[Federal Register Volume 59, Number 200 (Tuesday, October 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25783]
[[Page Unknown]]
[Federal Register: October 18, 1994]
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DEPARTMENT OF COMMERCE
[(C-301-003)--Roses and Other Cut Flowers from Colombia; (C-301-601)--
Miniature Carnations From Colombia]
Preliminary Results of Countervailing Duty Administrative Reviews
of Suspended Investigations
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty
Administrative Reviews of Suspended Investigations.
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SUMMARY: The Department of Commerce (the Department) is conducting
administrative reviews of the agreements suspending the countervailing
duty investigations on roses and other cut flowers from Colombia and on
miniature carnations from Colombia. These reviews cover the periods
January 1, 1991, through December 31, 1991, and January 1, 1992,
through December 31, 1992, and eight programs. We preliminarily
determine that the Government of Colombia (GOC) and the signatories/
exporters of roses and other cut flowers and miniature carnations have
complied with the terms of the suspension agreements. We invite
interested parties to comment on these results.
EFFECTIVE DATE: October 18, 1994.
FOR FURTHER INFORMATION CONTACT: Stephen Jacques, Jeanene Lairo or
Derek Parks, Office of Agreements Compliance, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Ave., N.W., Washington, D.C. 20230; telephone:
(202) 482-3793.
SUPPLEMENTARY INFORMATION:
Background
On December 26, 1991, and January 13, 1993, the Department
published notices of ``Opportunity to Request an Administrative
Review'' for the 1991 and 1992 review periods, respectively (56 FR
66846 and 58 FR 4148). On January 31, 1992, and on January 29, 1993,
the Floral Trade Council (FTC) requested administrative reviews of the
suspended countervailing duty investigations covering roses and other
cut flowers (roses) and miniature carnations (minis) for the 1991 and
1992 periods, respectively. On February 24, 1992, and on March 26,
1993, the Department initiated these reviews (57 FR 6314 and 58 FR
16397). The Department is now conducting these reviews in accordance
with section 751 of the Tariff Act of 1930, as amended (the Tariff
Act), and 19 CFR 355.22.
Scope of Review
Imports covered by these reviews are shipments of roses and minis
from Colombia. During the review periods, such merchandise was
classifiable under Harmonized Tariff Schedule (HTS) item numbers
0603.10.60, 0603.10.70, 0603.10.80, and 0603.90.00 for roses, and
0603.10.30 for minis. The HTS item numbers are provided for convenience
and Customs purposes. The written descriptions remain dispositive.
The review periods are January 1, 1991, through December 31, 1991
and January 1, 1992, through December 31, 1992. These reviews of the
suspended investigations involve over 450 producers/exporters of roses,
over 100 producers/exporters of minis, as well as the GOC. We verified
the responses from four producers/exporters of the subject merchandise:
Floramerica, Inc. (roses and minis); Jardines de los Andes S.A. (roses
and minis); Agrosuba, Ltda. (roses and minis) and Horticultura de la
Sabana (minis) (collectively, the four companies). The suspension
agreement for minis covers seven programs: (1) Tax Reimbursement
Certificate Program; (2) PROEXPO/BANCOLDEX (funds for the promotion of
exports); (3) Plan Vallejo; (4) Free Industrial Zones; (5) Export
Credit Insurance; (6) Countertrade; and (7) Research and Development.
The suspension agreement for roses covers the seven programs listed
above, as well as Air Freight Rates.
Analysis of Programs
For a description of changes to these programs during the review
periods, please see ``Summary of Changes to Programs Covered by the
Suspension Agreements on Roses and Other Cut Flowers and Miniature
Carnations from Colombia,'' Memorandum to Edward C. Yang, Division
Director, Office of Agreements Compliance, available in the public
file.
We examined the following programs subject to the suspension
agreements:
(1) Tax Reimbursement Certificate Program
The ``Certificado de Reembolso Tributario'' (CERT) or Tax
Reimbursement Certificate program allows exporters to receive a full or
partial rebate on indirect taxes based on the value of their exports of
specific products to specific destinations. The GOC determines the CERT
levels based on product and market conditions.
