[Federal Register Volume 62, Number 85 (Friday, May 2, 1997)]
[Notices]
[Pages 24082-24085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11460]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[C-535-001]


Cotton Shop Towels from Pakistan; Final Results of Countervailing 
Duty Administrative Reviews

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

ACTION: Notice of final results of countervailing duty administrative 
reviews.

-----------------------------------------------------------------------

SUMMARY: On September 25, 1996, the Department of Commerce (the 
Department) published in the Federal Register its preliminary results 
of administrative reviews of the countervailing duty order on cotton 
shop towels from Pakistan for the periods January 1, 1992 through 
December 31, 1992 and January 1, 1993 through December 31, 1993. We 
have completed these reviews and determine the net subsidy to be 7.81 
percent ad valorem for all companies for 1992. For 1993, we determine 
the net subsidy to be 11.50 percent ad valorem for Eastern Textiles 
(Eastern), 11.54 percent ad valorem for Creation (Pvt.), Ltd. 
(Creation), and 5.02 percent ad valorem

[[Page 24083]]

for all other companies. We will instruct the U.S. Customs Service to 
assess countervailing duties as indicated above.

EFFECTIVE DATE: May 2, 1997.

FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Kelly Parkhill, 
Office of CVD/AD Enforcement VI, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On September 25, 1996, the Department published in the Federal 
Register (61 FR 50273) the preliminary results of its administrative 
reviews of the countervailing duty order on cotton shop towels from 
Pakistan. The Department has now completed these administrative reviews 
in accordance with section 751 of the Tariff Act of 1930, as amended 
(the Act).
    We invited interested parties to comment on the preliminary 
results. On October 24, 1996, the Government of Pakistan, the Towel 
Manufacturers Association of Pakistan, and the exporters of shop towels 
from Pakistan (respondents), submitted case briefs. On November 1, 
1996, we received rebuttal briefs from Milliken & Company, petitioner. 
The reviews cover the periods January 1, 1992 through December 31, 1992 
and January 1, 1993 through December 31, 1993. The 1992 review covers 
17 manufacturers/exporters of the subject merchandise. The 1993 review 
covers 20 manufacturers/exporters. Both reviews cover five programs.

Applicable Statute and Regulations

    The Department is conducting these administrative reviews in 
accordance with section 715(a) of 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. 
References to the Department's Countervailing Duties; Notice of 
Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (May 
31, 1989) (Proposed Regulations), are provided solely for further 
explanation of the Department's countervailing duty practice. Although 
the Department has withdrawn the particular rulemaking proceeding 
pursuant to which the Proposed Regulations were issued, the subject 
matter of these regulations is being considered in connection with an 
ongoing rulemaking proceeding which, among other things, is intended to 
conform the Department's regulations to the Uruguay Round Agreements 
Act. See 60 FR 80 (Jan. 3, 1995).

Scope of the Review

    The subject merchandise is cotton shop towels from Pakistan. During 
the review periods, this merchandise was classifiable under item number 
6307.10.20 of the Harmonized Tariff Schedule (HTS). The HTS item number 
is provided for convenience and Customs purposes. The written 
description remains dispositive.

Best Information Available for Creation

    Section 776(c) of the Act requires the Department to use best 
information available (BIA) ``whenever a party or any other person 
refuses or is unable to produce information requested in a timely 
manner and in the form required, or otherwise significantly impeded an 
investigation.''
    In determining what rate to use as BIA, the Department follows a 
two-tiered methodology. The Department assigns lower BIA rates to those 
respondents who cooperated in an administrative review (tier two) and 
rates based on more adverse assumptions to respondents who did not 
cooperate, or significantly impeded the proceeding (tier one). See 
Allied Signal Aerospace Co. v. United States, 28 F. 3d 1188 (Fed. Cir. 
1994), cert. denied, 1995 U.S. Lexis 100 (1995). Creation, an exporter 
only during 1993, did not respond to the Department's initial or two 
supplemental questionnaires. However, the Government of Pakistan 
provided information regarding Creation's volume and value of exports 
during the 1993 administrative review period and regarding Creation's 
non-use of certain programs during that review period. For these final 
results we have utilized the information provided by the Government of 
Pakistan to the extent that it permitted us to calculate a program-
specific rate for Creation. See, Certain Steel Products from Italy; 
Affirmative Countervailing Duty Determinations (58 FR 37327, 37329; 
July 9, 1993). In the case of two programs, this information was 
inadequate and, in accordance with section 776 of the Act, we assigned 
to Creation a tier-one BIA rate for those programs for 1993. This tier-
one BIA rate is the highest individual rate found, either in the 
investigation or in a subsequent administrative review, for these 
programs.
    Most companies did not provide information for either review period 
regarding the benefits received under the Income Tax Reduction Program. 
For these companies, we used tier one BIA for this program in both 
reviews. For 1993, eight companies did attempt to cooperate but 
provided inadequate information as to the benefit received under this 
program. For these companies, we used tier two BIA.

