[Federal Register Volume 61, Number 129 (Wednesday, July 3, 1996)]
[Notices]
[Pages 34794-34798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17015]
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DEPARTMENT OF COMMERCE
[C-549-802]
Ball Bearings and Parts Thereof From Thailand; Preliminary
Results of 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 countervailing duty order on Ball Bearings and Parts
Thereof from Thailand was revoked effective January 1, 1995, as a
result of a changed circumstances review and pursuant to section
782(h)(2) of the Tariff Act of 1930, as amended by the Uruguay Round
Agreements Act (60 FR 40568). The Department is conducting an
administrative review of this order to determine the appropriate
assessment rate for entries made during the last review period prior to
the revocation of the order (January 1, 1994, through December 31,
1994). For information on the net subsidy for reviewed companies and
non-reviewed companies, please see the Preliminary Results of Review
section of this notice. If the final results remain the same as these
preliminary results of administrative review, we will instruct the U.S.
Customs Service to assess countervailing duties as detailed in the
Preliminary Results of Review section of this notice. Interested
parties are invited to comment on these preliminary results. Because
this order has been revoked, the Department will not issue further
instructions with respect to cash deposits of estimated countervailing
duties.
EFFECTIVE DATE: July 3, 1996.
FOR FURTHER INFORMATION CONTACT: Robert Copyak or Kelly Parkhill,
Office of Countervailing Compliance, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone: (202) 482-2209 and (202) 482-4126, respectively.
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 May 10, 1995, the Department published a
notice of ``Opportunity to Request an Administrative Review'' (60 FR
24831) of this countervailing duty order. We received a timely request
for review, and we initiated the review, covering the period January 1
through December 31, 1994, on June 15, 1995 (60 FR 31447).
In accordance with section 355.22(a) of the Department's Interim
Regulations, this review covers only those producers or exporters of
the subject merchandise for which a review was specifically requested
(see Antidumping and Countervailing Duties: Interim Regulations;
Request for Comments, 60 FR 25130 (May 11, 1995)) (Interim
Regulations). This review was requested for the Minebea Group of
Companies in Thailand, NMB Thai, Pelmec, and NMB Hi-Tech, which
manufacture and export the subject merchandise. During this review, the
Department learned of another Minebea company, NMB Precision Ball,
Ltd., which manufactures balls. The company does not export to the
United States but it does sell balls to the other three companies which
in turn export finished ball bearings to the United States and
elsewhere. This company, like the other three Minebea producers in
Thailand, is a wholly-owned subsidiary of Minebea Japan, and because
NMB Precision Ball, Ltd. received export subsidies during the period of
review (see, ``Programs Conferring Subsidies'' section below) for its
sales of balls to the related Thai ball bearing producers, we
preliminarily determine that it is appropriate to include the subsidies
to NMB Precision Ball, Ltd. in our calculations of the net subsidy.
On November 2, 1995, we extended the period for completion of the
preliminary and final results pursuant to section 751(a)(3) of the Act
(see Extension of the Time Limit for Certain Countervailing Duty
Administrative Reviews, 60 FR 55699). As explained in the memoranda
from the Assistant Secretary for Import Administration dated November
22, 1995, and January 11, 1996 (on file in the public file of the
Central Records Unit, Room B-099 of the Department of Commerce), all
deadlines were further extended to take into account the partial
shutdowns of the Federal Government from November 15 through November
21, 1995, and December 15, 1995, through January 6, 1996. As a result
of these extensions, the deadline for these preliminary results is no
later than June 27, 1996, and the deadline for the final results of
this
[[Page 34795]]
review is no later than 180 days from the date on which these
preliminary results are published in the Federal Register.
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 is conducting this administrative review in
accordance with section 751(a) of the Act.
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. In
prior reviews, we verified on a transaction-specific basis the direct
correlation between the invoice which reflects 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.
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
prior administrative reviews (57 FR 26646, (June 15, 1992); and 58 FR
36392 (July 7, 1993)). Since the mark-up is not part of the export
value upon which the respondents earn subsidies, the Department has
followed the methodology adopted in prior 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.
NMB Thai, Pelmec, NMB Hi-Tech, and NMB Precision Ball, Ltd. are
wholly-owned by one parent company, and are therefore affiliated
companies within the meaning of section 771(33) of the Act. See Final
Affirmative Countervailing Duty Determination: Certain Pasta
(``Pasta'') from Italy, 60 FR 30288, 30290 (June 14, 1996).
Furthermore, all four sister companies produce the subject merchandise.
