[Federal Register Volume 61, Number 88 (Monday, May 6, 1996)]
[Notices]
[Pages 20406-20411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11242]
[[Page 20405]]
_______________________________________________________________________
Part V
Department of Commerce
_______________________________________________________________________
International Trade Administration
_______________________________________________________________________
Standard Chrysanthemums From the Netherlands; Preliminary Results of
Countervailing Duty Administrative Reviews; Notice
Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices
[[Page 20406]]
DEPARTMENT OF COMMERCE
International Trade Administration
[C-421-601]
Standard Chrysanthemums From the Netherlands; Preliminary Results
of Countervailing Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty
administrative review.
-----------------------------------------------------------------------
SUMMARY: The Department of Commerce (the Department) is conducting two
administrative reviews of the countervailing duty order on standard
chrysanthemums from the Netherlands. We preliminarily determine the net
subsidy to be 0.43 percent ad valorem for the period January 1, 1992,
through December 31, 1992, and 0.80 percent ad valorem for the period
January 1, 1993, through December 31, 1993. If the final results of
these reviews remain the same as these preliminary results, the
Department intends to instruct the U.S. Customs Service to assess
countervailing duties as indicated above. Interested parties are
invited to comment on these preliminary results.
EFFECTIVE DATE: May 6, 1996.
FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Richard Herring,
Office of Countervailing Compliance, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230,
telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On March 12, 1987, the Department published in the Federal Register
(52 FR 7646) the countervailing duty order on standard chrysanthemums
from the Netherlands. On March 12, 1993, and March 4, 1994, the
Department published notices of ``Opportunity to Request Administrative
Review'' of this countervailing duty order (58 FR 13583) and (59 FR
10368), respectively. We received timely requests for reviews for the
1992 and the 1993 review periods from petitioner, Floral Trade Council.
We initiated the review covering the period January 1, 1992 through
December 31, 1992, on May 6, 1993 (58 FR 26960). We initiated the
review covering the period January 1, 1993, through December 31, 1993,
on April 15, 1994 (59 FR 18099). We conducted a verification of the
questionnaire responses in the 1992 administrative review from February
7 through 14, 1994. These reviews are being conducted on an aggregate
basis.
Applicable Statute and Regulations
The Department is conducting these administrative reviews in
accordance with section 751 of the Tariff Act of 1930, as amended (the
Act). 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 subject matter of these regulations is
being considered in connection with an ongoing rulemaking proceeding
which, among other things, is intended to conform the Department's
regulations to the Uruguay Round Agreements Act. See 60 FR 80 (Jan. 3,
1995).
Scope of Review
Imports covered by these reviews are shipments of Dutch standard
chrysanthemums. Such merchandise is classifiable under item number
0603.10.70 of the Harmonized Tariff Schedule (HTS). The HTS item number
is provided for convenience and Customs purposes. The written
description remains dispositive.
Verification
As provided in section 776(b) of the Act, we verified information
provided by the Government of the Netherlands. We followed standard
verification procedures, including meeting with government officials
and examining relevant original source documents. Our verification
results are outlined in the public versions of the verification report,
which are on file in the Central Records Unit (Room B-099 of the Main
Commerce Building).
Calculation Methodology for Assessment and Cash Deposit Purposes
We calculated the net subsidy on a country-wide basis by first
calculating the subsidy rate for each program. We then summed the
subsidy rates from all programs benefitting exports of the subject
merchandise to the United States.
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined to Confer Subsidies
1. Aids for the Creation of Cooperative Organizations
Under European Community (EC) Regulation 355/77, the EC has
provided grants to Dutch auction houses, which are flower grower
cooperatives. These funds were provided by the EC through the
Agricultural Guidance and Guarantee Fund, with matching grant
contributions from EC member states. The purpose of the program was to
improve the processing, marketing and distribution of agricultural
products in member states. This program was terminated on January 1,
1986, and no grants were disbursed after 1987.
