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 and termination of suspended investigations.

-----------------------------------------------------------------------

SUMMARY: On March 8, 1996, the Department of Commerce (``the

Department'') published the preliminary results of its administrative

reviews of, and its intent to terminate, 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 period January 1, 1994 through

December 31, 1994. We also determine that the producers/exporters of

subject merchandise have not received countervailable benefits or used

any program under review for a period of at least five consecutive

years. Additionally, we determine that the GOC and producers/exporters

of the subject merchandise (respondents) have provided sufficient

evidence for the Department to determine that it is likely that

producers/exporters of subject merchandise will not in the future apply

for or receive any net subsidy on the subject merchandise from those

programs the Department has found countervailable in any proceeding

involving Colombia or from other countervailable programs. Therefore,

we determine that respondents have met the requirements for termination

of the countervailing duty suspended investigation on roses and other

cut flowers and on miniature carnations as outlined in the Department's

Regulations.

EFFECTIVE DATE: August 30, 1996.

FOR FURTHER INFORMATION CONTACT: Rick Johnson or Jean Kemp, AD/CVD

Enforcement Group III, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Ave., NW., Washington, DC 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 or after January 1, 1995, the

[[Page 45942]]

effective date of amendments made to the Tariff Act in accordance with

the Uruguay Round Agreements Act (URAA).

Background

On March 8, 1996, the Department published in the Federal Register

(61 FR 9426) 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 2158 (January 18, 1983);

Roses and Other Cut Flowers From Colombia; Final Results of

Countervailing Duty Administrative Review and Revised Suspension

Agreement, 51 FR 44930 (December 15, 1986); and Miniature Carnations

from Colombia; Suspension of Countervailing Duty Investigation, 52 FR

1353 (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 period of review (``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 only. The written

descriptions remain dispositive.

These reviews of the suspended investigations involve over 600

Colombian flower producers/exporters of roses, over 100 Colombian

flower producers/exporters of minis, as well as the GOC. The suspension

agreement for minis covers ten programs: (1) BANCOLDEX (funds for the

promotion of exports); (2) Plan Vallejo; (3) Instituto de Fomento

Industrial (IFI); (4) Fondo Financiero de Proyectos de Desarrollo

(FONADE); (5) Financiero de Desarrollo Territorial (FINDETER); (6) Tax

Reimbursement Certificate Program (``CERT''); (7) Free Industrial

Zones; (8) Export Credit Insurance; (9) Countertrade; and (10) Research

and Development. The suspension agreement for roses covers the ten

programs listed above, as well as (11) Air Freight Rates. The POR is

January 1, 1994 through December 31, 1994.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received comments from the respondents, the GOC

and Associacion Colombiana de Exportadores de Flores

(``Asocolflores''); and the petitioner, the Floral Trade Council

(``FTC''). Comments submitted consist of petitioner's case brief of

April 8, 1996; and respondents' case brief of April 5, 1996 and

rebuttal brief of April 12, 1996.

Comment 1: The FTC asserts that, prior to any termination, the

Department must request confirmation that no CERT rebates were

fraudulently received on flower exports of subject merchandise. The FTC

further contends that this confirmation should be submitted in the form

of warehoused documents or affidavits of personnel at Direccion de

Investos y Aduanas Nacionales (``DIAN,'' the customs authority)

associated with the preparation of DIAN's 1992 Annual report, in which

it was noted that Panama and the Netherlands Antilles were eliminated

from the CERT program due to fraud. Moreover, the FTC states that DIAN

officials should also submit a certification describing what measures

they put in place to eliminate the possibility of fraudulent receipt of

CERT rebates over the five-year period. The FTC concludes that, absent

such confirmation, the record shows ``only that flower exporters can

receive CERT rebates on U.S. exports without detection in the absence

of an investigation.''

Respondents note that the Department examined the allegation

regarding the submission of fictitious invoices for exports to Panama

and the Netherlands Antilles in the 1991-92 review period, and found no

evidence to support FTC's claims, and thus found that there was no

evidence that CERT rebates were received for exports to the United

States.

