[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Notices]
[Pages 42539-42545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20299]
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DEPARTMENT OF COMMERCE
[C-301-003; C-301-601]
Roses and Other Cut Flowers From Colombia; Miniature Carnations
From Colombia; Final Results of Countervailing Duty Administrative
Reviews of Suspended Investigations
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Countervailing Duty Administrative
Reviews of Suspended Investigations.
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SUMMARY: On October 18, 1994, the Department of Commerce (``the
Department'') published the preliminary results of its administrative
reviews of the agreements suspending the countervailing duty
investigations on roses and other cut flowers (roses) from Colombia and
on miniature carnations (minis) from Colombia. We gave interested
parties an opportunity to comment on the preliminary results. After
reviewing all the comments received, we determine that the Government
of Colombia (GOC) and producers/exporters of roses and minis have
complied with the terms of the suspension agreements during the periods
January 1, 1991, through December 31, 1991, and January 1, 1992,
through December 31, 1992.
EFFECTIVE DATE: August 16, 1995.
FOR FURTHER INFORMATION CONTACT:
Jean Kemp and Stephen Jacques, 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:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are in reference to the provisions as they
existed on December 31, 1994. However, references to the Department's
Countervailing Duties; Notice of Proposed Rulemaking and Request for
Public Comments (54 FR 23366; May 31, 1989) (Proposed Regulations), are
provided solely for further explanation of the Department's
countervailing duty practice. Although the Department has withdrawn the
particular rulemaking proceeding pursuant to which the Proposed
Regulations were issued, the subject matter of these regulations is
being considered in connection with an ongoing rulemaking proceeding
which, among other things, is intended to conform the Department's
regulations of the Uruguay Round Agreements Act (See 60 FR 80 (January
3, 1995)).
Background
On October 18, 1994, the Department published in the Federal
Register (59 FR 52,514) the preliminary results of its administrative
reviews of the agreements suspending the countervailing duty
investigations on roses and minis from Colombia (See Roses and Other
Cut Flowers From Colombia; Suspension of Investigation, 48 FR 2,158
(January 18, 1983); Roses and Other Cut Flowers From Colombia; Final
Results of Countervailing Duty Administrative Review and Revised
Suspension Agreement, 51 FR 44,930 (December 15, 1986); and Miniature
Carnations from Colombia; Suspension of Countervailing Duty
Investigation, 52 FR 1,353 (January 13, 1987)). We have now completed
these administrative 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
The products covered by these administrative reviews constitute two
``classes or kinds'' of merchandise: roses and minis from Colombia.
During the PORs, such merchandise covered by these suspension
agreements was classifiable under Harmonized Tariff Schedule (HTS) item
numbers 0603.10.60, 0603.10.70, 0603.10.80, and
[[Page 42540]]
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.
These reviews of the suspended investigations involve over 450
Colombian flower growers/exporters of roses, over 100 Colombian flower
growers/exporters of minis, as well as the GOC. We verified the
response 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 (8) Air Freight Rates.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. Also, at the request of the GOC, we held a public
hearing on January 9, 1995. We received comments from the respondents,
the GOC and Association de Flores (Asocolflores), and the petitioners,
the Floral Trade Council (FTC).
Comment 1: The FTC asserts that both suspension agreements allow
the Department to terminate the suspension agreements if producers/
exporters account for less than 85 percent of the total exports of the
subject merchandise to the United States and Puerto Rico. Further, the
FTC claims that there is effectively no suspension agreement for the
minis since the GOC does not have an up-to-date list of signatories
during the periods of review (PORs) (See Roses and Other Cut Flowers
From Colombia; Final Results of Countervailing Duty Administrative
Review and Revised Suspension Agreement, 51 FR 44,930, and 44,933
(December 15, 1986); and Miniature Carnation from Colombia; Suspension
of Countervailing Duty Investigation, 52 FR 1,353 and 1,356 (January
13, 1987)).
Department's Position: The suspension agreement on minis states
that should exports to the United States by the producers and exporters
account for less than 85 percent of the subject merchandise imported
directly or indirectly into the United States from Colombia, the
Department may attempt to negotiate an agreement with additional
producers or exporters or may terminate this Agreement and reopen the
investigation under 19 CFR 355.18(b)(3)(c) of the Commerce Regulations.