In the 1986 and 1987 reviews, the Department determined that this
grant program was countervailable because it was limited to a specific
enterprise or industry, or group of enterprises or industries in the
Netherlands. (See Standard Chrysanthemums From The Netherlands;
Preliminary Results of Countervailing Duty Administrative Review (54 FR
43977, 43978; October 30, 1989) and Standard Chrysanthemums From the
Netherlands; Final Results of Countervailing Duty Administrative Review
(55 FR 462; January 5, 1990) (1987 Preliminary and Final Results)).
Although this program was officially terminated in 1986, under our
grant methodology, benefits are still accruing from this program.
To calculate the benefit, we used a declining balance grant
methodology, as determined in the Final Affirmative Countervailing Duty
Determination; Certain Fresh Cut Flowers From the Netherlands (52 FR
3301; February 3, 1987) (Netherland Flowers). We allocated the benefits
from each grant over 10 years, the average useful life of renewable
physical assets in the agricultural sector as determined under the U.S.
Internal Revenue Service's Asset Depreciation Range System. This
methodology is in accordance with the Proposed Regulations (51 FR
23366, 23385; May 31, 1989). We used the average interest rate for
long-term commercial loans published by the Netherlands Bank (the
Central Bank) as the discount rate for each year in which grants were
provided. We divided the sum of these benefits by the f.o.b. value of
total auction sales in the relevant review period. On this basis, we
preliminarily determine the net subsidy to be 0.07 percent ad valorem
for 1992 and 0.04 percent ad valorem for 1993.
[[Page 20407]]
2. Glasshouse Enterprises Program
Under the Glasshouse Enterprises Program, the Ministry of
Agriculture, Nature Management and Fisheries (MAF) provided grants to
greenhouse growers to stimulate private investment in energy saving
methods in the horticulture industry. This program was terminated in
June 1985. However, grants approved prior to the termination were
disbursed through 1987.
We previously determined that this program was a countervailable
domestic subsidy because it was available only to greenhouse growers.
(See 1987 Preliminary and Final Result). Although this program
officially terminated in 1985, under our grant methodology, benefits
are still accruing from this program.
To calculate the benefit from this program, we used the grant
methodology described in section 1. above. We divided the total
benefits from these grants by the value of total greenhouse sales in
the relevant review period. On this basis, we preliminarily determine
the net subsidy to be 0.17 percent ad valorem for the period January 1,
1992, through December 31, 1992, and 0.09 percent ad valorem for the
period January 1, 1993 through, December 31, 1993.
3. Aids for the Reduction of Glass Surface
Under the Aids for the Reduction of Glass Surface program, the MAF
provided grants to greenhouse growers for the purpose of increasing the
energy efficiency of greenhouses by replacing existing glass with
modern energy-saving glass. The program was terminated in November
1984. However, grants approved prior to the termination of the program
were disbursed through 1987.
We previously determined that this program was countervailable
because it was limited to a specific enterprise or industry, or group
of enterprises or industries. (See 1987 Preliminary and Final Results).
Although this program was officially terminated in 1984, under our
grant methodology, benefits are still accruing under this program.
To calculate the benefit from this program, we used the grant
methodology described in section 1. above. We divided the total
benefits from these grants by the value of total greenhouse sales in
the relevant review period. On this basis, we preliminarily determine
the net subsidy to be less than 0.005 percent ad valorem for the period
January 1, 1992, through December 31, 1992, and less than 0.005 percent
ad valorem for the period January 1, 1993, through December 31, 1993.
4. Steam Drainage Systems
In January 1981, the Government of the Netherlands (GON) banned the
use of methylbromide as a means of soil disinfection due to the
potential health hazards caused by the chemical. In December of that
year, the MAF established a program making available cash grants to
encourage the use of steam drainage as an alternative method of soil
disinfection for greenhouses. The program was terminated in September
1984. However, some grants were disbursed through 1987.
In the 1990 administrative review, we determined that this program
was countervailable because it was limited to a specific enterprise or
industry, or group of enterprises or industries. (See Standard
Chrysanthemums From the Netherlands; Preliminary Results of
Countervailing Duty Administrative Review (57 FR 9539; March 19, 1992)
and Standard Chrysanthemums From the Netherlands; Final Results of
Countervailing Duty Administrative Review (57 FR 24249; June 8, 1992)
(1990 Preliminary and Final Results)). Although this program was
officially terminated in 1984, under our grant methodology, benefits
are still accruing under this program.
