Preliminary Negative Countervailing Duty Determination: Elastic Rubber Tape From India

DEPARTMENT OF COMMERCE

INTERNATIONAL TRADE ADMINISTRATION

[C-533-816]

Preliminary Negative Countervailing Duty Determination: Elastic

Rubber Tape From India

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: December 7, 1998.

FOR FURTHER INFORMATION CONTACT: Vincent Kane or Suresh Maniam, Office

I, AD/CVD Enforcement, Import Administration, U.S. Department of

Commerce, Room 3099, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone (202) 482-2815 or 482-0176,

respectively.

Preliminary Determination

The Department of Commerce preliminarily determines that no

countervailable subsidies are being provided to producers and exporters

of elastic rubber tape from India.

Petitioners

The petition in this investigation was filed on August 18, 1998.

The petitioners are Fulflex, Inc., Middletown, Rhode Island; Elastomer

Technologies Group, Inc., Stuart, Virginia; and RM Engineered Products,

Inc., North Charleston, South Carolina (``the petitioners'').

Case History

Since the publication of the notice of initiation in the Federal

Register (see Notice of Initiation of Countervailing Duty

Investigation: Elastic Rubber Tape from India, 63 FR 49549 (September

16, 1998)), the following events have occurred. On September 18, 1998,

and October 15, 1998, we issued countervailing duty questionnaires to

the Government of India (``GOI'') and the only known producer and

exporter of the subject merchandise, Garware Elastomerics, Ltd.

(``GEL''). On November 3 and November 13, 1998, we issued supplemental

questionnaires to GEL and the GOI, respectively.

We received questionnaire responses from the GOI and GEL on

November 9, 1998, and a supplemental questionnaire response from GEL on

November 16, 1998.

On October 30, 1998, we postponed the preliminary determination of

this investigation until November 30, 1998. (See Notice of Postponement

of Time Limit for Countervailing Duty Investigation: Elastic Rubber

Tape from India, 63 FR 601762.)

Period of Investigation

The period for which we are measuring subsidies (``the POI'') is

GEL's 1997 fiscal year from April 1, 1997 through March 31, 1998.

Scope of Investigation

For purposes of this investigation, the product covered is elastic

rubber tape. Elastic rubber tape is defined as vulcanized, non-cellular

rubber strips, of either natural or synthetic rubber, 0.006 inches to

0.100 inches (0.15 mm to 2.54 mm) in thickness, and \1/8\ inches to

1\5/8\ inches (3 mm to 42 mm) in width. Such product is generally used

in swim wear and underwear.

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (``HTSUS'') at

subheading 4008.21.00. Although the HTSUS subheading is provided for

convenience and customs purposes, the written description of the

merchandise under investigation is dispositive.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions of the Tariff Act of 1930, as amended by

the Uruguay Round Agreements Act (``URAA''), effective January 1, 1995

(``the Act''). The Department of Commerce (``the Department'') is

conducting this investigation in accordance with section 701 of the

Act. All other references are to the Department's regulations codified

at 19 CFR Part 351 (1997), unless otherwise indicated.

Injury Test

Because India is a ``Subsidies Agreement Country'' within the

meaning of section 701(b) of the Act, the International Trade

Commission (``ITC'') is required to determine whether imports of the

subject merchandise from

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India materially injure, or threaten material injury to, a U.S.

industry. On October 15, 1998, the ITC published its preliminary

determination finding that there is a reasonable indication that an

industry in the United States is being materially injured, or

threatened with material injury, by reason of imports of the subject

merchandise from India (see 63 FR 55407 (October 15, 1998)).

Affiliated Company

In accordance with section 771(33) of the Act, the Department

considers the following persons to be affiliated or affiliated persons:

(1) Members of a family; (2) any officer or director of an organization

and such organization; (3) partners; (4) employer and employee; (5) any

person directly or indirectly owning, controlling, or holding with

power to vote, five percent or more of the outstanding voting stock or

shares of any organization and such organization; (6) two or more

persons directly or indirectly controlling, controlled by, or under

common control with, any person; and (7) any person who controls any

other person and such other person.

In cases when a company under investigation is affiliated with

another company, the Department will require the affiliated company to

respond to a countervailing duty questionnaire, if (1) that company

produces the subject merchandise or (2) that company is related to the

company under investigation, and financial transactions on terms

inconsistent with commercial considerations have occurred between them.

Normally, we consider companies to be related, if they prepare

consolidated financial statements or if one of the companies has at

least 20 percent ownership in the other. (See Final Affirmative

Countervailing Duty Determination: Certain Pasta (``Pasta'') from

Italy, 61 FR 30288, 30290 (June 14, 1996).) If an affiliated company,

which is related to the company under investigation and has had

financial transaction on terms inconsistent with commercial

considerations with that company, is found to have benefitted from

subsidies during the POI, the Department will attribute a portion of

these subsidies to the company under investigation.

In this case, based on proprietary information in GEL's November 9,

1998 questionnaire response and its November 16, 1998 supplementary

questionnaire response, we have preliminarily determined that GEL is

related to its affiliate through direct and indirect stock ownership

and through shared board members. In addition, GEL reported that

financial transactions have taken place between the two companies.

