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, 45811-45820 [E9-21427]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 74, Number 171 (Friday, September 4, 2009)]
[Notices]
[Pages 45811-45820]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21427]


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DEPARTMENT OF COMMERCE

International Trade Administration

(C-552-805)


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

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 polyethylene retail carrier bags (PRCBs) 
from the Socialist Republic of Vietnam (Vietnam). For information on 
the estimated subsidy rates, see the ``Suspension of Liquidation'' 
section of this notice. This notice also serves to align the final 
countervailing duty (CVD) determination in this investigation with the 
final determination in the companion antidumping duty (AD) 
investigation of PRCBs from Vietnam.

EFFECTIVE DATE: September 4, 2009.

FOR FURTHER INFORMATION CONTACT: Jun Jack Zhao or Gene Calvert, AD/CVD 
Operations, Office 6, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
1396 and (202) 482-3586, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The following events have occurred since the April 20, 2009 
initiation of this investigation. See Polyethylene Retail Carrier Bags 
From the Socialist Republic of Vietnam: Initiation of Countervailing 
Duty Investigation and Request for Public Comment on the Application of 
the Countervailing Duty Law to Imports From the Socialist Republic of 
Vietnam, 74 FR 19064 (April 27, 2009) (Initiation Notice).
    On April 21, 2009, the Department met with officials of the 
government of Vietnam (GOV) to provide an overview of the procedures 
and timetable of the investigation. See Memorandum to Barbara E. 
Tillman, Director, AD/CVD Operations, Office 6, ``Meeting with the 
Government of Socialist Republic of Vietnam (GOV): Countervailing Duty 
Investigation of Polyethylene Retail Carrier Bags from the Socialist 
Republic

[[Page 45812]]

of Vietnam'' (April 23, 2009). On May 13, 2009, the Department selected 
as mandatory respondents the three largest Vietnamese producers/
exporters of PRCBs that could reasonably be examined: Advance Polybag 
Co., Ltd. (API), Chin Sheng Company, Ltd. (Chin Sheng), and Fotai 
Vietnam Enterprise Corp. (Fotai Vietnam) and Fotai Enterprise 
Corporation (collectively, Fotai). See Memorandum to John M. Andersen, 
Acting Deputy Assistant Secretary, AD/CVD Operations, ``Selection of 
Respondents for the Countervailing Duty Investigation of Polyethylene 
Retail Carrier Bags from the Socialist Republic of Vietnam'' (May 13, 
2009). A public version of this memorandum is on file in the 
Department's Central Records Unit (CRU) in Room 1117 of the main 
Commerce building. On May 18, 2009, we issued the CVD questionnaire to 
the GOV, requesting that the GOV forward the company sections of the 
questionnaire to the mandatory company respondents.
    On May 22, 2009, the U.S. International Trade Commission (ITC) 
issued its affirmative preliminary determination that there is a 
reasonable indication that an industry in the United States is 
materially injured by reason of imports from Vietnam of PRCBs. See 
Polyethylene Retail Carrier Bags From Indonesia, Taiwan, and Vietnam; 
Determinations, 74 FR 25771 (May 29, 2009); and Polyethylene Retail 
Carrier Bags From Indonesia, Taiwan, and Vietnam, USITC Pub. 4080, Inv. 
Nos. 701-TA-462 and 731-TA-1156-1158 (May 2009).
    On May 28, 2009, the GOV requested that the Department conduct a 
questionnaire presentation in Hanoi. On June 4, 2009, the Department 
informed the GOV that it would be unable to conduct a questionnaire 
presentation given the timing of the request relative to the progress 
of the investigation. See Memorandum to the File, ``Communications with 
the Embassy of the Socialist Republic of Vietnam Concerning Request for 
Questionnaire Presentation'' (June 5, 2009) and the June 17, 2009 GOV 
submission (responding to the Department's June 4, 2009 letter). On 
June 9, 2009, the GOV requested that the Department modify the May 18, 
2009 questionnaire by establishing a ``cut-off date,'' limiting the 
time period covered by the questionnaire. During a follow-up ex parte 
meeting with the GOV, the Department stated that the issue of whether 
there should be a cut-off date, and what such a date would be, could 
not be determined until the preliminary determination. We also stated 
it was necessary, therefore, for the questionnaire to cover the entire 
average useful life (AUL) selected for this investigation (11 years). 
See Memorandum to the File, ``Ex-Parte Meeting with Counsel for the 
Government for the Socialist Republic of Vietnam and Chin Sheng Trading 
Production Co., Ltd.'' (June 18, 2009).
    On June 4, 2009, we published a postponement of the preliminary 
determination of this investigation until August 28, 2009. See 
Polyethylene Retail Carrier Bags from the Socialist Republic of 
Vietnam: Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 74 FR 26846 (June 4, 2009). We 
received responses from the GOV and the three mandatory company 
respondents on July 8, 2009, to our May 18, 2009 questionnaire. On July 
24, 2009, we issued supplemental questionnaires to the GOV and the 
three respondents. We received a response from API on August 7, 2009, 
and responses from the GOV, Chin Sheng, and Fotai on August 17, 2009.
    On June 25, 2009, Hilex Poly Co., LLC and Superbag Corporation 
(collectively, Petitioners) submitted new subsidy allegations covering 
nine programs. On July 17, 2009, the Department determined to 
investigate seven of these newly alleged subsidy programs pursuant to 
section 775 of the Tariff Act of 1930, as amended (the Act). See 
Memorandum to Barbara E. Tillman, Director, AD/CVD Operations, Office 
6, ``Countervailing Duty Investigation of Polyethylene Retail Carrier 
Bags from the Socialist Republic of Vietnam: Initiation Analysis
    of New Subsidy Allegations'' (July 17, 2009). Also on July 17, 
2009, the GOV submitted objections to the newly alleged subsidy 
programs, claiming Petitioners could have raised the allegations in the 
petition, but had chosen not to do so in order to manipulate the 
schedule of the investigation, depriving the GOV of adequate time to 
respond to questionnaires. Questions regarding these newly alleged 
subsidies were sent to the GOV and the three company respondents on 
July 17, 2009. API submitted its questionnaire response on July 30. The 
GOV, Chin Sheng, and Fotai submitted responses on August 7 and 10, 2009 
(narrative responses were due on August 7 and attachments were due on 
August 10).
    On July 17, 2009, Petitioners submitted a second set of new subsidy 
allegations regarding two programs. On July 28, 2009, the Department 
determined to investigate both subsidy programs pursuant to section 775 
of the Act. See Memorandum to Barbara E. Tillman, Director, AD/CVD 
Operations, Office 6, ``Countervailing Duty Investigation of 
Polyethylene Retail Carrier Bags from the Socialist Republic of 
Vietnam: Initiation Analysis of July 17, 2009 New Subsidy Allegations'' 
(July 28, 2009). Questions regarding this second set of newly alleged 
subsidies were sent to the GOV and the three company respondents on 
July 28, 2009. API responded to the questionnaire on August 7, 2009, 
and the GOV, Chin Sheng, and Fotai responded on August 17, 2009.
    On August 19, 2009, Petitioners submitted pre-preliminary 
determination comments. Fotai submitted rebuttal comments on August 21, 
2009, API on August 24, 2009, and the GOV on August 25, 2009.

