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[Federal Register Volume 61, Number 129 (Wednesday, July 3, 1996)]
[Notices]
[Pages 34794-34798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17015]

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DEPARTMENT OF COMMERCE
[C-549-802]

Ball Bearings and Parts Thereof From Thailand; Preliminary 
Results of Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty 
administrative review.

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SUMMARY: The countervailing duty order on Ball Bearings and Parts 
Thereof from Thailand was revoked effective January 1, 1995, as a 
result of a changed circumstances review and pursuant to section 
782(h)(2) of the Tariff Act of 1930, as amended by the Uruguay Round 
Agreements Act (60 FR 40568). The Department is conducting an 
administrative review of this order to determine the appropriate 
assessment rate for entries made during the last review period prior to 
the revocation of the order (January 1, 1994, through December 31, 
1994). For information on the net subsidy for reviewed companies and 
non-reviewed companies, please see the Preliminary Results of Review 
section of this notice. If the final results remain the same as these 
preliminary results of administrative review, we will instruct the U.S. 
Customs Service to assess countervailing duties as detailed in the 
Preliminary Results of Review section of this notice. Interested 
parties are invited to comment on these preliminary results. Because 
this order has been revoked, the Department will not issue further 
instructions with respect to cash deposits of estimated countervailing 
duties.

EFFECTIVE DATE: July 3, 1996.

FOR FURTHER INFORMATION CONTACT: Robert Copyak or Kelly Parkhill, 
Office of Countervailing Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-2209 and (202) 482-4126, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On May 3, 1989, the Department published in the Federal Register 
(54 FR 19130) the countervailing duty order on Ball Bearings and Parts 
Thereof from Thailand. On May 10, 1995, the Department published a 
notice of ``Opportunity to Request an Administrative Review'' (60 FR 
24831) of this countervailing duty order. We received a timely request 
for review, and we initiated the review, covering the period January 1 
through December 31, 1994, on June 15, 1995 (60 FR 31447).
    In accordance with section 355.22(a) of the Department's Interim 
Regulations, this review covers only those producers or exporters of 
the subject merchandise for which a review was specifically requested 
(see Antidumping and Countervailing Duties: Interim Regulations; 
Request for Comments, 60 FR 25130 (May 11, 1995)) (Interim 
Regulations). This review was requested for the Minebea Group of 
Companies in Thailand, NMB Thai, Pelmec, and NMB Hi-Tech, which 
manufacture and export the subject merchandise. During this review, the 
Department learned of another Minebea company, NMB Precision Ball, 
Ltd., which manufactures balls. The company does not export to the 
United States but it does sell balls to the other three companies which 
in turn export finished ball bearings to the United States and 
elsewhere. This company, like the other three Minebea producers in 
Thailand, is a wholly-owned subsidiary of Minebea Japan, and because 
NMB Precision Ball, Ltd. received export subsidies during the period of 
review (see, ``Programs Conferring Subsidies'' section below) for its 
sales of balls to the related Thai ball bearing producers, we 
preliminarily determine that it is appropriate to include the subsidies 
to NMB Precision Ball, Ltd. in our calculations of the net subsidy.
    On November 2, 1995, we extended the period for completion of the 
preliminary and final results pursuant to section 751(a)(3) of the Act 
(see Extension of the Time Limit for Certain Countervailing Duty 
Administrative Reviews, 60 FR 55699). As explained in the memoranda 
from the Assistant Secretary for Import Administration dated November 
22, 1995, and January 11, 1996 (on file in the public file of the 
Central Records Unit, Room B-099 of the Department of Commerce), all 
deadlines were further extended to take into account the partial 
shutdowns of the Federal Government from November 15 through November 
21, 1995, and December 15, 1995, through January 6, 1996. As a result 
of these extensions, the deadline for these preliminary results is no 
later than June 27, 1996, and the deadline for the final results of 
this

[[Page 34795]]

review is no later than 180 days from the date on which these 
preliminary results are published in the Federal Register.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the 
Act). The Department is conducting this administrative review in 
accordance with section 751(a) of the Act.

