[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Notices]
[Pages 42535-42539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20300]



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

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, 
Department of Commerce.

ACTION: Notice of Preliminary Results of Countervailing Duty 
Administrative Reviews of 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. These reviews cover the period of review (POR) 
January 1, 1993, through December 31, 1993, and eleven programs. We 
preliminarily determine that the Government of Colombia (GOC) and the 
signatories/exporters of roses and minis have complied with the terms 
of the suspension agreements. We invite interested parties to comment 
on these results.

EFFECTIVE DATE: August 16, 1995.

FOR FURTHER INFORMATION CONTACT:
Jean Kemp or Stephen Jacques, Office of Agreements Compliance, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
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 December 31, 1994. However, 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 Although the Department has withdrawn the 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 

[[Page 42536]]
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 of the Uruguay Round 
Agreements Act (See 60 FR 80 (January 3, 1995)).

Background

    On January 5, 1994, the Department published in the Federal 
Register (59 FR 564) a notice of ``Opportunity to Request an 
Administrative Review'' for the 1993 review period. On January 31, 1994 
the Colombian Association of Flower Exporters (Asocoflores) requested 
administrative reviews of the suspended countervailing duty 
investigations covering roses and minis for the 1993 period. On 
February 17, 1994, the Department initiated these reviews (59 FR 7979). 
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. The written descriptions remain 
dispositive.
    These reviews of the suspended investigations involve over 800 
Colombian flower growers/ exporters of roses, over 100 Colombian flower 
growers/exporters of minis, as well as the GOC. We verified the 
responses from six growers/exporters of the subject merchandise: Flores 
La Conchita German Ribon E. en C. (roses and minis); Tuchany, S.A. 
(roses); Flores de Exportacion, S.A. (roses and minis); Queen's Flowers 
of Colombia Ltda. (roses and minis); Florval, S.A. (roses and minis); 
and Flores de Funza, S.A. (roses and minis) (collectively, the six 
companies). The suspension agreement for minis covers ten programs: (1) 
Tax Reimbursement Certificate Program; (2) BANCOLDEX (funds for the 
promotion of exports); (3) Plan Vallejo; (4) Free Industrial Zones; (5) 
Export Credit Insurance; (6) Countertrade; (7) Research and 
Development; (8) Instituto de Fomento Industrial (IFI); (9) Financier 
de Desarrollo Territorial (FINDETER); and (10) Fondo Financiero de 
Proyectos de Desarrollo (FONADE). The suspension agreement for roses 
covers the ten programs listed above, as well as (11) Air Freight 
Rates.

Analysis of Programs

    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, Colombian flower 
growers/exporters will be apply for, or receive, tax certificates or 
other rebates, remissions, or exemptions under the CERT program for 
exports of the subject merchandise to the United States and Puerto 
Rico. Moreover, 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 wee 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 POR. In 
addition, at verification of the six 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 POR. 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 POR.

(2) BANCOLDEX

    On January 2, 1992, the former Fondo de Promocion de Exportaciones 
(PROEXPO) transferred from a government-administered fund to a 
commercial bank and was renamed Banco de Comercio Exterior de Exterior 
(BANCOLDEX). The same resolutions continued to govern export loans 
granted by BANCOLDEX as previously granted by PROEXPO.
    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 
growers/exporters will not apply for, or receive any export financing 
for BANCOLDEX other than that offered on non-preferential terms, and at 
or above the established Department benchmark interest rates. For the 
roses and minis suspension agreements in the Roses and Other Cut 
Flowers from Colombia and Miniature Carnations from Colombia: Final 
Results of Countevailing Duty Administrative Reviews of Suspended 
Investigations, (published concurrently with this notice), the 
Department established new benchmark interest rates for all short- and 
long-term peso loans. The Department's short-term benchmark interest 
rate is nominal DTF (the Colombian Central Bank time deposit rate, the 
``Depositos a Termino Fijo'') plus 3.66 percentage points, and for 
long-term loans nominal DTF plus 3.66 percentage points and 0.25 
percentage point for each additional year after the first. This change 
in the benchmark interest rates will be effective 14 days after 
publication of the final results for the administrative reviews 1991 
and 1992 (See Roses and Other Cut Flowers from Colombia and Miniature 
Carnations from Colombia: Final Results of Countevailing Duty 
Administrative Reviews of Suspended Investigations, (published 
concurrently with this notice). As discussed below, we preliminarily 
determine to maintain those benchmark rates.

