[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