Department's Position: In order to meet the regulatory requirements

for termination of a suspended investigation under 355.25(a)(2), the

Department must determine that all producers and exporters covered have

not applied for or received any net subsidy on the merchandise for a

period of at least five consecutive years, which in this case is the

period 1990 through 1994. Petitioner's allegation concerning the 1991-

92 period was examined by the Department during that review, and the

Department found no evidence to support an allegation of transshipment

or reshipment of the subject merchandise. See Roses and Other Cut

Flowers from Colombia; Miniature Carnations from Colombia; Final

Results of Countervailing Duty Administrative Reviews of Suspended

Investigations (1991-2 Review) 60 FR 42539, 42540-1 (August 16, 1995),

Comment 3. Hence, the Department determined that ``with respect to this

issue the GOC and the flower producers/exporters were in compliance

with the suspension agreements during the PORs.'' Because the

Department found no indication that the terms of the suspension

agreements were violated through the fraudulent receipt of CERT rebates

on subject merchandise, there is no requirement on respondents to place

any further documents, affidavits, or certifications on the record.

In fact, the GOC has already certified that it has ``eliminated all

subsidies on (i) miniature carnations and (ii) roses and all other

fresh cut flowers exported to the United States, by abolishing for such

merchandise for at least three consecutive years, all programs that the

Secretary of Commerce has found countervailable,'' and that it will

``not reinstate for such merchandise those programs or substitute other

countervailable programs.'' See Letter from Counsel to Respondents to

the Department of Commerce, February 2, 1996. Thus, the Department

determines that no further certifications are warranted with regard to

this issue.

Comment 2: The FTC argues that because 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 or export of the subject

merchandise.'' In particular, the FTC contends that under the new

statute (19 U.S.C. Sec. 1677(5)(A)), a countervailable subsidy is a

subsidy which is specific, and export subsidies are specific if they

are contingent upon export performance (19 U.S.C. Sec. 1677(5A) (A) &

(B)). Petitioners request that, prior to termination, the Department

should require the GOC to abolish CERT rebates for all flower exports.

Respondents argue that the statute, the Department's regulations,

and past determinations clearly refute petitioner's contention.

Furthermore, respondents assert that there is nothing in the URAA which

would change the Department's policy.

Department's Position: We agree with respondents. It is the

Department's continuing 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

[[Page 45943]]

questionnaire responses or at verification that would cause us to

reconsider our position, in this POR or in the last five consecutive

review periods. (See Roses and Other Cut Flowers from Colombia;

Miniature Carnations From Colombia; Final Results of Countervailing

Duty Administrative Reviews of Suspended Investigations, 1993 Review,

61 FR 94229 (Comment 3) (March 8, 1996); Miniature Carnations from

Colombia; Final Results of Countervailing Duty Administrative Review

and Determination not to Terminate Suspended Investigation, 59 FR 10790

(Comment 7) (March 8, 1994), and Roses and Other Cut Flowers from

Colombia; Miniature Carnations from Colombia; Final Results of

Countervailing Duty Administrative Reviews of Suspended Investigations,

60 FR 42541 (Comment 4) (August 16, 1995)).

As the Department has previously noted in this case, 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

production or export to the United States of the product under

investigation. See Miniature Carnations from Colombia; Final Results of

Countervailing Duty Administrative Review and Determination Not to

Terminate Suspended Investigation, 59 FR 10790, 10794 (March 8, 1994),

citing Industrial Nitrocellulose From France; Final Results of

Countervailing Duty Administrative Review, 52 FR 833 (January 9, 1987),

and Certain Fresh Cut Flowers from Israel; Final Affirmative

Countervailing Duty Determination, 52 FR 3316 (February 3, 1987). As

respondents have noted, the existence of export subsidies to third

countries could in fact serve to encourage producers to export to those

other countries, and not to the United States.

While the URAA makes it clear that export subsidies are per se

specific, specificity is not the issue. The issue is whether export

subsidies explicitly tied to non-subject merchandise (i.e., exports to

third countries) provide a countervailable benefit to subject

merchandise. Nothing in the URAA or its legislative history indicates

that Congress intended to countervail subsidies tied to exports to

third countries. In fact, 19 U.S.C. Sec. 1671(a) provides for the

imposition of countervailing duties when a countervailable subsidy is

provided to ``a class or kind of merchandise imported, or sold (or

likely to be sold) for importation, into the United States * * * .''

(emphasis added). The Department is continuing its longstanding

practice of not countervailing export subsidies tied to third

countries. Moreover, since the CERT rebates do not benefit subject

merchandise, it is not necessary that the GOC eliminate them on exports

to third countries.