Under the terms of the suspension agreements, producers/exporters
will not apply for, or receive, tax reimbursement certificates or other
rebates, remissions, or exemptions under the CERT program for exports
of the subject merchandise to the United States and Puerto Rico. Since
1987, when the GOC restructured the CERT program, the level of CERT
payments for exports of the subject merchandise to the United States
and Puerto Rico have been set at zero. Therefore, exporters of the
subject merchandise are no longer eligible to receive countervailable
benefits.
At verification, we examined documentation at the GOC and found
that this program was not used by exporters of the subject merchandise
for exports to the United States and Puerto Rico during the period of
reviews (PORs). In addition, at verification of the four companies, we
examined documentation and confirmed that they did not use the program
for exports of the subject merchandise to the United States and Puerto
Rico during the PORs. Therefore, we preliminarily determine that the
GOC has eliminated the subsidy on the subject merchandise by abolishing
this program for exports of the subject merchandise to the United
States and Puerto Rico and that this program did not confer any
countervailable benefits upon exports of the subject merchandise to the
United States and Puerto Rico during the PORs.
(2) PROEXPO/BANCOLDEX
During 1991, PROEXPO (Fondo de Promocion de Exportaciones) provided
funds for the promotion of exports. On January 1, 1992, the 7th Law
transferred PROEXPO from a government-administered fund to a commercial
bank. The new bank's legal nature, functions, rights, and obligations
were outlined in decree 2505 and PROEXPO was renamed Banco de Comercio
Exterior de Colombia S.A. (BANCOLDEX). As a result, the same GOC
resolutions for export loans that were implemented by PROEXPO, are now
implemented by BANCOLDEX.
PROEXPO/BANCOLDEX provides four peso credit lines (short-term
working capital, long-term loans (capitalization), fixed investment,
financing for trade promotion); and U.S. dollar credit lines. Most
loans provided by PROEXPO/BANCOLDEX are short-term (less than a year).
Under the terms of the suspension agreements, producers/exporters
will not apply for, or receive, for exports of the subject merchandise
to the United States and Puerto Rico, any short- or long-term export
financing from PROEXPO/BANCOLDEX other than that offered on non-
preferential terms and at interest rates at or above the established
Department benchmark interest rates.
For the roses suspension agreement, the Department established
benchmark interest rates for all short- and long-term peso loans when
the agreement was signed (51 FR 44930, (December 15, 1986)). The
Department's short-term benchmark interest rate was 22.5 percent and
the long-term benchmark interest rate was 21.0 percent, for loans to
producers/exporters of roses. These same interest rates were in effect
during the PORs.
For the minis suspension agreement, the Department also established
benchmark rates for all short- and long-term peso loans when the
agreement was signed: the short-term benchmark interest rate was 22.5
percent, and the long-term benchmark interest rate was 21 percent. In
Miniature Carnations from Colombia: Final Results of Countervailing
Duty Administrative Review, (56 FR 14240, (April 8, 1991)), the
Department changed its benchmark rate for minis to nominal DTF (the
Colombian Central Bank time deposit rate, the ``Depositos a Termino
Fijo'') plus 1 percentage point for short-term loans, and nominal DTF
plus 1 percentage point and 0.25 percentage point for each additional
year after the first for long-term loans. This change in the benchmark
interest rates became effective on April 8, 1991, the date of
publication of the Department's notice.
Colombian Peso Loans
At verification, we examined GOC documents and confirmed that
PROEXPO/BANCOLDEX charged interest rates on its short- and long-term
peso loans above the established Department benchmark interest rates
for the subject merchandise during the PORs. In addition, we found that
PROEXPO/BANCOLDEX issued the loans on non-preferential terms. We also
examined the four companies' accounting records which confirmed that
the companies received PROEXPO/BANCOLDEX peso loans for the subject
merchandise on non-preferential terms and at interest rates at or above
the established Department benchmark rates for exports of the subject
merchandise to the United States and Puerto Rico during the PORs.
Therefore, we preliminarily determine that PROEXPO/BANCOLDEX did not
confer any countervailable benefits upon exports of the subject
merchandise to the United States and Puerto Rico during the PORs.