As a result, these four companies warrant treatment as a single company
with a combined rate. This is consistent with our approach in the
investigation and all prior reviews of this order. See Ball Bearings
and Parts Thereof from Thailand; Preliminary Results of Countervailing
Duty Administrative Review, 60 FR 22563 (May 8, 1995); see also Ball
Bearings and Parts Thereof from Thailand; Preliminary Results of
Countervailing Duty Administrative Review, 60 FR 42532 (August 16,
1995). To avoid double counting, the sales value was adjusted to
account for intercompany sales of subject merchandise. We calculated
the countervailing duty rate by first totaling the benefits received by
the four companies for each program used. Dividing these sums by the
total Thai export value for the four companies, we calculated the
unadjusted subsidy rate 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 subsidy rate for
each program, to arrive at the total countervailing duty rate.
Scope of the Review
Imports covered by this review are ball bearings and parts thereof.
Such merchandise is described in detail in the Appendix to this notice.
The Harmonized Tariff Schedule (HTS) item numbers listed in the
Appendix are provided for convenience and Customs purposes. The written
description remains dispositive.
Verification
As provided in section 782(i) of the Act, we verified information
submitted by the Royal Thai Government and the Minebea Group of
companies. We followed standard verification procedures, including
meeting with government and company officials and examination of
relevant accounting and financial records and other original source
documents. Our verification results are outlined in the public versions
of the verification reports, which are on file in the Central Records
Unit (Room B-099 of the Main Commerce Building).
Analysis of Programs
I. Program Conferring Subsidies
Investment Promotion Act of 1977--Sections 28, 31, 36(1), and 36(4)
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.
We have previously determined that the BOI licenses of Pelmec, NMB
Thai, and NMB Hi-Tech constitute export subsidies (58 FR 36392, July 7,
1993 and 60 FR 52374, October 6, 1995). No new information or evidence
of changed circumstances has been provided to warrant reconsideration
of this finding. NMB Precision Ball, Ltd. held one license during the
period of review, and this license was tied to export performance and
is, therefore, countervailable like the others.
In past reviews, the Minebea Group received benefits under sections
28, 31, and 36(1) of the IPA. In this review, they received benefits
under these sections, as well as under section 36(4).
Section 28: Prior to the review period, IPA Section 28 allowed
companies to import machinery 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,
[[Page 34796]]
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 the 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, NMB
Hi-Tech, and NMB Precision Ball, Ltd. because all of their licenses
were granted before January 1, 1992, and contain Section 28 benefits.
The respondents have argued 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 have argued that this exemption from VAT on
imports of fixed assets did not constitute a benefit to the companies
because all companies, promoted and non-promoted alike, 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 inputs, including imports
of fixed assets, when their monthly VAT liability is computed. We
examined this issue through questionnaires and at verification. 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 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).
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.
Section 31: IPA Section 31 allows companies an exemption from
payment of corporate income tax on profits derived from promoted
exports. The corporate income tax rate in Thailand is 30 percent. NMB
Thai and NMB Hi-Tech claimed an income tax exemption under Section 31
on the income tax returns filed during the review period. The income
tax exemption continues to provide countervailable benefits to the
respondent companies.
Section 36(1): IPA Section 36(1) allows companies to import raw and
``essential'' materials free of import duties. As Pelmec, NMB Thai, NMB
Hi-Tech and Precision Ball Ltd. have bonded warehouses for the purchase
of raw materials, they have only claimed Section 36(1) duty exemptions
on their imports of essential materials. Respondents' questionnaire
response included a range of items that were categorized by the BOI as
essential materials (e.g., grinding wheels, blades, lubricating
cleaning solutions, gloves, and packing materials) for which they
received duty exemptions. Energy and fuel were not included as they are
not eligible for section 36(1) duty exemption.
Prior to the Uruguay Round Agreement, only duty exemptions on
inputs that were physically incorporated into the product being
exported (e.g., raw material inputs and packing materials) were
considered non-countervailable. Under the Agreement on Subsidies and
Countervailing Measures (the Agreement), this has been broadened to
include duty exemptions on products that are ``consumed in
production.'' Respondents claim that the essential materials for which
BOI grants duty exemptions meet the ``consumed in production''
standard, and, therefore, any duty exemptions on these materials should
be found not countervailable. However, Annex II of the Agreement
contains a footnote (fn 61) which defines inputs consumed in the
production process as: ``[i]nputs consumed in the production process
are inputs physically incorporated, energy, fuels and oils used in the
production process and catalysts which are consumed in the course of
their use to obtain the exported product.''
At verification, we requested respondents to break out the
``essential materials'' according to the definition in the Annex II
footnote, and provide that break-out in a supplemental response. Their
break-out continued to include a number of BOI essential materials that
fall outside the definition in footnote 61. Respondents argue that the
term ``consumed in production'' should include all items that are worn
out during the production process and that physically touch the product
(e.g., grinding wheels, drill bits, lubricating cleaning solutions) as
well as items such as packing materials. However, it is the
Department's position that the definition in Annex II is clear, and
therefore, the only duty exemptions that we find not countervailable
are those on oils, lubricating cleaning solutions, packing materials,
and materials which are physically incorporated into the exported
product. The remaining duty exemptions, received by the respondent
companies, continue to be countervailable. Because energy and fuels
were not eligible for Section 36(1) duty exemptions, we have not
addressed whether duty exemptions on those products would be
countervailable under the URAA.
