[Federal Register Volume 62, Number 181 (Thursday, September 18, 1997)]
[Notices]
[Pages 48985-48989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24845]



[[Page 48985]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[C-557-806]


Extruded Rubber Thread From Malaysia; Final Results of 
Countervailing Duty Administrative Review

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

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

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

SUMMARY: On May 13, 1997 the Department of Commerce (``the 
Department'') published in the Federal Register its preliminary results 
of administrative review of the countervailing duty order on Extruded 
Rubber Thread from Malaysia for the period January 1, 1995 through 
December 31, 1995 (62 FR 26289). The Department has now completed this 
administrative review in accordance with section 751(a) of the Tariff 
Act of 1930, as amended. For information on the net subsidy for each 
reviewed company, and for all non-reviewed companies, please see the 
Final Results of Review section of this notice.

EFFECTIVE DATE: September 18, 1997.

FOR FURTHER INFORMATION CONTACT:
Eric Greynolds, Kathleen Lockard or Richard Herring, 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

    Pursuate to 19 C.F.R. Sec. 335.22(a), this review covers only those 
producers or exporters of the subject merchandise for which a review 
was specifically requested. Accordingly, this review covers Heveafil 
Sdn. Bhd., Filmax Sdn, Bhd., Rubberflex Sdn. Bhd., Filati Lastex 
Elastofibre Sdn. Bhd. (Filati), and Rudfil Sdn. Bhd. Heveafil and 
Filmax are affiliated parties. (See Affiliated Parties section below). 
This review also covers the period January 1, 1995 through December 31, 
1995 and 13 programs.
    Since the publication of the preliminary results on May 13, 1997 
(62 FR 26289), the following events have occurred. We invited 
interested parties to comment on the preliminary results. On June 12, 
1997, case briefs were submitted by Heveafil, Filmax, Rubberflex, 
Filati, and Rubfil which exported extruded rubber thread to the United 
States during the review period.

Applicable Statute

    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.

Scope of the Review

    The product covered by this review is extruded rubber thread. 
Extruded rubber thread is defined as vulcanized rubber thread obtained 
by extrusion of stable or concentrated natural rubber latex of any 
cross sectional shape, measuring from 0.18 mm, which is 0.007 inch or 
140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge, in diameter. 
Extruded rubber thread is currently classified under subheading 
4007.00.00 of the Harmonized Tariff Schedule of the United States 
(HTSUS). The HTSUS subheadings are provided for convenience and U.S. 
Customs purposes. Our written description of the scope of this review 
remains dispositive.

Affiliated Parties

    Heveafil owns and controls Filmax and both companies produce 
subject merchandise. Therefore, we determine them to be affiliated 
companies under section 771(33) of the Act and, consistent with prior 
reviews of this order, we have calculated a single rate applicable to 
both of these companies. See Extruded Rubber Thread From Malaysia; 
Final Results of Countervailing Duty Administrative Review (61 FR 
55272; October 25, 1996) (Malaysian Rubber Thread 1994 Review). For 
further information, see Memorandum to file from Judy Kornfeld 
Regarding Status as Affiliated Parties dated March 28, 1997, on file in 
the public file of the Central Records Unit, Room B-099 of the 
Department of Commerce.

Analysis of Programs

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

I. Programs Conferring Subsidies

A. Programs Previously Determined to Confer Subsidies
    1. Export Credit Refinancing (ECR) Program. In the preliminary 
results, we found that both pre- and post-shipment loans under this 
program conferred countervailable subsidies on the subject merchandise. 
Our review of the record and our analysis of the comments submitted by 
the interested parties, summarized below, have not led us to change our 
findings from the preliminary results. Accordingly, the net subsidies 
for pre-shipment and post-shipment loans remain unchanged from the 
preliminary results and are as follows:

                           Pre-Shipment Loans                           
------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Heveafil/Filmax............................................         0.15
Rubberflex.................................................         0.30
Filati.....................................................         0.00
Rubfil.....................................................         0.03
------------------------------------------------------------------------


                           Post-Shipment Loans                          
------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Heveafil/Filmax............................................         0.00
Rubberflex.................................................         0.00
Filati.....................................................         0.15
Rubfil.....................................................         0.00
------------------------------------------------------------------------

