and AMS, and the petitioner, Tecumseh Products Company.

Respondents argue that the FTC program is not countervailable for

three reasons: (1) it is associated only with services, not goods; (2)

its benefits are ``tied'' to the provision of financial services to

entities outside Singapore and therefore the subsidy does not benefit

subject merchandise; and (3) it is not specific. We address each of

these arguments as separate comments below.

Comment 1: Respondents state that only services provided to

offshore companies can receive preferential tax treatment under the FTC

program. Because the FTC program is tied to these services, they argue,

it is not possible for the subject merchandise to receive

countervailable benefits from AMS's FTC program. Respondents note that

the FTC program approval letter authorizing AMS to be taxed at a

concessionary rate on profits from the provision of these services

states that ``the qualifying network companies shall be the

subsidiaries, branches, associates or related companies outside

Singapore,'' which have received approval from the proper authority in

Singapore for the purposes of the FTC incentive.

Respondents argue that the GOS stated in its questionnaire response

that ``the tax benefits of the program explicitly do not, by law and

under the terms of AMS' FTC approval, benefit either MARIS or the

subject merchandise.'' Respondents note that the Department has found

in previous cases that where a company receives a grant on terms that

prevent any benefit from flowing to the subject merchandise, the

program does not provide a countervailable benefit. See Live Swine from

Canada, Preliminary Results of Countervailing Duty Administrative

Review; 61 FR 26879 (May 29, 1996). Also, respondents point out that

the Department determined that equity infusions which were made to VEW,

a related company that did not produce subject merchandise, were

specifically tied by law to VEW, and

[[Page 36046]]

hence could not benefit the subject merchandise. See, Certain Carbon

Steel Products from Austria, Final Determination (``Austrian Steel); 50

FR 33369 (August 19, 1985). Lastly, respondents state that the

Department determined that where the ``export subsidies are explicitly

tied to non-subject merchandise (i.e., export to third countries), * *

* the subsidies do not benefit subject merchandise,'' and hence are not

countervailable. See Roses and Other Cut Flowers from Colombia:

Miniature Carnations from Colombia, Final Results of Countervailing

Duty Administrative Reviews of Suspended Investigations (``Flowers''),

61 FR 45941 (August 30, 1996).

Petitioner argues that the tax savings received by AMS are not

``tied'' to FTC centers, but rather accrue to the company as a whole

and thus to all goods manufactured, produced or exported by the

company. Petitioner argues that the Department's treatment of the FTC

program (i.e., tax relief) is similar to a grant program countervailed

in Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the

United Kingdom, Final Results, 60 FR 54841 (October 26, 1995). In that

case, the Department stated that ``the grants benefit the entire

operations of the company and are appropriately allocated to total

sales of the company.'' 60 FR at 54841. Additionally, petitioner states

that the administrative decisions cited by respondents are inapplicable

to this case. For example, Live Swine from Canada involved ``interest-

free cash advances on loans'' that are made pursuant to legislation

that ``specifically state[s] that the advances are to be used for crops

that are sold, not used on the farm.'' Petitioner states that this

arrangement tied benefits to specific products, whereas the savings

from the FTC's program's concessionary tax rate flow to the company and

all its products. Although the Department rejected a claim in Austrian

Steel that a specifically tied subsidy program should be countervailed

against the company as a whole, the FTC program, petitioner claims, is

not a specifically tied program. Petitioner maintains that benefits

received by AMS (i.e., increased net income) are not specifically tied

by law, but accrue to the entire company. Finally, petitioner argues

that Flowers is also inapplicable to this case. In Flowers, petitioner

notes, the Department did not allocate tied benefits across the subject

company's total sales; in this case, petitioner claims, the benefits

are untied, and therefore do accrue to the entire company. Thus,

petitioner asserts that the Department correctly applied its

methodology and allocated the benefit received by AMS to that company's

total sales.

Department's Position: The information on the record does not

support a finding that the preferential tax treatment authorized for

certain services performed by AMS' FTC bestows a countervailable

benefit on the production or exportation of the subject merchandise.

The Singapore Income Tax Act, Section 43G (Singaporean law) specifies

that an ``FTC may provide qualifying activities carried out on its own

account as may be prescribed or such prescribed qualifying services as

may be provided to its offices and associated companies where such

offices and associated companies are outside of Singapore.'' All of the

affiliated parties which qualified for these services were located

outside of Singapore. Furthermore, the record indicates that: (1)

Singaporean law does not permit AMS to claim preferential tax treatment

on financial transactions for entities located in Singapore; (2) under

the Singaporean Income Tax Code, it would be tax fraud if AMS attempted

to take a tax benefit for an unqualified transaction involving the

subject merchandise; and (3) the GOS does not permit preferential tax

treatment under the FTC program for any activities conducted with

regard to the sale, production, or export of the subject merchandise or

any merchandise produced in Singapore.

