NOTICES
DEPARTMENT OF COMMERCE
[C-565-001]
Canned Tuna From the Philippines; Preliminary Results of Countervailing Duty
Administrative Review
Thursday, October 9, 1986
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AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty administrative review.
SUMMARY: The Department of Commerce has conducted an administrative review of the
countervailing duty order on canned tuna from the Philippines. The review covers
the period January 1, 1984 through December 31, 1984 and 19 programs.
As a result of the review, the Department has preliminarily determined the total bounty
or grant to be 1.16 percent ad valorem for the period of review. Interested parties are
invited to comment on these preliminary results.
EFFECTIVE DATE: October 9, 1986.
FOR FURTHER INFORMATION CONTACT:Christopher Beach or Lorenza Olivas, Office of
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On October 31, 1983, the Department of Commerce ("the Department") published in the
Federal Register (48 FR 50134) a countervailing duty order on canned tuna from the
Philippines. On October 31, 1985, the Government of the Philippines, a group of
importers, the Tuna Group of the Association of Food Industries, and a group of
exporters, the Tuna Canners Association of the Philippines, requested in accordance
with § 355.10 of the Commerce Regulations an administrative review of the order. We
published the initiation of the administrative review on November 12, 1985 (50 FR
46689). The Department has now conducted that administrative review in accordance
with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Scope of Review
Imports covered by the review are shipments of Philippine tuna packed and preserved in
any manner, not in oil, in airtight containers. Such merchandise is currently classifiable
under items 112.3020, 112.3040 and 112.3400 of the Tariff Schedules of the United
States Annotated.
The review covers the period January 1, 1984 through December 31, 1984 and 19
programs: (1) Exporting packing credits; (2) An income tax deduction for labor and raw
materials; (3) Equity investment by insurance companies; (4) Foreign equity investment;
(5) Preferential access to foreign exchange; (6) An exemption from import taxes; (7) An
income tax deduction for overseas offices; (8) An income tax deduction for new brand
names; (9) An income tax deduction for export traders; (10) An income tax deduction for
financial assistance; (11) Government bank loans; (12) Private bank loans; (13) Employee
equity investment; (14) A tax credit for net local content; (15) A tax credit for net local
value; (16) Preferential loan guarantees; (17) Government equity investment; (18)
Various financial services by the Export Credit Insurance and Guarantee Corporation;
and (19) Various financial and marketing assistance by the Institute for Export
Development.
Analysis of Programs
(1) Export Packing Credits
The Central Bank of the Philippines offers a rediscounting program through commercial
banks. Upon receipt of a letter of credit from a foreign purchaser, an exporter may
negotiate with a commercial bank an "export packing credit," which is a pre-export loan,
based on the letter of credit. The commercial bank may then rediscount the packing
credit with the central bank. On November 22, 1983, Circular 981 set the maximum
interest rate at the 90-day Manila Reference Rate minus two points and the maximum
loan amount at 80 percent of the value of the letter of credit. Effective March 9, 1984,
Circular 994 raised the maximum loan amount to 90 percent of the value of the letter of
credit. If the commercial banks do not rediscount the loans, they may charge a
commerical rate of interest. We
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preliminarily determine that these loans are
countervailable to the extent that they are given at preferential rates.
For our benchmark interest rate, we took the weighted annual average interest rate for
secured loans for one year or less, as reported by the central bank. To find the benefit for
each loan, we took the difference between the actual interest paid and the interest the firm
would have paid using our benchwork interest rate. We then weight-averaged each firm's
benefit by its share of total exports of the merchandise to the United States. On this basis,
we preliminary determine the total benefit under this program to be 1.11 percent ad
valorem.
(2) Income Tax Deduction for Labor and Raw Materials (Article 48(b))
Article 48(b) of the Omnibus Investment Code ("the Code"), which provides a variety of
investment incentives to registered enterprises, allows a Philippine-owned and registered
exporter an income tax deduction for direct labor and local raw material costs for up to
five years following registration. We preliminarily determine that this program is
countervailable because it is available only to exporters. To calculate the benefit, we
multiplied the amount of the deduction claimed in 1984 by the normal corporate tax rate
and divided the result by the firm's total 1984 exports to all markets. We then
weight-averaged the benefit by each firm's share of total exports of the merchandise to
the United States. We preliminarily determine the benefit from this program to be 0.05
percent ad valorem.
(3) Equity Investments by Insurance Companies (Article 52)
Article 52 of the Code authorizes the Insurance Commissioner to allow insurance
companies to invest in registered enterprises. The Philippine government does not
provide funds or incentives to the insurance companies.
Insurance companies purchased equity in two of the exporting companies during the
review period. Because the insurance companies acted without any direction, funds, or
incentives from the Philippine government, we preliminarily determine that these equity
purchases are not countervailable.
(4) Foreign Equity Investment
Presidential Decree 1892 suspended, for a one-year period beginning on December 4,
1983, the 60-percent Philippine ownership requirement for enterprises registered under
Article 34(1) of the Code. Although this decree allows increased foreign equity in
registered enterprises, the Philippine government does not provide funds or incentives to
foreign investors.
