[Federal Register Volume 64, Number 150 (Thursday, August 5, 1999)] [Notices] [Pages 42672-42675] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 99-20224] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [C-535-001] Final Results of Expedited Sunset Review: Cotton Shop Towels From Pakistan AGENCY: Import Administration, International Trade Administration, U.S. Department of Commerce. ACTION: Notice of final results of expedited sunset review: cotton shop towels from Pakistan. ----------------------------------------------------------------------- SUMMARY: On January 4, 1999, the Department of Commerce (``the Department'') initiated a sunset review of the countervailing duty order on cotton shop towels from Pakistan pursuant to section 751(c) of the Tariff Act of 1930, as amended (``the Act''). On the basis of a notice of intent to participate and an adequate substantive response filed on behalf of the domestic party, and inadequate response (in this case, no response) from respondent interested parties, the Department determined to conduct an expedited review. As a result of this review, the Department finds that revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailing subsidy. The net countervailable subsidy and the nature of the subsidy are identified in the Final Results of Review section to this notice. For Further Information Contact: Martha V. Douthit or Melissa G. Skinner, Office of Policy for Import Administration, International Trade Administration, U.S. Department of Commerce, 14th St. & Constitution Ave., NW., Washington, DC 20230; telephone (202) 482-3207 or (202) 482-1560, respectively. Effective Date: August 5, 1999. Statute and Regulations This review was conducted pursuant to sections 751(c) and 752 of the Act. The Department's procedures for the conduct of sunset reviews are set forth in Procedures for Conducting Five-year (``Sunset'') Reviews of Antidumping and Countervailing Duty Orders, 63 FR 13516 (March 20, 1998) (``Sunset Regulations''). Guidance on methodological or analytical issues [[Page 42673]] relevant to the Department's conduct of sunset reviews is set forth in the Department's Policy Bulletin 98:3--Policies Regarding the Conduct of Five-year (``Sunset'') Reviews of Antidumping and Countervailing Duty Orders; Policy Bulletin, 63 FR 18871 (April 16, 1998) (``Sunset Policy Bulletin''). Scope The subject merchandise is cotton shop towels from Pakistan. This merchandise is classifiable under item number 6307.10.20 of the Harmonized Tariff Schedule (HTS). The HTS item number is provided for convenience and customs purposes. The written description remains dispositive. History of the Order On January 11, 1984, the Department issued a final affirmative countervailing duty determination on cotton shop towels from Pakistan.1 The Department found a country-wide estimated net subsidy rate of 12.67 percent ad valorem based on seven programs: 7.5 percent under the compensatory rebate program, 3.8 percent under the excise tax program, 0.11 percent under the sales tax rebate program, 0.37 percent under the customs duty rebate program, 0.013 percent under the income tax reduction program, 0.08 percent under the export financing program, and 0.8 percent under the export credit insurance program. Receipt of benefits under each of these programs was contingent upon exports. The Department also found that the import duty rebate program was not used.2 --------------------------------------------------------------------------- \1\ Cotton Shop Towels From Pakistan; Final Affirmative Countervailing Duty Determination, 49 FR 1408, (January 11, 1984). \2\ Id. --------------------------------------------------------------------------- On March 9, 1984, the Department issued a countervailing duty order which confirmed the subsidy rates found in the original investigation.3 Since the issuance of the order, the Department has conducted eight administrative reviews covering the eight programs investigated in the original investigation.4 --------------------------------------------------------------------------- \3\ Cotton Shop Towels From Pakistan, Countervailing Duty Order, 49 FR 8974 (March 9, 1984). \4\ Cotton Shop Towels From Pakistan; Final Results of Administrative Review of Countervailing Duty Order, 51 FR 5219 (February 12, 1986); Cotton Shop Towels From Pakistan; Final Results of Countervailing Duty Administrative Review, 54 FR 14671 (April 12, 1989); Cotton Shop Towels From Pakistan; Final Results of Countervailing Duty Administrative Review, 56 FR 28740 (June 24, 1991); Cotton Shop Towels From Pakistan; Final Results of Countervailing Duty Administrative Review, 57 FR 12475 (April 10, 1992); Cotton Shop Towels From Pakistan; Final Results of Countervailing Duty Administrative Review, 58 FR 48038, (September 14, 1993); and Cotton Shop Towels From Pakistan; Final Results of Countervailing Duty Administrative Reviews, 62 FR 24082 (May 2, 1997). --------------------------------------------------------------------------- During the administrative reviews covering April 1, 1984 through December 31, 1984 and