Fresh-Cut Flowers From Costa Rica; Preliminary Results of Countervailing Duty Administrative Review and Intent To Terminate Suspended Investigation

DEPARTMENT OF COMMERCE

International Trade Administration

[C-223-601]

Fresh-Cut Flowers From Costa Rica; Preliminary Results of

Countervailing Duty Administrative Review and Intent To Terminate

Suspended Investigation

AGENCY: International Trade Administration/Import Administration,

Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty

administrative review and intent to terminate suspended investigation;

fresh-cut flowers from Costa Rica.

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SUMMARY: The Department of Commerce (the Department) is conducting an

administrative review of the agreement suspending the countervailing

duty investigation on certain fresh-cut flowers from Costa Rica. The

review covers the period January 1, 1991 through December 31, 1991 and

six programs. On January 22, 1992, the Government of Costa Rica (GOCR)

requested an administrative review and termination of the suspended

investigation covering fresh-cut flowers. Section 355.25(a)(2) of the

Department's regulations permits termination of a suspended

investigation if the Department determines that all producers and

exporters covered by the suspension agreement have not applied for or

received any net subsidy on the subject merchandise for a period of at

least five consecutive years, and it is not likely that the producers

or exporters will in the future apply for or receive any net subsidy on

the merchandise from those programs that the Department has found

countervailable. Therefore, we examined the programs to determine if

the producers and exporters had complied with the terms of the

suspension agreement during the review period. The Department has found

that the signatories were in compliance with the terms of the

suspension agreement in each of the four previous review periods (56 FR

66434, December 23, 1991; 56 FR 2163, January 22, 1991; 55 FR 17478,

April 25, 1990; 54 FR 36838, September 5, 1989). We also preliminarily

determine that the GOCR and the signatories of the suspension agreement

on fresh-cut flowers have complied with the terms of the suspension

agreement during the current period of review (POR). On the basis of

our analysis of the information in the record, we preliminarily

determine that it is not likely that the producers or exporters will in

the future apply for or receive a net subsidy from the countervailable

programs. Therefore, we preliminarily determine that the GOCR has met

all requirements for termination of the suspended countervailing duty

investigation on certain cut flowers as outlined in the Department's

regulations. We invite interested parties to comment on these

preliminary results.

EFFECTIVE DATE: February 10, 1994.

FOR FURTHER INFORMATION CONTACT:

Elizabeth Patience or Jean Kemp, Office of Agreements Compliance,

International Trade Administration, U.S. Department of Commerce,

Constitution Avenue and 14th Street NW., Washington, DC 20230;

telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

Background

On December 26, 1991, the Department published a notice of

``Opportunity to Request an Administrative Review'' of the suspended

investigation in this proceeding (56 FR 66846). The producers and

exporters listed in appendix A, accounting for more than eighty-five

(85) percent of total exports of subject merchandise from Costa Rica to

the United States, are signatories to the suspension agreement. Our

information indicates that the 38 signatory companies accounted for

substantially all of the imports into the United States of this

merchandise during the POR. The GOCR and the signatories are the

respondents in this review. The suspension agreement permits ACOFLOR,

the Costa Rican Association of Flower Growers, to act on behalf of the

signatories. See Suspension of Countervailing Duty Investigation;

Certain Fresh-Cut Flowers from Costa Rica, 52 FR 1356, 1360 (1987).

On January 22, 1992, respondents requested the fifth administrative

review of the suspended investigation covering fresh-cut flowers (52 FR

1356, January 13, 1987). At the same time, respondents requested

termination of the suspended investigation, in accordance with 19 CFR

355.25(a)(2) and 355.25(b)(2). On February 24, 1992, the Department

initiated this review, covering the period January 1, 1991 through

December 31, 1991 (57 FR 6314). On March 31, 1992, the Department

published public notification of the GOCR's request for termination of

the suspended investigation (57 FR 10885). The Department is now

conducting this review in accordance with section 751 of the Tariff Act

of 1930, as amended (the Tariff Act), and 19 CFR 355.22 and 355.25. The

final results of the last administrative review in this case where

published in the Federal Register on December 23, 1991 (56 FR 66434).