To calculate the benefit from this program, we used the grant
methodology described in section 1, above. We divided the benefits from
these grants by the value of total greenhouse sales in the relevant
review period. On this basis, we preliminarily determine the net
subsidy to be less than 0.005 percent ad valorem for the period January
1, 1992, through December 31, 1992, and less than 0.005 percent ad
valorem for the period January 1, 1993, through December 31, 1993.
B. New Program Preliminarily Found to Confer Subsidies
Stimulation for the Innovation of Electric Energy (SES)
The SES program was implemented in 1988 with the goal of
stimulating energy conservation. Under the administration of the
Ministry of Economic Affairs (MEA), the program is designed to
encourage the installation of cogeneration equipment by providing
payments of up to 25 percent of the equipment cost, with a cap of 20
million guilders per project. Cogeneration equipment reduces energy
consumption by up to 30 percent.
At verification, we found that this program is available to
virtually all industries. Although the program is neither designed nor
administered with any particular industry in mind, we were told by MEA
officials that greenhouse growers were ideal candidates for the program
due to their enormous demand for energy. See Verification Report of the
Questionnaire Response in the 1992 Administrative Review (April 3,
1995) (public document).
We examined disbursements made under the program on an industry-
specific basis to determine whether horticulture was the dominant user
or received a disproportionate share of benefits under this program. We
based our analysis on payments to all horticulture recipients because
information is not available on a plant-by-plant basis. Based on our
analysis, we found that horticulture accounted for 69 percent of all
grant approvals and received 36 percent of all disbursements.
Horticulture was, therefore, the largest recipient of grants under this
program compared to the share of benefits to other recipients whose
disbursements ranged from less than 0.01 percent to 13.9 percent. In
prior cases where the Department has found disproportionality, we
analyzed whether a program provided a disproportionate share of
benefits by comparing their collective or individual share of benefits
provided to all other users of the program in question. (See, e.g.,
Final Affirmative Countervailing Duty Determination: Grain-Oriented
Electrical Steel From Italy (59 FR 18357; April 18, 1994) (Electrical
Steel)). In Electrical Steel, steel producers received 34 percent of
the benefits under the examined program. In that case, we found that
steel producers received a disproportionate share of the program being
considered. Similarly, in this case we compared the share of benefits
received by horticulture to the collective share of benefits to all
others. On this basis, we determine that the SES program provided a
disproportionate share of benefits to horticulture. Thus, we
preliminarily determine that this program provides a countervailable
benefit to producers of the subject merchandise.
Our policy with respect to grants is (1) to expense recurring
grants in the year of receipt and (2) to allocate non-recurring grants
over the average useful life of assets in the industry, unless the sum
of grants provided under a particular program is less than 0.50 percent
of a firm's total or export sales (depending on whether the program is
a domestic or export subsidy) in the year in which the grants were
received. (See section 355.49(a) of the Proposed
[[Page 20408]]
Regulations and the General Issues Appendix, at 37226, which is
attached to Final Affirmative Countervailing Duty Determination:
Certain Steel Products from Austria (58 FR 37217; July 9, 1993)
(General Issues Appendix)).
For the 1992 administrative review, the amount of grants received
under this program was not less than 0.50 percent of greenhouse sales.
Therefore, we must determine whether the grants provided under the SES
program are recurring or nonrecurring to determine whether the grants
should be expended in the year of receipt or allocated over time. For
the 1993 administrative review, the total amount of grants provided to
greenhouses under the SES program was less than 0.50 percent of total
greenhouse sales. Therefore, the total value of all grants provided
under this program in 1993 have been allocated to that year.
The Department considers that a grant is nonrecurring if the
benefits are exceptional, the recipient cannot expect to receive
benefits on an ongoing basis from year to year, and/or the provision of
funds by the government must be approved every year. The Department
also considers that grants used for the purchase of fixed assets would
generally be considered nonrecurring. (See General Issues Appendix, at
37226). We therefore determine that benefits from grants provided under
the SES program are nonrecurring. On this basis, we allocated the
benefit from the grants provided under this program during 1992 over
the useful life of assets.