Section 36(4): While the Minebea Group had not, prior to the period
of review, claimed any benefits under Section 36(4) of the IPA, its BOI
licenses, discussed in greater detail above, always included
eligibility to claim them. Thus, the general discussion of the IPA
above applies to Section 36(4) as well. In this review period, NMB Hi-
Tech claimed benefits under Section 36(4) of the IPA for the first
time. Under Section 36(4) of the IPA, promoted persons can deduct from
their assessable income for payment of income tax an amount equal to
five percent of the increased income over the previous year, derived
from the export of products produced by the promoted persons. This
benefit is calculated across the first ten years of a license, and it
can be used as a loss carried forward in any year the promoted person
wishes to use it, either during or after the promoted period. As
Section 36(4) is conditioned upon exports, we preliminarily find this
program to be countervailable.
[[Page 34797]]
Calculation of Benefit from IPA Sections 28, 31, 36(1) and 36(4)
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 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.
Prior to this review, none of the Minebea group had ever claimed
benefits under Section 36(4). During the period of review, NMB Hi-Tech
claimed benefits under Section 36(4) for the first time. We calculated
the Section 36(4) benefit by determining the amount of tax which would
have been paid absent this deduction.
We then added all duty and tax savings under all the IPA programs
and divided this aggregate 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 countervailing duty rate
from IPA Sections 31, 28, 36(1), and 36(4) to be 5.25 percent ad
valorem during the review period.
II. Programs Preliminarily Determined to be Not Used
We examined the following programs and preliminarily determine that
the producers and/or exporters of the subject merchandise did not apply
for or receive benefits under these programs during the period of
review:
A. Tax Certificates for Exporters
B. Electricity Discounts for Exporters
C. Export Packing Credits
D. Rediscount of Industrial Bills
E. IPA Section 33
F. Export Processing Zones
G. Reduced Business Taxes for Producers of Intermediate Goods for
Export Industries
H. International Trade Promotion Fund
Preliminary Results of Review
In accordance with section 355.22(c)(4)(ii) of the Department's
Interim Regulations, we calculated an individual subsidy rate for each
producer/exporter subject to this administrative review. As stated in
the Calculation Methodology section above, since the Minebea companies
are affiliated, we are treating them as one company, and calculating
one countervailing duty rate for the group. Thus, for the period
January 1, 1994, through December 31, 1994, we preliminarily determine
the net subsidy for NMB Thai, Pelmec, NMB Hi-Tech, and NMB Precision
Ball, Ltd. to be 5.25 percent ad valorem.
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct the U.S.
Customs Service to assess countervailing duties as indicated above.
As stated in the``Summary'' section above, the Department revoked
this countervailing duty order, effective January 1, 1995, pursuant to
section 782(h)(2) of the Act. Ball Bearings and Parts Thereof from
Thailand; Final results of Changed Circumstances Countervailing Duty
Review and Revocation of Countervailing Duty Order, 61 FR 20799 (May 8,
1996). Accordingly, suspension of liquidation was terminated effective
January 1, 1995; thus, the Department will not issue further
instructions with respect to cash deposits of estimated countervailing
duties.
The URAA replaced the general rule in favor of a country-wide rate
with a general rule in favor of individual rates for investigated and
reviewed companies. The procedures for countervailing duty cases are
now essentially the same as those in antidumping cases, except as
provided for in section 777A(e)(2)(B) of the Act. Requests for
administrative reviews must now specify the companies to be reviewed.
See section 355.22(a) of the Interim Regulations. The requested review
will normally cover only those companies specifically named. Pursuant
to 19 C.F.R. Sec. 355.22(g), for all companies for which a review was
not requested, duties must be assessed at the cash deposit rate
previously ordered. Accordingly, for the period January 1 through
December 31, 1994, the assessment rates applicable to all non-reviewed
companies covered by this order are the cash deposit rates in effect at
the time of entry.
Public Comment
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. Interested
parties may submit written arguments 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. Parties who
submit argument in this proceeding are requested to submit with the
argument: (1) a statement of the issue; and, (2) a brief summary of the
argument. 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 C.F.R. Sec. 355.38.
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, under 19 C.F.R. Sec. 355.38, 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)).
Dated: June 27, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
Appendix
Scope of Review
Ball Bearings, Mounted or Unmounted, and Parts Thereof
The products covered by this review, ball bearings, mounted or
unmounted, and parts thereof, 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
[[Page 34798]]
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
parts which will be subject to heat treatment after importation.
[FR Doc. 96-17015 Filed 7-2-96; 8:45 am]
BILLING CODE 3510-DS-P