Miniature Carnations From Colombia; Final Results of Countervailing Duty Administrative Review and Determination Not To Terminate Suspended Investigation

DEPARTMENT OF COMMERCE

[C-301-601]

Miniature Carnations From Colombia; Final Results of

Countervailing Duty Administrative Review and Determination Not To

Terminate Suspended Investigation

AGENCY: International Trade Administration/Import Administration,

Department of Commerce.

ACTION: Notice of final results of countervailing duty administrative

review.

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SUMMARY: On October 7, 1993, the Department of Commerce (``the

Department'') published the preliminary results of its administrative

review and intent not to terminate the suspended countervailing duty

investigation on miniature carnations from Colombia. The review covers

the period January 1, 1988 through December 31, 1990 and seven

programs. On January 31, 1991, the Government of Colombia (``GOC'')

requested termination of the suspended investigation based on

abolishment of the programs for a period of at least three years, in

accordance with 19 CFR 355.25(a)(1) and 355.25(b)(1). Therefore, we

examined the programs to determine if each program had been abolished

for a period of at least three consecutive years. We gave interested

parties an opportunity to comment on the preliminary results. After

reviewing all the comments received, we determine that the GOC and

producer/exporters of miniature carnations have complied with the terms

of the suspension agreement. However, we also determine that the GOC

has not abolished each program for a period of at least three

consecutive years. Therefore, we determine that the GOC has not met all

the requirements for termination of the countervailing duty suspended

investigation on miniature carnations as outlined in the Commerce

Regulations.

For the purpose of revoking a countervailing duty order or

terminating a suspended countervailing duty investigation based on

three consecutive years of elimination of all subsidies pursuant to 19

CFR 355.25(a)(1), it is the Department of Commerce's current policy

that administrative reviews must be requested and conducted for each of

the three consecutive years. See Memorandum from Joseph A. Spetrini,

Deputy Assistant Secretary for Compliance, to Alan M. Dunn, Assistant

Secretary for Import Administration, of December 14, 1992, which fully

describes this issue. However, the request for termination in this case

predates the above policy, and we nevertheless have examined a three-

year period in order to determine whether termination is appropriate.

We invited interested parties to comment on these results.

EFFECTIVE DATE: March 8, 1994.

FOR FURTHER INFORMATION CONTACT: Stephen Jacques or Jeanene Lairo,

Office of Agreements Compliance, International Trade Administration,

U.S. Department of Commerce, Washington, DC 20230; telephone: (202)

482-3434 or (202) 482-2243, respectively.

SUPPLEMENTARY INFORMATION:

Background

On October 7, 1993, the Department published in the Federal

Register the preliminary results of its countervailing duty

administrative review and intent not to terminate the suspended

investigation on miniature carnations from Colombia (58 FR 52269). (See

Suspension of Countervailing Duty Investigation; Miniature Carnations

from Colombia, 52 FR 1353 (January 13, 1987).) We have now completed

the administrative review in accordance with section 751 of the Tariff

Act of 1930, as amended (``the Tariff Act'').

Scope and Review

Imports covered by this review are shipments of miniature

carnations from Colombia. During the review period, the merchandise

covered by this suspension agreement is classified under Harmonized

Tariff Schedule (``HTS'') item numbers 0603.10.30. The HTS item numbers

are provided for convenience and Customs purposes. The written

description remains dispositive.

The period of review (``POR'') covers January 1, 1988 through

December 31, 1990, and seven programs: (1) Tax Reimbursement

(Certificate Program Certificado de Reembolso Tributario (CERT

program)); (2) The Fund for the Promotion of Export Loans (working and

fixed-capital) (``PROEXPO''); (3) Plan Vallejo; (4) Free Industrial

Zones; (5) Export Credit Insurance; (6) Countertrade; and (7) Research

and Development.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. Also, at the request of the petitioner, the Floral

Trade Council (``FTC'') and the GOC, we held a public hearing on

December 3, 1993. Comments 1 through 10 also pertain to the Final

Results of Countervailing Duty Administrative Review and Intent not to

Terminate Suspended Investigation; Roses and Other Cut Flowers from

Colombia which is being published concurrently with this notice.

