[Federal Register Volume 59, Number 91 (Thursday, May 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11590]
[[Page Unknown]]
[Federal Register: May 12, 1994]
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DEPARTMENT OF COMMERCE
[C-223-601]
Fresh Cut Flowers From Costa Rica; Final Results of
Countervailing Duty Administrative Review and Termination of Suspended
Investigation
AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
review and termination of suspended investigation; fresh cut flowers
from Costa Rica.
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SUMMARY: On February 10, 1994, the Department of Commerce (the
Department) published in the Federal Register (59 FR 6236) the
preliminary results of its administrative review of the Suspension of
Countervailing Duty Investigation; Certain Fresh Cut Flowers From Costa
Rica (52 FR 1356; January 13, 1987) (Agreement). We have now completed
that review and have upheld the results of the preliminary results. We
have determined for the final results that the signatories have
complied with the terms of the agreement during the period January 1,
1991 through December 31, 1991. In addition, we have determined that
the signatories of the agreement on fresh cut flowers have met the
requirements for termination of the suspended investigation.
EFFECTIVE DATE: May 12, 1994.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Patience or Jean Kemp, Office of Agreements Compliance,
International Trade Administration, U.S. Department of Commerce,
Constitution Avenue and 14th Street, NW., Washington, DC 20230;
telephone: (202) 482-3793.
SUPPLEMENTARY INFORMATION:
Background
On February 10, 1994, the Department published in the Federal
Register (59 FR 6236) the preliminary results of its administrative
review of the agreement. We have now completed that review in
accordance with section 751(a) of the Tariff Act of 1930, as amended
(the Act), 19 USC 1675(a) (1988).
Scope of Review
Imports covered by this review are shipments of miniature (spray)
carnations, standard carnations, and pompon chrysanthemums from Costa
Rica. This merchandise is currently classifiable under the Harmonized
Tariff Schedule (HTS) items 0603.10.30 and 0603.10.70. The HTS item
numbers are provided for convenience and Customs purposes. The written
description remains dispositive.
The review covers the period January 1, 1991 through December 31,
1991 and six programs: (1) Tax Credit Certificates; (2) Certificates
for Increasing Exports; (3) Income Tax Exemptions for Export Earnings;
(4) Exporter Credit for Sales Tax and Consumption Tax on Certain
Domestic Purchases; (5) Exporter Exemptions for Taxes and Duties on
Imports; and (6) Accelerated Depreciation.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments from petitioner and rebuttal
comments from respondents (ACOFLOR, the trade association representing
the signatories in these proceedings and the Government of Costa Rica
(GOCR)).
Comment 1: Petitioner argues that all Coast Rican flower producers
and exporters covered by the agreement have not established non-use of
countervailable programs for a period of at least five years. Since the
first administrative review, nine companies have signed on to the
agreement. Petitioner notes that Sec. 355.25(a)(2)(i) of the
Department's regulations states that a suspended investigation may be
terminated if ``[a]ll producers and exporters covered at the time of
revocation by the order or suspension agreement have not applied for or
received any net subsidy on the merchandise for a period of at least
five consecutive years.'' As not all current signatories were covered
by the first review, petitioner argues that they have not been found to
comply with the terms of the agreement for five consecutive years.
Petitioner contends that it is not Department practice to deviate from
its regulations without a demonstration that the unusual facts or
circumstances of a particular case require special consideration.
Petitioner points out that in Ceramic Tile from Mexico; Final Results
of Countervailing Duty Administrative Review and Revocation in Part of
the Countervailing Duty Order (59 FR 2823, 2824, January 19, 1994)
(``Tile from Mexico'') the Department found that a company had
fulfilled the five-year requirement, even though it had not been
reviewed during one review period because it did not ship during that
period. The Department based this determination on the ``unusual facts
and circumstances'' of the case and the lack of a clearly articulated
Department policy detailing the requirements of 19 CFR 355.25(a)(3).