Scope of Review

Imports covered by this review are shipments of miniature (spray)

carnations, standard carnations, and pompon chrysanthemums from Costa

Rica. This merchandise is currently classifiable under the Harmonized

Tariff Schedule (HTS) items 0603.10.30 and 0603.10.70. The HTS item

numbers are provided for convenience and Customs purposes. The written

description remains dispositive.

The review covers the period January 1, 1991 through December 31,

1991 and six programs: (1) Tax Credit Certificates; (2) Certificates

for Increasing Exports; (3) Income Tax Exemptions for Export Earnings;

(4) Exporter Credit for Sales Tax and Consumption Tax on Certain

Domestic Purchases; (5) Exporter Exemptions for Taxes and Duties on

Imports; and (6) Accelerated Depreciation. On January 20, 1992, ACOFLOR

certified, on behalf of itself, its individual members, and as

authorized, the signatories to the Agreement, that none of the

signatories (1) applied for or received any net subsidy on the subject

merchandise during the appropriate period under any program that the

Commerce Department previously found countervailable in these

proceedings; and (2) that the signatories shall not apply for or

receive any net subsidy on the subject merchandise under any program

the Department has previously determined to be countervailable in these

proceedings. On January 23, 1992, the Ministry of Foreign Trade

submitted a certification that the GOCR did not provide ACOFLOR, its

members, or any signatory of the Agreement, any net subsidy on the

subject merchandise during the appropriate period, pursuant to any

program that the Department has previously determined to be

countervailable in these proceedings. We selected six producers/

exporters of the subject merchandise which are signatories to the

agreement for the purpose of verifying the accuracy of the respondents'

information and certifications: American Flower Corporation, S.A.,

Flores de Coris, S.A., Fincas Nabori, S.A., Flores Garces, S.A.

(formerly Hermelink y Garces, S.A.), Flor Bella, S.A., and Floricultura

Cartaginesa (collectively, the six companies).

Analysis of Programs

(1) Tax Credit Certificates

Certificados de Abono Tributario (CATs) are bearer instruments

issued by the Central Bank of Costa Rica. Prior to 1991, the value of

the CAT was 15 percent of the amount of the foreign currency converted

from a firm's shipments of non-traditional exports. Effective December

3, 1993, the GOCR ceased granting CATs as part of new ``export

contracts'' which allow exporters to receive GOCR benefits. During the

period of review (POR), if a company with an export contract

voluntarily accepted a reduction in the value of the CAT from 15

percent to 10.5 percent, it could extend its export contract benefits

for three years and be exempt from the 25 percent tax on CAT earnings.

The Central Bank is not granting CATs in new export contracts.

The suspension agreement prohibits Costa Rican producers and

exporters of fresh-cut flowers from applying for or receiving any

benefits under the CAT program for shipments of the subject merchandise

to the United States. Effective the date of the agreement (January 13,

1987), any unused certificates received on prior shipments of the

subject merchandise to the United States were to be returned to the

Central Bank of Costa Rica (Central Bank). During verification, we

examined the GOCR's records and found no exporters of the subject

merchandise received or possessed unused CATs for exports to the United

States during the POR. In addition, we examined the six companies'

accounting records which indicated that the companies did not receive

or possess unused CATs for subject merchandise during the POR.

Therefore, we preliminarily determine that, with respect to this

program, the signatories have complied with the agreement during this

administrative review. We also preliminarily determine that, with

respect to this program, the signatories have complied with the

agreement for a period of five consecutive years based upon the results

in this review and the four previous administrative reviews.

(2) Certificates for Increasing Exports (CIEX)

This program provides grants to agricultural and agro-industrial

producers who increase exports from one year to the next. The

suspension agreement prohibits Costa Rican producers and exporters of

fresh-cut flowers from applying for or receiving any benefits under the

CIEX program. In August 1984, the program was discontinued due to lack

of funds, and the last benefits were paid in 1986. In 1988, the Costa

Rican Congress approved a special commission of bonds for the purpose

of liquidating the outstanding CIEX benefits for 1983/84, 1984/85, and

1985/86. During verification, we examined government and company

records and found that this program was not used by the signatories

during the POR. Therefore, we preliminarily determine that, with

respect to this program, the signatories have complied with the

agreement during this administrative review. We also preliminarily

determine that, with respect to this program, the signatories have

complied with the agreement for a period of five consecutive years

based upon the results in this review and the four previous

administrative reviews.