Comment 1: The FTC alleges that the GOC has not abolished certain

programs covered under the suspended investigations for a period of

three consecutive years as required under 19 CFR 355.25(a)(1)(i). The

FTC asserts that elimination of Colombian flower exporters' eligibility

to receive countervailable subsidies on exports of fresh cut flowers to

the United States is insufficient grounds for termination. The FTC also

contends that the regulation permits the Department to terminate only

when the government has abolished all programs benefitting the

merchandise, not merely the eligibility of exports of a particular

category of merchandise. Finally, the FTC argues that the Department

should consider the entire program in deciding whether to terminate the

suspended investigation.

The GOC asserts that the Department's preliminary determination was

erroneous for several reasons. First, the GOC contends that if the

program remains in existence but has been abolished for the subject

merchandise, termination is required. In the case of the CERT program,

the GOC asserts that the Department correctly focused on whether or not

the subject merchandise remains eligible to receive benefits under the

subsidy programs found countervailable. Thus, the GOC asserts that the

Department failed to consistently apply the correct legal standard for

program abolition in its analysis of PROEXPO, Plan Vallejo, and the air

freight rates program, since the subsidy programs have been abolished

with regard to the subject merchandise and there is no likelihood the

countervailable programs will be reinstated or new programs

substituted. (See Roses and Other Cut Flowers From Colombia; Final

Results of Countervailing Duty Administrative Review and Revised

Suspension Agreement, 51 FR 44930 (December 15, 1986).)

Department's Position: The Department's regulations at 19 CFR

355.25(a)(1)(i) state that the Secretary may terminate a suspended

investigation if the Secretary concludes that ``the Government of the

affected country has eliminated all subsidies on the merchandise by

abolishing for the merchandise, for a period of at least three

consecutive years, all programs that the Secretary has found

countervailable.'' A program is effectively abolished when the

government of the affected country has eliminated, by law, the

eligibility of producer/exporters of the subject merchandise for the

countervailable program. The regulation does not require that a program

be abolished for merchandise other than subject merchandise in order

for the Department to terminate the suspended investigations under this

provision.

In the case of CERT, Decree 107, issued by the GOC in January 1987,

set the level of CERT payments at zero for exports of the subject

merchandise to the United States. Because, as a matter of law, the GOC

has made the producer/exporters ineligible for any benefits on the

subject merchandise by setting their CERT rate to zero, for a period of

three consecutive years, we determine that the program has been

abolished for three years.

In the case of PROEXPO, the program has not been abolished for the

subject merchandise since flower exporters are eligible to receive

loans for exports to the United States which may or may not be at

preferential rates, although they did not receive preferential PROEXPO

loans during the POR. (See Comment 8, below). For Plan Vallejo, the

program has not been abolished for the subject merchandise for a period

of three consecutive years because the GOC did not eliminate

eligibility for the subject merchandise by law until April 1991. (See

Comment 9, below.) Because the GOC failed to meet the abolition

standard in 19 CFR 355.25(a)(1)(i) for Plan Vallejo and PROEXPO, we

will not terminate the suspended investigations.

Comment 2: The FTC contends that the Department verified that,

although, ``in 1988, the Central Bank made no CERT payments for

shipments of the subject merchandise, * * * there were applications for

CERT payments in 1988.'' The FTC contends that the verification report

does not indicate whether signatories to the suspension agreements

submitted these applications. Consequently, the FTC alleges that this

is a possible prima facie breach of the suspension agreements and

should result in a finding of non-compliance.

The GOC contends that in addition to flowers being ineligible to

receive any subsidies under the CERT program during the POR, no flower

grower or exporter received CERT rebates on the subject merchandise.

