[Federal Register Volume 77, Number 107 (Monday, June 4, 2012)]
[Notices]
[Pages 32930-32938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13474]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-552-813]
Certain Steel Wire Garment Hangers From the Socialist Republic of
Vietnam: Preliminary Affirmative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are being provided to
producers and exporters of certain steel wire garment hangers (garment
hangers) from the Socialist Republic of Vietnam (Vietnam). For
information on the estimated subsidy rates, see the ``Suspension of
Liquidation'' section of this notice.
DATES: Effective Date: June 4, 2012.
FOR FURTHER INFORMATION CONTACT: John Conniff (for the Hamico Companies
\1\) at 202-482-1009, and Robert Copyak (for the Infinite Companies
\2\) at 202-482-2209, AD/CVD Operations, Office 3, Import
Administration, U.S. Department of Commerce, Room 4014, 14th Street and
Constitution Avenue NW., Washington, DC 20230.
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\1\ The Hamico Companies are the South East Asia Hamico Export
Joint Stock Company (SEA Hamico), Nam A Hamico Export Joint Stock
Company (Nam A), and Linh Sa Hamico Company Limited (Linh Sa).
\2\ The Infinite Companies are Infinite Industrial Hanger
Limited (Infinite) and Supreme Hanger Company Limited (Supreme).
SUPPLEMENTARY INFORMATION:
Case History
On December 29, 2011, the Department received a countervailing duty
(CVD) petition concerning imports of garment hangers from Vietnam filed
in proper form by M&B Metal Products Company, Inc., Innovative
Fabrication LLC/Indy Hanger, and US Hanger Company, LLC (collectively,
petitioners).\3\ The Department initiated an investigation on January
18, 2012.\4\ In the Initiation, the Department stated that it intended
to rely on data from U.S. Customs and Border Protection (CBP) for
purposes of selecting the mandatory respondents.\5\ On January 18,
2012, the Department released the results of a query performed on the
CBP's database for calendar year 2011.\6\ Due to the large number of
producers and exporters of garment hangers in Vietnam, we determined
that it was not practicable to individually investigate each producer
and/or exporter. We, therefore, selected the following two producers
and/or exporters of garment hangers to be mandatory respondents:
Infinite and SEA Hamico, the largest publicly identifiable producers
and/or exporters of the subject merchandise.\7\ On February 10, 2012,
we issued the initial CVD questionnaire to the Government of the
Vietnam (GOV) and the selected mandatory respondents. We also issued a
confirmation of shipment questionnaire on the same date to Infinite and
SEA Hamico.
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\3\ See Petition for the Imposition of Countervailing Duties
(Petition). A public version of the Petition and all other public
documents and public versions for this investigation are available
on the public file in the Central Records Unit (CRU), Room 7046 of
the main Department of Commerce building.
\4\ See Steel Wire Garment Hangers From the Socialist Republic
of Vietnam: Initiation of Countervailing Duty Investigation, 77 FR
3737 (January 25, 2011) (Initiation), and accompanying Initiation
Checklist.
\5\ See Initiation, 77 FR at 3739.
\6\ See Memorandum to the File from Eric B. Greynolds, Program
Manager, AD/CVD Operations, Office 3, regarding ``Release of Customs
and Border Protection (CBP) Query Results'' (January 18, 2012).
\7\ See Memorandum to Christian Marsh, Deputy Assistant
Secretary for AD/CVD Operations, ``Respondent Selection'' (February
10, 2012). The companies are listed in alphabetical order and not
listed based on export value/volume.
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On February 14, 2012, Infinite and SEA Hamico confirmed that they
shipped subject merchandise to the United States during the period of
investigation (POI). On March 2, 2012, the Department postponed the
deadline
[[Page 32931]]
for the preliminary determination by 65 days to no later than May 29,
2012.\8\
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\8\ See Steel Wire Garment Hangers from the Socialist Republic
of Vietnam: Notice of Postponement of Preliminary Determination in
the Countervailing Duty Investigation, 77 FR 3737 (January 25,
2012).
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On February 3, 2012, petitioners submitted untimely new subsidy
allegations concerning electricity that the GOV allegedly provided for
less than adequate remuneration (LTAR). On March 29, 2012, the
Department issued a decision memorandum in which it declined to
initiate an investigation into petitioners' allegation.\9\
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\9\ See Memorandum to Melissa G. Skinner, Director, Office 3,
AD/CVD Operations, ``Decision Memorandum on a New Subsidy
Allegation'' (March 29, 2012).
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The GOV submitted its response to the initial questionnaire on
March 30, 2012. SEA Hamico submitted its questionnaire response on
behalf of the Hamico Companies on April 2, 2012. Infinite submitted its
questionnaire response on behalf of the Infinite Companies on April 3,
2012. The Department issued supplemental questionnaires to GOV, the
Hamico Companies, and the Infinite Companies from April 25 through May
14, 2012. The Department received the supplemental questionnaire
responses from May 4 through May 22, 2012.
Period of Investigation
The POI for which we are measuring subsidies is January 1, 2011,
through December 31, 2011, which corresponds to the most recently
completed fiscal year.\10\
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\10\ See 19 CFR 351.204(b)(2).
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Scope of the Investigation
The merchandise subject to the investigation is steel wire garment
hangers, fabricated from carbon steel wire, whether or not galvanized
or painted, whether or not coated with latex or epoxy or similar
gripping materials, and/or whether or not fashioned with paper covers
or capes (with or without printing) and/or nonslip features such as
saddles or tubes. These products may also be referred to by a
commercial designation, such as shirt, suit, strut, caped, or latex
(industrial) hangers.
Specifically excluded from the scope of the investigation are (a)
wooden, plastic, and other garment hangers that are not made of steel
wire; (b) steel wire garment hangers with swivel hooks; (c) steel wire
garment hangers with clips permanently affixed; and (d) chrome-plated
steel wire garment hangers with a diameter of 3.4mm or greater.
The products subject to the investigation are currently classified
under U.S. Harmonized Tariff Schedule (HTSUS) subheadings 7326.20.0020
and 7323.99.9080. Although the HTSUS subheadings are provided for
convenience and customs purposes, the written description of the
merchandise is dispositive.