Alignment of Final Countervailing Duty Determination with Final 
Antidumping Duty Determination

    On April 20, 2009, the Department initiated the CVD and AD 
investigations of PRCBs from Vietnam. See Initiation Notice and 
Polyethylene Retail Carrier Bags From Indonesia, Taiwan, and the 
Socialist Republic of Vietnam: Initiation of Antidumping Duty 
Investigations, 74 FR 19049 (April 27, 2009). The CVD investigation and 
the AD investigation have the same scope with regard to the merchandise 
covered.
    On August 24, 2009, Petitioners submitted a letter, in accordance 
with section 705(a)(1) of the Act, requesting alignment of the final 
CVD determination with the final AD determination of PRCBs 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 AD determination. Consequently, the final CVD determination 
will be issued on the same date as the final AD determination, which is 
currently scheduled to be issued no later than January 11, 2010, unless 
postponed.\1\
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    \1\ The calculated signature date is January 10, 2010, a Sunday. 
The next business day is January 11, 2010.
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Scope Comments

    As explained in the preamble to the Department's regulations, we 
set aside a period of time in the Initiation Notice for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 21 calendar days of publication of that notice. 
See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 
27323 (May 19, 1997); and Initiation Notice, 74 FR at 19065. No

[[Page 45813]]

such comments have been filed on the record of either this 
investigation or the companion AD investigation.

Scope of the Investigation

    The scope of this investigation covers polyethylene retail carrier 
bags, which also may be referred to as t-shirt sacks, merchandise bags, 
grocery bags, or checkout bags. The subject merchandise is defined as 
non-sealable sacks and bags with handles (including drawstrings), 
without zippers or integral extruded closures, with or without gussets, 
with or without printing, of polyethylene film having a thickness no 
greater than 0.035 inch (0.889 mm) and no less than 0.00035 inch 
(0.00889 mm), and with no length or width shorter than 6 inches (15.24 
cm) or longer than 40 inches (101.6 cm). The depth of the bag may be 
shorter than 6 inches but not longer than 40 inches (101.6 cm).
    PRCBs are typically provided without any consumer packaging and 
free of charge by retail establishments, e.g., grocery, drug, 
convenience, department, specialty retail, discount stores, and 
restaurants to their customers to package and carry their purchased 
products. The scope of this investigation excludes (1) polyethylene 
bags that are not printed with logos or store names and that are 
closeable with drawstrings made of polyethylene film and (2) 
polyethylene bags that are packed in consumer packaging with printing 
that refers to specific end-uses other than packaging and carrying 
merchandise from retail establishments, e.g., garbage bags, lawn bags, 
trash-can liners.
    Imports of merchandise included within the scope of this 
investigation are currently classifiable under statistical category 
3923.21.0085 of the Harmonized Tariff Schedule of the United States 
(HTSUS). This subheading may also cover products that are outside the 
scope of this investigation. Furthermore, although the HTSUS subheading 
is provided for convenience and customs purposes, the written 
description of the scope of this investigation is dispositive.

Application of the CVD Law to Vietnam

    This is the first CVD investigation of exports from Vietnam. 
Vietnam has been treated as a non-market economy (NME) country in all 
past AD investigations and administrative reviews. See, e.g., 
Memorandum to Faryar Shirzad, Assistant Secretary, Import 
Administration, Antidumping Duty Investigation of Certain Frozen Fish 
Fillets from the Socialist Republic of Vietnam - Determination of 
Market Economy Status, November 8, 2002 (this document is available 
online at https://ia.ita.doc.gov/download/vietnam-nme-status/vietnam-market-status-determination.pdf); see also Uncovered Innerspring Units 
from the Socialist Republic of Vietnam: Notice of Preliminary 
Determination of Sales at Less Than Fair Value, 73 FR 45738, 45739 
(August, 6, 2008), unchanged in Uncovered Innerspring Units from the 
Socialist Republic of Vietnam: Notice of Final Determination of Sales 
at Less Than Fair Value, 73 FR 62479 (October 21, 2008). In accordance 
with section 771(18)(C)(i) of the Act, any determination that a country 
is an NME country shall remain in effect until revoked by the 
administering authority. See, e.g., Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, From the People's Republic of China: 
Preliminary Results of 2001-2002 Administrative Review and Partial 
Rescission of Review, 68 FR 7500, 7500 (February 14, 2003), unchanged 
in Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
from the People's Republic of China: Final Results of 2001-2002 
Administrative Review and Partial Rescission of Review, 68 FR 70488 
(December 18, 2003).
    According to the petition, there is no statutory bar to applying 
countervailing duties to imports from non-market economy countries like 
Vietnam. See the March 31, 2009 Petition. Citing Georgetown Steel Corp. 
v. United States, 801 F.2d 1308 (Fed. Cir. 1986) (Georgetown Steel), 
the petition argues that the Court of Appeals for the Federal Circuit 
affirmed the Department's discretion regarding application of the 
countervailing duty law to NME countries. Id.
    Following its assessment of another NME country, the People's 
Republic of China (the PRC), the Department, in its final affirmative 
countervailing duty determination on coated free sheet paper from the 
PRC, determined that the current nature of the Chinese economy does not 
create obstacles to applying the necessary criteria in the 
countervailing duty law. See Memorandum to David M. Spooner, Assistant 
Secretary, Import Administration, Countervailing Duty Investigation of 
Coated Free Sheet Paper from the People's Republic of China: Whether 
the Analytical Elements of the Georgetown Steel Holding are Applicable 
to the PRC's Present-day Economy, March 29, 2007; Coated Free Sheet 
Paper from the People's Republic of China: Final Affirmative 
Countervailing Duty Determination, 72 FR 60645 (October 25, 2007) (CFS 
from the PRC), and the accompanying Issues and Decision Memorandum (CFS 
IDM) at Comment 1; see also Circular Welded Carbon Quality Steel Pipe 
from the People's Republic of China: Final Affirmative Countervailing 
Duty Determination and Final Affirmative Determination of Critical 
Circumstances, 73 FR 31966 (June 5, 2008) and accompanying Issues and 
Decision Memorandum at Comment 1.
    The petition argues that the Vietnamese economy, like the PRC's 
economy, is substantially different from the Soviet-style economy 
investigated in Georgetown Steel and that the Department should not 
have any special difficulties in the identification and valuation of 
subsidies involving a non-market economy like Vietnam. See the March 
31, 2009 Petition. Finally, the petition argues that Vietnam's economy 
significantly mirrors the PRC's present-day economy and is at least as 
different from the Soviet-style economy at issue in Georgetown Steel, 
as the PRC's economy was found to be in 2007. Id.
    The petition also argues that Vietnam's accession to the World 
Trade Organization (WTO) allows the Department to apply countervailing 
duties on imports from that country. Id. The WTO Subsidies and 
Countervailing Measures Agreement (SCM Agreement), similar to U.S. law, 
permits the imposition of countervailing duties on subsidized imports 
from member countries and nowhere exempts non-market economy imports 
from being subject to the provisions of the SCM Agreement. As Vietnam 
agreed to the SCM Agreement and other WTO provisions on the use of 
subsidies, the petition argues that Vietnam should be subject to the 
same disciplines as all other WTO members. Id.
    Given the complex legal and policy issues involved in determining 
whether the CVD law should be applied to Vietnam, the Department 
invited public comment on this matter. See Initiation Notice, 74 FR at 
19067. The comments we received are on file in the Department's CRU, 
and can be accessed on the Web at https://ia.ita.doc.gov/ia-highlights-and-news. Informed by those comments and based on our assessment of the 
differences between the Vietnamese economy today and the Soviet-style 
economies that were the subject of Georgetown Steel, we preliminarily 
determine that the countervailing duty law can be applied to imports 
from Vietnam. For a detailed discussion of the Department's research 
and analysis, see Memorandum to Ronald K. Lorentzen, Acting Assistant 
Secretary, Import Administration, ``Countervailing Duty Investigation 
of Polyethylene Retail Carrier Bags from the Socialist Republic of 
Vietnam Whether the CVD law is Applicable to