    2. Pioneer status. In the preliminary results, we found that this 
program conferred countervailable subsidies on the subject merchandise. 
Our review of the record and our analysis of the comments submitted by 
the interested parties, summarized below, have led us to modify our 
findings from the preliminary results for this program for Rubberflex 
(See Department's Position on Comment 7). Accordingly, the net 
subsidies for this program have changed and are as follows:

------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Heveafil/Filmax............................................         0.74
Rubberflex.................................................         0.00
Filati.....................................................         0.00
Rubfil.....................................................         0.00
------------------------------------------------------------------------

    3. Industrial building allowance. In the preliminary results, we 
found that this program conferred countervailable subsidies on the 
subject merchandise. We did not receive any comments on this program 
from the interested parties, and our review of the record has not led 
us to change our findings from the preliminary results. Accordingly, 
the net subsidies for this program remain unchanged from the 
preliminary results and are as follows:

[[Page 48986]]



------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Heveafil/Filmax............................................          \1\
Rubberflex.................................................         0.00
Filati.....................................................         0.00
Rubfil.....................................................         0.00
------------------------------------------------------------------------
\1\ Less than 0.005%.                                                   

    4. Double deduction for export promotion expenses. In the 
preliminary results, we found that this program conferred 
countervailable subsidies on the subject merchandise. We did not 
receive any comments on this program from the interested parties, and 
our review of the record has not led us to change our findings from the 
preliminary results. Accordingly, the net subsidies for this program 
remain unchanged from the preliminary results as are as follows:

------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Heveafil/Filmax............................................         0.01
Rubberflex.................................................         0.00
Filati.....................................................         0.00
Rubfil.....................................................         0.00
------------------------------------------------------------------------

