NOTICES
DEPARTMENT OF COMMERCE
Cotton Sheeting and Sateen From Peru; Preliminary Affirmative
Countervailing Duty Determinations
Friday, November 19, 1982
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AGENCY: International Trade Administration, Commerce.
ACTION: Preliminary Affirmative Countervailing Duty Determinations.
SUMMARY: We preliminarily determine that certain benefits which constitute bounties
or grants within the meaning of the countervailing duty laws are being provided to
manufacturers, producers, or exporters in Peru of cotton sheeting and/or sateen, as
described in the "Scope of Investigations" section of this notice. The estimated net
bounties or grants are 34.338 percent of the f.o.b. value of exports of cotton sheeting
and/or cotton sateen manufactured in the Department of Lima or the Province of Callao,
and 42.748 percent of the f.o.b. value of exports of cotton sheeting and/or sateen
manufactured outside Lima/Callao. Therefore, we are directing the U.S. Customs Service
to suspend liquidation of all entries of the product subject to these determinations which
are entered, or withdrawn from warehouse, for consumption, and to require a cash
deposit or bond for this product in an amount equal to the estimated net bounties or
grants.
If these investigations proceed normally, we will make our final determinations by
January 26, 1983.
EFFECTIVE DATE: November 19, 1982.
FOR FURTHER INFORMATION CONTACT: Vincent P. Kane or Melissa G. Skinner, Office of
Investigations, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C.
20230, Telephone: (202) 377-5414 or 3530.
SUPPLEMENTAL INFORMATION:
Preliminary Determinations
Based upon our investigations, we preliminarily determine that there is reason to believe
or suspect that the government of Peru provides certain benefits which constitute
bounties or grants within the meaning of section 303 of the Tariff Act of 1930, as amended
(the Act), to manufacturers, producers, or exporters in Peru of cotton sheeting and/or
sateen, as described in the "Scope of Investigation" section of this notice. The estimated
net subsidies are 34.338 percent of the f.o.b. value for cotton sheeting and/or sateen
manufactured in the Department of Lima or the Province of Callao, and 42.748 percent of
the f.o.b. value of the exports of cotton sheeting and/or sateen manufactured outside
Lima/Callao.
These preliminary determinations are based on the best information currently available.
We will seek more detailed information prior to the final determinations and also will
review the methodologies used in these preliminary determinations.
Case History
On June 15, 1982, we received a petition from the American Textile Manufacturing
Institute on behalf of the cotton sheeting and sateen industry in the United States. The
petition alleged that certain benefits which constitute bounties or grants within the
meaning of section 303 of the Act are being provided, directly or indirectly, to the
manufacturers, producers, or exporters of cotton sheeting and sateen in Peru.
Since Peru is not a "country under the Agreement" within the meaning of section 701(b)
of the Act and the products under investigation are dutiable, section 303 of the Act
applies to these investigations. Therefore, the domestic industry is not required to allege
that, and the U.S. International Trade Commission is not required to determine whether,
imports of these products cause or threaten to cause material injury to a U.S. industry.
We found the petition to contain sufficient grounds upon which to initiate
countervailing duty investigations, and on July 6, 1982, we initiated countervailing
duty investigations (47 FR 30274).
On July 14, 1982, we presented a questionnaire concerning the allegations to the
government of Peru at its embassy in Washington, D.C. Subsequently, on July 18, 1982,
we determined that the case was "extraordinarily complicated" within the meaning of
section 703(c)(1)(B) of the Act, and we published a notice of the postponement of the
preliminary countervailing duty determinations (47 FR 37267). On September 17,
1982, we received the responses to the questionnaire. A supplemental questionnaire was
presented to the government of Peru in Washington, D.C. on October 12, 1982. On
October 26, 1982, we received the responses to the supplemental questionnaire.