We have found that the GOC has not maintained an up-to-date list of
signatories for both suspension agreements. However, the GOC reported,
and the Department verified, information for all producers/exporters
during the PORs, regardless of whether they had signed the suspension
agreements. At verification, we reviewed the Colombian Custom
Authority's list of all flower companies exporting minis to the United
States and Puerto Rico for 1991 and 1992 (See verification exhibits D-
VIII and D-IX). In addition, the Department reviewed and verified at
each GOC agency information for all producers of the subject
merchandise, regardless of their signatory status. At the Banco de la
Republica (the Central Bank), we checked computer records of U.S. and
Puerto Rican country identification codes showing that no CERT payments
were made to any flower growers/exporters for shipments of the subject
merchandise. At PROEXPO/BANCOLDEX, we reviewed and verified all loans
issued and outstanding in 1991 (See also Government Verification
Report) and we have determined that the Colombian flower growers/
exporters have complied with the terms of the suspension agreements
during the PORs. Similarly, we verified that no countervailable
benefits were granted to or received by any flower growers/exporters
for Plan Vallejo, Air Freight Rates, Free Industrial Zones, and Export
Credit Insurance Program. Based on this evidence, the Department
verified more than 85 percent of the Colombian flower growers/exporters
during the PORs. Consequently, the Department will neither renegotiate
the minis suspension agreement with the GOC and the growers/exporters
of the subject merchandise, nor terminate the suspension agreements,
nor reopen the investigation. However, the Department may require
respondents to update the list of signatories of the suspension
agreements for future administrative reviews.
Comment 2: The FTC contends that the GOC is unable to monitor the
ultimate shipment destination of exports for which CERT rebates were
granted and therefore unable to monitor compliance with the suspension
agreements with regard to the CERT program (See Miniature Carnations
from Colombia; Final Results of Countervailing Duty Administrative
Review and Determination not to Terminate Suspended Investigation, 59
FR 10,790, and 10,793 (March 8, 1994); FTC Public Factual Submission at
Exhibits 9 and 10 (August 1, 1992); FTC Public Request for Verification
(July 23, 1993)).
Department's Position: We disagree with petitioners. At
verification, the Department reviewed documentation provided by the
four companies and by the Central Bank, including applications and
records of official government approval and disapproval for CERT
payments. The Department also examined export documents (DEX) and other
shipping documents to determine destinations of shipments receiving
CERT payments, and verified that no shipments of the subject
merchandise received CERT payments. We also verified documentation at
the four companies confirming that the GOC did not grant CERT payments
on subject merchandise (See verification reports for each company).
Thus, we have determined that the GOC has adequately monitored the
suspension agreements and has provided the Department of relevant
reports in accordance with the terms of the suspension agreements (See
also Miniature Carnations from Colombia; Final Results of
Countervailing Duty Administrative Review and Determination not to
Terminate Suspended Investigation, 59 FR 10,790 (Comment 7) (March 8,
1994)).
Comment 3: The FTC asserts that export documents offer no objective
support for the conclusion that CERT payments were made only for third-
country exports. The FTC contends that the GOC granted CERT payments on
certain shipments which may either have been transhipped to the United
States without traveling the entire distance to Canada and Europe or
have been reshipped to the United States from the Netherlands Antilles
and Panama (See Associacion Colombiana de Exportadores v. United
States, 704 F. Supp. 1114 (CIT 1989), aff'd 901 F.2d 1089, cert. denied
498 U.S. 848 (1990)). Moreover, the FTC cites the BANCOLDEX annual
report for 1992 and asserts that the GOC admitted that Panama and the
Netherlands Antilles ``have been traditionally identified as
destinations for fictitious and over-invoiced exports'' in order to
receive CERT rebates, and that ``it was precisely for this reason that
the CERT program was abolished for these countries in early 1992.'' The
FTC asserts that the sheer volume shipped to Panama and the Netherlands
Antilles indicates that it was a substantial conduit for transhipment
(See Fresh Cut Roses from Colombia and Ecuador, Inv. Nos. 731-
[[Page 42541]]
TA-684-85, USITC Pub. 2766, at C-7 (March 1994)). Consequently, the FTC
alleges that this is a prima facie breach of the suspension agreements,
which are no longer in the public interest, and that the Department is
required pursuant to 19 U.S.C. 1671c(i) to resume the investigation
and/or issue countervailing duty orders.
The GOC argues that the value of total exports of all Colombian
products to Panama (or even the Netherlands Antilles) does not indicate
that a single flower was transshipped through the Netherlands Antilles.
Contrary to FTC's assertions, the GOC explains that bananas and flowers
are not the largest of Colombia's non-traditional exports; however,
they are the largest agricultural exports.
Department's Position: The suspension agreements obligate Colombian
growers/exporters to renounce CERT payments on exports of the subject
merchandise to the United States and Puerto Rico. Additionally, in
January 1987, the GOC set the level of CERT payments at zero percent
for exports of the subject merchandise. At verification, the Department
fully verified the non-receipt of CERT payments on exports of the
subject merchandise by reviewing the Central Bank's CERT printouts by
destination. At the four companies, we examined several third-country
sales, including sales to Panama and the Netherlands Antilles, by
reviewing the export documents (DEXs), the receipt of payments, and
airway bills. In addition, we examined the ultimate destination of
specific sales of the subject merchandise. Based on the findings of
verification, we found no evidence to support an allegation of
transshipment or reshipment of the subject merchandise. As a result, we
have determined that with respect to this issue the GOC and the flower
growers/exporters were in compliance with the suspension agreements
during the PORs.