[[Page 45814]]

Vietnam's Present Day Economy'' (August 28, 2009).

Date of Applicability of CVD Law to Vietnam

    We preliminarily determine that it is appropriate and 
administratively desirable to identify a uniform date from which the 
Department will identify and measure subsidies in Vietnam for purposes 
of the CVD law, and have adopted January 11, 2007, the date on which 
Vietnam became a member of the WTO, as that date. We have selected this 
date because of the reforms in Vietnam's economy in the years leading 
up to its WTO accession and the linkage between those reforms and 
Vietnam's WTO membership. The changes in Vietnam's economy that were 
brought about by those reforms permit the Department to determine 
whether countervailable subsidies were being bestowed on Vietnamese 
producers. For example, the GOV has created room for private and 
foreign ownership in the production system by encouraging private 
entrepreneurship, liberalizing the foreign investment regime, and 
equitizing state-owned enterprises (SOEs).
    Additionally, Vietnam's accession agreement contemplates 
application of the CVD law. While the accession agreement itself would 
not preclude application of the CVD law prior to the date of accession, 
the Working Party Report at Paragraph 255 regarding benchmarks for 
measuring subsidies and Vietnam's assumption of obligations with 
respect to subsidies provides support for the notion that the 
Vietnamese economy had reached the stage where subsidies and 
disciplines on subsidies (e.g., countervailing duties) were meaningful. 
Accession of Vietnam: Report of the Working Party on the Accession of 
Viet Nam, WT/ACC/VNM/48 (October 27, 2006).

Period of Investigation

    The period for which we are measuring subsidies, i.e., the period 
of investigation (POI), is January 1, 2008 through December 31, 2008.

Subsidies Valuation Information

Allocation Period

    The AUL period in this proceeding, as described in 19 CFR 
351.524(d)(2), is 11 years according to the U.S. Internal Revenue 
Service's 1977 Class Life Asset Depreciation Range System for assets 
used to manufacture PRCBs. No party in this proceeding has disputed 
this allocation period. There are no non-recurring subsidy benefits in 
this preliminary determination that exceed 0.5 percent of relevant 
sales, and thus no benefits were allocated across the AUL. See 19 CFR 
351.524(b)(2).

Denominator and Attribution of Subsidies

    When selecting an appropriate denominator for use in calculating 
the ad valorem countervailable subsidy rate, the Department considered 
the basis for the approval of benefits under each program at issue. For 
example, export subsidies are attributed only to products exported and 
export sales are used as the denominator, see 19 CFR 351.525(b)(2); 
while domestic subsidies are attributed to the total sales of all 
products of each respondent and total sales are used as the denominator 
in our calculations. See 19 CFR 351.525(b)(3). All three respondents 
reported that they had no cross-owned affiliates that received 
subsidies and no trading companies involved in sales transactions; 
therefore, we are using only respondents' own sales figures as 
denominators. Id.
    API acts solely as a processor on behalf of its U.S. parent. Its 
sales revenue consists solely of conversion fees paid by the parent. It 
reported, however, the value of the merchandise that is reported to 
U.S. Customs and Border Protection (CBP) when the merchandise is 
entered into the United States as the value to be used as the 
denominator for all subsidy calculations. This constructed sales value 
includes the conversion fees plus the value of the materials converted.
    We preliminarily determine that API's sales revenue figure (i.e., 
its conversion fees) should be used as the denominator for subsidy 
calculations. This figure is the income value from its financial 
statements and its tax return. It is the basis used by API to claim the 
income tax preferences described below. The value of the merchandise, 
by contrast, represents the income of API's U.S. parent. Furthermore, 
we note that API did not adequately address why such an adjustment is 
warranted in this case and whether the facts in this case meet the 
criteria for the Department to consider such an adjustment set forth in 
Ball Bearings and Parts Thereof From Thailand; Final Results of 
Countervailing Duty Administrative Review, 57 FR 26646, 26647 (June 15, 
1992), and in CFS IDM at Comment 21.

Discount Rate for Allocation

    As noted above, there are no non-recurring subsidy benefits in this 
preliminary determination that exceed 0.5 percent of relevant sales, 
and thus no benefits were allocated across the AUL. As such, discount 
rates were not required for this preliminary determination.