The Department did revoke the order for this company. Petitioner also
notes a Department decision to require that separate administrative
reviews be conducted for each of the review periods. (See Lamb Meat
from New Zealand; Final Results of Countervailing Duty Administrative
Review (58 FR 45,097, August 26, 1993), and the Department's Memorandum
in that review Re: Basis for Revocation of Orders and Terminations of
Suspension Agreements Under 19 CFR 355.25(a)(1) at 4 (12/14/92) (on
file in room B-099, Department of Commerce, Washington, DC).
Respondents argue that the changes to the list of signatories
demonstrate the effectiveness and inclusiveness of compliance measures
established by respondents to assure fulfillment of their obligations
under the agreement. Respondents contend that requiring all those who
happen to appear on the list of signatories as of the period of review
to demonstrate their compliance with the terms of the agreement for a
period of five consecutive years imposes an impossible standard,
especially in the case where a company was newly established during the
five-year review period. Furthermore, respondents state that the 15
original signatories have accounted for at least 85 percent of Costa
Rican exports of subject merchandise to the United States throughout
the life of the agreement. Respondents argue that the Tile from Mexico
case, referred to by petitioner, dealt with partial revocation of a
countervailing duty order and is therefore irrelevant to the current
case. Respondents contend that the language of Sec. 355.25(a)(2), ``at
the time of revocation,'' refers to the current period of review upon
which the determination to terminate is based. Respondents argue that
following petitioner's interpretation would involve the parties in an
endless cycle of ongoing review that the termination provisions are
intended to avoid.
Department's Position: We disagree with petitioner. We recognize
that Sec. 355.25(a)(2)(i) appears to require that, in order for the
Department to terminate a suspended investigation, ``[a]ll producers or
exporters covered at the time of revocation'' must not have ``applied
for or received any net subsidy on the merchandise for a period of at
least five consecutive years.'' As explained below, however, the
Department has determined that the strict reading advocated by the
petitioner is not required by either the statute or the Department's
regulations, and would not be in accordance with the terms of the
agreement suspending the investigation in the present proceeding.
Specifically, section 704(b) of the Tariff Act provides that the
Department may suspend a countervailing duty investigation ``if the
government of the country in which the subsidy practice is alleged to
occur agrees, or exporters who account for substantially all of the
imports'' of the subject merchandise agree, ``to eliminate the subsidy
completely or to offset completely the amount of the net subsidy''
within the appropriate period of time. 19 U.S.C. 1671c(b) (emphasis
added). The statutory language has not been changed since 1987, when
the suspension agreement in this case was entered into. By regulation,
the Department has defined ``substantially all'' of the merchandise in
this context as meaning ``exporters that have accounted for not less
than 85 percent by value or volume of the merchandise during the period
for which the Department is measuring benefits in the investigation or
such other period that the [Department] considers representative.'' 9
CFR 355.18(c).
The regulations only require the addition of new exporters in the
event that the existing signatory exporters no longer account for
substantially all of the merchandise. 19 CFR 355.19(c). Consequently,
for purposes of terminating a suspended investigation under
355.25(a)(2)(i), all that is required is that the same exporters who
have accounted for 85 percent of the merchandise for a period of five
consecutive years have not applied for or received any net subsidy on
the merchandise during that period.
Although not required by the statute, the Department may require
new or additional producers or exporters to become signatories to an
agreement, thus raising the coverage above the 85 percent level, in
order to permit more effective monitoring of the agreement. In this
case, pursuant to the agreement, the GOCR was required to notify the
Department whenever new producers or exporters exported subject
merchandise to the United States, and whether those producers or
exporters had agreed to comply with the terms of the agreement.
Agreement, 52 FR at 1361. To ensure that it met this requirement, the
GOCR required any new or different producer or exporter which exported
a certain volume or value of the subject merchandise to the United
States to become a signatory. These new signatories were required to
comply with the terms of the agreement during each year they were
covered. The new signatories which have been reviewed by the Department
provided a further track record of compliance with the suspension
agreement. This provided the Department with evidence above and beyond
that required under the statute and the Department's regulations for
both coverage and termination.