Grants were also provided to greenhouses during the years 1988
through 1991. In those years, the grants provided were less than 0.50
percent of total greenhouse sales. Therefore, we would have allocated
all grants provided under this program solely to the year of receipt.
To calculate the benefit from this program, we allocated the
benefits from grants received in 1992 using the declining balance grant
methodology described in section I.A.1. above. For 1993, the benefit is
the total value of all grants provided in that year, plus the benefits
from the 1992 grants that were allocable to 1993. We then divided the
total benefits from these grants by the value of greenhouse sales for
the respective review period. On this basis, we preliminarily determine
the net subsidy to be 0.18 percent ad valorem for the period January 1,
1992, through December 31, 1992, and 0.66 percent ad valorem for the
period January 1, 1993, through December 1, 1993.
II. Programs Preliminarily Found Not to be Countervailable
1. Arrangement for Stimulation of Innovation Projects
Petitioner alleged that floricultural products benefitted from the
Arrangement for Stimulation of Innovation Projects. This program was
implemented in 1991 as the continuation of two innovation programs (the
Subsidy Scheme for Large Innovation Projects of 1989 and the Grant
Scheme for Small Innovation Projects of 1984.) Under the program, the
MAF provided funds to promote innovation within the agriculture sector,
including entities engaged in flower production. To qualify for
assistance, projects must have an innovative element and offer new
technological and economic perspectives that have not yet been in
practice. In addition, the projects must be such that the results can
be passed on to other firms in the Netherlands. Project applications
are assessed yearly by technical experts in consultation with
agribusiness. Approval or rejection of an application is not based on
the type of agricultural production engaged by the applicant, but
rather on whether the project meets the criteria outlined above.
The GON divides agriculture into four major subsectors:
horticulture, arable farming (crops grown on arable land), livestock
farming and cattle farming. We found that grants were provided to all
of the subsectors within agriculture. We examined at verification a
table listing disbursement of funds, by industry, showing cumulative
payments made under the program through December 1993. We verified that
flowers accounted for only 0.59 percent of total disbursements under
this program.
Because all agricultural subsectors are eligible for and used the
Stimulation of Innovation Projects program, and because no
disproportionate benefits were provided under this program, we
preliminarily determine this program is not countervailable because it
is not limited to a specific enterprise or industry, or group thereof.
2. Arrangement for Structural Improvement and the Complementary Scheme
for Investment in Agricultural Holdings
Petitioner alleged that floricultural products received benefits
from this program. The Arrangement for Structural Improvement (SVL) was
implemented in 1985 as a result of the EC Improvement of Efficiency of
Agriculture Structures Regulation, which mandated that each member
state develop a program to improve efficiency within the agricultural
sector. Through the provision of grants to cover the interest on loans
for farm improvement projects, the arrangements aim to promote a more
rapid adjustment of businesses to environmental and animal welfare
requirements. The MAF provides assistance to specified investments
which must benefit certain environmental and animal welfare policy
objectives. Each year applications from the entire agricultural sector
are approved by the MAF. These projects must generate a return but
cannot lead to an expansion of production capacity. Any farmer with a
farm production income between 15,155 and 43,300 guilders is eligible
to apply for SVL assistance. There are no restrictions on the types of
agricultural or horticultural products raised or produced by the
eligible farmer.
The EC regulation distinguishes between two types of investments,
real estate and non-real estate, and allows funding levels of up to 35
percent and 25 percent, respectively. The level of funding allowed by
the Dutch regulations, however, is lower than the EC regulation levels.
According to Dutch regulations, funding levels range from 7.5 percent
to 25 percent, depending upon the type of project.
The SVL program receives co-financing from the EC in the amount of
25 percent of the payments made by the Dutch government. For example,
although the EC regulation allows funding levels up to 35 percent for
real estate related investments, the Dutch regulation (SVL) allows only
7.5 percent funding. Of the 7.5 percent that is paid by the Dutch
government, the EC reimburses 25 percent of the payment.
