[Federal Register Volume 64, Number 88 (Friday, May 7, 1999)]
[Notices]
[Pages 24582-24585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11575]


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DEPARTMENT OF COMMERCE

International Trade Administration
[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 and Partial Rescission 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, 1997 through 
December 31, 1997. 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, we will instruct 
the U.S. Customs

[[Page 24583]]

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: May 7, 1999.

FOR FURTHER INFORMATION CONTACT: Dana Mermelstein or Sean Carey, Office 
of AD/CVD Enforcement VI, Group II, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone 
(202) 482-0984 or (202) 482-3691, 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 11, 1998, the Department 
published a notice of ``Opportunity to Request Administrative Review'' 
(63 FR 42821) of this countervailing duty order. We received a timely 
request for review, and we initiated the review, covering the period 
January 1, 1997 through December 31, 1997, on September 29, 1998 (63 FR 
51893). In accordance with 19 CFR 351.213(b), this review covers only 
those producers or exporters of the 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 11 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 (1998).

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 
1997.

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) ruled 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

    Israel Chemicals Limited (ICL), the parent company which owns 100 
percent of Rotem's shares, was partially privatized in 1992, 1993, 
1994, and 1995. In this administrative review, the Government of Israel 
(GOI) and Rotem reported that additional shares of ICL were sold in 
1997. 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 
privatization, less than 0.5 percent of ICL shares were privatized. 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 1994 Final Results, 61 FR at 53352. 
However, we are applying this methodology to the 1997 partial 
privatization because 17 percent of ICL's shares were sold. This 
approach is consistent with our findings in the GIA and Department 
precedent under the URAA. See e.g., GIA, 58 FR at 37259; Certain Hot-
Rolled Lead and Bismuth Carbon Steel Products from the United Kingdom; 
Final Results of Countervailing Duty Administrative Review, 61 FR 58377 
(November 14, 1996); Final Affirmative Countervailing

[[Page 24584]]

Duty Determination: Certain Pasta from Italy, 61 FR 30288 (June 14, 
1996).

Grant Benefit Calculations

    To calculate the benefit for the POR, we followed the same 
methodology used in the final results of the 1996 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 Review, 63 FR 13626, 
13633 (March 20, 1998) (1995 Final Results).

Discount Rates

    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 an 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 1997 as the most appropriate 
discount rate. ICL's interest 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 (63 FR 
at 13633-4).

Analysis of Programs

I. Programs Conferring Subsidies

A. Encouragement of Capital Investments Law (ECIL)
    The 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 program limits the 
availability of grants 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.
    To calculate the total subsidy in the POR, we first summed the 
grant amounts allocated to and received in 1997, after taking into 
account the partial privatizations in 1992, 1993, 1995, and 1997. 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; we attributed 
grants to Rotem's green acid facility to total sales minus direct sales 
of phosphate rock; and, finally, we attributed grants to Rotem's IPA 
facilities to sales of IPA, MKP, fertilizers, and ``IPA-Akonomika'' and 
MKP-HCL (by-products of IPA production which contribute to Rotem's 
sales revenue). We summed the rates obtained on this basis, and 
preliminarily determine the net countervailable subsidy from this 
program to be 5.43 percent ad valorem for the POR.
B. 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 benefitted 
Rotem's total production. On this basis, we preliminarily determine the 
net countervailable subsidy from this program to be 0.22 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. Encouragement of Industrial Research and Development Grants 
(EIRD)
B. Environmental Grant Program
C. Reduced Tax Rates under ECIL
D. ECIL Section 24 loans
E. Dividends and Interest Tax Benefits under Section 46 of the ECIL
F. ECIL Preferential Accelerated Depreciation
G. Exchange Rate Risk Insurance Scheme
H. Labor Training Grants
I. 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, 1997 through December 31, 1997, we 
preliminarily determine the net subsidy for Rotem to be 5.65 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

[[Page 24585]]

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 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, 1997 through December 31, 1997, 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.
    These preliminary results are issued and published in accordance 
with sections 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: May 3, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-11575 Filed 5-6-99; 8:45 am]
BILLING CODE 3510-DS-P