Comment 4: The FTC argues that since CERT rebates are not
necessarily tied to third-country exports, the Department should
reconsider its position that ``rebates tied to exports to third
countries do not benefit the production of export of the subject
merchandise.''
Department's Position: It is the Department's policy that rebates
tied to exports to third countries do not benefit the production or
export of the subject merchandise destined for the United States. We
found no evidence in the questionnaire responses or at verification
that would cause us to reconsider our position (See Miniature
Carnations from Colombia; Final Results of Countervailing Duty
Administrative Review and Determination not to Terminate Suspended
Investigation, 59 FR 10,790 (Comment 7) (March 8, 1994)). The
Department verified that Colombian exporters only received CERT
payments based on exports to countries other than the United States
during the PORs. The Department has determined that CERT payments
benefit only those shipments to which they are tied, and not to
shipments of subject merchandise to the United States.
Comment 5: The FTC asserts that the GOC did not comply with the
suspension agreements with regard to Colombian peso (peso) loans for
the following reasons:
First, the FTC claims that were the Department to compare the
interest rates on 1991 and 1992 PROEXPO/BANCOLDEX (BANCOLDEX) loans to
the weighted-average commercial lending published by the International
Monetary Fund (IMF) or the FFA/FINAGRO (FINAGRO) rates during the PORs,
the Department would find that Colombian flower growers/exporters
received loans at preferential interest rates.
Second, the FTC asserts that the Department should not equate
compliance with pre-established benchmark interest rates with
compliance with the terms of the suspension agreement covering minis,
because under the minis suspension agreement the Colombian flower
growers/exporters have two distinct obligations: (1) not not apply for
or receive financing at preferential terms; and (2) not to apply for or
receive financing other than that offered at or above the most recent
benchmark interest rates determined by the Department.
Finally, the FTC argues that if the Department's 1989 benchmark for
minis were to be applied to 1991 and 1992 loans received for roses, the
Department would likely find Colombian producers/exporters receiving
BANCOLDEX loans at preferential rates during the PORs. The 1989 minis
benchmarks set by the Department were tied to the ``Depositors a
Termino Fijo'' (DTF) interest rate, which is based on Colombian
financial institution's 90-day deposit rates, and was set at DTF plus
one percentage point. The FTC asserts that the annual average DTF rate
compared to a sample of individual loan rates for roses exporters shows
these exporters received preferential loans. Consequently, the FTC
asserts that the suspension agreements should either be revised or
found unworkable.
The GOC argues that all Colombian flower producers/exporters of
minis and roses have fully complied with the terms of their respective
suspension agreements. Furthermore, the GOC asserts that the FTC
incorrectly applies the minis benchmark interest rates to loans for
exports of roses. The GOC explains that the current benchmarks for
roses and minis differ, not because there is a defect in the suspension
agreements or because of the Department's approach, but instead because
the FTC had requested a review of only the minis suspension agreement
in 1989. Regardless, the GOC claims that loans issued to roses growers/
exporters met the benchmarks established under the minis suspension
agreement.
Department's Position: The Department disagrees with the FTC. The
Department has determined in previous reviews that any changes to
benchmark interest rates for the suspension agreements should be set
prospectively, since suspension agreements are forward looking
(Miniature Carnations From Colombia; Final Results of Countervailing
Duty Administrative Review and Determination Not To Terminate Suspended
Investigation, 59 FR 10,790, and 10,795 (March 8, 1994)). Because the
Department's benchmarks are prospective and are based on an appropriate
alternative source of financing, loans at or above the benchmark did
not confer any countervailable benefits. Furthermore, the Department
verified that the Colombian flower growers/exporters of the subject
merchandise have fulfilled the two distinct obligations in the
suspension agreements: (1) not to apply for or receive financing at
preferential terms; and (2) not to apply for or receive financing other
than that offered at or above the most recent benchmark interest rates
determined by the Department.
At verification, the Department reviewed all loans issued by
BANCOLDEX during the PORs, in particular the four companies we visited
at verification, and found that the loans granted were on terms
consistent with the suspension agreements. Additionally, because
BANCOLDEX loans were pegged to the floating DTF rate, and the DTF rate
fluctuated widely over the review periods, we did not compare the rate
on an individual loan with the annual average DTF rate. Therefore,
Colombian flower growers/exporters did not apply for or receive
financing at preferential terms, and the Department determines that the
GOC did not confer any countervailable benefits during the PORs, and
that signatories complied with the terms of
[[Page 42542]]
the suspension agreements for the BANCOLDEX programs during the PORs.