Scope of Investigations
The products covered by these investigations, as described in the notice of amendment to
the initiation notice (47 FR 33731) (August 4, 1982) are: (1) Plain-woven cotton fabric
sheeting, not fancy or figured and not napped, made of singles yarn, with an average yarn
number between 3 and 26, imported in Textile and Apparel Category 313, currently
classified under Tariff Schedules of the United States (TSUS) numbers 320.--36, 320.--38,
320.--40, and 320.-- 44; and (2) 100% carded cotton sateen fabrics woven with a sateen
weave and not napped, imported in Textile and Apparel Category 317, and currently
classified in TSUS under numbers 320.--54 and 321.--54.
There are twenty-seven producers and/or exporters in Peru of cotton sheeting and/or
sateen. Of those twenty-seven, twenty-five manufacture sheeting and five of those also
manufacture sateen. Two of the twenty-seven are exporters only. Eleven of these
exporters account for 85 percent of the total exports. We have received partial
information from the government of Peru on all twenty- seven companies. The period for
which we are measuring subsidization is calendar year 1981.
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Analysis of Programs
Based on our analysis to date of the petition and the responses to our questionnaires, we
have preliminarily determined the following.
I. Programs Preliminarily Determined to Confer Bounties or Grants
A. The Certificate of Tax Rebate (CERTEX)
The CERTEX is a tax certificate issued to exporters by the government of Peru in an
amount equal to a percentage of the f.o.b. value of export shipments. The CERTEX can be
used for paying any tax administered by the Tax Revenue. Applications for CERTEX are
made to the Division of Foreign Trade or to Regional Councils and must be submitted
within 4 months from the date of export. To be eligible for CERTEX, an exporter must be
registered in the Special Chapter of Exporting Enterprises and must submit certain
required documentation.
The face value of the CERTEX is equal to a percentage of the f.o.b. value of the export
shipment after deductions for consular expenses and commissions paid abroad. There are
no consular expenses applicable to exports of cotton sheeting and/or sateen to the
United States. In its response the government of Peru stated that the average rate of
commission was 4.5% of the f.o.b. value of the export, for exporters of both sheeting
and/or sateen. The percentage of rebate is set according to whether the product is
classified as being of high, medium, or low value added and whether the producer is
located within or outside the Department of Lima. Products of low value added
manufactured inside the Department of Lima or the Province of Callao receive 15 percent
of the f.o.b. value after deductions of the export expenses. The percentages for medium
and high value added products are 20 percent and 22 percent, respectively. Products
manufactured outside the Department of Lima and the Province of Callao qualify for an
additional 10 percent. In its response the government of Peru stated that cotton sheeting
and sateen are considered to be medium value added products and qualify for a 20
percent rate if manufactured in the Department of Lima and the Province of Callao, and
qualify for a 30 percent rate if manufactured outside of Lima/Callao.
Once the gross amount of the rebate certificate is determined, 2 percent of this amount is
issued to the Fund for the Provision of Nontraditional Exports (FOPEX), and 10 percent is
issued to the Provisional Municipal Towncouncil from which the product originated. The
exporter then receives the balance, 88 percent of the gross amount. The value of the
certificate is expressed in Peruvian soles as determined by the official exchange rate on
the day of shipment.
Although the respondent claims the CERTEX certificates are further reduced in value due
to delay in receipt, commissions charged on subsequent transfer of a certificate, and
taxability of certificates, are not offsets permitted under the countervailing duty law
(19 U.S.C. 1677(6)(a)).
Respondents state that the rebate of indirect taxes on production is one of CERTEX's
principal purposes and that there is a relationship between the present level of CERTEX
payments and the incidence of indirect taxation on the producers of the products under
investigation.
In determining whether the CERTEX program is a bona fide rebate of indirect taxes, the
primary considerations are: (1) Whether the CERTEX program operates for the purpose of
rebating indirect taxes, (2) whether there is a clear link between eligibility for CERTEX
payments and payment of indirect taxes, and (3) whether the government has reasonably
calculated and documented the actual indirect tax incidence borne by exported cotton
sheeting and sateen and has demonstrated a clear link between such tax incidence and the
amount of CERTEX payments.
