[Federal Register Volume 59, Number 200 (Tuesday, October 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25783]


[[Page Unknown]]

[Federal Register: October 18, 1994]


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DEPARTMENT OF COMMERCE
[(C-301-003)--Roses and Other Cut Flowers from Colombia; (C-301-601)--
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 investigations on roses and other cut flowers from Colombia and on 
miniature carnations from Colombia. These reviews cover the periods 
January 1, 1991, through December 31, 1991, and January 1, 1992, 
through December 31, 1992, and eight programs. We preliminarily 
determine that the Government of Colombia (GOC) and the signatories/
exporters of roses and other cut flowers and miniature carnations have 
complied with the terms of the suspension agreements. We invite 
interested parties to comment on these results.

EFFECTIVE DATE: October 18, 1994.

FOR FURTHER INFORMATION CONTACT: Stephen Jacques, Jeanene Lairo or 
Derek Parks, Office of Agreements Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Ave., N.W., Washington, D.C. 20230; telephone: 
(202) 482-3793.

SUPPLEMENTARY INFORMATION:

Background

    On December 26, 1991, and January 13, 1993, the Department 
published notices of ``Opportunity to Request an Administrative 
Review'' for the 1991 and 1992 review periods, respectively (56 FR 
66846 and 58 FR 4148). On January 31, 1992, and on January 29, 1993, 
the Floral Trade Council (FTC) requested administrative reviews of the 
suspended countervailing duty investigations covering roses and other 
cut flowers (roses) and miniature carnations (minis) for the 1991 and 
1992 periods, respectively. On February 24, 1992, and on March 26, 
1993, the Department initiated these reviews (57 FR 6314 and 58 FR 
16397). 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

    Imports covered by these reviews are shipments of roses and minis 
from Colombia. During the review periods, such merchandise 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.
    The review periods are January 1, 1991, through December 31, 1991 
and January 1, 1992, through December 31, 1992. These reviews of the 
suspended investigations involve over 450 producers/exporters of roses, 
over 100 producers/exporters of minis, as well as the GOC. We verified 
the responses from four producers/exporters of the subject merchandise: 
Floramerica, Inc. (roses and minis); Jardines de los Andes S.A. (roses 
and minis); Agrosuba, Ltda. (roses and minis) and Horticultura de la 
Sabana (minis) (collectively, the four companies). The suspension 
agreement for minis covers seven programs: (1) Tax Reimbursement 
Certificate Program; (2) PROEXPO/BANCOLDEX (funds for the promotion of 
exports); (3) Plan Vallejo; (4) Free Industrial Zones; (5) Export 
Credit Insurance; (6) Countertrade; and (7) Research and Development. 
The suspension agreement for roses covers the seven programs listed 
above, as well as Air Freight Rates.

Analysis of Programs

    For a description of changes to these programs during the review 
periods, please see ``Summary of Changes to Programs Covered by the 
Suspension Agreements on Roses and Other Cut Flowers and Miniature 
Carnations from Colombia,'' Memorandum to Edward C. Yang, Division 
Director, Office of Agreements Compliance, available in the public 
file.
    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, producers/exporters 
will not apply for, or receive, tax reimbursement certificates or other 
rebates, remissions, or exemptions under the CERT program for exports 
of the subject merchandise to the United States and Puerto Rico. 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 have been 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 period of 
reviews (PORs). In addition, at verification of the four 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 PORs. 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 PORs.

