[Federal Register Volume 64, Number 145 (Thursday, July 29, 1999)]
[Notices]
[Pages 41089-41092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19444]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-333-401]


Preliminary Results of Full Sunset Review: Cotton Shop Towels 
From Peru

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

ACTION: Notice of preliminary results of full Sunset Review: Cotton 
shop towels from Peru.

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SUMMARY: On January 4, 1999, the Department of Commerce (``the 
Department'') initiated a sunset review of the suspended countervailing 
duty investigation on cotton shop towels from Peru (64 FR 364) pursuant 
to section 751(c) of the Tariff Act of 1930, as amended (``the Act''). 
On the basis of a notice of intent to participate filed on behalf of 
the domestic industry and adequate substantive comments filed on behalf 
of both the domestic industry and respondent interested parties, the 
Department is conducting a full review. As a result of this review, the 
Department preliminarily finds that termination of the suspended 
countervailing duty investigation would not likely lead to continuation 
or recurrence of a countervailable subsidy.

FOR FURTHER INFORMATION CONTACT: Scott E. Smith or Melissa G. Skinner, 
Office of Policy for Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street & Constitution 
Avenue NW, Washington, D.C. 20230; telephone: (202) 482-6397 or (202) 
482-1560, respectively.

EFFECTIVE DATE: July 29, 1999.

Statute and Regulations

    This review is being conducted pursuant to sections 751(c) and 752 
of the Act. The Department's procedures for the conduct of sunset 
reviews are set forth in Procedures for Conducting Five-year 
(``Sunset'') Reviews of Antidumping and Countervailing Duty Orders, 63 
FR 13516 (March 20, 1998) (``Sunset Regulations'') and in 19 CFR Part 
351 (1998) in general. Guidance on methodological or analytical issues 
relevant to the Department's conduct of sunset reviews is set forth in 
the Department's Policy Bulletin 98:3--Policies Regarding the Conduct 
of Five-year (``Sunset'') Reviews of Antidumping and Countervailing 
Duty Orders; Policy Bulletin, 63 FR 18871 (April 16, 1998) (``Sunset 
Policy Bulletin'').

Scope

    The merchandise subject to this suspended countervailing duty 
investigation is cotton shop towels from Peru. Shop towels are 
absorbent industrial wiping cloths made from a loosely woven fabric. 
Shop towels are currently classifiable under item numbers 6307.10.2005 
and 6307.10.2015 of the Harmonized Tariff Schedule of the United States 
(``HTSUS''). Although the HTSUS subheadings are provided for 
convenience and customs purposes, the written description remains 
dispositive.

History of the Order

    On June 21, 1984, the Department issued an affirmative preliminary 
determination in the countervailing duty investigation on cotton shop 
towels from Peru (49 FR 26273). The Department preliminarily found a 
net bounty or grant of 44 percent ad valorem based on the certificate 
of tax rebate (CERTEX) and non-traditional export fund (FENT).
    On September 12, 1984, the Department suspended the countervailing 
duty investigation on the basis of an agreement between the Department 
and Fabrica de Tejidos La Union Limitada, S. A. (``La Union'') and 
Santa Cecilia Compania Textil, S.A. (``Santa Cecilia'') to cease 
exports of the subject merchandise to the United States (49 FR 35835). 
No final determination was issued in this case and the Department has 
not conducted an administrative review.
    Beginning in 1989, the Department began publishing notices of 
intent to terminate the suspended investigation. However, on the basis 
of objections by Milliken & Company (``Milliken''), the Department has 
not terminated the suspended investigation.\1\
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    \1\ See Cotton Shop Towels from Peru; Intent to Terminate 
Suspended Investigation, 54 FR 38262 (September 15, 1989); Cotton 
Shop Towels from Peru; Determination Not to Terminate Suspended 
Investigation, 54 FR 43977 (October 30, 1989); Cotton Shop Towels 
from Peru; Intent to Terminate Suspended Investigation, 55 FR 35921 
(September 4, 1990); Cotton Shop Towels from Peru; Determination Not 
to Terminate Investigation, 55 FR 43994 (October 29, 1990); Cotton 
Shop Towels from Peru; Intent to Terminate Suspended Investigation, 
57 FR 39391 (August 31, 1992); Cotton Shop Towels from Peru; 
Determination Not to Terminate Suspended Investigation, 57 FR 52614 
(November 4, 1992); Cotton Shop Towels from Peru; Intent to 
Terminate Suspended Investigation, 59 FR 45261 (September 1, 1994); 
Cotton Shop Towels from Peru; Intent to Terminate Suspended 
Investigation, 61 FR 40408 (August 2, 1996); Cotton Shop Towels from 
Peru; Intent to Terminate Suspended Investigation, 61 FR 41128 
(August 7, 1996); Cotton Shop Towels from Peru; Determination Not to 
Terminate Suspended Investigation, 61 FR 47885 (September 11, 1996).
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Background

