[Federal Register Volume 66, Number 68 (Monday, April 9, 2001)]
[Notices]
[Pages 18444-18447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8659]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-535-001]


Cotton Shop Towels From Pakistan: Preliminary Results and Partial 
Rescission of Countervailing Duty Administrative Review

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

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

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on certain 
cotton shop towels from Pakistan for the period January 1, 1999, 
through December 31, 1999. For information on the net subsidy for the 
reviewed companies, please see the ``Preliminary Results of Review'' 
section of this notice. If the final results remain the same as these 
preliminary results of administrative review, we will instruct the U.S. 
Customs Service (Customs) to assess countervailing duties as detailed 
in the ``Preliminary Results of Review'' section of this notice. 
Interested parties are invited to comment on these preliminary results. 
(See the ``Public Comment'' section of this notice). In accordance with 
19 CFR 351.213(d)(1), the Department is also rescinding this review 
with regard to Aqil Textile Industries (Aqil).

EFFECTIVE DATE: April 9, 2001.

FOR FURTHER INFORMATION CONTACT: Gayle Longest at (202) 482-3338 or 
Mark Young at (202) 482-6397, AD/CVD Enforcement Office VI, Group II, 
Import Administration, U.S. Department of Commerce, Room 4012, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230

SUPPLEMENTARY INFORMATION:

Background

    On March 9, 1984, the Department published in the Federal Register 
(49 FR 8974) the countervailing duty order on certain cotton shop 
towels from Pakistan. On March 16, 2000, the Department published a 
notice of ``Opportunity to Request an Administrative Review'' (65 FR 
14242) of this countervailing duty order. We received a timely request 
for review from Mehtabi Towel Mills Ltd. (Mehtabi), Shahi Textiles 
(Shahi), Silver Textile Factory (Silver), Universal Linen (Universal), 
United Towel Exporters (United), R.I. Weaving (R.I.), Fine Fabrico 
(Fabrico), Ejaz Linen (Ejaz), Quality Linen Supply Corp. (Quality), 
Jawwad Industries (Jawwad), Ahmed & Co. (Ahmed), and Aqil, the initial 
respondent companies in this proceeding. On May 1, 2000, the Department 
published a notice of initiation of administrative review of the 
countervailing duty on cotton shop towels from Pakistan, covering the 
period January 1, 1999 through December 31, 1999 (65 FR 25303).
    On December 1, 2000, we extended the period for completion of the 
preliminary results pursuant to section 751(a)(3) of the Tariff Act of 
1930, as amended (the Act). See Certain Cotton Shop Towels From 
Pakistan: Extension of Time Limit for Preliminary Results of 
Countervailing Duty Administrative Review (65 FR 75242).
    On February 28, 2001, we received a request to withdraw from the 
administrative review from Aqil. The applicable regulation, 19 CFR 
351.213(d)(1), states that if a party that requested an administrative 
review withdraws the request within 90 days of the date of publication 
of the notice of initiation of the requested review, the Secretary will 
rescind the review. Although the request for recession was made after 
the 90 day deadline, in accordance with 19 CFR 351.213(d)(1), the 
Secretary may extend this time limit if the Secretary decides it is 
reasonable to do so. Due to the fact that Aqil was the only party to 
make a request for its administrative review, we find it reasonable to 
accept the party's withdrawal of its request for review. Moreover, we 
have received no other comments by any other parties regarding Aqil's 
request for withdrawal from the administrative review. Therefore, we 
are rescinding this review of the countervailing duty order on cotton 
shop towels for Aqil covering the period January 1, 1999, through 
December 31, 1999.
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
The companies subject to this review are the companies listed above, 
with the exception of Aqil. This review covers seven programs.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Tariff Act of 1930 
(the Act), as amended, are references to the provisions of effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
references to the provisions codified at 19 CFR part 351 (2000).

Scope of Review

    The merchandise subject to this review is cotton shop towels. The 
product covered in this review is provided for under item number 
6307.10.20 of the Harmonized Tariff Schedule of the United States 
(HTSUS). The HTSUS subheadings are provided for convenience and Customs 
purposes. The written description of the scope of this proceeding is 
dispositive.

