[Federal Register Volume 59, Number 45 (Tuesday, March 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5307]
[[Page Unknown]]
[Federal Register: March 8, 1994]
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DEPARTMENT OF COMMERCE
[C-301-601]
Miniature Carnations From Colombia; Final Results of
Countervailing Duty Administrative Review and Determination Not To
Terminate Suspended Investigation
AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
review.
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SUMMARY: On October 7, 1993, the Department of Commerce (``the
Department'') published the preliminary results of its administrative
review and intent not to terminate the suspended countervailing duty
investigation on miniature carnations from Colombia. The review covers
the period January 1, 1988 through December 31, 1990 and seven
programs. On January 31, 1991, the Government of Colombia (``GOC'')
requested termination of the suspended investigation based on
abolishment of the programs for a period of at least three years, in
accordance with 19 CFR 355.25(a)(1) and 355.25(b)(1). Therefore, we
examined the programs to determine if each program had been abolished
for a period of at least three consecutive years. We gave interested
parties an opportunity to comment on the preliminary results. After
reviewing all the comments received, we determine that the GOC and
producer/exporters of miniature carnations have complied with the terms
of the suspension agreement. However, we also determine that the GOC
has not abolished each program for a period of at least three
consecutive years. Therefore, we determine that the GOC has not met all
the requirements for termination of the countervailing duty suspended
investigation on miniature carnations as outlined in the Commerce
Regulations.
For the purpose of revoking a countervailing duty order or
terminating a suspended countervailing duty investigation based on
three consecutive years of elimination of all subsidies pursuant to 19
CFR 355.25(a)(1), it is the Department of Commerce's current policy
that administrative reviews must be requested and conducted for each of
the three consecutive years. See Memorandum from Joseph A. Spetrini,
Deputy Assistant Secretary for Compliance, to Alan M. Dunn, Assistant
Secretary for Import Administration, of December 14, 1992, which fully
describes this issue. However, the request for termination in this case
predates the above policy, and we nevertheless have examined a three-
year period in order to determine whether termination is appropriate.
We invited interested parties to comment on these results.
EFFECTIVE DATE: March 8, 1994.
FOR FURTHER INFORMATION CONTACT: Stephen Jacques or Jeanene Lairo,
Office of Agreements Compliance, International Trade Administration,
U.S. Department of Commerce, Washington, DC 20230; telephone: (202)
482-3434 or (202) 482-2243, respectively.
SUPPLEMENTARY INFORMATION:
Background
On October 7, 1993, the Department published in the Federal
Register the preliminary results of its countervailing duty
administrative review and intent not to terminate the suspended
investigation on miniature carnations from Colombia (58 FR 52269). (See
Suspension of Countervailing Duty Investigation; Miniature Carnations
from Colombia, 52 FR 1353 (January 13, 1987).) We have now completed
the administrative review in accordance with section 751 of the Tariff
Act of 1930, as amended (``the Tariff Act'').
Scope and Review
Imports covered by this review are shipments of miniature
carnations from Colombia. During the review period, the merchandise
covered by this suspension agreement is classified under Harmonized
Tariff Schedule (``HTS'') item numbers 0603.10.30. The HTS item numbers
are provided for convenience and Customs purposes. The written
description remains dispositive.
The period of review (``POR'') covers January 1, 1988 through
December 31, 1990, and seven programs: (1) Tax Reimbursement
(Certificate Program Certificado de Reembolso Tributario (CERT
program)); (2) The Fund for the Promotion of Export Loans (working and
fixed-capital) (``PROEXPO''); (3) Plan Vallejo; (4) Free Industrial
Zones; (5) Export Credit Insurance; (6) Countertrade; and (7) Research
and Development.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. Also, at the request of the petitioner, the Floral
Trade Council (``FTC'') and the GOC, we held a public hearing on
December 3, 1993. Comments 1 through 10 also pertain to the Final
Results of Countervailing Duty Administrative Review and Intent not to
Terminate Suspended Investigation; Roses and Other Cut Flowers from
Colombia which is being published concurrently with this notice.
