[Federal Register Volume 64, Number 176 (Monday, September 13, 1999)]
[Notices]
[Pages 49464-49467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23040]


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DEPARTMENT OF COMMERCE

International Trade Administration


Final Results of Full Sunset Review: Sugar From the European 
Community

[C-408-046]
AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of Final Results of Full Sunset Review: Sugar From the 
European Community.

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SUMMARY: On April 26, 1999, the Department of Commerce (``the 
Department'') issued the preliminary results of full sunset review of 
the countervailing duty order on sugar from the European Community 
(``the EC'') (64 FR 20257) pursuant to section 751(c) of the Tariff Act 
of 1930, as amended (``the Act''). We provided interested parties an 
opportunity to comment on our preliminary results. We received comments 
filed on behalf of domestic interested parties. As a result of this 
review, the Department finds that revocation of the countervailing duty 
order would be likely to lead to continuation or recurrence of a 
countervailable subsidy. The net countervailable subsidy and the nature 
of the subsidy are identified in the ``Final Results of Review'' 
section of this notice.

For Further Information Contact: Scott E. Smith or Melissa G. Skinner, 
Office of Policy for Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th & Constitution, N.W., 
Washington, D.C. 20230; telephone: (202) 482-6397 or (202) 482-1560, 
respectively.

EFFECTIVE DATE: September 13, 1999.

Statute and Regulations

    This review was conducted pursuant to sections 751(c) and 752 of 
the Act. The Department's procedures for the conduct of sunset reviews 
are set forth in Procedures for Conducting Five-year (``Sunset'') 
Reviews of Antidumping and Countervailing Duty Orders, 63 FR 13516 
(March 20, 1998) (``Sunset Regulations'') and in 19 CFR Part 351 (1998) 
in general. Guidance on methodological or analytical issues relevant to 
the Department's conduct of sunset reviews is set forth in the 
Department's Policy Bulletin 98:3--Policies Regarding the Conduct of 
Five-year (``Sunset'') Reviews of Antidumping and Countervailing Duty 
Orders; Policy Bulletin, 63 FR 18871 (April 16, 1998) (``Sunset Policy 
Bulletin'').

[[Page 49465]]

Scope

    The merchandise subject to this countervailing duty order is sugar, 
with the exception of specialty sugars (e.g., cones, hats, pearls, 
loaves), from the European Community. Blends of sugar and dextrose, a 
corn-derived sweetener, containing at least 65 percent sugar are within 
the scope of this order. According to the final results of the 
Department's most recent administrative review, the merchandise subject 
to this order is currently classifiable under item numbers 1701.11.00, 
1701.12.00, 1701.91.20, and 1701.99.00 of the Harmonized Tariff 
Schedule of the United States (``HTSUS'') (see Sugar From the European 
Community; Final Results of Countervailing Duty Administrative Review, 
55 FR 35703 (August 31, 1990). In their substantive response, the 
domestic interested parties asserted that the merchandise subject to 
the order is currently classifiable under item numbers 1701.11.0025, 
1701.11.0045, and 1702.90.300 of the HTSUS. Although the HTSUS 
subheadings are provided for convenience and Customs purposes, the 
written description remains dispositive.

Background

    On April 26, 1999, the Department issued the Preliminary Results of 
Full Sunset Review: Sugar From the European Community (64 FR 20257). In 
our preliminary results, we found that revocation of the order would be 
likely to lead to continuation or recurrence of a countervailable 
subsidy. Further, we found the net countervailable subsidy likely to 
prevail if the order were revoked is 10.80 cents per pound, the subsidy 
from the original investigation. Finally, we found that, although 
qualifying as a countervailable export subsidy, Article 3 of the 
Subsidies Agreement did not apply to the export restitution payments 
program.
    On June 8, 1999, we received comments on behalf of the United 
States Beet Sugar Association and its individual members and the United 
States Cane Sugar Refiners' Association and its individual members 
(collectively ``the Associations''), within the deadline specified in 
19 CFR 351.309(c)(1)(i). We did not receive comments from respondent 
interested parties.