    On January 4, 1999, the Department initiated a sunset review of the 
suspended countervailing duty investigation on cotton shop towels from 
Peru (64 FR 364), pursuant to section 751(c) of the Act. The Department 
received an Entry of Appearance from Milliken on January 19, 1999, 
within the deadline specified in section 351.218(d)(1)(i) of the Sunset 
Regulations.
    The Department received complete substantive responses from the 
Government of Peru, the Comite Textil--Sociedad Nacional de Industrias 
(``Comite Textil'') and from Milliken on February 10, 1999, within the 
deadline specified in the Sunset Regulations under section 
351.218(d)(3)(i).\2\
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    \2\ On February 3, 1999, the Department received and granted a 
request from the Government of Peru for a five working-day extension 
of the deadline for filing substantive responses in this sunset 
review. This extension was granted for all participants eligible to 
file substantive comments in this review. The deadline for filing 
rebuttals to the substantive comments therefore became February 10, 
1999.
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    In its substantive response, Milliken claimed interested party 
status under section 19 U.S.C. 1677(9)(C), as a domestic producer of 
shop towels. Further, Milliken stated that it was the sole petitioner 
in the original investigation of shop towels from Peru and had 
participated as a domestic producer interested party in the proceeding 
since 1984.
    In its substantive response, the Comite Textil stated that it is a 
Peruvian trade association whose members are textile manufacturers, 
producers, and exporters. The Comite Textil claimed interested party 
status under section 771(9) of the Act. Moreover, two of the Comite 
Textil's members, La Union and Santa Cecilia, are the two Peruvian

[[Page 41090]]

companies that signed the suspension agreement. In addition, the 
Government of Peru claimed interested party status under section 
771(9)(B) of the Act, as a government of the country where subject 
merchandise is produced and from which it is exported. The Peruvian 
government stated that it has, in the past, submitted responses to the 
Department with regard to this suspended countervailing duty 
investigation.
    Because the responses of the Comite Textil and the Peruvian 
government constituted an adequate response to the notice of 
initiation, the Department is conducting a full (240 day) review in 
accordance with section 351.218(e)(2) of the Sunset Regulations.
    On February 19, 1999, the Department received rebuttal comments 
from both Milliken and the Comite Textil. \3\
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    \3\ On February 11, 1999, the Department received and granted a 
request from the Comite Textil for a five working-day extension of 
the deadline for filing rebuttal comments in this sunset review. 
This extension was granted for all participants eligible to file 
rebuttal comments in this review. The deadline for filing rebuttals 
to the substantive comments therefore became February 19, 1999.
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    The Department determined that the sunset review of the suspended 
countervailing duty investigation on cotton shop towels from Peru is 
extraordinarily complicated. In accordance with section 751(c)(5)(C)(v) 
of the Act, the Department may treat a review as extraordinarily 
complicated if it is a review of a transition order (i.e., an order in 
effect on January 1, 1995). (See section 751(c)(6)(C) of the Act.) 
Therefore, on April 26, 1999, the Department extended the time limit 
for completion of the preliminary results of this review until not 
later than July 23, 1999, in accordance with section 751(c)(5)(B) of 
the Act.\4\
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    \4\ See Sugar From the European Community: Extension of Time 
Limit for Preliminary Results of Five-Year Review, 64 FR 3683 
(January 25, 1999).
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Determination

    In accordance with section 751(c)(1) of the Act, the Department is 
conducting this review to determine whether termination of the 
suspended countervailing duty investigation would be likely to lead to 
continuation or recurrence of a countervailable subsidy. Section 752(b) 
of the Act provides that, in making this determination, the Department 
shall consider the net countervailable subsidy determined in the 
investigation and subsequent reviews, and whether any change in the 
program which gave rise to the net countervailable subsidy has occurred 
that is likely to affect that net countervailable subsidy. Pursuant to 
section 752(b)(3) of the Act, the Department shall provide to the 
International Trade Commission (``the Commission'') the net 
countervailable subsidy likely to prevail if the suspended 
investigation is terminated. In addition, consistent with section 
752(a)(6), the Department shall provide the Commission information 
concerning the nature of the subsidy and whether the subsidy is a 
subsidy described in Article 3 or Article 6.1 of the Subsidies 
Agreement.
    The Department's preliminary determinations concerning continuation 
or recurrence of a countervailable subsidy, the net countervailable 
subsidy likely to prevail if the suspended investigation is terminated, 
and nature of the subsidy are discussed below. In addition, parties' 
comments with respect to each of these issues are addressed within the 
respective sections.