The Complementary Scheme for Investment in Agricultural Holdings
(CRL) was implemented in 1989 by EC Regulation 2328/91. Under this
scheme, the MAF provides assistance to farmers which do not meet the
farm income requirement for SVL grants.
As with the SVL scheme, the CRL arrangement aims to promote a more
rapid adjustment of businesses to environmental and animal welfare
through the provision of grants for farm improvement projects. Grants
are given for specified investments which must benefit certain
environmental and animal welfare policy objectives. These projects,
too, must generate some return but must not lead to an expansion of
production capacity. The main eligibility requirement for assistance
under the CRL is that the agricultural holding must have a production
capacity of a one man-work unit. In addition, the investment cannot
have been initiated prior to applying for CRL
[[Page 20409]]
funds. All sectors of agriculture are eligible to apply for assistance
under the CRL scheme.
The CRL provides funds for projects in three areas of investments:
environmental protection and improvement, quality improvement, and
improvement of working conditions. According to a 1992 MAF Annual
Report, 74 percent of the approved investments under this program
during that year were in the area of environmental protection and
improvement. The GON typically provides funds for 15 to 25 percent of
the approved projects. The application process for CRL grants is the
same as for assistance in the SVL.
During verification, the Department confirmed that grants under the
SVL and CRL schemes were provided to the entire agricultural community
and that the evaluation criteria for approval were not product-based.
We found that, in 1992, horticulture accounted for 11 percent of total
applications for SVL assistance and 3.2 percent of total investments
under the SVL.
In the investigation, the Department reviewed a similar program
which provided funding of interest on loans for the modernization of
agricultural ventures under the Decree for Structural Improvement of
Agricultural Enterprises. That program was found not countervailable,
since there was no indication that the program was targeted toward
flower growers, or was otherwise limited to a specific enterprise or
industry. (See Netherland Flowers.)
Because all agricultural products are eligible for and used SVL and
CRL grants, and because no disproportionate of benefits were provided
under the SVL and CRL program, we preliminarily determine this program
is not limited to a specific enterprise or industry or group thereof.
3. Natural Gas Provided at Preferential Rates
Natural gas in the Netherlands is sold directly to major customers
by the N.V. Nederlandse Gasunie (Gasunie), the utility company. The
Agricultural Industrial Board, or ``Landbouwschap,'' a quasi-
governmental body created under the Industrial Organizations Act,
negotiates with Gasunie prices and general terms of gas delivery for
Dutch greenhouse growers. The Landbouwschap is the central consultative
and cooperative organization for agriculture in the Netherlands. Its
purpose is to represent the economic and political interests of the
agricultural sector. All agriculturists are required to be members of
the organization and pay dues. Gasunie is 40 percent owned by DSM
Aardgas (a company wholly-owned by the GON), 10 percent by the GON, 25
percent by Shell Nederland, and 25 percent by Esso Nederland N.V. While
the GON does not own a controlling interest in Gasunie, it plays a
significant role in setting the price of natural gas. The Minister of
Economic Affairs reserves the right to approve selling prices and terms
of delivery for supplies to public distributors in the Netherlands,
large export contracts, and contracts between Gasunie and the
Landbouwschap.
Natural gas prices are based on levels of consumption, which are
broken down into four categories or ``zones'', zones a through d. Zone
a consumers use between 0 and 170,000 cubic meters (m3) of gas per
year; zone d consumers use between 10 million to 50 million m3 of
gas per year. Zone a users pay the highest price per m3; zone d
the lowest.
In the October 1984 contract negotiated with Gasunie by the
Landbouwschap on behalf of greenhouse growers, a maximum ceiling price
was established. In Netherlands Flowers, we determined that this
contract with the price ceiling provision was countervailable.
Accordingly, in Netherlands Flowers, we determined that the benefit to
greenhouse growers was the difference between the price of gas actually
paid by greenhouse growers in the period of the investigation and the
zone d price they would have had to pay under the contract absent the
price ceiling provision.
In the 1987 administrative review (54 FR 43977,43978; October 30,
1989), a renegotiated contract was in effect. Because the new contract
did not contain a provision for a ceiling price, we determined
greenhouse growers did not receive natural gas at preferential rates
and, therefore, the program did not confer a countervailable benefit.