In order to update previous benchmark rates determined by the
Department, we reviewed interest rates in Colombia to define what
interest rate benchmarks were appropriate for future PROEXPO/BANCOLDEX
loans. In the case of short- and long-term peso PROEXPO/BANCOLDEX
loans, the Department confirmed at verification that the GOC adopted
the DTF-based rates because the DTF rates more accurately reflect
interest rate fluctuations in the market. While we verified that there
is no single predominant source of alternative financing in Colombia,
the Department established that a major lender to the agricultural
sector is the independent government agency, FINAGRO (Fondo para el
financiamiento del Sector Agropecuario). FINAGRO loans are outside
BANCOLDEX-controlled credit lines and account for 35 to 40 percent of
financing to the agricultural sector. FINAGRO loans are short-term.
The Department found that, in addition to FINAGRO, the Caja Agraria
bank finances 35 to 40 percent of the agricultural sector. At
verification, we found that the Caja Agraria interest rates are similar
to the rates offered by FFA/Finagro. However, information on the record
about Caja Agraria rates conflicts with what we found at verification.
Therefore, we preliminarily determine that FINAGRO interest rates
represent the best alternative source of financing for agricultural
entities in Colombia.
The Department, therefore, preliminarily determines that the short-
term benchmark interest rate will be the most recent FINAGRO short-term
interest rate established in February 1994, nominal DTF plus six
percentage points. The Department also preliminarily determines that
the long-term benchmark interest rate will be the most recent FINAGRO
short-term interest rate in February 1994, nominal DTF plus six
percentage points, plus an additional 0.25 percentage points for each
year after the first, including any grace period, reflecting the spread
between PROEXPO/BANCOLDEX short- and long-term loans. The short- and
long-term benchmark interest rates will apply to loans granted on or
after the date of publication of the final results of these
administrative reviews.
U.S. Dollar Loans
During the PORs, PROEXPO/BANCOLDEX established several new U.S.
dollar credit lines. On August 26, 1991, the GOC issued resolution 13/
91 and established a new short-term working capital credit line
financed by CAF (Corporacion Andina de Fomento) and administered by
PROEXPO/BANCOLDEX. The interest rates on CAF loans were set at the
London Interbank Offered Rate (LIBOR) plus up to 3.25 percentage
points, depending on the terms of the loan. In addition, resolution 4/
92 (February 19, 1992) established a U.S. dollar credit line for
preshipment operations. These loans are financed by FLAR (Fondo
Latinoamericano de Reservas) and BLADEX (Banco Latinoamericano de
Exportaciones), both of which are international financial institutions.
The interest rates on FLAR and BLADEX loans are LIBOR plus up to three
percentage points on 180-day loans, and interest is payable at the end
of the term of the loan.
In the case of short-term U.S. dollar loans, the Department had not
set any benchmarks prior to these PORs, since these loans had not been
introduced until 1991. Therefore, the Department could not examine
these loans for compliance with the terms of the suspension agreements
during these PORs.
In order to establish new U.S. dollar benchmark rates, we examined
alternative sources of dollar loans in Colombia to determine a
benchmark interest rate. We confirmed at verification that during the
PORs, PROEXPO/BANCOLDEX loan interest rates on U.S. dollar loans
charged to Colombian flower growers/exporters were based upon the LIBOR
plus a variable spread. At verification, we found no alternative
measure of what a firm's cost for debt in dollars would be in Colombia.
In the absence of a viable alternative source of dollar financing in
Colombia, we preliminarily determine that the U.S. weighted-average
effective interest rates, for short-term loans under $100,000 for
February 1994, as published in the Federal Reserve Statistical Release
is the most representative source of financing. This methodology is
consistent with DOC prior practice (See Final Affirmative
Countervailing Duty Determinations: Certain Steel Products From Mexico;
FR 58 37358, (July 9, 1993)).
The Federal Reserve publishes rates based upon the U.S. Prime
Lending Rate and not LIBOR rates. Thus, for short-term U.S. dollar
loans, we preliminarily determine setting the Department's benchmark at
U.S. Prime plus 1.96 percentage points, which corresponds to the
weighted-average effective interest rates for U.S. short-term loans
under $100,000 in February 1994.
We preliminarily determine that these new benchmarks will apply to
loans granted on or after the date of publication of the final results
of these administrative reviews. Any such financing outstanding on that
date shall be repaid or refinanced on non-preferential terms and
interest rates at or above the most recent benchmark interest rate
determined by the Department.