Scope Comments
As discussed in the Initiation, we set aside a period for
interested parties to raise issues regarding product coverage.\11\
However, no parties submitted scope comments on the records of the AD
or CVD investigations.
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\11\ See Initiation, 77 FR at 3737.
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Injury Test
Because Vietnam is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Tariff Act of 1930, as amended (the
Act), the International Trade Commission (the ITC) is required to
determine whether imports of the subject merchandise from the PRC
materially injure, or threaten material injury to, a U.S. industry. On
February 10, 2012, the ITC made a preliminary determination finding
that there is a reasonable indication that an industry in the United
States is threatened with material injury by reason of imports of
garment hangers from Vietnam.\12\
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\12\ See Steel Wire Garment Hangers from Taiwan and Vietnam
(Investigation Nos. 701-TA-487 and 731-TA-1197-1198 (Preliminary),
USITC Publication 4305, February 2012).
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Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination
On May 9, 2012, petitioners submitted a letter, in accordance with
section 705(a)(1) of the Act, requesting alignment of the final CVD
determination with the final determination in the companion AD
investigation of garment hangers from Vietnam. Therefore, in accordance
with section 705(a)(1) of the Act and 19 CFR 351.210(b)(4), we are
aligning the final CVD determination with the final determination in
the companion AD investigation of garment hangers from Vietnam. The
final CVD determination will be issued on the same date as the final AD
determination, which is currently scheduled to be issued on or about
October 9, 2012.
Application of the CVD Law to Imports From Vietnam
On April 1, 2010, the Department published the Carrier Bags from
Vietnam Final Determination in which we found the CVD law applicable to
Vietnam.\13\ Furthermore, on March 13, 2012, the President signed into
law HR 4105, which makes clear that the Department has the authority to
apply the CVD law to non-market economies such as Vietnam. The
effective date of the enacted legislation makes clear that this
provision applies to this proceeding.\14\ Additionally, for reasons
stated in the Carrier Bags from Vietnam Decision Memorandum at Comment
3, we are using the date of January 11, 2007, the date on which Vietnam
became a member of the WTO, as the date from which the Department will
identify and measure subsidies in Vietnam for purposes of CVD
investigations.
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\13\ See Polyethylene Retail Carrier Bags from the Socialist
Republic of Vietnam: Final Affirmative Countervailing Duty
Determination, 75 FR 16428 (April 1, 2010) (Carrier Bags from
Vietnam Final Determination), and accompanying Issues and Decision
Memorandum (Carrier Bags from Vietnam Decision Memorandum) at ``Land
Rent Reduction or Exemption for Exporters.''
\14\ See HR 4105, 112th Cong. 1(b) (2012) (enacted).
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Allocation Period
The average useful life (AUL) period in this proceeding, as
described in 19 CFR 351.524(d)(2), is 12 years according to the U.S.
Internal Revenue Service's 1977 Class Life Asset Depreciation Range
System.\15\ No party in this proceeding has disputed this allocation
period.
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\15\ See U.S. Internal Revenue Service Publication 946 (2008),
How to Depreciate Property, at Table B-2: Table of Class Lives and
Recovery Periods.
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Attribution of Subsidies
The Department's regulations at 19 CFR 351.525(b)(6)(i) state that
the Department will normally attribute a subsidy to the products
produced by the corporation that received the subsidy. However, 19 CFR
351.525(b)(6)(ii) through (v) directs that the Department will
attribute subsidies received by certain other companies to the combined
sales of those companies if (1) cross-ownership exists between the
companies, and (2) the cross-owned companies produce the subject
merchandise, are a holding or parent company of the subject company,
produce an input that is primarily dedicated to the production of the
downstream product, or transfer a subsidy to a cross-owned company.
According to 19 CFR 351.525(b)(6)(vi), 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. This regulation states that
this standard will normally be met where there is a
[[Page 32932]]
majority voting interest between two corporations or through common
ownership of two (or more) corporations. The Court of International
Trade (CIT) has upheld the Department's authority to attribute
subsidies based on whether a company could use or direct the subsidy
benefits of another company in essentially the same way it could use
its own subsidy benefits.\16\
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\16\ See Fabrique de Fer de Charleroi, SA v. United States, 166
F. Supp. 2d 593, 600-604 (CIT 2001) (Fabrique).
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The Hamico Companies
SEA Hamico, Nam A, and Linh Sa all produce subject merchandise. SEA
Hamico owns a majority stake in Nam A and Linh Sa. Therefore, in
accordance with 19 CFR 351.525(b)(6)(vi), we preliminarily determine
that SEA Hamico, Nam A, and Linh Sa are cross-owned companies. Further,
because all three firms produce subject merchandise, in accordance with
19 CFR 351.525(b)(6)(ii), we have attributed subsidies received by SEA
Hamico, Nam A, and Linh Sa to the combined sales of the three firms,
net of intra-company sales.
The Infinite Companies
Infinite and Supreme are owned by the same individual, Person
A.\17\ Therefore, in accordance with 19 CFR 351.525(b)(6)(vi), we
preliminarily determine that Infinite and Supreme are cross-owned.
Because Infinite and Supreme both produce subject merchandise, in
accordance with 19 CFR 351.525(b)(6)(ii), we have attributed subsidies
received by Infinite and Supreme to the combined sales of the two
firms, net of intra-company sales.
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\17\ The name of the individuals that owns Infinite and Supreme
is business proprietary. We refer to the principal owner of the two
firms as Person A.
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Subsidy Valuation
Interest Rate Benchmark
For purposes of this preliminary determine we require the use of a
short-term loan benchmark denominated in U.S. dollars. Section
771(5)(E)(ii) of the Act explains that the benefit for loans is the
``difference between the amount the recipient of the loan pays on the
loan and the amount the recipient would pay on a comparable commercial
loan that the recipient could actually obtain on the market,''
indicating that a benchmark must be a market-based rate. Normally, the
Department uses comparable commercial loans reported by the company for
benchmarking purposes.\18\ If the firm does not receive any comparable
commercial loans during the relevant periods, the Department's
regulations provide that we ``may use a national average interest rate
for comparable commercial loans.'' \19\ In the Carrier Bags from
Vietnam Preliminary Determination, the Department determined that loans
provided by Vietnamese banks reflect significant government
intervention in the banking sector and do not reflect rates that would
be found in a functioning market.\20\ We preliminarily determine that
there is no information on the record of the instant investigation that
warrants a reconsideration of this finding. Therefore, we continue to
find that the benchmarks that are described under 19 CFR
351.505(a)(3)(i) and (ii) are not appropriate and that we must use an
external, market-based benchmark interest rate.
