Roses and Other Cut Flowers From Colombia; Miniature Carnations From Colombia; Preliminary 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; Preliminary Results of Countervailing Duty

Administrative Reviews of Suspended Investigations

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Preliminary Results of Countervailing Duty

Administrative Reviews of Suspended Investigations.

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

administrative reviews of the agreements suspending the countervailing

duty investigation on roses and other cut flowers (roses) from Colombia

and the countervailing duty investigation on miniature carnations

(minis) from Colombia. These reviews cover the period of review (POR)

January 1, 1993, through December 31, 1993, and eleven programs. We

preliminarily determine that the Government of Colombia (GOC) and the

signatories/exporters of roses and minis have complied with the terms

of the suspension agreements. We invite interested parties to comment

on these results.

EFFECTIVE DATE: August 16, 1995.

FOR FURTHER INFORMATION CONTACT:

Jean Kemp or Stephen Jacques, Office of Agreements Compliance, Import

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

Commerce, 14th Street and Constitution Avenue, 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 Although the Department has withdrawn the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

[[Page 42536]]

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 January 5, 1994, the Department published in the Federal

Register (59 FR 564) a notice of ``Opportunity to Request an

Administrative Review'' for the 1993 review period. On January 31, 1994

the Colombian Association of Flower Exporters (Asocoflores) requested

administrative reviews of the suspended countervailing duty

investigations covering roses and minis for the 1993 period. On

February 17, 1994, the Department initiated these reviews (59 FR 7979).

The Department is now conducting these 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

separate ``classes or kinds'' of merchandise: roses and minis from

Colombia. During the POR, 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 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 800

Colombian flower growers/ exporters of roses, over 100 Colombian flower

growers/exporters of minis, as well as the GOC. We verified the

responses from six growers/exporters of the subject merchandise: Flores

La Conchita German Ribon E. en C. (roses and minis); Tuchany, S.A.

(roses); Flores de Exportacion, S.A. (roses and minis); Queen's Flowers

of Colombia Ltda. (roses and minis); Florval, S.A. (roses and minis);

and Flores de Funza, S.A. (roses and minis) (collectively, the six

companies). The suspension agreement for minis covers ten programs: (1)

Tax Reimbursement Certificate Program; (2) BANCOLDEX (funds for the

promotion of exports); (3) Plan Vallejo; (4) Free Industrial Zones; (5)

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

Development; (8) Instituto de Fomento Industrial (IFI); (9) Financier

de Desarrollo Territorial (FINDETER); and (10) Fondo Financiero de

Proyectos de Desarrollo (FONADE). The suspension agreement for roses

covers the ten programs listed above, as well as (11) Air Freight

Rates.

Analysis of Programs

We examined the following programs subject to the suspension

agreements:

(1) Tax Reimbursement Certificate Program

The ``Certificado de Reembolso Tributario'' (CERT) or Tax

Reimbursement Certificate program allows exporters to receive a full or

partial rebate on indirect taxes based on the value of their exports of

specific products to specific destinations. The GOC determines the CERT

levels based on product and market conditions.

Under the terms of the suspension agreements, Colombian flower

growers/exporters will be apply for, or receive, tax certificates or

other rebates, remissions, or exemptions under the CERT program for

exports of the subject merchandise to the United States and Puerto

Rico. Moreover, since 1987, when the GOC restructured the CERT program,

the level of CERT payments for exports of the subject merchandise to

the United States and Puerto Rico wee set at zero. Therefore, exporters

of the subject merchandise are no longer eligible to receive

countervailable benefits.

At verification, we examined documentation at the GOC and found

that this program was not used by exporters of the subject merchandise

for exports to the United States and Puerto Rico during the POR. In

addition, at verification of the six companies, we examined

documentation and confirmed that they did not use the program for

exports of the subject merchandise to the United States and Puerto Rico

during the POR. Therefore, we preliminarily determine that the GOC has

eliminated the subsidy on the subject merchandise by abolishing this

program for exports of the subject merchandise to the United States and

Puerto Rico and that this program did not confer any countervailable

benefits upon exports of the subject merchandise to the United States

and Puerto Rico during the POR.

