[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53351-53355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26220]


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DEPARTMENT OF COMMERCE
[C-508-605]


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

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

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

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SUMMARY: On June 6, 1996, the Department of Commerce (``the 
Department'') published in the Federal Register its preliminary results 
of administrative review of the countervailing duty order on industrial 
phosphoric acid (IPA) from Israel for the period January 1, 1994 
through December 31, 1994 (61 FR 28845). The Department has now 
completed this administrative review in accordance with section 751(a) 
of the Tariff Act of 1930, as amended. For information on the net 
subsidy for each reviewed company, and for all non-reviewed companies, 
please see the Final Results of Review section of this notice. We will 
instruct the U.S. Customs Service to assess countervailing duties as 
detailed in the Final Results of Review section of this notice.

EFFECTIVE DATE: October 11, 1996.


[[Page 53352]]


FOR FURTHER INFORMATION CONTACT: Cameron Cardozo or Brian Albright, 
Office of CVD/AD Enforcement VI, 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

    Pursuant to section 355.22(a) of the Department's Interim 
Regulations, this review covers only those producers or exporters of 
the subject merchandise for which a review was specifically requested. 
See Antidumping and Countervailing Duties: Interim regulations; request 
for comments, 60 FR 25130, 25137 (May 11, 1995) (``Interim 
Regulations''). Accordingly, this review covers Rotem Amfert Negev Ltd. 
(Rotem). This review also covers the period January 1, 1994 through 
December 31, 1994, and nine programs.
    We invited interested parties to comment on the preliminary 
results. Since the publication of the preliminary results on June 6, 
1996, the following events have occurred. On July 8, 1996, case briefs 
were submitted by the Government of Israel (GOI) and Rotem, a producer 
of the subject merchandise which exported industrial phosphoric acid to 
the United States during the review period (respondents). On July 12, 
1996, rebuttal briefs were submitted by FMC Corporation and Monsanto 
Company (petitioners).

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''). References to the 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 URAA. See Advance Notice of 
Proposed Rulemaking and Request for Public Comments, 60 FR 80 (January 
3, 1995).

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

    Previously, we have 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. 
Accordingly, in the preliminary results, we calculated a ratio 
representing the amount of subsidies remaining with Rotem after each 
partial privatization in 1992 and 1993. To calculate the benefit 
provided to Rotem in the POR (1994), we multiplied the benefit 
calculated for Encouragement of Capital Investment Law grants (the only 
non-recurring allocable subsidies) by the ratio representing the amount 
of subsidies remaining with Rotem after the partial privatizations.

Analysis of Programs

    Based upon our analysis of the questionnaire responses and written 
comments from the interested parties, we determine the following:

I. Programs Conferring Subsidies

1. Encouragement of Capital Investments Law (ECIL) Grants
    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
led us to change our findings from the preliminary results. For ECIL 
grants that were tied to IPA production, we have divided the benefit by 
Rotem's sales of IPA during the POR. For ECIL grants that were not tied 
specifically to IPA production but were tied to the production of 
products that can be used as inputs in the production of IPA, we have 
divided the benefit by Rotem's total sales of all products during the 
POR. On this basis, the net subsidy for this program is 8.00 percent ad 
valorem for 1994.
2. Long-term Industrial Development Loans
    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. We received no 
comments on our preliminary results and our findings remain unchanged 
in these final results. On this basis, the net subsidy for this program 
is less than 0.005 percent ad valorem for 1994.
3. Encouragement of Industrial Research and Development Grants (EIRD)
    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to change our findings from the preliminary results. On this 
basis, the net subsidy for this program is 0.06 percent ad valorem for 
1994.

II. Programs Found Not To Be Used

    In the preliminary results, we found that Rotem did not apply for 
or receive benefits under the following programs:
    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.
    Our analysis of the comments submitted by the interested parties, 
summarized below, has not led us to change our findings from the 
preliminary results.