Comment 1: The FTC alleges that the GOC has not abolished certain
programs covered under the suspended investigations for a period of
three consecutive years as required under 19 CFR 355.25(a)(1)(i). The
FTC asserts that elimination of Colombian flower exporters' eligibility
to receive countervailable subsidies on exports of fresh cut flowers to
the United States is insufficient grounds for termination. The FTC also
contends that the regulation permits the Department to terminate only
when the government has abolished all programs benefitting the
merchandise, not merely the eligibility of exports of a particular
category of merchandise. Finally, the FTC argues that the Department
should consider the entire program in deciding whether to terminate the
suspended investigation.
The GOC asserts that the Department's preliminary determination was
erroneous for several reasons. First, the GOC contends that if the
program remains in existence but has been abolished for the subject
merchandise, termination is required. In the case of the CERT program,
the GOC asserts that the Department correctly focused on whether or not
the subject merchandise remains eligible to receive benefits under the
subsidy programs found countervailable. Thus, the GOC asserts that the
Department failed to consistently apply the correct legal standard for
program abolition in its analysis of PROEXPO, Plan Vallejo, and the air
freight rates program, since the subsidy programs have been abolished
with regard to the subject merchandise and there is no likelihood the
countervailable programs will be reinstated or new programs
substituted. (See Roses and Other Cut Flowers From Colombia; Final
Results of Countervailing Duty Administrative Review and Revised
Suspension Agreement, 51 FR 44930 (December 15, 1986).)
Department's Position: The Department's regulations at 19 CFR
355.25(a)(1)(i) state that the Secretary may terminate a suspended
investigation if the Secretary concludes that ``the Government of the
affected country has eliminated all subsidies on the merchandise by
abolishing for the merchandise, for a period of at least three
consecutive years, all programs that the Secretary has found
countervailable.'' A program is effectively abolished when the
government of the affected country has eliminated, by law, the
eligibility of producer/exporters of the subject merchandise for the
countervailable program. The regulation does not require that a program
be abolished for merchandise other than subject merchandise in order
for the Department to terminate the suspended investigations under this
provision.
In the case of CERT, Decree 107, issued by the GOC in January 1987,
set the level of CERT payments at zero for exports of the subject
merchandise to the United States. Because, as a matter of law, the GOC
has made the producer/exporters ineligible for any benefits on the
subject merchandise by setting their CERT rate to zero, for a period of
three consecutive years, we determine that the program has been
abolished for three years.
In the case of PROEXPO, the program has not been abolished for the
subject merchandise since flower exporters are eligible to receive
loans for exports to the United States which may or may not be at
preferential rates, although they did not receive preferential PROEXPO
loans during the POR. (See Comment 8, below). For Plan Vallejo, the
program has not been abolished for the subject merchandise for a period
of three consecutive years because the GOC did not eliminate
eligibility for the subject merchandise by law until April 1991. (See
Comment 9, below.) Because the GOC failed to meet the abolition
standard in 19 CFR 355.25(a)(1)(i) for Plan Vallejo and PROEXPO, we
will not terminate the suspended investigations.
Comment 2: The FTC contends that the Department verified that,
although, ``in 1988, the Central Bank made no CERT payments for
shipments of the subject merchandise, * * * there were applications for
CERT payments in 1988.'' The FTC contends that the verification report
does not indicate whether signatories to the suspension agreements
submitted these applications. Consequently, the FTC alleges that this
is a possible prima facie breach of the suspension agreements and
should result in a finding of non-compliance.
The GOC contends that in addition to flowers being ineligible to
receive any subsidies under the CERT program during the POR, no flower
grower or exporter received CERT rebates on the subject merchandise.
Department's Position: We disagree with the petitioner. At
verification, the Department determined that none of the companies
examined had used the CERT program during the POR. We have already
found that for the roses and other cut flowers agreement producer/
exporters were in compliance during the 1988 period and that for the
miniature carnations agreement producer/exporters were in compliance
during the 1988 and 1989 periods.
