Roses and Other Cut Flowers From Colombia; Miniature Carnations From Colombia; Final Results of Countervailing Duty Administrative Reviews of Suspended Investigations

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 Although the Department has withdrawn the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