[Federal Register Volume 64, Number 88 (Friday, May 7, 1999)]
[Notices]
[Pages 24582-24585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11575]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-508-605]
Industrial Phosphoric Acid From Israel: Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Preliminary Results and Partial Rescission of
Countervailing Duty Administrative Review.
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SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty order on industrial
phosphoric acid from Israel for the period January 1, 1997 through
December 31, 1997. For information on the net subsidy for each reviewed
company, as well as for all non-reviewed companies, please see the
Preliminary Results of Review section of this notice. If the final
results remain the same as these preliminary results, we will instruct
the U.S. Customs
[[Page 24583]]
Service to assess countervailing duties as detailed in the Preliminary
Results of Review. Interested parties are invited to comment on these
preliminary results. See Public Comment section of this notice.
EFFECTIVE DATE: May 7, 1999.
FOR FURTHER INFORMATION CONTACT: Dana Mermelstein or Sean Carey, Office
of AD/CVD Enforcement VI, Group II, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone
(202) 482-0984 or (202) 482-3691, respectively.
SUPPLEMENTARY INFORMATION:
Background
On August 19, 1987, the Department published in the Federal
Register (52 FR 31057) the countervailing duty order on industrial
phosphoric acid from Israel. On August 11, 1998, the Department
published a notice of ``Opportunity to Request Administrative Review''
(63 FR 42821) of this countervailing duty order. We received a timely
request for review, and we initiated the review, covering the period
January 1, 1997 through December 31, 1997, on September 29, 1998 (63 FR
51893). In accordance with 19 CFR 351.213(b), this review covers only
those producers or exporters of the subject merchandise for which a
review was specifically requested. Accordingly, this review covers
Rotem-Amfert Negev Ltd. (Rotem) and Haifa Chemicals Ltd. (Haifa). Haifa
did not export the subject merchandise during the period of review
(POR). Therefore, we are rescinding the review with respect to Haifa.
This review covers 11 programs.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the
Act). The Department is conducting this administrative review in
accordance with section 751(a) of the Act. All citations to the
Department's regulations reference 19 CFR Part 351 (1998).
Scope of the Review
Imports covered by this review are shipments of industrial
phosphoric acid (IPA) from Israel. Such merchandise is classifiable
under item number 2809.20.00 of the Harmonized Tariff Schedule (HTS).
The HTS item number is provided for convenience and U.S. Customs
Service purposes. The written description of the scope remains
dispositive.
Subsidies Valuation Information
Period of Review
The period for which we are measuring subsidies is calendar year
1997.
Allocation Period
In British Steel plc. v. United States, 879 F.Supp. 1254 (February
9, 1995) (British Steel), the U.S. Court of International Trade (the
Court) ruled against the allocation period methodology for non-
recurring subsidies that the Department had employed for the past
decade, as it was articulated in the General Issues Appendix appended
to the Final Countervailing Duty Determination; Certain Steel Products
from Austria, 58 FR 37225 (July 9, 1993) (GIA). In accordance with the
Court's decision on remand, the Department determined that the most
reasonable method of deriving the allocation period for nonrecurring
subsides is a company-specific average useful life (AUL). This remand
determination was affirmed by the Court on June 4, 1996. British Steel,
929 F.Supp 426, 439 (CIT 1996). Accordingly, the Department has applied
this method to those non-recurring subsidies that have not yet been
countervailed. Rotem submitted an AUL calculation based on depreciation
expenses and asset values of productive assets reported in its
financial statements. Rotem's AUL was derived by adding the sum of
average gross book value of depreciable fixed assets for ten years and
dividing these assets by the total depreciation charges for the related
periods. We found this calculation to be reasonable and consistent with
our company-specific AUL objective. Rotem's calculation resulted in an
average useful life of 23 years, which we have used as the allocation
period for non-recurring subsidies received during the POR. For non-
recurring subsidies received prior to the POR and already countervailed
based on an allocation period established in an earlier segment of the
proceeding, it is not reasonable or practicable to reallocate those
subsidies over a different period of time. Since the countervailing
duty rate in earlier segments of the proceeding was calculated based on
a certain allocation period and resulted in a certain benefit stream,
redefining the allocation period in later segments of the proceeding
would entail taking the original grant amount and creating an entirely
new benefit stream for that grant. Such a practice may lead to an
increase or decrease in the total amount countervailed and, thus, would
result in the possibility of over- or under-countervailing the actual
benefit. Therefore, for purposes of these preliminary results, the
Department is using the original allocation period assigned to each
non-recurring subsidy received prior to the POR. See Certain Carbon
Steel Products from Sweden; Final Results of Countervailing Duty
Administrative Review, 62 FR 16549 (April 7, 1997).