Department's Position: We disagree with the petitioner. At

verification, the Department determined that none of the companies

examined had used the CERT program during the POR. We have already

found that for the roses and other cut flowers agreement producer/

exporters were in compliance during the 1988 period and that for the

miniature carnations agreement producer/exporters were in compliance

during the 1988 and 1989 periods.

While applications from a few producer/exporters did occur, the

companies applying constituted an insignificant portion of the subject

companies. In 1988, only seven out of approximately 400 flower

companies applied for CERT payments. The number of companies applying

for CERT benefits in 1989 and 1990 were two and five respectively. (See

verification exhibits C-6, C-7, C-13, and C-21.) Moreover, we have

verified that no countervailable benefits were received under CERT,

despite any applications made. Although applications for CERT benefits

are technically inconsistent with the suspension agreements, the

Department considers these acts inconsequential as specified under 19

CFR 355.19(d). Consequently, for the purposes of the final results, we

determine that the signatories were in compliance with the suspension

agreements during the POR.

Comment 3: FTC asserts that two signatories may have received CERT

rebates on U.S. flower exports. FTC contends that the questionnaire

responses in the 1990-91 administrative review of the antidumping duty

order indicate that two Colombian signatories to the suspension

agreements, Flores de la Sabana (``Sabana'') and Las Amalias, S.A.

(``LASA'') may have received CERT rebates for U.S. exports.

FTC asserts that in its constructed value questionnaire response,

Sabana stated that its internal sales taxes are not included in the

cost of materials because the GOC refunds those taxes because the final

product is sold outside of the country. Petitioner states that Sabana

also submitted in a supplemental response a page of its bookkeeping

records for the month of April 1990 that included the line item

``CERTs.''

Petitioner also contends that LASA reported that it was ``entitled

to a rebate for value added tax * * * paid to suppliers and contractors

for installations for flowers that are exported. During the period of

review, LASA received rebates * * *'' FTC claims that according to

LASA, ``the rebates cover all products exported.'' Finally, FTC states

that LASA's public version of its consolidated balance sheet dated

December 31, 1990 includes the line item ``CERTs.''

The GOC asserts that no CERT rebates were paid with respect to

exports of subject merchandise. The GOC notes that its questionnaire

responses and the Department's verification report indicate that no

subject merchandise received CERT payments.

The GOC contends that the documents indicate that two producers

received refund or exemption of value added tax paid on materials used

in the production for exportation. In addition, the GOC states that

refund of prior stage value added taxes are entirely permissible and

non-countervailable. The GOC cites Countervailing Duties; Notice of

Proposed Rulemaking, 19 CFR 355.44(i)(4)(i), F.R. 23366, 23369, 23380,

23382 (May 31, 1989) (``Proposed CVD Rules''); General Agreement on

Tariffs and Trade (``GATT'') Subsidies Code, item (h). Finally, the GOC

claims that the FTC has failed to demonstrate any link between value

added tax rebates and the CERT export certificate program.

The GOC asserts that the bookkeeping records of both companies

cited by FTC--Sabana and Las Amalias--contain a line item entry for

CERTs only because they received CERTs for their flower exports to

third countries.

Department's Position: We disagree with petitioner and with

respondent in part. The information described in petitioner's case

brief pertains to the antidumping administrative review and would

normally have been considered submitted untimely on the record of these

reviews. However, because a substantial period of time has passed since

the petitioner's January 1993 and August 1993 submissions on LASA and

Sabana, we will consider petitioner's comments on this issue for these

final results.