Continuation or Recurrence of a Countervailable Subsidy

Parties' Comments

    In its substantive response, Milliken argued that termination of 
the suspended investigation on cotton shop towels from Peru would 
likely result in the recurrence of a countervailable subsidy on the 
subject merchandise from Peru (see Substantive Response of Milliken, 
February 10, 1999, at 3). Milliken maintained that, to the best of its 
knowledge, there is no evidence that the programs in question (the 
CERTEX and FENT programs) have been suspended or terminated beyond the 
partial termination announced by the Peruvian Ambassador in the 
original proceedings (see Substantive Response of Milliken, February 
10, 1999, at 5).\5\
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    \5\ During the original investigation, the Peruvian Ambassador 
to the United States informed the Department that on June 17, 1984, 
the Peruvian government promulgated Supreme Decree No. 251-84-EFC 
eliminating cotton shop towel exports to the U.S. from eligibility 
for the CERTEX and FENT programs (see 49 FR 26273 at 26275).
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    Additionally, Milliken maintained that the cessation of imports 
into the U.S. of cotton shop towels from Peru indicates that the 
Peruvian exporters cannot export to the U.S. without the benefit of 
countervailable subsidies (see Substantive Response of Milliken, 
February 10, 1999, at 5). According to Milliken, the most recent 
information reflects the continued non-existence of imports into the 
United States of cotton shop towels from Peru.
    Milliken argued, therefore, that on the basis of the principles set 
out in the Sunset Policy Bulletin and the SAA, there is a clear case 
for a determination of likelihood of continuation or recurrence of a 
countervailable subsidy.
    The Comite Textil argued in its substantive response that the 
subsidy programs at issue--indeed all countervailable subsidy 
programs--have been eliminated by the Government of Peru and there is 
neither need nor justification for the suspension agreement (see 
Substantive Response of the Comite Textil, February 10, 1999, at 3). 
The Comite Textil stated that support for the statement that all 
countervailable subsidies have been eliminated was presented during the 
1994 verification conducted in Peru by the Department in the 
administrative review of Cotton Yarn from Peru (C-333-002), a 
countervailing duty order that was subsequently revoked on August 9, 
1995 (see Substantive Response of the Comite Textil, February 10, 1999, 
at 2). The Comite Textil stated that Legislative Decree No. 622, 
published November 30, 1990, eliminated the CERTEX program. The Comite 
Textil further stated that a directive from the Central Reserve Bank of 
Peru to all other banks (Circular No. 032-91-EF/90, dated September 13, 
1991) eliminated all FENT lines of credit as of January 1, 1992, and 
thereby ended the FENT program. The Comite Textil and the Peruvian 
government included in their substantive responses a copy of the 
decree, with translation of relevant excerpts and circular (see 
Substantive Response of the Comite Textil, February 10, 1999, the 
Declaration of the Ambassador of Peru, and attachments 1-3).
    Furthermore, the Comite Textil stated that independent confirmation 
of the elimination of these programs was part of a larger permanent 
change in Peruvian Government policy can be found in the 1994 report 
prepared by the World Bank. The full report of the World Bank's 1994 
independent audit of two Peruvian loans was provided in the substantive 
response. Finally, the Comite Textil provided a copy of Peru's 
Constitution, adopted December 29, 1993, and stated that the 
Constitution establishes the strict policy of commercial openness and 
free competition as a critical part of the economic framework of the 
country.