Because preferential tax treatment under the FTC program is

provided solely for income derived from financial services performed

for affiliated companies located outside of Singapore, and because

these types of financial services for which preferential tax treatment

can be claimed are not the types of services applicable to the

production or sale of merchandise, there is no basis for determining

that the preferential tax treatment of FTC income bestows a

countervailable subsidy on the subject merchandise.

Petitioner's claim, that the benefits from the FTC tax program are

not tied to FTC centers, is based on the theory that any tax savings

accrue to the company as a whole, and thus, in part, to subject

merchandise. Petitioner appears to be arguing that a subsidy provided

to certain specified service activities of a firm, as opposed to

certain specified production activities of a firm, must always be

attributed to the merchandise produced and sold by a firm, and must,

therefore always be countervailed.

We do not disagree with petitioner that there are financial

services that are undertaken during the course of producing and selling

merchandise (such as financing of input purchases, financing of sales,

financing the purchase of capital equipment among many others).

Specific benefits bestowed for the performance of these types of

services could certainly be attributed to production and sales of

merchandise. However, as noted above, the concessionary tax rate

authorized for AMS's FTC income does not include preferential tax

treatment of financial services with respect to production or sale of

merchandise produced in Singapore. Because the GOS does not allow

preferential tax treatment of any AMS' FTC services provided in

connection with companies producing or selling merchandise in

Singapore, we find that the FTC program does not confer a

countervailable subsidy on the production or export of subject

merchandise.

Comment 2: Respondents argue that the suspension agreement, U.S.

law, and the WTO Agreements all provide that countervailing duties only

may be imposed with regard to goods, and not services, and that thus

the FTC program is not countervailable because it pertains to services,

and not manufactured goods.

Petitioner argues that the statute requires the Department to

countervail benefits received by a company in the form of reduced

taxation, without regard to whether those benefits are provided for

production. Thus, petitioner asserts, current U.S. law allows the

Department to countervail benefits such as those conferred by the FTC

program. Therefore, petitioners argue, the Department can countervail

tax savings AMS derives from its income received from the FTC program.

Department's Position: We agree that benefits associated with

certain financial services may bestow a countervailable subsidy on

subject merchandise under certain conditions. However, in this case,

there is no countervailable benefit on subject merchandise, as

explained in the Department's Position on Comment 1 above.

Comment 3: Respondents argue that the Department should revisit its

earlier determination regarding the specificity of the FTC program and

find the program not specific based on the greater number of companies

receiving tax benefits under the FTC program in the tenth review, on

the extent of diversification of economic activities within the

jurisdiction of the authority providing the subsidy, and the length of

time during which the subsidy program has been in operation.

[[Page 36047]]

Petitioner cites section 1677(5A) of the Act and section 355.43(b)

of the Department's proposed regulations, and affirms that the FTC

program is specific and countervailable by virtue of being used by what

is still a limited number of companies and industries.

Department's Position: The Department previously found benefits

from the FTC program to be specifically provided. See, Certain

Refrigeration Compressors from the Republic of Singapore; Final Results

of Countervailing Duty Administrative Review, 61 FR 10315 (March 13,

1996) and Certain Refrigeration Compressors from the Republic of

Singapore; Final Results of Countervailing Duty Administrative Review,

61 FR 44296 (August 28, 1996). However, because we have found that the

program does not bestow a countervailable subsidy on the subject

merchandise, we need not address the comments on specificity raised by

respondents and petitioner in this review. Please see Department's

Position on Comment 1 above.

Final Results of Review

We determine that the signatories to the suspension agreement have

complied with the terms of the suspension agreement, including the

payment of the provisional export charge for the review period. From

April 1, 1994, through March 31, 1995, a rate of 5.52 percent was in

effect.

We determine the net subsidy to be 1.80 percent of the f.o.b. value

of the merchandise for the April 1, 1994 through March 31, 1995 review

period. Following the methodology outlined in section B.4 of the

agreement, the Department determines that, for the period of review, a

negative adjustment may be made to the provisional export charge rate

in effect. The adjustment will equal the difference between the

provisional rate in effect during the review period and the rate

determined in this review, plus interest. For this period the GOS may

refund or credit, in accordance with section B.4.c of the agreement,

the difference to the companies, plus interest, calculated in

accordance with section 778(b) of the Tariff Act.

The Department intends to notify the GOS that the provisional

export charge rate on all exports of the subject merchandise 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

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

This notice also 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 CFR 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 Tariff Act (19 U.S.C. 1675(a)(1)) and section

355.22 of the Department's regulations (19 CFR 355.22(1994)).

Dated: June 25, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-17397 Filed 7-2-97; 8:45 am]

BILLING CODE 3510-DS-P