01-25974. Preliminary Negative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination: IQF Red Raspberries From Chile

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

The Department of Commerce (the “Department”) preliminarily determines that countervailable subsidies are not being provided to producers or exporters of individually quick frozen (“IQF”) red raspberries in Chile.

EFFECTIVE DATE:

October 16, 2001.

FOR FURTHER INFORMATION CONTACT:

Craig Matney or Andrew Covington, Office of Antidumping/Countervailing Duty Enforcement, Group 1, Import Administration, U.S. Department of Commerce, Room 3099, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone [phone] and [phone], respectively.

Petitioners

The petition in this investigation was filed by the IQF Red Raspberries Fair Trade Committee (“Committee”) and its members (collectively referred to hereinafter as “the petitioners”). The Committee is an ad hoc association of growers and processors of IQF red raspberries. All of the members of the Committee are producers of IQF red raspberries.

Case History

On June 28, 2001 the Department published in the Federal Register the notice initiating this investigation (Initiation of Countervailing Duty Investigation: IQF Red Raspberries from Chile, 66 FR 34423, June 28, 2001) (“Initiation Notice”). Since the Initiation Notice, the following events have occurred.

On July 9, 2001, we issued a countervailing duty questionnaire to the Government of Chile (“GOC”). Due to the large number of producers and exporters of IQF red raspberries in Chile, we decided to limit the number of responding companies to the three producers/exporters with the largest volumes of exports to the United States during the period of investigation (see July 5, 2001, memorandum entitled “Respondent Selection”). We issued countervailing duty questionnaires to these three companies, Comercial Fruticola S.A. (“Comfrut”); Exportadora Frucol Ltda. (“Frucol”); and Fruticola Olmue S.A. (“Olmue”), also on July 9.

On August 3, 2001, the petitioners requested that the Department extend the deadline for the preliminary determination in this investigation. Pursuant to section 351.205(f)(1) of our regulations, the Department extended this deadline until October 9, 2001 (66 FR 42994, August 16, 2001).

The Department received the GOC and company questionnaire responses on August 20, 2001. The Department issued supplemental questionnaires to the GOC and the three companies on September 17, 2001, and received responses to those questionnaires on September 24, 2001.

On October 3, 2001, we received a request from the petitioners, pursuant to section 351.210(b)(4)(i) of our regulations, to postpone the final determination in this investigation to coincide with the final determination in the companion antidumping duty investigation of IQF red raspberries from Chile. Accordingly, we are aligning the final determinations in these investigations.

Scope of Investigation

The products covered by this petition are imports of IQF red raspberries, whole or broken, from Chile, with or without the addition of sugar or syrup, regardless of variety, grade, size or horticulture method (e.g., organic or not), the size of the container in which packed, or the method of packing. The scope of the petition excludes fresh red raspberries and block frozen red raspberries (i.e., puree, straight pack, juice stock, and juice concentrate).

Comment on Scope

In the Initiation Notice, we invited comments on the scope of this proceeding (see 66 FR at 34423). In the companion antidumping duty investigation, parties filed comments regarding inclusion in the scope of so-called “dirty crumbles.” Dirty crumbles are broken IQF red raspberries which have a high level of defects, as well as stems, leaves, and mold.

In order to maintain a consistent scope in the antidumping and countervailing duty proceedings, we have placed those comments and our decision memorandum in the file of this proceeding (see September 26, 2001 Memorandum to the File re: Scope). We determined that dirty crumbles are within the scope of the proceedings on IQF red raspberries from Chile.

The Applicable Statute

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 effective January 1, 1995 (the “Act”). All citations to our regulations refer to 19 CFR part 351 (April 2001).

Injury Test

Because Chile is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, the International Trade Commission (ITC) is required to determine whether imports of the subject merchandise from Chile materially injure, or threaten material injury to, a U.S. industry. On July 25, 2001, the ITC published its preliminary determination finding that there is a reasonable indication that an industry in the United States is being materially injured by reason of imports from Chile of the subject merchandise (66 FR 38740, July 25, 2001).

Period of Investigation (“POI”)

The period for which we are measuring subsidies is calendar year 2000.

Subsidies Valuation Information

Benchmarks for Loans: To calculate the countervailable benefit from loans, we have used U.S. dollar borrowing rates in Chile, as submitted by the GOC. We have used dollar rates, in accordance with section 351.505(a)(2)(i) of our regulations, because the loans and interest in question were denominated in U.S. dollars.

Allocation Period: In accordance with section 351.524(d)(2)(i) of our regulations, we have used a 12-year allocation period based on the Internal Revenue Service's 1977 Class Life Depreciation Range System. None of the responding companies disputed this allocation period.