Calculation Methodology for Assessment and Cash Deposit Purposes

    In accordance with Ceramica Regiomontana, S.A. v. United States, 
853 F. Supp. 431 (CIT 1994) (Ceramica), we calculated the net subsidy 
on a country-wide basis by first calculating the total subsidy rate for 
each company subject to the administrative review. We then weighted the 
rate received by each company using as the weight its share of total 
exports to the United States of subject merchandise, including all 
companies, even those with de minimis and zero rates. We then summed 
the individual companies' weighted rates to determine the country-wide, 
weighted-average subsidy rate from all programs benefiting exports of 
subject merchandise to the United States.
    Since the country-wide rate calculated using this methodology was 
above de minimis, as defined by 19 CFR Sec. 355.7 (1994), for each 
review period, we examined the net subsidy rate calculated for each 
company to determine whether individual company rates differed 
significantly from the weighted-average country-wide rate, pursuant to 
19 CFR Sec. 355.22(d)(3). None of the companies had net subsidy rates 
which were significantly different during the 1992 review period 
pursuant to 19 CFR Sec. 355.22(d)(3). Therefore, all companies are 
assigned the country-wide rate in 1992. In 1993, Eastern had a 
significantly different rate. Based on BIA, Creation also had a 
significantly different rate. These companies are treated separately 
for assessment and cash deposit purposes. All other companies are 
assigned the country-wide rate.

Analysis of Programs

    Based upon responses to our questionnaire and written comments from 
the interested parties, we determine the following:

I. Programs Conferring Subsidies

A. Export Financing

    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to change our findings from the preliminary results. On this 
basis, we

[[Page 24084]]

determine the net subsidy from this program for 1992 to be 0.72 percent 
ad valorem for all manufacturers and exporters of shop towels from 
Pakistan. For 1993, we determine the net subsidy from this program to 
be 0.49 percent ad valorem for all manufacturers and exporters of shop 
towels from Pakistan, except for Eastern, who has a significantly 
different subsidy rate. The rate for Eastern is 6.31 percent ad 
valorem. As BIA, we assigned to Creation the rate determined for 
Eastern in this review period because it is the highest rate calculated 
for any company that used this program in any administrative review.

B. Excise Tax, Sales Tax and Customs Duty Rebate Programs

    In the preliminary results, we found that these programs conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to change our findings from the preliminary results. On this 
basis, we determine the net subsidy from these programs to be 5.67 
percent ad valorem for all manufacturers and exporters of shop towels 
from Pakistan during 1992. For 1993, we determine the net subsidy from 
these programs to be 3.35 percent ad valorem for all manufacturers and 
exporters of shop towels from Pakistan, including Creation. Because we 
had adequate information on the record for this program for Creation to 
calculate a benefit from this program, we did not assign BIA to that 
company.

C. Income Tax Reductions

    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to change our findings from the preliminary results. On this 
basis, we determine the net subsidy from this program to be 1.42 
percent ad valorem for all manufacturers and exporters of shop towels 
from Pakistan during 1992. For 1993, we determine the net subsidy from 
this program to be 1.19 percent ad valorem for all manufacturers and 
exporters of shop towels from Pakistan, except for Eastern Textiles and 
Creation, who had significantly different overall subsidy rates. For 
Eastern, we calculated the benefit to be 1.84 ad valorem. For Creation, 
we assigned a tier one BIA rate of 1.88 percent ad valorem because it 
is the highest rate calculated for any company that used this program 
in any administrative review.

