[Federal Register Volume 60, Number 88 (Monday, May 8, 1995)]
[Notices]
[Pages 22563-22566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11257]



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DEPARTMENT OF COMMERCE
[C-549-802]


Ball Bearings and Parts Thereof From Thailand; Preliminary 
Results of a Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty 
administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on ball bearings 
and parts thereof from Thailand. We preliminarily determine the total 
bounty or grant to be 4.29 percent ad valorem for all companies for the 
period January 1, 1992, through December 31, 1992. If the final results 
remain the same as these preliminary results of administrative review, 
we will instruct U.S. Customs Service to assess countervailing duties 
as indicated above. We invite interested parties to comment on these 
preliminary results.

EFFECTIVE DATE: May 8, 1995.

FOR FURTHER INFORMATION CONTACT:
Martina Tkadlec or Kelly Parkhill, Office of Countervailing Compliance, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230, telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION: 

Background

    On May 3, 1989, the Department published in the Federal Register 
(54 FR 19130) the countervailing duty order on ball bearings and parts 
thereof from Thailand. On April 28, 1993, the Department published in 
the Federal Register a notice of ``Opportunity to Request 
Administrative Review'' (58 FR 25802) of this countervailing duty 
order. On May 28, 1993, Torrington Company, the petitioner, requested 
an administrative review of the order. On May 28, 1993, Pelmec Thai 
Ltd. (Pelmec) and NMB Thai Ltd. (NMB Thai), the respondent companies in 
prior reviews also requested an administrative review.
    On June 25, 1993 (58 FR 34414), we initiated the review, covering 
the period January 1, 1992, through December 31, 1992. The review 
covers nine programs and three related producers/exporters, NMB Thai, 
Pelmec, and NMB Hi-Tech Bearings Ltd. (NMB Hi-Tech), which are wholly 
owned by Minebea, Co., Ltd. of Japan.

Applicable Statute and Regulations

    The Department is conducting this administrative review in 
accordance with section 751(a) of the Tariff Act of 1930, as amended 
(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 ball bearings and parts thereof. 
Such merchandise is described in detail in Appendix A to this notice. 
The Harmonized Tariff Schedule (HTS) item numbers listed in Appendix A 
are provided for convenience and Customs purposes. The written 
description remains dispositive.

Calculation Methodology

    In the first administrative review, respondents claimed that the 
F.O.B. value of the subject merchandise entering the United States is 
greater than the F.O.B. price charged by the companies in Thailand (57 
FR 26646; June 15, 1992). They explained that this discrepancy is due 
to a mark-up charged by the parent company, located in a third country, 
through which the merchandise is invoiced. However, the subject 
merchandise is shipped directly from Thailand to the United States and 
is not transshipped, combined with other merchandise, or repackaged 
with other merchandise. In other words, for each shipment of subject 
merchandise, there are two invoices and two corresponding F.O.B. export 
prices: (1) The F.O.B. export price at which the subject merchandise 
leaves Thailand, and on which subsidies from the Royal Thai Government 
(RTG) are earned by the companies, and upon which the subsidy rate is 
calculated; and (2) the F.O.B. export price which includes the parent 
company mark-up, and which is listed on the invoice accompanying the 
subject merchandise as it enters the United States, and upon which the 
cash deposits are collected and the countervailing duty is assessed. 
Respondents argued that the calculated ad valorem rate should be 
adjusted by the ratio of the export value from Thailand to the export 
value charged by the parent company to the U.S. customer so that the 
amount of countervailing duties collected would reflect the amount of 
subsidies bestowed. The Department agreed and made this adjustment in 
the first and second administrative reviews (57 FR 26646; June 15, 
1992; and 58 FR 36392; July 7, 1993).
    In the present review, we again verified on a transaction-specific 
basis the direct correlation between the invoice which reflect the 
F.O.B. price on which the subsidies are earned and the invoice which 
reflects the marked-up price that accompanies each shipment as it 
enters the United States. Since the mark-up is not part of the export 
value upon which the respondents earn bounties or grants, the 
Department has followed the methodology adopted in the first and second 
administrative reviews, and calculated the ad valorem rate as a 
percentage of the original export value from Thailand and then 
multiplied this rate by the adjustment ratio--the original export value 
from Thailand divided by the marked-up value of the goods entering the 
United States.
    We did not calculate a separate rate for each company because NMB 
Thai, Pelmec, and NMB Hi-Tech are wholly owned by one parent company, 
and are therefore related. As a result of this relationship, we 
considered the three companies as one corporate entity in our 
calculations. We calculated the bounty or grant by first totalling the 
benefits received by the three companies for each program used. 
Dividing these sums by total Thai export value for the three companies, 
we calculated the adjusted bounty or grant for each program used. As 
described above, we adjusted these rates by multiplying them by the 
ratio of the original export price from Thailand to the marked-up price 
of the goods entering the United States. Finally, we summed the 
adjusted bounty or grant for each program, to arrive at the total 
country-wide bounty or grant.
[[Page 22564]]