Comments

    Comment 1: The Associations assert that the Department's 
preliminary determination that revocation of the order would likely 
lead to continuation or recurrence of a countervailable subsidy was 
appropriate and should be maintained for the final results. The 
Associations further assert that the Department properly applied the 
relevant standards, and the record in the underlying sunset review 
cannot support any alternative conclusion.
    Department Position: We agree with the Associations. For the 
reasons enunciated in our notice of preliminary results (see 
Preliminary Results of Full Sunset Review: Sugar From the European 
Community, 64 FR 20257 (April 26, 1999)), we continue to find that 
revocation of the countervailing duty order would likely lead to 
continuation or recurrence of a countervailable subsidy.
    Comment 2: The Associations assert that the Department correctly 
concluded that the export restitution payments on European sugar 
constitute a countervailable subsidy. However, they argue that the 
Department incorrectly concluded that the subsidies are exempt from 
Articles 3 and 6 of the Subsidies Agreement.
    The Associations argue that the respondent foreign government and/
or industry bears the burden of demonstrating that the export subsidy 
program at issue is in conformance with the provisions of Part V of the 
Agreement on Agriculture before the Department may properly determine 
that the program is exempt from Articles 3, 5, or 6 of the Subsidies 
Agreement. Further, the Associations assert that the European 
Commission failed to place evidence on the record or set forth 
arguments supporting the proposition that the restitution payment 
system under the CAP conforms to Part V of the Agreement on 
Agriculture. The Associations assert that in their substantive response 
they had presented significant evidence that the sugar restitution 
payments under the CAP have repeatedly been found to violate GATT/WTO 
principles. Additionally, they assert that they had presented further 
evidence showing that it is likely that the European Union (``EU'') 
will be unable to meet its GATT/WTO commitments to reduce the levels of 
these export subsidies, in light of the increasing gap between the EU 
and world price of sugar and the likely accession of ten new member 
states to the EU in the near term.
    In conclusion the Associations argue that the EU's sugar export 
restitution payments most certainly constitute a prohibited 
countervailable subsidy, whether under Article 3 of the Subsidies 
Agreement or under Article 13(c) of the Agreement on Agriculture.
    Department's Position: We disagree with the Associations' assertion 
that the burden is on the respondent government and/or exporters to 
provide evidence demonstrating that the export subsidy program at issue 
is in conformance with the provisions of Part V of the Agreement on 
Agriculture before the Department may properly determine that the 
program is exempt from Articles 3, 5, or 6 of the Subsidies Agreement. 
While the provision of such evidence would certainly aid the Department 
in its determination, failure of the respondent government to provide 
such evidence does not preclude the Department from finding that the 
program is in conformance with the provisions of Part V of the 
Agreement on Agriculture.
    Further, we do not agree with the Associations that the evidence 
they presented regarding prior determinations is sufficient to find 
this program is a prohibited subsidy under the WTO Agreements. The 
Associations referred to prior determinations by Treasury, Commerce, 
the Commission, and the Canadian International Trade Tribunal, that 
export restitution payments under the CAP are countervailable 
subsidies. We agree that each of these determinations supports a 
finding that the program is a countervailable export subsidy; however, 
they do not address the question of whether the program is a prohibited 
export subsidy under the Subsidies Agreement. In addition, the 
Associations refer to the GATT Dispute Panel Report on Complaint by 
Brazil Concerning EC Refunds on Exports of Sugar (adopted November 10, 
1980) and the GATT Dispute Panel Report on Complaint by Australia 
Concerning EC Refunds on Exports of Sugar (adopted November 6, 1979). 
While both of these adopted Panel Reports held that the CAP sugar 
regime constitutes a form of subsidy subject to the provisions of 
Article XVI of the GATT, neither of these reports addresses the 
question of whether the program is in conformance with the provisions 
of Part V of the WTO Agreement on Agriculture.
    As to the Associations' assertions that falling world sugar prices 
and the pending application of ten new former Eastern bloc countries 
currently seeking admission to the EU make it, at best, uncertain 
whether the EU will be able to meet its commitments to reduce export 
subsidies, we find these allegations insufficient to support a finding 
that the program is not in conformance with Part V of the WTO Agreement 
on Agriculture.
    Article 13(c) of the Agreement on Agriculture states that export 
subsidies conforming to the provisions of Part V of the Agreement on 
Agriculture shall be exempt from actions based on Article

[[Page 49466]]