Finally, the Department agrees with the respondents that because
the suspension agreements are two separate agreements, it is erroneous
to apply the 1989 minis benchmark interest rates to the roses
suspension agreement.
Comment 6: The FTC asserts that the Department should reconsider
its use of the subsidized FINAGRO interest rate, when establishing new
short- and long-term benchmarks. The FTC argues instead that the
Department use weighted-average interest rates of available non-
government-related financing at commercial lending rates maintained by
the Central Bank during the PORs. In addition, the FTC asserts that the
Department is not required to look to interest rates available to the
agricultural sector, when the rates are not available to flower
growers/exporters (See Rice From Thailand; Preliminary Results of
Countervailing Duty Administrative Review, 57 FR 8,437 and 8,439 (March
10, 1992)).
The FTC asserts that if the Department decides to base its peso
loan benchmarks on FINAGRO interest rates, then it should use the
maximum interest rates for large producers, i.e., DTF plus 6 percentage
points. In addition, the FTC argues that the Department should adjust
the interest rates to reflect the spread between short- and long-term
BANCOLDEX loans. The FTC argues that the Department should not
establish a two-tier benchmark system, or a range of interest rate
benchmarks, because there would be no criteria by which the Department
could determine what is preferential
The GOC assets that the FTC offers no basis upon which the
Department could support a change from a FINAGRO based benchmark to
weighted-average interest rates on available non-government-related
financing at commercial lending rates. The GOC argues that FINAGRO
lending rates are appropriate because the rates are not enterprise or
industry specific, which otherwise would make them a counteravailable
subsidy (See Final Affirmative Countervailing Duty Determination:
Miniature Carnations from Columbia, 52 FR 32,033, and 32,037 (August
25, 1987); and Roses and Other Cut Flowers From Colombia; Final Results
of Countervailing Duty Administrative Review and Revised Suspension
Agreement, 51 FR 44,930, and 44,932 (December 15, 1986)).
The GOC asserts that the Department's benchmarks for peso loans
(DTF plus 6 percentage points, plus 0.25 percentage point for each year
after the first year) are not the actual FINAGRO rates. Instead, the
appropriate benchmark interest rates set by the Departments should be
in accordance with FINAGRO's specified interest rates of January 24,
1992, i.e., DTF plus 2 percentage points for small producers and DTF
plus up to 6 for large producers, with no provisions for an additional
one quarter percentage point for long-term loans. The GOC asserts that
the actual interest rate paid by the borrower is determined by arm's-
length negotiations between the borrower and the financial intermediary
and that the FINAGRO's specified interest rates serve as a cap for any
loans issued by the intermediary bank.
Department's Position: While the Department verified that there is
no single, predominant source of alternative financing in Colombia, we
have determined that FINAGRO, a major intermediary lender to the
agricultural sector, is an appropriate alternative source of financing
for the Department's benchmarks. Because there is insufficient
information on the record about nongovernment-related financing at
commercial rates, we have determined that it is inappropriate to weight
average the commercial interest rates.
The most recent FINAGRO short-term rate is equal to the Colombian
fixed deposit rate, DTF, plus up to 6 percentage points. We agree with
petitioners that by establishing a range of interest rate benchmarks
(i.e., DTF plus up to 6 percentage points), as suggested by
respondents, there is in effect no benchmark because this would be
equivalent to setting the benchmark (minimum rate) at DTF--a rate that
does not reflect commercial rates or an alternative rate of financing.
Therefore, the Department determines that the most recent verified
average interest rate on all loans (administrative review 1993)
financed by FINAGRO through Caja Agraria, i.e., nominal DTF plus 3.66
percentage points, is the appropriate benchmark for short-term
financing. These interest rates were verified in the concurrent 1993
administrative review (See Government Verification Report 1993-
Administrative Review of Countervailing Duty Suspension Agreements on
Roses and Other Cut Flowers and Miniature Carnations from Colombia
(July 21, 1995)). Since BANCOLDEX also administered long-term loans, we
determine that the same nominal DTF plus 3.66 percentage points, plus
an additional 0.25 percentage point for each year after the first is
the appropriate benchmark. Furthermore, loans provided at or above the
benchmark will not be considered preferential (See Comments 5 and 9).
The Department determines not to adopt the two-tier interest rate
system (borrowers can receive different interest rates depending on the
size of the company) because BANCOLDEX loans are not issued on the
basis on the size of flower growers.
The Department determines that the short- and long-term benchmarks
for peso denominated financing will be effective 14 days after the date
of publication of the final results of these administrative reviews.