II. Programs Found to be Not Used

    In the preliminary results, we found that the producers and/or 
exporters of the subject merchandise did not apply for or receive 
benefits under the following programs:
     Import Duty Rebates
     Export Credit Insurance
    Our analysis of the comments submitted by the interested parties, 
summarized below, has not led us to change our findings from the 
preliminary results.

Analysis of Comments

Comment 1
    Respondents argue that for those firms that attempted to respond to 
questions regarding the income tax reduction program but were unable to 
do so, the Department should not apply as BIA the highest rate from a 
prior review, particularly since the benefit from the program was 
significantly reduced during the review period. Rather, the Department 
should apply the highest rate found for the program for a responding 
company in this review.
    Petitioner, on the other hand, argues that the Department should 
continue to use as BIA the highest rate found in a previous review.
    Department's Position: We disagree with respondents. In this 
initial questionnaire, the Department requested information regarding 
the income tax program which was available to exporters of shop towels. 
In supplemental questionnaires, we again requested the information 
needed to determine the extent of benefits from this program. While 
most respondents attempted to respond, some failed to provide the 
specific program information requested. Section 776(c) of the Tariff 
Act requires the Department to rely upon the best information otherwise 
available to establish a respondent's benefits when necessary 
information is not available on the record or a party refuses or is 
unable to produce the information requested. See also 19 CFR section 
355.37 and section 355.35 of the Department regulations. The Department 
applies two types of BIA: First tier BIA is used when a respondent 
refuses to cooperate or substantially impedes a proceeding; second tier 
BIA is used when a respondent has substantially cooperated but failed 
to provide the information in a timely manner or in the form required.
    Where an exporter cooperated by attempting to provide data, but 
failed to provide adequate information on which to calculate benefit 
during 1993, we relied on company-specific information provided in the 
1992 review for tier two BIA. Where a firm failed to provide specific 
program information and there was no information on the record, we used 
tier one BIA for both reviews. This tier one BIA is the highest 
individual rate found, either in the investigation or in a subsequent 
administrative review, for this program. The Department's use of BIA in 
this manner is in accordance with the Department's practice and 
judicial precedent; therefore, we have not changed the BIA from the 
preliminary results.
Comment 2
    Respondents argue that in calculating the benefit derived from the 
income tax reduction in 1993, when the new system of tax collection 
(preemptive tax) for exporters was in effect for the entire year, the 
Department inappropriately added benefits under the previous program to 
the benefits provided from the current program. Respondents contend 
that the Department should determine the benefit to be either the ad 
valorem tax benefit found for each responding company using the 
information provided or simply the preemptive tax rate in effect in 
1993. According to respondents, they received benefits from one or the 
other system, but not from both.
    Petitioner disagrees with respondents' position. Petitioner 
contends that given respondents failure to provide data required to 
calculate the income tax reduction benefit, the Department must assign 
these companies as best information available the highest rate found in 
a previous review. Otherwise, it should use the rates applied in the 
preliminary results.
    Department's positions: We disagree with respondents. The 
Department's tax methodology is based on a cash flow basis which for 
countervailing duty purposes means that the benefit occurs when the tax 
benefit is realized by the firm receiving the benefit. Section 
355.48(b) of the Proposed Regulations states that, ``[T]he cash flow 
and economic effect of a benefit normally occurs when a firm 
experiences a difference in cash flow, either in the payment it 
receives or the outlays it makes, as result of its receipt of the 
benefit.'' In the case of a direct tax, ordinarily the cash flow occurs 
at the time a firm can calculate the amount of benefit, which normally 
will be the time at which a company files its tax return. In Pakistan, 
the fiscal tax year for the exporters ends in March. Tax returns for 
one year are filed the following year. Thus, any tax benefits earned 
during a given fiscal year are received by the exporters in the 
following year. Since the prior tax system was still in effect