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\18\ See 19 CFR 351.505(a)(3)(i).
\19\ See 19 CFR 351.505(a)(3)(ii).
\20\ See 74 FR at 45814, which references a Memorandum to Ronald
K. Lorentzen, Acting Assistant Secretary, Import Administration,
``Countervailing Duty Investigation of Polyethylene Retail Carrier
Bags from the Socialist Republic of Vietnam A Review of Vietnam's
Banking Sector'' (August 28, 2009) (Vietnam Banking Memorandum). We
have placed the Banking Memorandum on the record of the instant
investigation. See Memorandum to the File from Eric B. Greynolds,
Program Manager, Office 3, Operations, ``Placement of Banking
Memorandum on Record of Investigation,'' (May 29, 2012). The
Department's conclusions in the Vietnam Banking Memorandum were not
reversed as a result of the Carrier Bags from Vietnam Final
Determination. See Carrier Bags from Vietnam Decision Memorandum at
``Application of Facts Otherwise Available and AFA for API and
Fotai.''
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For short-term U.S. dollar loans, we have followed the methodology
developed over a number of successive PRC investigations. Specifically,
for U.S. dollar loans, the Department used as a benchmark the one-year
dollar interest rates from the London-Interbank Offered Rate (LIBOR)
indexes, plus the average spread between LIBOR and the one-year
corporate bond rates for companies with a BB rating.
Land Benchmark
Section 351.511(a)(2) of the Department's regulations sets forth
the basis for identifying comparative benchmarks for determining
whether a government good or service is provided for less than adequate
remuneration (LTAR). These potential benchmarks are listed in
hierarchical order by preference: (1) Market prices from actual
transactions within the country under investigation; (2) world market
prices that would be available to purchasers in the country under
investigation; or (3) an assessment of whether the government price is
consistent with market principles.
In Polyethylene Retail Carrier Bags from the Socialist Republic of
Vietnam: Preliminary Affirmative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination with Final
Antidumping Duty Determination, 74 FR 45811, 45815-16 (September 4,
2009) (Carrier Bags from Vietnam Preliminary Determination), the
Department had also examined land rent exemptions and established a
benchmark for land in Vietnam. The Department explained that it could
not rely on the use of so-called ``first-tier'' and ``second-tier
benchmarks'' to assess the benefits from the provision of land at LTAR
in Vietnam. It also determined that the purchase of land-use rights in
Vietnam is not conducted in accordance with market principles. Id. at
45815, referencing the Memorandum to Ronald K. Lorentzen, Acting
Assistant Secretary, Import Administration, ``Countervailing Duty
Investigation of Polyethylene Retail Carrier Bags from the Socialist
Republic of Vietnam: Land Markets in Vietnam'' (August 28, 2009) (Land
Market Memorandum).\21\ Therefore, in selecting a benchmark for land,
the Department analyzed comparable market-based prices in another
country at a comparable level of economic development within the
geographic vicinity of Vietnam. As a result of this analysis, the
Department selected the cities of Pune and Bangalore in India as
providing the closest match among options on the record to Vietnam in
terms of per capita GNI and population density, and derived a simple
average of all rental rates for industrial property in both cities to
use as the appropriate land benchmark for Vietnam. Id. at 45816.
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\21\ We have placed the Land Market Memorandum on the record of
the instant investigation. See Memorandum to the File from Eric B.
Greynolds, Program Manager, Office 3, Operations, ``Placement of
Land Market Memorandum on Record of Investigation,'' (May 29, 2012).
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In the final determination of retail carrier bags, the Department
retained this land benchmark methodology unchanged from the preliminary
determination.\22\
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\22\ See Carrier Bags from Vietnam Decision Memorandum at ``Land
Rent Reduction or Exemption for Exporters,'' footnote 23.
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We find no information on the record of the instant investigation
that warrants a revision to the land benchmark methodology developed in
Carrier Bags from Vietnam Preliminary Determination. Therefore, we
continue to find that we cannot rely on the use of ``first'' and
``second-tier'' benchmarks for purposes of the land for LTAR benchmark
because the GOV continues
[[Page 32933]]
to retain land-use pricing authority (including lease rates) for land
leased directly from the government, restrictions are still in place
with regard to land that is sub-leased by private parties, and the
land-use contracts held by private parties, that serve as the basis for
sub-leases, have been granted by government agencies that have been set
under government decrees.\23\ For the same reasons, we further continue
to find that that the purchase of land-use rights in Vietnam is not
conducted in accordance with market principles.
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\23\ See Land Memorandum at 6.
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Accordingly, to measure the benefit for land for LTAR in this
preliminary determination, we are using a land benchmark based on the
rental rates for industrial property in Pune and Bangalore. Using the
same data sources used in Carrier Bags from Vietnam Preliminary
Determination, we sought 2011 data on those rental rates. We find that
the 2008 data from Carrier Bags from Vietnam Preliminary Determination
remain the latest data available. Therefore, we are using the same
simple average of all rental rates for industrial property in the
cities of Pune and Bangalore that was calculated in Carrier Bags from
Vietnam Preliminary Determination and adopted in Carrier Bags from
Vietnam Final Determination, indexed forward to 2011 using consumer
price index data for India, as published by the International Monetary
Fund.
Analysis of Programs
I. Programs Preliminary Determined To Be Countervailable
A. Land Preferences for Enterprises in Encouraged Industries or
Industrial Zones
Decree No. 142/2005/NC-CP (Decree 142) of November 14, 2005,
provides for the collection of land rents and water surface rents in
connection with land leased by the GOV. See the GOV's March 30, 2012,
Questionnaire Response at Exhibit 34. Decree 142 states that land rent
shall be reduced or exempted under certain circumstances enumerated
under the law and also where the Prime Minister determines it is
appropriate to do so, based on the recommendation of the agency heads
and provincial and municipal governments. Id. at Articles 13-15. For
example, Decree 142 provides for land exemptions for firms located in
certain geographical areas facing socio-economic difficulties. Id. at
Article 14.