Privatization
Israel Chemicals Limited (ICL), the parent company which owns 100
percent of Rotem's shares, was partially privatized in 1992, 1993,
1994, and 1995. In this administrative review, the Government of Israel
(GOI) and Rotem reported that additional shares of ICL were sold in
1997. We have previously determined that the partial privatization of
ICL represents a partial privatization of each of the companies in
which ICL holds an ownership interest. See Final Results of
Countervailing Duty Administrative Review; Industrial Phosphoric Acid
from Israel, 61 FR 53351, 53352 (October 11, 1996) (1994 Final
Results). In this review and prior reviews of this order, the
Department found that Rotem and/or its predecessor, Negev Phosphates
Ltd., received non-recurring countervailable subsidies prior to these
partial privatizations. Further, the Department found that a portion of
the price paid by a private party for all or part of a government-owned
company represents partial repayment of prior subsidies. See GIA, 58 FR
at 37262. Therefore, in 1992, 1993, and 1995 reviews, we calculated the
portion of the purchase price paid for ICL's shares that is
attributable to repayment of prior subsidies. In the 1994
privatization, less than 0.5 percent of ICL shares were privatized. We
determined that the percentage of subsidies potentially repaid through
this privatization could have no measurable impact on Rotem's overall
net subsidy rate. Thus, we did not apply our repayment methodology to
the 1994 partial privatization. See 1994 Final Results, 61 FR at 53352.
However, we are applying this methodology to the 1997 partial
privatization because 17 percent of ICL's shares were sold. This
approach is consistent with our findings in the GIA and Department
precedent under the URAA. See e.g., GIA, 58 FR at 37259; Certain Hot-
Rolled Lead and Bismuth Carbon Steel Products from the United Kingdom;
Final Results of Countervailing Duty Administrative Review, 61 FR 58377
(November 14, 1996); Final Affirmative Countervailing
[[Page 24584]]
Duty Determination: Certain Pasta from Italy, 61 FR 30288 (June 14,
1996).
Grant Benefit Calculations
To calculate the benefit for the POR, we followed the same
methodology used in the final results of the 1996 administrative
review. We converted Rotem's shekel-denominated grants into U.S.
dollars, using the exchange rate in effect on the date the grant was
received. We then applied the grant methodology to determine the
benefit for the POR. See Industrial Phosphoric Acid from Israel; Final
Results of Countervailing Duty Administrative Review, 63 FR 13626,
13633 (March 20, 1998) (1995 Final Results).
Discount Rates
We considered Rotem's cost of long-term borrowing in U.S. dollars
as reported in the company's financial statements for use as the
discount rate used to allocate the countervailable benefit over time.
However, this information includes Rotem's borrowing from its parent
company, ICL, and thus does not provide an appropriate discount rate.
Therefore, we have turned to ICL's cost of long-term borrowing in U.S.
dollars in each year from 1984 through 1997 as the most appropriate
discount rate. ICL's interest rates are shown in the notes to the
company's financial statements, public documents which are in the
record of this review. See Comment 9 in the 1995 Final Results (63 FR
at 13633-4).