II. Programs Found To Be Not Used

    In the preliminary results, we examined the following programs and 
determined 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:
     Investment Tax Allowance,
     Abatement of a Percentage of Net Taxable Income Based on 
the F.O.B. Value of Export Sales,
     Abatement of Five Percent of Taxable Income Due to 
Location in a Promoted Industrial Area,
     Abatement of Taxable Income of Five Percent of Adjusted 
Income of Companies due to Capital Participation and Employment Policy 
Adherence,
     Double Deduction of Export Credit Insurance Payment, and
     Preferential Financing for Bumiputras.
    We did not received any comments on these programs from the 
interested parties, and our review of the record has not led us to 
change our findings from the preliminary results.
Analysis of Comments
    Comment 1: The Department had no authority to issue a CVD order. 
Respondents allege that the Department initiated the original 
investigation pursuant to Section 303(a)(2) of the Act, and, therefore, 
the Department can impose countervailing duties under this section only 
if there is an injury determination by the International Trade 
Commission (ITC). (The ITC discontinued its injury determination under 
Section 303(a)(2) because the duty-free status of rubber thread from 
Malaysia was terminated). Respondents contend that without an injury 
determination, the Department had no authority to issue a 
countervailing duty order and to require the payment of cash deposits. 
Respondents further maintain that the Department cannot simply transfer 
the jurisdiction for an investigation from Section 303(a)(2) to Section 
303(a)(1) without issuing a public notice that it intends to proceed 
with the investigation under a different statutory provision. See 
Certain Textile Mill Products and Apparel from Turkey (50 FR 9817; 
March 12, 1987); Certain Textile Mill Products and Apparel from the 
Philippines (50 FR 1195; March 26, 1985) and Certain Textile Mill 
Products and Apparel from Indonesia (50 FR 9861; March 12, 1985). 
Further, because there was no initiation notice or a preliminary 
determination under Section 303(a)(1), a final determination under that 
section was not appropriate. If the Department wanted to proceed with 
the investigation, it was required to reinitiate under the appropriate 
provision.
    In addition, respondents argue that the Department's untimeliness 
theory in previous reviews is misplaced. They state that the Department 
has the power to modify its judgments or correct its errors and that 
Ceramica Regiomontana v. United States, 64 F.3d 1579 (Fed. Cir. 1995) 
(Ceramica 1995) confirmed the right to challenge the continuing 
validity of an order during a review proceeding. Respondents also cite 
to Gilmore Steel Corp. v. United States, 585 F. Supp. 670, 674 (CIT 
1984) (Gilmore), to support their ``timeliness'' argument regarding the 
Department's authority to correct errors, such as ``jurisdictional 
defects.''
    Department's Position: As the Department pointed out in the 
previous views, respondents' challenge to the Department's authority to 
issue the order is untimely. Challenges to the issuance of an order 
must be filed within 30 days of the date the order is published. See 19 
U.S.C. Sec. 1516a(a)(2). The countervailing duty order on extruded 
rubber thread from Malaysia was published on August 25, 1992. 
Respondents voluntarily withdrew a timely-filed complaint challenging 
the order on these same grounds. Respondents' attempt to revive that 
challenge in this proceeding is untimely.
    Contrary to respondents' assertions, there was not requirement that 
the Department reinitiate its investigation as a result of the decision 
by the United States to terminate the duty-free status of Malaysian 
rubber thread. Indeed, respondents' interpretation could create an 
impermissible gap in statutory coverage, which Congress did not intend. 
See Techsnabexport. Ltd. v. United States, 802 F. Supp. 469, 472 (CIT 
1992). Nor do the administrative cases relied upon by respondents 
support their position. In those cases, the Department published notice 
that authority to continue the particular investigations was 
transferred from section 303 of the Tariff Act of 1930 to title VII of 
the Act.
    In the course of administrative reviews conducted under this order, 
respondents have misconstrued judicial precedent regarding the 
correction of ``jurisdictional defects.'' Gilmore involved a challenge 
to the termination of a pending investigation based upon information 
obtained in the course of that investigation. In particular, the 
petitioner contended that the Department lacked the authority to 
rescind the investigation based upon insufficient industry support for 
the petition after the 20-day initiation period had elapsed. 585 
F.Supp. at 673. In upholding the Department's determination, the court 
recognized that administrative officers have the authority to correct 
errors, such as ``jurisdictional defects,'' at any time during the 
proceeding. Id. At 674-75. The court did not state or imply that the 
Department may reverse a decision to issue an antidumping duty order in 
the context of an administrative review under section 751 of the Act. 
Indeed, the case did not even involve an administrative review. The 
court simply held that the administering authority may, in the context 
of the original investigation, rescind an ongoing proceeding after the 
expiration of the 20-day initiation period. In short, Gilmore says 
nothing to excuse respondents' failure to timely challenge the issuance 
of the order in this case.
    Similarly, we disagree with respondents' reliance on Ceramica 1995. 
Ceramica 1995 challenged the continued imposition of countervailing 
duties following Mexico's change in status to a ``country under the 
Agreement'' which entitled it to an injury test. Unlike respondents in 
the instant review, Ceramica 1995 did not challenge the validity of the 
original countervailing duty order, nor did the Federal Circuit 
determine that the issuance of the order was invalid. Consequently, 
Ceramica 1995 is an inappropriate basis to excuse respondents' failure 
to timely challenge the issuance of the order.

[[Page 48987]]