This contract expired on October 1, 1989.
In the last administrative review, we found that greenhouse
growers, through the Landbouwschap, had negotiated a new contract with
Gasunie for the period October 1, 1989 through October 1, 1994. The
terms of the new contract were basically the same as the 1987 contract.
Therefore, we determined that such a contract did not confer a
countervailable benefit. (See 1990 Preliminary and Final Results).
With respect to the pricing arrangement under this program, we
confirmed during the verification of the 1992 administrative review
that the terms of the contract in effect during this review period,
which were still in effect during the subsequent 1993 review period,
had not changed from the previous contract found not countervailable in
the 1990 administrative review. Therefore, we continue to determine
that the contract rate for greenhouse growers does not provide a
countervailable benefit to producers and exporters of the subject
merchandise.
However, in the 1992 administrative review, petitioners alleged
that an additional aspect of the contract may confer a countervailable
benefit upon the production of the subject merchandise. Petitioner
alleged that the contract in effect during the 1992 review period
contained a new compensation arrangement for ``small'' consumption
users of natural gas. During verification of the 1992 administrative
review, we found that this compensation arrangement was part of the
contract in effect during October 1989 through October 1994 (the 1989-
1994 contract).
Negotiated by the Landbouwschap, that contract was made on behalf
of the horticulture sector. Gas prices in the 1989-1994 contract were
based on two annual gas consumption levels: Level 1, 0-30,000 cubic
meters (m3); and Level 2, 30,000 m3 and over. Since gas prices
were lower for Level 2 consumption, there were concerns that users
consuming less than 30,000 m3 of gas might waste gas in order to
qualify for the lower rate. Therefore, Landbouwschap and Gasunie
established a compensation arrangement which provided rebates to small
gas users to offset the difference in the consumption prices. The
purpose of this compensation arrangement was twofold: to ensure energy
conservation as well as to protect the environment.
According to the provisions of the contract, the arrangement was
funded through monies paid by those Landbouwschap members which were
large gas users. The fund, administered by Landbouwschap, was derived
from a surcharge built into the price of gas paid by the large gas
users under the 1989-1994 contract. The criteria for eligibility, as
outlined in the contract, were that the recipient had to be a
registered agriculturist or horticulturist and that the gas had to be
used for the growing process of horticulture. We noted at verification
that virtually all horticulturists (95-98 percent) fell under Level 2
with an average consumption of 450,000 m3 a year; these users were
covered by the 1989-1994 contract between the Landbouwschap and
Gasunie. The remaining horticulturists were the small gas users who
could be eligible for a rebate.
With respect to the separate rebate program for small growers, we
determine that the program does not provide a countervailable benefit.
This
[[Page 20410]]
rebate program was established under the contract between Landbouwschap
and Gasunie, and the funds used to provide the rebates are collected
from the large growers and then are distributed to the small growers of
the cooperative. The utility company received the full rates due it
under the contract from both the large and small grower-members of the
Landbouwschap. Under this arrangement, the role of Gasunie is to
collect the surcharge from the larger members of the Landbouwschap.
These funds are then returned to the Landbouwschap, which administers
the program and provides the rebates to the small growers. In addition,
there is no evidence to indicate that the Landbouwschap was required by
Government of the Netherlands to enter into this specific contract
arrangement with Gasunie. As such, this rebate program is not
countervailable.
4. Income Tax Deduction
The Income Tax Deduction was established in January 1990 under
Article 11 of The Netherlands Tax Code and was geared towards small
businesses. The program provides for a tax allowance on investments in
tangible assets. Any entrepreneur is eligible for this deduction as
long as the business reports the investments on the income tax form,
the investment amount does not exceed 471,000 guilders, and the
investment is substantiated by attaching the capital improvement
invoices to the tax form. The allowance ranges from 2 percent to 18
percent, depending on the amount of the investment, and is deducted
from the profits made during the year in which the investment is made.
