[Federal Register Volume 63, Number 174 (Wednesday, September 9, 1998)]
[Notices]
[Pages 48193-48197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24141]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-508-605]


Industrial Phosphoric Acid From Israel: Preliminary Results and 
Partial Recission 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 the period January 1, 1996 through 
December 31, 1996. For information on the net subsidy for each reviewed 
company, as well as 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. 
Interested parties are invited to comment on these preliminary results. 
See Public Comment section of this notice.

EFFECTIVE DATE: September 9, 1998.

FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Eric Greynolds, 
Office CVD/AD Enforcement VI, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
3692 or (202) 482-6071, respectively.

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 4, 1997, the Department 
published a notice of ``Opportunity to Request Administrative Review'' 
(62 FR 41925) of this countervailing duty order. We received a timely 
request for review, and we initiated the review, covering the period 
January 1, 1996 through December 31, 1996, on September 25, 1997 (62 FR 
50292).
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters of the

[[Page 48194]]

subject merchandise for which a review was specifically requested. 
Accordingly, this review covers Rotem-Amfert Negev Ltd. (Rotem) and 
Haifa Chemicals Ltd. (Haifa). Haifa did not export the subject 
merchandise during the period of review (POR). Therefore, we are 
rescinding the review with respect to Haifa. This review covers nine 
programs.

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. All citations to the 
Department's regulations reference 19 CFR Part 351, et seq. Antidumping 
Duties; Countervailing Duties; Final Rule, 62 FR 27296 (May 19, 1997), 
unless otherwise indicated.

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 U.S. Customs 
Service purposes. The written description of the scope remains 
dispositive.

Subsidies Valuation Information

Period of Review

    The period for which we are measuring subsidies is calendar year 
1996.

Allocation Period

    In British Steel plc. v. United States, 879 F.Supp. 1254 (February 
9, 1995) (British Steel), the U.S. Court of International Trade (the 
Court) rules against the allocation period methodology for non-
recurring subsidies that the Department had employed for the past 
decade, as it was articulated in the General Issues Appendix appended 
to the Final Countervailing Duty Determination; Certain Steel Products 
from Austria, 58 FR 37225 (July 9, 1993) (GIA). In accordance with the 
Court's decision on remand, the Department determined that the most 
reasonable method of deriving the allocation period for nonrecurring 
subsides is a company-specific average useful life (AUL). This remand 
determination was affirmed by the Court on June 4, 1996. British Steel, 
929 F.Supp 426, 439 (CIT 1996). Accordingly, the Department has applied 
this method to those non-recurring subsidies that have not yet been 
countervailed.
    Rotem submitted an AUL calculation based on depreciation expenses 
and asset values of productive assets reported in its financial 
statements. Rotem's AUL was derived by adding the sum of average gross 
book value of depreciable fixed assets for ten years and dividing these 
assets by the total depreciation charges for the related periods. We 
found this calculation to be reasonable and consistent with our 
company-specific AUL objective. Rotem's calculation resulted in an 
average useful life of 23 years, which we have used as the allocation 
period for non-recurring subsidies received during the POR.
    For non-recurring subsidies received prior to the POR and already 
countervailed based on an allocation period established in an earlier 
segment of the proceeding, it is not reasonable or practicable to 
reallocate those subsidies over a different period of time. Since the 
countervailing duty rate in earlier segments of the proceeding was 
calculated based on a certain allocation period and resulted in a 
certain benefit stream, redefining the allocation period in later 
segments of the proceeding would entail taking the original grant 
amount and creating an entirely new benefit stream for that grant. Such 
a practice may lead to an increase or decrease in the total amount 
countervailed and, thus, would result in the possibility of over- or 
under-countervailing the actual benefit. Therefore, for purposes of 
these preliminary results, the Department is using the original 
allocation period assigned to each non-recurring subsidy received prior 
to the POR. See Certain Carbon Steel Products from Sweden; Final 
Results of Countervailing Duty Administrative Review, 62 FR 16549 
(April 7, 1997).

Privatization

(I) Background

    Israel Chemicals Limited (ICL), the parent company which owns 100 
percent of Rotem's shares, was partially privatized in 1992, 1993, 
1994, and 1995. We have previously 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 Review; Industrial Phosphoric 
Acid from Israel, 61 FR 53351, 53352 (October 11, 1996) (1994 Final 
Results).
    In this review and prior reviews of this order, the Department 
found that Rotem and/or its predecessor, Negev Phosphates Ltd., 
received non-recurring countervailable subsidies prior to these partial 
privatizations. Further, the Department found that a portion of the 
price paid by a private party for all or part of a government-owned 
company represents partial repayment of prior subsidies. See GIA, 58 FR 
at 37262. Therefore, in 1992, 1993, and 1995 reviews, we calculated the 
portion of the purchase price paid for ICL's shares that is 
attributable to repayment of prior subsidies. In the 1994 review, the 
portion of the ICL shares privatized was so small, less than 0.5 
percent, that we determined that the percentage of subsidies 
potentially repaid through this privatization could have no measurable 
impact on Rotem's overall net subsidy rate. Thus, we did not apply our 
repayment methodology to the 1994 partial privatization. See the 1994 
Final Results, 61 FR at 53352.