Analysis of Programs

1. Investment Promotion Act of 1977--Sections 31, 28 and 36(1)

    The Investment Promotion Act of 1977 (IPA) is administered by the 
Board of Investment (BOI) and is designed to provide incentives to 
invest in Thailand. In Order to receive IPA benefits, each company must 
apply to the BOI for a Certificate of Promotion (license), which 
specifies goods to be produced, production and export requirements, and 
benefits approved. These licenses are granted at the discretion of the 
BOI and are periodically amended or reissued to change benefits or 
requirements. Each IPA benefit for which a company is eligible must be 
specifically stated in the license.
    The BOI licenses for Pelmec, NMB Thai and NMB Hi-Tech all 
originally included export requirements. In the Final Affirmative 
Countervailing Duty Determination and Countervailing Duty Order: Ball 
Bearings and Parts Thereof from Thailand (54 FR 19130; May 3, 1989), we 
determined that because the receipt of benefits under the IPA licenses 
was contingent upon export performance, these benefits were 
countervailable. However, effective January 1, 1990, producers of 
electronic parts (BOI Category 4.6) became eligible to apply to have 
export requirements eliminated from their BOI licenses. Most of the 
subject merchandise is classified by BOI under Category 4.6, and 
consequently, NMB Thai, NMB Hi-Tech, and Pelmec all applied for 
eliminations of their export requirements. NMB Thai's export 
requirements were lifted effective October 16, 1992, for one license, 
and effective November 9, 1992, for its three remaining licenses. The 
export requirements for NMB Hi-Tech's two licenses were lifted 
effective February 26, 1990, and November 19, 1990. Export requirements 
were eliminated from two of Pelmec's three licenses, effective November 
9, 1992. However, because the BOI considers some of the subject 
merchandise produced by Pelmec under one of its BOI licenses to be 
``ball bearings and parts for general industry,'' the export 
requirement has not been eliminated completely from its remaining 
license.
    During the period of review, export requirements were specified in 
most of the companies' licenses. Furthermore, the subject merchandise 
constitutes one class or kind of merchandise and export requirements 
remain in place for certain ball bearings subject to the countervailing 
duty order. Consequently, we preliminarily determine that IPA benefits 
continued to be tied to export performance for manufacturers of subject 
merchandise during the review period and are, therefore, 
countervailable.
    Pelmec, NMB Thai and NMB Hi-Tech received benefits under three 
sections of the IPA during the review period: IPA Sections 31, 28, and 
36(1).
    Section 31: IPA Section 31 allows companies an exemption from 
payment of corporate income tax on profits derived from promoted 
exports. Pelmec, NMB Thai, and NMB Hi-Tech all claimed an income tax 
exemption under Section 31 on the income tax return filed during the 
review period.
    Section 28: Prior to the review period, IPA Section 28 allowed 
companies to import fixed assets free of import duties, the business 
tax and the local tax. However, effective January 1, 1992, the RTG 
eliminated both the business and the local tax and instituted a value 
added tax (VAT) system.
    According to Section 21(4) of the VAT Act, if Section 28 benefits 
were granted by BOI to a company before January 1, 1992, that company, 
when importing fixed assets under Section 28, would continue to be 
subject to the business tax provisions under Chapter IV, Title II, of 
the Revenue Code before being amended by VAT Act. In accordance with 
Section 21(4), the company would be required to pay the business and 
local taxes only if its BOI license requirements were violated. Section 
21(4) of the VAT Act applies to Pelmec, NMB Thai, and NMB Hi-Tech 
because all of their licenses were granted before January 1, 1992, and 
contain Section 28 benefits. The respondents argued in their 
questionnaire response that given the provisions of the VAT Act and, 
specifically Section 21(4), their exemption from the business and local 
taxes no longer constitutes a benefit to the companies because: (1) No 
other companies are required to pay the business and local taxes, and 