Finally, we agree with respondents that the Tile from Mexico case
dealt with partial revocation, i.e., a company-specific revocation, of
a countervailing duty order under Sec. 355.25(a)(3) of the Department's
regulations. The regulations contain no similar provision permitting
partial termination of a suspension agreement. Therefore, the Tile from
Mexico determination does not bear on the outcome of this proceeding.
Accordingly, we have determined that section 355.25(a)(2) permits
termination of a suspended investigation whenever the Department
determines that the exporters or producers that originally signed the
suspension agreement have consistently accounted for at least 85
percent of the imports of the subject merchandise for a period of at
least five consecutive years, during which time they did not apply for
or receive any net subsidy on the subject merchandise. In addition, any
new signatories must be found to have complied with the terms of the
agreement during the time they are covered.
The Department has determined that throughout the life of the
present agreement, including during the current review, the producers
and exporters that originally signed the agreement have continued to
account for at least 85 percent of the imports, despite the fact that
new producers or exporters were added to the agreement. See Memo to the
File, dated March 30, 1994, public version on file in room B-099,
Department of Commerce, Washington, DC. In addition, we have determined
that no producer or exporter covered by the agreement has applied for
or received any net subsidy on the subject merchandise during this
review or during any of the previous four reviews. Hence, for a period
of at least five consecutive years after entry into the agreement, the
Department has determined that the producers and exporters that signed
the agreement and that consistently have accounted for substantially
all of the imports of the subject merchandise into the United States
have not applied for or received any net subsidy on the subject
merchandise. Also, the signatories that were later added to the
agreement have complied with the terms of the agreement during each
review period in which they were covered. Therefore, we determine that
the requirements for termination under Sec. 355.25(a)(2)(i) have been
met. Comment 2: Petitioner argues that the Department should decline to
terminate the suspended investigation because all the programs are
still in existence and used by the flower producers and exporters for
non-subject merchandise. Petitioner asserts that after termination, the
former signatories will continue to be eligible to receive benefits for
most of the programs, absent active ACOFLOR intervention and
monitoring. Moreover, petitioner contends that termination would be
inappropriate without updated information covering the 1992 and 1993
review periods.
Petitioner argues that it is not unlikely that the flower producers
and exporters will use the six programs covered by the agreement.
Specifically, petitioner makes the following arguments regarding the
six programs:
(1) Exporter Credit for Sales Tax on Certain Domestic Purchases:
Petitioner argues that there will be no incentive for ACOFLOR or the
GOCR to continue monitoring receipt of benefits under this program.
Petitioner also asserts that there will be incentives for flower
producers and exporters to switch equipment used for the production on
non-subject merchandise, for which exemptions are allowed, to the
production of subject merchandise, for which exemptions are monitored
under the agreement.
(2) Exporter Exemptions for Taxes and Duties on Imports: Petitioner
makes the same arguments as stated above for the Exporter Credit for
Sales Tax on Certain Domestic Purchases.
(3) Accelerated Depreciation: Petitioner argues that, although the
Department has found that no signatories have used accelerated
depreciation, there is no formal or informal mechanism to stop flower
producers and exporters from claiming accelerated depreciation on their
tax forms.
(4) Certificates for Increasing Exports (CIEX): Petitioner argues
that the CIEX program has not been terminated because some Costa Rican
exporters received CIEX benefits in 1991 through a special commission
established in 1984 to pay benefits accrued in earlier years.
Additionally, petitioner contends that there are no formal or informal
measures to render exports of the subject merchandise ineligible for
the benefit.
(5) Tax Credit Certificates (Certificados Abono Tributario CATs)):
Petitioner contends that it is not clear that the CAT program was
terminated as it continues to undergo fundamental changes. Petitioner
also urges that although the Central Bank is not granting CATs in new
export contracts, it is unclear whether the same or different benefits
could be granted without using export contracts which are currently
required to obtain CAT benefits.