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 six 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 

[[Page 42537]]
or above the Department benchmark rates for exports of the subject 
merchandise to the United States and Puerto Rico in effect during the 
POR. Therefore, we preliminary 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.
    In order to update previous benchmark rates determined by the 
Department, we reviewed interest rates in Columbia to define what 
interest rate benchmarks were appropriate for future BANCOLDEX loans. 
In the case of short- and long-term peso BANCOLDEX loans, the 
Department confirmed at verification that the GOC adopted rates based 
on the Colombian fixed deposit rate, DTF, because the DTF rates more 
accurately reflect interest rate fluctuations in the market. While the 
Department verified that there is no single, predominant source of 
alternative financing in Columbia, we have determined that the 
independent government agency, FINAGRO (Fondo para el financiameinto 
del Sector Agropecuario), a major intermediary lender to the 
agricultural sector, is an appropriate alternative source of financing 
for the Department's benchmarks. FINAGRO is the successor to the Fondo 
Financiero Agropecuario (FFA).
    The most recent FINAGRO short-term rate is equal to DTF plus up to 
6 percentage points. Because the Department is unable to set the 
benchmark as a range (i.e., DTF plus up to 6 percentage points), the 
Department established a benchmark rate applying the methodology used 
in the final determination for the 1991 and 1992 administrative reviews 
(See Roses and Other Cut Flowers and Miniature Carnations from 
Columbia; Final Results of Countervailing Duty Administrative Reviews 
of Suspended Investigations; (published concurrently with this notice). 
In calculating the prospective benchmarks for short- and long-term peso 
loans, the Department preliminarily determines that the most recent 
verified weighted-average interest rate on all loans financed by 
FINAGRO through Caja Agraria, i.e., DTF plus 3.66 percentage points is 
the appropriate benchmark for short-term financing.
    Consequently, the Department preliminarily determines that the 
appropriate benchmark for the short-term peso loans rate is the nominal 
DTF plus 3.66 percentage points. The Department also preliminarily 
determines that the appropriate benchmark for long-term peso loans is 
the nominal DTF plus 3.66 percentage points, plus an additional 0.25 
percentage points for each year after the first, including any grace 
period, reflecting the spread between BANCOLDEX short- and long-term 
loans. Loans provided at or above the benchmark will not be considered 
preferential.

U.S. Dollar Loans

    At verification, we examined GOC documents and confirmed that 
BANCOLDEX issued short- and long-term dollar loans. In the case of 
short- and long-term dollar loans, there were no benchmark rates in 
effect during the POR, because these loans were introduced in 1991, 
i.e., after the last completed reviews of the suspension agreements.
    In order to establish dollar benchmark rates. we followed the same 
calculation methodology as in the final notice for Roses and Other Cut 
Flowers and Miniature Carnations from Columbia; Final Results of 
Countervailing Duty Administrative Reviews of Suspended Investigations; 
(published concurrently with this notice). We confirmed at verification 
that during the POR, BANCOLDEX loan interest rates on dollar loans 
charged to Colombian flower growers/exporters were based upon the 
London Interbank Offered Rate (LIBOR) plus a variable spread. The 
Department determines that LIBOR will be the basis of the benchmark for 
dollar loans, because LIBOR is used as the basis for dollar loan 
interest rates in Colombia. Therefore, the Department preliminarily 
determines that for the short-term dollar loans the Department's 
benchmark for dollar-based loans in Colombia will be the six-month 
LIBOR rate in effect at the time of the loan plus 1.52 percentage 
points. Based on the same methodology used for short-term dollar loan 
benchmark, we preliminarily determine that for long-term dollar loans 
the Department's benchmark for dollar-based loans in Colombia will be 
the six-month LIBOR rate in effect at the time of the loan plus 2.82 
percentage points.
    It should be noted that the rate specified here was calculated 
based on effective, not nominal, interest rates; the effective rate is 
the equivalent to the nominal rate calculated on the basis of interest 
being payable at the end of the quarter. BANCOLDEX should set the 
nominal interest rate for dollar-based loans at a level that is high 
enough to ensure that the effective interest rate of these loans are at 
or above the Department's new benchmark.