Attribution of Subsidies: Section 351.525(a)(6) of our regulations directs that the Department will attribute subsidies received by certain affiliated companies to the combined sales of those companies. Based on our review of the responses, we find that “cross ownership” exists with respect to certain companies, as described below, and have attributed subsidies accordingly.

Comfrut: Comfrut has responded on behalf of itself and two affiliated companies, Frutas y Hortalizas Del Sur (“Frusur”) and Agricosa S.A. (“Agricosa”). Based on the proprietary details of the relationships between these companies, we preliminarily determine that cross ownership exists with respect to these companies and that subsidies received by the three companies are properly attributed to the combined sales of the three companies. We further determine that cross ownership exists with respect to certain other companies affiliated with one or more of these companies and that those companies did not receive subsidies that were transferred to Comfrut, Frusur, or Agricosa. For a full discussion of these issues, see October 9, 2001 Proprietary Memorandum to the File, entitled “Attribution of Subsidies in CVD Investigation of IQF Red Raspberries from Chile.”

Frucol: Frucol has responded on behalf of itself and Sociedad Agricola Machicura (“Agricola Machicura”). Based on the proprietary details of the relationships between these companies, we preliminarily determine that cross ownership exists with respect to these companies and that subsidies received by both are properly attributed to the combined sales of the two companies. We further determine that cross ownership exists with respect to certain other companies affiliated with Frucol and/or Agricola Machicura, and that those companies did not receive subsidies that were transferred to Frucol or Agricola Machicura. For a full discussion of these issues, see October 9, 2001 Proprietary Memorandum to the File, entitled “Attribution of Subsidies in CVD Investigation of IQF Red Raspberries from Chile.”

Olmue: Olmue has responded on behalf of itself and Tecnofrio Cautin S.A. (“Tecnofrio Cautin”). Based on the proprietary details of the relationships between these companies, we preliminarily determine that cross ownership exists with respect to these companies and that subsidies received by both are properly attributed to the combined sales of the two companies. However, Olmue reported that Tecnofrio Cautin did not operate during the POI and did not use any of the programs during the POI. Therefore, we have based our calculations only on Olmue's subsidies and sales. We further determine that cross ownership exists with respect to certain other companies affiliated with Olmue and Tecnofrio Cautin, and that those companies did not receive subsidies that were transferred to Olmue or Tecnofrio Cautin. For a full discussion of these issues, see October 9, 2001 Proprietary Memorandum to the File, entitled “Attribution of Subsidies in CVD Investigation of IQF Red Raspberries from Chile.”

Analysis of Programs: Based upon our analysis of the petition and the responses to our questionnaires, we determine the following:

I. Program Preliminarily Determined To Be Countervailable

Law No. 18,634 (Deferrals, Credits and Waivers for Capital Goods Purchases)

Law Number 18,634 of August 5, 1987, established a three-pronged program related to purchases of capital equipment and subsequent export of products produced with that equipment. Under the first prong, referred to as the “duty deferral prong,” both exporters and non-exporters are allowed to defer paying duties on designated capital goods that are imported. During the deferral period, the amount of duties owed is treated as a loan on which the producer is required to pay interest. Under the second prong of the program, referred to as the “fiscal credit prong,” both exporters and non-exporters can apply for a fiscal credit when they purchase the same designated capital goods from domestic suppliers. The fiscal credit also functions as a loan on which the producer is required to pay interest.

Under the third prong of the program, referred to as “the waiver prong,” the deferred duties and fiscal credits, and the accrued interest can be waived. Eligibility for the waivers and the amounts of the waivers are dependent upon exportation. In November 1998, the waiver portion of Law 18,634 was eliminated. However, producers that had applied to receive benefits under Law 18,634 prior to that time continue to be eligible for waivers based on those applications.

In Preliminary Negative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Determination: Fresh Atlantic Salmon from Chile (62 FR 61803, November 19, 1997) (“Salmon—Preliminary Determination”), we analyzed the different prongs of Law 18,634 separately. We determined that the duty deferral prong was not specific within the meaning of section 771(5A) and, therefore, did not confer a countervailable benefit. Regarding the second prong, the fiscal credit for purchases of capital equipment produced in Chile, we found specificity and a countervailable subsidy. Our specificity determination was based on the requirement that the producer purchase the capital equipment from domestic sources (see section 771(5A)(C) of the Act). Finally, we found that the waiver prong of Law 18,634 provided a countervailable subsidy. The waivers were specific by virtue of being contingent upon exportation (see section 771(5A)(B) of the Act), and the benefit was a grant in the amount of the waiver.