Comment 7: The FTC requests that the Department weight-average Caja
Agraria interest rates with FINAGRO rates as done in previous reviews.
In the case that there is conflicting data, the FTC suggests rejecting
such data and using best information available.
In response, the GOC claims that the reported Caja Agraria interest
rates are lower than reported FINAGRO rates (Submission of June 3,
1994) and further argues that the submitted information does not
conflict with rates provided in the questionnaire response, which were
reported as applicable rates for different denomination loans.
Department's Position: The Department disagrees with petitioners.
FINAGRO is the major alternative source of agricultural financing in
Colombia that provides rediscount rates to intermediary banks in
Colombia. We have determined that because information submitted by
respondents about Caja Agraria rates conflicts with what we found at
verification and because Caja Agraria's interest rates are similar to
the rates offered by FINAGRO, FINAGRO interest rates represent the best
alternative source of financing for agricultural entities in Colombia.
Comment 8: The FTC asserts that the Department should use effective
rather than nominal interest rates. The FTC contends that effective
rates are a more accurate measure of a subsidy and reflect a
considerably higher rate. The FTC asserts that nominal rates vary
widely, since commissions and other surcharges can add to the cost of a
loan. In addition, the FTC asserts, the GOC has not established that
the financial intermediary does not assess surcharges for its services
or use of its own funds in financing loans.
In response, the GOC argues that the nominal and effective interest
rates are equivalent, because the nominal rate is the rate expressed as
if interest were due at the beginning of each quarter, while the
effective rate is the equivalent rate calculated on the basis of
interest being payable at the end of the quarter. Furthermore, the GOC
argues that there
[[Page 42543]]
are no surcharges by financial intermediaries on BANCOLDEX loans for
the portion of the loan provided by the financial intermediary.
Department's Position: We agree with respondents. The Department
determines that the nominal and effective interest rates are
equivalent, as stated by respondents. In addition, the Department
verified that there are no surcharges by financial intermediaries on
BANCOLDEX loans for the portion of the loan provided by the financial
intermediary. Therefore, we will continue using nominal interest rates.
Comment 9: The FTC contends that the Department must determine
whether Colombian flower growers/exporters have received U.S. dollar
(dollar) loans at preferential interest rates. To the extent that the
suspension agreements restrict the Department's ability to administer
the law, the FTC asserts that the agreements must be terminated or
amended for the PORs.
The FTC asserts that the Department should determine the
countervailability of dollar loans administered by BANCOLDEX during the
PORs because none of the international lending and development
institution funding (i.e., the Corporation Andina de Fomento (CAF),
Banco Latinoamericano de Exportaciones (BLADEX) and Fondo
Latinoamericano de Reservas (FLAR)) satisfy the three criteria
established by the North Star Steel Ohio v. United States, 824 F. Supp.
1074 (CIT 1993); First, the GOC partially funded FLAR and CAF and FLAR
is located in Colombia, that is a ``country under the agreement.''
Second, the FTC asserts that ``the terms and benefits'' of FLAR, CAF
and BLADEX are ``within the purview of the GOC'' since BANCOLDEX
controls the administration of these programs and the distribution of
funds. Third, the FTC contends that the U.S. Government did not fund
either CAF or BLADEX.
The GOC asserts that since the source of funds for the dollar loans
was not the GOC but international lending and development institutions,
there is no legal basis for the Department to declare them
countervailable, regardless of the interest rate (See Proposed CVD
Regulations, 54 FR 23,366, 23,374, and 23,382 (May 31, 1989) Section
355.44(o).
Department's Position: We disagree with respondents. Respondents
suggest that the BANCOLDEX loans funded by the dollars secured from
CAF, FLAR, and BLADEX are non-countervailable because these are
international development or lending institutions. It is long-standing
Department policy that loans from international institutions, such as
the World Bank or the Inter-American Development Bank (IADB), are not
countervailable subsidies (See Final Affirmative Countervailing Duty
Determination: Fuel Ethanol from Brazil, 51 FR 3361, 3375 (January 27,
1986); Final Results of Countervailing Duty Administrative Review; Oil
Country Tubular Goods from Argentina (OCTG), 56 FR 64493 (December 10,
1991); and North Star Steel of Ohio v. United States, 824 F. Supp.
1074, and 1079 (CIT 1993)). Nevertheless, as demonstrated below,
whether the CAF, FLAR, and BLADEX are international development or
lending institutions is irrelevant for this review.