Interest Rate Benchmarks

    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. 19 CFR 351.505(a)(3)(i). 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 CFR 351.505(a)(3)(ii). The Department, however, has 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. See 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). Thus, the 
benchmarks that are described under 19 CFR 351.505(a)(3) are not 
appropriate. The Department is, therefore, preliminarily determining 
that it must use an external, market-based benchmark interest rate.
    For loans denominated in Vietnamese dong, we are calculating the 
external benchmark following, where appropriate, the regression-based 
methodology first developed in the CVD investigation of Coated Free 
Sheet Paper from the PRC, and updated in several subsequent PRC 
investigations, most recently Citric Acid. See CFS IDM at 
``Benchmarks'' section, and Citric Acid and Certain Citrate Salts From 
the People's Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 16836 (April 13, 2009) and accompanying Issues and 
Decision Memorandum at ``Benchmarks and Discount Rates'' section. This 
methodology bases the benchmark interest rate on the inflation-adjusted 
interest rates of countries with per capita gross national incomes 
(GNIs) similar to Vietnam's, and takes into account a key factor 
involved in interest rate formation, that of the quality of a country's 
institutions, which is not

[[Page 45815]]

directly tied to the state-imposed distortions in the banking sector 
discussed in the Vietnam Banking Memorandum.
    Following the methodology developed in the PRC investigations, we 
first identified the countries most similar to Vietnam in terms of GNI, 
based on the World Bank's classification of countries as low income, 
lower-middle income, upper-middle income, and high income. Vietnam, 
with a per capita GNI of $890, is near the upper boundary of the low 
income category (and the lower boundary of the lower-middle income 
category), which the World Bank established as $975 during the POI. 
However, data are not currently available for many of the countries in 
the low income ``basket.'' See Memorandum to Mark Hoadley, Program 
Manager, AD/CVD Operations, Office 6, ``Countervailing Duty 
Investigation of Polyethylene Retail Carrier Bags (PRCBs) from the 
Socialist Republic of Vietnam: Preliminary Determination Loan Benchmark 
Analysis'' (August 28, 2009) (Loan Benchmark Memorandum). Moreover, 
several of the countries in the basket appear to be involved in crises 
that would preclude a functional internal lending system. These factors 
suggest that the low income basket of countries cannot serve as the 
basis of a benchmark interest rate. Thus, we are preliminarily 
determining to use the lower-middle income basket of countries as the 
basis of our regression analysis.
    With the following exceptions, we have used the interest and 
inflation rates reported in the International Financial Statistics 
(IFS), collected by the International Monetary Fund, for the countries 
identified as ``lower-middle income'' by the World Bank. First, we did 
not include those economies the Department considered to be non-market 
economies for any part of the years in question: the PRC, Armenia, 
Azerbaijan, Belarus, Georgia, Moldova, and Turkmenistan. Second, the 
pool necessarily excludes any country that did not report both lending 
and inflation rates for the IFS for the relevant years, since our 
calculation requires both lending and inflation rates for each country 
considered in the regression analysis (i.e., we deduct inflation from 
nominal lending rates to derive real rates). Third, Jordan reported a 
deposit rate, not a lending rate; and the rates reported by Ecuador and 
Timor L'Este are dollar-denominated rates. Therefore, the rates for 
these three countries have been excluded. Finally, for each year the 
Department calculated an inflation-adjusted short-term benchmark rate, 
we have also excluded any countries with aberrational or negative real 
interest rates for the year in question.
    With the interest rates remaining, adjusted for inflation, we 
performed the regression analysis and calculated short-term interest 
rates, exclusive of inflation, for the years the Vietnamese dong loans 
were disbursed. See Loan Benchmark Memorandum. We did not need to 
calculate long-term Vietnamese dong benchmark rates.
    For loans denominated in U.S. dollars, we are again choosing to 
follow 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 for the London 
Interbank Offering Rate (LIBOR), plus the average spread between LIBOR 
and the one-year corporate bond rates for companies with a BB rating. 
For long-term U.S. dollar loans, we added the spread between one-year 
and 5-year and 10-year BB bond rates in order to calculate 5-year and 
10-year dollar benchmark rates. Id.

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. As explained in detail in a separate 
memorandum, the Department cannot 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, and we have also preliminarily 
determined that the purchase of land-use rights in Vietnam is not 
conducted in accordance with market principles. See 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).
    Given these findings, we looked for an appropriate basis to 
determine the extent to which land-use rights are provided for less 
than adequate remuneration. Consistent with our PRC investigations in 
which land has been an issue, we have preliminarily determined that 
this analysis is best achieved by comparing prices for land-use rights 
in Vietnam with comparable market-based prices in a country at a 
comparable level of economic development that is within the geographic 
vicinity of Vietnam. In the PRC investigations, we concluded that the 
most appropriate benchmark for respondents' land-use rights were sales 
of certain industrial land plots in industrial estates, parks, and 
zones in Thailand. We relied on prices from a real estate market report 
on Asian industrial property that was prepared outside the context of 
any Department proceeding by an independent and internationally 
recognized real estate agency with a long-established presence in Asia. 
In relying on a land benchmark from Thailand, we noted that the PRC and 
Thailand had similar levels of per capita GNI and that population 
density in the PRC and Thailand are roughly comparable. Additionally, 
we noted that producers consider a number of markets, including 
Thailand, as options for diversifying production bases in Asia beyond 
the PRC. Therefore, we concluded, the same producers may compare prices 
across borders when deciding what land to buy. We cited to a number of 
sources which named Thailand as an alternative production base to the 
PRC.
    For this investigation, we have obtained two additional sets of 
information from the same independent and internationally recognized 
real estate agency: The latest Asian Industrial Property Market Flash 
(AIPMF), an updated version of the same report relied on in the PRC 
investigations, which includes industrial land rental values for plots 
in industrial estates, parks, and zones in Thailand, the Philippines, 
and other Asian countries; and, an unpublished report that includes 
industrial land rental values for plots in industrial estates, parks, 
and zones in several Indian cites. We are placing both the AIPMF, which 
is available on the internet, and the unpublished Indian report on the 
record of this investigation. See Memorandum to Mark Hoadley, Program 
Manager, AD/CVD Operations, Office 6, ``Countervailing Duty 
Investigation of Polyethylene Retail Carrier Bags (PRCBs) from the 
Socialist Republic of Vietnam: Preliminary Determination Land Benchmark 
Analysis'' (August 28, 2009) (Land Benchmark Memorandum). In evaluating 
which of these locations is most appropriate to use as the source of 
the benchmark, we have focused on per capita GNI, considering 
population

[[Page 45816]]

density as well (following the PRC precedent described above).
    Based on our analysis, we preliminarily determine that a simple 
average of all rental rates for industrial property in the cities of 
Pune and Bangalore in India provides the closest match among options on 
the record to Vietnam in terms of per capita GNI and population 
density. The per capita GNI of India is $1,070, compared to $890 for 
Vietnam, while the per capita GNI for the Philippines and Thailand is 
$1,890 and $2,840, respectively (the AIPMF includes data for other 
Asian nations, all with even higher incomes; e.g., Singapore). While 
the Philippines is a closer match in terms of population density with 
285 people per square kilometer (psk) compared to Vietnam's 253 people 
psk, India is still close with 344 people psk. At the metropolitan 
level, Pune and Bangalore have an average population density of 7,791 
psk compared to 8,805 psk for Ho Chi Minh City (all three respondents 
are located in Ho Chi Minh City or adjacent towns). The other cities 
analyzed in the Indian report have population densities much higher 
than Ho Chi Minh City. The calculated average of the rates for Pune and 
Bangalore is $6.088 per square meter per month. See Land Benchmark 
Memorandum.