As we stated in our response to Comment 2, the Department verified

that none of the signatories had used the CERT program for the subject

merchandise during the POR. Petitioner's remarks concerning line items

titled ``CERT'' in Sabana's consolidated balance sheet and rebates for

exports are consistent with the fact that the program is still in

effect for exports to third countries. However, the Department reviewed

GOC documentation for all three years of the POR which indicated there

were no countervailable CERT benefits given on exports of the subject

merchandise to the United States and corroborated the GOC information

at verification of three other companies. Consequently, for the

purposes of the final results, we determine that the signatories were

in compliance with the suspension agreements during the POR, and that

we will not conduct any further investigations or verifications with

regard to Sabana and LASA during this POR. (See also Comment 4, below.)

As to the GOC's claim that refunds of value-added taxes are

entirely permissible and non-countervailable, the Department's position

is that refund of prior stage value added taxes upon export are

permissible and non-countervailable only to the extent such refund does

not exceed the amount of prior stage indirect taxes levied on goods

that are physically incorporated in the export product. (See

Sec. 355.44(i)(4)(i) of the Proposed CVD Rules.) In the present case,

because CERT rates were set at zero, no taxes were refunded.

Comment 4: The FTC contends that the Department's verification of

the CERT program for three Colombian producer/exporters was

inconclusive. First, the FTC asserts that the Department failed to

address how Agropecuria Cuernavaca listed export destinations based on

the sales ledger if destination was not recorded. Furthermore,

petitioner contends that the customers' identity are insufficient to

indicate the final destination, where there are innumerable companies

trading flowers on consignment.

Second, the FTC states that since Minispray was incorporated in

1989 and made its first sale in May 1990, it is hardly representative

of the Colombian flower producer/exporters.

Third, the FTC claims that with respect to Floramerica, the

Department should have investigated whether a CERT payment for the

merchandise exported to Germany was actually for merchandise exported

to the United States. The FTC requests that the Department explain how

it determined that the CERT payment was actually for a shipment to

Germany, and not the United States. The FTC asserts that the GOC should

have questioned the CERTs reported by Floramerica on its U.S. sales.

Finally, the FTC requests that the Department either (1) conduct a

further investigation and verification or (2) presume that Colombian

growers received CERT rebates on U.S. flower exports. In support of

their argument the FTC cites Federal-Mogul Corp. v. United States, 17

CIT ______. Slip Op. 93-180 (Sept. 14, 1993); and Freeport Minerals

(Freeport-McMoran Inc.) v. United States, 776 F.2d 1029, 1032-33 (Fed.

Cir. 1985).

The GOC contends that the Department fully verified the non-receipt

of CERT certificates on floral exports for the United States. Also, the

GOC claims that its records showed no CERT payments being made to

Floramerica with respect to its exports to the United States. The GOC

asserts that a Floramerica internal worksheet erroneously listed a U.S.

CERT payment which the company demonstrated to the Department verifiers

was actually made for a shipment to Germany.

The GOC claims that the suspension agreements only obligate

Colombian growers and exporters to renounce CERT benefits on shipments

of the subject products exported, directly or indirectly, from Colombia

to the United States and that the U.S. countervailing duty law

generally concerns itself only with bounties or grants benefitting

merchandise exported to the United States.

Department's Position: We agree with the respondent. The Department

verified that producer/exporters of the subject merchandise did not

receive any CERT payments. We were satisfied that the GOC's records and

procedures meet their obligations under the suspension agreements to

ensure that no benefits ensue to producer/exporters. At verification,

from documentation provided by the GOC, we traced all CERT payments

received by Agropecuria Cuernavaca during the POR to their exports of

the merchandise to third countries. We verified that all CERT payments

are recorded in an internal report which tracks CERT payments on a

yearly basis and that no payments were for shipments of subject

merchandise. We further verified that the GOC requires documentation

that the shipment does not go to a country for which CERT payments are

not available. In the case of Minispray, it was fully operating during

the POR, thereby making the company a legitimate and representative

Colombian flower producer and we verified it did not receive CERT

payments for exports of the subject merchandise. In the case of

Floramerica, we verified that the company received no CERT payments for

exports of the subject merchandise during the POR. The Floramerica

report indicating a CERT payment for a U.S. shipment was the result of

a clerical error by the company. Based on an official GOC export

document and other company documents reviewed during the Floramerica

verification which included the destination and importer, we verified

the shipment in question went to Germany and not to the United States.

