[Federal Register Volume 64, Number 58 (Friday, March 26, 1999)]
[Notices]
[Pages 14695-14697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7372]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-560-804]


Final Negative Countervailing Duty Determination: Extruded Rubber 
Thread From Indonesia

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

EFFECTIVE DATE: March 26, 1999.

FOR FURTHER INFORMATION CONTACT: Robert Copyak or Eric B. Greynolds, 
Office of CVD/AD Enforcement VI, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
2786.

FINAL DETERMINATION: The Department of Commerce (the ``Department'') 
determines that countervailable subsidies are not being provided to 
producers or exporters of extruded rubber thread (ERT) in Indonesia.

[[Page 14696]]

Case History

    Since the publication of the preliminary negative determination in 
the Federal Register on September 9, 1998, (63 FR 48191) (Preliminary 
Determination), the following events have occurred. Between September 
23 and October 2, 1998, we conducted verification of the responses of 
the Government of Indonesia (GOI) and the respondent companies, P.T. 
Swasthi Parama Mulya (Swasthi) and Bakrie Rubber Industries (Bakrie). 
Swasthi submitted a case brief on December 1, 1998. No other parties to 
this investigation filed case briefs or rebuttal briefs. A public 
hearing was not requested by any interested party.

Scope of Investigation

    For purposes of this investigation, the product covered is extruded 
rubber thread (ERT) from Indonesia. ERT 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 inches or 140 gauge, to 1.42 mm, which is 0.056 inch or 18 gauge, 
in diameter. ERT is currently classified under subheadings 4007.00.00 
of the Harmonized Tariff Schedule (HTS). Although the HTS subheadings 
are provided for convenience and customs purposes, the written 
description of the scope of this investigation is dispositive.

The 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 effective January 1, 1995 (the Act). 
In addition, unless otherwise indicated, all citations to the 
Department's regulations are to the regulations codified at 19 CFR 351 
and published in the Federal Register on May 19, 1997 (62 FR 27295).

Petitioner

    The petition in this investigation was filed by North American 
Rubber Thread Co., Ltd. (the petitioner).

Period of Investigation

    The period for which we are measuring subsidies (the ``POI'') is 
calendar year 1997.

De Minimis Countervailable Subsidy

    Pursuant to its authority under section 771(36) of the Act, the 
United States Trade Representative (``USTR'') has designated Indonesia 
as a ``least developed country.'' See USTR Interim Final Rule: 
Developing and Least-Developed Country Designations Under the 
Countervailing Duty Law 15 CFR 2013 (63 FR 29945). Consequently, a net 
countervailable subsidy rate that does not exceed three percent ad 
valorem is considered de minimis, in accordance with section 
703(b)(4)(B) of the Act, which implements Article 27 of the Agreement 
on Subsidies and Countervailing Measures (``SCM Agreement''). As 
discussed below, we determine that the net countervailable subsidy 
bestowed on extruded rubber thread from Indonesia is less than three 
percent ad valorem, and therefore, de minimis.

Analysis of Programs

    Based upon our analysis of the petition, the responses to our 
questionnaires, the information reviewed at verification, and written 
briefs submitted by interested parties, we determine the following:

I. Programs Determined to Be Countervailable

A. Bank of Indonesia (BI) Rediscounted Loans

    Under Decree No. 132/MPP/Kep/1996 of June 4, 1996, the Ministry of 
Industry and Trade, the Ministry of Finance, and the Bank of Indonesia 
(BI) provide support for certain exporters with the goal of achieving 
diversification of the Indonesian export base from oil and gas. Under 
the program, companies can sell their letters of credit and export 
drafts at a discount to the BI through participating foreign exchange 
banks, which are commercial banks that have obtained a license to 
conduct activities in foreign currencies. In the Preliminary 
Determination, we determined that this program was countervailable 
because the sale of the letters of credit and export drafts provided 
exporters with working capital at lower interest rates than they would 
otherwise obtain on the market. Our review of the information on the 
record, our findings at verification, and our analysis of the case 
brief submitted by Swasthi (see Comment 1) has not led us to change our 
preliminary determination that this program is countervailable.
    During the POI, Swasthi obtained rediscounted loans under the BI 
rediscount loan program, as well as commercial rediscounted loans that 
were not associated with the BI rediscount loan program. Because 
Swasthi is a Designated Export Company (PET), it was eligible to obtain 
BI rediscounted loans at a rate that was lower than the rate available 
to non-PET companies, specifically, at the Singapore Interbank Offering 
Rate (SIBOR) rather than SIBOR plus one percentage point.
    For purposes of the Preliminary Determination, we calculated the 
benefit to Swasthi under this program as the difference in the interest 
that Swasthi would have paid at the non-PET rate and interest it paid 
at the PET rate. However, for purposes of this final determination, we 
are using a different benchmark. According to section 771(5)(E)(ii) of 
the Act, the benefit conferred under a loan program is the difference 
between the amount the recipient of the loan pays on the loan under the 
government program and the amount the recipient would pay on a 
comparable commercial loan that it could actually obtain on the market. 
We verified that, during the POI, Swasthi obtained comparable 
commercial rediscounted loans outside of the BI rediscount loan 
program. Thus, we determine that those company-specific loans provide a 
more appropriate benchmark than the benchmark used in the Preliminary 
Determination. Therefore, instead of the using a rate established by 
the BI, we calculated the benchmark as the weighted-average interest 
rate of the non-BI rediscounted loans Swasthi obtained during the POI. 
In order to calculate the benefit under the program, we calculated the 
difference in the amount of interest Swasthi actually paid on the BI 
rediscounted loans during the POI and the amount it would have paid at 
the benchmark interest rate. We then divided the calculated benefit 
provided from the BI rediscount loan program by Swasthi's total exports 
of subject merchandise to the United States during the POI. We used 
export of subject merchandise to the United States because the loans 
could be segregated by product and destination. On this basis, we 
determine the benefit to Swasthi under this program to be 0.18 percent 
ad valorem for Swasthi. No other producers/exporters of the subject 
merchandise applied for or received loan under this program during the 
POI.