While applications from a few producer/exporters did occur, the
companies applying constituted an insignificant portion of the subject
companies. In 1988, only seven out of approximately 400 flower
companies applied for CERT payments. The number of companies applying
for CERT benefits in 1989 and 1990 were two and five respectively. (See
verification exhibits C-6, C-7, C-13, and C-21.) Moreover, we have
verified that no countervailable benefits were received under CERT,
despite any applications made. Although applications for CERT benefits
are technically inconsistent with the suspension agreements, the
Department considers these acts inconsequential as specified under 19
CFR 355.19(d). Consequently, for the purposes of the final results, we
determine that the signatories were in compliance with the suspension
agreements during the POR.
Comment 3: FTC asserts that two signatories may have received CERT
rebates on U.S. flower exports. FTC contends that the questionnaire
responses in the 1990-91 administrative review of the antidumping duty
order indicate that two Colombian signatories to the suspension
agreements, Flores de la Sabana (``Sabana'') and Las Amalias, S.A.
(``LASA'') may have received CERT rebates for U.S. exports.
FTC asserts that in its constructed value questionnaire response,
Sabana stated that its internal sales taxes are not included in the
cost of materials because the GOC refunds those taxes because the final
product is sold outside of the country. Petitioner states that Sabana
also submitted in a supplemental response a page of its bookkeeping
records for the month of April 1990 that included the line item
``CERTs.''
Petitioner also contends that LASA reported that it was ``entitled
to a rebate for value added tax * * * paid to suppliers and contractors
for installations for flowers that are exported. During the period of
review, LASA received rebates * * *'' FTC claims that according to
LASA, ``the rebates cover all products exported.'' Finally, FTC states
that LASA's public version of its consolidated balance sheet dated
December 31, 1990 includes the line item ``CERTs.''
The GOC asserts that no CERT rebates were paid with respect to
exports of subject merchandise. The GOC notes that its questionnaire
responses and the Department's verification report indicate that no
subject merchandise received CERT payments.
The GOC contends that the documents indicate that two producers
received refund or exemption of value added tax paid on materials used
in the production for exportation. In addition, the GOC states that
refund of prior stage value added taxes are entirely permissible and
non-countervailable. The GOC cites Countervailing Duties; Notice of
Proposed Rulemaking, 19 CFR 355.44(i)(4)(i), F.R. 23366, 23369, 23380,
23382 (May 31, 1989) (``Proposed CVD Rules''); General Agreement on
Tariffs and Trade (``GATT'') Subsidies Code, item (h). Finally, the GOC
claims that the FTC has failed to demonstrate any link between value
added tax rebates and the CERT export certificate program.
The GOC asserts that the bookkeeping records of both companies
cited by FTC--Sabana and Las Amalias--contain a line item entry for
CERTs only because they received CERTs for their flower exports to
third countries.
Department's Position: We disagree with petitioner and with
respondent in part. The information described in petitioner's case
brief pertains to the antidumping administrative review and would
normally have been considered submitted untimely on the record of these
reviews. However, because a substantial period of time has passed since
the petitioner's January 1993 and August 1993 submissions on LASA and
Sabana, we will consider petitioner's comments on this issue for these
final results.
As we stated in our response to Comment 2, the Department verified
that none of the signatories had used the CERT program for the subject
merchandise during the POR. Petitioner's remarks concerning line items
titled ``CERT'' in Sabana's consolidated balance sheet and rebates for
exports are consistent with the fact that the program is still in
effect for exports to third countries. However, the Department reviewed
GOC documentation for all three years of the POR which indicated there
were no countervailable CERT benefits given on exports of the subject
merchandise to the United States and corroborated the GOC information
at verification of three other companies. Consequently, for the
purposes of the final results, we determine that the signatories were
in compliance with the suspension agreements during the POR, and that
we will not conduct any further investigations or verifications with
regard to Sabana and LASA during this POR. (See also Comment 4, below.)