The Hamico Companies reported that on January 12, 2004, the GOV's
Department of Natural Resources and Environment granted SEA Hamico
land-use rights for its facility in the Chau Son Industrial Zone Area
located in Phuong Le Hong Phong, Phu Ly City of Ha Nam Province. The
Hamico Companies state that SEA Hamico signed a ``new land lease
contract'' with the GOV with regard to the same plot of land on August
11, 2009. The lease contract in effect during the POI establishes an
annual rent charged to SEA Hamico. The lease contract further specifies
that the annual rent is subject to the provisions of Decree 142. See
the Hamico Companies' April 2, 2012, Questionnaire Response, Exhibit 7
at 15. However, the preferential investment certificate issued to SEA
Hamico indicates that SEA Hamico is exempted from paying the annual
rent on the land for ten years, a period that extends into the POI, and
shall enjoy a 50 percent reduction in rent during the second ten years
of the lease. See The GOV's March 30, 2012, Questionnaire Response at
Exhibit 43. Further, Decision No. 2459/QD-CT, December 28, 2011,
(Decision No. 2459) issued by the GOV's Department of Taxation of Ha
Nam Province specifies the amount of rent exemption that SEA Hamico
received during the POI. See The GOV's March 30, 2012, Questionnaire
Response at Exhibit 47. Decision No. 2459 states that the rent
exemption was provided pursuant to the ``encouraged investment
provisions'' of Article 14.4 of Decree 142, which deals with rent
exemptions provided to investment projects located in geographic areas
facing socio-economic difficulties. See the GOV's March 30, 2012,
Questionnaire Response at Exhibit 34.
The Hamico Companies report that Nam A also received exemptions on
annual lease payments in connection with its land lease with People's
Committee of Ha Nam Province during the POI. See the Hamico Companies
May 16, 2012, supplemental questionnaire response at 5 and Exhibit 3,
which contains Nam A's lease contract. The Hamico Companies state that
Nam A's benefit is ``similar'' to that received by SEA Hamico in that
the GOV provided the lease exemption contingent upon Nam A leasing land
in a geographically designated area. Id. at 5.
As explained above, we have adopted January 11, 2007, the date on
which Vietnam became a member of the WTO, as the date from which the
Department will identify and measure subsidies in Vietnam. In the case
of SEA Hamico, the lease contract in question was signed prior to the
cut-off date. However, as indicated by the Hamico Companies, SEA Hamico
signed a ``new lease contract'' with the GOV concerning the plot of
land at issue on August 11, 2009, which established the relevant terms
of the lease after the cut-off date. Therefore, we find that it is
appropriate to consider the land rent exemptions received by SEA Hamico
during the POI in connection with the lease contract for purposes of
our subsidy analysis.
Information on the record indicates that SEA Hamico and Nam A
received the rent exemptions because the land plots were located in
designated geographical areas and, thus, we preliminarily determine
that the exemptions are specific under section 771(5A)(D)(iv) of the
Act. We also preliminarily determine that the leasing of the land
constitutes a financial contribution, in the form of a provision of a
good, within the meaning of section 771(5)(D)(iii) of the Act. In
addition, we find that the rent exemptions confer a benefit in
accordance with section 771(5)(E) of the Act and 19 CFR 351.511(a).
The land contracts SEA Hamico and Nam A signed with the GOV did not
require lump-sum payments at the time the original leases were signed.
Rather, the contracts call for annual rent payments, which the GOV
subsequently exempted. Thus, in accordance with 19 CFR 351.524(c)(1),
we preliminarily determine that the rent exemptions received by SEA
Hamico and Nam A constitute recurring subsidies. Therefore, pursuant to
19 CFR 351.524(a), we have allocated benefits from the rent exemptions
to the year in which the exemptions were received. See also 351.511(b).
As a result, for purposes of this preliminary determination, the
benefit calculations for the rent exemptions are limited to those SEA
Hamico and Nam A received during the POI.
As discussed above in the ``Land Benchmark'' section, we continue
to find that land prices in Vietnam are not based on market principles,
consistent with the findings in the Carrier Bags from Vietnam
Preliminary Determination; unchanged in Carrier Bags from Vietnam
Decision Memorandum at ``Land Rent Reduction or Exemption for
Exporters.''
Consequently, we continue to find that we cannot rely on the use of
``first'' and ``second-tier'' benchmarks for purposes of the land for
LTAR benchmark and, as was done in Carrier Bags from Vietnam
Preliminary Determination, we must use a benchmark based on comparable
market-based prices outside Vietnam. Therefore, for purposes of the
preliminary determination, we have used as our benchmark the calculated
[[Page 32934]]
average of the rental rates for Pune and Bangalore, which corresponds
to $6.088 per square meter per month. See Land Memorandum. This rate
corresponds to rental prices during calendar year 2008, which we
determine to be the latest such data available. Therefore, in our
preliminary calculations, we indexed the 2008 price into a 2011 price
using consumer price index data for India, as published by the
International Monetary Fund.
To calculate the benefit, we multiplied the land benchmark
discussed above by the total area of the land plots at issue. In this
manner, we derived the benefit attributable to the land lease
exemptions enjoyed by SEA Hamico and Nam A during the POI. To calculate
the net subsidy rate, we converted the benefits into Vietnamese Dong
and divided the total benefit by the total sales of the Hamico
Companies, net of intra-company sales. On this basis, we determine the
net countervailable subsidy to be 18.59 percent ad valorem for the
Hamico Companies.
Regarding Linh Sa, the Hamico Companies reported that it signed its
lease with cross-owned affiliate SEA Hamico and not with a GOV entity.
See the Hamico Companies May 22, 2012, Supplemental Questionnaire
Response at 6 and Exhibit 1, which contains the lease Lihn Sa signed
with SEA Hamico. Based on this information, we preliminarily determine
that Lihn Sa's lease with SEA Hamico does not constitute a government
financial contribution as described under section 771(5)(D)(iv) of the
Act.