II. Programs Determined To Be Not Used

    Based on the information provided in the responses and the results 
of verification, we determine that, during the POI, the producers/
exporters of subject merchandise did not apply for or receive benefits 
under the following programs:
    A. Investment Credit for the Expansion of the Rubber Industry.
    B. Corporate Income Tax Holiday.
    C. Import Duty Exemption of Capital Equipment.

[[Page 14697]]

Interest Party Comment

    Comment 1: Benchmark Used in the Calculation of the Bank of 
Indonesia (BI) Rediscount Loan Program: Swasthi states that the 
Department should continue to use the benchmark interest rate employed 
in the Preliminary Determination, (i.e., the interest rate differential 
between the BI's PET rate and the non-PET rate). Swasthi further argues 
that, when calculating the benefit provided by BI rediscounted loans, 
the Department should take into consideration the opportunity costs 
that Swasthi incurred as a result of collateral deposits. Swasthi 
states that collateral deposits are a typical banking practice in 
Indonesia.
    Department's Position: We disagree with Swasthi's argument that the 
Department should continue to calculate the benefit to Swasthi using 
the BI rate for non-PET companies for comparison purposes. As explained 
above, section 771(5)(E)(ii) of the Act states that the benefit from a 
government loan program should be based upon comparable commercial 
loans that the company could actually obtain on the market. During the 
POI, Swasthi obtained comparable commercial rediscounted loans which 
are not associated with the BI rediscount loan program. Therefore, 
these loans are a more appropriate basis for benchmark purposes than 
the BI rediscount rate for non-PET companies.
    Also we disagree that we should factor into our benefit 
calculations opportunity costs associated with collateral deposits. In 
determining whether particular loans are comparable for benchmark 
purposes, the Department normally focuses on the structure of the 
loans, the maturities of the loans, and the currencies in which the 
loans are denominated. As explained above, we have determined that 
Swasthi's commercial rediscounted loans are appropriate for benchmark 
purposes. They have comparable structures and maturities and are 
denominated in dollars.
    As Swasthi acknowledges, collateral requirements are a typical bank 
practice in Indonesia. Both banks that participate in the BI rediscount 
loan program and banks that do not participate in the BI rediscount 
loan program require collateral. Moreover, collateral requirements vary 
across banks and loan types. Based on these facts, there is no basis 
for factoring in collateral requirements in determining the effective 
interest rates, nor is there a basis for finding that Swasthi's 
commercial rediscounted loans are not an appropriate benchmark.

Verification

    In accordance with section 782(i) of the Act, we verified the 
information used in making our final determination. We followed our 
standard verification procedures, including meeting with government and 
company officials, and examining relevant accounting records and 
original source documents. Our verification results are outlined in 
detail 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).

Summary

    In accordance with section 705(a)(3) of the Act, we determine that 
the total net countervailable subsidy rate for Bakrie is zero and that 
the total net countervailable subsidy rate for Swasthi is 0.18 percent 
ad valorem, which is de minimis. Therefore, we determine that no 
countervailable subsidies are being provided to the production or 
exportation of extruded rubber thread from Indonesia. Pursuant to 
section 705(c)(2) of the Act, this investigation will be terminated 
upon the publication of the final negative determination in the Federal 
Register.

ITC Notification

    In accordance with section 705(d) of the Act, we will notify the 
ITC of our determination.

Return or Destruction of Proprietary Information

    This notice serves as the only reminder to parties subject to 
Administrative Protective Order (``APO'') of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 355.34(d). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to section 705(d) of the 
Act.

    Dated: March 18, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7372 Filed 3-25-99; 8:45 am]
BILLING CODE 3510-DS-P