January through December 1985, the Department determined that the compensatory rebate scheme had been repealed. In addition, during these same reviews, the Department found that Pakistan producers/exporters received countervailable benefits under the import duty rebate program at a rate of zero percent in 1984 and 0.000028 percent in 1985. In the final results of the administrative review of the period January 1, 1993 through December 31, 1993, the Department, for the first time, issued company-specific rates in addition to a country-wide rate. Net subsidies of 11.50 percent and 11.54 percent were determined for Eastern Textiles, Ltd., and Creation (Pvt.) Ltd., respectively. This review covers all producers and exporters of cotton shop towels from Pakistan. Background On January 4, 1999, the Department initiated a sunset review of the countervailing duty order on cotton shop towels from Pakistan pursuant to section 751(c) of the Act. On January 19, 1999, the Department received a Notice of Intent to Participate from Milliken & Company (``Milliken''), within the deadline specified in Sec. 351.218(d)(1)(i) of the Sunset Regulations. Milliken claimed interested party status under Sec. 771(9)(C) of the Act, as a domestic producer of cotton shop towels. Milliken asserted that it was the petitioner in the original countervailing duty investigation and has participated as a domestic interested party since that time. On February 3, 1999, the Department received Milliken's substantive response to the Department's notice of initiation, within the 30-day deadline specified in the Sunset Regulations in Sec. 351.218(d)(3)(i). We did not receive a response from any respondent interested party, including the Government of Pakistan. As a result, pursuant to section 751(c)(3)(B) of the Act and our regulations (19 CFR 351.218(e)(1)(ii)(C)(2)), we determined to conduct an expedited review. The Department determined that the sunset review of the countervailing duty order on cotton shop towels from Pakistan is extraordinarily complicated. In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). (See section 751(c)(6)(C) of the Act.) Therefore, on May 7, 1999, the Department extended the time limit for completion of the final results of this review until not later than August 2, 1999, in accordance with section 751(c)(5)(B) of the Act.5 --------------------------------------------------------------------------- \5\ See Steel Wire Rope from Japan, et. al.: Extension of Time Limit for Final Results of Five-Year Reviews, 64 FR 24573 (May 7, 1999). --------------------------------------------------------------------------- Determination In accordance with section 751(c)(1) of the Act, the Department conducted this review to determine whether revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy. Section 752(b) of the Act provides that, in making this determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the program which gave rise to the net countervailable subsidy has occurred that is likely to affect that net countervailable subsidy. Pursuant to section 752(b)(3) of the Act, the Department shall provide to the International Trade Commission (``the ITC'') the net countervailable subsidy likely to prevail if the order is revoked. In addition, consistent with section 752(a)(6), the Department shall provide the ITC information concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the 1994 WTO Agreement on Subsidies and Countervailing Measures (``Subsidies Agreement''). The Department's determination concerning continuation or recurrence of a countervailable subsidy, the net countervailable subsidy likely to prevail if the order is revoked, and the nature of the subsidy are discussed below. In addition, Milliken's comments with respect to each of these issues are addressed within the respective sections. Continuation or Recurrence of a Countervailable Subsidy Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreement Act (``URAA''), specifically the Statement of Administrative Action (``the SAA''), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No.103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the [[Page 42674]] Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order-wide basis (see section III.A.2 of the Sunset Policy Bulletin). Additionally, the Department normally will determine that revocation of a countervailing duty order is likely to lead to continuation or recurrence of a countervailable subsidy when (a) a subsidy program continues, (b) a subsidy program has been only temporarily suspended, or (c) a subsidy program has been only partially terminated (see section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this policy are provided when a company has a long record of not using a program (see section III.A.3.b of the Sunset Policy Bulletin). In addition to considering the guidance on likelihood cited above, section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of an order is likely to lead to continuation or recurrence of a countervailable subsidy when a respondent interested party waives its participation in the