As to the GOC's claim that refunds of value-added taxes are
entirely permissible and non-countervailable, the Department's position
is that refund of prior stage value added taxes upon export are
permissible and non-countervailable only to the extent such refund does
not exceed the amount of prior stage indirect taxes levied on goods
that are physically incorporated in the export product. (See
Sec. 355.44(i)(4)(i) of the Proposed CVD Rules.) In the present case,
because CERT rates were set at zero, no taxes were refunded.
Comment 4: The FTC contends that the Department's verification of
the CERT program for three Colombian producer/exporters was
inconclusive. First, the FTC asserts that the Department failed to
address how Agropecuria Cuernavaca listed export destinations based on
the sales ledger if destination was not recorded. Furthermore,
petitioner contends that the customers' identity are insufficient to
indicate the final destination, where there are innumerable companies
trading flowers on consignment.
Second, the FTC states that since Minispray was incorporated in
1989 and made its first sale in May 1990, it is hardly representative
of the Colombian flower producer/exporters.
Third, the FTC claims that with respect to Floramerica, the
Department should have investigated whether a CERT payment for the
merchandise exported to Germany was actually for merchandise exported
to the United States. The FTC requests that the Department explain how
it determined that the CERT payment was actually for a shipment to
Germany, and not the United States. The FTC asserts that the GOC should
have questioned the CERTs reported by Floramerica on its U.S. sales.
Finally, the FTC requests that the Department either (1) conduct a
further investigation and verification or (2) presume that Colombian
growers received CERT rebates on U.S. flower exports. In support of
their argument the FTC cites Federal-Mogul Corp. v. United States, 17
CIT ______. Slip Op. 93-180 (Sept. 14, 1993); and Freeport Minerals
(Freeport-McMoran Inc.) v. United States, 776 F.2d 1029, 1032-33 (Fed.
Cir. 1985).
The GOC contends that the Department fully verified the non-receipt
of CERT certificates on floral exports for the United States. Also, the
GOC claims that its records showed no CERT payments being made to
Floramerica with respect to its exports to the United States. The GOC
asserts that a Floramerica internal worksheet erroneously listed a U.S.
CERT payment which the company demonstrated to the Department verifiers
was actually made for a shipment to Germany.
The GOC claims that the suspension agreements only obligate
Colombian growers and exporters to renounce CERT benefits on shipments
of the subject products exported, directly or indirectly, from Colombia
to the United States and that the U.S. countervailing duty law
generally concerns itself only with bounties or grants benefitting
merchandise exported to the United States.
Department's Position: We agree with the respondent. The Department
verified that producer/exporters of the subject merchandise did not
receive any CERT payments. We were satisfied that the GOC's records and
procedures meet their obligations under the suspension agreements to
ensure that no benefits ensue to producer/exporters. At verification,
from documentation provided by the GOC, we traced all CERT payments
received by Agropecuria Cuernavaca during the POR to their exports of
the merchandise to third countries. We verified that all CERT payments
are recorded in an internal report which tracks CERT payments on a
yearly basis and that no payments were for shipments of subject
merchandise. We further verified that the GOC requires documentation
that the shipment does not go to a country for which CERT payments are
not available. In the case of Minispray, it was fully operating during
the POR, thereby making the company a legitimate and representative
Colombian flower producer and we verified it did not receive CERT
payments for exports of the subject merchandise. In the case of
Floramerica, we verified that the company received no CERT payments for
exports of the subject merchandise during the POR. The Floramerica
report indicating a CERT payment for a U.S. shipment was the result of
a clerical error by the company. Based on an official GOC export
document and other company documents reviewed during the Floramerica
verification which included the destination and importer, we verified
the shipment in question went to Germany and not to the United States.
(See verification exhibit F-6). Finally, the Department will not
conduct a further investigation or verification of the information the
FTC submitted on LASA and Sabana. (See Comment 3, above.)
