Standard Chrysanthemums From the Netherlands; Final Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-421-601]

Standard Chrysanthemums From the Netherlands; Final Results of

Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative

Review.

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SUMMARY: On May 6, 1996, the Department of Commerce (the Department)

published in the Federal Register (61 FR 20411) its preliminary results

of administrative review of the countervailing duty order on standard

chrysanthemums from the Netherlands for the period January 1, 1994

through December 31, 1994. We have completed this review and determine

the net subsidies to be de minimis for all exports of the subject

merchandise to the United States. The Department will instruct the U.S.

Customs Service to liquidate, without regard to countervailing duties,

all shipments of the subject merchandise from the Netherlands exported

on or after January 1, 1994, and on or before December 31, 1994.

EFFECTIVE DATE: September 11, 1996.

FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Anne D'Alauro,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On May 6, 1996, the Department published in the Federal Register

(61 FR 20406) the preliminary results of its administrative review of

the countervailing duty order on standard chrysanthemums from the

Netherlands (Preliminary Results). We invited interested parties to

comment on the preliminary results. The Floral Trade Council,

petitioner, and the Government of the Netherlands (GON), respondent,

submitted both case and rebuttal briefs. The Department has now

completed this administrative review in accordance

[[Page 47889]]

with section 751 of the Tariff Act of 1930, as amended (the Act).

The period covered by the review was January 1, 1994 through

December 31, 1994. This review was conducted on an aggregate basis and

involves 13 programs.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions of the Tariff Act of 1930, as amended by

the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the

Act). 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 to the Uruguay Round Agreements

Act. See 60 FR 80 (Jan. 3, 1995).

Scope of the Review

Imports covered by this review are shipments of Dutch standard

chrysanthemums. Such merchandise is classifiable under item number

0603.10.70 of the Harmonized Tariff Schedule (HTS). The HTS item number

is provided for convenience and Customs purposes. The written

description remains dispositive.

Country-Wide Rate

Because the URAA replaced the general rule in favor of a country-

wide rate with a general rule in favor of individual rates for

investigated and reviewed companies, the procedures for establishing

countervailing duty rates, including those for non-reviewed companies,

are now essentially the same as those in antidumping cases, except as

provided for in section 777A(e)(2)(B) of the Act. In the original

investigation of this order, it was determined that there were over

8,000 flower growers in the Netherlands. Therefore, we requested that

the GON provide information on an aggregate basis. See Final

Affirmative Countervailing Duty Determination; Certain Fresh Cut

Flowers From the Netherlands (52 FR 3301; February 3, 1987). Consistent

with the decision made in the investigation, administrative reviews of

this order have been conducted on an aggregate basis. In accordance

with section 777A(e)(2)(B) of the Act, we have also conducted this

administrative review on an aggregate basis because of the large number

of producers and exporters, and on the basis of the aggregate

information submitted by the GON, we have determined a single country-

wide subsidy rate to be applied to all producers and exporters of the

subject merchandise.

Analysis of Programs

Based upon our analysis of the questionnaire responses and written

comments from the interested parties, we determine the following:

I. Programs Conferring Subsidies

A. Programs Previously Determined to Confer Subsidies

1. Aids for the Creation of Cooperative Organizations

In the preliminary results, we found that this program conferred

countervailable benefits on the subject merchandise. We received no

comments on our preliminary results, and our findings remain unchanged

in these final results. On this basis, the net subsidy for this program

is 0.03 percent ad valorem for 1994.

2. Glasshouse Enterprises Program

In the preliminary results, we found that this program conferred

countervailable benefits on the subject merchandise. We received no

comments on our preliminary results, and our findings remain unchanged

in these final results. On this basis, the net subsidy for this program

is 0.05 percent ad valorem for 1994.

3. Aids for the Reduction of Glass Surface

In the preliminary results, we found that this program conferred

countervailable benefits on the subject merchandise. We received no

comments on our preliminary results, and our findings remain unchanged

in these final results. On this basis, the net subsidy for this program

is less than 0.005 percent ad valorem for 1994.

4. Steam Drainage System

In the preliminary results, we found that this program conferred

countervailable benefits on the subject merchandise. We received no

comments on our preliminary results, and our findings remain unchanged

in these final results. On this basis, the net subsidy for this program

is less than 0.005 percent ad valorem for 1994.

B. New Program Found to Confer Subsidies Stimulation for the Innovation

of Electric Energy Program

In the preliminary results, we found that this program conferred

benefits on the subject merchandise. Our analysis of the comments

submitted by the interested parties, summarized below, has not led us

to modify our findings from the preliminary results for this program.

On this basis, the net subsidy for this program is 0.35 percent ad

valorem for 1994.