During GEL's start up in 1995, the affiliated company supplied

technical advice to GEL. It has also provided loans and loan guarantees

to GEL. In addition, the affiliated company provided certain machinery

and equipment to GEL during its start up year and, on limited

occasions, certain inputs to production. GEL claims that the machinery,

inputs to production, loans and technical advise have been provided to

it on market terms and, in support of its claim, has referred to an

annexure to its 1997 audited financial statements. In this annexure,

the auditors stated that the prices and terms for GEL purchases and

sales of goods, materials, and services are reasonable based on the

prices prevailing in the market. The auditors qualify this statement,

however, indicating that it does not apply to those goods, materials,

and services for which comparable quotations were not available because

of the specialized nature of the goods, materials, and services.

Regarding the loans and loan guarantees received by GEL, the auditors

stated that the interest rate and other terms on loans from companies

and other parties were not prejudicial to the interest of GEL.

Based on the auditors' statements and other information currently

on the record, we are unable to preliminarily conclude that the

financial transactions between GEL and its affiliate are on terms

consistent with commercial considerations. In the case of goods,

materials, and services, the auditors' statement applies only to those

purchases for which comparable products could be found in the market

place. In the case of the loans, the auditors' statement may be

suggesting that the loans to GEL were provided on favorable terms to

the company. Therefore, we are currently gathering additional

information about these financial transactions. Once this information

has been obtained and, subject to verification, we will determine

whether they were on terms inconsistent with commercial considerations.

If we find these transactions to be inconsistent with commercial

considerations, we will request that the affiliated company respond to

a countervailing duty questionnaire and, if appropriate, attribute a

portion of any subsidies that it may have received to GEL in

calculating a subsidy rate for the final determination.

Critical Circumstances

The petitioners have alleged that critical circumstances within the

meaning of section 703(e) of the Act exist with respect to the subject

merchandise. For critical circumstances to exist, there must be massive

imports of the subject merchandise over a relatively short period, and

the company must have received a countervailable subsidy, which is

inconsistent with the Subsidies Agreement. In this investigation, GEL

has responded that it has not used nor benefitted from any of the

programs under investigation. Therefore, we have preliminarily found no

subsidies which are inconsistent with the Subsidies Agreement. On this

basis, we preliminarily determine that critical circumstances do not

exist in this investigation. However, because of the outstanding

affiliation issue, we will continue to gather import statistics in the

event that subsidies inconsistent with the Subsidies Agreement may be

identified later in this investigation.

Programs Preliminarily Determined To Be Not Used

Based upon the information provided in the responses, we determine

that GEL did not apply for or receive benefits under the following

programs during the POI:

A. Passbook/Duty Entitlement Passbook Scheme

B. Export Promotion Capital Goods Scheme

C. Export Processing Zones/Export Oriented Units Programs

D. Income Tax Exemption Scheme

E. Pre-Shipment Export Financing

F. Post-Shipment Export Financing

G. Import Mechanism (Sale of Import Licenses)

H. Exemption of the Interest Tax on Export Credits

I. Rediscounting of Export Bills Abroad

J. Programs Operated by the Small Industries Development Bank of India

K. Special Imprest Licenses

L. Market Development Assistance

M. Special Benefits to Export and Trading Houses and Super Star Trading

Houses

N. Duty Drawback on Excise Taxes

O. Pre-Shipment Export Financing in Foreign Currency

P. Preferential Freight Rates

Verification

In accordance with section 782(i) of the Act, we will verify the

information submitted by respondent prior to making our final

determination.

ITC Notification

In accordance with section 703(f) of the Act, we will notify the

ITC of our determination. In addition, we are making available to the

ITC all non-privileged and nonproprietary

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information relating to this investigation. We will allow the ITC

access to all privileged and business proprietary information in our

files, provided the ITC confirms that it will not disclose such

information, either publicly or under an administrative protective

order, without the written consent of the Assistant Secretary, Import

Administration.

If our final determination is affirmative, the ITC will make its

final determination within 45 days after the Department makes its final

determination.

Public Comment

In accordance with 19 CFR 351.310, we will hold a public hearing,

if requested, to afford interested parties an opportunity to comment on

this preliminary determination. The hearing will tentatively be held 57

days from the date of publication of the preliminary determination at

the U.S. Department of Commerce, 14th Street and Constitution Avenue,

N.W., Washington, D.C. 20230. Individuals who wish to request a hearing

must submit a written request within 30 days of the publication of this

notice in the Federal Register to the Assistant Secretary for Import

Administration, U.S. Department of Commerce, Room 1870, 14th Street and

Constitution Avenue, N.W., Washington, DC 20230. Parties should confirm

by telephone the time, date, and place of the hearing 48 hours before

the scheduled time.

Requests for a public hearing should contain: (1) The party's name,

address, and telephone number; (2) the number of participants; and, (3)

to the extent practicable, an identification of the arguments to be

raised at the hearing. In addition, six copies of the business

proprietary version and three copies of the nonproprietary version of

the case briefs must be submitted to the Assistant Secretary no later

than 50 days from the date of publication of the preliminary

determination. As part of the case brief, parties are encouraged to

provide a summary of the arguments not to exceed five pages and a table

of statutes, regulations, and cases cited. Six copies of the business

proprietary version and three copies of the nonproprietary version of

the rebuttal briefs must be submitted to the Assistant Secretary no

later than 55 days from the date of publication of the preliminary

determination. An interested party may make an affirmative presentation

only on arguments included in that party's case or rebuttal briefs.

Written arguments should be submitted in accordance with 19 CFR 351.309

and will be considered if received within the time limits specified

above.

This determination is issued and published in accordance with

pursuant to sections 703(f) and 777(i)(1) of the Act.

Dated: November 30, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-32436 Filed 12-4-98; 8:45 am]

BILLING CODE 3510-DS-P