Attribution of Subsidies

    Section 351.525 of the CVD Regulations states that the Department 
will attribute subsidies received by two or more corporations to the 
products produced by those corporations where cross-ownership exists. 
According to section 351.525(b)(6)(vi) of the CVD Regulations, cross-
ownership exists between two or more corporations where one corporation 
can use or direct the individual assets of the other corporation(s) in 
essentially the same ways it can use its own assets. In this review, we 
found that several of the respondent firms belonged to family-owned 
company-groups; (i.e., the same family owns companies A, B, and C). All 
of these family companies produce and export the subject merchandise. 
Moreover, in most cases these firms share the same physical facilities,

[[Page 18445]]

administrative services, and marketing services.
    On the basis of the above facts, combined with the fact that these 
family-owned and controlled companies produce the subject merchandise, 
we preliminarily determine that loans under the export financing scheme 
and the sales tax rebates, programs previously found countervailable by 
the Department, are attributable to the total sales of exports to the 
United States of that group of family-related firms and to the total 
export sales of that group of family-owned firms, respectively. This 
conforms with section 351.525(b)(6)(ii) of the Department's CVD 
regulations, which explicitly states that if two (or more) corporations 
with cross-ownership produce the subject merchandise, the Secretary 
will attribute the subsidies received by either or both corporations to 
the products produced by both corporations.
    We preliminarily determine that cross-ownership exists between the 
following family related companies: (1) Mehtabi/Quality/Fabrico/Ejaz; 
(2) United/R.I./Universal; and (3) Ahmed/Shahi. Therefore, we have 
calculated one rate for each of these family-owned corporate groups and 
have applied that rate to each of the member companies.

Use of Facts Available

    The respondents have failed to adequately respond to the 
Department's initial and subsequent questionnaires, with respect to one 
of the investigated programs, the Income Tax Reduction Program. 
Sections 776(a)(2)(A) and 776(a)(2)(B) of the Act provide for the use 
of facts available when an interested party withholds information that 
has been requested by the Department, or when an interested party fails 
to provide the information requested in a timely manner and in the form 
required. As described in more detail below, the respondents have been 
unable to provide information explicitly requested by the Department; 
therefore, we must resort to the use of facts otherwise available.
    The respondents did not provide the Department with adequate 
information to calculate a subsidy rate for the Income Tax Reduction 
Program. Under the Finance Act of 1992 and section 80CC of the Income 
Tax Ordinance, commercial banks withhold a tax of 0.5 percent on 
foreign exchange proceeds for all shop towel exports. The amount 
withheld became the company's final tax liability irrespective of the 
company's profitability. See Cotton Shop Towels From Pakistan; 
Preliminary Results of Countervailing Duty Administrative Reviews, 61 
FR 50273 (September 25 1996) (1996 Shop Towels) and Cotton Shop Towels 
From Pakistan; Final Results of Countervailing Duty Administrative 
Reviews, 62 FR 24082 (May 2, 1997) (1997 Shop Towels).
    Because the shop towel exporters pay this tax on all export 
transactions, the exporters are not required to file income tax returns 
because this export transaction tax is collected in lieu of the payment 
of income taxes. Under the Department's standard tax methodology, the 
benefit from the Income Tax Reduction Program would be the difference 
in the amount of income taxes the company would have paid absent this 
program. This amount would be the difference in income taxes the 
company would have paid under Pakistan's corporate tax law and the 
actual amount of taxes the company paid under the Income Tax Reduction 
Program. Because the shop towel exporters were not required to file 
income tax returns, the companies were unable to provide us with the 
amount of alternative taxes they would have paid under Pakistan's 
corporate tax law.
    Therefore, we had to use facts available to determine the benefit 
provided to the respondents under this program. As facts available, we 
used the subsidy rate found for this program in the last administrative 
reivew conducted for this order which was 1997 Shop Towels. The subsidy 
rate calculated for this program in 1997 Shop Towels serves as a 
reasonable basis for facts available because the program has not 
changed and the income tax reduction rate for cotton shop towel 
exporters has remained constant since that last administrative review. 
Because the program remains the same and cotton shop towel exports 
still receive a 0.50 percent tax reduction rate on total export 
earnings, for these preliminary results, we have utilized the 
information regarding the benefits earned from these reductions from 
1997 Shop Towels.

Analysis of Programs

I. Programs Preliminarily Determined to Confer Subsidies

A. Export Finance Scheme
    The Export Finance Scheme (EFS), which is administered by the State 
Bank of Pakistan, grants short-term loans at below-market interest 
rates to exporters. The EFS has two parts. Under Part I, exporters may 
obtain financing on irrevocable letters of credit or firm export 
orders. Under Part II, exporters may obtain financing in the form of a 
credit line based upon the value of the previous year's eligible 
exports. The Department found this program countervailable in the 
investigation (see Cotton Shop Towels from Pakistan: Final Affirmative 
Countervailing Duty Determination, 49 FR 1408 (January 11, 1984)) and 
in all subsequent reviews. There has been no new information or 
evidence of changed circumstances in this review to warrant 
reconsideration of this program's countervailability.
    During the current review period, cotton shop towel exporters made 
interest payments on loans obtained under the EFS. The interest rates 
ranged between 7 percent and 8 percent. Loan terms require payment 
within a maximum of 180 days. As our benchmark, we used the national 
average commercial rate for short-term credit which was reported by the 
Government of Pakistan (GOP). This rate was 13.5 percent in 1999. We 
used a national average interest rate because we could not calculate 
company-specific benchmark rates because none of the respondents 
received short-term loans from commercial sources during the POR.
    To calculate the benefit, we took the difference between the actual 
interest paid and the interest that would have been paid at the rates 
charged on comparable commercial loans. See 1997 Shop Towels). We then 
divided the benefit derived from the EFS loans by the respective 
companies' export sales values. On this basis, we preliminarily 
determine the net subsidy from this program during the period of review 
to be the following:

