[Federal Register Volume 61, Number 110 (Thursday, June 6, 1996)]
[Notices]
[Pages 28844-28847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14156]



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[[Page 28845]]


DEPARTMENT OF COMMERCE
[C-508-605]


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

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty 
administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on industrial 
phosphoric acid from Israel. For information on the net subsidy for the 
reviewed company, as well for all non-reviewed companies, please see 
the Preliminary Results of Review section of this notice. If the final 
results remain the same as these preliminary results of administrative 
review, we will instruct the U.S. Customs Service to assess 
countervailing duties as detailed in the Preliminary Results of Review 
section of this notice. Interested parties are invited to comment on 
these preliminary results.

EFFECTIVE DATE: June 6, 1996.

FOR FURTHER INFORMATION CONTACT: Norma Curtis or Cameron Cardozo, 
Office of Countervailing Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230; telephone: 
(202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On August 19, 1987, the Department published in the Federal 
Register (52 FR 31057) the countervailing duty order on industrial 
phosphoric acid from Israel. On August 1, 1995, the Department 
published a notice of ``Opportunity to Request an Administrative 
Review'' (60 FR 39150) of this countervailing duty order. We received 
timely requests for review, and we initiated the review, covering the 
period January 1, 1994 through December 31, 1994, on September 15, 1995 
(60 FR 47930).
    In accordance with Sec. 355.22(a) of the Department's Interim 
Regulations, this review covers only the producer and/or exporter of 
the subject merchandise for which a review was specifically requested 
(see Antidumping and Countervailing Duties: Interim Regulations; 
Request for Comments, 60 FR 25130 (May 11, 1995) (Interim 
Regulations)). Accordingly, this review covers Rotem Amfert Negev Ltd. 
(Rotem). This review also covers nine programs.
    As explained in the November 22, 1995 and January 11, 1996, 
Memoranda from the Assistant Secretary for Import Administration for 
the Record Re: Deadlines Affected by the November/December-January 
Closure of the Import Administration, which are on file in the public 
file of the Central Records Unit, Room B-099 of the Department of 
Commerce, all deadlines were extended to take into account the partial 
shutdowns of the Federal Government from November 15 through November 
21, 1995, and December 15, 1995, through January 6, 1996. Therefore, 
the deadline for these preliminary results is no later than May 30, 
1996, and the deadline for the final results of this review is no later 
than 120 days from the date on which these preliminary results are 
published in the Federal Register.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the 
Act). The Department is conducting this administrative review in 
accordance with section 751(a) of the Act. References to the 
Countervailing Duties; Notice of Proposed Rulemaking and Request for 
Public Comments, 54 FR 23366 (May 31, 1989) (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 
1989 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 URAA. See Advance Notice of 
Proposed Rulemaking and Request for Public Comments, 60 FR 80 (January 
3, 1995); Antidumping Duties; Countervailing Duties: Notice of Proposed 
Rulemaking and Request for Public Comments, 61 FR 7308 (February 27, 
1996).

Scope of the Review

    Imports covered by this review are shipments of industrial 
phosphoric acid (IPA) from Israel. Such merchandise is classifiable 
under item number 2809.20.00 of the Harmonized Tariff Schedule (HTS). 
The HTS item number is provided for convenience and Customs purposes. 
The written description remains dispositive.