(6) Income Tax Exemption for Export Earnings: The agreement
requires exporters to maintain separate accounting records for subject
and non-subject merchandise. Petitioner argues that as only one
company, American Flower, maintains separate records of duty and tax
exemption benefits received for exports of non-subject merchandise, the
Department cannot confirm whether flower producers and exporters have
received countervailable benefits on exports of subject merchandise.
Petitioner contends that flower producers and exporters were eligible
to apply for the income tax exemption if they had tax-exempt export
profits and if they segregated domestic and export sales income in
calculating income tax. Consequently, petitioner asserts, it is
unlikely that new flower producers and exporters not previously subject
to the agreement will maintain separate records for the subject
merchandise.
Respondents argue that the GOCR and ACOFLOR have pledged to
maintain controls to monitor receipt of benefits and that the GOCR is
committed to eliminating incentives that distort trade. Respondents
argue that it is unlikely that the flower producers and exporters will
use the following six programs after termination:
(1) Exporter Credit for Sales Tax on Certain Domestic Purchases:
Respondents argue that, in most cases, it will not always be feasible
for flower producers and exporters to switch equipment from the
production of a product which is non-subject merchandise to subject
merchandise product.
(2) Exporter Exemptions for Taxes and Duties on Imports:
Respondents made the same arguments as above for the Exporter Credit
for Sales Tax on Certain Domestic Purchases.
(3) Accelerated Depreciation: Respondents assert that there are two
separate government agencies, Ministry of Finance and CENPRO, which
have established government controls to block access to the use of
accelerated depreciation.
(4) CIEX: Respondents argue that this program was terminated in
1988. Respondents argue that even if some of the funds authorized for
this program in 1988 were not actually distributed until 1991, the GOCR
made no CIEX distributions to flower producers and exporters. The
respondents also argue that the fact that such funds may have actually
been distributed in 1991 does not alter that fact that the CIEX program
was effectively terminated in 1984 for lack of funding and officially
closed in 1988.
(5) CATs: Respondents argue that the only verified fundamental
changes to the CAT program are those reducing or restricting its
benefits.
(6) Income Tax Exemption for Export Earnings: Respondents contend
that with the continuation of GOCR controls, the GOCR will not grant
exemptions unless the claimant can demonstrate that the income for
which an exemption is sought is not derived from exports of the subject
merchandise. Respondents also note that this program is being phased
out.
Department's Position: Section 355.25(a)(2) of the Department's
regulations provides that the Department may terminate a suspension
agreement despite the fact that the subsidy programs have not been
abolished, provided the Department concludes that the requirements of
this provision are met. As explained in Comment 1, the Department
determines that the original signatories have complied with the terms
of the agreement and the requirements of Sec. 355.25(a)(2)(i).
Regarding Sec. 355.25(a)(2)(ii), ACOFLOR has certified that the
signatories are not likely to apply for or receive any countervailable
subsidies in the future. The GOCR and ACOFLOR have certified that the
control mechanisms to ensure compliance with the agreement will remain
in place if the agreement is terminated. Furthermore, government
officials stated during verification that Costa Rican subsidies in
general were being phased out. In sum, as the Department determined in
the preliminary results of review, the record contains no evidence
indicating that the signatories will apply for or receive any net
subsidy on the subject merchandise in the future. 59 FR at 6238.
Petitioner has offered no arguments which would reasonably contradict
this determination.
In addition, we disagree with each of the petitioner's program-
specific arguments for the following reasons:
(1) Exporter Credit for Sales Tax on Certain Domestic Purchases and
(2) Exporter Exemptions for Taxes and Duties on Imports: The GOCR and
ACOFLOR have certified that the control mechanisms currently in place
to monitor compliance with the agreement will remain in place so that
equipment on which duties or taxes were exempted will not be switched
to the production of subject merchandise after termination.
(3) Accelerated Depreciation: We agree with respondents that there
are formal mechanisms in place at the Ministry of Finance and CENPRO to
prevent flower producers and exporters from claiming accelerated
depreciation. At verification, we found that the signatories have not
used the accelerated depreciation program.