    Comment 2: Country-wide subsidy rate. Respondents argue that the 
Department improperly assigned company-specific rates without first 
determining whether the overall country-wide subsidy rate was above de 
minimis. They contend that the Department acted contrary to its 
established practice of applying its two-part test in measuring levels 
of subsidization. According to respondents, the Department should first 
calculate the net subsidy on a country-wide basis to determine whether 
the country-wide rate was above de minimis, in accordance with Ceramica 
Regiomontana, S.A. v. United States, 853 Supp. 431,439 (Ct. Intl. Trade 
1994) (Ceramica 1994). If the country-wide benefit is de minimis, the 
overall subsidy level would be zero. Only if the country-wide rate was 
above de minimis would the Department proceed to the second step of its 
test to determine if individual rates would apply. Respondents cite 
Certain Iron Metal Castings from India, Preliminary Results of 
Countervailing Duty Administrative Review (61 FR 25623; May 22, 1996); 
Carbon Steel Butt-Weld Pipe Fitting from Thailand; Final Results of 
Countervailing Administrative Review (61 FR 4959; Feb. 9, 1996); 
Extruded Rubber Thread from Malaysia, Final Results of Countervailing 
Duty Administrative Review (60 FR 51982, 51983; October 4, 1995), in 
which the Department applied its two-step test.
    According to respondents, as a precondition to imposing 
countervailing duties, the statute requires subsidization to occur with 
respect to imports of the subject merchandise on an overall or 
aggregated basis. In addition, respondents contend that the URAA 
altered the assessment provision but not the requirement to determine 
whether subsidies were being provided on a country-wide basis.
    Department's Position: There is no legal basis to support 
respondent's argument. Pursuant to the URAA, there is no longer a 
preference for calculating a single country-side subsidy rate in 
countervailing duty proceedings. The URAA replaced the former practice 
of calculating subsidies on a country-wide basis in favor of individual 
rates for investigated or reviewed companies. The procedures for 
countervailing duty cases are now essentially the same as those in 
antidumping case, except as provided for in section 777A(a)(2)(B) of 
the Act. Section 777A(e) requires the calculation of an individual 
countervailable subsidy rate for each known producer/exporter of the 
subject merchandise, except where it is not practicable to determine 
individual countervailable subsidy rates because of the larger number 
of exporters or producers involved in the investigation or review. This 
exception was inapplicable in this review as there were only five 
producers/exporters for which a review was requested.
    As a result, the judicial and administrative precedents relied upon 
by respondents are inappropriate as they refer to the requirements as 
they existed prior to effective date of the URAA. All of the reviews 
cited by respondents were requested and initiated prior to January 1, 
1995, the effective date of the URAA. More pertinent citations would be 
to reviews conducted under the URAA. See, e.g., Certain Iron-Metal 
Castings From India; Final Results of Countervailing Duty 
Administrative Review (1994 Castings Review) (62 FR 32297; June 13, 
1997), since that review was initiated pursuant to requests for 
administrative reviews filed after January 1, 1995.
    Comment 3: Financial contribution. Respondents argue that the 
Department cannot countervail benefits under the ECR loan program or 
the Pioneer Industries program because neither involves a financial 
contribution by the Government of Malaysia (GOM). The WTO Subsidies 
Agreement defined the term ``subsidy'' as one involving a ``financial 