(2) under Section 21(4), payment of the business and local taxes serves 
only as a penalty for noncompliance with BOI license requirements. We 
verified that under the new VAT law, companies are no longer required 
to pay business and local taxes with the exception of the noncompliance 
penalty noted above. For these reasons, we preliminarily determine that 
the business and local tax exemptions under Section 28 no longer 
constitute a countervailable benefit for companies subject to Section 
21(4) of the VAT Act.
    However, under provisions of Section 21(4) of the VAT Act, 
companies that were granted Section 28 benefits under the IPA before 
January 1, 1992, are not required to pay VAT on imports of fixed 
assets. The respondents argued in their supplementary questionnaire 
that this exemption from VAT on imports of fixed assets did not 
constitute a benefit to the companies because all companies are 
effectively exempted from VAT on their imports of fixed assets. 
According to the Section 82 of the VAT Act, the VAT liability is 
computed by subtracting the ``input tax'' (the VAT paid) from the 
``output tax'' (the VAT collected). Consequently, companies that pay 
VAT on imports of fixed assets are effectively exempted from this VAT 
payment as they receive a credit for the VAT they paid on purchases of 
all inputs, including imports of fixed assets, when their monthly VAT 
liability is computed. We examined this issue at verification and 
through questionnaires. We confirmed that under the VAT system, 
companies receive credit for the VAT paid on the purchases of inputs 
and, as a result, no VAT is effectively paid by companies on these 
purchases. Since VAT liability is computed on a monthly basis, any 
possible time-value-of-money benefit under Section 21(4) of the VAT Act 
in the review would be insignificant. On this basis, we preliminarily 
determine at this time that the exemption of the VAT on imports of 
fixed assets under Section 21(4) of the VAT Act does not constitute a 
countervailable benefit to the companies specified in Section 21(4). In 
future administrative reviews, however, the Department will continue to 
examine provisions of the VAT Act, including Section 21(4), to 
ascertain that no countervailable benefits are being provided to 
manufacturers of subject merchandise.
    Since the business and local tax exemptions under Section 28 of the 
IPA and the VAT exemption under Section 21(4) of the VAT Act do not 
confer countervailable benefits to companies subject to Section 21(4) 
of the VAT Act, we preliminarily determine that only the exemptions of 
import duties on fixed assets under Section 28 of IPA continue to 
provide countervailable benefits to the respondent companies which were 
all subject to Section 21(4) of the VAT Act during the review period.
    Section 36(1): IPA Section 36(1) allows companies to import 
essential materials (nonfixed assets that are not physically 
incorporated into the exported good) free of import duties. Pelmec, NMB 
Thai, and NMB Hi-Tech all claimed such exemptions during the review 
period.
    To calculate the benefit from Sections 31, 28, and 36(1) of the 
IPA, we followed the same methodology that has been used in past 
administrative [[Page 22565]] reviews (see, e.g., 58 FR 16174, March 
25, 1993; 57 FR 9413, March 18, 1992). For Section 31, we calculated 
the benefit by calculating the difference between what each company 
paid in corporate income tax during the review period and what it would 
have paid absent the exemption. We did this by multiplying the 
corporate income tax rate in effect during the review period by the 
amount of each company's income that was exempted from income tax. For 
Sections 28 and 36(1), we calculated the benefit by obtaining the 
amount of import duties that would have been paid on the imports absent 
the exemption. We then added all duty and tax savings under all the IPA 
programs and divided this aggregat benefit by the total export value of 
the subject merchandise. We then made the adjustment for the parent 
company mark-up discussed in the ``Calculation Methodology'' section 
above. On this basis, we preliminarily determine the bounty or grant 
from IPA Sections 31, 28 and 36(1) to be 4.27 percent ad valorem during 
the review period.