(2) PROEXPO/BANCOLDEX

    During 1991, PROEXPO (Fondo de Promocion de Exportaciones) provided 
funds for the promotion of exports. On January 1, 1992, the 7th Law 
transferred PROEXPO from a government-administered fund to a commercial 
bank. The new bank's legal nature, functions, rights, and obligations 
were outlined in decree 2505 and PROEXPO was renamed Banco de Comercio 
Exterior de Colombia S.A. (BANCOLDEX). As a result, the same GOC 
resolutions for export loans that were implemented by PROEXPO, are now 
implemented by BANCOLDEX.
    PROEXPO/BANCOLDEX provides four peso credit lines (short-term 
working capital, long-term loans (capitalization), fixed investment, 
financing for trade promotion); and U.S. dollar credit lines. Most 
loans provided by PROEXPO/BANCOLDEX are short-term (less than a year).
    Under the terms of the suspension agreements, producers/exporters 
will not apply for, or receive, for exports of the subject merchandise 
to the United States and Puerto Rico, any short- or long-term export 
financing from PROEXPO/BANCOLDEX other than that offered on non-
preferential terms and at interest rates at or above the established 
Department benchmark interest rates.
    For the roses suspension agreement, the Department established 
benchmark interest rates for all short- and long-term peso loans when 
the agreement was signed (51 FR 44930, (December 15, 1986)). The 
Department's short-term benchmark interest rate was 22.5 percent and 
the long-term benchmark interest rate was 21.0 percent, for loans to 
producers/exporters of roses. These same interest rates were in effect 
during the PORs.
    For the minis suspension agreement, the Department also established 
benchmark rates for all short- and long-term peso loans when the 
agreement was signed: the short-term benchmark interest rate was 22.5 
percent, and the long-term benchmark interest rate was 21 percent. In 
Miniature Carnations from Colombia: Final Results of Countervailing 
Duty Administrative Review, (56 FR 14240, (April 8, 1991)), the 
Department changed its benchmark rate for minis to nominal DTF (the 
Colombian Central Bank time deposit rate, the ``Depositos a Termino 
Fijo'') plus 1 percentage point for short-term loans, and nominal DTF 
plus 1 percentage point and 0.25 percentage point for each additional 
year after the first for long-term loans. This change in the benchmark 
interest rates became effective on April 8, 1991, the date of 
publication of the Department's notice.

Colombian Peso Loans

    At verification, we examined GOC documents and confirmed that 
PROEXPO/BANCOLDEX charged interest rates on its short- and long-term 
peso loans above the established Department benchmark interest rates 
for the subject merchandise during the PORs. In addition, we found that 
PROEXPO/BANCOLDEX issued the loans on non-preferential terms. We also 
examined the four companies' accounting records which confirmed that 
the companies received PROEXPO/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 during the PORs. 
Therefore, we preliminarily determine that PROEXPO/BANCOLDEX did not 
confer any countervailable benefits upon exports of the subject 
merchandise to the United States and Puerto Rico during the PORs.
    In order to update previous benchmark rates determined by the 
Department, we reviewed interest rates in Colombia to define what 
interest rate benchmarks were appropriate for future PROEXPO/BANCOLDEX 
loans. In the case of short- and long-term peso PROEXPO/BANCOLDEX 
loans, the Department confirmed at verification that the GOC adopted 
the DTF-based rates because the DTF rates more accurately reflect 
interest rate fluctuations in the market. While we verified that there 
is no single predominant source of alternative financing in Colombia, 
the Department established that a major lender to the agricultural 
sector is the independent government agency, FINAGRO (Fondo para el 
financiamiento del Sector Agropecuario). FINAGRO loans are outside 
BANCOLDEX-controlled credit lines and account for 35 to 40 percent of 
financing to the agricultural sector. FINAGRO loans are short-term.
    The Department found that, in addition to FINAGRO, the Caja Agraria 
bank finances 35 to 40 percent of the agricultural sector. At 
verification, we found that the Caja Agraria interest rates are similar 
to the rates offered by FFA/Finagro. However, information on the record 
about Caja Agraria rates conflicts with what we found at verification. 
Therefore, we preliminarily determine that FINAGRO interest rates 
represent the best alternative source of financing for agricultural 
entities in Colombia.
    The Department, therefore, preliminarily determines that the short-
term benchmark interest rate will be the most recent FINAGRO short-term 
interest rate established in February 1994, nominal DTF plus six 
percentage points. The Department also preliminarily determines that 
the long-term benchmark interest rate will be the most recent FINAGRO 
short-term interest rate in February 1994, nominal DTF plus six 
percentage points, plus an additional 0.25 percentage points for each 
year after the first, including any grace period, reflecting the spread 
between PROEXPO/BANCOLDEX short- and long-term loans. The short- and 
long-term benchmark interest rates will apply to loans granted on or 
after the date of publication of the final results of these 
administrative reviews.