Privatization

    Israeli Chemicals Ltd. (ICL), the parent company which holds one 
hundred percent of Rotem's shares, was partially privatized in 1992 and 
1993. The percentages of ICL's shares privatized were twenty percent 
and five percent respectively. In the questionnaire responses, the 
Government of Israel and Rotem reported that ICL was also partially 
privatized in 1994. We have determined that the partial privatization 
of ICL represents a partial privatization of each of the companies in 
which ICL holds an ownership interest. See Final Results of 
Countervailing Duty Administrative Reviews; Industrial Phosphoric Acid 
from Israel published concurrently with this notice (Final Results).
    In this review and prior reviews of the subject merchandise, the 
Department has found that Rotem and/or its predecessor, Negev 
Phosphates Ltd., received non-recurring countervailable subsidies prior 
to these partial privatizations. Further, the Department has found that 
a private party purchasing all or part of a government-owned company 
can repay prior non-recurring subsidies on behalf of the company as 
part or all of the sales price (see the General Issues Appendix 
appended to the Final Countervailing Duty Determination; Certain Steel 
Products from Austria, 58 FR 37262 (July 9, 1993) (General Issues 
Appendix)). Therefore, to the extent that a portion of the sales price 
paid for a privatized company can be reasonably attributed to prior 
subsidies, that portion of those subsidies are repaid. This methodology 
was applied in the 1992 and 1993 reviews. In the questionnaire response 
for 1994, respondents reported that the Government of Israel sold less 
than 0.5 percent of its shares in ICL. Because this percentage of 
shares privatized is so small, the percentage of subsidies potentially 
repaid through this privatization could have no measurable impact on 
Rotem's overall net subsidy rate. Therefore, we have not applied our 
repayment methodology which is described in the General Issues 
Appendix. (See May 23, 1996 memorandum to Paul L. Joffe regarding 
applicability of the Department's privatization methodology in the 
instant review, which is on file in the public file of the Central 
Records Unit, Room B-099 of the Department of Commerce.)

[[Page 28846]]

