NOTICES

                        DEPARTMENT OF COMMERCE

  Leather Wearing Apparel From Argentina; Preliminary Affirmative Countervailing
                            Duty Determination

                         Thursday, January 15, 1981

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 AGENCY: International Trade Administration, Commerce.

 ACTION: Preliminary affirmative countervailing duty determination.

 SUMMARY: With this notice we inform the public that we have preliminarily determined
 that the Government of Argentina grants benefits to manufacturers, producers or
 exporters of certain leather wearing apparel which constitute a subsidy within the
 meaning of the countervailing duty law. We will make a final determination no later
 than 75 days from the date of this preliminary determination.

 EFFECTIVE DATE: January 15, 1981.

 FOR FURTHER INFORMATION CONTACT:

 Fred Howell, Import Administration Specialist, Office of Investigations, International
 Trade Administration, Department of Commerce, Washington, D.C. 20230 (202)
 377-5050.

 SUPPLEMENTARY INFORMATION:

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 Procedural Background

 On November 14, 1980, the Department of Commerce ("Department") received a petition
 in proper form from Ralph Edwards Sportswear, Inc., Cape Girardeau, Missouri, alleging
 that the Government of Argentina provides manufacturers, producers or exporters of
 leather wearing apparel, certain subsidies which are bounties or grants within the
 meaning of section 303, Tariff Act of 1930, as amended by the Trade Agreements Act of
 1979 (93 Stat. 190, 19 U.S.C. 1303) (hereinafter referred to as "the Tariff Act"). Because
 Argentina is not "a country under the Agreement" within the meaning of section 70(b) of
 the Tariff Act (93 Stat. 151, 19 U.S.C. 1671(b)), section 303 of the Act applies to this
 investigation. The Department of Commerce has not, therefore, referred this case to the
 United States International Trade Commission (ITC) for a preliminary determination of
 material injury to a domestic industry.

 Description of Product

 The merchandise covered by this investigation is leather wearing apparel currently
 provided for in item number 791.76 of the Tariff Schedules of the United States. These
 products include leather coats and jackets for men, boys, women, girls and infants and
 other leather wearing apparel products including leather vests, pants and shorts. Number
 791.76 of the Tariff Schedules of the United States also includes outer leather shells and
 parts and pieces of leather wearing apparel as designated in this Tariff number.

 Programs Under Investigation

 We are investigating four programs: "reembolso" or rebate on exports of leather wearing
 apparel and parts and pieces thereof; a reembolso or rebate on exports of tanned leather;
 an income tax reduction plan; and a preferential financing program.

 "Reembolso" or Rebate on Exports

 Argentina has an export rebate program which includes a cash payment on exports
 which, according to Government of Argentina reimburses exporters for indirect taxes
 paid at the various stages of production. The amount of the reimbursement varies
 according to product and is based on a percentage of the FOB price of export shipments.
 The Reembolso under investigation involves rebates made by the Government of
 Argentina on the exportation of leather wearing apparel and parts and pieces thereof.
 For leather wearing apparel the export reimbursement is in the amount of 20 percent of
 the FOB value paid upon exportation, and for parts and pieces of leather wearing apparel
 it amounts to 10 percent.
 The non-excessive refund of indirect taxes levied on exported products and their
 components is not a subsidy under rules of the General Agreement on Tariffs and Trade
 (GATT) or the U.S. countervailing duty law. While the Tariff Act limited the use of
 indirect taxes not rebated on export as offsets against the amount of any subsidy found, it
 did not intend this limitation on the use of offset to:
 Prohibit the administering authority from determining that export payments are not
 subsidies if those payments are reasonably calculated, are specifically provided as
 non-excessive rebates of indirect taxes within the meaning of Annex A of the Agreement
 and are directly related to the merchandise exported.
 (Senate Report No. 96-249, July 17, 1979 at 84085).
 The Department has published administrative guidelines (19 CFR Part 355 Annex I, para.
 2, 45 FR 4949) for determining when the payment of a lump sum calculated and identified
 as a non-excessive rebate of an indirect tax on an exported product or its component is
 not a subsidy. The guidelines state that the foreign government must reasonably have
 calculated and documented the actual indirect tax incidence borne by the product under
 investigation and demonstrated a clear link between the export payment and the tax
 incidence. Ex post facto rationalizations of export payment programs will not be
 accepted. The foreign government must present information that demonstrates to the
 Department's satisfaction (a) that indirect taxes paid have served as the official basis upon
 which the export rebate was calculated and (b) that there is, in fact, the requisite link
 between the export payment and the indirect tax incidence.
 The Argentine Government has cooperated fully in providing information requested for
 this countervailing duty investigation. The information submitted appears to indicate
 that the payment made under the reembolso program may be bona fide rebates of
 indirect taxes within the meaning of the Tariff Act. However, there still remains several
 basic questions regarding the reembolso program which the department cannot resolve
 on the basis of the information presently on hand. Questions yet to be resolved include:
 whether the reimbursement is directly linked to the indirect taxes; whether the indirect
 tax actually paid by Argentine producers bears a relationship to the indirect tax model
 presented by the respondent; the extent to which the taxes rebated can be regarded as
 indirect taxes on inputs physically incorporated in the exported product; and whether
 the basis of certain computations is acceptable. Prior to reaching a final determination in
 this case, full consideration will be given to the information which has been submitted and
 other information to be supplied by the Government of Argentina. After reviewing such
 information, we expect to be in a position to answer the question which remain.
 In review of the above, we have preliminary determined that the export rebate program
 of the Government of Argentina does constitute a subsidy within the meaning of section
 771(5) of the Act (19 U.S.C. 1677). The subsidy amount for leather wearing apparel is 20
 percent of the FOB value paid upon exportation. For parts and pieces of leather apparel
 the subsidy amount is 10 percent of the FOB value paid upon exportation.