Calculation Methodology

    In the first administrative review, respondents claimed that the 
F.O.B. value of the subject merchandise entering the United States is 
greater than the F.O.B. price charged by the companies in Thailand (57 
FR 26646 (June 15, 1992)). They explained that this discrepancy is due 
to a mark-up charged by the parent company, located in a third country, 
through which the merchandise is invoiced. However, the subject 
merchandise is shipped directly from Thailand to the United States and 
is not transshipped, combined with other merchandise, or repackaged 
with other merchandise. In other words, for each shipment of subject 
merchandise, there are two invoices and two corresponding F.O.B. export 
prices: (1) The F.O.B. export price at which the subject merchandise 
leaves Thailand, and on which subsidies from the Royal Thai Government 
(RTG) are earned by the companies, and upon which the subsidy rate is 
calculated; and (2) the F.O.B. export price which includes the parent 
company mark-up, and which is listed on the invoice accompanying the 
subject merchandise as it enters the United States, and upon which the 
cash deposits are collected and the countervailing duty is assessed. In 
prior reviews, we verified on a transaction-specific basis the direct 
correlation between the invoice which reflects the F.O.B. price on 
which the subsidies are earned and the invoice which reflects the 
marked-up price that accompanies each shipment as it enters the United 
States.
    Respondents argued that the calculated ad valorem rate should be 
adjusted by the ratio of the export value from Thailand to the export 
value charged by the parent company to the U.S. customer so that the 
amount of countervailing duties collected would reflect the amount of 
subsidies bestowed. The Department agreed and made this adjustment in 
prior administrative reviews (57 FR 26646, (June 15, 1992); and 58 FR 
36392 (July 7, 1993)). Since the mark-up is not part of the export 
value upon which the respondents earn subsidies, the Department has 
followed the methodology adopted in prior administrative reviews, and 
calculated the ad valorem rate as a percentage of the original export 
value from Thailand and then multiplied this rate by the adjustment 
ratio--the original export value from Thailand divided by the marked-up 
value of the goods entering the United States.
    NMB Thai, Pelmec, NMB Hi-Tech, and NMB Precision Ball, Ltd. are 
wholly-owned by one parent company, and are therefore affiliated 
companies within the meaning of section 771(33) of the Act. See Final 
Affirmative Countervailing Duty Determination: Certain Pasta 
(``Pasta'') from Italy, 60 FR 30288, 30290 (June 14, 1996). 
Furthermore, all four sister companies produce the subject merchandise. 
As a result, these four companies warrant treatment as a single company 
with a combined rate. This is consistent with our approach in the 
investigation and all prior reviews of this order. See Ball Bearings 
and Parts Thereof from Thailand; Preliminary Results of Countervailing 
Duty Administrative Review, 60 FR 22563 (May 8, 1995); see also Ball 
Bearings and Parts Thereof from Thailand; Preliminary Results of 
Countervailing Duty Administrative Review, 60 FR 42532 (August 16, 
1995). To avoid double counting, the sales value was adjusted to 
account for intercompany sales of subject merchandise. We calculated 
the countervailing duty rate by first totaling the benefits received by 
the four companies for each program used. Dividing these sums by the 
total Thai export value for the four companies, we calculated the 
unadjusted subsidy rate for each program used. As described above, we 
adjusted these rates by multiplying them by the ratio of the original 
export price from Thailand to the marked-up price of the goods entering 
the United States. Finally, we summed the adjusted subsidy rate for 
each program, to arrive at the total countervailing duty rate.

Scope of the Review

    Imports covered by this review are ball bearings and parts thereof. 
Such merchandise is described in detail in the Appendix to this notice. 
The Harmonized Tariff Schedule (HTS) item numbers listed in the 
Appendix are provided for convenience and Customs purposes. The written 
description remains dispositive.

Verification

    As provided in section 782(i) of the Act, we verified information 
submitted by the Royal Thai Government and the Minebea Group of 
companies. We followed standard verification procedures, including 
meeting with government and company officials and examination of 
relevant accounting and financial records and other original source 
documents. Our verification results are outlined in the public versions 
of the verification reports, which are on file in the Central Records 
Unit (Room B-099 of the Main Commerce Building).

Analysis of Programs

I. Program Conferring Subsidies

Investment Promotion Act of 1977--Sections 28, 31, 36(1), and 36(4)
    The Investment Promotion Act of 1977 (IPA) is administered by the 
Board of Investment (BOI) and is designed to provide incentives to 
invest in Thailand. In order to receive IPA benefits, each company must 
apply to the BOI for a Certificate of Promotion (license), which 
specifies goods to be produced, production and export requirements, and 
benefits approved. These licenses are granted at the discretion of the 
BOI and are periodically amended or reissued to change benefits or 
requirements. Each IPA benefit for which a company is eligible must be 
specifically stated in the license.
    We have previously determined that the BOI licenses of Pelmec, NMB 
Thai, and NMB Hi-Tech constitute export subsidies (58 FR 36392, July 7, 
1993 and 60 FR 52374, October 6, 1995). No new information or evidence 
of changed circumstances has been provided to warrant reconsideration 
of this finding. NMB Precision Ball, Ltd. held one license during the 
period of review, and this license was tied to export performance and 
is, therefore, countervailable like the others.
    In past reviews, the Minebea Group received benefits under sections 
28, 31, and 36(1) of the IPA. In this review, they received benefits 
under these sections, as well as under section 36(4).
    Section 28: Prior to the review period, IPA Section 28 allowed 
companies to import machinery free of import duties, the business tax 
and the local tax. However, effective January 1, 1992, the RTG 
eliminated both the business and the local tax and instituted a value 
added tax (VAT) system.
    According to Section 21(4) of the VAT Act, if Section 28 benefits 
were granted by BOI to a company before January 1,