U.S. Dollar Loans

    During the PORs, PROEXPO/BANCOLDEX established several new U.S. 
dollar credit lines. On August 26, 1991, the GOC issued resolution 13/
91 and established a new short-term working capital credit line 
financed by CAF (Corporacion Andina de Fomento) and administered by 
PROEXPO/BANCOLDEX. The interest rates on CAF loans were set at the 
London Interbank Offered Rate (LIBOR) plus up to 3.25 percentage 
points, depending on the terms of the loan. In addition, resolution 4/
92 (February 19, 1992) established a U.S. dollar credit line for 
preshipment operations. These loans are financed by FLAR (Fondo 
Latinoamericano de Reservas) and BLADEX (Banco Latinoamericano de 
Exportaciones), both of which are international financial institutions. 
The interest rates on FLAR and BLADEX loans are LIBOR plus up to three 
percentage points on 180-day loans, and interest is payable at the end 
of the term of the loan.
    In the case of short-term U.S. dollar loans, the Department had not 
set any benchmarks prior to these PORs, since these loans had not been 
introduced until 1991. Therefore, the Department could not examine 
these loans for compliance with the terms of the suspension agreements 
during these PORs.
    In order to establish new U.S. dollar benchmark rates, we examined 
alternative sources of dollar loans in Colombia to determine a 
benchmark interest rate. We confirmed at verification that during the 
PORs, PROEXPO/BANCOLDEX loan interest rates on U.S. dollar loans 
charged to Colombian flower growers/exporters were based upon the LIBOR 
plus a variable spread. At verification, we found no alternative 
measure of what a firm's cost for debt in dollars would be in Colombia. 
In the absence of a viable alternative source of dollar financing in 
Colombia, we preliminarily determine that the U.S. weighted-average 
effective interest rates, for short-term loans under $100,000 for 
February 1994, as published in the Federal Reserve Statistical Release 
is the most representative source of financing. This methodology is 
consistent with DOC prior practice (See Final Affirmative 
Countervailing Duty Determinations: Certain Steel Products From Mexico; 
FR 58 37358, (July 9, 1993)).
    The Federal Reserve publishes rates based upon the U.S. Prime 
Lending Rate and not LIBOR rates. Thus, for short-term U.S. dollar 
loans, we preliminarily determine setting the Department's benchmark at 
U.S. Prime plus 1.96 percentage points, which corresponds to the 
weighted-average effective interest rates for U.S. short-term loans 
under $100,000 in February 1994.
    We preliminarily determine that these new benchmarks will apply to 
loans granted on or after the date of publication of the final results 
of these administrative reviews. Any such financing outstanding on that 
date shall be repaid or refinanced on non-preferential terms and 
interest rates at or above the most recent benchmark interest rate 
determined by the Department.

