(Cite as: 49 FR 26784)
NOTICES
DEPARTMENT OF COMMERCE
[C-469-403]
Potassium Chloride From Spain: Preliminary Affirmative Countervailing Duty Determination
Friday, June 29, 1984
*26784 AGENCY: International Trade Administration, Import Administration, Commerce.
ACTION: Notice of Preliminary Affirmative Countervailing Duty Determination.
SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Spain of potassium chloride. The estimated net subsidy is 7.54 percent ad valorem. Therefore, we are directing the U.S. Customs Service to suspend liquidation of all unliquidated entries of potassium chloride from Spain which are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. The Customs Service shall require a cash deposit or bond on this product in the amount equal to the estimated net subsidy. If this investigation proceeds normally, we will make our final determination by September 10, 1984.
EFFECTIVE DATE: June 29, 1984.
FOR FURTHER INFORMATION CONTACT: Terry Link, 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) 377-0189.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based upon our investigation, we preliminarily determine there is reason to believe or suspect that certain benefits which constitute subsidies within the meaning of section 701 of the act are being provided to manufacturers, producers, or exporters in Spain of potassium chloride. The following programs are preliminarily determined to confer subsidies:
1/8 Short-term preferential loans (provided under the Privileged Circuit Exporter Credits Program as working-capital loans and export credits)
1/8 Excessive rebates of indirect taxes on exports under the Desgravacion Fiscal a la Exportacion (DFE)
We estimate the net subsidy to be 7.54 percent ad valorem.
Case History
On March 30, 1984, we received a petition from Amax Chemical, Inc. and Kerr- McGee Chemical Corporation filed on behalf of the U.S. industry producing potassium chloride. In compliance with the filing requirements of s 355.26 of the Commerce Regulations (19 CFR 355.26), petitioners alleged that manufacturers, producers, or exporters in Spain of potassium chloride receive, directly or indirectly, benefits which constitute subsidies within the meaning of section 701 of the Act, and that these imports are materially injuring, or threatening to materially injure, a U.S. industry.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on April 19, 1984, we initiated an investigation (49 FR 18149). We stated that we expected to issue a preliminary determination by June 25, 1984.
Since Spain is a "country under the Agreement" within the meaning of section 701(b) of the Act, an injury determination is required for this investigation. On May 14, 1984, the U.S. International Trade Commission (ITC) determined that there is a reasonable indication that these imports are materially injuring, or threatening to materially injure, a U.S. industry (49 FR 21813).
We presented questionnaries concerning the allegations to the government of Spain at its embassy in Washington, D.C. on April 23, 1984. On June 4, 1984, we received a response to the questionnaire from the related exporter, Comercial de Potasas, S.A., on behalf of Minas de Potasa de Suria, S.A., (Suria).
*26785 Scope of Investigation
The product covered by this investigation is potassium chloride. For the purpose of this investigation, the term "potassium chloride" covers potassium chloride, otherwise known as muriate of potash, as currently provided for in item 480.50 of the Tariff Schedules of the United States.
There is one known firm in Spain which produces potassium chloride for export to the United States. We have received information from Suria, which produced 100 percent of the potassium chloride exported to the United States during the period of investigation, calendar year 1983. Since we have not received a response from the government of Spain, we have used Suria's response for the purposes of this preliminary determination.
Analysis of Programs
Based upon our analysis of the petition and Suria's response to our questionnaire, we have preliminarily determined the following:
I. Programs Preliminarily Determined To Confer Subsidies
We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Spain of potassium chloride under the programs discussed below:
A. Privileged Circuit Exporter Credits Program
Petitioners alleged benefits which constitute subsidies in the form of short- term preferential loans. We requested information on all short-term loans outstanding during the period for which we are measuring subsidization. The only preferential short-term borrowing reported by Suria was that obtained under the Privileged Circuit Exporter Credits Program.
The government of Spain requires all Spanish commercial banks to maintain a specific percentage of their lendable funds in privileged circuit accounts. These funds are made available to exporters at preferential interest rates through a variety of credit programs. While there is no direct outlay of government funds, the benefits conferred on the companies are the result of a government-mandated program to promote exports. Of the four privileged circuit programs available to companies, we preliminarily determine that the respondent potassium chloride producer benefited from the working-capital loans and short- term export credit programs.
1. Working Capital Loans. Under the privileged circuit program, firms may obtain working-capital loans for one year, the total of which is not to exceed a specified percentage of their previous year's exports. During the period of investigation, Suria received three working-capital loans under this program. In 1983, the privileged circuit working-capital loan interest rate ceiling mandated by the government was 10 percent, including fees and commissions.
We chose as our benchmark for 1983 the national average commercial interest rate, which was calculated as the average prime interest rate for one- year loans, 17.15 percent, plus two percentage points (reflecting average borrowing experience). Since the 10 percent working-capital loan interest rate includes fees and commissions, we also made an addition of 0.5 percent to the commercial rate, which by Spanish law is the maximum allowable charge for fees and commissions. Based on this data, we preliminarily determine the national average commercial interest rate to average borrowers to be 19.65 percent for one-year loans, including fees and commissions.
To determine the benefit, we compared the preferential interest rate of 10 percent with the national average commercial interest rate of 19.65 percent. This interest differential of 9.65 percent was multiplied by the total amount of Suria's privileged circuit working-capital loans.