[[Page 34796]]

1992, that company, when importing fixed assets under Section 28, would 
continue to be subject to the business tax provisions under Chapter IV, 
Title II, of the Revenue Code before being amended by the VAT Act. In 
accordance with Section 21(4), the company would be required to pay the 
business and local taxes only if its BOI license requirements were 
violated. Section 21(4) of the VAT Act applies to Pelmec, NMB Thai, NMB 
Hi-Tech, and NMB Precision Ball, Ltd. because all of their licenses 
were granted before January 1, 1992, and contain Section 28 benefits.
    The respondents have argued that given the provisions of the VAT 
Act and, specifically Section 21(4), their exemption from the business 
and local taxes no longer constitutes a benefit to the companies 
because: (1) no other companies are required to pay the business and 
local taxes; and (2) under Section 21(4), payment of the business and 
local taxes serves only as a penalty for noncompliance with BOI license 
requirements. We verified that under the new VAT law, companies are no 
longer required to pay business and local taxes with the exception of 
the noncompliance penalty noted above. For these reasons, we 
preliminarily determine that the business and local tax exemptions 
under Section 28 no longer constitute a countervailable benefit for 
companies subject to Section 21(4) of the VAT Act.
    However, under provisions of Section 21(4) of the VAT Act, 
companies that were granted Section 28 benefits under the IPA before 
January 1, 1992, are not required to pay VAT on imports of fixed 
assets. The respondents have argued that this exemption from VAT on 
imports of fixed assets did not constitute a benefit to the companies 
because all companies, promoted and non-promoted alike, are effectively 
exempted from VAT on their imports of fixed assets. According to the 
Section 82 of the VAT Act, the VAT liability is computed by subtracting 
the ``input tax'' (the VAT paid) from the ``output tax'' (the VAT 
collected). Consequently, companies that pay VAT on imports of fixed 
assets are effectively exempted from this VAT payment as they receive a 
credit for the VAT they paid on purchases of inputs, including imports 
of fixed assets, when their monthly VAT liability is computed. We 
examined this issue through questionnaires and at verification. We 
confirmed that under the VAT system, companies receive credit for the 
VAT paid on the purchases of inputs and, as a result, no VAT is 
effectively paid by companies on these purchases. Since VAT liability 
is computed on a monthly basis, any possible time-value-of-money 
benefit under Section 21(4) of the VAT Act in the review would be 
insignificant. On this basis, we preliminarily determine that the 
exemption of the VAT on imports of fixed assets under Section 21(4) of 
the VAT Act does not constitute a countervailable benefit to the 
companies specified in Section 21(4).
    Since the business and local tax exemptions under Section 28 of the 
IPA and the VAT exemption under Section 21(4) of the VAT Act do not 
confer countervailable benefits to companies subject to Section 21(4) 
of the VAT Act, we preliminarily determine that only the exemptions of 
import duties on fixed assets under Section 28 of IPA continue to 
provide countervailable benefits to the respondent companies.
    Section 31: IPA Section 31 allows companies an exemption from 
payment of corporate income tax on profits derived from promoted 
exports. The corporate income tax rate in Thailand is 30 percent. NMB 
Thai and NMB Hi-Tech claimed an income tax exemption under Section 31 
on the income tax returns filed during the review period. The income 
tax exemption continues to provide countervailable benefits to the 
respondent companies.
    Section 36(1): IPA Section 36(1) allows companies to import raw and 
``essential'' materials free of import duties. As Pelmec, NMB Thai, NMB 
Hi-Tech and Precision Ball Ltd. have bonded warehouses for the purchase 
of raw materials, they have only claimed Section 36(1) duty exemptions 
on their imports of essential materials. Respondents' questionnaire 
response included a range of items that were categorized by the BOI as 
essential materials (e.g., grinding wheels, blades, lubricating 
cleaning solutions, gloves, and packing materials) for which they 
received duty exemptions. Energy and fuel were not included as they are 
not eligible for section 36(1) duty exemption.
    Prior to the Uruguay Round Agreement, only duty exemptions on 
inputs that were physically incorporated into the product being 
exported (e.g., raw material inputs and packing materials) were 
considered non-countervailable. Under the Agreement on Subsidies and 
Countervailing Measures (the Agreement), this has been broadened to 
include duty exemptions on products that are ``consumed in 
production.'' Respondents claim that the essential materials for which 
BOI grants duty exemptions meet the ``consumed in production'' 
standard, and, therefore, any duty exemptions on these materials should 
be found not countervailable. However, Annex II of the Agreement 
contains a footnote (fn 61) which defines inputs consumed in the 
production process as: ``[i]nputs consumed in the production process 
are inputs physically incorporated, energy, fuels and oils used in the 
production process and catalysts which are consumed in the course of 
their use to obtain the exported product.''
    At verification, we requested respondents to break out the 
``essential materials'' according to the definition in the Annex II 
footnote, and provide that break-out in a supplemental response. Their 
break-out continued to include a number of BOI essential materials that 
fall outside the definition in footnote 61. Respondents argue that the 
term ``consumed in production'' should include all items that are worn 
out during the production process and that physically touch the product 
(e.g., grinding wheels, drill bits, lubricating cleaning solutions) as 
well as items such as packing materials. However, it is the 
Department's position that the definition in Annex II is clear, and 
therefore, the only duty exemptions that we find not countervailable 
are those on oils, lubricating cleaning solutions, packing materials, 
and materials which are physically incorporated into the exported 
product. The remaining duty exemptions, received by the respondent 
companies, continue to be countervailable. Because energy and fuels 
were not eligible for Section 36(1) duty exemptions, we have not 
addressed whether duty exemptions on those products would be 
countervailable under the URAA.
    Section 36(4): While the Minebea Group had not, prior to the period 
of review, claimed any benefits under Section 36(4) of the IPA, its BOI 
licenses, discussed in greater detail above, always included 
eligibility to claim them. Thus, the general discussion of the IPA 
above applies to Section 36(4) as well. In this review period, NMB Hi-
Tech claimed benefits under Section 36(4) of the IPA for the first 
time. Under Section 36(4) of the IPA, promoted persons can deduct from 
their assessable income for payment of income tax an amount equal to 
five percent of the increased income over the previous year, derived 
from the export of products produced by the promoted persons. This 
benefit is calculated across the first ten years of a license, and it 
can be used as a loss carried forward in any year the promoted person 
wishes to use it, either during or after the promoted period. As 
Section 36(4) is conditioned upon exports, we preliminarily find this 
program to be countervailable.