(2) BANCOLDEX

On January 2, 1992, the former Fondo de Promocion de Exportaciones

(PROEXPO) transferred from a government-administered fund to a

commercial bank and was renamed Banco de Comercio Exterior de Exterior

(BANCOLDEX). The same resolutions continued to govern export loans

granted by BANCOLDEX as previously granted by PROEXPO.

There are six major BANCOLDEX credit lines: Short-term working

capital Colombian peso (peso) loans; medium-term working capital peso

loans; short- and long-term working capital U.S. dollar (dollar) loans;

long-term capitalization peso loans; long-term capitalization dollar

loans; and long-term fixed investment loans. In accordance with

Departmental practice, we will treat medium-term working capital peso

loans as long-term working capital peso loans.

Under the terms of the suspension agreements, Colombian flower

growers/exporters will not apply for, or receive any export financing

for BANCOLDEX other than that offered on non-preferential terms, and at

or above the established Department benchmark interest rates. For the

roses and minis suspension agreements in the Roses and Other Cut

Flowers from Colombia and Miniature Carnations from Colombia: Final

Results of Countevailing Duty Administrative Reviews of Suspended

Investigations, (published concurrently with this notice), the

Department established new benchmark interest rates for all short- and

long-term peso loans. The Department's short-term benchmark interest

rate is nominal DTF (the Colombian Central Bank time deposit rate, the

``Depositos a Termino Fijo'') plus 3.66 percentage points, and for

long-term loans nominal DTF plus 3.66 percentage points and 0.25

percentage point for each additional year after the first. This change

in the benchmark interest rates will be effective 14 days after

publication of the final results for the administrative reviews 1991

and 1992 (See Roses and Other Cut Flowers from Colombia and Miniature

Carnations from Colombia: Final Results of Countevailing Duty

Administrative Reviews of Suspended Investigations, (published

concurrently with this notice). As discussed below, we preliminarily

determine to maintain those benchmark rates.

Colombian Peso Loans

At verification, we examined GOC documents and confirmed that

BANCOLDEX charged interest rates on its short- and long-term peso loans

above the established Department benchmark interest rates in effect

during the POR. In addition, we found that BANCOLDEX issued the loans

on non-preferential terms. We also examined the six companies'

accounting records which confirmed that the companies received

BANCOLDEX peso loans for the subject merchandise on non-preferential

terms and at interest rates at

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or above the Department benchmark rates for exports of the subject

merchandise to the United States and Puerto Rico in effect during the

POR. Therefore, we preliminary determine that BANCOLDEX did not confer

any countervailable benefits upon exports of the subject merchandise to

the United States and Puerto Rico during the POR.

In order to update previous benchmark rates determined by the

Department, we reviewed interest rates in Columbia to define what

interest rate benchmarks were appropriate for future BANCOLDEX loans.

In the case of short- and long-term peso BANCOLDEX loans, the

Department confirmed at verification that the GOC adopted rates based

on the Colombian fixed deposit rate, DTF, because the DTF rates more

accurately reflect interest rate fluctuations in the market. While the

Department verified that there is no single, predominant source of

alternative financing in Columbia, we have determined that the

independent government agency, FINAGRO (Fondo para el financiameinto

del Sector Agropecuario), a major intermediary lender to the

agricultural sector, is an appropriate alternative source of financing

for the Department's benchmarks. FINAGRO is the successor to the Fondo

Financiero Agropecuario (FFA).

The most recent FINAGRO short-term rate is equal to DTF plus up to

6 percentage points. Because the Department is unable to set the

benchmark as a range (i.e., DTF plus up to 6 percentage points), the

Department established a benchmark rate applying the methodology used

in the final determination for the 1991 and 1992 administrative reviews

(See Roses and Other Cut Flowers and Miniature Carnations from

Columbia; Final Results of Countervailing Duty Administrative Reviews

of Suspended Investigations; (published concurrently with this notice).