(See verification exhibit F-6). Finally, the Department will not

conduct a further investigation or verification of the information the

FTC submitted on LASA and Sabana. (See Comment 3, above.)

Comment 5: The FTC contends that the Department's verification

reports revealed an inability on the part of the GOC to monitor

compliance with the terms of the suspension agreements and the CERT

program, in particular.

In addition, the FTC contends that the verification reports do not

establish that the Central Bank or Customs collect information on the

intermediate and ultimate destinations of exports. Therefore, the FTC

argues that the GOC is unable to certify that CERT payments were made

for shipments to third countries. In addition, the FTC asserts that

since the documents are prepared by the exporters, they do not offer

any objective support that CERT payments were made only for third-

country exports. In support of their position, the petitioner cites

Asociacion Colombiana de Exportadores v. U.S., 704 F. Supp. 1114, 1117

(CIT 1989).

The GOC argues that the Department is not required to investigate

unsupported allegations and that the GOC is under no obligation to

disprove these allegations.

Department's Position: Contrary to petitioner's assertions, we have

determined that the agreements have been effectively monitored by the

GOC during the POR. During verification, the Department reviewed

documentation provided by companies and by the Banco de la Republica,

including applications and records of official government approval and

disapproval for CERT payments listed by individual companies for

exports to various countries during the POR. (See verification exhibits

C-7, C-13, C-18, and C-21.) The Department also examined export

manifests and other shipping documents to determine destinations of

shipments receiving CERT rebates and verified that no shipments of

subject merchandise received CERT rebates. The export manifests which

indicated the country of destination for the merchandise matched

documents verified at the companies. (See verification exhibit AC-3A.)

Consequently, we determine that the GOC has adequately monitored the

agreements and has provided the Department the relevant reports in

accordance with the terms of the agreements.

Comment 6: The FTC contends that certain shipments received CERT

rebates which may have been reshipped to the United States from the

Netherlands Antilles and Panama. The FTC also questions the GOC's

decision to reduce the CERT rebate rate for exports to the Netherlands

Antilles and Panama to zero. Finally, the FTC questions whether

shipments having received CERT payments actually traveled the entire

distance to Canada and Europe, etc. as indicated on the export

documentation. The FTC alleges that the Department did not confirm that

third country exports receiving CERT payments were not actually

unloaded at Miami port.

The GOC argues that the Department is not required to investigate

unsupported allegations and that the GOC is under no obligation to

disprove these allegations.

Department's Position: During verification, the Department examined

export documents to determine destinations of shipments receiving CERT

rebates and verified that no shipments of subject merchandise received

CERT rebates. There is no evidence in the questionnaire response, in

documentation reviewed by the Department at verification, or anywhere

else on the record to support an allegation of transhipment through

third countries or of unloading of flowers in the United States.

Comment 7: The FTC contends that the Department should determine

that flower exports to the U.S. continue to benefit from CERT rebates

on third country exports and that the CERT program still exists. Thus,

the FTC contends that the benefit received benefits the whole company's

production, including production exported to the United States. In

support of their position, petitioner cites Certain Carbon Steel

Products from Brazil; Final Affirmative Countervailing Duty

Determinations, 49 FR 17988, 17996 (April 26, 1984); Final

Determination of Sales at Less Than Fair Value: Silicon Metal from

Brazil, 56 FR 26977, 26987 (June 12, 1991); and British Steel Corp. v.

United States, 605 F. Supp. 286, 293-95 (CIT 1985).

The GOC contends that the suspension agreements obligate

signatories to renounce CERT payments ``on shipments of the subject

products exported, directly or indirectly, from Colombia to the United

States.'' The GOC claims that Colombian producer/exporters are under no

obligation to renounce CERT benefits to third countries.