Similarly, the Infinite Companies reported that Infinite leased
land from Vinh Hung Limited Liability (Vinh Hung), which the Infinite
Companies claim is a private company. The Infinite Companies also
reported that Supreme leased land from a private party. See the
Infinite Companies' April 3, 2012, initial questionnaire response at
pages 21 through 24 and Exhibits 8-9. We obtained ownership information
from the GOV regarding the party that leased land to Infinite and
Supreme. Our review of this ownership information leads us to
preliminarily determine that the lessors are private companies and, as
such, its leases of land to Infinite and Supreme do not constitute a
government financial contribution as described under section
771(5)(D)(iv) of the Act. See the GOV's May 22, 2012, Supplemental
Questionnaire Response at 3-5 and Exhibit GOV S2-7.
B. Corporate Income Tax Reductions for Newly Established Investment
Projects
We started an investigation of corporate income tax exemptions and
reductions pursuant to alleged income tax preferences in industrial
zones, and sought relevant information from the GOV and the
respondents. The Hamico Companies reported that SEA Hamico received a
50 percent reduction in income taxes payable with regard to the 2010
tax return that it filed during the POI. The 2010 tax returns of Nam A
and Linh Sa indicate that the firms were in a tax-loss position and,
therefore, had no taxable income to exempt. The 2010 tax returns of the
Infinite Companies filed during the POI indicate that the firms did not
receive any income tax deductions or exemptions.
Information from the Hamico Companies and the GOV indicate that SEA
Hamico received the exemption pursuant to the 1997 Law on Enterprise
Income Tax, No. 57/L-CTN (Law No. 57), Law on Domestic Investment
Encouragement, No. 03/1998/QH10 (Law No. 03) and the Implementing
Decree of Law on Domestic Investment Encouragement of 1998, Decree No.
51/1999/ND-CP (Decree No. 51). See the GOV's May 22, 2012, Supplemental
Questionnaire Response at 3; see also the Hamico Companies' May 14,
2012, questionnaire response, Exhibit 1 at 9. This income tax exemption
is also referenced in the certificate of investment incentives issued
to SEA Hamico by the People's Committee of Ha Nam Province. Id. at
Exhibit 4. According to the GOV, SEA Hamico was entitled to an income
tax exemption for two years and a 50 percent reduction in income taxes
for the subsequent four years pursuant to Article 17, Clause 1, Point b
of Law No. 57; Articles 15.7 and 21.1 of Law No. 3; and List A of
Decree No. 51. See the GOV's May 22, 2012, Supplemental Questionnaire
Response at 3-4. Specifically, the GOV states that this entitlement is
based on Law No. 3, Article 15.7, ``Branches and trades that should be
given priority in each period of socio-economic development.''
The GOV submitted Hamico's Preferential Investment Certificate No.
1107/GCNUD (September 23, 2003) and Certificate of Amendment to
Investment Certificate No. 06221000076 (February 5, 2010), which
describe the incentives applicable to Hamico's investment project. See
the GOV's May 22, 2012, Third Supplemental Questionnaire Response at
Exhibit GOVS3-3. We note that while these investment certificates
identify the applicable laws and regulations, including Law No. 57, Law
No. 3, and Decree 51, they do not identify the specific sections of the
laws or decree. Thus, while the GOV has specified Article 15.7 of Law
No. 3 as defining the entitlement, we note that Article 15 contains
other investment activities with equal entitlement to the same
incentives, e.g., Article 15.3, investment projects related to ``the
production of and trading in export goods,'' under which Hamico could
qualify for the same exemption and reduction in income tax.
Consequently, we will continue to seek information to clarify the
precise basis on which Hamico benefited from this program.
As noted above, we initially examined the income tax exemption and
reduction program pursuant to alleged tax preferences in industrial
zones. As discussed above, the facts on the record thus far indicate
the program provides benefits based on investment activities or certain
enterprises, specifically ``branches and trades that should be given
priority in each period of socio-economic development'' with regard to
Hamico. To the extent that this constitutes a different program from
among those that we enumerated in our initiation, 19 CFR 351.311(b)
allows the Department to investigate other possible countervailable
subsidies discovered during the course of a proceeding. This approach
is consistent with the Department's practice.\24\
---------------------------------------------------------------------------
\24\ See Carrier Bags from Vietnam Preliminary Determination, 74
FR 45818; unchanged in Carrier Bags from Vietnam Decision Memorandum
at ``Income Tax Preferences for Encouraged Industries.''
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We preliminarily determine that the tax reduction provided to SEA
Hamico under this program is specific to a group of enterprises, namely
``branches and trades that should be given priority in each period of
socio-economic development'' specified under Article 15.7 of Law No. 3
within the meaning of section 771(5A)(D)(i) of the Act. The income tax
reduction and exemption are financial contributions in the form of
revenue forgone by the government under section 771(5)(D)(ii) of the
Act, and provide a benefit to SEA Hamico in the amount of tax savings
pursuant to section 771(5)(E) of the Act and 19 CFR 351.509(a)(1).
To calculate the net subsidy rate, we divided the amount of SEA
Hamico's tax savings, as indicated on the 2010 tax return it filed
during the POI, by the combined total sales of SEA Hamico, Nam A, and
Linh Sa, net of intra-company sales. On this basis, we preliminarily
determine a net countervailable subsidy rate of 0.93 percent ad valorem
for the Hamico Companies.
[[Page 32935]]
C. Import Duty Exemptions or Reimbursements for Raw Materials
Duty exemptions on raw materials are addressed in the Law on Import
Duty and Export Duty, Law No. 45/2005/QH-11 (Law No. 45) and Decree No.
87/2010/ND-CP (Decree 87). See the GOV's March 30, 2012, questionnaire
response at Exhibits 60. Specifically, under Law No. 45, Chapter IV,
import duty exemption is provided for ``raw materials and supplies used
for manufacture of equipment and machinery'' (Article 16.6(d)) and
``Raw materials, supplies and accessories imported for production
activities of investment projects on the list of domains where
investment is particularly encouraged or the list of geographical areas
meeting with exceptional socio-economic difficulties'' (Article 16.9).