------------------------------------------------------------------------
                                                              Ad valorem
                          Company                                rate
                                                              (percent)
------------------------------------------------------------------------
 Mehtabi...................................................         0.10
Quality....................................................         0.10
Fabrico....................................................         0.10
Ejaz.......................................................         0.10
United.....................................................         3.57
R.I........................................................         3.57
Universal..................................................         3.57
Shahi......................................................         0.02
Ahmed......................................................         0.02
Silver.....................................................         0.09
Jawwad.....................................................         0.00
------------------------------------------------------------------------

    Jawwad did not use this program during the period of review.
B. Sales Tax and Customs Duty Rebate Programs
    The Central Bureau of Revenue administers the rebate of sales taxes 
and customs duties on both domestic and imported inputs used in 
exported products. The sales tax rebate applicable to cotton shop 
towels during the review period ranged from 0.14 percent ad valorem to 
7.23 percent ad valorem, and the customs duty rebate applicable to

[[Page 18446]]

cotton shop towels during the review period was 1.70 percent ad valorem 
for all producers/exporters. All rebates are calculated on the f.o.b. 
value of the total exports. In the investigation and subsequent 
reviews, we found these programs countervailable because the GOP failed 
to establish the requisite linkage and comparison between taxes paid 
and rebates provided. In this review, the GOP did not provide new 
information to establish the required linkage between the rebates given 
and the indirect tax incurred. Therefore, we preliminarily determine 
that the GOP pays these rebates without regard to specific taxes 
incurred in the production of shop towels and that the full amount of 
these rebates are countervailable because these rebates are contingent 
upon export performance. See Preliminary Results of Countervailing Duty 
Administrative Review: Cotton Shop Towels from Pakistan, 58 FR 32104 
(June 8, 1993) and Final Results of Countervailing Duty Administrative 
Review: Cotton Shop Towels from Pakistan, 58 FR 48038 (September 14, 
1993).
    For the sales tax program and the customs duty rebate program, the 
cash rebates are earned on a sale-by-sale basis, and a firm can 
precisely calculate the amount of rebate it will receive for each 
export sale at the moment the sale is made. Because the amount of these 
rebates is known at the time of export, we calculate the benefit from 
this rebate program on an ``as-earned'' basis for all exporters. To 
calculate the benefit, for the sales tax rebate program, we divided the 
amount of sales tax rebated to each exporter/manufacturer by their 
total exports during the 1999 review period. On this basis, we 
preliminarily determine the benefit from the sales tax rebate to be the 
following:

------------------------------------------------------------------------
                                                              Ad valorem
                          Company                                rate
                                                              (percent)
------------------------------------------------------------------------
Mehtabi....................................................         0.69
Quality....................................................         0.69
Fabrico....................................................         0.69
Ejaz.......................................................         0.69
United.....................................................         0.14
R.I........................................................         0.14
Universal..................................................         0.14
Shahi......................................................         0.41
Ahmed......................................................         0.41
Jawwad.....................................................         0.08
Silver.....................................................         7.26
------------------------------------------------------------------------

    For the customs duty rebate program, we used the rate applicable to 
cotton shop towels as shown in The Gazette of Pakistan the official GOP 
publication of standard duty drawback notification (SRO-172(I)/99 dated 
March 1999). This rate is based on an official survey of the imported 
inputs that are not physically incorporated into the exported product 
and is calculated on an f.o.b. basis. Imported inputs not physically 
incorporated include sizing chemicals used in the productions process 
to stiffen, straighten, and shrink the yarn. The benefit for the 
customs duty rebate during the 1999 review period for exporters of shop 
towels is the following:

------------------------------------------------------------------------
                                                              Ad valorem
                          Company                                rate
                                                              (percent)
------------------------------------------------------------------------
All companies..............................................         1.70
------------------------------------------------------------------------