XVI of GATT 1994 or Articles 3, 5, and 6 of the Subsidies Agreement. 
Part V of the Agreement on Agriculture, specifically Articles 8 and 9, 
refers to the export subsidy commitments as specified in the Schedule 
of each Member. Nothing on the record suggests that the restitution 
payments on sugar do not conform to the commitments as reflected in the 
EU's Schedule. Therefore, we continue to find that, although qualifying 
as a countervailable export subsidy, Articles 3 and 6 of the Subsidies 
Agreement do not apply to the export restitutions payment program on 
sugar under the CAP.
    Comment 3: The Associations argue that the Department should make 
an upward adjustment to the net countervailable subsidy rate to arrive 
at a rate that represents the countervailing duty rate likely to 
prevail if the order is revoked. The Associations assert that the 
evidence set forth in their substantive response supports a net 
countervailable subsidy rate of 27.97 cents/pound of sugar and that 
even the data presented in the EC's response supports a net subsidy 
rate of 18.61 cents/pound of sugar. The Associations argue that, in the 
present case, because the investigation rate is based on data that is 
more than 20 years old and both domestic and foreign interested parties 
have provided the Department with more recent data establishing a 
current net subsidy rate of at least 18.61 cents/pound, there is 
sufficient cause for the Department to make an exception to the general 
rule of selecting the subsidy rate from the original investigation.
    In conclusion, the Associations request that the Department make an 
upward adjustment to the countervailing duty rate likely to exist in 
the event of revocation to reflect the current prevailing rate of 27.97 
cents/pound, or 18.61 cents/pound at a minimum.
    Department's Position: In sunset reviews, the Department is 
assigned the responsibility of providing to the International Trade 
Commission (``the Commission'') the magnitude of the net 
countervailable subsidy that is likely to prevail if the order is 
revoked. For purposes of determining whether revocation of a 
countervailing duty order would be likely to lead to continuation or 
recurrence of a countervailable subsidy, section 752(b)(1) of the Act 
directs the Department to consider the net countervailable subsidy 
determined in the investigation and subsequent reviews and whether any 
change in the program which gave rise to the net countervailable 
subsidy has occurred that is likely to affect that net countervailable 
subsidy. The Department noted in its Sunset Policy Bulletin that, 
consistent with the Statement of Administrative Action (``the SAA'') 
1 at 890, and the House Report 2 at 64, the 
Department normally will select a rate from the investigation, because 
that is the only rate that reflects the behavior of exporters and 
foreign governments without the discipline of an order in place (see 
section III.B.1 of the Sunset Policy Bulletin). Additionally, the 
Department noted that the rate from the investigation may not be the 
most appropriate if it was derived from a subsidy program which was 
found in a subsequent review to have undergone a program-wide change 
(see id. at section III.B.3).
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    \1\ H.R. Doc. No. 103-316, vol. 1 (1994).
    \2\ H.R. Rep. No. 103-826, pt. 1 (1994).
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    The Department defines ``program-wide change'' as a change that (1) 
is not limited to an individual firm or firms and (2) is effectuated by 
an official act, such as the enactment of a statute, regulation, or 
decree, or contained in the schedule of an existing statute, 
regulation, or decree.3
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    \3\ See 19 CFR 351.526 (1999), which although not applicable to 
this sunset review, nonetheless provides guidance on the 
Department's policy.
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    As described in numerous Federal Register notices regarding the 
underlying investigation and administrative reviews, export restitution 
payments made under the CAP are a means of guaranteeing sugar producers 
a stated export price for sugar (see e.g., Sugar From the European 
Community; Preliminary Results of Countervailing Duty Administrative 
Review, 55 FR 28799 (July 13, 1990)). Further, export restitution 
payments are only granted when the world price of sugar as established 
in international markets is lower than the ``threshold price'' 
established by the EC. Changes in the world market price are not 
effectuated by the EC. However, the ``threshold price,'' the amount of 
restitution payments to be provided, are determined by the EC, 
effectuated by regulation, and published in the Official Journal. As 
such, these changes constitute program-wide changes that the Department 
may consider in determining the net countervailable subsidy likely to 
prevail if the order were revoked.
    Therefore, in a change from our preliminary results, we agree with 
the Associations that the Department should determine the net 
countervailable subsidy likely to prevail were the order revoked based 
on more recent information. In its substantive response, the EC 
identified the average export refund for marketing years 1995/1996, 
1996/1997, and 1997/1998. In its substantive response, the Committee 
calculated a subsidy rate based on the export refund rate from October 
1998. Because, as the Committee argues, the world price of sugar has 
been declining since 1995, we determine that recent data would more 
closely approximate the level of subsidy if the order were revoked than 
would the subsidy levels from the original investigation or 
administrative reviews conducted in the early 1980's.
    We do not, however, agree with the Associations' suggestion that a 
rate based on an October 1998 announcement is the most appropriate. 
Over the 1995-1998 time period, the average export refund has varied 
from year to year and we do not have a basis to select one year over 
the other as the most probative rate. Because we must provide the 
Commission with the rate likely to prevail in the future based upon 
past experience, we have determined that an average of the marketing 
year refunds since the implementation of the WTO Agreement on 
Agriculture, as reported in the EC's response, is an appropriate 
representation of the net countervailable subsidy likely to prevail if 
the order were revoked. On this basis, we find that the net 
countervailable subsidy likely to prevail were the order revoked is 
23.69 cents per pound of sugar, the rate established by the record as 
reflecting recent trends in the level of export refunds.
    Comment 4: The Associations argue that the Department's 
determination to conduct a full sunset review is plainly inconsistent 
with its own regulations, and will have the effect of rendering the 
provision of 19 CFR 351.218(e)(3)(ii) meaningless in all countervailing 
duty sunset determinations going forward. Specifically, the 
Associations assert that none of the foreign respondent producers filed 
any substantive responses to the notice of initiation and, therefore, 
the Department should have determined that it did not receive adequate 
response since it did not have complete substantive responses from 
respondent interested parties accounting on average for more than 50 
percent of the total exports of the subject merchandise. Given that the 
legislative history contemplates that a response from the foreign 
government in addition to responses from the foreign industry 
respondents is essential to the sunset determination, foreign 
governments are not entitled to a full review where all of the industry 
participants that the government