In Final Negative Countervailing Duty Determination: Fresh Atlantic Salmon from Chile (63 FR 31437, June 9, 1998) (“Salmon—Final Determination”), we applied a different analysis to Law 18,634. Instead of analyzing the individual prongs, we examined the program in its entirety.

We determined that all benefits provided under Law 18,634, when viewed this way, constituted export subsidies because “their overarching purpose ... is to promote exports” (63 FR at 31442).

For purposes of the preliminary determination in this proceeding, we are following the analytical framework used in Salmon—Preliminary Determination. This framework is most consistent with section 351.514(a) of our regulations, which states:

* * * the Secretary will consider a subsidy to be contingent upon export performance if the provision of the subsidy is, in law or in fact, tied to actual or anticipated exportation or export earnings, alone or as one of two or more conditions.

Because the subsidies provided under the waiver prong differ from the subsidies provided under the other prongs of Law 18,634 and the eligibility criteria vary under the different prongs, we preliminarily determine that the duty deferrals and fiscal credits are not contingent upon exportation or anticipated exportation. We note, however, that even if we were to apply the analytical framework used in Salmon—Final Determination, it would not change our negative preliminary determination in this proceeding.

Duty Deferrals: A Chilean producer who imports capital equipment designated in Decree No. 506 (June 17, 1999) can apply to the Chilean Customs Service for a duty deferral. Payment of the deferred amount is staged, with equal installments due in the third, fifth and seventh years after importation. In addition to paying the deferred amount, the producer also pays interest at a rate set by the Central Bank of Chile.

We preliminarily determine that the duty deferral prong of Law 18,634 is not specific within the meaning of section 771(5)(A) of the Act. Duty deferrals are contingent neither upon exportation nor use of domestic goods as a matter of law, and Law 18,634 does not limit the industries in Chile that can receive duty deferrals. Moreover, information submitted by the GOC indicates that duty deferrals are used by a wide variety of industries in Chile, and that the industry producing the subject merchandise does not receive a predominant or disproportionate share of the deferrals. Therefore, we preliminarily determine that the duty deferral prong under Law 18,634 does not confer a countervailable benefit.

Fiscal Credits: Under this prong, companies purchasing domestically produced capital equipment designated in Decree No. 506 can borrow up to 73 percent of the amount of customs duties that would have been paid on the capital goods if they had been imported. The repayment of this fiscal credit, plus interest, is made according to the same schedule described above for duty deferrals.

We preliminarily determine that the fiscal credit prong of Law 18,634 is specific within the meaning of section 771(5A)(C) of the Act because receipt of the credit is contingent upon the use of domestic goods. We also preliminarily determine that the fiscal credit is a direct transfer of funds (see section 771(5)(D)(i) of the Act) that provides a benefit in the amount of the difference between the interest the company pays on the fiscal credit and the interest the company would pay for a comparable commercial loan (see section 771(5)(E)(ii) of the Act). Therefore, we preliminarily determine that the fiscal credit prong of Law 18,634 confers a countervailable subsidy.

Olmue had fiscal credits outstanding during the POI.

To calculate the benefit of these credits to Olmue, we treated the fiscal credits outstanding during the POI as long-term loans taken out at the time of importation. We used the benchmark rate described above in the “Benchmarks for Loans” section as the measure of what the recipient would have paid for comparable commercial loans.

Applying the loan methodology described in section 351.505(c)(2) of our regulations, we calculated the interest savings received by Olmue in the POI. With one exception, the capital equipment for which Olmue received fiscal credits was used for all products produced by the company. Thus, we have divided the interest savings from these fiscal credits by Olmue's total sales. The one exception involved capital equipment used exclusively to produce non-subject merchandise. Therefore, we have not included the interest savings on this fiscal credit in the calculation of Olmue's benefit.

On this basis, we preliminarily determine that the subsidy under the fiscal credit prong of Law 18,634 is 0.00 percent ad valorem for Olmue.

The GOC stated in its response that the fiscal credit prong of Law 18,634 is not an import substitution program. Instead, according to the GOC, this prong of the program is intended to encourage capital investment in Chile and to avoid a preference for imported capital goods resulting from the duty deferral prong.

We will consider this claim further for our final determination, but note that we addressed a similar claim by the GOC in Salmon—Final Determination (66 FR at 31442). In the salmon case, the GOC argued that the Department should look at the duty deferral and fiscal credit prongs of Law 18,634 as a single program. We disagreed, stating that to do so would amount to “picking and choosing which elements of the law should be combined in order to achieve the result that the loans to purchasers of domestic equipment are not specific” (see id.).