Id. at Exhibit 60. We believe raw materials may also be imported duty-
free under Article 16.4, ``goods imported for processing for foreign
partners then exported or goods exported to foreign countries for
processing for Vietnam then re-imported under processing contracts.''
Id. Additionally, Article 19 provides for reimbursement of duties on
raw materials or supplies imported for the production of export goods,
for which import tax has been paid.'' Id.
Decree No. 87, enacted in August 2010 reflects the implementation
of Law No. 45 that was in effect during the POI. Id. at Exhibit 61.
Article 12 of Decree 87 provides additional detail for the duty
exemptions on raw materials originally provided under Law No. 45.
Articles 12.6(d) and 12.14 specify that the exemptions for ``raw
materials and supplies used for manufacture of equipment and
machinery'' and ``raw materials, supplies and accessories imported for
production activities of investment projects on the list of domains
where investment is particularly encouraged or the list of geographical
areas meeting with exceptional socio-economic difficulties'' will apply
only where such raw materials and supplies ``cannot be domestically
produced yet.'' Id. With regard to ``goods imported for processing for
foreign parties,'' Article 12.4 leaves the import duty exemption
unchanged, but adds that the exported processed products are also
exempt from export duty.
Infinite and the GOV state that Infinite received exemptions on raw
material imports based the export processing contracts it had with
foreign firms. SEA Hamico and Lihn Sa also state that they received
duty exemptions on raw materials. The Hamico Companies reported that
Nam A did not import raw materials during the POI. Most, if not all, of
the sales of the Infinite Companies and Hamico Companies are devoted to
exports.
For import duty exemptions on raw materials for exported goods, the
exemptions cannot exceed the amount of duty levied; otherwise, the
excess amounts exempted confer a countervailable benefit under 19 CFR
351.519(a)(1)(i). Moreover, under 19 CFR 351.519(a)(4), the government
must have a system to confirm which inputs are consumed in production
and in what amounts; otherwise, the exemptions confer a benefit equal
to the total amount of duties exempted. In the Retail Carrier Bags from
Vietnam Final Determination, the Department concluded that the GOV does
not have in place a system to confirm which inputs are consumed in the
production of the exported products and in what amounts, including a
normal allowance for waste. See Carrier Bags from Vietnam Decision
Memorandum at ``Import Duty Exemptions for Imported Raw Materials for
Exported Goods.'' No information on the record of the instant
proceeding warrants a reconsideration of that finding; therefore, we
find that the import duty exemptions on raw materials confer a benefit
equal to the total amount of the duties exempted, in accordance with 19
CFR 351.519(a)(4).
Because the receipt of import duty exemptions on raw materials was
contingent upon export performance as one or more criteria, we
preliminarily determine that they are specific in accordance with
section 771(5A)(B) of the Act. We further preliminarily determine that
the exemptions constitute a financial contribution in the form of
revenue forgone, as described under section 771(5)(D)(ii) of the Act.
To calculate the benefit, we summed the amount of duties saved
during the POI. To calculate the net subsidy rate, we divided the
benefit by respondents' total export sales, net of intra-company sales.
On this basis, we preliminarily determine a net countervailable subsidy
rate of 1.34 percent ad valorem for the Hamico Companies and 11.03
percent ad valorem for the Infinite Companies.
D. Preferential Lending to Exporters
The Hamico Companies reported that SEA Hamico and Linh SA had loans
outstanding during the POI that were issued by the Vietnam Joint Stock
Commercial Bank for Industry and Trade (Vietinbank) as well as an
additional lending institution.\25\ See the Hamico Companies' April 2,
2012, questionnaire response at Attachment 1; see also the Hamico
Companies May 22, 2012, Supplemental Questionnaire Response at
Attachment I, which contains the loan information of the additional
lending institution. The GOV states that SEA Hamico and Linh Sa
received these loans in connection with an ``export loan program''
operated by the respective lending institutions. See the GOV's March
30, 2012, questionnaire response at 24. According to the GOV, under
this program, the lending institutions offered ``supported'' interest
rates to exporters, provided that they use the proceeds of the loan in
the manner specified in the contract, follow the payment schedule
specified in the contract, conduct payment for exporting through the
lending institution, and sell the foreign exchange earned from the
export sale through the lending institution. Id. Regarding the
Vietinbank, information from the GOV specifically indicates that
Vietinbank offered the ``preferential'' interest rates to exporters in
an effort to implement its ``Export Loan Program.'' See the GOV's May
16, 2012, supplemental questionnaire response at Exhibit 2. The Hamico
Companies reported that Nam A did not have any loans outstanding during
the POI. The Infinite Companies similarly reported that they did not
have any loans outstanding during the POI.
---------------------------------------------------------------------------
\25\ The identity of this lending institution is business
proprietary.
---------------------------------------------------------------------------
In past CVD proceedings involving Vietnam, the Department has found
Vietinbank to be a state-owned commercial bank (SOCB) and thus, a
government authority capable of providing a financial contribution as
described under section 771(5)(D)(i) of the Act. See Carrier Bags from
Vietnam Preliminary Determination, 74 FR at 45817.\26\ Information
provided by the GOV indicates that it owned approximately 80 percent of
Vietinbank during the POI. See the GOV's May 16, 2012, supplemental
questionnaire response at 4. Hence, we continue to find that Vietinbank
is a government authority. Therefore, we preliminarily determine that
the loans issued to SEA Hamico and Lihn Sa by Vietinbank constitute a
financial contribution by a government authority within the meaning of
section 771(5)(D)(i) of the Act. Regarding the additional lending
institution, because the Hamico Companies identified loans outstanding
from this institution as financing offered
[[Page 32936]]
``under the export loan program'' we find, for purposes of the
preliminary determination, that such loans constitute a financial
contribution by a government authority within the meaning of section
771(5)(D)(i) of the Act.
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\26\ The Department's finding that Vietinbank was a government
authority operating as a SOCB was not reversed as a result of the
Carrier Bags from Vietnam Final Determination. See Carrier Bags from
Vietnam Decision Memorandum at ``Application of Facts Otherwise
Available and AFA for API and Fotai.''