Analysis of Programs

    Based upon our analysis of the petition and the responses to our 
questionnaires, we
    determine the following:
I. Programs Preliminarily Determined to Be Countervailable

A. Preferential Lending for the Plastics Industry
    According to the petition, the GOV directs preferential lending to 
plastic producers through the Vietnam Development Bank (VDB) and state-
owned commercial banks (SOCBs). The petition claims this allegation is 
evident from the GOV's ``plastics plan,'' a five-year plan for the 
plastics industry subsequently provided by the GOV as Exhibit 15 of its 
July 8, 2009 questionnaire response, and other official documentation 
and press reports. See the March 31, 2009 Petition at 78.
    The GOV states there is no policy for the provision of preferential 
lending to plastic producers. See the GOV's July 8, 2009 questionnaire 
response at II-27. According to the GOV, five-year plans are not 
``self-executing.'' Id. at II-11. Instead, there must be separate, 
distinct policies creating preferences or subsidies designed to meet 
the goals of five-year plans. For example, according to the GOV, the 
plastics plan states only four specific programs available to plastic 
producers: exemptions for land rent, R&D subsidies, trade promotion 
funds, and loans from the VDB. Thus, the GOV argues, if there were a 
policy to provide preferential lending to plastic producers through 
SOCBs, it would be explicit, and specified within the plastics plan or 
other document issued by the administering agency. See the GOV's August 
17, 2009 questionnaire response at 23. In that regard, the GOV claims 
that the plastic plan's reference to ``preferential credit capital,'' 
discussed below, refers only to loans and other financing from the 
VDB.\2\ Id. at 24. The GOV also emphasizes that its influence on SOCBs 
was removed through a series of measures beginning in 1997. See the 
GOV's July 8, 2009 questionnaire response at II-17.
---------------------------------------------------------------------------

    \2\ As noted above, the GOV acknowledges there is preferential 
lending from the VDB, a state-owned policy bank, which does not lend 
to the three respondents.
---------------------------------------------------------------------------

    We preliminarily determine that lending from SOCBs (including 
joint-stock commercial banks that are owned by government entities such 
as other state-owned banks or SOEs) to Chin Sheng and Fotai confers a 
countervailable subsidy. (API did not receive any loans from banks in 
Vietnam). The central five-year plan for 2006-2010 identifies the 
``plastics industry'' among 14 ``major tasks'' in the economic 
development section of the plan, and specifically states the goal of 
satisfying demand for ``plastic packages'' for ``daily life.'' Exhibit 
10 of the July 8, 2009 GOV submission (FYP) at 81. Plastic products are 
also discussed in other sections of the FYP. For example, within the 
regional development section of the FYP, the plan provides for a 
``focus'' on the development of ``key processing industries,'' such as 
plastics, among several others, in the ``southeastern region,'' which 
is where all three respondents are located. FYP at 122.
    The GOV also issued a five-year plan explicitly for the plastics 
industry. Exhibit 15 of the July 8, 2009 GOV submission (Plastics 
Plan). According to the GOV, the Plastics Plan was prepared by the same 
agencies that prepared the FYP, and elements of the Plastics Plan were 
included in the FYP.\3\ The Plastics Plan enumerates several types of 
assistance that should be made available for the development of the 
plastics industry, or segments within that industry, including 
preferential credit capital. Article 2 of the Plastics Plan states that 
the GOV's ``preferential credit capital shall be concentrated on 
investment projects in support of the industry's development . . . .'' 
Plastics Plan at 18. The Plastics Plan also requires the State Bank of 
Vietnam (SBV), which is the central bank of Vietnam, to coordinate with 
the GOV's principal planning agency and other government agencies ``in 
supporting enterprises in the implementation of the approved 
planning.'' Id.
---------------------------------------------------------------------------

    \3\ The Plastics Plan was issued nearly a year and a half before 
the FYP. Both documents cover planning and development until 2010.
---------------------------------------------------------------------------

    The 2007 annual report of Vietcombank, an SOCB that provided 
Vietnam dong loans outstanding during the POI in this investigation, 
states that it ``arranged and financed for many state important 
projects'' during 2007, indicating a goal of lending to targeted or 
encouraged projects. Exhibit 21 of the August 17, 2009 GOV submission 
at 4. A directive from the SBV, effective in the POI, ``requires credit 
institutions . . . to continue increasing credit extension for national 
key projects . . . .'' See Directive No. 05/2008/CT-NHNN, October 9, 
2008, attached to Memorandum to the File, ``Additional Documents 
Regarding Preferential Lending Allegation,'' August 28, 2009 (Lending 
Documents Memorandum). A questionnaire issued by the SBV, also in the 
POI, requests that commercial banks report information on interest 
rates charged to different categories of customers, including 
``preferential subjects under the bank's policy.'' See Document No. 
10080/NHNN-CSTT, November 13, 2008, attached to Lending Documents 
Memorandum. Finally, a news bulletin posted on the SBV's website during 
the POI discusses the progress of SOCBs in reducing interest rates to 
``priority policy-based sectors,''\4\ thus appearing to acknowledge the 
existence of preferential policy-based lending. See ``News & Event: 
Commercial banks join in massive reduction of lending rate,'' September 
24, 2008, attached to Lending Documents Memorandum.
---------------------------------------------------------------------------

    \4\ Another document singles out the steel industry for debt 
restructuring and requests that banks approve new loans to that 
industry, thus providing evidence that the SBV promotes specific 
industries. Document No. 11170/NHNN-TD, December 24, 2008, attached 
to Lending Documents Memorandum.
---------------------------------------------------------------------------

    Therefore, the Department finds that the merchandise under 
investigation is part of a state targeted, or encouraged, industry or 
project, and that there is evidence that loans from SOCBs are a 
designated means for developing that industry or project. While there 
may be no single policy document directing preferential lending to 
plastic producers from SOCBs, when all of the documents described above 
are evaluated together, it is the Department's preliminary

[[Page 45817]]

determination that SOCBs are part of the GOV framework to provide 
lending to targeted industries in the economy and that the plastics 
industry (which explicitly includes products like PRCBs as priority 
products) is one of the major targeted industries. Likewise, while the 
GOV argues that commercial banks have autonomy and are free from 
government interference, the record indicates that, in practice, SOCBs 
implement the goals of the state planning documents.
    Finally, despite the GOV's claim, the fact that there may be 
subsidies enumerated in the plastics plan cannot be construed as proof 
of the non-existence of any other means of development. Such an 
interpretation fails to explain the purpose of the document beyond the 
four subsidy programs,\5\ and, in our view, one of the four enumerated 
programs includes the provision of preferential credit capital through 
more than just the VDB. The plan includes no language linking the 
reference to ``preferential credit capital'' to the VDB, and does not 
even imply that the use of ``preferential credit capital'' is limited 
to funds from the VDB. The VDB is only mentioned once as one of several 
GOV agencies that are instructed to advance the goals of the plan 
through their coordinated efforts. As discussed above, other evidence 
on the record indicates that SOCBs are required to provide credit to 
priority industries and activities.
---------------------------------------------------------------------------