Waivers: Chilean producers that received duty deferrals and fiscal credits under Law 18,634 can have the duties and credits waived if the producers export merchandise manufactured with the capital equipment covered by the deferral or credit. Comfrut and Frucol received waivers during the POI.

We preliminarily determine that the waiver prong of Law 18,634 is specific within the meaning of section 771(5A)(B) of the Act because receipt of the waivers is contingent upon exportation. We also preliminarily determine that the waiver is a direct transfer of funds (see section 771(5)(D)(i) of the Act) that provides a benefit in the amount of the duty or fiscal credit waived (see section 351.508(a) of our regulations). Therefore, we preliminarily determine that the waiver prong of Law 18,634 confers a countervailable subsidy.

Consistent with Salmon—Preliminary Determination (unchanged in final), we have treated the waivers as recurring benefits (see 62 FR at 61805, and section 351.524( c)(1) of our regulations). Consequently, we have summed the waivers received in the POI and divided these by the appropriate export sales (all exports, all frozen exports, or raspberry exports) for both recipients. For certain waivers received by Comfrut, we lacked the correct sales information. We intend to request this information for our final determination.

On this basis, we preliminarily determine that the subsidy under the waiver prong of Law 18,634 is 0.17 percent ad valorem for Comfrut and 0.64 percent ad valorem for Frucol.

II. Program Preliminarily Determined Not To Confer a Subsidy During the POI

Fund for the Promotion of Agricultural Exports/ProChile Export Promotion Assistance

Chile's Fund for the Promotion of Agricultural Exports (FPEA) co-finances up to 50 percent of the cost of export promotion activities. Companies can seek assistance from the FPEA for conducting market surveys and for projects that help the companies enter and remain in particular markets. The types of expenses that the FPEA will co-finance include: advertising and promotion, office space rental, studies, and operating expenses at trade fairs.

Between 1995 and 1998, the FPEA operated under the direction of a committee including officials from the Ministry of Agriculture, ProChile (Chile's Export Promotion Bureau), and agricultural associations. Day-to-day operations were centralized at ProChile.

Beginning in 1999, the National Contest for Export Promotion (“Contest”) was developed in order to allocate export promotion resources as effectively as possible. The Contest is open to persons exporting (or seeking to export) agricultural products, whether fresh, frozen or at different stages of processing. Once the plans are submitted, they are reviewed and ranked by ProChile, and the best are accepted.

None of the responding companies participated directly in export promotion programs co-financed by the FPEA through ProChile. However, two frozen food trade associations which include the responding companies among their members did participate in projects which were co-financed by the FPEA through ProChile. The first project, in 1998, supported the first meeting of the International Berries Association. The second project, also in 1998, supported publicity for a variety of IQF fruits and vegetables in Europe, Latin America, and North America. The third project, in 1999, supported the travel of three officials (not from the responding companies) to the second meeting of the International Berries Association.

Under section 351.514(b) of our regulations, government activities to promote exports do not confer a benefit if the activities consist of general informational activities that do not promote particular products over others. Based on the information in the GOC's response, we preliminarily determine that the projects which were co-financed by the FPEA through ProChile promoted specific products. Therefore, we preliminarily determine that this assistance does not fall within the exception provided by section 351.514(b) of our regulations.

Instead, we preliminarily determine that the co-financing provided by the FPEA through ProChile confers a countervailable subsidy within the meaning of section 771(5) of the Act. The co-financing is specific within the meaning of section 771(5A)(B) of the Act because its receipt is tied to the anticipated exportation of merchandise covered by the project. Also, the co-financing is a direct transfer of funds from the GOC (see section 771(5)(D)(i) of the Act) providing a benefit in the amount granted (see section 351.504(a) of our regulations).

We are treating this assistance as “non-recurring” based on the factors identified in section 351.524(c)(2) of our regulations. In particular, each project funded by the FPEA/ProChile requires a separate application and approval, and the projects represent one-time events. This is consistent with our treatment of export assistance provided by ProChile in Salmon—Preliminary Determination (62 FR at 61804-5) (unchanged in final).

To calculate the countervailable subsidy, we used the allocation methodology described in section 351.524(b) of our regulations. Because the amounts approved in 1998 and 1999 were less than 0.5 percent of the value of appropriate exports in those years, we expensed the benefits in the years of receipt (see section 351.524(b)(2) of our regulations). We selected, as the “appropriate” exports, total berry exports from Chile for the two grants relating to meetings of the International Berries Association. For the grant related to IQF fruits and vegetables, we used total exports of IQF fruits and vegetables from Chile to Latin America, Europe and the United States. Based on the descriptions of these projects in the responses, there is no indication that benefits were limited only to the exports of the member companies of the trade associations that received the funding.