2. Electricity Discounts for Exporters

    Electricity discounts for exporters were terminated effective 
January 1, 1990. However, because government authorities can defer 
action on company applications for up to five years, residual benefits 
are possible up to five years after termination of the program.
    Pelmec and NMB Thai received such residual benefits during the 
review period. We calculated the benefit attributable to these residual 
benefits by dividing the amount of the electricity discount by the 
total F.O.B. export value of subject merchandise. We then made the 
adjustment for the parent company mark-up discussed in the 
``Calculation Methodology'' section above. On this basis, we 
preliminarily determine the bounty or grant from residual electricity 
discounts to be 0.02 percent ad valorem during the review period.

3. Tax Certificates for Exporters

    The RTG issues tax certificates to exporters of record which are 
transferable and which rebate indirect taxes and import duties levied 
on inputs used to produce exports. This rebate program is provided for 
in the ``Tax and Duty Compensation of Exported Goods Produced in the 
Kingdom Act'' (Tax and Duty Act).
    The Thai Ministry of Finance computes the value of the rebate rates 
under the Tax and Duty Act based on the Basic Input-Output Table of 
Trailand (I-O table). Using this table, the Ministry computes the value 
of total inputs (both imported and domestic) at ex-factory prices, and 
the import duties and indirect taxes on each input. As determined in 
the Final Affirmative Countervailing Duty Determination and 
Countervailing Duty Order: Ball Bearings and Parts Thereof from 
Thailand (54 FR 19130; May 3, 1989), these rebates are countervailable 
only to the extent that the remissions of duties and taxes exceed those 
actually levied on physically incorporated inputs.
    Prior to 1992, there were two rates for tax certificates, the ``A'' 
rate, which rebated import duties and business taxes, and the ``B'' 
rate, which rebated only business taxes. Exporters of the subject 
merchandise were eligible for the ``B'' rate only. Because of their IPA 
benefits, they were ineligible to receive the ``A'' rate.
    Effective January 1, 1992, as a result of the adoption of the VAT, 
the ``B'' rate was terminated and the ``A'' rate was revised to rebate 
only import duties. Accordingly, none of the companies under review 
were eligible to apply for or earn rebates under this program during 
the review period. Based on prior Department practice, we countervailed 
the benefits under the Tax Certificates program at the time the tax 
certificates were earned. See, e.g., Final Affirmative Countervailing 
Duty Determination: Carbon Steel Butt-Weld Pipe Fittings from Thailand, 
55 FR 1695, 1699 (January 18, 1990). All tax certificates received 
during the 1992 review period were earned in prior years and were 
countervailed in prior review periods.
    At verification, we examined the official announcement that 
terminated the ``B'' rebate rate and we examined individual company 
documentation showing that none of the companies earned ``B'' rate tax 
certificates. Additionally, we confirmed with RTG officials that the 
companies under review are not eligible for the ``A'' rate rebate. As 
no tax certificates were earned during the review period, we 
preliminarily determine that producers of the subject merchandise 
received no bounty or grant from the tax certificate program during the 
review period.

4. Other Programs

    We also examined the following programs and preliminarily determine 
that the exporters of the subject merchandise did not apply for or 
receive benefits under these programs during the review period:
     Export Packing Credits
     Rediscount of Industrial Bills
     Export Processing Zones
     IPA Sections 33 and 36(4)
     Reduced Business Taxes for Producers of Intermediate Goods 
for Export Industries
     International Trade Promotion Fund

Preliminary Results of Review

    As a result of our review, we preliminarily determine the total 
bounty or grant to be 4.29 percent ad valorem for the period January 1, 
1992, through December 31, 1992. If the final results of this review 
remain the same as the preliminary results, the Department intends to 
instruct the Customs Service to assess countervailing duties of 4.29 
percent of the F.O.B. invoice price on all shipments from Thailand of 
the subject merchandise exported on or after January 1, 1992, and on or 
before December 31, 1992. The Department also intends to instruct the 
Customs Service to collect a cash deposit of estimated countervailing 
duties of 4.29 percent of the F.O.B. invoice price on all shipments 
from Thailand of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the date of publication of the 
final results of this review.
    Interested parties may request disclosure of the calculation 
methodology and may request a hearing within 10 days of the date of 
publication of this notice. Case briefs or other written comments from 
interested parties may be submitted not later than 30 days after the 
date of publication of this notice. Rebuttal briefs and rebuttal 
comments, limited to issues raised in the case briefs, may be filed not 
later than 37 days after the date of publications of this notice. 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 section 
355.38(e) of the Department's regulations.
    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 event later than the date the 
case briefs, under 19 CFR 355.38(c)(1994), 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 Act (19 U.S.C. 1675(a)(1)(1994)) and 19 CFR 
355.22(1994).

    [[Page 22566]] Dated: April 27, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.

Appendix A

Scope of the Review

    The products covered by this review, ball bearings, mounted or 
unmounted, and parts thereof, constitute the following as outlined 
below.

Ball Bearings, Mounted or Unmounted, and Parts Thereof

    These products include all antifriction bearings which employ 
balls as the rolling element. During the review period, imports of 
these products were classifiable under the following categories: 
antifriction balls; ball bearings with integral shafts; ball 
bearings (including radial ball bearings) and parts thereof; ball 
bearing type pillow blocks and parts thereof; ball bearing type 
flange, take-up, cartridge, and hanger units, and parts thereof; and 
other bearings (except tapered roller bearings) and parts thereof. 
Wheel hub units which employ balls as the rolling element are 
subject to the review. Finished but unground or semiground balls are 
not included in the scope of this review. Imports of these products 
are currently classifiable under the following HTS item numbers: 
8482.10.10, 8482.10.50, 8482.80.00, 8482.91.00, 8482.99.10, 
8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 8483.30.80, 
8483.90.20, 8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 
8708.99.50.
    This review covers all of the subject bearings and parts thereof 
outlined above with certain limitations. With regard to finished 
parts (inner race, outer race, cage, rollers, balls, seals, shields, 
etc.), all such parts are included in the scope of this review. For 
unfinished parts (inner race, outer race, rollers, balls, etc.), 
such parts are included if: (1) They have been heat treated, or (2) 
heat treatment is not required to be performed on the part. Thus, 
the only unfinished parts that are not covered by this review are 
those where the part will be subject to heat treatment after 
importation.
[FR Doc. 95-11257 Filed 5-5-95; 8:45 am]
BILLING CODE 3510-DS-M