Comment 3: The FTC asserts that the Department cannot terminate the

suspended investigations for a period in which the Department could not

determine whether signatories to both suspension agreements accounted

for 85 percent of imports of the subject merchandise. Specifically, the

FTC argues that for the purposes of satisfying termination

requirements, the Department requires that the same producer/exporters

account for 85 percent of the merchandise for a period of five

consecutive years. Because the Department discovered, in the 1991 and

1992 reviews, that the GOC had not maintained an up-to-date list of

signatories for both suspension agreements, the FTC suggests that

respondents have no way to guarantee that the same exporters have

accounted for 85 percent of the merchandise for the periods 1990

through 1994. See Roses and Other Cut Flowers from Colombia; Miniature

Carnations from Colombia; Final Results of Countervailing Duty

Administrative Reviews of Suspended Investigations (1991-2 Review) 60

FR 42539, 42540 (August 16, 1995).

Respondents argue that there is no 85-percent test for termination,

but rather the termination standards require that no producer/exporter

covered by the suspension agreement receive any net subsidy over the

five-year period. Respondents note further that the Department found,

in the 1993 review, that no countervailable benefits were provided

during the POR to any flower producer/exporter. Because the statutory

purpose of the 85 percent rule is to ensure that ``substantially all''

imports do not benefit from countervailable subsidies, according to

respondents, the 85 percent requirement is met, given that the

Department has verified that 100 percent of exports do not receive any

benefit.

Finally, respondents state that there is no Departmental

requirement that the same producer/exporters must account for 85

percent of the merchandise for a period of five consecutive years.

Department's Position: Section 704(b) of the statute provides that

Commerce may enter into a suspension agreement if the producers/

exporters accounting for ``substantially all'' of the imports of the

subject merchandise agree to eliminate (or offset completely)

countervailable subsidies. The regulations do not define

``substantially all'' imports. However, the suspension agreements

require that producer/exporters accounting for 85 percent of the

imports must be subject to the terms of the suspension agreements. See

48 FR 2158, 2161 (January 18, 1983) (roses); 52 FR 1353, 1356 (January

13, 1987) (miniature carnations).

The Department's regulations provide that the Secretary may

terminate a suspended investigation if the Secretary concludes that all

producer/exporters covered by the suspension agreements have not

applied for or received any net subsidy on the subject merchandise for

a period of at least five consecutive years. 19 C.F.R.

Sec. 355.25(2)(i) (1995). In Certain Fresh Cut Flowers from Costa Rica,

the case cited by petitioner, the Department determined that the same

producer/exporters who have accounted for 85 percent of the merchandise

for a period of five consecutive years must not have applied for or

received any net subsidy on the merchandise during that period in order

for the Department to terminate the suspended investigation. However,

the Department's concern in that case stemmed from the fact that, in

its administration of that suspension agreement, the Government of

Costa Rica eliminated subsidies only to signatories, not all producers/

exporters of the subject merchandise.

In contrast, in implementing these agreements, the GOC has acted to

ensure that 100 percent of companies producing and exporting the

subject merchandise were in compliance with the terms of the roses and

minis suspension agreements, whether or not those companies had signed

these suspension agreements.

The Department has found that all Colombian producers/exporters

were in full compliance in the 1990, 1991, 1992, and 1993

administrative reviews of these suspension agreements. In the current

1994 administrative reviews, the Department reviewed and verified

information at each GOC agency for all producers/exporters of the

subject merchandise, regardless of their signatory status. The record

evidence for the 1994 administrative reviews indicates that all

Colombian producers/exporters have been in full compliance with the

agreements. At verification, we analyzed the Colombian Customs

Authority's export statistics of all flower companies exporting roses

and minis to the United States and Puerto Rico. At the Central Bank, we

checked computer records of exports with U.S. and Puerto Rican country

identification codes showing that no CERT payments were made to any

flower producers/exporters

[[Page 45944]]

for shipments of the subject merchandise.

At BANCOLDEX, we reviewed and verified all PROEXPO/BANCOLDEX loans

issued and outstanding in the POR (see Government Verification Report

of February 27, 1996) and we have determined that all Colombian flower

producers/exporters have complied with the terms of the suspension

agreements during the POR. Similarly, we verified that no

countervailable benefits were granted to or received by any flower

producers/exporters for Plan Vallejo, Air Freight Rates, Free

Industrial Zones, and the Export Credit Insurance Program.