[[Page 49467]]

presumably represents have failed to respond.
    In conclusion, the Associations argue that the Department should 
determine that a full review in this case was unnecessary and 
unwarranted.
    Department's Position: We disagree. The Department's regulations do 
not require that the Department conduct an expedited review. Rather, 
the regulations provide that the Department normally will conduct an 
expedited review where it does not receive adequate response, where 
adequate response is described as responses from parties accounting for 
more than 50 percent of the volume of exports over the five years 
preceding initiation of the sunset review. The Department must conduct 
an expedited sunset review of a countervailing duty order only when the 
foreign government does not participate.
    Unlike other countervailing duty investigations or reviews, where 
company-specific information is required in order to measure the amount 
of countervailable subsidy, the subsidy rate from the only program 
investigated over the life of this order has consistently been 
determined without the need for, or use of, company-specific 
information. Because adequacy determinations are made for the purpose 
of determining whether there is sufficient participation to warrant a 
full review, in a case such as this, where company-specific information 
provides no additional input into our determinations, we believe that 
requiring producer/exporter participation is not warranted. Therefore, 
in this sunset review, we continue to believe that the response of the 
EC forms an adequate basis for conducting a full review to determine 
whether revocation of the countervailing duty order on sugar from the 
EC will likely lead to continuation or recurrence of a countervailable 
subsidy and, if so, what the level of the net countervailable subsidy 
would be.

Final Results of Review

    As a result of this review, the Department finds that revocation of 
the countervailing duty order would be likely to lead to continuation 
or recurrence of a countervailable subsidy for the reasons set forth in 
the preliminary results of review. For the reasons set forth in the 
preliminary results of review, we continue to determine the country-
wide net countervailable subsidy in terms of cents per pound. However, 
for this final, we find the net countervailable subsidy likely to 
prevail if the order were revoked is 23.69 cents per pound. Although 
qualifying as a countervailable export subsidy, Articles 3 and 6 of the 
Subsidies Agreement do not apply to the export restitution payments 
program under the EC's CAP.
    This five-year (``sunset'') review and notice are in accordance 
with sections 751(c), 752, and 777(i)(1) of the Act.

    Dated: August 27, 1999.
Bernard T. Carreau,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-23040 Filed 9-10-99; 8:45 am]
BILLING CODE 3510-DS-P