[Federal Register: April 9, 2001 (Volume 66, Number 68)]
[Page 18444-18447]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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