sunset review. Pursuant to the SAA, at 881, in a review of a countervailing duty order, when the foreign government has waived participation, the Department shall conclude that revocation of the order would be likely to lead to a continuation or recurrence of a countervailable subsidy for all respondent interested parties.6 In the instant review, the Department did not receive a response from the foreign government or from any other respondent interested party. Pursuant to Sec. 351.218(d)(2)(iii) of the Sunset Regulations, this constitutes a waiver of participation. --------------------------------------------------------------------------- \6\ See 19 CFR 351.218(d)(2)(iv). --------------------------------------------------------------------------- In its substantive response, Milliken asserted that revocation of the countervailing duty order on cotton shop towels from Pakistan would likely result in the recurrence of countervailable subsidies. Milliken asserted that in the original investigation and in the subsequent administrative reviews, the Department found several programs to confer countervailable subsidies. Further, Milliken asserted that the Government of Pakistan's recent withdrawal of its administrative review request strongly suggests that there has been no change in the programs giving rise to countervailing subsidies.7 In its substantive response, Milliken asserted that, with the exception of the compensatory rebate program, to the best of its knowledge, there is no evidence that the programs giving rise to the subsidies have been suspended or terminated, or that the respondent exporters have renounced the countervailable subsidies under these programs.8 --------------------------------------------------------------------------- \7\ See Milliken Substantive Response (February 3, 1999) at 4, and Cotton Shop Towels From Pakistan; Termination of Countervailing Duty Administrative Review, 62 FR 34046 (June 24, 1997). \8\ See Milliken Substantive Response (February 3, 1999) at 6. --------------------------------------------------------------------------- In conclusion, Milliken argued that, based on the history of this case, the Department must determine that revocation of the countervailing duty order would likely lead to the recurrence of subsidized imports of cotton shop towels from Pakistan. The Sunset Policy Bulletin, at section III.A.3, states that, consistent with the SAA at 888, continuation of a program will be probative of the likelihood of continuation or recurrence of countervailable subsidies. Temporary suspension or partial termination of a subsidy program also will be probative of continuation or recurrence of countervailable subsidies, absent significant evidence to the contrary. Additionally, the Sunset Policy Bulletin provides that, when a program has been officially terminated by the foreign government, this will be probative of the fact that the program will not continue or recur if the order is revoked (see Sunset Policy Bulletin at section III.A.5). We agree with Milliken that Pakistan producers/exporters continue to benefit from several countervailable subsidy programs. The Department, in the most recent administrative review, determined that producers/exporters received countervailable benefits under the export financing program, the excise tax, sales tax, and customs duty rebate programs, and the income tax reduction program. The Department also listed two programs found not to be used that had previously been found countervailable. As stated above, the continued use of a program is highly probative of the likelihood of continuation or recurrence of countervailable subsidies if the order were revoked. Additionally, the presence of programs that have not been used, but that also have not been terminated, is also probative of the likelihood of continuation or recurrence of a countervailable subsidy. Therefore, because there are countervailable programs that are currently being used and others that remain in existence, the foreign government and other respondent interested parties waived their right to participate in this review before the Department, and absent argument and evidence to the contrary, the Department determines that it is likely that a countervailable subsidy will continue if the order is revoked. Net Countervailable Subsidy In the Sunset Policy Bulletin, the Department stated that, consistent with the SAA and House Report, the Department normally will select a rate from the investigation, because that is the only calculated rate that reflects the behavior of exporters and foreign governments without the discipline of an order or suspension agreement in place. The Department went on to clarify that this rate may not be the most appropriate rate if, for example, the rate was derived (in whole or in part) from subsidy programs which were found in subsequent reviews to be terminated, there has been a program-wide change, or the rate ignores a program found to be countervailable in a subsequent administrative review. Additionally, when the Department determined company-specific countervailing