---------------------------------------------------------------------------
We further preliminarily determine that, pursuant to section
771(5)(E)(ii) of the Act, loans issued to SEA Hamico and Lihn Sa under
this program confer a benefit equal to the difference between what the
recipients paid on the loans from the lending institutions and the
amount they would have paid on comparable, commercial loans. In
determining the amount SEA Hamico and Lihn Sa would have paid on
comparable, commercial loans, we employed the interest rate benchmark
discussed above in the ``Interest Rate Benchmark'' section. Information
from the GOV indicates that receipt of the Vietinbank loans are
contingent, in part, upon export activities and, thus, we preliminarily
determine that this program is specific under section 771(5A)(B) of the
Act.
Next, we summed the benefit calculated on each loan the firms had
outstanding under the program during the POI and divided the total
benefit by the combined total export sales of SEA Hamico, Nam A, and
Lihn Sa, net of intra-company sales. On this basis, we preliminarily
determine a net countervailable subsidy rate of 0.39 percent ad valorem
for the Hamico Companies.
II. Program Preliminarily Determined Not To Confer Benefits During the
POI
A. Import Duty Exemptions on Imports of Goods for Encouraged Projects
Article 12.6 of Decree 87 allows firms with investment in
encouraged projects and/or located in certain geographical areas (which
includes industrial zones) to receive duty exemptions on import of
goods to create fixed assets and equipment. Infinite, SEA Hamico, and
Lihn Sa are located in industrial zones. We preliminarily determine
that information from Infinite indicates that it received duty
exemptions under this program. Regarding the Hamico Companies, though
they qualified for duty exemptions under the program, information
provided thus far indicates that, absent the program, the duty rates on
the equipment the Hamico Companies imported were zero.
Because the receipt of import duty exemptions on fixed assets was
contingent upon the firms' location in a designated geographic area, we
preliminarily determine that they are regionally-specific in accordance
with section 771(5A)(D)(iv) of the Act. We further preliminarily
determine that the exemptions constitute a financial contribution in
the form of revenue forgone, as described under section 771(5)(D)(ii)
of the Act and confer a benefit under section 771(5(E) and 19 CFR
351.519(a)(4).
Normally, we treat exemptions from indirect taxes and import
charges, such as tariff exemptions, as recurring benefits, consistent
with 19 CFR 351.524(c)(1) and allocate these benefits only in the year
that they were received. However, when an indirect tax or import charge
exemption is provided for, or tied to, the capital structure or capital
assets of a firm, the Department may treat it as a non-recurring
benefit and allocate the benefit to the firm over the AUL. See 19 CFR
351.524(c)(2)(iii) and 19 CFR 351.524(d)(1). Therefore, because these
exemptions are for goods used in creating capital equipment, we find
that the duty exemptions are tied to the company's capital assets, and
we have examined the tariff exemptions that respondents received under
the program throughout the period between January 11, 2007, (the ``cut-
off'' date for Vietnam) and the POI.
To calculate the amount of import duties exempted under the
program, we multiplied the value of the imported equipment by the
import duty rate that would have been levied absent the program. Next,
we summed the amount of duty exemptions received in each year. Then we
divided the total amount of tariff exemptions by the corresponding
total sales for the year in which the exemptions were received. Those
exemptions that were less than 0.5 percent of total sales were expensed
to the year of receipt. Those exemptions that were greater than 0.5
percent of total sales were allocated over the AUL using the
methodology described under 19 CFR 351.524(d)(2) and then divided by
respondents' total sales during the POI, net of intra-company sales. In
the case of Infinite, the benefits received under the program were
fully expensed prior to the POI.
III. Programs Preliminarily Determined To Be Not Used
A. Grants to Firms That Employ More Than 50 Employees
The GOV self-reported the existence of this program in which it
provides grants to firms that employ more than 50 employees. See the
GOV's March 30, 2012, questionnaire response at 101. The GOV further
reported that the Hamico Companies may have received benefits under the
program given that the investment certificate for Nam A indicates that
Nam A is eligible to receive funds under the program. Id.; see also the
Hamico Companies' May 14, 2012, questionnaire response at Exhibit 5,
which contains Nam A's investment certificate.
There is no evidence of the Infinite Companies' use of this program
in its questionnaire response, investment certificate, or financial
statements. Regarding the Hamico Companies, they explain that though
they are eligible to participate in the program, they have not received
any funds under the program from the GOV. See the Hamico Companies May
16, 2012, questionnaire response at 7. On this basis, we preliminarily
determine that this program was not used by the Hamico and Infinite
Companies.
B. Provision of Water for LTAR
The Infinite Companies reported that they draw their water from
their own well located on site and, thus, do not pay water fees to the
GOV. See the Infinite Companies May 11, 2012, supplemental
questionnaire response at 11. Regarding the Hamico Companies, source
documents for SEA Hamico indicate that it paid water fees to the GOV
during the POI and that these fees were equal to those fees charged to
businesses engaged in commercial and production activities, as set by
the provincial government. See the Hamico Companies' April 2, 2012,
questionnaire response at 28 and Exhibits 11-13. Concerning Nam A, its
investment certificate provides that it is eligible to receive
exemptions on its ``water rent.'' See the Hamico Companies' May 14,
2012, questionnaire response at Exhibit 5. However, despite qualifying
for such an exemption, the Hamico Companies state that Nam A did not
use the program because it did not use ``surface water'' (i.e., water
sources rented from the GOV) in its production process. See the Hamico
Companies' May 16, 2012, questionnaire response at 6-7. Notwithstanding
the Hamico Companies' claims regarding Nam A, information from the
Hamico Companies indicates that Nam A paid water fees to the GOV during
the POI and that these fees were equal to those fees charged to
businesses engaged in commercial and production activities, as set by
the provincial government. See the Hamico Companies May 22, 2012,
Supplemental Questionnaire Response at Exhibit 9. Similarly,
information from Lihn Sa and the GOV indicates that the firm paid a
water usage rate equal to the rate charged to businesses engaged in
commercial and production activities. See the GOV's March 30, 2012,
Questionnaire response at Exhibit 3 and
[[Page 32937]]
the Hamico Companies' May 22, 2012, Supplemental Questionnaire Response
at Exhibit 10. Therefore, we preliminarily determine that the provision
of water is not specific to the industrial zones in which the
respondents are located, and find that the Infinite Companies and the
Hamico Companies did not use the program.
