[Federal Register Volume 62, Number 128 (Thursday, July 3, 1997)]
[Notices]
[Pages 36045-36047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17397]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-559-001]


Certain Refrigeration Compressors From the Republic of Singapore: 
Final Results of Countervailing Duty Administrative Review

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

ACTION: Notice of Final Results of Countervailing Duty Administrative 
Review.

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SUMMARY: On August 29, 1996, the Department of Commerce published the 
preliminary results of its administrative review of the agreement 
suspending the countervailing duty investigation on certain 
refrigeration compressors from the Republic of Singapore.
    In our preliminary results of review, we preliminarily determined 
that the signatories to the suspension agreement complied with the 
terms of the suspension agreement during the period of review. We gave 
interested parties an opportunity to comment on our preliminary 
results.
    We have now completed this review, the twelfth review of this 
Agreement, and determine that the Government of the Republic of 
Singapore (GOS), Matsushita Refrigeration Industries (Singapore) Pte. 
Ltd. (MARIS), and Asia Matsushita Electric (Singapore) Pte. Ltd. (AMS), 
the signatories to the suspension agreement, have complied with the 
terms of the suspension agreement during the period April 1, 1994 
through March 31, 1995. Based on our analysis of the comments received, 
we have changed the results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: July 3, 1997.

FOR FURTHER INFORMATION CONTACT: Robert Bolling or Jean Kemp, Office of 
AD/CVD Enforcement, Group III, International Trade Administration, U.S. 
Department of Commerce, Washington, D.C. 20230; telephone: (202) 482-
3793.

SUPPLEMENTARY INFORMATION:

Applicable Statutes and Regulations

    Unless otherwise indicated, all citations to the statute and to the 
Department's regulations are in reference to the provisions as they 
existed on or after January 1, 1995, the effective date of the 
amendments made to the Tariff Act of 1930 (the Tariff Act) in 
accordance with the Uruguay Round Agreements Act (URAA).

Background

    On August 29, 1996, the Department of Commerce (the Department) 
published in the Federal Register (61 FR 45402-04) the preliminary 
results of its 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 
received comments from interested parties on our preliminary results. 
Also, the Department sent out supplemental questionnaires on December 
10, 1996 and January 14, 1997, to obtain additional information on the 
Finance and Treasury Center (FTC) program. Petitioner provided comments 
to respondents' supplemental questionnaires on January 8 and February 
5, 1997. We have now completed this administrative review in accordance 
with section 751 of the Tariff Act of 1930.

Scope of the 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 covers the period April 1, 1994 through March 31, 1995, 
and includes three 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 (subsidy) 
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 Comments Received

    We preliminarily determined that the signatories to the suspension 
agreement complied with the terms of the suspension agreement during 
the period of review (POR). We invited interested parties to comment on 
the preliminary results. We received comments from the respondents, 
MARIS and AMS, and the petitioner, Tecumseh Products Company.
    Respondents argue that the FTC program is not countervailable for 
three reasons: (1) it is associated only with services, not goods; (2) 
its benefits are ``tied'' to the provision of financial services to 
entities outside Singapore and therefore the subsidy does not benefit 
subject merchandise; and (3) it is not specific. We address each of 
these arguments as separate comments below.
    Comment 1: Respondents state that only services provided to 
offshore companies can receive preferential tax treatment under the FTC 
program. Because the FTC program is tied to these services, they argue, 
it is not possible for the subject merchandise to receive 
countervailable benefits from AMS's FTC program. Respondents note that 
the FTC program approval letter authorizing AMS to be taxed at a 
concessionary rate on profits from the provision of these services 
states that ``the qualifying network companies shall be the 
subsidiaries, branches, associates or related companies outside 
Singapore,'' which have received approval from the proper authority in 
Singapore for the purposes of the FTC incentive.
    Respondents argue that the GOS stated in its questionnaire response 
that ``the tax benefits of the program explicitly do not, by law and 
under the terms of AMS' FTC approval, benefit either MARIS or the 
subject merchandise.'' Respondents note that the Department has found 
in previous cases that where a company receives a grant on terms that 
prevent any benefit from flowing to the subject merchandise, the 
program does not provide a countervailable benefit. See Live Swine from 
Canada, Preliminary Results of Countervailing Duty Administrative 
Review; 61 FR 26879 (May 29, 1996). Also, respondents point out that 
the Department determined that equity infusions which were made to VEW, 
a related company that did not produce subject merchandise, were 
specifically tied by law to VEW, and