(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, Colombian flower 
growers/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 producer applied 
for Plan Vallejo benefits. In addition, we verified that the six 
companies did not use the program for capital equipment during the POR. 
Therefore, we preliminarily determine that this program did not confer 
any countervailable benefits upon exports of the subject merchandise of 
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 1212 since flower growers are 
ineligible to receive benefits for exports to the United States and 
Puerto Rico.

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

(5) 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 

[[Page 42538]]
client. Several commodities are ineligible for the program: coffee in 
certain forms, crude leather, oil and by-products, precious and 
semiprecious 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, Colombian flower 
growers/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. Because we did not receive any such notification and confirmed 
that subject merchandise is ineligible for this program, 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. We also preliminarily 
determine that the GOC has eliminated the subsidy by abolishing this 
program for the subject merchandise.

(6) 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. GOC officials have 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 confirmed 
that this program had been terminated on that date. Therefore, we 
preliminarily determine that this program did not confer any 
countervailing benefits upon exports of the subject merchandise to the 
United States and Puerto Rico during the POR. We also preliminarily 
determine that the GOC has eliminated the subsidy by abolishing this 
program for the subject merchandise.
Other Programs

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

(7) Research and Development

    Columbian flower exporters, on a voluntary basis, allowed the 
Central Bank to withhold a certain percentage of the CERT rebates 
earned on exports of the subject merchandise to the United States and 
Puerto Rico and other countries for research and development from 
January 1983 (the effective date of the original suspension agreement) 
through November 1985, when the rebate rate for roses and other cut 
flowers subject to the suspension agreement was reduced to zero. In 
1985, the GOC issued Resolution 10, which established a fund from the 
CERT payments that were withheld for the cultivation of and general and 
technological research on all flowers. The resolution requires that any 
funds expended under this resolution be disbursed in a manner 
consistent with the suspension agreements. The resolution 10 account 
was officially closed in October 1991 and no contributions were made to 
the account during the POR. 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 POR. We also preliminarily determine that the GOC has eliminated 
the subsidy on the merchandise by abolishing this program for the 
subject merchandise.

(8) 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 to only 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 TCC (DTF) 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 percentage 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 percentage 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 that 
they are not countervailable.
    Furthermore, we verified that no Colombian flower growers/exporters 
received loans under the two export credit lines during the POR. We 
preliminarily determine that the GOC and the Colombian flower growers/
exporters of the subject merchandise were in compliance with the 
suspension agreements because IFI's export credit lines were not used 
by Colombian flower growers/exporters of the subject merchandise during 
the POR. However, flower growers/exporters of the subject merchandise 
are eligible to apply for and receive IFI's export credit lines. Any 
such loans must be on non-preferential terms, and at or above the 
Department's most recent benchmarks (See Section II.c of the suspension 
agreements). We preliminarily determine that the short- and long-term 
benchmarks for IFI loans are the same as those for BANCOLDEX peso and 
dollar financing apply (See Section 2 above).

(9) Financiera de Desarrollo Territorial (FINDETER)

    FINDETER, a government financial entity, finances state and 
municipal governments and governmental entities to promote urban and 
regional development projects relating to infrastructure and 
development in the public sector. The Department verified that all 
projects are aimed to improve the public sector, and that Colombian 
flower growers/exporters are not eligible to receive FINDETER loans. 
Therefore, we preliminarily determine that FINDETER financing is not 
countervailable for exports of the subject merchandise to the United 
States and Puerto Rico during the POR.

[[Page 42539]]


(10) 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. We verified that 
no Colombian flower growers/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 growers/exporters of the subject merchandise 
during the POR.

Program Specific to the Roses and Other Cut Flowers' Suspension 
Agreement

(11) 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 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.
    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 POR.

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 period January 1, 1993 through December 31, 1993. In addition, we 
preliminarily determine that the peso and dollar benchmarks established 
in the 1991 and 1992 administrative reviews of these suspended 
investigations will continue to apply to loans after the date of 
publication of the final results of these administrative reviews, and 
until revised by the Department (See Roses and Other Cut Flowers and 
Miniature Carnations from Colombia; Final Results of Countervailing 
Duty Administrative Reviews of Suspended Investigations; (published 
concurrently with this notice).
    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: August 8, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-20300 Filed 8-15-95; 8:45 am]
BILLING CODE 3510-DS-M