Analysis of Comments

    Comment 1: Respondents argue that ECIL grants for Project 14 should 
not be considered subsidies bestowed on the subject merchandise, which 
is IPA sold as IPA, because the grants were intended to increase 
production of IPA for use in downstream products. Respondents take 
issue with the Department's application of section 355.47 of the 
Proposed Regulations, which the Department cited in its memorandum 
addressing the treatment of Project 14. (See, Memorandum to File from 
Team on April 15, 1996, available in the public file of the Central 
Records Unit, Room B-099, Department of Commerce). According to 
respondents, section 355.47 does not support the Department's 
preliminary decision to countervail Project 14 grants that were used in 
the ``production'' of IPA. While the regulation does speak in terms of 
``production,'' respondents argue that this does not contemplate 
production of a product for use in value-added downstream products that 
are outside the scope of the order. Rather, the provision contemplates 
production of the product for sale as the product itself; that is, as 
the subject merchandise.

[[Page 53353]]

    Respondents further argue that the Department's treatment of 
Project 14 is at odds with its treatment of other ECIL grants. 
Respondents point out that the Department allocated a portion of the 
grants for Rotem's green acid facility, Project 9, to its calculation 
of the subsidy on IPA because a portion of green acid was fed to IPA 
production. IPA was thus, to a certain degree, a downstream product of 
green acid. According to the Department's analysis, argue respondents, 
the Project 9 grants, since the grants were for the production of green 
acid and not downstream IPA, should have been fully allocated to the 
production of green acid and not IPA.
    Finally, respondents question the Department's citations to four 
earlier determinations which support the ``practice of tying benefits 
to specific products.'' In doing so, respondents maintain that Project 
14 grants should not be ``tied'' to IPA when the sole purpose of the 
grants was to benefit products other than IPA. Thus, respondents 
conclude, while the four cited cases do stand for the ``established 
tenet'' of tying benefits, they are not relevant to the issue of how to 
treat grants for the ultimate production of downstream products.
    In rebuttal, petitioners argue that the Department correctly 
included Project 14 grants in its calculation of the net subsidy. 
According to petitioner, the statute makes clear that when a 
countervailable subsidy is provided with respect to the manufacture or 
production of a class or kind of merchandise imported into the United 
States, and the requisite injury determination is made, a duty shall be 
imposed equal to the amount of the net countervailable subsidy. It is 
undisputed that the grants made available to Rotem under Project 14 
were for the ``manufacture'' or ``production'' of industrial phosphoric 
acid. Moreover, state petitioners, as a matter of law, the Department 
has also determined that the grants provided under Project 14 do 
constitute ``countervailable subsidies.'' Under these circumstances, 
the Department had no alternative but to include the amount of this 
countervailable subsidy in its calculation of the net subsidy amount.
    Petitioners further maintain that there are several flaws in 
respondents' argument that the grants are not intended to benefit IPA 
as subject merchandise. First, it does not square with the language of 
the statute, which mentions no requirement for any sale, much less a 
requirement that a sale be for a particular purpose. In addition, state 
petitioners, respondents' argument would require a finding by the 
Department that the grants provided to Rotem actually benefited Rotem's 
sales of IPA in the United States, a so-called competitive-benefits-
conferred interpretation of the statute that has been soundly rejected 
by the Department and the Court of Appeals for the Federal Circuit in 
the privatization context. According to petitioners, the only relevant 
legal test has been met in this case, i.e., that the grants received in 
connection with Project 14 were provided for the production of IPA. 
What Rotem subsequently did with the production and whether it used the 
grants to obtain a competitive advantage for its sales of IPA in the 
United States are legally irrelevant matters.