[[Page 36046]]

hence could not benefit the subject merchandise. See, Certain Carbon 
Steel Products from Austria, Final Determination (``Austrian Steel); 50 
FR 33369 (August 19, 1985). Lastly, respondents state that the 
Department determined that where the ``export subsidies are explicitly 
tied to non-subject merchandise (i.e., export to third countries), * * 
* the subsidies do not benefit subject merchandise,'' and hence are not 
countervailable. See Roses and Other Cut Flowers from Colombia: 
Miniature Carnations from Colombia, Final Results of Countervailing 
Duty Administrative Reviews of Suspended Investigations (``Flowers''), 
61 FR 45941 (August 30, 1996).
    Petitioner argues that the tax savings received by AMS are not 
``tied'' to FTC centers, but rather accrue to the company as a whole 
and thus to all goods manufactured, produced or exported by the 
company. Petitioner argues that the Department's treatment of the FTC 
program (i.e., tax relief) is similar to a grant program countervailed 
in Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the 
United Kingdom, Final Results, 60 FR 54841 (October 26, 1995). In that 
case, the Department stated that ``the grants benefit the entire 
operations of the company and are appropriately allocated to total 
sales of the company.'' 60 FR at 54841. Additionally, petitioner states 
that the administrative decisions cited by respondents are inapplicable 
to this case. For example, Live Swine from Canada involved ``interest-
free cash advances on loans'' that are made pursuant to legislation 
that ``specifically state[s] that the advances are to be used for crops 
that are sold, not used on the farm.'' Petitioner states that this 
arrangement tied benefits to specific products, whereas the savings 
from the FTC's program's concessionary tax rate flow to the company and 
all its products. Although the Department rejected a claim in Austrian 
Steel that a specifically tied subsidy program should be countervailed 
against the company as a whole, the FTC program, petitioner claims, is 
not a specifically tied program. Petitioner maintains that benefits 
received by AMS (i.e., increased net income) are not specifically tied 
by law, but accrue to the entire company. Finally, petitioner argues 
that Flowers is also inapplicable to this case. In Flowers, petitioner 
notes, the Department did not allocate tied benefits across the subject 
company's total sales; in this case, petitioner claims, the benefits 
are untied, and therefore do accrue to the entire company. Thus, 
petitioner asserts that the Department correctly applied its 
methodology and allocated the benefit received by AMS to that company's 
total sales.
    Department's Position: The information on the record does not 
support a finding that the preferential tax treatment authorized for 
certain services performed by AMS' FTC bestows a countervailable 
benefit on the production or exportation of the subject merchandise. 
The Singapore Income Tax Act, Section 43G (Singaporean law) specifies 
that an ``FTC may provide qualifying activities carried out on its own 
account as may be prescribed or such prescribed qualifying services as 
may be provided to its offices and associated companies where such 
offices and associated companies are outside of Singapore.'' All of the 
affiliated parties which qualified for these services were located 
outside of Singapore. Furthermore, the record indicates that: (1) 
Singaporean law does not permit AMS to claim preferential tax treatment 
on financial transactions for entities located in Singapore; (2) under 
the Singaporean Income Tax Code, it would be tax fraud if AMS attempted 
to take a tax benefit for an unqualified transaction involving the 
subject merchandise; and (3) the GOS does not permit preferential tax 
treatment under the FTC program for any activities conducted with 
regard to the sale, production, or export of the subject merchandise or 
any merchandise produced in Singapore.
    Because preferential tax treatment under the FTC program is 
provided solely for income derived from financial services performed 
for affiliated companies located outside of Singapore, and because 
these types of financial services for which preferential tax treatment 
can be claimed are not the types of services applicable to the 
production or sale of merchandise, there is no basis for determining 
that the preferential tax treatment of FTC income bestows a 
countervailable subsidy on the subject merchandise.
    Petitioner's claim, that the benefits from the FTC tax program are 
not tied to FTC centers, is based on the theory that any tax savings 
accrue to the company as a whole, and thus, in part, to subject 
merchandise. Petitioner appears to be arguing that a subsidy provided 
to certain specified service activities of a firm, as opposed to 
certain specified production activities of a firm, must always be 
attributed to the merchandise produced and sold by a firm, and must, 
therefore always be countervailed.
    We do not disagree with petitioner that there are financial 
services that are undertaken during the course of producing and selling 
merchandise (such as financing of input purchases, financing of sales, 
financing the purchase of capital equipment among many others). 
Specific benefits bestowed for the performance of these types of 
services could certainly be attributed to production and sales of 
merchandise. However, as noted above, the concessionary tax rate 
authorized for AMS's FTC income does not include preferential tax 
treatment of financial services with respect to production or sale of 
merchandise produced in Singapore. Because the GOS does not allow 
preferential tax treatment of any AMS' FTC services provided in 
connection with companies producing or selling merchandise in 
Singapore, we find that the FTC program does not confer a 
countervailable subsidy on the production or export of subject 
merchandise.
    Comment 2: Respondents argue that the suspension agreement, U.S. 
law, and the WTO Agreements all provide that countervailing duties only 
may be imposed with regard to goods, and not services, and that thus 
the FTC program is not countervailable because it pertains to services, 
and not manufactured goods.
    Petitioner argues that the statute requires the Department to 
countervail benefits received by a company in the form of reduced 
taxation, without regard to whether those benefits are provided for 
production. Thus, petitioner asserts, current U.S. law allows the 
Department to countervail benefits such as those conferred by the FTC 
program. Therefore, petitioners argue, the Department can countervail 
tax savings AMS derives from its income received from the FTC program.
    Department's Position: We agree that benefits associated with 
certain financial services may bestow a countervailable subsidy on 
subject merchandise under certain conditions. However, in this case, 
there is no countervailable benefit on subject merchandise, as 
explained in the Department's Position on Comment 1 above.
    Comment 3: Respondents argue that the Department should revisit its 
earlier determination regarding the specificity of the FTC program and 
find the program not specific based on the greater number of companies 
receiving tax benefits under the FTC program in the tenth review, on 
the extent of diversification of economic activities within the 
jurisdiction of the authority providing the subsidy, and the length of 
time during which the subsidy program has been in operation.