The GOC further asserts that U.S. countervailing duty law generally

concerns itself with only bounties or grants benefitting subject

merchandise (i.e. merchandise shipped to the United States). In support

of their claim, the GOC cites Roses and Other Cut Flowers From

Colombia; Final Results of Countervailing Duty Administrative Review

and Revised Suspension Agreement, 51 FR 44930 (Dec. 15, 1986); Roses

and Other Cut Flowers From Colombia; Final Results of Countervailing

Duty Administrative Review, 52 FR 48846, 48847-8 (Dec. 28, 1987); and

Final Affirmative Countervailing Duty Determination; Miniature

Carnations from Colombia, 52 FR 32033, 32036 (Aug. 25, 1987).

Finally, the GOC contends that by having export subsidies to third

countries, there is an incentive for Colombian exporters to shift

exports from the United States to third countries. Consequently, the

GOC argues that flowers sold in the United States in no way benefit

from CERT rebates.

Department's Position: As stated in the final results of the 1983-

1985 administrative review of this case (Roses and Other Cut Flowers

From Colombia; Final Results of Countervailing Duty Administrative

Review, 52 FR 48847 and 48848 (Comments 2 and 4)(December 28, 1987)),

it is the Department's position that rebates tied to exports to third

countries do not benefit the production or export of the subject

merchandise. (See Sec. 355.47(b) of the Proposed CVD Rules.) The

Department has verified that Colombian exporters only received CERT

payments based on exports to countries other than the United States.

CERT payments benefit only those shipments to which they are tied, not

shipments of subject merchandise. It is the Department's policy that we

will not allocate benefits tied to a product not under investigation

over a product under investigation unless we have a clear reason to

believe that such a benefit encourages the production or export to the

United States of the product under investigation. (See Industrial

Nitrocellulose From France; Final Results of Countervailing Duty

Administrative Review, 52 FR 833 (Comment 1)(January 9, 1987), and

Certain Fresh Cut Flowers From Israel; Final Affirmative Countervailing

Duty Determination, 52 FR 3316 (Comment 9)(February 3, 1987). We have

no such evidence in this case. We determine, therefore, that the

signatories have not violated the suspension agreements.

We disagree with the FTC that Silicon Metal from Brazil is germane

to this review. The issue in that antidumping case involved the

allocation of financing cost for new furnaces that could produce the

subject merchandise. While it is true that money is fungible, subsidies

on exports to third countries do not provide benefits to exports to the

United States if the subsidies are tied to specific non-subject

merchandise destined for third countries. The FTC's reliance on Certain

Carbon Steel Products from Brazil is misplaced because in that case,

although we found the IPI tax rebate was a subsidy benefitting all

production including exports, we did not find that it was tied to

specific exports to individual countries. In the case of CERT payments,

we were able to determine that payments were clearly tied to particular

countries.

Comment 8: FTC contends that the Department should compare the

interest rates received on PROEXPO loans to commercial benchmark

interest rates available on comparable loans during the POR. FTC also

argues that the Department applied outdated benchmark interest rates,

inconsistent with the Department's practice. In support of its

position, FTC cites the Proposed CVD Rules; Final Affirmative

Countervailing Duty Determinations: Certain Steel Products From

Belgium, 58 FR 37273, 37288-89 (July 9, 1993); Final Affirmative

Countervailing Duty Determinations: Certain Steel Products from

Germany, 58 FR 37315, 37322-23 (July 9, 1993); Oil Country Tubular

Goods from Argentina--Preliminary Results of Countervailing Duty;

Administrative Review, 56 FR 50,855 (October 9, 1991); Preliminary

Affirmative Countervailing Duty Determination: Bulk Ibuprofen from

India, 56 FR 66432 (December 23, 1991); Preliminary Affirmative

Countervailing Duty Determination: Extruded Rubber Thread from

Malaysia, 56 FR 67276, 67277 (December 30, 1991); Rice from Thailand;