(3) Income Tax Exemptions for Export Earnings

Firms in Costa Rica are eligible for a tax exemption for export

earnings. The suspension agreement prohibits Costa Rican producers and

exporters of fresh-cut flowers from applying for or receiving any

income tax exemptions for income derived from exports of the subject

merchandise to the United States. During verification, we examined the

six companies' tax returns. We found that any benefits due under this

program had been calculated in accordance with the terms of the

suspension agreement and did not include earnings on exports of the

subject merchandise. Therefore, we preliminarily determine that, with

respect to this program, the signatories have complied with the

agreement during the POR. We also preliminarily determine that, with

respect to this program, the signatories have complied with the

agreement for a period of five consecutive years based upon the results

in this review and the four previous administrative reviews.

(4) Exporter Credit for Sales Tax and Consumption Tax on Certain

Domestic Purchases

Exporting firms in Costa Rica are eligible for a rebate of sales

taxes and selective excise taxes (i.e., indirect taxes) paid on certain

domestically-purchased articles. The suspension agreement prohibits

Costa Rican producers and exporters of fresh-cut flowers from applying

for or receiving any rebates of sales taxes and selective excise taxes

on domestic purchases not physically incorporated into any exports.

During verification, we examined government and company records and

determined that none of the signatory producers and exporters applied

for or received any rebates of these taxes during the review period on

domestic purchases not physically incorporated into exports. Therefore,

we preliminarily determine that, with respect to this program, the

signatories have complied with the agreement during the POR. We also

preliminarily determine that, with respect to this program, the

signatories have complied with the agreement for a period of five

consecutive years based upon the results in this review and the four

previous administrative reviews.

(5) Exporter Exemptions for Taxes and Duties on Imports

Costa Rican firms with export contracts may be exempted from paying

duties and taxes on imported raw materials, intermediate products and

capital goods used to produce exported finished products. The

suspension agreement prohibits Costa Rican producers and exporters of

fresh-cut flowers from applying for or receiving any exemptions from

taxes, surcharges, and duties (i.e., indirect taxes) on non-physically

incorporated imports. Initially, this requirement prevented exporters

or producers from receiving an exemption on any non-physically

incorporated imports, whether used in the production of subject

merchandise or not, because the Department was unable to verify that

the exemption did not benefit the subject merchandise. Subsequently,

the Department found that the agency responsible for granting

exemptions, CENPRO, had instituted a system of controls to ensure that

no exemptions would be granted for imports no physically incorporated

into exports of the subject merchandise. See Certain Cut Flowers from

Costa Rica; Preliminary Results of Countervailing Duty Administrative

Review, 54 FR 27197, 27198 (1989). During the POR, as part of this

system of controls, ACOFLOR received a list from CENPRO of flower

growers that applied for tax and duty exemptions under this program.

Before any applications were processed, a representative of ACOFLOR

visited the flower growers claiming the exemptions, inspected the

imported good in question, and verified its intended use. If the

ACOFLOR representative determined that the imported good would be used

in the production of the subject merchandise, ACOFLOR would require

that the flower grower promptly withdraw its application for exemption.

During verification, we examined the system of controls

administered by ACOFLOR and CENPRO and government and company records,

and determined that no exporter or producer received such exemptions on

any item without verification that the item in question had not been or

will not be physically incorporated in the subject merchandise.

Therefore, because we were able to verify that items receiving duty-

free treatment did not provide benefits to the subject merchandise, we

preliminarily determine that, with respect to this program, the

signatories have complied with the agreement during this administrative

review. We also preliminarily determine that, with respect to this

program, the signatories have complied with the agreement for a period

of five consecutive years based upon the results in this review and the

four previous administrative reviews.

