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,

Commerce.

ACTION: Notice of Preliminary Results of Countervailing Duty

Administrative Reviews and Intent To Terminate Suspended

Investigations.

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

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. Termination of these two cases has been

requested by the Government of Colombia (``GOC'') pursuant to 19 CFR

355.25(a)(2) and the procedures specified in 19 CFR 355.25(b)(2), and

by certain producers and exporters of subject merchandise pursuant to

19 CFR 355.25(a)(3) and the procedures specified in 19 CFR 355.25(b)(3)

in the event the Department denies the GOC's request to terminate.

These reviews cover the period of review (``POR'') January 1, 1994,

through December 31, 1994, and eleven programs. We preliminarily

determine that the GOC and the producers/exporters of roses and minis

have complied with the terms of the suspension agreements. We also

preliminarily determine that the producers/exporters of subject

merchandise have not used any program under review for a period of at

least five consecutive years. Additionally, we preliminarily 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 preliminarily 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 Commerce

Regulations.

We invite interested parties to comment on these results. Parties

who submit arguments in this proceeding are requested to submit with

any argument (1) a statement of the issue and (2) a brief summary of

the argument.

EFFECTIVE DATE: March 8, 1996.

FOR FURTHER INFORMATION CONTACT: Rick Johnson or Jean Kemp, Office of

Agreements Compliance, Import Administration, International Trade

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

Constitution Avenue, 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 effective date of amendments

made to the Tariff Act in accordance with the Uruguay Round Agreements

Act.

Background

On January 12, 1995, the Department published in the Federal

Register (60 FR 2941) a notice of ``Opportunity to Request an

Administrative Review'' for the 1994 review period. On January 31, 1995

the GOC and the Colombian Association of Flower Exporters

(Asocolflores) requested administrative reviews of the suspended

countervailing duty investigations covering roses and

[[Page 9427]]

minis for the 1994 period. On April 14, 1995, the Department initiated

these reviews (60 FR 19017, 19018). 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 only. The written descriptions remain

dispositive.

These reviews of the suspended investigations involve approximately

600 Colombian flower producers/exporters of roses, over 100 Colombian

flower producers/exporters of minis, and 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.

Verification

As provided in Section 776(b) of the Tariff Act, we verified

information provided by the respondents by using standard verification

procedures, including inspection of programs at the appropriate

administering agencies, onsite inspection of the manufacturers'

facilities, the examination of relevant sales and financial records,

and selection of original documentation containing relevant

information. We verified the responses from four producers/exporters of

both classes or kinds of merchandise under review for the period

January 1, 1994 to December 31, 1994: Flores Condor de Colombia, Ltda,

Flores Las Palmas, S.A., Splendid Flowers, Ltda, and Flores del Rio,

S.A. Our verification results are outlined in the public versions of

the verification reports.

Analysis of Programs

We examined the following programs subject to the terms of the

suspension agreements:

(1) BANCOLDEX

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

exporters will not apply for, or receive any export financing from

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

above the established Department benchmark interest rates. For the

period of review, the benchmark interest rates in effect for minis were

nominal Depositos a Termino Fijo (DTF)+1 for short-term peso loans, and

nominal DTF+1+.25/year for long-term loans. See Miniature Carnations

from Colombia; Final Results of Countervailing Duty Administrative

Review (1989), 56 FR 14240 (April 8, 1991). For roses for the period of

review, the benchmark interest rates in effect were 22.5% for short-

term peso loans and 21% for long-term peso loans. See Roses and Other

Cut Flowers from Colombia; Final Results of Countervailing Duty

Administrative Review and Revised Suspension Agreement (1983), 51 FR

44930, 44932 (December 15, 1986). There was no applicable benchmark for

U.S. dollar loans for the POR.

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 four 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 or above the established Department

benchmark rates for exports of the subject merchandise to the United

States and Puerto Rico in effect during the POR. Therefore, we

preliminarily 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. We also preliminarily

determine that no countervailable loans under the BANCOLDEX loan

program have been used by exporters of the subject merchandise for a

period of five consecutive years.

U.S. Dollar Loans

For the period of review, there were no applicable benchmark

interest rates for U.S. dollar loans. However, for the purposes of

determining whether termination of the suspension agreement is

appropriate, we examined whether BANCOLDEX conferred any

countervailable benefits upon exports of the subject merchandise to the

United States and Puerto Rico during the POR with regard to BANCOLDEX

U.S. dollar-denominated loans. We preliminarily determine that

BANCOLDEX did not confer any countervailable U.S. dollar loans on

subject merchandise during the POR (See Memorandum to the File,

February 28, 1996). We also preliminarily determine that no

countervailable loans under the BANCOLDEX loan program have been used

by exporters of the subject merchandise for a period of five

consecutive years.