In calculating the prospective benchmarks for short- and long-term peso

loans, the Department preliminarily determines that the most recent

verified weighted-average interest rate on all loans financed by

FINAGRO through Caja Agraria, i.e., DTF plus 3.66 percentage points is

the appropriate benchmark for short-term financing.

Consequently, the Department preliminarily determines that the

appropriate benchmark for the short-term peso loans rate is the nominal

DTF plus 3.66 percentage points. The Department also preliminarily

determines that the appropriate benchmark for long-term peso loans is

the nominal DTF plus 3.66 percentage points, plus an additional 0.25

percentage points for each year after the first, including any grace

period, reflecting the spread between BANCOLDEX short- and long-term

loans. Loans provided at or above the benchmark will not be considered

preferential.

U.S. Dollar Loans

At verification, we examined GOC documents and confirmed that

BANCOLDEX issued short- and long-term dollar loans. In the case of

short- and long-term dollar loans, there were no benchmark rates in

effect during the POR, because these loans were introduced in 1991,

i.e., after the last completed reviews of the suspension agreements.

In order to establish dollar benchmark rates. we followed the same

calculation methodology as in the final notice for Roses and Other Cut

Flowers and Miniature Carnations from Columbia; Final Results of

Countervailing Duty Administrative Reviews of Suspended Investigations;

(published concurrently with this notice). We confirmed at verification

that during the POR, BANCOLDEX loan interest rates on dollar loans

charged to Colombian flower growers/exporters were based upon the

London Interbank Offered Rate (LIBOR) plus a variable spread. 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 preliminarily

determines that for the short-term dollar loans 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. Based on the same methodology used for short-term dollar loan

benchmark, we preliminarily determine that for long-term dollar loans

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 2.82

percentage points.

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 should set the

nominal interest rate for dollar-based loans at a level that is high

enough to ensure that the effective interest rate of these loans are at

or above the Department's new benchmark.

(3) Plan Vallejo

Plan Vallejo was established in 1967 under decree 444. Its purpose

is to exempt exporters from certain indirect taxes and customs duties

assessed on imported capital equipment used to produce finished

products for export. The Instituto Colombiano de Comercio Exterior

(INCOMEX) administers the Plan Vallejo program.

Under the terms of the suspension agreements, Colombian flower

growers/exporters will not apply for or receive any benefits from duty

and tax exemptions for capital equipment under Plan Vallejo for exports

of the subject merchandise to the United States and Puerto Rico. At

verification, we examined the GOC's documentation and confirmed that

this program was not used by the exporters of the subject merchandise

for exports to the United States and Puerto Rico during the POR. Also,

GOC officials stated that, during the POR, no flower producer applied

for Plan Vallejo benefits. In addition, we verified that the six

companies did not use the program for capital equipment during the POR.

Therefore, we preliminarily determine that this program did not confer

any countervailable benefits upon exports of the subject merchandise of

the United States and Puerto Rico during the POR. In addition, we

preliminarily determine that Plan Vallejo has been abolished for the

subject merchandise in Resolution 1212 since flower growers are

ineligible to receive benefits for exports to the United States and

Puerto Rico.

(4) Free Industrial Zones

In December 1985, Law 109 established Free Industrial Zones (FIZs)

for industrial and service sector purposes. Certain regions in Colombia

are designated as FIZs.

At verification, we examined documentation at the Ministry of

Foreign Trade and determined that there were not any flower producers

located in FIZs. Therefore, we preliminarily determine that this

program did not confer any countervailing benefits upon exports of the

subject merchandise to the United States and Puerto Rico during POR. We

also preliminarily determine that during the POR the GOC had eliminated

the subsidy on this merchandise by abolishing this program for the

merchandise.

