Industrial Phosphoric Acid From Israel: Preliminary Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[C-508-605]

Industrial Phosphoric Acid From Israel: Preliminary Results of

Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Preliminary Results and Partial Rescission of

Countervailing Duty Administrative Review.

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

administrative review of the countervailing duty order on industrial

phosphoric acid from Israel for the period January 1, 1997 through

December 31, 1997. For information on the net subsidy for each reviewed

company, as well as for all non-reviewed companies, please see the

Preliminary Results of Review section of this notice. If the final

results remain the same as these preliminary results, we will instruct

the U.S. Customs

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Service to assess countervailing duties as detailed in the Preliminary

Results of Review. Interested parties are invited to comment on these

preliminary results. See Public Comment section of this notice.

EFFECTIVE DATE: May 7, 1999.

FOR FURTHER INFORMATION CONTACT: Dana Mermelstein or Sean Carey, Office

of AD/CVD Enforcement VI, Group II, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone

(202) 482-0984 or (202) 482-3691, respectively.

SUPPLEMENTARY INFORMATION:

Background

On August 19, 1987, the Department published in the Federal

Register (52 FR 31057) the countervailing duty order on industrial

phosphoric acid from Israel. On August 11, 1998, the Department

published a notice of ``Opportunity to Request Administrative Review''

(63 FR 42821) of this countervailing duty order. We received a timely

request for review, and we initiated the review, covering the period

January 1, 1997 through December 31, 1997, on September 29, 1998 (63 FR

51893). In accordance with 19 CFR 351.213(b), this review covers only

those producers or exporters of the subject merchandise for which a

review was specifically requested. Accordingly, this review covers

Rotem-Amfert Negev Ltd. (Rotem) and Haifa Chemicals Ltd. (Haifa). Haifa

did not export the subject merchandise during the period of review

(POR). Therefore, we are rescinding the review with respect to Haifa.

This review covers 11 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). The Department is conducting this administrative review in

accordance with section 751(a) of the Act. All citations to the

Department's regulations reference 19 CFR Part 351 (1998).

Scope of the Review

Imports covered by this review are shipments of industrial

phosphoric acid (IPA) from Israel. Such merchandise is classifiable

under item number 2809.20.00 of the Harmonized Tariff Schedule (HTS).

The HTS item number is provided for convenience and U.S. Customs

Service purposes. The written description of the scope remains

dispositive.

Subsidies Valuation Information

Period of Review

The period for which we are measuring subsidies is calendar year

1997.