Taxes rebated by CERTEX certificates include those on salaries and wages of workers, the
enterprise patrimony, revaluation of fixed assets, customs duties on fixed assets, goods
and services collected over insurances and capital goods, interests in local and foreign
currency, the fund for research and development, the consumption of electricity and fuel,
custom duties on supplies, and the municipal sales tax. With the possible exception of the
customs duties on supplies and the municipal sales tax, none of the taxes subject to
CERTEX rebates appear to represent an indirect tax on inputs physically incorporated
into cotton sheeting or sateen.
To date the Government of Peru has not satisfactorily demonstrated the requisite linkage
between the indirect tax incidence and the level of CERTEX payments, nor has it shown
that the actual indirect tax incidence has been reasonably calculated and documented.
We will seek additonal information on this aspect of the CERTEX program.
Since the above-described linkage has not been demonstrated to date, we have
preliminarily determined that the CERTEX payments must be considered as conferring
bounties or grants in the amount of 16.8% of the f.o.b. value of the export for all exporters
of cotton sheeting and/or sateen located in the Department of Lima or the Province of
Callao, and 25.21% of f.o.b. value of the export for all exporters of cotton sheeting and/or
sateen located outside Lima/Callao.
B. Nontraditional Export Fund (FENT)
The Nontraditional Export Fund (FENT) was established by the government of Peru to
grant financial support to nontraditional export activities. Changes were made to the
FENT System in June 1982. The new FENT System was established to assure the exporter
a line of credit with which he could finance his exports. The government's responses
detailed the characteristics of the new FENT System.
The fund is administered by the Banco Industrial del Peru through credits to financial
institutions for short-term financing of exports or through credits direct to exporters for
short-term financing of nontraditional exports.
The direct financing may be in the form of either preshipment credit or post- shipment
credit. Preshipment credit is credit given directly to Peruvian exporters prior to
shipment of the goods. Post-shipment credit is credit to the Peruvian exporter for which
the bank collects foreign receivables and remits to the exporter the difference between
the collection and the loan amount plus expenses. The FENT loans are for 90 days, but
may be renewed once in order to cover both pre- and post-shipments, thus having an
actual life of 180 dys.
The exporter requesting FENT financing may apply directly to the Banco Industrial del
Peru or to a financial intermediary for an amount of credit up to 90 percent of the f.o.b.
value of the export. The credits are expressed in foreign currency (U.S. dollars). The
interest rate charged on the FENT loan is 1 percent.
In order to obtain a FENT credit, the exporter must make a deposit of an amount
equivalent to 72 percent of the f.o.b. value of the export, or 80 percent of the amount of
the loan he is requesting. The deposit must be made in the Banco Central (Central Bank of
Peru) and must be in a foreign currency. The exporter must obtain the resources for this
deposit through borrowing from a commercial bank. The Banco Central pays a LIBOR
90-day rate plus 5 percent on the deposit.
According to information obtained from sources other than the respondent, exporters
can borrow the amount of the required deposit at a rate of LIBOR plus
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8 percent,
thus making the net interest charged on the loan approximately 3.5 percent ((LIBOR+8
percent) (deposit)+(1 percent) (loan amount)--(LIBOR+5 percent) (deposit)=3.5
percent). Since the net interest paid on FENT loans (the interest charged on the loan for
the amount of the required deposit plus the 1 percent paid to the Banco Central on the
FENT loan less the interest received from the Banco Central on the required deposit)
appears to be less than the interest payment had the loan been from a commercial bank at
a rate of LIBOR plus 8 percent, we preliminarily find that FENT export loans result in the
payment of a bounty or grant.