Parties' Rebuttal Comments

    In its rebuttal comments, Milliken argued that although the 
respondents asserted that the CERTEX and FENT programs have been 
eliminated, they did not submit specific evidence that all subsidy 
programs from which Peruvian exporters of shop towels can potentially 
benefit have been eliminated or that Peruvian shop towel manufacturers 
are not eligible for such programs. Milliken asserted that this is 
important because

[[Page 41091]]

the Department has found that a number of other Peruvian programs 
confer countervailable subsidies in other countervailing duty 
investigations. Specifically, Milliken referred to the granting of tax 
incentives for investments outside the Department of Lima or the 
Province of Callao under the 1982 Industrial Law, as well as an 
employment benefit for decentralized companies under Article 8 of 
Decree 22836.\6\ Additionally, Milliken stated that the Government of 
Peru acknowledged the existence of an export insurance program (SECREX) 
in its July 28, 1994, response to Supplementary Questionnaire in the 
countervailing duty proceeding on cotton yarn from Peru.
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    \6\ Milliken cites to Deformed Steel Concrete Reinforcing Bar 
from Peru, 50 FR 48819, and Certain Textile Mill Products and 
Apparel from Peru, 50 FR 9871.
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    In their rebuttal comments, the Comite Textil stated that its 
substantive response included clear-cut documentary evidence of the 
complete repeal of the countervailable subsidy programs identified in 
the suspended investigation of cotton shop towels from Peru. Further, 
the Comite Textile asserted that the February 10, 1999, Declaration of 
Ambassador Ricardo Luna (also attached to its substantive response) 
makes clear that the Peruvian Government's commitment to 
nonintervention in its free market economy and rejection of subsidy 
programs has continued without interruption for nearly a decade to the 
present. Finally, the Comite Textile stated that these principles, 
which are embedded in the Constitution, are also integral to Peru's 
international undertakings with the International Monetary Fund on 
economic and fiscal policy and the domestic adoption of the Agreement 
establishing the World Trade Organization and the Multilateral 
Agreements contained in the Final Act of the Uruguay Round of the GATT.

Department's Determination

    Drawing on the guidance provided in the legislative history 
accompanying the Uruguay Round Agreements Act (``URAA''), specifically 
the Statement of Administrative Action (``the SAA''), H.R. Doc. No. 
103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 
(1994), and the Senate Report, S. Rep. No. 103-412 (1994), the 
Department issued its Sunset Policy Bulletin providing guidance on 
methodological and analytical issues, including the basis for 
likelihood determinations. The Department clarified that determinations 
of likelihood will be made on an order-wide basis (see section III.A.2 
of the Sunset Policy Bulletin). Additionally, the Department normally 
will determine that termination of a suspended countervailing duty 
investigation is likely to lead to continuation or recurrence of a 
countervailable subsidy where (a) a subsidy program continues, (b) a 
subsidy program has been only temporarily suspended, or (c) a subsidy 
program has been only partially terminated (see section III.A.3.a of 
the Sunset Policy Bulletin). Exceptions to this policy are provided 
where a company has a long record of not using a program (see section 
III.A.3.b of the Sunset Policy Bulletin).
    In this review, the Government of Peru and the Comite Textile 
asserted that the two programs preliminarily found in the original 
investigation to confer subsidies have both been completely eliminated. 
As noted in the Sunset Policy Bulletin, where a foreign government has 
eliminated a subsidy program, the Department will consider the legal 
method by which the government eliminated the program and whether the 
government is likely to reinstate the program. As noted above, the 
respondents submitted copies of the legislative decree and directive 
supporting their assertion that these programs have been terminated. We 
note that Milliken did not argue that these programs have not been 
terminated or that these programs could easily be reinstated. Given the 
evidence submitted by the respondents, we preliminarily determine that 
both the CERTEX and FENT programs have been eliminated and cannot 
easily be reinstated.
    Referring to section 752(b)(2) of the Act, the Sunset Policy 
Bulletin provides that if the Department determines that good cause is 
shown, the Department will consider programs determined to provide 
countervailable subsidies in other investigations or reviews, but only 
to the extent that such programs (a) can potentially be used by the 
exporters or producers subject to the sunset review and (b) did not 
exist at the time that the suspension agreement was accepted (see 
section III.C.1). Additionally, the Sunset Policy Bulletin provides 
that if the Department determines that good cause is shown, the 
Department will also consider programs newly alleged to provide 
countervailable subsidies, but only to the extent that the Department 
makes an affirmative countervailing duty determination with respect to 
such programs and with respect to the exporters or producers subject to 
the sunset review (see section III.C.2). Both sections specify that the 
burden is on interested parties to provide information or evidence that 
would warrant consideration of the subsidy program in question. As 
noted above, Milliken merely stated that the Department has found in 
other countervailing duty investigations that a number of other 
Peruvian programs confer countervailable subsidies.
    With respect to the tax incentive for investments outside the 
Department of Lima or the Province of Callao under the 1982 Industrial 
Law, we note that this program existed at the time the suspension 
agreement was accepted. Further, we note that both signatories to the 
suspension agreement, La Union and Santa Cecilia have Lima, Peru 
addresses which would appear to make them ineligible for this 
program.\7\
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    \7\ See Cotton Shop Towels From Peru; Suspension of 
Countervailing Duty Determination, 49 FR 35835 (September 12, 1984).
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    With respect to the employment benefit for decentralized companies 
under Article 8 of Decree 22836, we note that such program was also in 
effect at the time the suspension agreement was accepted.\8\ 
Additionally, the Lima, Peru addresses of the suspension agreement 
signatories appear to make them ineligible for this program.
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    \8\ The program was determined to provide an estimated bounty or 
grant of 0.008 percent ad valorem during 1983 in Final Affirmative 
Countervailing Duty Determinations and Countervailing Duty Orders; 
Certain Textile Mill Products and Apparel From Peru; and Rescission 
of Initiation of Investigations With Respect to Hand-Made Alpaca 
Apparel and Hand-Made Carpets and Tapestries, 50 FR 987, 9876 (March 
12, 1985).
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    Finally, with respect to the SECREX program, Milliken did not 
provide any information other than to state that the Government of Peru 
had acknowledged the existence of the program.
    On the basis of the above analysis, we preliminarily find that 
termination of the suspended investigation is not likely to result in 
the continuation or recurrence of a countervailable subsidy.