Comment 5: The FTC contends that the Department's verification
reports revealed an inability on the part of the GOC to monitor
compliance with the terms of the suspension agreements and the CERT
program, in particular.
In addition, the FTC contends that the verification reports do not
establish that the Central Bank or Customs collect information on the
intermediate and ultimate destinations of exports. Therefore, the FTC
argues that the GOC is unable to certify that CERT payments were made
for shipments to third countries. In addition, the FTC asserts that
since the documents are prepared by the exporters, they do not offer
any objective support that CERT payments were made only for third-
country exports. In support of their position, the petitioner cites
Asociacion Colombiana de Exportadores v. U.S., 704 F. Supp. 1114, 1117
(CIT 1989).
The GOC argues that the Department is not required to investigate
unsupported allegations and that the GOC is under no obligation to
disprove these allegations.
Department's Position: Contrary to petitioner's assertions, we have
determined that the agreements have been effectively monitored by the
GOC during the POR. During verification, the Department reviewed
documentation provided by companies and by the Banco de la Republica,
including applications and records of official government approval and
disapproval for CERT payments listed by individual companies for
exports to various countries during the POR. (See verification exhibits
C-7, C-13, C-18, and C-21.) The Department also examined export
manifests and other shipping documents to determine destinations of
shipments receiving CERT rebates and verified that no shipments of
subject merchandise received CERT rebates. The export manifests which
indicated the country of destination for the merchandise matched
documents verified at the companies. (See verification exhibit AC-3A.)
Consequently, we determine that the GOC has adequately monitored the
agreements and has provided the Department the relevant reports in
accordance with the terms of the agreements.
Comment 6: The FTC contends that certain shipments received CERT
rebates which may have been reshipped to the United States from the
Netherlands Antilles and Panama. The FTC also questions the GOC's
decision to reduce the CERT rebate rate for exports to the Netherlands
Antilles and Panama to zero. Finally, the FTC questions whether
shipments having received CERT payments actually traveled the entire
distance to Canada and Europe, etc. as indicated on the export
documentation. The FTC alleges that the Department did not confirm that
third country exports receiving CERT payments were not actually
unloaded at Miami port.
The GOC argues that the Department is not required to investigate
unsupported allegations and that the GOC is under no obligation to
disprove these allegations.
Department's Position: During verification, the Department examined
export documents to determine destinations of shipments receiving CERT
rebates and verified that no shipments of subject merchandise received
CERT rebates. There is no evidence in the questionnaire response, in
documentation reviewed by the Department at verification, or anywhere
else on the record to support an allegation of transhipment through
third countries or of unloading of flowers in the United States.
Comment 7: The FTC contends that the Department should determine
that flower exports to the U.S. continue to benefit from CERT rebates
on third country exports and that the CERT program still exists. Thus,
the FTC contends that the benefit received benefits the whole company's
production, including production exported to the United States. In
support of their position, petitioner cites Certain Carbon Steel
Products from Brazil; Final Affirmative Countervailing Duty
Determinations, 49 FR 17988, 17996 (April 26, 1984); Final
Determination of Sales at Less Than Fair Value: Silicon Metal from
Brazil, 56 FR 26977, 26987 (June 12, 1991); and British Steel Corp. v.
United States, 605 F. Supp. 286, 293-95 (CIT 1985).
The GOC contends that the suspension agreements obligate
signatories to renounce CERT payments ``on shipments of the subject
products exported, directly or indirectly, from Colombia to the United
States.'' The GOC claims that Colombian producer/exporters are under no
obligation to renounce CERT benefits to third countries.