The amount of the benefit was determined by subtracting the net interest rate paid on
FENT loans from the interest rate available to non-exporters of nontraditional goods
(19.625-3.5=16.125). We then applied the difference to the amount of FENT loans the
exporters of cotton sheeting and/or sateen obtained, and allocated over total exports. On
this basis we calculated a bounty or grant in the amount of 3.596 percent of the f.o.b.
value of the export.
C. The Law for the Promotion of Exports of Nontraditional Goods (the Export Law)
The intent of the Export Law is to improve the foreign trade structure of Peru. The
Export Law is an integral system aimed at the promotion of nontraditional exports. We
have preliminarily determined that cotton sheeting and sateen exporters have benefitted
from the Export Law as follows:
(1) Articles 8 and 9 of the Export Law are available to all enterprises exporting
nontraditional goods. Both articles refer to the application of the General Law of
Industries to exporters of nontraditional goods. Articles 8 and 9 offer incentives for
reinvestment in the form of exemption of income tax.
We determined the amount of the benefit by multiplying the amount of the exemption
claimed under this article by the tax rate and allocating the result over the value of total
exports in 1981. On this basis we calculated a bounty or grant in the amount of 0.374
percent of the f.o.b. value of the export.
(2) In its response, the government of Peru stated that the benefits provided by Article
12 of the Export Law are available to all enterprises exporting nontraditional goods. This
article states that enterprises that export nontraditional goods may claim, for income tax
purposes, up to 50% additional depreciation on equipment listed among their fixed
assets. We preliminarily regard this additional depreciation allowance as conferring
bounties or grants, since it is available only to exporters.
We determined the amount of the benefit by multiplying the amount of the exemption
claimed under this article times the tax rate and allocating the result over the value of
total exports in 1981. On this basis we calculated a bounty or grant in the amount of 3.012
percent of the f.o.b. value of the export.
(3) The government of Peru stated in its responses that the benefits from Article 13 of the
Export Law are available to all enterprises exporting nontraditional goods. Article 13 of
the Export Law states that enterprises may receive a tax exemption on the capitalization
of earnings which are invested or reinvested, as long as the exemption is claimed within
six years, inclusive of the fiscal year in which the investment occurs. Since this provision
for an income tax exemption on earnings invested or reinvested is intended only for
exporters, we preliminarily determine that this article confers bounties or grants.
The benefit provided by Article 13 was quantified by allocating the tax savings over the
value of total exports in 1981. On this basis we calculated a bounty or grant in the amount
of 0.348 percent of the f.o.b. value of the export.
(4) In response to our questionnaires, the government of Peru stated that Article 14 of
the Export Law is available to all exporters on nontraditional goods. According to Article
14 of the Export Law, enterprises that increase the number of permanent jobs in relation
to those existing in the previous year may, for income tax purposes, deduct as an expense
in the fiscal year the amount of remuneration paid out as a result of the new jobs created.
Since this income tax deduction in the amount of the remuneration paid out on new jobs
is available only to exporters, we preliminarily regard the resulting income tax savings as
conferring bounties or grants.
We calculated this amount by determing the amount of remuneration paid out in 1981
and applying this amount to the applicable tax credit permitted. We determined the
amount of the benefit by multiplying the amount of the exemption claimed under this
article times the tax rate and allocating the result over the value of total exports in 1981.
On this basis we calculated a bounty or grant in the amount of 0.019 percent of the f.o.b.
value of the export.
(5) According to the response from the government of Peru, Article 15 of the Export Law
is available to all exporters of nontraditional goods. Article 15 states that increases in
capital shall be exempt from registration tax. It also states that any contributions of real
property that are made for the purpose of capital increases and purchases made to
expand production facilities shall be exempt from sales and excise taxes as well as from
the addtional taxes added on to the sales and excise taxes.
Decree Law 22392, dated November 19, 1978, abolished the provision of Article 15
allowing an exemption from a registration tax. Therefore the only exemption currently
being provided by Article 15 is for the excise tax paid on the transfer of real property.