Allocation Period

In British Steel plc. v. United States, 879 F.Supp. 1254 (February

9, 1995) (British Steel), the U.S. Court of International Trade (the

Court) ruled against the allocation period methodology for non-

recurring subsidies that the Department had employed for the past

decade, as it was articulated in the General Issues Appendix appended

to the Final Countervailing Duty Determination; Certain Steel Products

from Austria, 58 FR 37225 (July 9, 1993) (GIA). In accordance with the

Court's decision on remand, the Department determined that the most

reasonable method of deriving the allocation period for nonrecurring

subsides is a company-specific average useful life (AUL). This remand

determination was affirmed by the Court on June 4, 1996. British Steel,

929 F.Supp 426, 439 (CIT 1996). Accordingly, the Department has applied

this method to those non-recurring subsidies that have not yet been

countervailed. Rotem submitted an AUL calculation based on depreciation

expenses and asset values of productive assets reported in its

financial statements. Rotem's AUL was derived by adding the sum of

average gross book value of depreciable fixed assets for ten years and

dividing these assets by the total depreciation charges for the related

periods. We found this calculation to be reasonable and consistent with

our company-specific AUL objective. Rotem's calculation resulted in an

average useful life of 23 years, which we have used as the allocation

period for non-recurring subsidies received during the POR. For non-

recurring subsidies received prior to the POR and already countervailed

based on an allocation period established in an earlier segment of the

proceeding, it is not reasonable or practicable to reallocate those

subsidies over a different period of time. Since the countervailing

duty rate in earlier segments of the proceeding was calculated based on

a certain allocation period and resulted in a certain benefit stream,

redefining the allocation period in later segments of the proceeding

would entail taking the original grant amount and creating an entirely

new benefit stream for that grant. Such a practice may lead to an

increase or decrease in the total amount countervailed and, thus, would

result in the possibility of over- or under-countervailing the actual

benefit. Therefore, for purposes of these preliminary results, the

Department is using the original allocation period assigned to each

non-recurring subsidy received prior to the POR. See Certain Carbon

Steel Products from Sweden; Final Results of Countervailing Duty

Administrative Review, 62 FR 16549 (April 7, 1997).

Privatization

Israel Chemicals Limited (ICL), the parent company which owns 100

percent of Rotem's shares, was partially privatized in 1992, 1993,

1994, and 1995. In this administrative review, the Government of Israel

(GOI) and Rotem reported that additional shares of ICL were sold in

1997. We have previously determined that the partial privatization of

ICL represents a partial privatization of each of the companies in

which ICL holds an ownership interest. See Final Results of

Countervailing Duty Administrative Review; Industrial Phosphoric Acid

from Israel, 61 FR 53351, 53352 (October 11, 1996) (1994 Final

Results). In this review and prior reviews of this order, the

Department found that Rotem and/or its predecessor, Negev Phosphates

Ltd., received non-recurring countervailable subsidies prior to these

partial privatizations. Further, the Department found that a portion of

the price paid by a private party for all or part of a government-owned

company represents partial repayment of prior subsidies. See GIA, 58 FR

at 37262. Therefore, in 1992, 1993, and 1995 reviews, we calculated the

portion of the purchase price paid for ICL's shares that is

attributable to repayment of prior subsidies. In the 1994

privatization, less than 0.5 percent of ICL shares were privatized. We

determined that the percentage of subsidies potentially repaid through

this privatization could have no measurable impact on Rotem's overall

net subsidy rate. Thus, we did not apply our repayment methodology to

the 1994 partial privatization. See 1994 Final Results, 61 FR at 53352.

However, we are applying this methodology to the 1997 partial

privatization because 17 percent of ICL's shares were sold. This

approach is consistent with our findings in the GIA and Department

precedent under the URAA. See e.g., GIA, 58 FR at 37259; Certain Hot-

Rolled Lead and Bismuth Carbon Steel Products from the United Kingdom;

Final Results of Countervailing Duty Administrative Review, 61 FR 58377

(November 14, 1996); Final Affirmative Countervailing

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Duty Determination: Certain Pasta from Italy, 61 FR 30288 (June 14,

1996).

Grant Benefit Calculations

To calculate the benefit for the POR, we followed the same

methodology used in the final results of the 1996 administrative

review. We converted Rotem's shekel-denominated grants into U.S.

dollars, using the exchange rate in effect on the date the grant was

received. We then applied the grant methodology to determine the

benefit for the POR. See Industrial Phosphoric Acid from Israel; Final

Results of Countervailing Duty Administrative Review, 63 FR 13626,

13633 (March 20, 1998) (1995 Final Results).

Discount Rates

We considered Rotem's cost of long-term borrowing in U.S. dollars

as reported in the company's financial statements for use as the

discount rate used to allocate the countervailable benefit over time.

However, this information includes Rotem's borrowing from its parent

company, ICL, and thus does not provide an appropriate discount rate.

Therefore, we have turned to ICL's cost of long-term borrowing in U.S.

dollars in each year from 1984 through 1997 as the most appropriate

discount rate. ICL's interest rates are shown in the notes to the

company's financial statements, public documents which are in the

record of this review. See Comment 9 in the 1995 Final Results (63 FR

at 13633-4).