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Calculation of Benefit from IPA Sections 28, 31, 36(1) and 36(4)
    To calculate the benefit from Sections 31, 28, and 36(1), of the 
IPA, we followed the same methodology that has been used in past 
administrative reviews (see, e.g., 58 FR 16174, March 25, 1993; 57 FR 
9413, March 18, 1992). For Section 31, we calculated the benefit by 
calculating the difference between what each company paid in corporate 
income tax during the review period and what it would have paid absent 
the exemption. We did this by multiplying the corporate income tax rate 
in effect during the review period by the amount of each company's 
income that was exempted from income tax. For Sections 28 and 36(1), we 
calculated the benefit by obtaining the amount of import duties that 
would have been paid on the imports absent the exemption.
    Prior to this review, none of the Minebea group had ever claimed 
benefits under Section 36(4). During the period of review, NMB Hi-Tech 
claimed benefits under Section 36(4) for the first time. We calculated 
the Section 36(4) benefit by determining the amount of tax which would 
have been paid absent this deduction.
    We then added all duty and tax savings under all the IPA programs 
and divided this aggregate benefit by the total export value of the 
subject merchandise. We then made the adjustment for the parent company 
mark-up discussed in the ``Calculation Methodology'' section above. On 
this basis, we preliminarily determine the countervailing duty rate 
from IPA Sections 31, 28, 36(1), and 36(4) to be 5.25 percent ad 
valorem during the review period.