When determining the countervailability of funding supplied by
international institutions, the Department's analysis considers not
only the source of the funding for a particular program, but how those
funds are administered. The Department analyzes whether the
international institution or the government in the recipient country
controls the administration, the terms, conditions, and interest rate
of the loan program. OCTG, 56 FR at 64496. In this context, the
Department is careful to ``distinguish the countervailable benefit
accruing from the government's action from the benefits to the borrower
extended by the international lending institution.'' North Star Steel,
824 F. Supp. at 1079.
According to Article 21 of the 7th Law (January 11, 1991), the
Colombian Congress in its General Rules for Foreign Trade called for
the creation of the Banco de Comercio Exterior de Colombia S.A.
(BANCOLDEX) as a financial institution linked to the Ministry of
Foreign Trade. This law enabled the GOC to replace PROEXPO with
BANCOLDEX and to regulate BANCOLDEX's legal and operational aspects. In
November 1991, the GOC passed decree 2505 officially establishing
BANCOLDEX and defining its legal nature, function, rights, and
obligations. The business purpose of BANCOLDEX consists mainly, but not
exclusively, of the promotion of activities related to exports. To this
end, BANCOLDEX acts as a discount or rediscount bank, rather than as a
direct intermediary. Despite the change in name from PROEXPO to
BANCOLDEX, the same GOC resolutions which governed export loans granted
by PROEXPO govern those granted by BANCOLDEX.
In the North Star Steel case cited above, the Court affirmed the
Department's determination that IADB loans were not countervailable
because the financing was from an international lending institution and
the Government of Argentina had no control over the administration of
the loans. In similar cases, the Department has found a subsidy where a
portion of the loans was provided by the government of the recipient
country involved (Ethanol, 51 FR at 3375). In all cases, it is the
Department's policy, where the funding is international in nature, to
examine the administration of the funding, i.e., the origin and nature
of the loan terms, to determine what party or parties control the
funds. In the OCTG case cited above, the international lending
institution set the interest rates on its loans while the Argentina
government provided only guarantees and had no control over the
interest rate set by the lending institution (See OCTG, 56 FR 64496).
The BANCOLDEX loan programs are an updated version of the PROEXPO
loan programs with the addition of the dollar loan program. The GOC
resolutions governing the BANCOLDEX programs are identical to the
PROEXPO resolutions. Most importantly, BANCOLDEX loans, including the
terms and benefits applicable to those loans, are within the GOC's
control. The interest rates, terms, and conditions of the BANCOLDEX
dollar loans are set or controlled by the GOC through the governing
resolutions, i.e., Resolutions 13/91 and 4/92. Therefore, despite the
source of the funding for the dollar loans, the Department determines
that the dollar loans administered by BANCOLDEX are potentially
countervailable and the Department has calculated dollar benchmarks
accordingly (See Comment 10 below).
Comment 10: the FTC asserts that, by using the annual weighted-
average effective U.S. prime lending rates reported in the Federal
Reserve rather than one quarter of 1994 as done in the preliminary
determination, the Department would find that the dollar denominated
BANCOLDEX loans issued during the PORs were preferential (the weighted-
average U.S. lending rate for 1992 was 8.72 percent, compared to the
dollar denominated loans issued to the five leading exporters of roses
and minis in 1992; See Public questionnaire response). Consequently,
the FTC requests that the Department either terminate the suspension
agreements or remove their reference to benchmarks and determine
compliance with the suspension agreements based on current rates for
1991 and 1992.
However, the FTC argues that should the Department decide to
establish prospective benchmarks, the Department should include dollar
benchmarks for BANCOLDEX loans for
[[Page 42544]]
the following reasons: the Department cannot know whether dollar loans
will continue to be funded by international financial institutions or
whether BANCOLDEX will convert non-funded, peso-based loans to dollar-
based loans. Furthermore, the FTC argues that it is unclear whether
international lending institutions will continue to supply the funding
to BANCOLDEX for these loans.
When setting dollar benchmarks, the FTC argues that instead of the
GOC's proposed benchmark based on the average rate for fixed and
floating loans under $1 million, the Department should compare interest
rates on BANCOLDEX loans to the U.S. Prime rate for comparable
commercial financing as published by the Fedeal Reserve (See Certain
Steel Products from Mexico, 58 FR 37,358 (Dep't Comm. 1993)). Or at
minimum, the FTC argues that the Department should establish multiple
benchmarks reflecting different size loans at fixed or floating rates.
The GOC disagrees with the proposed benchmark and contends that the
Department should adopt the following: first, the Department should use
the average lending rate for loans under $1 million, because some
BANCOLDEX loans at issue are not limited to amounts under $100,000.