The resulting product was then allocated over the total sales value of all exports of Suria in 1983. We preliminarily determine that the ad valorem subsidy for short-term working capital loans to Suria is 0.61 percent.
2. Short-Term Export Credit. The short-term export credit program provides loans for up to 90 percent of the value of a company's export shipments at a 10 percent interest rate for a maximum of one year. Suria stated that it obtained 90-day loans under this program in 1983 to finance exports of potassium chloride.
We chose as our 1983 benchmark the average national prime interest rate, which was calculated as the average prime interest rate for loans of 90 days, 16.04 percent, plus two percentage points (reflecting average borrowing experience). As the 10 percent export credit rate includes fees and commissions, we also made an addition of 0.5 percent to the commercial rate, which is the legally established charge for fees and commissions. Based on this data, we preliminarily determine the national average commercial interest rate to average borrowers to be 18.54 percent for 90-day loans, including fees and commissions.
We multiplied the difference between the government-mandated interest rate of 10 percent and the national average commercial interest rate by the amount of privileged circuit export credit loans to determine Suria's interest savings. The interest savings were allocated over the total sales value of all exports of Suria during 1983. We preliminarily determine that the ad valorem subsidy for short-term export credit to Suria is 1.09 percent.
B. Desgravacion Fiscal a la Exportacion (DFE)
Spain employs a cascading tax system. Under this system, the government levies a turnover tax ("IGTE") on each sale of a product through its various stages of production, up to (but not including) the final sale in Spain. Upon exportation of the product, the government, under the DFE, rebates both these accumulated IGTE indirect taxes and certain final stage taxes.
Although the Spanish government rebates upon exportation all indirect taxes paid under the cascading tax system, the Tariff Act and the Commerce Regulations allow the rebate of only the following: (1) Indirect taxes borne by inputs which are physically incorporated in the exported product (see Annex 1.1 of part 355 of the Commerce Regulations); and (2) indirect taxes levied at the final stage (see Annex 1.2 of part 355 of the Commerce Regulations). If the payment upon export exceeds the total amount of allowable indirect taxes decribed above, the Department considers the difference to be an overrebate of indirect taxes and, therefore, a subsidy.
In this case, we preliminarily determine that there are no physically incorported inputs upon which indirect taxes are paid. The rebate of a final stage tax, the tax on freight, is, however, allowable when calculating whether or not there is an overrebate of indirect taxes under the DFE. Based on our analysis, we preliminarily determine that the DFE rebate, less the final stage tax, confers an ad valorem subsidy of 5.84 percent.
II. Programs Preliminarily Determined Not To Be Used
We have preliminarily determined that potassium chloride manufacturers, producers, or exporters in Spain do not use the following programs that were identified in the notice of "Initiation of Countervailing Duty Investigation of Potassium Chloride from Spain."
*26786 A. Certain Benefits Under the Privileged Circuit Export Credits Program
In our analysis of the Privileged Circuit Export Credits Program earlier in this notice, we found that two programs, short-term working capital loans and short-term export credits, did provide subsidies to the respondent. We preliminarily determine that the two remaining programs identified in our notice of initiation are not used. They are:
(1) Commercial services loans, and
B. Medium- and Long-Term Preferential Loans
Petitioners alleged that producers of potassium chloride are receiving medium- and long-term preferential financing either directly from the government of Spain or from banks instructed by the government of Spain. Suria stated that it had no outstanding medium- or long-term loans during the period of investigation.
C. Government Equity Purchases
Petitioners alleged that producers of potassium chloride benefited from government of Spain purchases of equity on terms inconsistent with commercial considerations. Suria stated that it has not benefited from any government purchase of equity.
Verification
In accordance with section 776(a) of the Act, we will verify information used in making our final determination.
Suspension of Liquidation
In accordance with section 703 of the Act, we are directing the U.S. Customs Service to suspend liquidation of all unliquidated entries of potassium chloride from Spain which are entered, or withdrawn from warehouse, for consumption, on or after the date of publication of this notice in the Federal Register. The Customs Service shall require a cash deposit or the posting of a bond for each such entry of this merchandise in the amount of 7.54 percent ad valorem. This suspension will remain in effect until further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all nonprivileged and nonconfidential information relating to this investigation. We will allow the ITC access to all privileged and confidential information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Import Administration.
The ITC will make its determination of whether these imports are materially injuring, or threatening to materially injure, a U.S. industry before the latter of 120 days after the Department makes its preliminary affirmative determination or 45 days after the Department makes its final affirmative determination.
Public Comment
In accordance with s 355.35 of the Commerce Department Regulations, if requested, we will hold a public hearing to afford interested parties an opportunity to comment on this preliminary determination at 10 a.m. on August 9, 1984, at the United States Department of Commerce, Room 4830, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to participate in the hearing must submit a written request to the Deputy Assistant Secretary for Import Administration, Room 3099B, at the above address within 10 days of this 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 in at least 10 copies must be submited to the Deputy Assistant Secretary by August 3, 1984. 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 7 days after the hearing date, at the above address and in at least 10 copies.
Dated: June 25, 1984.
Alan F. Holmer,
Deputy Assistant Secretary for Import Administration.
BILLING CODE 3510-DS-M