(6) Accelerated Depreciation

Exporting firms in Costa Rica may use accelerated depreciation for

new equipment if they are authorized to do so by the Ministerio de

Hacienda. The suspension agreement prohibits Costa Rican producers and

exporters of fresh-cut flowers from making use of accelerated

depreciation. During verification, we examined the six companies'

depreciation records and determined that no firm used accelerated

depreciation during the POR. Therefore, we preliminarily determine that

the signatories have complied with the terms of the suspension

agreement for the POR. We also preliminarily determine that, with

respect to this program, the signatories have complied with the

agreement for a period of five consecutive years based upon the results

in this review and the four previous administrative reviews.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the GOCR

and signatory companies have complied with all the terms of the

suspension agreement during period January 1, 1991 through December 31,

1991. As described above, we also preliminarily determine that the

signatories have complied with the agreement for a period of five

consecutive years. In addition, the GOCR and ACOFLOR, as authorized by

the signatories, have certified to the Department that the signatories

will not in the future apply for or receive any net subsidy on the

subject merchandise under any program the Department has previously

determined to be countervailable in these proceedings. We also note

that the GOCR and ACOFLOR have stated in the record that they will

maintain procedures to ensure producers and exporters of fresh-cut

flowers from Costa Rica will not receive net subsidies under any

program the Department has previously determined to be countervailable

in these proceedings, in the event that the agreement is terminated.

Moreover, the Department has not been presented with any evidence

indicating the signatories may apply for or receive any such subsidy in

the future. On the basis of the foregoing evidence, in accordance with

19 CFR 355.25(a)(2)(ii), we preliminarily determine that it is not

likely that the producers or exporters will in the future apply for or

receive a net subsidy from the countervailable programs. See Matsushita

Elec. Indus. Co, Ltd. v. United States, 750 F.2d 927, 933 (Fed Cir.

1984); PPG Indus. v. United States, 780 F. Supp. 1389 (CIT 1991); See

also Ceramic Tile from Mexico; Final Results of Countervailing Duty

Administrative Review and Revocation in Part of Countervailing Duty

Order, 59 FR 2823, 2824 (January 19, 1994). Therefore we preliminarily

determine to terminate the suspended countervailing duty investigation

on fresh-cut flowers from Costa Rica.

Interested parties may submit written comments on these preliminary

results within 30 days of the date of publication of this notice and

may request disclosure and/or a hearing within 10 days of the date of

publication. Any hearing, if requested, will be held 44 days after the

date of publication or the first workday thereafter. Rebuttal briefs

and rebuttals to written comments, limited to issues in those comments,

must be filed not later than 37 days after the date of publication. The

Department will publish the final results of its analysis of issues

raised in any such written comments or at a hearing.

This administrative review and notice are in accordance with

sections 751(a)(1)(C) and 751(c) of the Tariff Act (19 U.S.C.

1675(a)(1)(C) and 1675(c)) and 19 CFR 355.22 and 355.25.

Dated: February 3, 1994.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

Appendix A--List of Signatory Producers and Exporters

1. American Flower Corporation, S.A.

2. Flores del Cerro, S.A.

3. Agroflor de Paraiso, S.A.

4. Flores Garces, S.A.

5. Tico Flor, S.A.

6. Coexflo, S.A.

7. Compania Agricola Flex, S.A.

8. Flor Bella, S.A.

9. Exporflor de Cartago, S.A.

10. Lianpa, S.A.

11. Floricultura de Costa Rica, S.A.

12. Vivero El Zamorano, S.A.

13. Floress de Iztaru, S.A.

14. Inversiones Costa Flor, S.A.

15. Coopeflor, S.A.

16. Euroflores, S.A.

17. Flores y Follajes del Tirol, S.A.

18. Flores del Volcan CRP, S.A.

19. Goreza, S.A.

20. Llano Claro, S.A.

21. Ornamentales Cargil, S.A.

22. Floricultura La Colina, S.A.

23. Flores Intercontinentales, S.A.

24. Fincas Nabori, S.A.

25. Flores de Coris, S.A.

26. Florex, S.A.

27. C.R.B. Internacional, S.A.

28. Flores del Caribe, S.A.

29. Zurqui Flor de Costa Rica, S.A.

30. Rio Tapezco, S.A.

31. Jardin Botanico LDL de Costa Rica, S.A.

32. Tropiflor de la Montana, S.A.

33. Floricultura Santa Rosa, S.A.

34. Corporacion Rica Flor, S.A.

35. Intertec, S.A.

36. Accoreo, S.A.

37. Floricultura Cartaginesa, S.A.

38. Brumas Bajas, S.A.

[FR Doc. 94-3062 Filed 2-9-94; 8:45 am]

BILLING CODE 3510-DS-M