Thus, all Colombian flower producers/exporters have been required

to comply with the terms of the suspension agreements. Further, the

Department has determined that all producers/exporters of the subject

merchandise have been in full compliance with the suspension agreements

for five consecutive years. The Department has verified that all

producers/exporters of subject merchandise (not just signatories to the

agreements) have not received subsides on the subject merchandise

during the current POR or during any POR from 1990 through the 1994

period. Therefore, the Department has determined that the requirements

for termination of the suspended investigations have been met.

Comment 4: The FTC claims that under the terms of the suspension

agreements, the Department applies outdated 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. The FTC claims that the suspension

agreements are not in the public interest because Colombian flower

producers/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. FTC concludes that to terminate the suspension agreements, the

Department must compare the PROEXPO/Bancoldex interest rates to current

interest rate benchmarks for the five year period to determine that all

producer/exporters covered by the suspension agreements have not

applied for or received any net subsidy on the merchandise for a period

of at least five consecutive years.

Respondents note that the Department has addressed and rejected

these arguments in earlier reviews of these suspension agreements. See

Roses and Other Cut Flowers from Colombia; Miniature Carnations From

Colombia; Final Results of Countervailing Duty Administrative Reviews

of Suspended Investigations, 1993 Review, at 9431-32 (Comment 5), March

8, 1996. Furthermore, respondents claim that petitioners have offered

no basis that would support a different finding in the 1994 review.

Department's Position: We agree with respondents. Because these

suspension agreements are forward-looking, the Department sets

benchmark interest rates prospectively for these agreements. (See

Miniature Carnations from Colombia: Final Results of Countervailing

Duty Administrative Review; 56 FR 14240 (April 8, 1991), Miniature

Carnations from Colombia; Final Results of Countervailing Duty

Administrative Review and Determination Not To Terminate Suspended

Investigation, 59 FR 10790, (March 8, 1994), and Roses and Other Cut

Flowers from Colombia: Miniature Carnations from Colombia: Final

Results of Countervailing Duty Administrative Reviews of Suspended

Investigations, 60 FR 42541 (August 16, 1995)).

At verification for the 1994 POR, 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

respondents were in compliance with the terms of the suspension

agreements for the BANCOLDEX programs. Therefore, we determine that the

GOC did not confer any countervailable benefits through the BANCOLDEX

programs during the POR. Respondents complied with the suspension

agreements' benchmarks and avoided receiving countervailable benefits

during the POR, resulting in a situation analogous to non-use for the

BANCOLDEX programs by Colombian flower producers/exporters of the

subject merchandise. Therefore, there is no basis for petitioner's

claim that the suspension agreements are not in the public interest.

Comment 5: The FTC asserts that the Department should reconsider

its use of the subsidized FINAGRO interest rate when establishing

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. In addition, the FTC asserts, citing Rice From

Thailand; Preliminary Results of Countervailing Duty Administrative

Review, 57 FR 8437, and 8439 (March 10, 1992), that the Department is

not required to look to interest rates available to the agricultural

sector, when the rates are not available to flower producers/exporters.

Respondents note that the FTC has argued this issue repeatedly in

the course of these proceedings, and the Department has consistently

rejected these arguments on an equal number of occasions. Moreover,

according to respondents, this is an issue of no relevance to the

termination proceeding, as long as the producer/exporters complied with

the terms of the suspension agreements.

Department's Position: We agree with respondents. The Department

has repeatedly determined that FINAGRO is a major intermediary lender

to the agricultural sector, and therefore is an appropriate alternative

basis for the Department's benchmarks. See Roses and Other Cut Flowers

from Colombia; Miniature Carnations From Colombia; Final Results of

Countervailing Duty Administrative Reviews of Suspended Investigations,

1993 Review (Comment 8), 61 FR 9429, 9433, (March 8, 1996); Roses and

Other Cut Flowers from Colombia; Miniature Carnations from Colombia;

Final Results of Countervailing Duty Administrative Reviews of

Suspended Investigations (1991-2 Review) (Comments 6 and 7), 60 FR

42539, 42542 (August 16, 1995); and Miniature Carnations from Colombia;

Final Results of Countervailing Duty Administrative Review and

Determination Not To Terminate Suspended Investigation (Comment 8), 59

FR 10790, 10794-95 (March 8, 1994). In this review we examined

potential alternative benchmarks and continued to find that FINAGRO was

the most appropriate alternative source of financing to the

agricultural sector.