II. Programs Preliminarily Determined to be Not Used

    We examined the following programs and preliminarily determine that 
the producers and/or exporters of the subject merchandise did not apply 
for or receive benefits under these programs during the period of 
review:
A. Tax Certificates for Exporters
B. Electricity Discounts for Exporters
C. Export Packing Credits
D. Rediscount of Industrial Bills
E. IPA Section 33
F. Export Processing Zones
G. Reduced Business Taxes for Producers of Intermediate Goods for 
Export Industries
H. International Trade Promotion Fund
Preliminary Results of Review
    In accordance with section 355.22(c)(4)(ii) of the Department's 
Interim Regulations, we calculated an individual subsidy rate for each 
producer/exporter subject to this administrative review. As stated in 
the Calculation Methodology section above, since the Minebea companies 
are affiliated, we are treating them as one company, and calculating 
one countervailing duty rate for the group. Thus, for the period 
January 1, 1994, through December 31, 1994, we preliminarily determine 
the net subsidy for NMB Thai, Pelmec, NMB Hi-Tech, and NMB Precision 
Ball, Ltd. to be 5.25 percent ad valorem.
    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct the U.S. 
Customs Service to assess countervailing duties as indicated above.
    As stated in the``Summary'' section above, the Department revoked 
this countervailing duty order, effective January 1, 1995, pursuant to 
section 782(h)(2) of the Act. Ball Bearings and Parts Thereof from 
Thailand; Final results of Changed Circumstances Countervailing Duty 
Review and Revocation of Countervailing Duty Order, 61 FR 20799 (May 8, 
1996). Accordingly, suspension of liquidation was terminated effective 
January 1, 1995; thus, the Department will not issue further 
instructions with respect to cash deposits of estimated countervailing 
duties.
    The URAA replaced the general rule in favor of a country-wide rate 
with a general rule in favor of individual rates for investigated and 
reviewed companies. The procedures for countervailing duty cases are 
now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. Requests for 
administrative reviews must now specify the companies to be reviewed. 
See section 355.22(a) of the Interim Regulations. The requested review 
will normally cover only those companies specifically named. Pursuant 
to 19 C.F.R. Sec. 355.22(g), for all companies for which a review was 
not requested, duties must be assessed at the cash deposit rate 
previously ordered. Accordingly, for the period January 1 through 
December 31, 1994, the assessment rates applicable to all non-reviewed 
companies covered by this order are the cash deposit rates in effect at 
the time of entry.
Public Comment
    Parties to the proceeding may request disclosure of the calculation 
methodology and interested parties may request a hearing not later than 
10 days after the date of publication of this notice. Interested 
parties may submit written arguments in case briefs on these 
preliminary results within 30 days of the date of publication. Rebuttal 
briefs, limited to arguments raised in case briefs, may be submitted 
seven days after the time limit for filing the case brief. Parties who 
submit argument in this proceeding are requested to submit with the 
argument: (1) a statement of the issue; and, (2) a brief summary of the 
argument. Any hearing, if requested, will be held seven days after the 
scheduled date for submission of rebuttal briefs. Copies of case briefs 
and rebuttal briefs must be served on interested parties in accordance 
with 19 C.F.R. Sec. 355.38.
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under 19 C.F.R. Sec. 355.38, are due. The Department 
will publish the final results of this administrative review including 
the results of its analysis of issues raised in any case or rebuttal 
brief or at a hearing.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

    Dated: June 27, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.

Appendix

Scope of Review

Ball Bearings, Mounted or Unmounted, and Parts Thereof
    The products covered by this review, ball bearings, mounted or 
unmounted, and parts thereof, include all antifriction bearings which 
employ balls as the rolling element. During the review period, imports 
of these products were classifiable under the following categories: 
antifriction balls; ball bearings with integral shafts; ball bearings 
(including radial ball bearings) and parts thereof; ball bearing type 
pillow blocks and parts thereof; ball bearing type flange, take-up, 
cartridge, and hanger units, and parts thereof; and other bearings 
(except tapered roller bearings) and parts thereof. Wheel hub units 
which employ balls as the rolling element are subject to the review. 
Finished but unground or semiground balls are not included in the scope 
of this review.
    Imports of these products are currently classifiable under the

[[Page 34798]]

following HTS item numbers: 8482.10.10, 8482.10.50, 8482.80.00, 
8482.91.00, 8482.99.10, 8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 
8483.30.80, 8483.90.20, 8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 
8708.99.50. This review covers all of the subject bearings and parts 
thereof outlined above with certain limitations. With regard to 
finished parts (inner race, outer race, cage, rollers, balls, seals, 
shields, etc.), all such parts are included in the scope of this 
review. For unfinished parts (inner race, outer race, rollers, balls, 
etc.), such parts are included if (1) they have been heat treated, or 
(2) heat treatment is not required to be performed on the part. Thus, 
the only unfinished parts that are not covered by this review are those 
parts which will be subject to heat treatment after importation.

[FR Doc. 96-17015 Filed 7-2-96; 8:45 am]
BILLING CODE 3510-DS-P
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