Second, because some of the BANCOLDEX dollar loans are floating rates,
the GOC claims that the Department should average the Federal Reserve's
short-term floating and fixed rate for loans under $1 million. Third,
the GOC asserts that the Department should use the most recent
published terms of Federal Reserve lending statistics. Fourth, the GOC
contends that the Department should convert its Prime-base benchmark to
a London Interbank Offered Rate (LIBOR) based benchmark, by taking the
appropriate Prime-based benchmark rate spread, and adding the average
spread between Prime and LIBOR. If not converted to LIBOR, it will
create severe administrative problems for BANCOLDEX to be working
simultaneously with two different base rates. Finally, because the
rates published in the Federal Reserve Bulletin are compound interest
rates, the GOC asserts that the Department should permit the GOC to
freely set the nominal interest rate at whatever level is necessary to
ensure that the effective interest rate equals or exceeds the proposed
benchmark.
Consequently, because the actual rate on short-term BANCOLDEX loans
exceeded the GOC's proposed benchmark rate, there is no basis for
requiring producers/exporters to renegotiate any outstanding loans. If
any dollar loans nonetheless did have to be refinanced or repaid, the
GOC contends that the Department must allow time for this process to
occur (See Comment 9).
Department's Position: The Department agrees with respondents that
the calculation of the dollar loan benchmark in the Department's
preliminary determination was incorrect because it was not necessarily
representative of dollar-based interest rates in Colombia. The
Department has, therefore, modified its calculation of the dollar loan
benchmark in the following manner, which is consistent with the
Department's prior practice (See Final Affirmative Countervailing Duty
Determination: Certain Steel Products from Mexico; 58 FR 37358 (July 9,
1993)) (See Calculation Memo (July 21, 1995)).
The Department determines that LIBOR will be the basis of the
benchmark for dollar loans, because LIBOR is used as the basis for
dollar loan interest rates in Colombia. Therefore, the Department's
benchmark for dollar-based loans in Colombia will be the six-month
LIBOR rate in effect at the time of the loan plus 1.52 percentage
points. The Department determines that the short- and long-term
benchmarks for dollar denominated financing will be effective 14 days
after the date of publication of the final results of these
administrative reviews (See Comment 11 below).
It should be noted that the rate specified here was calculated
based on effective, not nominal, interest rates; the effective rate is
the equivalent to the nominal rate calculated on the basis of interest
being payable at the end of the quarter. BANCOLDEX will now be required
to set the nominal interest rates for dollar-based loans at a level
that is high enough to ensure that the effective interest rates of
these loans are at or above the Department's new benchmark.
Comment 11: The GOC asserts that if any dollar loan needs to be
refinanced or repaid, the Department should grant 90 days after the
publication of the final results for the process of refinancing to
occur. This is the same period initially established in the minis
suspension agreement (52 FR 1355, para. II.B., 1986).
Department's Position: We agree with respondents. The Department,
therefore, determines that the effective date for completing the
repayment and/or refinancing of any outstanding dollar and peso loans
to meet the new short and long-term dollar and peso benchmarks is 90
days after publication of these final results in the Federal Register.
Comment 12: The FTC claims that under the terms of the suspension
agreements the Department is forced to apply outdated/subsidized
benchmark interest rates to determine ``compliance'' with the
suspension agreements. The FTC objects to the Department's practice in
setting prospective and outdated benchmark interest rates to determine
compliance with the terms of the suspension agreements and argues that
the Department should either terminate the suspension agreements with
respect to the BANCOLDEX program, or, at least, amend the agreements by
prohibiting Colombia growers from receiving loans at non-preferential
rates. The FTC asserts that the Department should refrain from
establishing fixed benchmark interest rates, and instead the Department
should determine a benchmark for each review period by adhering to the
precedents set in the Final Affirmative Countervailing Duty
Determination and Countervailing Duty Order, Steel Wire Rope from
Thailand, 56 FR 46299 (September 11, 1991); and Final Results of the
Administrative Review for Rice from Thailand, 59 FR 8,906, and 8,907
(1994).
The FTC claims that the suspension agreements are not in the public
interest because Colombian flower growers/exporters can ``technically''
comply with the terms of the suspension agreements while at the same
time receive loans at preferential interest rates. Because the
benchmarks are outdated, the FTC asserts, they are incapable of
eliminating the net subsidy on flowers. Thus, the FTC contends that if
Colombian flower growers continue to receive loans at preferential
interest rates, the Department should either impose countervailing
duties or fashion a suspension agreement that eliminates the subsidy,
offsets the subsidy completely, or ceases the exports.
In addition, the FTC asserts that the Department cannot predict
future interest rates, especially since interest rates fluctuated
widely between 19 and 32 percent during the POR, or predict what
Colombian flower growers/exporters could receive in non-peso based
interest rates years after establishing benchmarks which may not be
applicable to unforeseen loan programs.