(II) Modification of the Application of Repayment Methodology

    In prior reviews, to calculate the portion of the purchase price 
which represented repayment of prior subsidies through partial 
privatizations in 1992, 1993 and 1995, the Department converted the net 
worth figures for Rotem from new Israeli shekels (NIS) to U.S. dollars, 
based on exchange rate information on the record. In this review, the 
respondent has submitted U.S. dollar denominated audited financial 
statements for 1983 through 1989. The notes to the financial statements 
indicate that the company maintains its accounts in NIS and in U.S. 
dollars. Amounts originating from transactions denominated in, or 
linked to, the dollar are stated at their original amounts. Amounts not 
originating from such transactions are determined on the basis of the 
exchange rate prevailing at the time of the transaction. As a result, 
we have recalculated the portion of the purchase price paid for ICL's 
shares that is attributable to repayment of prior subsidies using the 
U.S. dollar denominated net worth figures provided in Rotem's financial 
statements.

Grant Benefit Calculations

    To calculate the benefit for the POR, we followed the same 
methodology used in the final results of the 1995 administrative 
review. We converted Rotem's shekel-denominated grants into U.S. 
dollars, using the exchange rate in effect on the date the grant was 
received. We then applied the grant methodology to determine the 
benefit for the POR. See Industrial Phosphoric Acid from Israel; Final 
Results of Countervailing Duty Administrative

[[Page 48195]]

Review, 63 FR 13626, 13633 (March 20, 1998) (1995 Final Results).

Facts Available

    Section 776(a)(2) of the Act requires the Department to use facts 
available if ``an interested party or any other person * * * withholds 
information that has been requested by the administering authority * * 
*.'' In this case, the Government of Israel (GOI) did not comply with 
the Department's requests for information that was necessary to conduct 
a specificity analysis of the Environment Grant Program. On April 7, 
1998 and on April 24, 1998, the Department issued questionnaires 
requesting information regarding eligibility for and actual use of the 
benefits provided under the Environment Grant Program. The GOI provided 
information regarding the total number of applicants that applied for 
or received grants, and the total amount of the grants given under the 
program. However, the GOI did not extract information from this data 
that would have allowed the Department to fully examine whether the 
program is, in fact, specific. Based on the information presented, the 
Department could only derive the absolute number of applicants for and 
recipients of grants under this program. The GOI also provided the 
Department with the criteria considered by the MOE in determining 
whether an application will be approved, including the financial and 
economic strength of the applicant, extent of the investment needed, 
and the extent of the improvement compared to the investment, but did 
not provide information as to how these criteria were applied.
    Section 776(b) of the Act permits the administrative authority to 
use an inference that is adverse to the interests of an interested 
party if that party has ``failed to cooperate by not acting to the best 
of its ability to comply with a request for information.'' Such an 
adverse inference may include reliance on information derived from: (1) 
The petition, (2) a final determination in the investigation under this 
title, (3) any previous review under section 751 or determination under 
section 753 regarding the country under consideration, or (4) any other 
information placed on the record. Because respondents did not comply 
with the Department's requests for such information, and failed to 
explain why such information could not be provided, we find that 
respondents failed to cooperate by not acting to the best of their 
ability. Therefore, we are using an adverse inference in accordance 
with section 776(b) of the Act. The adverse inference is a finding that 
the Environment Grant Program is specific under section 771(5A)(D)(iii) 
of the Act. For further discussion, see Memorandum regarding 
Specificity of the Environment Grant Program dated August 12, 1998, 
which is on file in the Central Records Unit (Room B-099 of the Main 
Commerce Building.)