contribution,'' therefore adding a new requirement to the pre-existing 
notion of a subsidy. Accordingly, a program cannot be a countervailable 
subsidy unless it involves a ``financial contribution.'' In the case of 
the ECR loans, they argue that there cannot be any financial 
contribution because the funds that the GOM lends to exporters generate 
a profit. In the case of the Pioneer Industries program, they argue 
that because the only company claiming the tax exemption would have 
paid the same amount of taxes without the exemption, the GOM did not 
forgo or fail to collect any revenues as a result of the program. 
Respondents believe that the Department's preliminary determination 
overlooks this new requirement.
    Department's Position: We disagree with respondents that the 
Department overlooked the requirement of a financial contribution. 
Under section 771(5)(D) (i) and (ii) of the Act, a financial 
contribution is defined as ``the direct transfer of funds, such as 
grants, loans, and equity infusions, or the potential direct transfer 
of funds or liabilities, such as loan guarantees,'' or ``foregoing or 
not collecting revenue that is otherwise due, such as granting tax 
credits or deductions from taxable income.'' The ECR Loan and Pioneer 
Industries tax programs clearly fall within these definitions. We also 
note that under Article 1.1(a)(1) (i) and (ii) of the Subsidies 
Agreement, a financial contribution is defined as ``where government 
practice involves a direct transfer of funds (e.g., grants, loans, and 
equity infusions), potential direct transfers of funds of liabilities 
(e.g., loan guarantees)'' or ``government revenue that is otherwise 
due, is foregone or not collected (e.g., fiscal incentives such as tax 
credits).''
    Respondents mistakenly focus on the ``financial contribution'' 
concept in terms of the cost to the Malaysian government. As explained 
in the previous reviews, the Department has a longstanding practice of 
valuing the benefit to the recipient rather than the cost to the 
government for the purpose of calculating countervailing duty rates. 
This practice is now reflected in section 771(5)(E) of the Act, which 
states that the subsidy benefit ``shall normally be treated as 
conferred where there is a benefit to the recipient.'' In addition, 
Article 14 of the Subsidies Agreement defines the method for 
calculating the amount of a subsidy in terms of the benefit to the 
recipient.
    In the case of ECR loans, the funds that the GOM lends to the 
exporters are lent on a short-term basis at an interest rate below the 
amount the exporters would have paid on a comparable commercial loan. 
In the case of the Pioneer Industries program, a company that has 
received pioneer status is allowed not to pay taxes otherwise due to 
the government. (Also, see Department's Position on Comment 7.) 
Therefore, under both programs, financial contributions are provided to 
the recipients (the respondents) and the Department properly treated 
those benefits as countervailable subsidies.
    Comment 4: Short-term loan benchmark. Respondents contend that the 
benefit from the ECR program was overstated because the Department's 
benchmark for the ECR pre-shipment loans incorrectly excluded Banker's 
Acceptances (``BA's'') from the calculated benchmark interest rate and 
incorrectly included rates on overdrafts in calculating the benchmark.
    Department's Position: We disagree with respondents. While the BA 
rates are an acceptable benchmark for post-shipment loans, pre-shipment 
financing used by the respondents is based on a line of credit, much 
like a general short-term loan in the Malaysian market. As such, we 
used the average of the commercial bank lending rates charged to each 
company during the POR for revolving lines of credit and overdrafts