(2) 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

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 exporter applied

for Plan Vallejo benefits. Therefore, we preliminarily determine that

this program has not been used for subject merchandise for a period of

five consecutive years.

In addition, we verified that the four companies we examined at

verification did not use the program for capital equipment during the

POR. Therefore,

[[Page 9428]]

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. In addition, we

preliminarily determine that Plan Vallejo has been abolished for the

subject merchandise in Resolution 2386 because flower exporters are

ineligible to receive benefits for exports to the United States and

Puerto Rico.

(3) 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 only to 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 the tasa de captacion para

corporaciones (``TCC'') 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 percent 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 percent 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,

therefore, are not countervailable.

Furthermore, we verified that no Colombian flower exporters

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

preliminarily determine that the GOC and the Colombian flower exporters

of the subject merchandise were in compliance with the suspension

agreements because IFI's export credit lines were not used by Colombian

flower exporters of the subject merchandise during the POR. As we noted

in Roses and Other Cut Flowers From Colombia; Miniature Carnations From

Colombia; Preliminary Results of Countervailing Duty Administrative

Reviews of Suspended Investigations (60 FR 42535, 42538, August 16,

1995) (1993 review), because flower exporters of the subject

merchandise were eligible to apply for and receive IFI's export credit

lines, the same short- and long-term benchmarks as for BANCOLDEX peso

financing applied for the POR (See Section 1 above).

At verification, we determined that Colombian flower exporters did

not apply for or receive any IFI short- and long-term export credits

for the subject merchandise to the United States and Puerto Rico.

Therefore, we preliminarily determine that IFI loans did not confer any

countervailable benefits upon exports of the subject merchandise to the

United States and Puerto Rico during the POR. Although no loans at

preferential rates were received by exporters of the subject

merchandise, the program itself has not been abolished. Rather, the

above scenario constitutes non-use of the program. Therefore, we

preliminarily determine that IFI's export credit line program has not

been used by exporters of the subject merchandise for the period of

review. We also preliminarily determine that exporters of the subject

merchandise have not received countervailable loans under this IFI

program since the Department began examining this program, in the 1993

review.

(4) 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. At verification,

we found no evidence that Colombian flower producers/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 producers/exporters of the

subject merchandise during the POR. Furthermore, we preliminarily

determine that FONADE financing has not been used by producers/

exporters of the subject merchandise since the Department began

examining this program, in the 1993 review.

(5) Financiera de Desarrollo Territorial (FINDETER)

The Department has previously found Financiera de Desarrollo

Territorial (``FINDETER'') financing to be not countervailable for

exports of the subject merchandise (Roses and Other Cut Flowers from

Colombia; Miniature Carnations From Colombia; Preliminary Results of

Countervailing Duty Administrative Reviews of Suspended Investigations,

60 FR 42535-38, August 16, 1995). For the current review, the

Department has examined this program and preliminarily finds it to be

unchanged and therefore not countervailable for the subject

merchandise.

Other Programs

In past reviews, the Department has found the following programs to

have been abolished for the subject merchandise for a period of at

least three consecutive years (see, infra, Roses and Other Cut Flowers

from Colombia; Preliminary Results of Countervailing Duty

Administrative Review and Intent Not To Terminate Suspended

Investigation, 58 FR 52272-5, October 7, 1993; Miniature Carnations

From Colombia; Preliminary Results of Countervailing Duty

Administrative Review and Intent Not To Terminate Suspended

Investigation, 58 FR 52269-72, October 7, 1993):

(6) Tax Reimbursement Certificate Program (``CERT'');

(7) Free Industrial Zones;

(8) Export Credit Insurance;

(9) Countertrade; and

(10) Research and Development.

For the current review, the Department has examined these programs

and verified that they are unchanged from earlier reviews. Therefore,

they remain abolished for the subject merchandise.

[[Page 9429]]

Program Specific to the Suspension Agreement on Roses and Other Cut

Flowers

(11) Air Freight Rates

The Civil Aeronautics Board (Departmento Administrativo de la

Aeronautica Civil, hereafter referred to as ``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.

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. Although no subsidies

were received by exporters of the subject merchandise through this

program, the program establishing minimum and maximum rates itself has

not been abolished. Rather, the above scenario characterizes non-use of

the program. Therefore, we preliminarily determine that this program

has not been used by exporters of the subject merchandise for a period

of five consecutive years.

Preliminary Results of Review

We preliminarily 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 preliminarily 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 preliminarily determine that the GOC and the

producers/exporters covered by this agreement 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.

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: February 28, 1996.

Paul L. Joffe,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-5439 Filed 3-6-96; 8:45 am]

BILLING CODE 3510-DS-P