Since this exemption is available only to exporters, we preliminarily regard it as a
conferring a bounty or grant.
We quantified the benefit by allocating total excise tax exempted during 1981 over total
exports for 1981. On this basis we calculated a bounty or grant in the amount of 0.007
percent of the f.o.b. value of the export.
(6) In its responses, the government of Peru stated that Article 16 of the Export Law is
available to all enterprises that export nontraditional goods. Article 16 states that
industrial companies exporting nontraditional goods that export 40 percent of their
annual production shall enjoy suspension of payment of tariff duties levied on imported
capital goods for a maximum period of 5 years. If they have generated, from the use of the
imported capital goods, a net inflow of foreign exchange equal to 100 percent of the value
of the imported capital goods before or by the end of the 5 years, then they shall enjoy
total exemption from tariff duties. The company must obtain 40 percent exportation
within a maximum period of 2 years from the date of commencement of the production
generated by the imported capital goods.
In order to be eligible for this benefit, the companies must sign a contract with the state.
If the conditions are not met, the import duties whose payment had previously been
suspended will be paid with a surcharge equal to the rate of interest established for the
debt. We have no evidence that producers have failed to meet the requirements for
complete exemption.
Since the suspension and/or the complete exemption from payment of import duties on
imports of capital equipment used for the production of exports benefit only exporters,
we preliminarily regard the exemption from import duties as a bounty or grant.
We calculated the amount of benefit provided by Article 16 of the Export Law by
allocating the amount of import
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duties deferred in 1981 over the total value of
exports in 1981. On this basis we calculated a bounty or grant in the amount of 8.869
percent of the f.o.b. value of the export.
(7) According to the responses submitted by the government of Peru, this article is
available to all exporters of nontraditional goods. Article 32 of the Export Law allows
enterprises exporting nontraditional goods to hire temporary personnel for a specific job,
at wage rates which are not determined by the industrial community.
The government of Peru stated in its responses that in practice, there is no case in the
textile sector where a company has been able to prevent the formation of an industrial
community through the hiring of non-industrial community personnel. Nevertheless,
exporters have been able to hire temporary personnel at wage rates less than those of
their permanent employees.
To the extent that use of Article 32 has enabled producers selling for export to reduce
labor costs, we preliminarily find that this article of the Export Law confers bounties or
grants.
We quantified the benefit to exporters using Article 32 by dividing the reduced labor
costs in 1981 by total exports. On this basis we calculated a bounty or grant in the amount
of 1.313 percent of the f.o.b. value of the export.
II. Programs Preliminarily Determined Not To Confer Bounties or Grants
We preliminarily determine that bounties or grants are not being provided to
manufacturers, producers, or exporters in Peru of cotton sheeting and sateen under the
following programs.
A. The Fund for the Provision of Nontraditional Exports (FOPEX)
The petition alleges that the fund for the Promotion of Nontraditional Exports
(FOPEX)--whose functions include furnishing technical services contributing to the
adaptation, increase, and diversification of nontraditional exports--confers bounties or
grants. The Peruvian government's response states that FOPEX provides general
information services on international trade, import/export development, export
promotion programs, and international shipments and transportation. FOPEX resources
are composed of:
(1) 10% of the yield from a 1% ad valorem tax which is assessed on the importation of
goods. This is transferred monthly to FOPEX by the Banco Industrial del Peru;
(2) 2% of the value of the CERTEX certificates, which is deducted and transferred at the
time of the issuance settlement;
(3) Income generated from the services it renders; and
(4) Any other contribution of a public or private nature.
The annual reports of FOPEX were not available for our review.
However, it appears from the response that FOPEX provides no credits, guarantees,
grants, or other forms of economic assistance. Since no financial assistance is provided,
and since it appears that the services provided through FOPEX are essentially the same as
the general types of trade information normally available from government agencies, we
have preliminarily determined that FOPEX does not confer bounties or grants.