[[Page 48988]]

as the benchmark. ECR post-shipment loans and BAs are short-term 
borrowing instruments used to finance specified export shipments, 
unlike ECR pre-shipment loans that provide a more general line of 
credit.
    Comment 5: Pre-shipment ECR loans do not benefit U.S. exports. 
Respondents argue that the Department overstated the net subsidy for 
the review period and for duty deposit purposes because in calculating 
eligibility for the pre-shipment export financing, the Department 
failed to take account of the exclusion by Heveafil and Filmax of U.S. 
exports in obtaining export financing. In addition, respondents claim 
that the two companies did not use funds from exports to the United 
States to repay any of the pre-shipment loans. They claim that in a 
similar situation, the Department concluded that exports to the United 
States did not receive benefits from short-term financing. See 
Suspension of Countervailing Duty Investigation; Certain Forged Steel 
Crankshafts from Brazil (52 FR 28177, 28179; July 28, 1987) 
(Crankshafts from Brazil). Although in the first administrative review, 
the Department rejected this method of eliminating the effect of a 
subsidy, respondents maintain that Heveafil and Filmax received no 
benefit with regard to U.S. shipments. Respondents further assert that 
the Department found a subsidy in this case, in part, because there was 
no strict segregation of U.S. exports and the materials used in their 
manufacture from materials and exports to other markets financed with 
ECR loans. However, according to the respondents, the Department was 
presented with exactly the same issue in Crankshafts from Brazil and in 
that case the Department did not require that the exporters segregate 
raw materials purchased with export financing.
    Department's Position: The GOM provides ECR financing based on 
export performance. The explicit purpose of this program is to promote 
the export of manufactured and approved agricultural products. Two 
types of ECR financing are available: pre-shipment and post-shipment 
financing. There is no evidence that the GOM limits these ECR loans to 
increase exports only to markets other than the United States, nor is 
there evidence of a provision that prevents exporters from receiving 
ECR loans for exports to the United States.
    During the review period, both Heveafil and Filmax applied for and 
used pre-shipment financing based on certificates of performance (CP). 
Pre-shipment financing based on CPs is a line of credit based on 
previous exports and, when received, cannot be tied to specific sales 
in specific markets. Where a benefit is not tied to a particular 
product or market, it is the Department's practice to allocate the 
benefit to all products exported by a firm where the benefit is 
received pursuant to an export program. See e.g., 1994 Castings Review. 
Because pre-shipment loans were not shipment-specific, we included all 
loans in calculating the subsidy rate.
    By excluding exports to the United States from their application 
for ECR pre-shipment export financing, the companies merely reduced the 
amount of financing they received. Reducing the pool of funds available 
for total export financing does not eliminate financing to any 
particular product. Tying occurs in the provision of the subsidy, 
usually through government mandate requirements or in certain limited 
situations where the application for the subsidy can be isolated to 
specific shipments, e.g., post-shipment loans provided on a shipment-
by-shipment basis where the company can demonstrate through source 
documentation that it did not apply for or receive loans on shipments 
to the United States. See e.g., 1994 Castings Review. Hence, the 
companies did not eliminate ECR pre-shipment financing for U.S. 
exports.
    We disagree with respondents that, in similar circumstances, the 
Department has concluded that the exclusion of U.S. exports from 
applications in the manner described by respondents eliminates any 
countervailable subsidy that would otherwise be present. As stated in 
the last review of this order, Extruded Rubber Thread From Malaysia; 
Final Results of Countervailing Duty Administrative Review (61 FR 
55272; October 25, 1996), respondents' reliance on the Crankshafts from 
Brazil suspension agreement is misplaced. Suspension agreements are 
unusual, negotiated arrangements in which parties to a proceeding agree 
to renounce countervailable subsidies. As such, unlike final 
determinations, they do not serve as administrative precedent. 
Moreover, the Crankshafts from Brazil suspension agreement is 
consistent with our allocation practice.
    Comment 6: Pioneer Program is neither specific nor contingent upon 
export performance. Respondents argue that the Department previously 
found the Pioneer Status Program not countervailable because it was 
found to be not specific. See Carbon Steel Wire Rod from Malaysia: 
Final Results of Countervailing Duty Administrative Review; 56 FR 14927 
(April 12, 1991) (Wire Rod). Respondents assert that it is not 
countervailable because tax benefits under this program are not limited 
to any sector or region of the Malaysian economy, nor is the program 
exclusively available to exporting companies. They contend that the 
Department confirmed, in the first administrative review, both the de 
jure and de facto availability of this program to the entire Malaysian 
economy, and that the pioneer status tax benefits are not targeted to 
specific industries or companies in a discriminatory manner. Further, 
the Department verified in the original investigation that the internal 
guidelines used to grant pioneers status are characterized by neutral 
criteria unrelated to exports, location or any other factors that could 
require a determination that the program is countervailable.
    Respondents further argue that the Department verified in the first 
administrative review that the GOM does not require export commitments, 
or view them as preponderant, in evaluating applications; that export 
potential is merely one of 12 factors considered in granting status; 
and that a product will not be accepted based on export potential 
alone. Further, respondents argue that the Department verified in the 
first administrative review that the GOM commonly approves companies 
that do not make export commitments, as well as some that do make them.
    Therefore, export performance is not viewed as a preponderant 
factor, but as one of many neutral criteria.
    Department's Position: We addressed this identical argument in the 
previous review of this order. In Wire Rod, we concluded that benefits 
were not used by a specific industry or group of industries and that no 
industry or group of industries used the program disproportionately; 
accordingly, we found the program not to be countervailable. That 
determination, however, did not specifically address situations where 
companies had a specific export condition attached to their pioneer 
status approval. In the Wire Rod investigation, although petitioners 
raised the issue of an export requirement with respect to pioneer 
status, the export requirement was not at issue with the companies 
investigated in Wire Rod.
    In this case, recipients of the tax benefits conferred by Pioneer 
Status can be divided into two categories: industries and activities 
that will find market opportunities in Malaysia and elsewhere, and 
those that face a saturated domestic market. At verification of the 
first administrative review, we established that an export requirement 
may sometimes be applied