C. Income Tax Reductions on Export Income
    Section 80CC of the Income Tax Ordinance, 1979, as amended by 
Finance Act, 1999, requires the commercial banks to withhold the income 
tax at one source from all foreign exchange proceeds. The amount 
withheld becomes the company's final tax liability irrespective of 
whether the company is profitable. Eligible exporters continued to 
receive a tax reduction rate on export earnings. For shop towel 
exporters, the tax rate was 0.50 percent of total export earnings. This 
was found countervailable in 1996 Shop Towels and 1997 Shop Towels. 
There has been no new information or evidence of changed circumstances 
in this review to warrant reconsideration of this program's 
countervailability.
    As explained above in the ``Facts Available'' section of this 
notice, the respondents did not provide sufficient information 
regarding the benefits earned from these claimed reductions. Therefore, 
we were unable to calculate a rate for the shop towels exporters' 
benefits received from this program, and we assigned, as facts 
available, a rate of 1.19 percent, the rate calculated in the last 
administrative review. See 1997 Shop Towels. Therefore, we 
preliminarily determine the net subsidy from this program to be the 
following:

------------------------------------------------------------------------
                                                              Ad valorem
                          Company                                rate
                                                              (percent)
------------------------------------------------------------------------
All companies..............................................         1.19
------------------------------------------------------------------------

II. Programs Preliminarily Determined To Be Not Used

    A. Rebate of Excise Duty
    B. Export Credit Insurance
    C. Import Duty Rebates

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for each producer/exporter subject to this 
administrative review. For the period January 1, 1999, through December 
31, 1999, we preliminarily determine the net subsidy to be the 
following:

------------------------------------------------------------------------
                                                              Ad valorem
                          Company                                rate
                                                              (percent)
------------------------------------------------------------------------
Mehtabi....................................................         3.68
Quality....................................................         3.68
Fabrico....................................................         3.68
Ejaz.......................................................         3.68
United.....................................................         6.60
R.I........................................................         6.60
Universal..................................................         6.60
Shahi......................................................         3.32
Ahmed......................................................         3.32
Jawwad.....................................................         2.97
Silver.....................................................        10.24
------------------------------------------------------------------------

If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct Customs to 
assess countervailing duties at the rates listed above, as a percentage 
of the f.o.b. invoice price on shipments from the above companies 
entered, or withdrawn from warehouse, for consumption on or after the 
date of publication of the final results of this review.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 19 CFR 
351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which 
a review was not requested, duties must be assessed at the cash deposit 
rate, and cash deposits must continue to be collected, at the rate 
previously determined. As such, the countervailing duty cash deposit 
rate applicable to a company can no longer change, except pursuant to a 
request for a review of that company. See Federal-Mogul Corporation and 
The Torrington Company v. United States, 822 F. Supp. 782 (CIT 1993) 
and Floral Trade Council v. United States, 822 F. Supp. 766 (CIT 1993). 
Therefore, the cash deposit rates for all companies except those 
covered by this review will be unchanged by the results of this review.

[[Page 18447]]

    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 under the URAA. If such a review 
has not been conducted, the rate established in the most recently 
completed administrative proceeding pursuant to the statutory 
provisions that were in effect prior to the URAA amendments is 
applicable. 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, 1999, through December 31, 1999, the 
assessment rates applicable to all non-reviewed companies covered by 
this order are the cash deposit rates in effect at the time of entry.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of the public 
announcement of this notice. Pursuant to 19 CFR 351.309, interested 
parties may submit written comments in response to these preliminary 
results. Unless otherwise indicated by the Department, case briefs must 
be submitted within 30 days after the date of publication of this 
notice, and rebuttal briefs, limited to arguments raised in case 
briefs, must be submitted no later than five days after the time limit 
for filing case briefs, unless otherwise specified by the Department. 
Parties who submit argument in this proceeding are requested to provide 
the Department copies of the public version on disk. Case and rebuttal 
briefs must be served on interested parties in accordance with 19 CFR 
351.303(f). Also, pursuant to 19 CFR 351.310, within 30 days of the 
date of publication of this notice, interested parties may request a 
public hearing on arguments to be raised in the case and rebuttal 
briefs. Unless the Secretary specifies otherwise, the hearing, if 
requested, will be held two days after the date for submission of 
rebuttal briefs, that is, thirty-seven days after the date of 
publication of these preliminary results.
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under 19 CFR 351.309(c)(ii), are due. The Department 
will publish the final results of these administrative reviews, 
including the results of its analysis of issues raised in any case, or 
rebuttal brief or at a hearing.
    This administrative review is issued and published in accordance 
with sections 751(a)(1) and 777(i)(1) of the Act (19 USC 1675(a)(1) and 
19 USC 1677f(i)(1)). Effective January 20, 2001, Bernard T. Carreau is 
fulfilling the duties of the Assistant Secretary for Import 
Administration.

    Dated: April 2, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 01-8659 Filed 4-6-01; 8:45 am]
BILLING CODE 3510-DS-P