The legislation provides that all industries are eligible to claim the
income tax deduction if the aggregate annual investments are at least
3,100 guilders, but not more than 471,000 guilders. As the investment
amount increases, the investment deduction decreases. For example: for
an investment in the 3,100-53,000 guilder range, the allowable
deduction is 18 percent of the investment; for investments in the
419,000-471,000 guilder range, it is 2 percent. Companies exceeding the
investment cap are not eligible for a deduction under this program.
At verification, we found that as long as any entrepreneur meets
the investment criteria the receipt of the deduction is automatic and
that there is no formal application process to apply for the deduction.
We also found that no specific government approval is required prior to
a company filling its tax form. Therefore, because any business in the
Netherlands who makes an investment no greater than 471,000 guilders
automatically receives the income tax deduction under this program by
merely claiming it in its tax return, we preliminarily determine this
program to be not countervailable because it is not limited to a
specific enterprise or industry, or group thereof.
5. Value Added Tax (VAT) Reduction of 6 Percent for Natural Gas Users
and Partial Restitution of VAT for Mineral Oils, Fuels, Bulk or Bottled
Gas
Petitioner alleged that the horticultural industry benefits from a
reduced VAT on natural gas and a partial restitution of the VAT on
purchases of mineral oils, fuel and bulk or bottled gas used for
heating greenhouses. The VAT system was first introduced in 1960 by the
EC. The VAT is a country-wide internal consumption tax paid by
consumers. As a commodity goes through various processing or production
stages, each downstream consumer pays a tax on the value added portion
of the product. The seller subtracts the tax already paid and forwards
the VAT owed on the ``enhanced or improved portion'' of the commodity
to the Dutch Internal Revenue Service. The general VAT rate for the
Netherlands was 17.5 percent during the review period.
When the EC first introduced the VAT, it decided that the
agricultural sector could be exempted from the normal VAT system
because the required record keeping was too burdensome. Under Article
25 of the EC Sixth Council Directive of May 17, 1977 (the 1977
Directive), member countries could exclude all or partial sectors of
agriculture and establish different rates for this sector.
Agricultural producers in the Netherlands fall under a flat-rate
scheme established to offset the VAT ``expense'' included in the price
of the goods and services they provide. Under this scheme, farmers are
not entitled to deduct the VAT they have already paid when purchasing
their own goods and services, but instead pass it along in their
selling price(s). Commodities sold by farmers to individual consumers
incorporate the prior stage VAT, resulting in a higher price to the
consumer.
The 1977 Directive and the Dutch National Tax Law also stipulate a
reduced VAT rate of 6 percent for virtually all goods and services
purchased or used by flat-rate farmers. Therefore, during this review,
farmers (which also includes all greenhouse growers and
horticulturists) paid only a 6 percent VAT rate on natural gas
purchased for heating their greenhouses.
In addition to the flat-rate scheme outlined above, farmers are
eligible for a reduced VAT rate of 6 percent, as per Article 34b of the
Dutch National Tax Law, on the purchase of fuels, mineral oils, and
bulk or bottled gas used for heating their greenhouses. In purchasing
these products, farmers paid the standard 17.5 percent VAT rate and
then applied for a VAT rebate with the MAF. The rebate is 11.5 percent
of the value of the gas or oil (not including the VAT). The rebate
represents the difference between the 17.5 percent VAT already paid and
the 6 percent VAT the farmers are entitled to pay under the Dutch
National Tax Law.
We verified that under Article 17 of the Dutch National Tax Law the
VAT rate established for farmers was 6 percent. We also found that the
Dutch Value Added Tax Act of 1968 provides a 6 percent reduced tax rate
for a variety of goods and services used in agriculture; such as,
foodstuffs, cereals, seeds, cattle, sheep, goats, pigs, horses,
breeding eggs, veterinary medicines, water, gas and mineral oil,
beetroot, agricultural seeds, fertilizer, feed, round wood, flax, wool,
agricultural tools, bulbs, plants, and services to agriculture, such
as, contracting, repairs, breeding, inspections, accounting, drying,
cooling, cleaning and packaging of agricultural products.