Analysis of Programs
I. Programs Conferring Subsidies
A. Encouragement of Capital Investments Law (ECIL)
The ECIL program is designed to encourage the distribution of the
population throughout Israel, to create new sources of employment, to
aid the absorption of immigrants, and to develop the economy's
production capacity. To be eligible for benefits under the ECIL,
including investment grants, capital grants, accelerated depreciation,
reduced tax rates, and certain loans, applicants must obtain approved
enterprise status. Investment grants cover a percentage of the cost of
the approved investment, and the amount of the grant depends on the
geographic location of eligible enterprises. For purposes of the ECIL
program, Israel is divided into three zones--Development Zones A and B,
and the Central Zone. Under the ECIL program the Central Zone was not
eligible for benefits. In Final Affirmative Countervailing Duty
Determination: Industrial Phosphoric Acid From Israel, 52 FR 25447
(July 7, 1987) (IPA Investigation), the Department found the ECIL grant
program to be de jure specific because the program limits the
availability of grants to enterprises located in specific regions. In
this review, no new information or evidence of changed circumstances
has been submitted to warrant reconsideration of this determination.
Rotem is located in Development Zone A, and received ECIL
investment, drawback, and capital grants in disbursements over a period
of years for several projects. As explained in the ``Allocation
Period'' section above, for grants that have been allocated in prior
administrative reviews, we are continuing to use the allocation period
assigned to these grants. For grants received during the POR, we have
used the AUL calculated by Rotem in this review, which is 23 years. To
calculate the benefit for the POR, we followed the same methodology
used in the final results of the 1995 administrative review, as
indicated in the ``Grant Benefit Calculations'' section above.
To calculate the total subsidy in the POR, we first summed the
grant amounts allocated to and received in 1997, after taking into
account the partial privatizations in 1992, 1993, 1995, and 1997. To
derive the subsidy rates, as discussed in the 1995 Final Results, we
attributed ECIL grants to a particular facility over the sales of the
product produced by that facility plus sales of all products into which
that product may be incorporated. Accordingly, we attributed ECIL
grants to Rotem's phosphate rock mines to total sales; we attributed
grants to Rotem's green acid facility to total sales minus direct sales
of phosphate rock; and, finally, we attributed grants to Rotem's IPA
facilities to sales of IPA, MKP, fertilizers, and ``IPA-Akonomika'' and
MKP-HCL (by-products of IPA production which contribute to Rotem's
sales revenue). We summed the rates obtained on this basis, and
preliminarily determine the net countervailable subsidy from this
program to be 5.43 percent ad valorem for the POR.
B. Infrastructure Grant Program
Under the Infrastructure Grant Program, the GOI establishes new
industrial areas by partially reimbursing companies for their costs of
developing the infrastructure in certain geographical zones. Rotem
received assistance under this program during the POR. Therefore,
within the meaning of section 771(5)(B)(i), a subsidy is bestowed
because the GOI provided a financial contribution, which conferred a
benefit. We analyzed whether this program is specific within the
meaning of section 751(5A)(D) of the Act. Because the infrastructure
grants are limited to an enterprise or industry located in certain
zones within the jurisdiction of the authority providing the subsidy,
we find this program to be regionally specific in accordance with
section 771(5A)(D)(iv). We view these grants as non-recurring based on
the analysis set forth in the ``Allocation'' section of the GIA (58 FR
at 37226) because these benefits are exceptional, and the company
cannot expect to receive benefits on an ongoing basis from review
period to review period. Therefore, we calculated the benefit under
this program using the methodology for non-recurring grants noted above
in the ``Grant Benefit Calculations'' section. We then divided the
grant amount by Rotem's total sales because the grant benefitted
Rotem's total production. On this basis, we preliminarily determine the
net countervailable subsidy from this program to be 0.22 percent ad
valorem.