Prospective Benchmarks
The Department invites interested parties to comment on the current
procedure for determining revised and new benchmarks for PROEXPO/
BANCOLDEX loans or any other loan programs.
There are two main issues that arise out of the current procedure.
First, suspension agreements are forward looking, and the Department
sets benchmark interest rates prospectively (See Miniature Carnations
from Colombia: Final Results of Countervailing Duty Administrative
Review; 56 FR 14240 (April 8, 1991) and Miniature Carnations from
Colombia; Final Results of Countervailing Duty Administrative Review
and Determination Not To Terminate Suspended Investigation; 59 FR
10790, (March 8, 1994.)) Petitioners have argued that this leads to
situations where PROEXPO/BANCOLDEX loans at interest rates in
compliance with the Department's benchmarks could be at preferential
interest rates and thus be countervailable. Second, the Department did
not set benchmarks for U.S. dollar loans prior to these PORs because
the dollar loan programs were not initiated until August 26, 1991.
Therefore, because Department benchmarks in these suspension agreements
are set prospectively, during these PORs there was no Department dollar
interest rate benchmark in place against which the Department could
establish whether or not PROEXPO/BANCOLDEX dollar loans were granted on
non-preferential terms.
For these reasons, we invite interested parties to comment on
whether it would be in the public interest to amend and/or clarify
these suspension agreements with regard to benchmarks and the
procedures for establishing benchmarks for loan programs.
(3) Plan Vallejo
Plan Vallejo was established in 1967 under decree 444. Its purpose
is to exempt exporters from certain indirect taxes and customs duties
assessed on imported capital equipment used to produce finished
products for export. The Instituto Colombiano de Comercio Exterior
(INCOMEX) administers the Plan Vallejo program.
Under the terms of the suspension agreements, producers/ exporters
will not apply for or receive any benefits from duty and tax exemptions
for capital equipment under Plan Vallejo for exports of the subject
merchandise to the United States and Puerto Rico. At verification, we
examined the GOC's documentation and confirmed that this program was
not used by the exporters of the subject merchandise for exports to the
United States and Puerto Rico during the PORs. Also, GOC officials
stated that, during the PORs, no flower producers applied for Plan
Vallejo benefits. In addition, we verified that the four companies did
not use the program for capital equipment during the PORs. Therefore,
we preliminarily determine that this program did not confer any
countervailable benefits upon exports of the subject merchandise to the
United States and Puerto Rico during the PORs.
We also preliminarily determine that Plan Vallejo has been
abolished for the subject merchandise in resolution 1212 since flower
growers are ineligible to receive benefits for exports to the United
States and Puerto Rico.
(4) Air Freight Rates (Apply Only to the Roses Suspension Agreement)
The Departmento Administrativo de la Aeronautica Civil (DAAC) is
the government agency that develops, maintains and regulates air
transport and air space activities. Section D(3) of the roses
suspension agreement states that the Department may consider rescinding
the agreement and reopening the investigation if the air freight rates
paid by cut flower exporters approach the government-mandated maximum
rates set by the DAAC because such rates might be indicative of
government control rather than the result of competitive forces.
At verification, we examined the companies' air freight bills and
found that the rates negotiated between the flower producers and air
freight carriers were between the minimum and maximum rates permitted
and did not approach the maximum. Therefore, we preliminarily determine
that this program did not confer any countervailable benefits upon
exports of the subject merchandise to the United States and Puerto Rico
during the PORs.
Since the Department has never found the air freight rates to be a
countervailable subsidy, the GOC is not required to abolish the program
for eventual termination of the agreement.
(5) Free Industrial Zones
In December 1985, Law 109 established Free Industrial Zones (FIZs)
for industrial and service sector purposes. Certain regions in Colombia
are designated as FIZs.
At verification, we examined documentation at the Ministry of
Foreign Trade and determined that there were not any flower producers
located in FIZs. Therefore, we preliminarily determine that this
program did not confer any countervailable benefits upon exports of the
subject merchandise to the United States and Puerto Rico during the
PORs. We also preliminarily determine that during the PORs the GOC had
eliminated the subsidy on this merchandise by abolishing this program
for the subject merchandise.