III. Programs Preliminarily Determined Not To Be Used
We preliminarily determine that the programs listed below which were listed in the notice
of "Initiation of Countervailing Duty Investigation, Cotton Sheeting and Sateen from
Peru" are not being used by the manufacturers, producers, or exporters in Peru of
cotton sheeting and sateen.
A. The Law for the Promotion of Exports of Nontraditional Goods (the Export Law)
(1) Article 23 of the Export Law is available to all consortiums exporting nontraditional
goods. In its responses, the government of Peru stated that no consortiums exporting
nontraditional goods which export cotton sheeting and sateen have been formed. Thus,
we preliminarily determine that Article 23 of the Export Law has not been used.
(2) Article 24 of the Export Law applies to all enterprises exporting nontraditional goods.
The Article states that the General Law of Customs (Decree-Law 20165) and its
corresponding rules and regulations shall govern the Temporary Admission Arrangement
referring to the exemption from duties on raw materials and/or unfinished goods to be
used exclusively in the manufacture of finished goods for export and in the manufacture
of unfinished goods which, once processed, are included among such goods. In its
reponses the government of Peru stated that Article 24 of the Export Law is, in practice,
not applicable to cotton sheeting and sateen producers, as the importation of raw cotton
is forbidden for sanitary reasons. They also responded that manufacturers of cotton
sheeting and sateen have not imported supplies and/or intermediate goods which were
incorporated into the final product. Therefore, we have preliminarily determined that
Article 23 of the Export Law has not been used.
(3) Article 31 of the Export Law states that shipping firms may grant promotional
shipping rates to nontraditional exports. It further states that entities administering
services in ports and airports may charge promotional fees to nontraditional exports. The
government of Peru stated in its response that producers of cotton sheeting and sateen
have not obtained any preferential shipping rates under Article 31 of Export Law during
the period for which we are measuring subsidization.
Verification
In accordance with section 776(a) of the Act, we will verify all the information used in
making our final determinations.
Suspension of Liquidation
In accordance with section 703 of the Act, we are directing the U.S. Customs Service to
suspend liquidation of all entries of cotton sheeting and sateen from Peru which are
entered, or withdrawn from warehouse, for consumption, on or after the date of
publication of this notice in the Federal Register, and to require a cash deposit or bond,
for each such entry of the merchandise in the amount of 34.338 percent of the f.o.b. value
of exports of cotton sheeting and sateen manufactured in the Department of Lima or the
Province of Callao, and 42.748 percent of the f.o.b. value of exports of cotton sheeting
and sateen manufactured outside of Lima/Callao. At the present time, with information
available to the Department of Commerce, Tejidos de ICA is the only company exporting
cotton sheeting and/or sateen from Peru which is located outside Lima/Callao. This
suspension will remain in effect until further notice.
Public Comment
In accordance with section 355.35 of the Commerce Department Regulations, if
requested, we will hold a public hearing to afford interested parties an opportunity to
comment on these preliminary determinations at 10:00 a.m. on December 17, 1982, at
the U.S. Department of Commerce, Room 6802, 14th Street and Constitution Avenue,
N.W. Washington, D.C. 20230. Individuals who wish to participate in the hearing must
submit a request to the Deputy Assistant Secretary for Import Administration, Room
3099B, at the above address within ten days of this
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notice's publication. Requests
should contain: (1) The party's name, address, and telephone number; (2) the number of
participants; (3) the reason for attending; and (4) a list of the issues to be discussed. In
addition, prehearing briefs must be submitted to the Deputy Assistant Secretary by
December 2, 1982. Oral presentations will be limited to issues raised in the briefs. All
written views should be filed in accordance with 19 CFR 355.34, within thirty days of this
notice's publication, at the above address and in at least ten copies.
Judith Hippler Bello,
Acting Deputy Assistant Secretary for Import Administration.
November 15, 1982.
[FR Doc. 82-31754 Filed 11-18-82; 8:45 am]
BILLING CODE 3510-25-M