II. Programs Preliminarily Determined To Be Not Used
We examined the following programs and preliminarily determined
that the producer and/or exporter of the subject merchandise did not
apply for or receive benefits under these programs during the POR:
A. Encouragement of Industrial Research and Development Grants
(EIRD)
B. Environmental Grant Program
C. Reduced Tax Rates under ECIL
D. ECIL Section 24 loans
E. Dividends and Interest Tax Benefits under Section 46 of the ECIL
F. ECIL Preferential Accelerated Depreciation
G. Exchange Rate Risk Insurance Scheme
H. Labor Training Grants
I. Long-term Industrial Development Loans
Preliminary Results of Review
In accordance with 19 CFR 351.213(b), we calculated an individual
subsidy rate for each producer/exporter subject to this administrative
review. For the period January 1, 1997 through December 31, 1997, we
preliminarily determine the net subsidy for Rotem to be 5.65 percent ad
valorem. If the final results of this review remain the same as these
preliminary results, the Department intends to instruct the U.S.
Customs Service (Customs) to assess countervailing duties as indicated
above. The Department also intends to instruct Customs to collect cash
deposits of estimated countervailing duties as indicated above of the
f.o.b. invoice price on all shipments of the subject merchandise from
reviewed companies, entered, or withdrawn from warehouse, for
consumption on or after
[[Page 24585]]
the date of publication of the final results of this review. Because
the URAA replaced the general rule in favor of a country-wide rate with
a general rule in favor of individual rates for investigated and
reviewed companies, the procedures for establishing countervailing duty
rates, including those for non-reviewed companies, are now essentially
the same as those in antidumping cases, except as provided for in
section 777A(e)(2)(B) of the Act. The requested review will normally
cover only those companies specifically named. See 19 CFR 351.213(b).
Pursuant to 19 CFR 351.212(c), for all companies for which a review was
not requested, duties must be assessed at the cash deposit rate, and
cash deposits must continue to be collected, at the rate previously
ordered. As such, the countervailing duty cash deposit rate applicable
to a company can no longer change, except pursuant to a request for a
review of that company. See Federal-Mogul Corporation and The
Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and
Floral Trade Council v. United States, 822 F. Supp. 766 (CIT 1993).
Therefore, the cash deposit rates for all companies except those
covered by this review will be unchanged by the results of this review.
We will instruct Customs to continue to collect cash deposits for non-
reviewed companies at the most recent company-specific or country-wide
rate applicable to the company. Accordingly, the cash deposit rates
that will be applied to non-reviewed companies covered by this order
will be the rate for that company established in the most recently
completed administrative proceeding under the URAA. If such a review
has not been conducted, the rate established in the most recently
completed administrative proceeding conducted pursuant to the statutory
provisions that were in effect prior to the URAA amendments, is
applicable. See 1992/93 Final Results, 61 FR 28842. These rates shall
apply to all non-reviewed companies until a review of a company
assigned these rates is requested. In addition, for the period January
1, 1997 through December 31, 1997, the assessment rates applicable to
all non-reviewed companies covered by this order are the cash deposit
rates in effect at the time of entry.
Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of
publication of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these preliminary
results. Case briefs must be submitted within 30 days after the date of
publication of this notice, and rebuttal briefs, limited to arguments
raised in case briefs, must be submitted no later than five days after
the time limit for filing case briefs. Parties who submit argument in
this proceeding are requested to submit with the argument: (1) a
statement of the issues, and (2) a brief summary of the argument. Case
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, within 30
days of the date of publication of this notice, interested parties may
request a public hearing on arguments to be raised in the case and
rebuttal briefs. Unless the Secretary specifies otherwise, the hearing,
if requested, will be held two days after the date for submission of
rebuttal briefs, that is, thirty-seven days after the date of
publication of these preliminary results. Representatives of parties to
the proceeding may request disclosure of proprietary information under
administrative protective order no later than 10 days after the
representative's client or employer becomes a party to the proceeding,
but in no event later than the date case briefs, under 19 CFR
351.309(c)(ii), are due. The Department will publish the final results
of this administrative review, including the results of its analysis of
issues raised in any case or rebuttal brief or at a hearing.
These preliminary results are issued and published in accordance
with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1)
and 19 U.S.C 1677f(i)(1)).
Dated: May 3, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-11575 Filed 5-6-99; 8:45 am]
BILLING CODE 3510-DS-P