duty rates in the original investigation, the Department normally will report to the Commission those company-specific rates from the original investigation, or where no company-specific rate was determined for a company, the Department normally will provide to the Commission the country-wide or ``all others'' rate. (See Sunset Policy Bulletin at section III.B.2.) Milliken suggested that the Department select the original subsidy rate of 12.67 percent as the net countervailable subsidy rate likely to prevail if the order is revoked. Milliken argued that, should the Department decide that adjustments to the original subsidy rate are warranted, the Department should provide the Commission the rates from the final results of the most recent administrative review: Eastern Textiles, Ltd., 11.50 percent ad valorem, and Creation (Pvt), Ltd., 11.54 percent ad valorem, and for all other producers/exporters of cotton shop towels from Pakistan, 8.49 percent ad valorem; the rates from the final results of the most recent administrative review (see Milliken's February 3, 1999, Substantive Response, at 9.) We disagree with Milliken's arguments that we use either the unadjusted rate from the original investigation or the rates from the most recent administrative review. As stated above, the Department normally will select the rate from the investigation, because that is the only calculated rate that reflects the behavior of exporters and foreign governments without the [[Page 42675]] discipline of the order in place. However, the Sunset Policy Bulletin (in section III.B.3.) also provides that adjustments may be made to the original net countervailable subsidy when programs have been terminated or when new programs have been added. As Milliken noted in its substantive response, the compensatory rebate scheme was found to have been terminated. Additionally, over the life of this order, the Department found that producers/exporters received countervailable benefits under the import duty rebate program--a program found not used in the original investigation. As a result of changes in programs since the imposition of the order, the Department determines that using the net countervailable subsidy rate as determined in the original investigation is no longer appropriate. Rather, we have adjusted the net countervailable subsidy from the original investigation by adding in the rate from the import duty rebate program (first used in the review covering April 1984 through December 1984) and subtracting out the subsidy from the compensatory rebate scheme which was terminated on May 29, 1986. (See calculation memo.) Nature of the Subsidy In the Sunset Policy Bulletin, the Department stated that, consistent with section 752(a)(6) of the Act, the Department will provide information to the Commission concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the Subsidies Agreement. In this case, Milliken did not address this issue. Because receipt of benefits under each of the countervailable programs is contingent upon exports, these programs fall within the definition of an export subsidy under Article 3.1(a) of the Subsidies Agreement. Each of the countervailable programs is described below. Customs Duty Rebate The government provides a 2% customs duty rebate on exported goods. The program, is in effect, a duty drawback. The government pays this rebate on items not physically incorporated into the exported product. Rebates On Exportation The government of Pakistan provides exporters of shop towels with cash rebates which are calculated as a percentage of the f.o.b. value of the exported product. Income Tax Reduction The government of Pakistan provides a 55% reduction of taxes attributable to income generated by products made for export. Preferential Export Financing The government permits short-term export financing to be provided to exporters at rates considerably lower than those otherwise charged on short-term loans in Pakistan. Excise Tax and Sales Tax Rebate The government of Pakistan provides an excise tax rebate and sales tax rebate on exports of shop towels. Final Results of Review As a result of this review, the Department finds that revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy at the rate listed below. ------------------------------------------------------------------------ Margin Manufacturers/exporters (percent) ------------------------------------------------------------------------ All manufacturers/exporters................................ 5.17 ------------------------------------------------------------------------ This notice serves as the only reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with Sec. 351.305 of the Department's regulation (19 CFR 351.305). Timely notification of return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation. This five-year (``sunset'') review and notice are in accordance with sections 751(c), 752, and 777(i)(1) of the Act. Dated: July 30, 1999. Joseph A. Spetrini, Acting Assistant Secretary for Import Administration. [FR Doc. 99-20224 Filed 8-4-99; 8:45 am] BILLING CODE 3510-DS-P