The GOC contends that there are several reasons why loans are non-
preferential: First the Department establishes its benchmark interest
rates as a spread above a base rate--this ties the benchmark interest
rate to a market indicator like the DTF, Prime rate, and/or LIBOR--and
no longer as a fixed interest rate benchmark. Second, GOC
[[Page 42545]]
keeps BANCOLDEX interest rates in line with overall interest rate
levels regardless of the Department's benchmarks. Finally, prospective
benchmarks could be to the advantage, i.e., too low, but just as well
to the disadvantage, i.e., too high, for the Colombia flower growers/
exporters.
Department's Position: The Department disagrees with petitioners.
The Department determines that suspension agreements are forward
looking, and that 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.)).
At verification, the Department examined documentation that
indicated that BANCOLDEX 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
BANCOLDEX 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 BANCOLDEX programs.
Since BANCOLDEX loans were above the benchmark rates, the Department
determines that the GOC did not confer any countervailable benefits
through the BANCOLDEX programs 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 BANCOLDEX programs by Colombian
flower growers/exporters of the subject merchandise. Therefore, there
is no basis for petitioners claim that suspension agreements are not in
the public interest.
To ensure timely updates of the benchmarks for BANCOLDEX financing,
however, the Department may request information on FINAGRO, commercial
dollar loans and other alternative sources of financing in Colombia
outside of the annual administrative review process (See Section III.
Monitoring of the Agreement in Roses and Other Cut Flowers from
Colombia: Final Results of Countervailing Duty Administrative Review
and Revised Suspension Agreement 51 FR 44930 and 44933 (December 15,
1986) and Suspension of Countervailing Duty Investigation: Miniature
Carnations from Colombia 52 FR 1353 and 1355 (January 13, 1987)).
Comment 13: The FTC asserts that according to 19 CFR 355.19(b), the
Department can revise the suspension agreements if it ``has reason to
believe that the signatory government or exporters have violated an
agreement or that an agreement no longer meets the requirements of
section 704(d)(1) of the Act.'' The FTC claims that respondents have
violated the terms of the suspension agreements during the PORs (See
Comments 5 and 9).
The GOC argues that all Colombian flower producers/exporters of
minis and roses have fully complied with the terms of their respective
suspension agreements and that it supports the Department's past policy
of having suspension agreements be forward looking, and that the
Department sets benchmarks interest rates prospectively.
The GOC asserts that there is no need to amend or clarify the
suspension agreements and it was inappropriate for the Department to
have requested comments from interested parties for the following
reasons: first, the suspension agreements cannot be unilaterally
amended or clarified by the Department or the Colombian flower growers/
exporters. Second, the Department has no power to amend or clarify the
agreements without the consent of all signatories. Third, the
Department should first raise the issue with the signatories and
negotiate an amendment, which then can be subject to public comments
(See 19 CFR 355.18(g)).
The GOC contends that there is no basis for considering to amend
the suspension agreements Because dollar loans were provided by
international financial institutions, the GOC asserts that the loans
are non-countervailable and there is no need for the Department to
determine whether these loans were granted on non-preferential terms.
The GOC argues that based on FTC's proposed amendments of the
suspension agreements (See Comment 12), no Colombian flower grower/
exporter would sign such an agreement where signatories would agree to
a blanket commitment to that all PROEXPO/BANCOLDEX loans have to be
``non-preferential'' without any understanding as to how the Department
would interpret that term. Further, the GOC argues that suspension
agreements are supposed to provide certainty so that when BANCOLDEX
loans are issued the GOC knows what rate must be charged to comply with
the suspension agreements.
Department's Position: The Department has determined not to
initiate an amendment to the suspension agreements, based on the
information received. The Secretary has no reason to believe at this
time that the exporters of the subject merchandise have violated the
suspension agreements or that the agreements no longer meet the
requirements of section 704(d)(1). Consequently, the Department will
not currently renegotiate the suspension agreements with the GOC and
the producers/exporters of the subject merchandises and will not
terminate the suspension agreements and reopen the investigation.
Final Results of Reviews
After considering all of the comments received, we determine that
the GOC and the Colombian flower growers/exporters of the subject
merchandise have complied with the terms of the suspension agreements
for the periods January 1, 1991, through December 31, 1991, and January
1, 1992, through December 31, 1992. In addition, we determine that the
peso and U.S. dollar benchmarks established in this final notice will
be effective 14 days after the date of publication of this notice.
Moreover, the Department determines that the effective date for
completing the repayment and/or refinancing for any outstanding peso
and U.S. dollar loans to meet the new short- and long-term benchmarks
in 90 days after publication of these final results in the Federal
Register.
These administrative reviews 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: August 8, 1995.
Susan G. Esserman,
Assistant Secretary for Important Administration.
[FR Doc. 95-20299 Filed 8-15-95; 8:45 am]
BILLING CODE 3510-DS-M