(5) Export Credit Insurance

Decree 444, issued in 1967, established the Export Credit Insurance

program. Under the Export Credit Insurance program a company may

receive insurance to cover certain commercial expenses (transportation,

custom duties, insurance expenses, etc.) that it would have difficulty

covering as a result of the insolvency of its foreign

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client. Several commodities are ineligible for the program: coffee in

certain forms, crude leather, oil and by-products, precious and

semiprecious stones, gold, perishable goods, and others. The subject

merchandise is classified under the ``perishable goods'' category which

renders all exports of the subject merchandise ineligible for the

program.

Under the terms of the suspension agreements, Colombian flower

growers/exporters shall notify the Department in writing prior to

applying for any benefit from the Export Credit Insurance program for

exports of the subject merchandise to the United States and Puerto

Rico. Because we did not receive any such notification and confirmed

that subject merchandise is ineligible for this program, we

preliminarily determine that this program did not confer any

countervailable benefits upon exports of the subject merchandise to the

United States and Puerto Rico during the POR. We also preliminarily

determine that the GOC has eliminated the subsidy by abolishing this

program for the subject merchandise.

(6) Countertrade

Law 48 of 1983 established a special system for three types of

exchange arrangements: (1) countertrade; (2) compensation offsets; and

(3) three-way trade. GOC officials have stated that in 1986, Decree

1459 terminated the exchange system and there has been no follow-up

legislation which would re-establish the exchange system. We confirmed

that this program had been terminated on that date. Therefore, we

preliminarily determine that this program did not confer any

countervailing benefits upon exports of the subject merchandise to the

United States and Puerto Rico during the POR. We also preliminarily

determine that the GOC has eliminated the subsidy by abolishing this

program for the subject merchandise.

Other Programs

Although not specifically listed in the suspension agreements, we

examined the following programs:

(7) Research and Development

Columbian flower exporters, on a voluntary basis, allowed the

Central Bank to withhold a certain percentage of the CERT rebates

earned on exports of the subject merchandise to the United States and

Puerto Rico and other countries for research and development from

January 1983 (the effective date of the original suspension agreement)

through November 1985, when the rebate rate for roses and other cut

flowers subject to the suspension agreement was reduced to zero. In

1985, the GOC issued Resolution 10, which established a fund from the

CERT payments that were withheld for the cultivation of and general and

technological research on all flowers. The resolution requires that any

funds expended under this resolution be disbursed in a manner

consistent with the suspension agreements. The resolution 10 account

was officially closed in October 1991 and no contributions were made to

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

this program did not confer any countervailable benefits upon exports

of the subject merchandise to the United States and Puerto Rico during

the POR. We also preliminarily determine that the GOC has eliminated

the subsidy on the merchandise by abolishing this program for the

subject merchandise.

(8) Instituto de Fomento Industrial (IFI) Loans

The Instituto de Fomento Industrial, or Institute for the Promotion

of the Industrial Sector, is a branch of the Colombian Ministry of

Economic Development. It provides financing to all sectors of the

Colombian economy and to large and small companies. Companies with

assets above 1.25 billion pesos may borrow directly from IFI, while

smaller companies may borrow funds from IFI which are rediscounted

through financial intermediaries.

Two IFI credit lines are available to only exporters. These include

a credit line for new exporters and relocation of export enterprises,

and the ANDEAN Trade Preference Act (ATPA) line of credit. The other

IFI credit lines are available to all enterprises. These include a

commercial sector line of credit, a line of credit for free zones, a

line of credit for working capital, a line of credit for capital

equipment, a capitalization line of credit, ordinary resource loans, a

line of credit for motel and tourist projects, and a line of credit for

market studies. Loans are available in both pesos and dollars.

Loan terms and rates vary by credit line and length of the loan.

Fixed asset dollar loans are available for five-year terms at LIBOR

plus five percentage points. Peso working capital loans are available

for terms of up to three years at TCC (DTF) plus five percentage

points. Long-term peso loans are available for terms up to seven years

at TCC plus six percentage points plus a 0.25 percentage point for each

additional year after the fifth. ATPA loans are available in pesos for

up to four years at TCC plus five percentage points for working capital

loans and for terms of up to twelve years for fixed asset peso loans at

TCC plus five percentage points plus a 0.25 percentage point for each

year after the fifth. In addition, ATPA fixed asset loans are available

in dollars at LIBOR plus five percentage points plus 0.25 for each year

after the fifth.