The GOC further asserts that U.S. countervailing duty law generally
concerns itself with only bounties or grants benefitting subject
merchandise (i.e. merchandise shipped to the United States). In support
of their claim, the GOC cites Roses and Other Cut Flowers From
Colombia; Final Results of Countervailing Duty Administrative Review
and Revised Suspension Agreement, 51 FR 44930 (Dec. 15, 1986); Roses
and Other Cut Flowers From Colombia; Final Results of Countervailing
Duty Administrative Review, 52 FR 48846, 48847-8 (Dec. 28, 1987); and
Final Affirmative Countervailing Duty Determination; Miniature
Carnations from Colombia, 52 FR 32033, 32036 (Aug. 25, 1987).
Finally, the GOC contends that by having export subsidies to third
countries, there is an incentive for Colombian exporters to shift
exports from the United States to third countries. Consequently, the
GOC argues that flowers sold in the United States in no way benefit
from CERT rebates.
Department's Position: As stated in the final results of the 1983-
1985 administrative review of this case (Roses and Other Cut Flowers
From Colombia; Final Results of Countervailing Duty Administrative
Review, 52 FR 48847 and 48848 (Comments 2 and 4)(December 28, 1987)),
it is the Department's position that rebates tied to exports to third
countries do not benefit the production or export of the subject
merchandise. (See Sec. 355.47(b) of the Proposed CVD Rules.) The
Department has verified that Colombian exporters only received CERT
payments based on exports to countries other than the United States.
CERT payments benefit only those shipments to which they are tied, not
shipments of subject merchandise. It is the Department's policy that we
will not allocate benefits tied to a product not under investigation
over a product under investigation unless we have a clear reason to
believe that such a benefit encourages the production or export to the
United States of the product under investigation. (See Industrial
Nitrocellulose From France; Final Results of Countervailing Duty
Administrative Review, 52 FR 833 (Comment 1)(January 9, 1987), and
Certain Fresh Cut Flowers From Israel; Final Affirmative Countervailing
Duty Determination, 52 FR 3316 (Comment 9)(February 3, 1987). We have
no such evidence in this case. We determine, therefore, that the
signatories have not violated the suspension agreements.
We disagree with the FTC that Silicon Metal from Brazil is germane
to this review. The issue in that antidumping case involved the
allocation of financing cost for new furnaces that could produce the
subject merchandise. While it is true that money is fungible, subsidies
on exports to third countries do not provide benefits to exports to the
United States if the subsidies are tied to specific non-subject
merchandise destined for third countries. The FTC's reliance on Certain
Carbon Steel Products from Brazil is misplaced because in that case,
although we found the IPI tax rebate was a subsidy benefitting all
production including exports, we did not find that it was tied to
specific exports to individual countries. In the case of CERT payments,
we were able to determine that payments were clearly tied to particular
countries.
Comment 8: FTC contends that the Department should compare the
interest rates received on PROEXPO loans to commercial benchmark
interest rates available on comparable loans during the POR. FTC also
argues that the Department applied outdated benchmark interest rates,
inconsistent with the Department's practice. In support of its
position, FTC cites the Proposed CVD Rules; Final Affirmative
Countervailing Duty Determinations: Certain Steel Products From
Belgium, 58 FR 37273, 37288-89 (July 9, 1993); Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from
Germany, 58 FR 37315, 37322-23 (July 9, 1993); Oil Country Tubular
Goods from Argentina--Preliminary Results of Countervailing Duty;
Administrative Review, 56 FR 50,855 (October 9, 1991); Preliminary
Affirmative Countervailing Duty Determination: Bulk Ibuprofen from
India, 56 FR 66432 (December 23, 1991); Preliminary Affirmative
Countervailing Duty Determination: Extruded Rubber Thread from
Malaysia, 56 FR 67276, 67277 (December 30, 1991); Rice from Thailand;
Preliminary Results of Countervailing Duty Administrative Review, 57 FR
8437, 8439 (March 10, 1992); and Alhambra Foundry v. United States, 626
F. Supp. 402 (CIT 1985).
FTC argues that the Department should instead apply periodically
reconstructed benchmarks that reflect, for short-term loans, comparable
commercial financing on a nation-wide and non-sector specific basis
and, for long-term loans, the firm's other commercial loans taken out
in the same year or the national average interest rate. FTC asserts
that if the Department were to apply benchmarks chosen in the 1989
miniature carnations review it is likely that certain Colombian
producers/exporters received PROEXPO loans at preferential rates. (See
Asociacion Colombiana de Exportadores v. United States, 704 F. Supp.