    \5\ We note in this regard that the record indicates at least 
two other GOV efforts to implement the goals of the plastics plan 
that are not explicitly mentioned in the plastics plan: 1) Chin 
Sheng received tax preferences, as discussed below, because, 
apparently, of its production of plastics; and, 2) the GOV's tariff 
schedule applies zero rates to imports of basic plastic raw 
materials (polyethylene and polypropylene) and plastic processing 
equipment.
---------------------------------------------------------------------------

    In addition to being a subsidy specific to the plastics industry, 
pursuant to section 771(5A)(D)(i) of the Act, loans from SOCBs, which 
we determine are public entities, constitute financial contributions 
from the GOV pursuant to section 771(5)(D)(i) of the Act. See also 
771(5)(B)(i) of the Act. Information provided by the GOV in its August 
17, 2009 questionnaire response indicates that two SOCBs that lent to 
respondents are public entities given that they are almost entirely 
owned by the GOV: Vietcombank and the Bank for Investment and 
Development of Vietnam (BIDV).\6\ The August 17, 2009 questionnaire 
response indicates a third bank involved in this investigation, 
Indovina Bank Ltd. (Indovina), is also a public entity. Indovina is a 
joint venture between Vietin Bank (Vietin), another one of the five 
SOCBs in Vietnam, and Cathay United Bank, a Taiwanese bank. Vietin owns 
50 percent of Indovina. It is the Department's position that it is not 
necessary to conduct further analysis to determine whether an SOCB (or 
any state-owned non-bank enterprise) is a public entity if the 
government is a majority owner. For Indovina, we note that under the 
Law of Credit Institutions, December 12, 1997, provided by the GOV as 
Exhibit 7 of its July 8, 2009 questionnaire response, the chairman and 
other members of the managing board including the general director of 
the bank must be approved by the SBV. In addition, there are conditions 
within Indovina's Articles of Association which provide the GOV with an 
apparent upper hand in any dispute between the two partners. See 
Exhibit S1-25 of the GOV's August 17, 2009 questionnaire response. (The 
Articles of Association is a proprietary document, therefore, the exact 
terms may not be publically disclosed.) Based on either of these two 
factors, the GOV is the dominant partner or shareholder. Therefore, we 
preliminarily determine that Indovina is a public entity.
---------------------------------------------------------------------------

    \6\ According to the GOV, there are five SOCBs: Vietcombank, 
BIDV, Vietin Bank, Agribank, and Mekong Housing and Commercial Bank.
---------------------------------------------------------------------------

    Finally, this program provides benefits to the recipients equal to 
the difference between what the recipients paid on loans from SOCBs and 
the amount they would have paid on comparable commercial loans, 
pursuant to section 771(5)(E)(ii) of the Act. Only Fotai and Chin Sheng 
received loans from the GOV SOCBs that were outstanding during the POI. 
In determining the amount these companies would have paid on comparable 
commercial loans, we employed the interest rate benchmarks discussed 
above. We then divided the benefits by each company's total sales. On 
this basis, we preliminarily determine the CVD subsidy to be 1.18 
percent ad valorem for Chin Sheng and 0.21 percent ad valorem for 
Fotai.

B. Land Rent Exemption for Manufacturers of Plastic Products
    According to the petition, the GOV owns all land in Vietnam and 
uses this land ownership to further its industrial and economic 
policies. See June 25, 2009 New Subsidy Allegations at 2. In addition, 
the petition claims the Plastics Plan, discussed above in the context 
of preferential lending, exempts companies that invest in ``key 
programs'' from paying rent for land. According to the GOV, the 
``mandatory respondents did not enjoy any reduction or exemption from 
the payment of the amounts applicable to their sub-leases or, in the 
case of Fotai, lease.'' GOV's August 10, 2009 questionnaire response at 
14.
    We preliminarily determine that one tract of land leased by Fotai 
is countervailable. API and Chin Sheng lease their land from private 
companies, who in turn lease their land from the GOV.\7\ Fotai leases 
two tracts from private companies and a third tract from the Binh Duong 
provincial government. According to Fotai's submission, the tract 
leased from the provincial government was previously exempt from lease 
fees in its entirety, apparently under a now terminated land law that 
provided an exemption for certain projects.\8\ The exemption expired 
for all but that fraction used for office space, and, under the 
superseding land law, a new lease rate was negotiated in 2006. In May 
2007, the agreement was amended by the province to provide a 30-year 
extension of the terms of the lease.
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    \7\ To be precise, except for the transaction involving Fotai 
and Binh Duong province, the respondents sublease land from other 
private companies that have leased the land use rights from the GOV. 
The Department could not find any evidence that the companies 
involved in these sublease transactions with the respondents are 
government entities or SOEs. We intend to gather additional 
information regarding the lease agreements between the GOV and the 
private parties from whom the respondents sublease their land in 
supplemental questionnaires.
    \8\ Fotai's documents reference Decision No. 189/2000/QD-BTC, 
November 24, 2000.
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    According to a decree implementing the new land law, Decree No. 
142/2005/ND-CP, November 14, 2005, Exhibit NSA1-7 of the GOV's August 
10, 2009 questionnaire response, land rent shall be reduced under 
several specific circumstances enumerated in the law, and also where 
the Prime Minister determines it is appropriate to do so based on the 
recommendations of agency heads and provincial and municipal 
governments. Id. at Article 15. The GOV's plastics plan, in turn, 
provides that ``key programs . . . and projects relocated out of cities 
are all entitled to enjoy the localities' preferential regimes on land 
rent exemption.'' Plastics Plan at Article 2.
    The plan then briefly describes three key programs (Plastics Plan 
at Article 2), and expands these three programs in a list of nine 
investment fields in an appendix. Fotai would appear to qualify under 
one or more of the three programs and nine fields. Moreover, Binh Duong 
province, is one of three ``concentrated plastic industry zones'' 
specifically directed in the plastics plan to relocate plastic 
factories from inner cities into ``industrial parks or clusters.''\9\
---------------------------------------------------------------------------

    \9\ Advance is also located in Binh Duong province. Chin Sheng 
is located in Ho Chi Minh City, another one of the three 
zones referred to in the plastics plan.