II. Programs Found to be Not to Confer Subsidies

In the preliminary results, we found the following programs to be

non-countervailable:

1. Arrangement for Stimulation of Innovation Projects

2. Arrangement for Structural Improvements and the Complementary Scheme

for Investment in Agricultural Holdings

3. Natural Gas Provided at Preferential Rates

4. Income Tax Deduction

5. Value Added Tax (VAT) Reduction of 6 Percent for Natural Gas Users

and Partial Restitution of VAT for Mineral Oils, Fuels, Bulk or Bottled

Gas

6. Guarantee Fund for Agriculture

Our analysis of comments submitted by interested parties,

summarized below, has not led us to modify our findings from the

preliminary results.

III. Programs Found to be Not Used

We determine that producers and/or exporters of the subject

merchandise did not apply for or receive benefits under the following

programs:

1. Investment Incentive (WIR)--Regional Program

2. Loans at preferential interest rates.

Analysis of Comments

Comment 1: Respondent contends that the Department improperly

determined the Stimulation for the Innovation of Electric Energy (SES)

program to be countervailable. Respondent states that the URAA exempts

from countervailability assistance to promote adaptation of existing

facilities to new environmental requirements.

Petitioner disagrees that there is a general exemption for

subsidies which provide environmental benefits. Instead, the petitioner

notes that Article 8(c) of the Agreement on Subsidies and

Countervailing Measures lists certain non-actionable subsidies

benefitting the environment and that one of the criteria necessary for

the exemption is that the new environmental requirements are

[[Page 47890]]

imposed by law or regulation. Petitioner argues that the GON program

encouraging the installation of cogeneration equipment is not pursuant

to a new environmental requirement imposed by law or regulation.

Department's Position: We disagree with the respondent. While

section 771(5B) of the Act does describe subsidies which are non-

actionable if certain conditions are met, the GON has not provided any

timely factual information to support its claim, which was raised for

the first time in its May 28, 1995 case brief.

In our August 28, 1995 questionnaire, the Department provided the

GON with the opportunity to claim ``green light'' status under section

771(5B) for eligible programs, and stated that the GON ``may also claim

that certain subsidies for research activities, disadvantaged regions

and/or the adaptation of existing facilities to new environmental

requirements are not countervailable. If you wish to do so, then please

notifiy the official in charge * * * '' (see, section II-3, page 2 of

the Questionnaire). This request for parties to notify the Department

if they wish to claim ``green light'' status has been a standard

question in the Department's questionnaire since January 1, 1995, the

effective date of the URAA. In its questionnaire response filed on

October 20, 1995, the GON did not request ``green light'' consideration

for any of its programs. Moreover, the GON did not provide any factual

information which the Department could use to determine whether the SES

program meets the criteria outlined in section 771(5B)(D) of the Act.

Since the GON raised this issue for the first time in its case

brief, which is well past the deadline for submitting factual

information in the review, and since no information supporting its

claim otherwise exists on the record, the Department determines that

the SES program does not qualify as a noncountervailable subsidy

pursuant to section 771(5B) of the Act.

Comment 2: Petitioner argues that the Department should reverse its

determination that the reduced VAT rate and VAT rebates, applicable to

purchases of mineral oils, fuels, or gas for greenhouses are not

countervailable. Petitioner argues that the VAT reduction and rebates

provide greenhouse growers with preferential gas prices and that these

benefits are targeted to greenhouse growers and are, therefore,

countervailable. Other reasons noted in support of its argument are

that recipients must produce affidavits attesting that the gas is used

only to heat greenhouses and that inspection programs insure that the

reduced rate only benefits greenhouse production. Petitioner further

contends that absent this program flower growers would pay the higher

VAT. Therefore, according to petitioner, the program is specifically

targeted to greenhouse growers. In support of its arguments, petitioner

cites Bicycle Tires and Tubes from Taiwan, 46 FR 53201 (October 28,

1981) (tax ceiling for bicycle manufacturers); Certain Steel Products

from Belgium, 58 FR 32273 (July 9, 1993) (exemptions for companies in

development zone); Certain Steel Products from Brazil (58 FR 37295;

July 9, 1993) (tax rebates to a specific industry); and Certain Steel

Products from Italy, 58 FR 37327; July 9, 1993) (increased VAT

deduction for a firm in a specific region).

Respondent disputes petitioner's argument that the special VAT

regime is countervailable. Respondent argues that the special regime is

available to the entire agricultural sector and that the administrative

procedures that reduce the VAT on oil and natural gas are necessary to

arrive at the reduced VAT level and rebates to which the recipients in

the entire agricultural sector are entitled.

Department's Position: Section 771.5 of the Act and section

355.43(b)(1) of the Proposed Regulations require the Department to

countervail a subsidy that is limited, in law, or in fact, to an

enterprise or industry or group thereof. However, section 355.43(b)(8)

provides that the Department ``will not regard a program as being

specific, within the meaning of paragraph (b)(1) of this section,

solely because the program is limited to the agricultural sector.''