[[Page 48989]]

to certain industries after it is determined that the domestic market 
will no longer support additional producers. The extruded rubber thread 
industry is among these industries.
    The combination of the necessary export orientation of the industry 
due to lack of domestic market opportunities and the explicit export 
condition attached to pioneer status approval in the rubber thread 
industry leads us to conclude that the Pioneer Status program 
constitutes an export subsidy to the rubber thread industry. Whether or 
not the commitment was voluntary, as respondents suggest, the company 
has obligated itself to export a very large portion of its production, 
and that commitment was a condition for approval of benefits. Thus, the 
Department upholds its decision to countervail this program as an 
export subsidy.
    Comment 7: Overstatement of Pioneer Program. Respondents argue that 
the Department overstated the benefit from the Pioneer program because 
it failed to deduct the normal capital allowances that would have been 
allowed if the program had not been used. Further, they claim, the 
Department incorrectly allocated pioneer status tax benefits over only 
export sales even though pioneer status tax benefits are also 
applicable to profits on domestic sales. According to the respondents, 
this is inconsistent with the Department's practice to allocate 
benefits over total sales to which they are ``tied.''
    Respondents also argue that the Department countervailed 
Rubberflex's pioneer benefit in the 1993 review, and must avoid 
countervailing the same benefit in the 1995 review.
    Department's Position: The Department disagrees with the 
respondents' allegation that it overstated the benefit from the Pioneer 
Program because of capital allowances. When a company receives pioneer 
status, it is allowed to accumulate the normal capital allowances for 
use in future years. Heveafil/Filmax did not pay income taxes during 
the period of review because of its pioneer status. Therefore, the 
income tax exemption under the Pioneer Program has conferred a benefit 
upon the company because it used its pioneer status to offset income. 
Because Heveafil/Filmax is also able to accumulate capital allowances 
which can be used to offset taxable income in the future, after its 
pioneer status expires, there is no basis for adjusting the benefit 
from the income tax exemption for these allowances. Moreover, export 
sales should form the denominator because receipt of pioneer status tax 
benefits is contingent upon exportation. Accordingly, we have not 
overstated the benefit from the Pioneer Program. See e.g., Final 
Affirmative Countervailing Duty Determination: Certain Agricultural 
Tillage Tools From Brazil (50 FR 34525; August 26, 1985) and 1994 
Castings Review.
    We agree with the respondents' claim that there is no 
countervailable subsidy to Rubberflex under the Pioneer Program in the 
instant review. In the 1993 review, the Department used the estimated 
tax return submitted by Rubberflex to calculate the countervailing duty 
rate for the Pioneer Program. For the 1995 preliminary review, the year 
in which Rubberflex for this program. Because we have previously 
countervailed the benefit from that tax return in our 1993 
administrative review of this order, we have not countervailed it again 
in this review. Therefore, the new ad valorem rate for Rubberflex for 
this program is 0.00% (See Section I(A)(2) above).

Final Results of Review

    In accordance with 19 CFR Sec. 355.22(c)(4)(ii), we calculated an 
individual subsidy rate for each producer/exporter subject to this 
administrative review. For the period January 1, 1995 through December 
31, 1995, we determine the net subsidy for the following companies to 
be:

------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Heveafil/Filmax............................................         0.90
Rubberflex.................................................         0.30
Filati.....................................................         0.15
Rubfil.....................................................         0.03
------------------------------------------------------------------------

    The Department will instruct Customs to collect cash deposits of 
estimated countervailing duties in the percentages detailed above of 
the f.o.b. invoice price on all shipments from reviewed companies, 
entered, or withdrawn from warehouse, for consumption on or after the 
date of publication of the final results of this review. As provided 
for in 19 C.F.R. Sec. 355.7, any rate less than 0.5 percent ad valorem 
in an administrative review is de minimis. Accordingly, for those 
producers/exporters, no cash deposits will be required.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to non-reviewed companies covered by this 
order are those established in the most recently completed 
administrative proceeding, conducted pursuant to the statutory 
provisions that were in effect prior to the URAA amendments. (See 
Extruded Rubber Thread From Malaysia: Final Results of Countervailing 
Duty Administrative Review, 60 FR 51982 (October 4, 1995). These rates 
shall apply to all non-reviewed companies until a review of a company 
assigned these rates is requested. In addition, for the period January 
1, 1995 through December 31, 1995, the assessment rates that will be 
applicable to all non-reviewed companies covered by this order are the 
cash deposit rates in effect at the time of entry.
    This countervailing duty order was determined to be subject to 
section 753 of the Act (as amended by the Uruguay Round Agreements Act 
of 1994). Countervailing Duty Order: Opportunity to Request a Section 
753 Injury Investigation, 60 FR 27,963 (May 26, 1995), amended 60 FR 
32,942 (June 26, 1995). In accordance with section 753(a), domestic 
interested parties have requested an injury investigation with respect 
to this order with the International Trade Commission (ITC). Pursuant 
to section 753(a)(4), liquidation of entries of subject merchandise 
made on or after January 1, 1995, the date Malaysia joined the World 
Trade Organization, is suspended until the ITC issues a final injury 
determination. We will not issue assessment instructions for any 
entries made after January 1, 1995; however, as discussed above, we 
will instruct Customs to collect cash deposits in accordance with the 
final results of this administrative review.
    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 C.F.R. Sec. 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 Act (19 U.S.C. 1675(a)(1)).

    Dated: September 10, 1997.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-24845 Filed 9-17-97; 8:45 am]
BILLING CODE 3510-DS-M