On December 31, 1983 a foreign company purchased equity in one of the exporting
companies. Because the foreign company acted without any government direction, funds,
or incentives, we preliminarily determine that this foreign equity investment is not
countervailable.
(5) Preferential Access to Foreign Exchange
Because of the financial crisis and severe foreign exchange shortage in 1983 and 1984, the
Philippine government established an interim system that would allocate scarce foreign
exchange to those sectors that would lead the country towards economic recovery. A
domestic producer, Starkist, alleges that tuna exporters receive priority access to foreign
exchange.
All companies must deposit their foreign exchange holdings in commercial banks. Under
central bank Circular 970, commercial banks are required to sell to the central bank all
foreign exchange receipts from exports of merchandise and services. Over the course of
1984, this requirement was modified to allow the banks to retain an increasing portion of
their foreign exchange receipts to use as they wished. Circular 970 set the following
priorities for distribution of foreign exchange: (1) Oil imports, (2) debt servicing, and (3)
exporters in need of imported raw materials. On October 15, 1984, this program was
terminated by Circular 1030.
Exporters need to prove that they need imported raw materials in order to qualify. For
each industry, the central bank establishes an import coefficient that represents the
maximum amount of foreign currency it will allow a firm in that industry. This coefficient
is based on the historical proportion of imports to total production cost in that industry.
The government allows exporters to repurchase an amount equal to the import
coefficient for the industry. One firm used this program during the period of review.
Although the law states that exporters and certain priority industries have preferential
access to foreign exchange, we found that foreign currency is also available to producers
for the domestic market at a fixed rate of exchange. Since the exchange rate in the
Philippines is fixed, producers for both the domestic and export markets purchase
foreign exchange at the same rate. Domestic producers can purchase foreign exchange
from commercial banks and may open import letters of credit using foreign exchange.
Furthermore, most of the foreign currency collected by the central bank is generated by
exporters. Producers selling domestically do not earn foreign currency because they do
not export. Since exporters earn most of the foreign currency that the government then
redistributes, the exporters are in effect subsidizing the foreign exchange requirements of
the rest of the economy. Rather than acting to the benefit of certain exporters, restricted
access to foreign exchange acts to their detriment. In permitting certain exporters to
retain or buy back a certain percentage of their foreign exchange earnings, the
government is only allowing those exporters to have a portion of their own money.
For these reasons, we preliminarily determine that this program is not countervailable.
(6) Other Programs
We also examined the following programs and preliminarily find that exporters of canned
tuna did not use them during the review period:
(A) An exemption from import taxes (Article 48(f) of the Code);
(B) An income tax deduction for overseas offices (Article 49(f) of the Code);
(C) An income tax deduction for new brand names (Article 48(e) & 49(g) of the Code);
(D) An income tax deduction for export traders (Article 49(d) of the Code);
(E) An income tax deduction for financial assistance (Article 49(e) of the Code);
(F) Government bank loans (Article 51 of the Code);
(G) Private bank loans (Article 52 of the Code);
(H) Employee equity investment (Article 53 of the Code);
(I) A tax credit for net local content;
(J) A tax credit for net local value;
(K) Preferential loan guarantees;
(L) Government equity investment;
(M) Various financial services by the Export Credit Insurance and Guarantee Corp.; and
(N) Various financial and marketing assistance by the Institute for Export Development.
Preliminary Results of Review
As a result of our review, we prelimiarily determine the total bounty or grant to be 1.16
percent ad valorem for the period of review. The Department intends to instruct the
Customs Service to assess
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countervailing duties of 1.16 percent of the f.o.b.
invoice price on any shipments of this merchandise exported on or after January 1, 1984
and on or before December 31, 1984.
Further, the Department intends to instruct the Customs Service to collect a cash deposit
of estimated countervailing duties, as provided by section 751(a)(1) of the Tariff Act,
of 1.16 percent of the f.o.b. invoice price on all shipments of this merchandise entered, or
withdrawn from warehouse, for consumption on or after the date of publication of the
final results of this administrative review. This deposit requirement shall remain in effect
until publication of the final results of the next administrative review.
Interested parties may submit written comments on these preliminary results within 30
days of the date of publication of this notice and may request disclosure and/or a hearing
within 10 days of the date of publication. Any hearing, if requested, will be held 30 days
after the date of publication or the first workday following. Any request for an
administrative protective order must be made no later than five days after the date of
publication. The Department will publish the final results of this administrative review
including the results of its analysis of issues raised in any such written comments or at a
hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the
Tariff Act (19 U.S.C. 1675(a)(1)) and § 355.10 of the Commerce Regulations (50 FR 32556,
August 13, 1985).
Dated: October 2, 1986.
Gilbert B. Kaplan,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 86-22905 Filed 10-8-86; 8:45 am]
BILLING CODE 3510-DS-M