Analysis of Programs

I. Programs Conferring Subsidies

A. Programs Previously Determined To Confer Subsidies

1. Encouragement of Capital Investments Law (ECIL)
    This ECIL program is designed to encourage the distribution of the 
population throughout Israel, to create new sources of employment, to 
aid the absorption of immigrants, and to develop the economy's 
production capacity. To be eligible for benefits under the ECIL, 
including investment grants, capital grants, accelerated depreciation, 
reduced tax rates, and certain loans, applicants must obtain approved 
enterprise status. Investment grants cover a percentage of the cost of 
the approved investment, and the amount of the grant depends on the 
geographic location of eligible enterprises. For purposes of the ECIL 
program, Israel is divided into three zones--Development Zones A and B, 
and the Central Zone. Under the ECIL program the Central Zone was not 
eligible for benefits.
    In Final Affirmative Countervailing Duty Determination: Industrial 
Phosphoric Acid From Israel, 52 FR 25447 (July 7, 1987) (IPA 
Investigation), the Department found the ECIL grant program to be de 
Jure specific 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. As explained in the ``Allocation 
Period'' section above, for grants that have been allocated in prior 
administrative reviews, we are continuing to use the allocation period 
assigned to these grants. For grants received during the POR, we have 
used the AUL calculated by Rotem in this review, which is 23 years.
    To calculate the benefit for the POR, we followed the same 
methodology used in the final results of the 1995 administrative 
review, as indicated in the ``Grant Benefit Calculations'' section 
above. We considered Rotem's cost of long-term borrowing in U.S. 
dollars as reported in the company's financial statements for use as 
the discount rate used to allocate the countervailable benefit over 
time. However, this information includes Rotem's borrowing from its 
parent company, ICL, and thus does not provide appropriate discount 
rate. Therefore, we have turned to ICL's cost of long-term borrowing in 
U.S. dollars in each year from 1984 through 1996 as the most 
appropriate discount rate. ICL's interests rates are shown in the notes 
to the company's financial statements, public documents which are in 
the record of this review. See Comment 9 in the 1995 Final Results.
    To calculate the total subsidy in the POR, we first summed the 
grant amounts allocated to and received in 1996, after taking into 
account the partial privatizations in 1992, 1993, and 1995. To derive 
the subsidy rates, as discussed in the 1995 Final Results, we 
attributed ECIL grants to a particular facility over the sales of the 
product produced by that facility plus sales of all products into which 
that product may be incorporated. Accordingly, we attributed ECIL 
grants to Rotem's phosphate rock mines to total sales, and grants to 
Rotem's green acid to total sales minus direct sales of phosphate rock 
and grants to Rotem's IPA facilities to sales of IPA, MKP, and 
fertilizers. We summed the rates obtained on this basis, and 
preliminarily determine the net subsidy from this program to be 5.58 
per ad valorem for the POR.
2. Encouragement of Industrial Research and Development Grants (EIRD)
    During the 1996 review period, Rotem received five EIRD grants. Two 
of them were received for projects which have no relation to the 
production of subject merchandise or inputs thereto; the three 
remaining grants are for research into phosphate rock production, which 
is an input to IPA production. Thus, they provide countervailable 
benefits to the production of subject merchandise. In the 1995 Final 
Results, we determined that EIRD rants were specifically provided to 
Rotem, and that they conferred a benefit. In this review, no new 
information or evidence of changed circumstances has been submitted to 
warrant reconsideration of this determination.
    We view these grants as ``non-recurring'' based on the analysis set 
forth in the ``Allocation'' section of the GIA (58 FR at 37226) because 
these benefits are exceptional, and Rotem cannot expect to receive 
benefits on an ongoing basis from review period to

[[Page 48196]]

review period. However, because the total benefit of the EIRD grants 
received in 1996 was less than 0.50 percent of Rotem's total sales, we 
allocated the entire benefit to the POR. To obtain the subsidy rate, we 
divided the benefit by Rotem's total sales. On this basis, we 
preliminarily determine the benefit from this program to be 0.02 
percent ad valorem.