[[Page 24085]]

during part of 1992, exporters received an income tax deduction 
reflected in the tax return for tax fiscal year 1992/1993 filed in 
1993. Thus, according to our cash flow methodology, benefits from the 
previous program were realized in 1993. Moreover, under the preemptive 
tax system, which was in effect in 1993, commercial banks were required 
to withhold the income tax at the source from all foreign exchange 
proceeds. The amount withheld became the company's final tax liability. 
Therefore, under the new tax system of collecting income tax from 
exporters, the benefit is effectively realized by the firm at the time 
the banks withhold the income tax. Accordingly, the Department was 
correct in adding benefits derived under both tax systems to determine 
the benefit derived from this program in 1993.
Comment 3
    Respondents argue that the excise tax rebate should not be found 
countervailable because the excise tax is paid on cotton yarn and then 
rebated upon export. Petitioner argues that the Department correctly 
calculated the benefit from the export tax credit because the 
Government of Pakistan failed to establish the required linkage between 
the taxes paid and the rebates received.
    Department's Position: We agree with petitioner. In the 
investigation and subsequent reviews, we found the rebate of excise tax 
was countervailable because the Government of Pakistan failed to 
establish the required linkage and comparison between taxes paid and 
rebates provided. See Preliminary Results of Countervailing Duty 
Administrative Review: Cotton Shop Towels from Pakistan (58 FR 32104; 
June 8, 1993) and Final Results of Countervailing Duty Administrative 
Review: Cotton Shop Towels from Pakistan (58 FR 48038; September 14, 
1993). As stated in the preliminary results of these reviews, the 
government did not provide new information to establish linkage. 
Therefore, we continue to find the rebate of excise taxes 
countervailable.
Comment 4
    Repsondents argue that for the 1993 review, the Department 
improperly included company rates that are based on BIA in the 
calculation of the country-wide rate. They also contend that it is 
inappropriate to include, in the calculation, company rates which are 
``significantly'' higher than the country-wide rate. Petitioner, on the 
other hand, argues that the Department's calculation of the country-
wide rate is correct.
    Department's Position: We disagree with respondents. On May 4, 
1994, the Court of International Trade (the Court) rules, pursuant to 
Ceramica, that the Department is required to calculate a country-wide 
countervailing duty rate by weight averaging the benefits received by 
all companies by their proportion of exports to the United States, 
inclusive of zero rate firms and de minimis firms, pursuant to the 
methodology set forth in Ipsco v United States, 899 F.2d 1192 (Fed. 
Cir. 1990).'' (Ipsco). Given that the Court in Ceramica and Ipsco 
states that the Department should include all company rates, there is 
no legal basis for excluding ``significantly different'' rates, 
including BIA rates. (See Certain Iron-Metal Castings From India: Final 
Results of Countervailing Duty Administrative Review (60 FR 44848; 
August 29, 1995), at comment 13 and Bricks From Mexico: Amended 
Revocation of Countervailing Duty Order and Amended Final Results of 
Countervailing Duty Administrative Review (61 FR 26162; May 24, 1996). 
Therefore, we have not changed the country-wide rate calculation 
methodology from our preliminary results.

Final Results of Review

    For 1992, we determine that net subsidy to be 7.81 percent ad 
valorem for all companies. For 1993, we determine the net subsidy to be 
11.50 percent ad valorem for Eastern, 11.54 percent ad valorem for 
Creation and 5.03 percent ad valorem for all other companies.
    The Department will instruct the U.S. Customs Service to assess 
countervailing duties of 7.81 percent ad valorem for all shipments of 
the subject merchandise exported from Pakistan on or after January 1, 
1992 and on or before December 31, 1992. For all shipments of the 
subject merchandise exported from Pakistan on or after January 1, 1993 
and on or before December 31, 1993, the Department will instruct the 
U.S. Customs Service to assess countervailing duties of 11.50 percent 
ad valorem for all shipments of the subject merchandise from Eastern, 
11.54 percent ad valorem for all shipments of the subject merchandise 
from Creation and 5.02 percent ad valorem from all others.
    The Department will also instruct the U.S. Customs Service to 
collect a cash deposit of estimated countervailing duties of 11.50 
percent of the f.o.b. invoice price on all shipments of this 
merchandise from Eastern, 11.54 percent of the f.o.b. invoice price on 
all shipments of this merchandise from Creation, and 5.02 percent of 
the f.o.b. invoice price from all others on all shipments of this 
merchandise entered, or withdrawn from warehouse, for consumption on or 
after the date of publication of the final results of these reviews.
    This notice serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR. 355.34(d). Timely written notification 
of return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.

    These administrative reviews and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
355.22.

    Dated: April 24, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-11460 Filed 5-1-97; 8:45 am]
BILLING CODE 3510-DS-M