1114, 1122 (CIT 1989.) Furthermore, the FTC contends that the
Department should apply effective, rather than nominal benchmark rates.
Finally, the FTC argues that if ``established benchmarks'' rather than
reconstructed benchmarks are used in the final results, the Department
should use its established benchmark methodology to determine
benchmarks for each of the 1988, 1989, and 1990 periods. FTC contends
that the Department should confirm the primary source of financing by
reviewing source documents.
The GOC contends that the signatories fully complied with the
suspension agreements because during the POR it rendered flower growers
ineligible for a countervailable PROEXPO benefit by setting the PROEXPO
interest rates for flower growers not just at but above the benchmark
interest rates established by the Department. In addition, the GOC
asserts that the suspension agreements require their signatories not to
renounce PROEXPO loans per se, but only to renounce the preferential
interest rates. The GOC claims that, under the agreements, the
Department establishes the benchmark interest rates, and that the
agreements only obligate the renouncing producers and exporters to
refinance existing loans and obtain new loans on non-preferential terms
at or above the relevant benchmark interest rate determined by the
Department. Thus, the GOC argues that continued receipt by flower
growers of PROEXPO loans at the Department-established rates not only
is permitted under the suspension agreements but is expressly
contemplated.
The GOC also asserts that the Department erred because it defined
``the program'' at issue as all PROEXPO loans, including PROEXPO loans
at non-preferential and thus non-countervailable rates.
The GOC contends the effect was that no flower grower could receive
a PROEXPO loan at a preferential interest rate, irrespective of the
destination to which it shipped its flowers, and even if it did not
export at all. Consequently, GOC asserts that the Department erred in
its preliminary results of review because it appears to have defined
``the program'' at issue as all PROEXPO loans, including PROEXPO loans
at non-preferential and thus non-countervailable rates.
Department's Position: The Department set the benchmark rates
applicable to the POR in 1987. Although we determined on April 8, 1991
that the benchmark for PROEXPO should be changed, we stated that ``any
changes to short-term and long-term benchmark interest rates for this
suspension agreement should be set prospectively.'' See Miniature
Carnations from Colombia; Final Results of Countervailing Duty
Administrative Review, 56 Fed. Reg. 14240 (April 8, 1991).
Consequently, the Department cannot reset the benchmarks for these
suspension agreements in the middle of an administrative review. Had
the Department changed the benchmark interest rates during the POR it
would have imposed undue burdens on the signatories to the suspension
agreements to comply with the changed benchmark rates. Since suspension
agreements are forward looking, the terms and conditions should not be
retroactively changed during the POR.
At verification, the Department examined documentation that
indicated that PROEXPO charged interest rates on its short- and long-
term loans above the Department's established benchmark rates in effect
during the POR. The Department also found that the companies received
PROEXPO loans on terms consistent with the suspension agreements.
Consequently, we have determined that signatories were in compliance
with the terms of the suspension agreements for the PROEXPO program.
Since PROEXPO loans were above the benchmark rates, the Department
determines that the GOC did not confer any countervailable benefits
through the PROEXPO program during the POR. The Department finds that
signatories complied with the suspension agreements' benchmarks and
avoided countervailable benefits during the POR, resulting in a
situation analogous to non-use for the PROEXPO program by signatories.
However, the GOC has not abolished the PROEXPO program for the
subject merchandise as required by 19 CFR 355.25(a)(1)(i). In the case
of the CERT program, the GOC has changed the law to eliminate subsidies
and would have to change the law again in order to confer any future
countervailable benefits for the subject merchandise through the CERT
program. In other words, the GOC would have to take a specific action
in the future (e.g., passing a new law or repealing the old law) in
order for any possible countervailable benefits to occur in the future.
