[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]




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Part V





Department of Commerce





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International Trade Administration



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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

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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

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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