Preliminary Results of Countervailing Duty Administrative Review, 57 FR

8437, 8439 (March 10, 1992); and Alhambra Foundry v. United States, 626

F. Supp. 402 (CIT 1985).

FTC argues that the Department should instead apply periodically

reconstructed benchmarks that reflect, for short-term loans, comparable

commercial financing on a nation-wide and non-sector specific basis

and, for long-term loans, the firm's other commercial loans taken out

in the same year or the national average interest rate. FTC asserts

that if the Department were to apply benchmarks chosen in the 1989

miniature carnations review it is likely that certain Colombian

producers/exporters received PROEXPO loans at preferential rates. (See

Asociacion Colombiana de Exportadores v. United States, 704 F. Supp.

1114, 1122 (CIT 1989.) Furthermore, the FTC contends that the

Department should apply effective, rather than nominal benchmark rates.

Finally, the FTC argues that if ``established benchmarks'' rather than

reconstructed benchmarks are used in the final results, the Department

should use its established benchmark methodology to determine

benchmarks for each of the 1988, 1989, and 1990 periods. FTC contends

that the Department should confirm the primary source of financing by

reviewing source documents.

The GOC contends that the signatories fully complied with the

suspension agreements because during the POR it rendered flower growers

ineligible for a countervailable PROEXPO benefit by setting the PROEXPO

interest rates for flower growers not just at but above the benchmark

interest rates established by the Department. In addition, the GOC

asserts that the suspension agreements require their signatories not to

renounce PROEXPO loans per se, but only to renounce the preferential

interest rates. The GOC claims that, under the agreements, the

Department establishes the benchmark interest rates, and that the

agreements only obligate the renouncing producers and exporters to

refinance existing loans and obtain new loans on non-preferential terms

at or above the relevant benchmark interest rate determined by the

Department. Thus, the GOC argues that continued receipt by flower

growers of PROEXPO loans at the Department-established rates not only

is permitted under the suspension agreements but is expressly

contemplated.

The GOC also asserts that the Department erred because it defined

``the program'' at issue as all PROEXPO loans, including PROEXPO loans

at non-preferential and thus non-countervailable rates.

The GOC contends the effect was that no flower grower could receive

a PROEXPO loan at a preferential interest rate, irrespective of the

destination to which it shipped its flowers, and even if it did not

export at all. Consequently, GOC asserts that the Department erred in

its preliminary results of review because it appears to have defined

``the program'' at issue as all PROEXPO loans, including PROEXPO loans

at non-preferential and thus non-countervailable rates.

Department's Position: The Department set the benchmark rates

applicable to the POR in 1987. Although we determined on April 8, 1991

that the benchmark for PROEXPO should be changed, we stated that ``any

changes to short-term and long-term benchmark interest rates for this

suspension agreement should be set prospectively.'' See Miniature

Carnations from Colombia; Final Results of Countervailing Duty

Administrative Review, 56 Fed. Reg. 14240 (April 8, 1991).

Consequently, the Department cannot reset the benchmarks for these

suspension agreements in the middle of an administrative review. Had

the Department changed the benchmark interest rates during the POR it

would have imposed undue burdens on the signatories to the suspension

agreements to comply with the changed benchmark rates. Since suspension

agreements are forward looking, the terms and conditions should not be

retroactively changed during the POR.

At verification, the Department examined documentation that

indicated that PROEXPO 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

PROEXPO 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 PROEXPO program.

Since PROEXPO loans were above the benchmark rates, the Department

determines that the GOC did not confer any countervailable benefits

through the PROEXPO program 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 PROEXPO program by signatories.

However, the GOC has not abolished the PROEXPO program for the

subject merchandise as required by 19 CFR 355.25(a)(1)(i). In the case

of the CERT program, the GOC has changed the law to eliminate subsidies

and would have to change the law again in order to confer any future

countervailable benefits for the subject merchandise through the CERT

program. In other words, the GOC would have to take a specific action

in the future (e.g., passing a new law or repealing the old law) in

order for any possible countervailable benefits to occur in the future.