Analysis of Programs

I. Programs Previously Determined to Confer Subsidies

(A) Encouragement of Capital Investments Law (ECIL) Grants
    The ECIL grants program was established to attract capital to 
Israel. In order to be eligible to receive various benefits under the 
ECIL, including investment grants, capital grants, accelerated 
depreciation, reduced tax rates, and certain loans, the applicant must 
obtain approved enterprise status. Approved enterprise status is 
granted by the Investment Center of the Israeli Ministry of Industry 
and Trade. Investment grants are given for the amount representing a 
percentage of the cost of the approved investment. The amount of the 
grant benefits received by approved enterprises depends on the 
geographic location of the eligible enterprise. For purposes of the 
ECIL program, Israel is divided into three zones--Development Zone A, 
Development Zone B, and the Central Zone--each with a different funding 
level.
    Since 1978, only investment projects outside the Central Zone have 
been eligible to receive grants. The Central Zone comprises the 
geographic center of Israel, including its largest and most developed 
population centers. In Final Affirmative Countervailing Duty 
Determination: Industrial Phosphoric Acid from Israel, 52 FR 25447 
(July 7, 1987) (IPA Investigation), the Department found the ECIL 
grants program to be de jure specific and thus countervailable because 
the grants are limited to enterprises located in specific regions. In 
this review, no new information or evidence of changed circumstances 
has been submitted to warrant reconsideration of this determination.
    Rotem is located in Development Zone A, and received ECIL 
investment, drawback, and capital grants in disbursements over a period 
of years for several projects. In this review we have followed the 
methodology developed in IPA Investigation to determine the benefits 
from the ECIL grants. However, consistent with the Final Results, we 
are utilizing a calculation methodology that conforms with the use of 
variable rather than fixed interest rates in the years these grants 
were disbursed. This methodology reflects the actual long-term options 
open to Israeli firms, and also ensures that the net present value of 
the amount countervailed in the year of receipt does not exceed the 
face value of the grant. In accordance with General Issues Appendix, we 
allocated these grants over ten years (the average useful life of 
renewable physical assets in the chemical manufacturing industry, as 
determined under the U.S. Internal Revenue Service Asset Depreciation 
Range System).
    Section 355.49(b)(2) of the Department's 1989 Proposed Regulations 
requires the use of a discount rate based on the cost of fixed-rate 
long-term debt for the firm under review or generally in the country 
under review. However, Rotem had no fixed-rate long-term debt during 
the years in which it received ECIL grants. Moreover, in Final Results, 
the Department determined that no long-term loans with fixed interest 
rates (or other long-term debt) were available in Israel during that 
period; the only long-term loans (or other long-term debt) available to 
companies in Israel were provided at variable interest rates. 
Consistent with Final Results, as the discount rate we have used the 
rate of return on CPI-indexed commercial bonds (as published in the 
Bank of Israel Annual Reports, plus the CPI).
    To calculate the benefit, we summed the benefits from these 
projects for 1994. We then divided the results by Rotem's sales of IPA 
during the review period. On this basis, we preliminarily determine the 
net subsidy from this program to be 6.53 percent ad valorem for 1994.
(B) Long-term Industrial Development Loans
    Prior to July 1985, approved enterprises were eligible to receive 
long-term industrial development loans funded by the Government of 
Israel (GOI). During the original investigation, we verified that these 
loans were project-specific. They were disbursed through the Industrial 
Development Bank of Israel (IDBI) and other industrial development 
banks which no longer exist.
    The long-term industrial development loans were provided to a 
diverse number of industries, including agricultural, chemical, mining, 
machine, and others. However, the interest rates on loans vary 
depending on the Development Zone in which the borrower is located. The 
interest rates on loans to borrowers in Development Zone A are lowest, 
while those on loans to borrowers in the Central Zone are highest. 
Therefore, loans to companies in Zone A are provided on preferential 
terms relative to loans received by companies in the heavily populated 
and developed Central Zone. In IPA Investigation, the Department found 
long-term industrial development loans to be regional subsidies and 
countervailable to the extent that they are provided at interest rates 
which are lower than those applied on loans provided to companies 
located in the Central Zone. In this review, no new information or 
evidence of changed circumstances has been submitted to warrant 
reconsideration of this determination. Rotem had loans outstanding 
under this program during the review period. The loans carry the Zone A 
interest rates because of Rotem's location. Therefore, we determine 
that Rotem received countervailable benefits under this program because 
the interest rates paid by Rotem are lower than those which would apply 
in the Central Zone.
    As was determined in the Final Affirmative Countervailing Duty 
Determination: Certain Carbon Steel Butt-Weld Pipe Fittings from 
Israel, 60 FR 10569 (February 27, 1995), under the terms of this 
program, the interest rates on these loans have two components--a fixed 
real interest rate and a variable interest rate, the latter of which is 
based on either the CPI or the dollar/shekel exchange rate. All of 
Rotem's loans were linked to the dollar/shekel exchange rate. Because 
the dollar-shekel exchange rate varies from year-to-year, we were 
unable to apply the Department's methodology described in the 1989 
Proposed Regulations because we cannot calculate a priori the payments 
due over the life of these loans, and hence cannot calculate the 
``grant equivalent'' of the loans. Therefore, in accordance with 
Sec. 355.49(d)(1) of the 1989 Proposed Regulations, we have compared 
the interest that would have been paid by a company in the Central 
Zone, as a benchmark, to the amount actually paid by Rotem during the 
review period. We then calculated the interest savings during the 
period of review. We summed the benefits and divided the total by 
Rotem's sales of IPA during the review period. On this basis, we 
preliminarily determine the net subsidy from this program to be 0.002 
percent ad valorem for 1994.
(C) Encouragement of Industrial Research and Development Grants (EIRD)
    Rotem received several grants under this program during the review 
period. In IPA Investigation, we determined that these grants are 
countervailable. In this review, no new information or evidence of 
changed circumstances has been submitted to warrant reconsideration of 
this determination. We followed the methodology developed in IPA 
Investigation in determining the benefits from the EIRD funding.

[[Page 28847]]

    During the 1994 review period, Rotem received three EIRD grants. 
The EIRD grants issued to Rotem on February 1, 1994 and April 7, 1994 
benefited a research project concerning green acid, which is used as an 
input in the production of IPA as well as other products. The EIRD 
grant issued to Rotem on August 1, 1994 benefited a research project 
concerning phosphate, which can be used to produce IPA as well as other 
products. We view these grants as ``non-recurring'' grants based on the 
analysis set forth in the ``Allocation'' section of the General Issues 
Appendix (58 FR 37226) because these benefits are exceptional, and 
Rotem cannot expect to receive benefits on an ongoing basis from review 
period to review period. Since the total value of the grants received 
in 1994 was less than 0.50 percent of all Rotem's sales, we divided the 
total amount of the 1994 grants by Rotem's total sales of all products. 
On this basis, we preliminarily determine the benefit from this program 
to be 0.06 percent ad valorem.