Analysis of Programs

I. Programs Conferring Subsidies

A. Encouragement of Capital Investments Law (ECIL)

The ECIL program is designed to encourage the distribution of the

population throughout Israel, to create new sources of employment, to

aid the absorption of immigrants, and to develop the economy's

production capacity. To be eligible for benefits under the ECIL,

including investment grants, capital grants, accelerated depreciation,

reduced tax rates, and certain loans, applicants must obtain approved

enterprise status. Investment grants cover a percentage of the cost of

the approved investment, and the amount of the grant depends on the

geographic location of eligible enterprises. For purposes of the ECIL

program, Israel is divided into three zones--Development Zones A and B,

and the Central Zone. Under the ECIL program the Central Zone was not

eligible for benefits. In Final Affirmative Countervailing Duty

Determination: Industrial Phosphoric Acid From Israel, 52 FR 25447

(July 7, 1987) (IPA Investigation), the Department found the ECIL grant

program to be de jure specific because the program limits the

availability of grants to enterprises located in specific regions. In

this review, no new information or evidence of changed circumstances

has been submitted to warrant reconsideration of this determination.

Rotem is located in Development Zone A, and received ECIL

investment, drawback, and capital grants in disbursements over a period

of years for several projects. As explained in the ``Allocation

Period'' section above, for grants that have been allocated in prior

administrative reviews, we are continuing to use the allocation period

assigned to these grants. For grants received during the POR, we have

used the AUL calculated by Rotem in this review, which is 23 years. To

calculate the benefit for the POR, we followed the same methodology

used in the final results of the 1995 administrative review, as

indicated in the ``Grant Benefit Calculations'' section above.

To calculate the total subsidy in the POR, we first summed the

grant amounts allocated to and received in 1997, after taking into

account the partial privatizations in 1992, 1993, 1995, and 1997. To

derive the subsidy rates, as discussed in the 1995 Final Results, we

attributed ECIL grants to a particular facility over the sales of the

product produced by that facility plus sales of all products into which

that product may be incorporated. Accordingly, we attributed ECIL

grants to Rotem's phosphate rock mines to total sales; we attributed

grants to Rotem's green acid facility to total sales minus direct sales

of phosphate rock; and, finally, we attributed grants to Rotem's IPA

facilities to sales of IPA, MKP, fertilizers, and ``IPA-Akonomika'' and

MKP-HCL (by-products of IPA production which contribute to Rotem's

sales revenue). We summed the rates obtained on this basis, and

preliminarily determine the net countervailable subsidy from this

program to be 5.43 percent ad valorem for the POR.

B. Infrastructure Grant Program

Under the Infrastructure Grant Program, the GOI establishes new

industrial areas by partially reimbursing companies for their costs of

developing the infrastructure in certain geographical zones. Rotem

received assistance under this program during the POR. Therefore,

within the meaning of section 771(5)(B)(i), a subsidy is bestowed

because the GOI provided a financial contribution, which conferred a

benefit. We analyzed whether this program is specific within the

meaning of section 751(5A)(D) of the Act. Because the infrastructure

grants are limited to an enterprise or industry located in certain

zones within the jurisdiction of the authority providing the subsidy,

we find this program to be regionally specific in accordance with

section 771(5A)(D)(iv). We view these grants as non-recurring based on

the analysis set forth in the ``Allocation'' section of the GIA (58 FR

at 37226) because these benefits are exceptional, and the company

cannot expect to receive benefits on an ongoing basis from review

period to review period. Therefore, we calculated the benefit under

this program using the methodology for non-recurring grants noted above

in the ``Grant Benefit Calculations'' section. We then divided the

grant amount by Rotem's total sales because the grant benefitted

Rotem's total production. On this basis, we preliminarily determine the

net countervailable subsidy from this program to be 0.22 percent ad

valorem.