As the PROEXPO program is now structured, PROEXPO loans granted at

interest rates at or above the current benchmarks could constitute

countervailable subsidies if the commercial interest rate falls below

the benchmark specified by the suspension agreements. In such a case,

producer/exporters would be eligible for countervailable benefits under

PROEXPO without the GOC taking specific action to change the program

(as would be the case with the CERT program). Thus the GOC has failed

to eliminate the subsidy by abolishing PROEXPO because loans under the

program may in future constitute countervailable subsidies without

further GOC action. Consequently, we determine that PROEXPO has not

been abolished for the subject merchandise as required by 19 CFR

355.25(a)(1)(i), and the Department will not terminate the suspended

investigations.

Comment 9: The GOC asserts that it rendered flower growers

ineligible for any countervailable subsidy under the Plan Vallejo

program for capital equipment. Consequently, the GOC asserts that it

has satisfied the Department's requirement for abolishing programs

``for the merchandise'' found to confer countervailable benefits. The

GOC contends that the Department's preliminary determination is not in

accordance with law because it appears to require that Plan Vallejo as

a whole be abolished rather than simply that it be abolished for the

merchandise.

Department's Position: We disagree with the GOC. The GOC only

formalized its policy of not providing subsidies on the subject

merchandise by abolishing the Plan Vallejo program for the subject

merchandise in April 1991, after the POR. At verification, the

Department reviewed documentation that indicated that no flower

producer/exporters received Plan Vallejo benefits for the subject

merchandise during the POR. (See verification exhibits PV-4 and PV-5.)

However, while producer/exporters did not receive any benefits under

Plan Vallejo, they were eligible for benefits because the GOC had not

changed its law to abolish the program. Consequently, we determine that

the program has not been abolished for the subject merchandise for a

period of three consecutive years as required by 19 CFR

355.25(a)(1)(i), and the Department will not terminate the suspended

investigations.

Comment 10: The GOC argues that because they have not only met

their obligations under side letters provided in connection with the

suspension agreements, but have also exceeded them by taking steps to

reduce, phase out, or eliminate the programs as a whole, there is no

likelihood that countervailable subsidies will be substituted or

replaced. To support their arguments petitioner cites the following: 19

CFR 355.25(a)(1); Manufacturas Industriales de Nogales, S.A. v. United

States, 666 F. Supp. 1562 (CIT 1987); and Leather Wearing Apparel from

Mexico; Final Results of Administrative Review of Countervailing Duty

Order, 50 FR 6024 (February 13, 1985).

The FTC claims that the existence of potentially countervailable

subsidies increases the likelihood of the reactivation of the programs

or their substitution with other countervailable programs after

termination. In the case of CERT, the GOC may simply issue another

decree to change the CERT rate on the subject merchandise. As for

PROEXPO, the FTC asserts that the Department's review cannot establish

the likelihood of PROEXPO's reinstatement or substitution after

termination.

Department's Position: Because we have found that the Plan Vallejo

and PROEXPO programs have not been abolished during the POR, the

conditions of 19 CFR 355.25(a)(1)(i) have not been met, and we will not

terminate the suspension agreements. Therefore, it is unnecessary for

us to address the question of the likelihood of benefits resuming.

Final Results of Review

After considering all of the comments received, we determine that

the signatories have complied with the terms of the suspension

agreement for the period January 1, 1988 through December 31, 1990.

However, we will not terminate the suspension agreement. In order for

us to terminate the suspension agreement the GOC must have abolished

all programs for a period of three consecutive years which is not the

case with Plan Vallejo and PROEXPO.

This administrative review 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: March 1, 1994.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-5307 Filed 3-7-94; 8:45 am]

BILLING CODE 3510-DS-P