(4) CIEX: We agree with respondents that this program was
terminated in 1988 and that no flower producers or exporters have
received benefits from this program during the five years required for
termination.
(5) CAT: We agree with respondents that all changes during the
period of review to this program have reduced and/or restricted the
receipt of benefits.
(6) Income Tax Exemption for Export Earnings: The agreement
requires signatories to maintain separate accounting records of exports
to receive income tax exemptions for export earnings. Contrary to the
argument of petitioner, the Department has verified that the
signatories maintained these records. A company must maintain separate
accounting records in order to receive an exemption from duties on non-
physically incorporated inputs. Only one company, American Flower,
maintained these separate accounting records for the exemption from
duties on non-physically incorporated inputs, and only American Flower
received this exemption on duties. All companies maintained separate
records of imports eligible for tax and duty exemptions and domestic
purchases eligible for tax credits on inputs physically incorporated
into exports of the subject merchandise.
Further, under Sec. 355.25(b)(2) of the Department's regulations,
the government of the affected country may request termination of a
suspension agreement during the fifth and subsequent annual anniversary
months of the suspension of the investigation. In the current
proceedings, the fifth anniversary month was January 1992 and the
review period for termination is January 1, 1991 through December 31,
1991. Therefore, contrary to petitioner's argument, the fifth
anniversary month, January 1992, and the 1991 review period is the
``time of revocation'' within the meaning of Sec. 355.25(a)(2), and the
Department may terminate the agreement without information regarding
the 1992 and 1993 review periods.
Based upon the foregoing, in accordance with section
Sec. 355.25(a)(2)(ii) of the Department's regulations, we determine
that it is not likely that the producers or exporters will in the
future apply for or receive a net subsidy on the subject merchandise.
Comment 3: Petitioner argues that the ability to export to the U.S.
market is essential for Costa Rican flower producers and exporters to
remain viable. Petitioner asserts that because Costa Rican flower
producers and exporters must compete with hundreds of Colombian flower
producers who dominate the U.S. market, the Costa Rican flower
producers and exporters continue to have a need for flower subsidies.
Respondents counter that throughout the life of the agreement,
Costa Rican flower producers and exporters of the subject merchandise
have been able to compete in the U.S. market without receiving
subsidies. They also argue that the GOCR is committed to eliminating
incentives that distort trade because they are no longer needed to
maintain competitiveness, and because they cost too much.
Department's Position: We disagree with petitioner. As stated in
Comment 1, the original signatories still accounted for substantially
all of the exports of the subject merchandise to the United States in
1991, the period of review. The Department has determined that the
original signatories have not received subsidies on exports of the
subject merchandise to the United States during at least five
consecutive years. Hence, there is no evidence that Costa Rican flower
producers and exporters continue to need subsidies to compete.
Final Results of Review
After considering all of the comments received, we determine that
the signatories have complied with the terms of the agreement for the
period January 1, 1991 through December 31, 1991. In addition, we
determine that the signatories have met the requirements for
termination of the agreement. The original signatories have not applied
for or received any net subsidy on the subject merchandise for five
consecutive years and they have filed the certifications required by 19
CFR Sec. 355.25(b)(2). Based on the foregoing, we determine that there
is no likelihood that the signatories will apply for or receive any net
subsidy in the future. Therefore, we determine to terminate the
Suspension of the Countervailing Duty Investigation on Fresh Cut
Flowers from Costa Rica. As a result, we will also terminate the
reviews in progress for the agreement covering the 1992 and 1993
periods.
The administrative review and notice are in accordance with section
751(a)(1)(C) and 751(c) of the Tariff Act (19 U.S.C. 1675(a)(1)(C) and
1675(c)) and 19 CFR 355.22 and 355.25.
Dated: May 5, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-11590 Filed 5-11-94; 8:45 am]
BILLING CODE 3510-DS-M