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[[Page 45818]]

    Thus, we preliminarily determine that Fotai's land rented from Binh 
Duong province was provided by the province pursuant to Fotai's 
production of plastics as referenced under the Plastics Plan. While the 
rate readjustment took place in 2006, before the January 11, 2007 cut-
off date, discussed above under the ``Date of Applicability of CVD Law 
to Vietnam'' section, the Department finds that the May 2007 amendment 
to the agreement, which changed its material terms by extending its 
duration to 30 years, constitutes a new subsidy provided after the cut-
off date, which is countervailable.
    We preliminarily determine that the provision of land to 
manufacturers of plastic products is specific to the plastics industry, 
pursuant to section 771(5A)(D)(i) of the Act. We also preliminarily 
determine there is a financial contribution under section 
771(5)(D)(iii) of the Act because the rented land use rights constitute 
the provision of a good or service. We preliminarily determine that a 
benefit exists under 19 CFR 351.511(a) to the extent that these rights 
were provided for LTAR. In order to calculate the benefit, we first 
multiplied the benchmark land rental rate, discussed above under the 
``Land Benchmark'' section, by the total area of Fotai's tract at 
issue. We then deducted the rental fee paid by Fotai during the POI to 
derive the total benefit. We then divided the total benefit by Fotai's 
total sales to calculate a countervailable subsidy rate of 3.86 percent 
ad valorem for Fotai.

C. Corporate Income Tax Exemptions and Reductions
    The petition alleged Income Tax Preferences for Foreign Invested 
Enterprises (FIEs). In the June 25, 2009 new subsidy allegations, 
Petitioners alleged a similar program of Discounted Corporate Income 
Taxes for Industrial Zone Enterprises.
    We preliminarily determine that API was eligible for 
countervailable income tax preferences under the Discounted Corporate 
Income Taxes for Industrial Zone Enterprises program, but received no 
benefit during the POI.
    We preliminarily determine that Fotai received countervailable 
income tax preferences under the Income Tax Preferences for FIEs 
program. Such preferences are specific under section 771(5A)(D)(i) of 
the Act because they are limited as a matter of law to a group of 
enterprises, FIEs. The preferences are financial contributions in the 
form of revenue foregone by the government under section 771(5)(D)(ii) 
of the Act, and provide a benefit to Fotai pursuant to 19 CFR 
351.509(a)(1) in the amount of tax savings. Specifically, Fotai 
benefited from a reduction in the standard corporate income tax rate 
for the tax return filed during the POI (its income tax rate under the 
program will change in subsequent years). To calculate the amount of 
the benefit,
    we divided Fotai's tax savings by its total sales. On this basis, 
we preliminarily determine a countervailable subsidy rate of 0.17 
percent ad valorem for Fotai.
    Chin Sheng also benefited from a corporate income tax rate 
reduction for the tax return filed during the POI. Chin Sheng also 
enjoyed an exemption at the same time, further reducing its effective 
rate. We preliminarily determine that Chin Sheng received this 
reduction and exemption under a program for new investment projects and 
relocated businesses. While such a program was not alleged in the 
petition or in the new subsidy allegations, 19 CFR 351.311(b) allows 
the Department to investigate a possible countervailable subsidy 
discovered during a proceeding. According to Chin Sheng's August 10, 
2009 questionnaire response at page 6, the company received its 
``incentive tax'' rate because of its status as a ``business 
establishment newly set up under investment projects.'' Chin Sheng also 
references an April 2007 memorandum it received from the Tax 
Department, Exhibit 7 of the August 10, 2009 questionnaire response, 
that discusses its tax treatment. The memorandum refers to Circular 
128/2003/TT-BTC, December 22, 2003 (Circular 128), a document not 
submitted or discussed by the GOV, but which appears to be a terminated 
tax law for domestic enterprises. Chin Sheng refers to section 
E.III.1.1 of the circular. However, there is no section E.III.1.1. 
Presumably, Chin Sheng intended to cite section F.III.1.1, which 
provides rate reductions and exemptions for ``business establishments 
newly set up under investment projects and relocated business 
establishments.''
    We preliminarily determine that the tax reduction and exemption 
provided to Chin Sheng under this program are specific to a group of 
enterprises, ``business establishments newly set up under investment 
projects and relocated business establishments,'' under 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 Chin Sheng pursuant to 19 CFR 351.509(a)(1) in the amount of 
tax savings. To calculate the amount of the benefit, we divided Chin 
Sheng's tax savings by its total sales. On this basis, we preliminarily 
determine a countervailable subsidy rate of 0.51 percent ad valorem for 
Chin Sheng.
D. Import Duty Exemptions for Raw Materials
    According to the petition and the June 25, 2009 new subsidy 
allegations, companies in Vietnam are entitled to exemptions from 
import duties on raw materials if they are FIEs or located in 
industrial zones. While both API and Fotai are in fact exempt from 
paying duties on imported raw materials, their exemptions stem from 
Article 16 of the Law on Import Tax and Export Tax, Law No. 45/2005/QH-
11, June 14, 2005, included as Exhibit 43 of the GOV's July 8, 2009 
questionnaire response. Article 16 states that ``Sec. gSec. oods 
imported for processing for a foreign party which are then exported'' 
are exempt from import duties. Thus, according to respondents, their 
exemptions are not contingent on either FIE status or location in 
industrial zones.\10\
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    \10\ According to the GOV, the FIE exemption program was part of 
a terminated law. Also according to the GOV, there is no exemption 
program for industrial zones.
---------------------------------------------------------------------------

    Despite this incorrect identification of the nature of the program, 
such exemptions can still constitute countervailable export subsidies 
``to the extent that the Sec. DepartmentSec.  determines that the 
amount of the remission or drawback exceeds the amount of import 
charges on imported inputs that are consumed in the production of the 
exported product, making normal allowances for waste'' under 19 CFR 
351.519(a)(1)(i). Thus, we preliminarily determine that API received 
countervailable benefits under this program to the extent it imported 
materials not consumed in exported products. Such materials were 
identified by API in its July 8, 2009 questionnaire response. Such 
exemptions are specific as export subsidies in accordance with section 
771(5A)(A) and (B) of the Act because they are contingent upon export 
performance. Furthermore, such exemptions provide a financial 
contribution in the form of revenue forgone under 771(5)(D)(ii) of the 
Act. To calculate the amount of the benefit, we summed the amount of 
duties saved on materials imported but not consumed in exported 
products, and divided the sum by API's export sales. On this basis, we 
preliminarily determine a rate of 0.20 percent ad valorem.