We note that, based on the record information thus far, the level
of government at which the actual rate-setting authority rests remains
unclear. While the GOV issues a national pricing framework for water
supply, distribution and consumption, the actual published rate
schedules are issued at the provincial levels on approval by the
provincial governments. See GOV's March 30, 2012, Questionnaire
Response at Exhibit 6. Hence, we will continue to examine the price-
setting regime for water in Vietnam.
C. Provision of Wire Rod for LTAR
The Infinite Companies state that they only purchased wire from
foreign sources during the POI. See the Infinite Companies' May 11,
2012, at 9 and Attachment 3. The Hamico Companies state that they did
not purchase wire rod from Vietnamese sources during the POI. Instead,
they report that they either imported wire rod from foreign sources or
purchased wire from domestic sources.
The allegation on which the Department initiated its investigation
centers on the provision of wire rod not drawn wire. We find that wire
is a good that is distinct from wire rod. On this point, we note that
the Hamico Companies have submitted source documents (e.g., invoices)
which indicate the specifications (e.g., diameter) of the wire they
purchased from domestic sources during the POI. See the Hamico
Companies' May 16, 2012, supplemental questionnaire response at
Exhibits 1-4. Our review of these source documents, confirms our
preliminary finding that the inputs the Hamico Companies purchased from
domestic sources constitute wire products and not wire rod. Thus, we
find that purchases of wire rod from non-Vietnamese sources are not
subject to our subsidy analysis. On this basis, we preliminarily
determine that respondents did not use the provision of wire rod for
LTAR program during the POI.
In addition, we preliminarily determine that respondents did not
use the programs listed below:
D. Export Promotion Program
E. Land Rent Reduction/Exemption for Exporters
F. Land-Rent Reduction or Exemption for Foreign Invested Enterprises
(``FIEs'')
G. Income Tax Preferences for FIEs
H. Income Tax Refund for Reinvestment by FIEs
I. Income Tax Preferences in Industrial Zones
J. Import Duty Preferences for FIEs
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by the respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we have
calculated individual rates for the respondents individually
investigated, the Hamico Companies and the Infinite Companies. We
preliminarily determine the total estimated net countervailable subsidy
rates to be:
------------------------------------------------------------------------
Net
subsidy
Exporter/manufacturer rate
(percent)
------------------------------------------------------------------------
South East Asia Hamico Export Joint Stock Company (SEA 21.25
Hamico), Nam A Hamico Export Joint Stock Company (Nam A),
and Linh Sa Hamico Company Limited (Linh Sa) (collectively,
the Hamico Companies).......................................
Infinite Industrial Hanger Limited (Infinite) and Supreme 11.03
Hanger Company Limited (Supreme) (collectively the Infinite
Companies)..................................................
All Others................................................... 16.14
------------------------------------------------------------------------
Sections 703(d), 705(c)(1)(B)(i)(I), and 705(c)(5)(A) of the Act
state that for companies not investigated, we will determine an all-
others rate by weight-averaging the individual subsidy rates by each
company's exports of the subject merchandise to the United States.
However, the all-others rate may not include zero and de minimis rates
or any rates based solely on the facts available.\27\ In this
preliminary determination, the calculated net subsidy rate for the
Hamico Companies and the Infinite Companies are above de minimis.
Notwithstanding the language of sections 705(c)(1)(B)(i)(I), and
705(c)(5)(A) of the Act, we have not calculated the all others rate by
weight averaging the rates of the Hamico and Infinite Companies because
doing so risks disclosure of proprietary information. Therefore, for
the all others rate, we have calculated a simple average of the
respondents' net subsidy rates.
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\27\ Pursuant to 19 CFR 351.204(d)(3), the Department must also
exclude the countervailable subsidy rate calculated for a voluntary
respondent. In this investigation, we had no producers or exporters
request to be voluntary respondents.
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In accordance with sections 703(d)(1)(B) and (2) of the Act, we are
directing CBP to suspend liquidation of all entries of steel wire
garment hangers from Vietnam that are entered, or withdrawn from
warehouse, for consumption on or after the date of the publication of
this notice in the Federal Register, and to require a cash deposit or
bond for such entries of merchandise in the amounts indicated
above.\28\
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\28\ See Modification of Regulations Regarding the Practice of
Accepting Bonds During the Provisional Measures Period in
Antidumping and Countervailing Duty Investigations, 76 FR 61042
(October 3, 2011).
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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 non-privileged and non-proprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary 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 Assistant Secretary for Import Administration.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Disclosure and Public Comment
In accordance with 19 CFR 351.224(b), the Department will disclose
to the parties the calculations for this preliminary determination
within five days of its announcement. Case briefs for this
investigation must be submitted no later than one week after the
issuance of the last verification report. See 19 CFR 351.309(c) (for a
further discussion of case briefs). Rebuttal briefs, which must be
limited to issues raised in the case briefs, must be filed within five
days after the deadline for submission of case briefs. See 19 CFR
351.309(d). A list of authorities relied upon, a table of contents, and
an executive summary of issues should accompany any briefs submitted to
the
[[Page 32938]]
Department. Executive summaries should be limited to five pages total,
including footnotes.
In accordance with 19 CFR 351.310(c), we will hold a public
hearing, if requested, to afford interested parties an opportunity to
comment on this preliminary determination. Individuals who wish to
request a hearing must submit a request within 30 days of the
publication of this notice in the Federal Register to the Assistant
Secretary for Import Administration, U.S. Department of Commerce.
Parties will be notified of the schedule for the hearing, and parties
should confirm the time, date, and place of the hearing 48 hours before
the scheduled time. Requests for a public hearing should contain: (1)
Party's name, address, and telephone number; (2) the number of
participants; and (3) to the extent practicable, an identification of
the arguments to be raised at the hearing.
This determination is issued and published pursuant to sections
703(f) and 777(i) of the Act.
Dated: May 29, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-13474 Filed 6-1-12; 8:45 am]
BILLING CODE 3510-DS-P