Prospective Benchmarks

    The Department invites interested parties to comment on the current 
procedure for determining revised and new benchmarks for PROEXPO/
BANCOLDEX loans or any other loan programs.
    There are two main issues that arise out of the current procedure. 
First, suspension agreements are forward looking, and the Department 
sets benchmark interest rates prospectively (See Miniature Carnations 
from Colombia: Final Results of Countervailing Duty Administrative 
Review; 56 FR 14240 (April 8, 1991) and Miniature Carnations from 
Colombia; Final Results of Countervailing Duty Administrative Review 
and Determination Not To Terminate Suspended Investigation; 59 FR 
10790, (March 8, 1994.)) Petitioners have argued that this leads to 
situations where PROEXPO/BANCOLDEX loans at interest rates in 
compliance with the Department's benchmarks could be at preferential 
interest rates and thus be countervailable. Second, the Department did 
not set benchmarks for U.S. dollar loans prior to these PORs because 
the dollar loan programs were not initiated until August 26, 1991. 
Therefore, because Department benchmarks in these suspension agreements 
are set prospectively, during these PORs there was no Department dollar 
interest rate benchmark in place against which the Department could 
establish whether or not PROEXPO/BANCOLDEX dollar loans were granted on 
non-preferential terms.
    For these reasons, we invite interested parties to comment on 
whether it would be in the public interest to amend and/or clarify 
these suspension agreements with regard to benchmarks and the 
procedures for establishing benchmarks for loan programs.

(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, producers/ 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 PORs. Also, GOC officials 
stated that, during the PORs, no flower producers applied for Plan 
Vallejo benefits. In addition, we verified that the four companies did 
not use the program for capital equipment during the PORs. 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 PORs.
    We also 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) 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 roses 
suspension agreement states that the Department may consider rescinding 
the agreement and reopening the investigation 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 PORs.
    Since the Department has never found the air freight rates to be a 
countervailable subsidy, the GOC is not required to abolish the program 
for eventual termination of the agreement.

(5) 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 countervailable benefits upon exports of the 
subject merchandise to the United States and Puerto Rico during the 
PORs. We also preliminarily determine that during the PORs the GOC had 
eliminated the subsidy on this merchandise by abolishing this program 
for the subject merchandise.

(6) 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 client. Several 
commodities are ineligible for the program: coffee in certain forms, 
crude leathers, oil and by-products, precious and semi-precious 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, producers/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. At 
verification of the SEGUREXPO insurance company, we examined a list of 
all insurance policies outstanding during the PORs issued by the 
company. We verified that exporters of the subject merchandise did not 
participate in the Export Credit Insurance Program during the PORs. 
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 PORs. We also 
preliminarily determine that the GOC has eliminated the subsidy on this 
merchandise by abolishing this program for the subject merchandise.

(7) 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. During verification, GOC officials 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 
reviewed documentation that confirmed that this program had been 
terminated on that date. 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 PORs. We also preliminarily determine that the GOC has eliminated 
the subsidy on the subject merchandise.

Other Program

    Although not specifically listed in the suspension agreements, we 
examined the following program:

(8) Research and Development

    From January 1983 (the effective date of the original suspension 
agreement) until November 1985, when the CERT rate for roses and other 
cut flowers subject to the suspension agreement was reduced to zero, 
flower exporters, on a voluntary basis, allowed the Central Bank to 
withhold a certain percentage of the CERTs earned on exports of the 
subject merchandise to the United States and Puerto Rico and other 
countries for research and development. In 1985, the GOC issued 
resolution 10, which established a fund from the CERT payments that 
were withheld for general and technological research on the cultivation 
of all flowers. During the PORs, the only source of revenue for the 
fund was from interest income. The resolution requires that any funds 
expended under this resolution be disbursed in a manner consistent with 
the suspension agreements. During the PORs, there was only one 
disbursement of funds for the payment of legal fees to Arnold & Porter, 
counsel to GOC and respondents in this proceeding. The resolution 10 
account was officially closed in October 1991.
    At verification at the four companies, we examined financial 
documents and found that no funds were received under resolution 10 
during the PORs. 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 
PORs. We also preliminarily determine that the GOC has eliminated the 
subsidy on the merchandise by abolishing this program.

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 periods January 1, 1991, through December 31, 1991, and January 1, 
1992, through December 31, 1992. In addition, we preliminarily 
determine that the new peso and U.S. dollar benchmarks will apply to 
loans granted on or after the date of publication of the final results 
of these administrative reviews.
    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: October 7, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-25783 Filed 10-17-94; 8:45 am]
BILLING CODE 3510-DS-P