(See Proposed Regulations at page 23380.) In the final determination of

this case, the Department found that if a program is available to and

used by virtually all of agriculture and is not limited to flower

growers or otherwise limited to a specific enterprise or industry, or

group of enterprises or industries, within agriculture, then the

program is not countervailable. See Final Affirmative Countervailing

Duty Determination; Certain Fresh Cut Flowers From the Netherlands (52

FR 3303; February 3, 1987) (Final Determination). See also, Final

Affirmative Countervailing Duty Determination and Countervailing Duty

Order; Lamb Meat from New Zealand (50 FR 37708; September 17, 1985). In

Lamb Meat, we found that the examined program was not limited to a

specific enterprise or industry, or group thereof, because it was

available to and used by a wide variety of agricultural producers. In

the preliminary results of this review, we found that under the Dutch

National Tax Law, farmers in the Netherlands pay the reduced VAT rate

on purchases of virtually all the goods and services required in

agriculture, including natural gas and oil. The application procedure,

noted by petitioner, for obtaining the reduced VAT rate and rebates is

merely a mechanism which enables farmers to receive the reductions to

which they are entitled under the Dutch National Tax Law.

The cases cited by petitioner in its brief are not relevant to the

issue at hand. The issue in those cases dealt with benefits limited to

specific industries or to specific zones or regions. The issue in this

review is whether the reduced VAT rates are applied to virtually all of

the goods and services used within the agricultural sector and whether

there is any limitation within agriculture to provide benefits to

specific commodities under this program. The issue is not whether the

agricultural sector pays lower VAT rates on its purchases than the

other industries in the Netherlands. We found that the reduced VAT rate

is applied to a wide variety of goods in the agricultural sector; such

as, foodstuffs, cereals, seeds, cattle, sheep, goats, pigs, horses,

breeding eggs, veterinary medicines, water, gas and mineral oil,

beetroot, agricultural seeds, fertilizer, feed, round wood, flax, wool,

agricultural tools, bulbs and plants, as well as to services in the

agricultural sector; such as, contracting, repairs, breeding,

inspections, accounting, drying, cooling, cleaning and packaging of

agricultural products. Therefore, since virtually all goods purchased

by and required in the agricultural sector receive the reduced VAT

rate, we determine that this program is not specific. As such, the

reduced VAT rate for agriculture does not provide a countervailable

benefit.

Comment 3: Petitioner argues that the Department understated the

benefits derived from the SES program by allocating the grants received

over estimated greenhouse sales, rather than floricultural sales.

Petitioner claims that because the GON did not provide data regarding

disbursements to flower growers or chrysanthemums growers, the

Department must apply best information available.

Respondent, on the other hand, agrees with the Department's

allocation methodology. Respondent argues that aid from the program is

spread over the entire horticultural sector and is not specific to

flowers or standard chrysanthemums.

Department's Position: Petitioner incorrectly asserts that the

Department understated the benefits from the SES program. We are

conducting this review

[[Page 47891]]

on an aggregate basis due to the large number of growers of the subject

merchandise. Therefore, we collected information on program usage from

the government rather than from individual producers. The GON does not

maintain records on the grants provided under this program on a

product-specific basis. However, the grants under this program were

provided to greenhouse growers, and we allocated the grants over

greenhouse sales. Therefore, the Department has not understated the

benefits under this program attributable to the subject merchandise.

Comment 4: Petitioner argues that the Department should recalculate

the 1994 subsidy flowing from the SES program. Petitioner contends that

the amount calculated for the 1994 review was based on the grant amount

reported in the original questionnaire response, which was smaller than

the total amount reported in the supplemental response.

Department's Position: The Department used the correct amount in

calculating the benefit for the review period, which was the amount

reported in the original response. The amount reported in the

supplemental response was actually the total amount of grants earmarked

for the horticultural industry, while the actual amount of grants

disbursed was what was reported in the original response. The

Department's practice is to countervail the amount of grants actually

provided, not the amount awarded. (See section 355.44(a) of the

Proposed Regulations.)

Final Results of Review

In accordance with section 777A(e)(2)(B) of the Act, we calculated

a country-wide rate to apply to all producers and exporters of the

subject merchandise. For the period January 1, 1994 through December

31, 1994, we determine the net subsidy to be 0.43 percent ad valorem.

As provided for in the Act, any rate less than 0.5 percent ad valorem

is de minimis.

Accordingly, the Department intends to instruct the Customs Service

to liquidate, without regard to countervailing duties, all shipments of

the subject merchandise exported on or after January 1, 1994 and on or

before December 31, 1994. The Department will also instruct Customs to

collect cash deposits of estimated countervailing duties of zero on all

shipments of subject merchandise from the Netherlands entered, or

withdrawn from warehouse, for consumption on or after the date of

publication of the final results of this review.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 355.43(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

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

355.22.

Dated: August 30, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-23231 Filed 9-10-96; 8:45 am]

BILLING CODE 3510-DS-P