B. Other Programs Preliminarily Determined To Confer Subsidies

1. Infrastructure Grant Program
    Under the Infrastructure Grant Program, the GOI establishes new 
industrial areas by partially reimbursing companies for their costs of 
developing the infrastructure in certain geographical zones. Rotem 
received assistance under this program during the POR. Therefore, 
within the meaning of section 771(5)(B)(i), a subsidy is bestowed 
because the GOI provided a financial contribution, which conferred a 
benefit. We analyzed whether this program is specific within the 
meaning of section 751(5A)(D) of the Act. Because the infrastructure 
grants are limited to an enterprise or industry located in certain 
zones within the jurisdiction of the authority providing the subsidy, 
we find this program to be regionally specific in accordance with 
section 771(5A)(D)(iv).
    We view these grants as non-recurring based on the analysis set 
forth in the ``Allocation'' section of the GIA (58 FR at 37226) because 
these benefits are exceptional, and the company cannot expect to 
receive benefits on an ongoing basis from review period to review 
period. Therefore, we calculated the benefit under this program using 
the methodology for non-recurring grants noted above in the ``Grant 
Benefit Calculations'' section. We then divided the grant amount by 
Rotem's total sales because the grant benefited the Company's total 
production. On this basis, we preliminarily determine the benefit from 
this program to be 0.18 percent ad valorem.
2. Environmental Grant Program
    Through the Ministry of the Environment, the GOI administers a 
program to provide financial assistance for the adaptation of existing 
industrial facilities to new environmental requirements. Companies 
undertaking programs to reduce air pollution, hazardous wastes, and 
noise levels, and to improve water quality, can receive assistance. The 
maximum amount of assistance available is the lesser of 35 percent of 
the approved investment or the actual investment, and is capped at 
1.125 million NIS.
    We analyzed whether this program is specific in law (de jure), or 
in fact (de facto), within the meaning of section 751(5A)(D) of the 
Act. We examined the Directive of the Director-General of the Ministry 
of the Environment for the program eligibility criteria and found that 
this program is not de jure specific, because there is no express 
intent to limit the availability of benefits under this program to an 
enterprise or industry or group of enterprises or industries.
    We then examined the information provided by the GOI with respect 
to the actual provision of assistance under the program (since its 
inception in 1995) to see whether it meets the criteria for de facto 
Specificity. According to 771(5A)(D)(iii), ``a subsidy is de facto 
specific if one of the following factors exists: (1) The actual 
recipients of the subsidy, whether considered on an enterprise or 
industry basis, are limited in number; (2) an enterprise or industry is 
a predominant user of the subsidy; (3) an enterprise or industry 
receives a disproportionately large amount of the subsidy; or (4) the 
manner in which the authority providing the subsidy has exercised 
discretion in the decision to grant the subsidy indicates that an 
enterprise or industry is favored over others.''
    The Department requested information regarding the number of 
companies and type of industries that applied for or received benefits 
under the program, and the amount of benefits received. The GOI 
provided no information on actual usage of the program by enterprise or 
industry nor did it identify any alternative information through which 
the Department could make an assessment of whether the program is de 
facto specific. Accordingly, based on the information on the record, we 
preliminarily determine that this program is de facto specific and is, 
therefore, countervailable within the meaning of section 
771(5A)(D)(iii). (See Facts Available section of this notice.)
    We view these grants as non-recurring based on the analysis set 
forth in the ``Allocation'' section of the GIA (58 FR at 37226) because 
these benefits are exceptional, and the company cannot expect to 
receive benefits on an ongoing basis from review period to review 
period. However, because the total value of the benefit received in 
1996 was less then 0.50 percent of Rotem's total sales, we allocated 
the entire benefit to the POR. We divided the grant amount by Rotem's 
total sales because the grants benefited the company's total 
production. On this basis, we preliminarily determine the benefit from 
this program to be 0.11 percent ad valorem.

II. Programs Preliminarily Determined To Be Not Used

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

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

Preliminary Results of Review

    In accordance with 19 CFR 351.213(b), we calculated an individual 
subsidy rate for each producer/exporter subject to this administrative 
review. For the period January 1, 1996 through December 31, 1996, we 
preliminarily determine the net subsidy for rotem to be 5.89 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 (Customs) to assess countervailing duties as indicated 
above.
    The Department also intends to instruct Customs to collect cash 
deposits of estimated countervailing duties as indicated 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 19 CFR 
351.213(b). Pursuant to 19 CFR 351.212(c), 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

[[Page 48197]]

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). 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 will be the rate for that company established in the most 
recently completed administrative proceeding under the URAA. If such a 
review has not been conducted, the rate established in the most 
recently completed administrative proceeding conducted pursuant to the 
statutory provisions that were in effect prior to the URAA amendments, 
is applicable. See 1992/93 Final Results, 61 FR 28842. 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, 1996 through December 31, 1996, 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

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of 
publication of this notice. Pursuant to 19 CFR 351.309, interested 
parties may submit written comments in response to these preliminary 
results. Case briefs must be submitted within 30 days after the date of 
publication of this notice, and rebuttal briefs, limited to arguments 
raised in case briefs, must be submitted no later than five days after 
the time limit for filing case briefs. Parties who submit argument in 
this proceeding are requested to submit with the argument: (1) a 
statement of the issues, and (2) a brief summary of the argument. Case 
and rebuttal briefs must be served on interested parties in accordance 
with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, within 30 
days of the date of publication of this notice, interested parties may 
request a public hearing on arguments to be raised in the case and 
rebuttal briefs. Unless the Secretary specifies otherwise, the hearing, 
if requested, will be held two days after the date for submission of 
rebuttal briefs, that is, thirty-seven days after the date of 
publication of these preliminary results.
    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 
case briefs, under 19 CFR 351.309(c)(ii), 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 is issued and published in accordance 
with section 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1) 
and 19 U.S.C 1677f(i)(1)).

    Dated: August 31, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-24141 Filed 9-8-98; 8:45 am]
BILLING CODE 3510-DS-M