[[Page 36047]]

    Petitioner cites section 1677(5A) of the Act and section 355.43(b) 
of the Department's proposed regulations, and affirms that the FTC 
program is specific and countervailable by virtue of being used by what 
is still a limited number of companies and industries.
    Department's Position: The Department previously found benefits 
from the FTC program to be specifically provided. See, Certain 
Refrigeration Compressors from the Republic of Singapore; Final Results 
of Countervailing Duty Administrative Review, 61 FR 10315 (March 13, 
1996) and Certain Refrigeration Compressors from the Republic of 
Singapore; Final Results of Countervailing Duty Administrative Review, 
61 FR 44296 (August 28, 1996). However, because we have found that the 
program does not bestow a countervailable subsidy on the subject 
merchandise, we need not address the comments on specificity raised by 
respondents and petitioner in this review. Please see Department's 
Position on Comment 1 above.

Final Results of Review

    We determine that the signatories to the suspension agreement have 
complied with the terms of the suspension agreement, including the 
payment of the provisional export charge for the review period. From 
April 1, 1994, through March 31, 1995, a rate of 5.52 percent was in 
effect.
    We determine the net subsidy to be 1.80 percent of the f.o.b. value 
of the merchandise for the April 1, 1994 through March 31, 1995 review 
period. Following the methodology outlined in section B.4 of the 
agreement, the Department determines that, for the period of review, a 
negative adjustment may be made to the provisional export charge rate 
in effect. The adjustment will equal the difference between the 
provisional rate in effect during the review period and the rate 
determined in this review, plus interest. For this period the GOS may 
refund or credit, in accordance with section B.4.c of the agreement, 
the difference to the companies, plus interest, calculated in 
accordance with section 778(b) of the Tariff Act.
    The Department intends to notify the GOS that the provisional 
export charge rate on all exports of the subject merchandise 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 
1.80 percent of the f.o.b. value of the merchandise.
    This notice also 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.
    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 section 
355.22 of the Department's regulations (19 CFR 355.22(1994)).

    Dated: June 25, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-17397 Filed 7-2-97; 8:45 am]
BILLING CODE 3510-DS-P