[[Page 45819]]

    As noted, Fotai also had imports of materials under this program, 
but it is unclear whether all of these materials were consumed in the 
exported products. We intend to gather clarifying information after 
this preliminary determination. Chin Sheng reported that its imports 
are subject to a zero rate under the normal tariff schedule, and, 
therefore, it did not benefit from the program. Chin Sheng's claims are 
consistent with the 2005 Tariff Schedule for Vietnam, the latest the 
Department was able to locate in English. However, the Department 
intends to gather more information regarding how the GOV establishes 
and verifies which goods are consumed in the production of exported 
products and how it reconciles imports and exports under these 
exemptions. Because the exemptions received by API and Fotai were not 
linked to FIE status or industrial zone location, the GOV provided 
limited information in its questionnaire responses concerning these 
exemptions.

II. Programs Preliminarily Determined to Be Not Countervailable

VAT Exemptions for Equipment for FIEs

    In the June 25, 2009 new subsidy allegations, Petitioners claim 
FIEs are exempt from paying VAT on imported equipment. We preliminarily 
determine that this program is not countervailable because a benefit is 
not provided under the program.
    Under the VAT system described by the GOV and company respondents, 
absent an exemption, a company would normally pay VAT to suppliers on 
purchases. In turn, the company collects VAT from its customer along 
with the sales price. The VAT paid by the company to suppliers on 
purchased equipment is called ``input'' VAT, while the VAT the company 
collects from the customer is called ``output'' VAT. The company 
periodically submits a VAT report to the GOV that reconciles the two 
VAT amounts, and passes forward to the government only the amount by 
which output VAT exceeds input VAT. Conversely, if input VAT exceeds 
output VAT, the government refunds the difference to the company. Thus, 
with or without the exemption, the company merely passes forward VAT 
collected from its customer (or receives a refund); it is the final 
consumer, not the producer, who actually incurs the VAT owed to the 
government.
    The Department has examined similar VAT exemptions and rebates in 
past proceedings and has determined that the amount of exempted or 
rebated VAT was, in itself, not countervailable within the meaning of 
19 CFR 351.510 and 19 CFR 351.517. The Department has further 
determined in these prior cases that exempting the tax at the time of 
importation, rather than recovering the tax at the time of 
reconciliation, conferred no benefit because of the short time 
difference between the two events. See, e.g., Final Affirmative 
Countervailing Duty Determination: Certain Hot-Rolled Carbon Steel Flat 
Products From Thailand, 66 FR 50410 (October 3, 2001) and accompanying 
Issues and Decision Memorandum at ``VAT Exemptions Under the Investment 
Promotion Act,'' and Final Affirmative Countervailing Duty 
Determination: Dynamic Random Access Memory ``DRAM'' Semiconductors 
from the Republic of Korea, 68 FR 37122 (June 23, 2003) and 
accompanying Issues and Decision Memorandum at ``Exemption of VAT on 
Imports Used for Bonded Factories under Construction.'' Therefore, 
based on the respondents' description of the program, we preliminarily 
determine the respondents did not benefit from a VAT exemption for 
equipment.

III. Programs Preliminarily Determined to Be Terminated

Export Bonus Program

    The GOV submitted documents, specifically Decision No. 1042/QD-BTM, 
June 29, 2007, Exhibit 39 of the GOV's July 8, 2009 questionnaire 
response, demonstrating this program was terminated effective June 29, 
2007. The GOV also stated the last bonuses were granted in 2006 based 
on exports in 2005. Thus, we preliminarily determine, in accordance 
with 19 CFR 351.526, that the program was terminated and the last 
benefits disbursed before the POI of this investigation.

IV. Programs Preliminarily Determined to Be Not Used by Respondents

A. Government Provision of Water for LTAR in Industrial Zones

    The petition claims occupants of industrial zones are offered 
special rates on water. API provided all of its water invoices for the 
POI along with a water rate schedule for the area outside its 
industrial zone. The rates on the invoices were identical to the rates 
on the schedule. Chin Sheng also provided POI invoices. The rates on 
its invoices are identical to the rate stated by the GOV in its August 
10, 2009 questionnaire response. Fotai claimed not to have used water 
in its industrial zone location, which was not operational during the 
POI. The GOV stated that the rates paid in all industrial zones in 
which the three respondents have facilities are identical to the rates 
charged in the surrounding regions. Therefore, because there is no 
evidence of preferential pricing, we preliminarily determine that this 
program is not used.

B. Preferential Lending for Exporters

C. Export Promotion Program

D. New Product Development Program

E. Income Tax Preferences for Exporters

F. Income Tax Preferences for FIEs Operating in Encouraged Industries

G. Import Tax Exemptions for FIEs Using Imported Goods to Create Fixed 
Assets

H. Import Tax Exemptions for FIEs Importing Raw Materials

I. Provision of Land Use Rights in Industrial Zones For LTAR

J. Land Rent Reduction or Exemption for FIEs

K. Exemption of Import Duties on Importation of Fixed Assets for 
Industrial Zone Enterprises

    According to the petition and the June 25, 2009 new subsidy 
allegations, companies in Vietnam are entitled to exemptions from 
import duties for equipment if they are FIEs or located in industrial 
zones. API and Fotai reported they are eligible for such exemptions 
because of their location in industrial zones. API also reported it is 
eligible for such exemptions because, under a now terminated law, it 
exports more than 80 percent of its sales; its preference apparently 
surviving under a grandfathering or transition clause. Chin Sheng 
reported it did not participate in any program providing duty 
exemptions for imported equipment.
    After applying the ``cut-off'' date discussed above under the 
``Date of Applicability of CVD Law to Vietnam'' section, we 
preliminarily determine Fotai had no equipment import exemptions after 
the cut-off date. API had no equipment import exemptions during the POI 
and its equipment import exemptions prior to the POI were not greater 
than 0.5 percent of relevant sales. Therefore, benefits for these 
imports were expensed prior to the POI in accordance with 19 CFR 
351.524(b)(2).

[[Page 45820]]

L. Exemption of Import Duties for Imported Raw Materials for Industrial 
Zone Enterprises

M. Accelerated Depreciation for Companies in Encouraged Industries and 
Industrial Zones

N. Losses Carried Forward for Companies in Encouraged Industries and 
Industrial Zones

Verification

    In accordance with section 782(i)(1) of the Act, we intend to 
verify the information submitted by the GOV and the company respondents 
prior to making our final determination.

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we 
calculated an individual rate for each producer/exporter of the subject 
merchandise. We preliminarily determine the total estimated net 
countervailable subsidy rates to be:

------------------------------------------------------------------------
                Exporter/Manufacturer                  Net Subsidy Rate
------------------------------------------------------------------------
Advance Polybag Co., Ltd............................  0.20% (de minimis)
Chin Sheng Company, Ltd.............................               1.69%
Fotai Vietnam Enterprise Corp.......................               4.24%
All Others..........................................               2.97%
------------------------------------------------------------------------

    Sections 703(d) and 705(c)(5)(A) of the Act state that, for 
companies not investigated, we will determine an all others rate by 
weighting the individual company subsidy rate of each of th