[Federal Register Volume 59, Number 222 (Friday, November 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28575]


[[Page Unknown]]

[Federal Register: November 18, 1994]


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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]
BILLING CODE 3510-DS-P