 Reembolso or Rebate on Exports of Tanned Leather

 A recently established reembolso or rebate program applying to tanned leather is not a
 benefit to the leather apparel manufacturers because the rebate is for direct exports of
 tanned leather and the tannery does not obtain any rebate or benefit for sales to
 Argentine leather apparel manufacturers.

 Income Tax Reduction Program

 A program of income tax reduction on export related income alleged by the petitioner
 has been discontinued.

 Preferential Financing Program

 Argentina has an export financing program providing a preferential interest rate for
 loans up to 55 percent of the FOB value of the exported merchandise. The principal of the
 loan is pegged to the U.S. dollar. As a result, the loan must be repaid in the peso
 equivalent of dollar denominated principal on the date of repayment.
 Based on information provided by the Government of Argentina we have used an
 Argentine preferential annual rate of loan cost of 86.87 percent. Based on information we
 received from our Embassy we estimate that short term interest rates in Argentina have
 averaged 137.75 percent in 1979. The maximum amount that could have been loaned
 under the preferential financing program totaled $11,478,556 or 55 

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 percent of
 the FOB value of the exported goods. Based on this information and a 180 day maximum
 term of these loans we calculate a subsidy of 13.99%.

 Determination

 On the basis of information received, we preliminarily determine that the total benefit of
 subsidy programs granted by the Government of Argentina on exports of leather
 wearing apparel amounts to 33.99 percent ad valorem and the total benefit of the subsidy
 programs on export of parts and pieces of leather wearing apparel amounts to 23.99
 percent ad valorem.

 Administrative Procedures

 In accordance with 355.34 of the Commerce Department Regulations (19 CFR 355.34, 45
 FR 4946), interested parties may submit information or written views concerning this
 proceeding to the address indicated above in at least 10 copies, not later than February
 12, 1981. The mailing address is room 2800, U.S. Department of Commerce, 14th Street
 and Constitution Avenue, NW., Washington, D.C. 20230.
 The Department will afford interested parties an opportunity to present oral views in
 accordance with 355.35 of the Commerce Department Regulations. This hearing is
 scheduled to be held if requested, at the U.S. Department of Commerce, Room 6802, 14th
 Street and Constitution Avenue, NW., Washington, D.C. 20230 beginning at 2:00 p.m. on
 February 10, 1981. Interested parties who wish to have such a conference should submit
 a written request to the Office of the Deputy Assistant Secretary for Import
 Administration, Room 2800 at the address shown above. These requests should contain
 (1) the name, address and telephone number of the requester (2) the number of
 participants and (3) a statement outlining the issues to be discussed. The Deputy Assistant
 Secretary for Import Administration must receive the request no later than January 23,
 1981.
 Interested parties must submit pre-hearing briefs no later than February 3, 1981, to the
 Office of the Deputy Assistant Secretary at the address noted above. Oral presentations by
 persons submitting pre-hearing briefs will be limited to those issues raised in the briefs.
 All written views must be filed in accordance with 355.34 of the Department of Commerce
 Regulations.
 In accordance with section 703(d) of the Act (19 U.S.C. 1671b(d)), Customs officers will
 be advised to suspend liquidation of all entries, or withdrawals from warehouse, for
 consumption of the subject merchandise on or after January 15, 1981. This suspension of
 liquidation shall remain in effect until further notice. The posting of a cash deposit, bond,
 or other security, in the amount of 33.99 percent ad valorem for leather wearing apparel
 and 23.99 percent ad valorem for parts and pieces of leather wearing apparel, will be
 required as of that date.
 We will issue a final determination no later than March 24, 1981.
 This determination is published in accordance with section 703(f) of the Act (19 U.S.C.
 1671b(f)).

 John D. Greenwald,

 Deputy Assistant Secretary for Import Administrations.

 January 9, 1981.

 [FR Doc. 81-527 Filed 1-14-81; 8:45 am]

 BILLING CODE 3510-25-M