Because all benefits received under this program were expensed in years prior to the POI, we find no countervailable subsidy to the subject merchandise.

III. Program Preliminarily Determined To Be Not Countervailable

Supplier Development Program

The Supplier Development Program, which is administered by the Corporacion de Fomento de la Produccion (“CORFO”), was created in 1998. The purpose of the Supplier Development Program is to encourage the creation and consolidation of relationships between large companies and the small companies that supply them or sub-contract from them.

Under this program, CORFO co-finances a two-phase project. In the first stage, the diagnostic stage, CORFO will fund up to 60 percent of the cost of analyzing the strengths and weaknesses of the supplier companies, and developing a plan for improvement. In the second phase, CORFO will fund up to 60 percent in the first year and 50 percent in subsequent years of the cost of carrying out the improvement plan. The maximum duration of the development phase is three years for non-agricultural producers and four years for agricultural producers. Despite the difference in the duration of support for agricultural and non-agricultural users, the ceiling for the amount CORFO can contribute to both groups is the same.

We preliminarily determine that the Supplier Development Program is not specific within the meaning of section 771(5)(A) of the Act. The provision of co-financing by CORFO for these projects is neither contingent upon exportation nor upon the use of domestic goods as a matter of law, and the laws or regulations of the program do not limit the industries in Chile that can apply for or receive the co-financing. Moreover, information submitted by GOC indicates that co-financing under the Supplier Development Program is used by a wide variety of industries in Chile, and that the industry producing the subject merchandise does not receive a predominant or disproportionate share of the deferrals. Therefore, we preliminarily determine that the Supplier Development Program does not confer a countervailable benefit.

IV. Program Preliminarily Determined To Have Been Eliminated

CORFO Export Credit Insurance Premium Assistance

According to the GOC's response, this program was terminated on January 19, 1998. In anticipation of the termination, CORFO's Credit Allocation Committee stopped granting contracts for this insurance in October 1997. Since the contracts had a one-year duration, all payments under the program would have been made by October 1998.

V. Programs Preliminarily Determined Not To Have Been Used

CORFO Export Credit Financing

Law No. 18576 (Export Credit Limits)

Law No. 18480 (Simplified Duty Drawback)

Verification

In accordance with section 782(i)(1) of the Act, we will verify the information submitted by the respondents prior to making our final determination.

Suspension of Liquidation

In accordance with section 703(d)(A)(i) of the Act, we have calculated individual rates for Comfrut, Frucol, and Olmue. We preliminarily determine that the net countervailable subsidy rate for each of these manufacturer/exporters is de minimis. Because all the producers/exporters that received our countervailing duty questionnaire had de minimis subsidies, we preliminarily determine that producers/exporters of IQF red raspberries in Chile did not receive countervailable subsidies (see section 703(b)(4) of the Act). Accordingly, we are not ordering suspension of liquidation of entries of IQF red raspberries from Chile.

ITC Notification

In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Import Administration. If our final determination is affirmative, the ITC will make its final determination within 75 days after the Department makes its final determination.

Public Comment

In accordance with section 351.310 of our regulations, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination. Individuals who wish to request a hearing must submit a written request within 30 days of the publication of this notice in the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Requests for a public hearing should contain: (1) The party's name, address, and telephone number; (2) the number of participants; and, (3) to the extent practicable, an identification of the arguments to be raised at the hearing.

The hearing in this proceeding, if requested, is tentatively scheduled for November 21, 2001. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time.

If a hearing is held, parties must submit case briefs and the hearing will be limited to issues raised in the case briefs. Even if a hearing is not requested, parties may submit case briefs presenting arguments relevant to the final determination. Six copies of the business proprietary version and six copies of the nonproprietary version of the case briefs must be submitted to the Assistant Secretary no later than 30 days from the date of publication of this preliminary determination. As part of the case brief, parties are encouraged to provide a summary of the arguments, not to exceed five pages, and a table of statutes, regulations, and cases cited. Rebuttal briefs must be submitted to the Assistant Secretary no later than 4 days from the date of filing of the case briefs. Again, six copies of the business proprietary version and six copies of the non-proprietary version of rebuttal briefs must be filed. Written arguments should be submitted in accordance with section 351.309 of our regulations and will be considered if received within the time limits specified above.

This determination is published pursuant to sections 703(f) and 777(i) of the Act.

Dated: October 9, 2001.

Faryar Shirzad,

Assistant Secretary for Import Administration.