Finally, we note that by terminating these suspension agreements,

any issue regarding the establishment of prospective benchmarks for

these cases is moot.

Comment 6: The FTC asserts that the Department had inadequate

evidence concerning whether signatories are likely to apply for or

receive any net subsidy on the merchandise. The FTC argues that the

Department relied on GOC certifications that were substantially the

same as the

[[Page 45945]]

commitments made under the suspension agreements. Furthermore,

petitioner claims that the GOC still maintains BANCOLDEX benefits and

the CERT program. The FTC cites the Statement of Administrative Action

(``SAA'') accompanying the URAA as stipulating that, ``as long as a

subsidy program continues to exist, Commerce will not consider company-

or industry-specific renunciations of countervailable subsidies, by

themselves, as an indication that continuation or recurrence of

countervailable subsidies is unlikely.''

Respondents argue that the certifications supplied to the

Department exceed both the requirements of the Department's regulations

and the terms of the suspension agreements. Second, respondents claim

that abolition of programs (such as the BANCOLDEX program) is not

required for termination for non-use, and that the FTC has failed to

point out that the GOC has eliminated countervailable benefits by

eliminating preferential rates to flower producers/exporters under the

BANCOLDEX program. Third, respondents note that the Department has

found that the CERT program has been abolished for flower exports to

the United States since ``at least'' 1988. In conclusion, respondents

claim that the FTC's reliance on the SAA is ill-conceived, because the

Department has relied on more than simply company-specific

renunciations: in fact, for the most part, the subsidy programs at

issue no longer exist for flower producers/exporters; the Department

has the aforementioned certifications from the GOC; and finally, there

is a record of ``7-11 years'' compliance with the suspension

agreements.

Department's Position: We agree with respondents. With regard to

CERT, flower producers/exporters are prohibited by Colombian law from

receiving CERT rebates on exports to the United States and Puerto Rico.

With regard to BANCOLDEX loans for the period 1990-94, flower

producers/exporters have been prohibited by the terms of various GOC

resolutions from receiving loans at countervailable rates, and have

been unable to obtain loans at rates below the Department's benchmarks

pursuant to Colombian law and BANCOLDEX instructions to refinancers of

BANCOLDEX loans. Furthermore, the GOC has certified that it will not

confer any loans constituting countervailable subsidies on flower

producers/exporters. Finally, the record of compliance with the terms

of these suspension agreements over the period 1990-94, together with

the actions described above, indicates that continuation or recurrence

of countervailable subsidies is unlikely.

Final Results of Reviews

After considering all of the comments received, we determine that

the GOC and the producers/exporters of the subject merchandise have

complied with all the terms of the suspension agreements during the

period January 1, 1994 through December 31, 1994. We determine that no

countervailable benefits have been bestowed on subject merchandise, and

furthermore, that producers/exporters of subject merchandise have not

used the above programs for at least five years (or, in the case of

programs only recently created, for the life of the program).

Additionally, we note that the GOC has stated for the record that it

will institute or maintain appropriate measures to ensure that export

loan programs will be administered to guarantee that loans granted to

recipients are comparable to commercial loans that a flower producer/

exporter could obtain in the market, such as those alternative sources

of financing available to agriculture in Colombia, and will not confer

any loan program countervailable subsidies on flower producers/

exporters. Furthermore, the GOC has certified that, for the subject

merchandise, it shall not reinstate those programs which the Department

has found countervailable, and it shall not substitute other

countervailable programs. Finally, producers/exporters have certified

that they will not apply for or receive any net subsidy on exports to

the United States of subject merchandise from those programs that the

Department has found countervailable in any proceeding involving

Colombia or from other countervailable programs.

Therefore, we determine that the GOC and the producers/exporters

covered by these agreements have met the requirements for termination

of the suspended countervailing duty investigations on roses and other

cut flowers and miniature carnations, as required by 19 CFR 355.25. We,

therefore, determine to terminate the suspended investigation on roses

and other cut flowers from Colombia and the suspended investigation on

miniature carnations from Colombia.

Lastly, as a result of this determination, we will also terminate

the reviews in progress for these agreements covering the 1995 period.

These administrative reviews and this notice are in accordance with

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

1675(c)) and 19 CFR 355.22 and 355.25.

Dated: August 26, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-22235 Filed 8-29-96; 8:45 am]

BILLING CODE 3510-DS-P