II. Programs Preliminarily Determined To Be Not Used

    We examined the following programs and preliminarily determine that 
the producer and/or exporter of the subject merchandise did not apply 
for or receive benefits under these programs during the period of 
review:

A. Exchange Rate Risk Insurance Scheme;
B. Reduced Tax Rates under ECIL;
C. ECIL Section 24 loans;
D. Labor Training Grants;
E. Dividends and Interest Tax Benefits under Section 46 of the ECIL; 
and
F. ECIL Preferential Accelerated Depreciation.

Preliminary Results of Review

    In accordance with Sec. 355.22(c)(4)(ii) of the Department's 
Interim Regulations, we have calculated an individual subsidy rate for 
each producer/exporter subject to this administrative review. For the 
period January 1, 1994 through December 31, 1994, we preliminarily 
determine the net subsidy for Rotem to be 6.59 percent ad valorem.
    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct the U.S. 
Customs Service to assess the following countervailing duties:

------------------------------------------------------------------------
                                                                   Net  
               Net Subsidies-- Producer/Exporter                 Subsidy
                                                                 Rate % 
------------------------------------------------------------------------
Rotem Amfert Negev Ltd........................................      6.59
------------------------------------------------------------------------

The Department also intends to instruct the U.S. Customs Service to 
collect cash deposits of estimated countervailing duties, at the rate 
indicated above, on the f.o.b. invoice price for all shipments of the 
subject merchandise from the reviewed company, entered, or withdrawn 
from warehouse, for consumption on or after the date of publication of 
the final results of this review.
    The URAA replaced the general rule in favor of a country-wide rate 
with a general rule in favor of individual rates for investigated and 
reviewed companies. The procedures for countervailing duty cases are 
now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. Requests for 
administrative reviews must now specify the companies to be reviewed. 
See Sec. 355.22(a) of the Interim Regulations. The requested review 
will normally cover only those companies specifically named. Pursuant 
to 19 CFR 355.22(g), for all companies for which a review was not 
requested, duties must be assessed at the cash deposit rate, and cash 
deposits must continue to be collected at the rate previously ordered. 
As such, the countervailing duty cash deposit rate applicable to a 
company can no longer change, except pursuant to a request for a review 
of that company. See Federal-Mogul Corporation and The Torrington 
Company v. United States, 822 F.Supp. 782 (CIT 1993) and Floral Trade 
Council v. United States, 822 F.Supp. 766 (CIT 1993) (interpreting 19 
CFR 353.22(e), the antidumping regulation on automatic assessment, 
which is identical to 19 CFR 355.22(g)). Therefore, the cash deposit 
rates for all companies except those covered by this review will be 
unchanged by the results of this review.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to all non-reviewed companies covered by 
this order are those established in the most recently completed 
administrative proceeding. These rates shall apply to all non-reviewed 
companies until a review of a company assigned these rates is 
requested. In addition, for the period January 1, 1994 through December 
31, 1994, the assessment rates applicable to all non-reviewed companies 
covered by this order are the cash deposit rates in effect at the time 
of entry.

Public Comment

    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 
seven days after the time limit for filing the case brief. Parties who 
submit argument in this proceeding are requested to submit with the 
argument (1) a statement of the issue and (2) a brief summary of the 
argument. Any hearing, if requested, will be held seven 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.
    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, are due. The Department will 
publish the final results of this administrative review including the 
results of its analysis of issues raised in any case or rebuttal brief 
or at a hearing.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

    Dated: May 29, 1996.
Paul L. Joffe,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-14156 Filed 6-5-96; 8:45 am]
BILLING CODE 3510-DS-P