To receive a refund of the VAT, any taxpayer entitled to the
reduced tax rate was required only to present proof of the amount of
VAT tax already paid when purchasing the goods and services. No other
approval process was necessary. With respect to the farmer, we found
that to obtain a VAT refund, he merely provided proof that his
purchases of natural gas, mineral oils, and bulk and bottled gas were
used for heating his greenhouse and then received the reduced rate
automatically. Therefore, because the 6 percent VAT rate charged to
farmers is the same as the 6 percent VAT rate paid by all farmers on
virtually all their purchases of goods and services under the Dutch Tax
Law, and because no disproportionate benefits were provided under this
program, we preliminarily find that this program is not limited to a
specific enterprise or industry or group thereof.
6. Guarantee Fund for Agriculture
The Stichting Borgstellingsfonds voor de Landbouw (Foundation
Security Fund for Agriculture, or ``Fund'') is used to guarantee the
servicing and repayment of loans made by banks to farmers. The Fund
acts as an
[[Page 20411]]
institutional guarantor, not as a lender itself, providing guarantees
only when the security offered by the farmer is inadequate for the
total loan amount. A loan application may be made to the Fund only
after all of the farmer's own securities or collateral have been
provided for the loan. If an application is approved under the Fund,
the guarantee applies only to the portion of the loan not originally
approved by the bank. This program was originally found countervailable
in the Netherlands Flowers.
In the 1990 administrative review, we found that the average long-
term annual interest rates charged on loans under this Fund were
consistent with the average interest rates charged on long-term bank
loans, as reported by De Nederlandsche Bank. (See 1990 Preliminary and
Final Results).
Based on verification of the 1992 review and on our analysis of
information provided in the 1993 review, we again determine that the
average long-term annual interest rates charged on loans under this
Fund were consistent with the average interest rates charged on long-
term bank loans. On this basis, we determine that this program does not
provide a countervailable benefit. Because this program has not been
terminated, we will continue to review it in subsequent administrative
reviews.
III. Programs Preliminarily Found Not to be Used
We determine that the producers or exporters of the subject
merchandise did not apply for or receive countervailable benefits under
these programs during these review periods:
A. Investment Incentive (WIR)--Regional Program.
B. Loans at preferential interest rates.
Preliminary Results of Reviews
For the period January 1, 1992, through December 31, 1992, we
preliminarily determine the total net subsidy to be 0.43 percent ad
valorem. For the period January 1, 1993 through December 31, 1993, we
preliminarily determine the net subsidy to be 0.80 percent ad valorem.
If the final results of these reviews remain the same as these
preliminary results, the Department intends to instruct the Customs
Service to assess countervailing duties of 0.43 percent of the f.o.b.
invoice price on shipments of the subject merchandise exported on or
after January 1, 1992, and on or before December 31, 1992, and 0.80 for
all shipments of the subject merchandise exported on or after January
1, 1993, and on or before December 31, 1993.
The Department also intends to instruct Customs to collect cash
deposits of estimated countervailing duties, as provided for by section
751(a)(1) of the Act, of 0.80 percent of the f.o.b. invoice price on
all shipments of the subject merchandise from the Netherlands entered,
or withdrawn from warehouse, for consumption on or after the date of
publication of the final results of these administrative reviews.
Parties to the proceeding may request disclosure of the calculation
methodology and interested parties may request a hearing not later than
10 days after the date of publication of this notice. Interested
parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted 7
days after the time limit for filing the case brief. Parties who submit
written arguments in these proceedings are requested to submit with the
argument (1) a statement of the issue and (2) a brief summary of the
argument. Written arguments that are intended to comment on the
preliminary results for both the 1992 and 1993 reviews must be
submitted to the file for each proceeding. Any hearing, if requested,
will be held 7 days after the scheduled date for submission of rebuttal
briefs. Copies of case briefs and rebuttal briefs must be served on
interested parties in accordance with 19 CFR 355.38(e).
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
the case briefs, under 19 CFR 355.38(c), are due. The Department will
publish the final results of these administrative reviews including the
results of its analysis of issues raised in any case or rebuttal brief
or at a hearing.
These administrative reviews 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: April 29, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-11242 Filed 5-3-96; 8:45 am]
BILLING CODE 3510-DS-P