Net Countervailable Subsidy

Parties' Comments

    In its substantive response, Milliken argued that based on an 
application of the principles expressed in the Sunset Policy Bulletin, 
the Department should provide to the Commission a net countervailable 
subsidy rate of 44 percent ad valorem, the country-wide rate of bounty 
or grant determined in the original preliminary determination. Milliken 
stated that this represents the only calculation of the net 
countervailable subsidy and, since the Department has conducted no 
administrative reviews since the

[[Page 41092]]

preliminary determination, the Sunset Policy Bulletin dictates that the 
Department should not make any adjustments to this rate. Moreover, 
Milliken argued that since the Peruvian Government modified the CERTEX 
and FENT programs to eliminate exports to the United States from 
eligibility, rather than the programs in their entirety, no adjustment 
should be made.
    In its substantive response, the Comite Textil stated that the net 
countervailable subsidy that would prevail if the suspended 
investigation were terminated would be zero, bcause, as discussed 
above, there are no countervailable programs in place.

Department's Determination

    Because we preliminarily determine that a countervailable subsidy 
is not likely to continue or recur were the suspended investigation to 
be terminated, there is no net countervailable subsidy to report to the 
Commission.

Nature of the Subsidy

Parties' Comments

    Neither party addressed this issue.

Department's Position

    Because we preliminarily determine that a countervailable subsidy 
is not likely to continue or recur were the suspended investigation to 
be terminated, there is no nature of the subsidy to report to the 
Commission.

Preliminary Results of Review

    As a result of this review, the Department preliminarily finds that 
termination of the suspended countervailing duty investigation would 
not be likely to lead to continuation or recurrence of a 
countervailable subsidy. As a result of this determination, the 
Department, pursuant to section 751(d)(2) of the Act, preliminarily 
intends to terminate the suspended countervailing duty investigation on 
cotton shop towels from Peru. Pursuant to section 751(c)(6)(A)(iv) of 
the Act, this termination would be effective January 1, 2000.
    Consistent with section 351.218(f)(2)(i) of the Sunset Regulations 
we intend to verify the factual information relied on in making this 
determination because we preliminarily determine that termination of 
the suspended investigation is not likely to lead to continuation or 
recurrence of a countervailable subsidy and our preliminary results are 
not based on countervailing duty rates determined in the investigation 
or subsequent reviews.
    Any interested party may request a hearing within 30 days of 
publication of this notice in accordance with 19 CFR 351.310(c). Any 
hearing, if requested, will be held on September 20, 1999. Interested 
parties may submit case briefs no later than September 13, 1999, in 
accordance with 19 CFR 351.309(c)(1)(i). Rebuttal briefs, which must be 
limited to issues raised in the case briefs, may be filed not later 
than September 16, 1999. The Department will issue a notice of final 
results of this Sunset Review, which will include the results of its 
analysis of issues raised in any such comments, no later than November 
30, 1999.
    This five-year (``sunset'') review and notice are in accordance 
with sections 751(c), 752, and 777(i)(1) of the Act.

    Dated: July 23, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-19444 Filed 7-28-99; 8:45 am]
BILLING CODE 3510-DS-P