II. Programs Preliminarily Determined To Be Not Used

We examined the following programs and preliminarily determined

that the producer and/or exporter of the subject merchandise did not

apply for or receive benefits under these programs during the POR:

A. Encouragement of Industrial Research and Development Grants

(EIRD)

B. Environmental Grant Program

C. Reduced Tax Rates under ECIL

D. ECIL Section 24 loans

E. Dividends and Interest Tax Benefits under Section 46 of the ECIL

F. ECIL Preferential Accelerated Depreciation

G. Exchange Rate Risk Insurance Scheme

H. Labor Training Grants

I. Long-term Industrial Development Loans

Preliminary Results of Review

In accordance with 19 CFR 351.213(b), we calculated an individual

subsidy rate for each producer/exporter subject to this administrative

review. For the period January 1, 1997 through December 31, 1997, we

preliminarily determine the net subsidy for Rotem to be 5.65 percent ad

valorem. If the final results of this review remain the same as these

preliminary results, the Department intends to instruct the U.S.

Customs Service (Customs) to assess countervailing duties as indicated

above. The Department also intends to instruct Customs to collect cash

deposits of estimated countervailing duties as indicated above of the

f.o.b. invoice price on all shipments of the subject merchandise from

reviewed companies, entered, or withdrawn from warehouse, for

consumption on or after

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the date of publication of the final results of this review. 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. The requested review will normally

cover only those companies specifically named. See 19 CFR 351.213(b).

Pursuant to 19 CFR 351.212(c), for all companies for which a review was

not requested, duties must be assessed at the cash deposit rate, and

cash deposits must continue to be collected, at the rate previously

ordered. As such, the countervailing duty cash deposit rate applicable

to a company can no longer change, except pursuant to a request for a

review of that company. See Federal-Mogul Corporation and The

Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and

Floral Trade Council v. United States, 822 F. Supp. 766 (CIT 1993).

Therefore, the cash deposit rates for all companies except those

covered by this review will be unchanged by the results of this review.

We will instruct Customs to continue to collect cash deposits for non-

reviewed companies at the most recent company-specific or country-wide

rate applicable to the company. Accordingly, the cash deposit rates

that will be applied to non-reviewed companies covered by this order

will be the rate for that company established in the most recently

completed administrative proceeding under the URAA. If such a review

has not been conducted, the rate established in the most recently

completed administrative proceeding conducted pursuant to the statutory

provisions that were in effect prior to the URAA amendments, is

applicable. See 1992/93 Final Results, 61 FR 28842. These rates shall

apply to all non-reviewed companies until a review of a company

assigned these rates is requested. In addition, for the period January

1, 1997 through December 31, 1997, the assessment rates applicable to

all non-reviewed companies covered by this order are the cash deposit

rates in effect at the time of entry.

Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to

parties to the proceeding any calculations performed in connection with

these preliminary results within five days after the date of

publication of this notice. Pursuant to 19 CFR 351.309, interested

parties may submit written comments in response to these preliminary

results. Case briefs must be submitted within 30 days after the date of

publication of this notice, and rebuttal briefs, limited to arguments

raised in case briefs, must be submitted no later than five days after

the time limit for filing case briefs. Parties who submit argument in

this proceeding are requested to submit with the argument: (1) a

statement of the issues, and (2) a brief summary of the argument. Case

and rebuttal briefs must be served on interested parties in accordance

with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, within 30

days of the date of publication of this notice, interested parties may

request a public hearing on arguments to be raised in the case and

rebuttal briefs. Unless the Secretary specifies otherwise, the hearing,

if requested, will be held two days after the date for submission of

rebuttal briefs, that is, thirty-seven days after the date of

publication of these preliminary results. Representatives of parties to

the proceeding may request disclosure of proprietary information under

administrative protective order no later than 10 days after the

representative's client or employer becomes a party to the proceeding,

but in no event later than the date case briefs, under 19 CFR

351.309(c)(ii), are due. The Department will publish the final results

of this administrative review, including the results of its analysis of

issues raised in any case or rebuttal brief or at a hearing.

These preliminary results are issued and published in accordance

with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1)

and 19 U.S.C 1677f(i)(1)).

Dated: May 3, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-11575 Filed 5-6-99; 8:45 am]

BILLING CODE 3510-DS-P