We verified that the non-export lines of credit provided by IFI

were granted to a broad range of Colombian industry sectors including:

agriculture, mining, textiles, metallic products, financial

establishments, and chemicals, rubber and plastics. Therefore, we

preliminarily determine that IFI's non-export lines of credit are not

provided to a specific enterprise or industry or group thereof and that

they are not countervailable.

Furthermore, we verified that no Colombian flower growers/exporters

received loans under the two export credit lines during the POR. We

preliminarily determine that the GOC and the Colombian flower growers/

exporters of the subject merchandise were in compliance with the

suspension agreements because IFI's export credit lines were not used

by Colombian flower growers/exporters of the subject merchandise during

the POR. However, flower growers/exporters of the subject merchandise

are eligible to apply for and receive IFI's export credit lines. Any

such loans must be on non-preferential terms, and at or above the

Department's most recent benchmarks (See Section II.c of the suspension

agreements). We preliminarily determine that the short- and long-term

benchmarks for IFI loans are the same as those for BANCOLDEX peso and

dollar financing apply (See Section 2 above).

(9) Financiera de Desarrollo Territorial (FINDETER)

FINDETER, a government financial entity, finances state and

municipal governments and governmental entities to promote urban and

regional development projects relating to infrastructure and

development in the public sector. The Department verified that all

projects are aimed to improve the public sector, and that Colombian

flower growers/exporters are not eligible to receive FINDETER loans.

Therefore, we preliminarily determine that FINDETER financing is not

countervailable for exports of the subject merchandise to the United

States and Puerto Rico during the POR.

[[Page 42539]]

(10) Fondo Financiero de Proyectos de Desarrollo (FONADE)

FONADE is an industrial and commercial state entity owned by the

National Department of Planning. FONADE finances feasibility studies on

pre-investment projects that are not conditioned on exporting. The main

client is the National Institute for Road Development. We verified that

no Colombian flower growers/exporters of the subject merchandise

applied for or received financing from FONADE during the POR.

Therefore, we preliminarily determine that FONADE's financing was not

used by Colombian flower growers/exporters of the subject merchandise

during the POR.

Program Specific to the Roses and Other Cut Flowers' Suspension

Agreement

(11) Air Freight Rates (apply only to the roses suspension agreement)

The Departmento Administrativo de la Aeronautica Civil (DAAC) is

the government agency that develops, maintains and regulates air

transport and air space activities. Section D(3) of the suspension

agreement states that the Department may consider rescinding the

agreement if the air freight rates paid by cut flower exporters

approach the government-mandated maximum rates set by the DAAC because

such rates might be indicative of government control rather than the

result of competitive forces.

At verification, we examined the companies' air freight bills and

found that the rates negotiated between the flower producers and air

freight carriers were between the minimum and maximum rates permitted

and did not approach the maximum. Therefore, we preliminarily determine

that this program did not confer any countervailable benefits upon

exports of the subject merchandise to the United States and Puerto Rico

during the POR.

Preliminary Results of Review

We preliminarily determine that the GOC and signatory companies

have complied with all the terms of the suspension agreements during

the period January 1, 1993 through December 31, 1993. In addition, we

preliminarily determine that the peso and dollar benchmarks established

in the 1991 and 1992 administrative reviews of these suspended

investigations will continue to apply to loans after the date of

publication of the final results of these administrative reviews, and

until revised by the Department (See Roses and Other Cut Flowers and

Miniature Carnations from Colombia; Final Results of Countervailing

Duty Administrative Reviews of Suspended Investigations; (published

concurrently with this notice).

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. 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. Any hearing, if requested, will be held 44

days after the date of publication or the first workday thereafter. 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 section

751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

Dated: August 8, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-20300 Filed 8-15-95; 8:45 am]

BILLING CODE 3510-DS-M