(6) Export Credit Insurance
Decree 444, issued in 1967, established the Export Credit Insurance
program. Under the Export Credit Insurance program a company may
receive insurance to cover certain commercial expenses (transportation,
custom duties, insurance expenses, etc.) that it would have difficulty
covering as a result of the insolvency of its foreign client. Several
commodities are ineligible for the program: coffee in certain forms,
crude leathers, oil and by-products, precious and semi-precious stones,
gold, perishable goods, and others. The subject merchandise is
classified under the ``perishable goods'' category which renders all
exports of the subject merchandise ineligible for the program.
Under the terms of the suspension agreements, producers/exporters
shall notify the Department in writing prior to applying for any
benefit from the Export Credit Insurance program for exports of the
subject merchandise to the United States and Puerto Rico. At
verification of the SEGUREXPO insurance company, we examined a list of
all insurance policies outstanding during the PORs issued by the
company. We verified that exporters of the subject merchandise did not
participate in the Export Credit Insurance Program during the PORs.
Therefore, we preliminarily determine that this program did not confer
any countervailable benefits upon exports of the subject merchandise to
the United States and Puerto Rico during the PORs. We also
preliminarily determine that the GOC has eliminated the subsidy on this
merchandise by abolishing this program for the subject merchandise.
(7) Countertrade
Law 48 of 1983 established a special system for three types of
exchange arrangements: (1) Countertrade; (2) compensation offsets; and
(3) three-way trade. During verification, GOC officials stated that in
1986, Decree 1459 terminated the exchange system and there has been no
follow-up legislation which would re-establish the exchange system. We
reviewed documentation that confirmed that this program had been
terminated on that date. Therefore, we preliminarily determine that
this program did not confer any countervailable benefits upon exports
of the subject merchandise to the United States and Puerto Rico during
the PORs. We also preliminarily determine that the GOC has eliminated
the subsidy on the subject merchandise.
Other Program
Although not specifically listed in the suspension agreements, we
examined the following program:
(8) Research and Development
From January 1983 (the effective date of the original suspension
agreement) until November 1985, when the CERT rate for roses and other
cut flowers subject to the suspension agreement was reduced to zero,
flower exporters, on a voluntary basis, allowed the Central Bank to
withhold a certain percentage of the CERTs earned on exports of the
subject merchandise to the United States and Puerto Rico and other
countries for research and development. In 1985, the GOC issued
resolution 10, which established a fund from the CERT payments that
were withheld for general and technological research on the cultivation
of all flowers. During the PORs, the only source of revenue for the
fund was from interest income. The resolution requires that any funds
expended under this resolution be disbursed in a manner consistent with
the suspension agreements. During the PORs, there was only one
disbursement of funds for the payment of legal fees to Arnold & Porter,
counsel to GOC and respondents in this proceeding. The resolution 10
account was officially closed in October 1991.
At verification at the four companies, we examined financial
documents and found that no funds were received under resolution 10
during the PORs. Therefore, we preliminarily determine that this
program did not confer any countervailable benefits upon exports of the
subject merchandise to the United States and Puerto Rico during the
PORs. We also preliminarily determine that the GOC has eliminated the
subsidy on the merchandise by abolishing this program.
Preliminary Results of Review
We preliminarily determine that the GOC and signatory companies
have complied with all the terms of the suspension agreements during
the periods January 1, 1991, through December 31, 1991, and January 1,
1992, through December 31, 1992. In addition, we preliminarily
determine that the new peso and U.S. dollar benchmarks will apply to
loans granted on or after the date of publication of the final results
of these administrative reviews.
Interested parties may submit written comments on these preliminary
results within 30 days of the date of publication of this notice and
may request disclosure and/or a hearing within 10 days of the date of
publication. Rebuttal briefs and rebuttals to written comments, limited
to issues in those comments, must be filed not later than 37 days after
the date of publication. Any hearing, if requested, will be held 44
days after the date of publication or the first workday thereafter. The
Department will publish the final results of its analysis of issues
raised in any such written comments or at a hearing.
This administrative review and notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
355.22.
Dated: October 7, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-25783 Filed 10-17-94; 8:45 am]
BILLING CODE 3510-DS-P