    Department's Position: We disagree with respondents. Where the 
Department determines that a countervailable benefit is tied to the 
production or sale of a product or products, as set forth in section 
355.47 of the Proposed Regulations, the benefit is attributable to 
sales of that product or products made during the period of review. As 
respondents have themselves pointed out, Project 14 grants are clearly 
tied directly to the production of IPA, the subject merchandise. 
Contrary to respondents assertion that it is clear that section 355.47 
does not contemplate production of an input for use in value-added 
downstream products, section 355.47 does not address the ``use'' of the 
product in question in determining whether a benefit is tied to subject 
merchandise. Rather, as outlined in section 355.47, the Department may 
countervail a benefit that is tied to production or sale of the subject 
merchandise.
    While respondents have stated that during the POR their capacity to 
produce IPA expanded in some measure as a result of the Project 14 
grant, respondents' submission merely indicated a future intent to 
manufacture products that can use IPA as an input. See April 15, 1996 
submission to the Department from respondents regarding New Factual 
Information at 5-8. They have submitted no evidence that any increased 
production of IPA during the POR (1994), which resulted from expansion 
of capacity from Project 14, was used as an input in the production of 
downstream products manufactured by Rotem. Moreover, respondents' April 
15, 1996 submission indicates that the expansion intended to increase 
production of IPA ``has not yet come fully on stream.'' If, in future 
reviews, Rotem increases its production of IPA and record evidence 
establishes that some portion of Rotem's IPA is used as an input for 
downstream products manufactured by Rotem, we will then examine how the 
benefits from Project 14 grants on IPA, whether sold or captively 
consumed, should be treated for the purpose of calculating the subsidy 
rate. In this review, however, the information on the record indicates 
that during the POR Rotem only produced IPA that is sold as IPA.
    Respondents have also mistakenly analogized the Department's 
treatment of Project 14 grants with its treatment of other ECIL grants 
that were not directly tied to IPA production. In those projects, 
grants were provided to expand the production of materials (e.g., 
phosphate rock, green acid) that were either sold or used captively 
during the POR to produce IPA. Accordingly, consistent with our 
approach in prior reviews, the Department is allocating benefits from 
those grants to IPA, (See, e.g., Industrial Phosphoric Acid from 
Israel; Final Results of Countervailing Duty Administrative Reviews, 61 
FR 28841 (June 6, 1996), although utilizing a different allocation 
methodology (See Department's Position on Comment 2). In contrast, the 
Project 14 grants were provided for the purpose of expanding production 
of IPA, and are therefore tied directly to the production of the 
subject merchandise.
    Respondents correctly recognize that the four cases cited by the 
Department stand for the ``established tenet'' of tying benefits and 
that they are not relevant to the issue of how to treat grants for the 
ultimate production of downstream products. Project 14 grants were 
provided to increase production of IPA. Although respondents claim that 
the ``sole purpose'' of the Project 14 grants was to benefit products 
other than IPA, record evidence indicates that during the POR, IPA 
produced was sold as IPA. Therefore, we continue to treat the Project 
14 grants as subsidies bestowed directly on the production of the 
subject merchandise during the 1994 POR and allocate the benefit over 
sales of IPA during the review period.
    Comment 2: Rotem argues that the Department should not have found 
that three EIRD grants conferred benefits on IPA during the review 
period, since Rotem stated in its questionnaire response that these 
grants were not related to IPA production. Two grants benefited a 
research project concerning green acid, and one grant benefited a 
research project concerning phosphate. Accordingly, for the final 
results, Rotem argues that the Department should find that the EIRD 
grants were not countervailable subsidies to IPA during the period of 
review. Alternatively, if the Department refuses to accept