As the PROEXPO program is now structured, PROEXPO loans granted at
interest rates at or above the current benchmarks could constitute
countervailable subsidies if the commercial interest rate falls below
the benchmark specified by the suspension agreements. In such a case,
producer/exporters would be eligible for countervailable benefits under
PROEXPO without the GOC taking specific action to change the program
(as would be the case with the CERT program). Thus the GOC has failed
to eliminate the subsidy by abolishing PROEXPO because loans under the
program may in future constitute countervailable subsidies without
further GOC action. Consequently, we determine that PROEXPO has not
been abolished for the subject merchandise as required by 19 CFR
355.25(a)(1)(i), and the Department will not terminate the suspended
investigations.
Comment 9: The GOC asserts that it rendered flower growers
ineligible for any countervailable subsidy under the Plan Vallejo
program for capital equipment. Consequently, the GOC asserts that it
has satisfied the Department's requirement for abolishing programs
``for the merchandise'' found to confer countervailable benefits. The
GOC contends that the Department's preliminary determination is not in
accordance with law because it appears to require that Plan Vallejo as
a whole be abolished rather than simply that it be abolished for the
merchandise.
Department's Position: We disagree with the GOC. The GOC only
formalized its policy of not providing subsidies on the subject
merchandise by abolishing the Plan Vallejo program for the subject
merchandise in April 1991, after the POR. At verification, the
Department reviewed documentation that indicated that no flower
producer/exporters received Plan Vallejo benefits for the subject
merchandise during the POR. (See verification exhibits PV-4 and PV-5.)
However, while producer/exporters did not receive any benefits under
Plan Vallejo, they were eligible for benefits because the GOC had not
changed its law to abolish the program. Consequently, we determine that
the program has not been abolished for the subject merchandise for a
period of three consecutive years as required by 19 CFR
355.25(a)(1)(i), and the Department will not terminate the suspended
investigations.
Comment 10: The GOC argues that because they have not only met
their obligations under side letters provided in connection with the
suspension agreements, but have also exceeded them by taking steps to
reduce, phase out, or eliminate the programs as a whole, there is no
likelihood that countervailable subsidies will be substituted or
replaced. To support their arguments petitioner cites the following: 19
CFR 355.25(a)(1); Manufacturas Industriales de Nogales, S.A. v. United
States, 666 F. Supp. 1562 (CIT 1987); and Leather Wearing Apparel from
Mexico; Final Results of Administrative Review of Countervailing Duty
Order, 50 FR 6024 (February 13, 1985).
The FTC claims that the existence of potentially countervailable
subsidies increases the likelihood of the reactivation of the programs
or their substitution with other countervailable programs after
termination. In the case of CERT, the GOC may simply issue another
decree to change the CERT rate on the subject merchandise. As for
PROEXPO, the FTC asserts that the Department's review cannot establish
the likelihood of PROEXPO's reinstatement or substitution after
termination.
Department's Position: Because we have found that the Plan Vallejo
and PROEXPO programs have not been abolished during the POR, the
conditions of 19 CFR 355.25(a)(1)(i) have not been met, and we will not
terminate the suspension agreements. Therefore, it is unnecessary for
us to address the question of the likelihood of benefits resuming.
Final Results of Review
After considering all of the comments received, we determine that
the signatories have complied with the terms of the suspension
agreement for the period January 1, 1988 through December 31, 1990.
However, we will not terminate the suspension agreement. In order for
us to terminate the suspension agreement the GOC must have abolished
all programs for a period of three consecutive years which is not the
case with Plan Vallejo and PROEXPO.
This administrative review and notice are in accordance with
sections 751(a)(1)(C) of the Tariff Act (19 U.S.C. 1675(a)(1)(C)) and
19 CFR 355.22 and 355.25.
Dated: March 1, 1994.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 94-5307 Filed 3-7-94; 8:45 am]
BILLING CODE 3510-DS-P