[[Page 53354]]

Rotem's statements, then the Department must allocate the EIRD grants 
in the same manner as the ECIL grants that related to the green acid 
facility.
    Petitioners respond that the countervailing duty law does not 
require that a subsidy directly benefit the subject merchandise. 
Instead, the statute is quite clear that countervailable subsidies may 
be provided either directly or indirectly. Both the phosphate raw 
material and the green acid, which were the direct targets of these 
grants, are important inputs in the production of IPA. As a result, IPA 
benefits indirectly from these grants.
    Finally, petitioners argue that the Department has dealt previously 
with this issue in the 1987 administrative review. In that review, 
respondent advanced a similar argument that a grant provided for 
research on phosphate rock did not benefit IPA. The Department rejected 
that argument because rock phosphates are a main input in the 
production of IPA. This reasoning, argue petitioners, is equally 
applicable to the EIRD grants at issue in the instant review. To the 
extent the production of green acid and phosphate is improved by the 
research made possible through the EIRD grants, IPA will also benefit. 
Therefore, the Department acted properly in including these EIRD grants 
in its calculation of the net subsidy rate for IPA.
    Department's Position: The statute gives the Department clear 
authority to countervail benefits that are provided directly or 
indirectly to the production of the subject merchandise. See 19 U.S.C. 
Sec. 1671(a). To the extent that green acid and phosphate produced by 
Rotem are inputs in the production of IPA produced by Rotem, the EIRD 
grants benefit IPA. In making this determination, we are being 
consistent with our past practice with regard to EIRD grants. The 
respondent received an EIRD grant for a research project on rock 
phosphate during the 1990 administrative review. We found this grant 
countervailable because the research would ``benefit the gathering of 
raw materials (inputs) required to produce IPA.'' Industrial Phosphoric 
Acid from Israel; Preliminary Results of Countervailing Duty 
Administrative Review, 57 FR 21958, 21960 (May 26, 1992) and Final 
Results of Countervailing Duty Administrative Review, 57 FR 39391 
(August 31, 1992). The method used by the Department to calculate the 
benefit under these grants is therefore reasonable and consistent with 
our practice in prior reviews.
    In consideration of respondents' comment, specifically respondents' 
argument that EIRD grants should be allocated in the same manner as 
ECIL grants, we have reexamined our calculation methodology with 
respect to EIRD and ECIL grants. We have determined that the proper 
grant allocation methodology to follow is the one that the Department 
has used to determine the benefit for the EIRD grants. This methodology 
is consistent with the Department's approach in Final Affirmative 
Countervailing Duty Determination: Certain Pasta from Italy, 61 FR 
30288, 30289 (June 14, 1996) (Certain Pasta). As the Department stated 
in Certain Pasta, in cases where an input product and the subject 
merchandise are produced within a single corporate entity, the 
Department has found that subsidies to the input product benefit total 
sales of the corporation, including sales of the subject merchandise. 
See also Final Affirmative Countervailing Duty Determination: Certain 
Softwood Lumber Products from Canada, 57 FR 22570 (May 28, 1992). 
Therefore, we are taking the entire amount of grants provided to the 
production of products that are inputs to IPA and dividing the benefit 
by Rotem's total sales. As discussed above (Comment 1), for grants that 
are directly tied to IPA production, we will continue to allocate the 
entire amount of the grant to Rotem's sales of IPA.

Final Results of Review

    In accordance with section 355.22(c)(4)(ii) of the Department's 
Interim Regulations, we 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 determine the net subsidy 
for Rotem to be 8.06 percent ad valorem. 

------------------------------------------------------------------------
                                                                  Net   
                                                                subsidy 
               Net subsidies--producer/exporter                   rate  
                                                               (percent)
------------------------------------------------------------------------
Rotem Amfert Negev Ltd.......................................      8.06 
------------------------------------------------------------------------

    We will instruct the U.S. Customs Service (``Customs'') to assess 
countervailing duties as indicated above. The Department will also 
instruct Customs to collect cash deposits of estimated countervailing 
duties in the percentages detailed above of the f.o.b. invoice price on 
all shipments of the subject merchandise from reviewed companies, 
entered, or withdrawn from warehouse, for consumption on or after the 
date of publication of the final results of this review.
    Because 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 establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 
section 355.22(a) of the Interim Regulations. Pursuant to 19 C.F.R. 
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 C.F.R. 
353.22(e), the antidumping regulation on automatic assessment, which is 
identical to 19 C.F.R. 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 non-reviewed companies covered by this 
order are those established in the most recently completed 
administrative proceeding. See Industrial Phosphoric Acid from Israel; 
Final Results of Countervailing Duty Administrative Reviews, 61 FR 
28841 (June 6, 1996). 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.
    This notice serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 C.F.R. 355.34(d). Timely written notification 
of return/destruction of

[[Page 53355]]

APO materials or conversion to judicial protective order is hereby 
requested. Failure to comply with the regulations and the terms of an 
APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

    Dated: October 4, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-26220 Filed 10-10-96; 8:45 am]
BILLING CODE 3510-DS-P