[Federal Register Volume 65, Number 26 (Tuesday, February 8, 2000)]
[Notices]
[Pages 6163-6166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2852]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-508-605]


Final Results of Full Sunset Review: Industrial Phosphoric Acid 
From Israel

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

ACTION:  Notice of final results of full sunset review: Industrial 
phosphoric acid from Israel.

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SUMMARY:  On September 27, 1999, the Department of Commerce (``the 
Department'') published in the Federal Register (64 FR 51954) the 
preliminary results of the full sunset review of the countervailing 
duty order on industrial phosphoric acid from Israel 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 and received comments filed on behalf of domestic 
and respondent 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: Kathryn B. McCormick 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) 482-1930 or (202) 482-
1560, respectively.

Effective Date:  February 8, 2000.

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 (1999) 
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'').

Scope

    This order covers shipments of industrial phosphoric acid (``IPA'') 
from Israel. According to the final results of the Department's most 
recent administrative review, the merchandise subject to this order is 
currently classifiable under item number 2809.20.00 of the Harmonized 
Tariff Schedule of the United States (``HTSUS''). \1\ Although the 
HTSUS subheading is provided for convenience and customs purposes, the 
written description remains dispositive.
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    \1\ See Industrial Phosphoric Acid from Israel: Final Results 
and Partial Recission of Countervailing Duty Administrative Review, 
64 FR 49460 (September 12, 1999).
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Background

    On September 27, 1999, the Department published in the Federal 
Register the Preliminary Results of Full Sunset Review: Industrial 
Phosphoric Acid from Israel (64 FR 51954). 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 to be 10.93 percent for Haifa Chemicals Ltd. (``Haifa'') 
and 5.97 percent for ``all others.''
    On November 16, 1999, we received a case brief on behalf of 
Albright and Wilson Americas Inc., FMC Corporation, and Solutia Inc. 
(collectively, ``domestic interested parties''), within the deadline 
specified in 19 CFR 351.309(c)(1)(i). We also received a case brief on 
behalf of the Government of Israel (``GOI'') and Rotem Amfert Negev 
Ltd. (``Rotem'') (collectively, ``respondent interested parties''). On 
November 23, 1999, within the deadline specified in 19 CFR 351.309(d), 
the Department received rebuttal comments from domestic and respondent 
interested parties. We have addressed the comments below.
    Although the deadline for this determination was originally January 
25, 2000, due to the Federal Government shutdown on January 25 and 26, 
2000, resulting from inclement weather, the timeframe for issuing this 
determination has been extended by three days.

Comments

Comment 1

    The domestic interested parties assert that the Department 
correctly concluded in its preliminary results that revocation of the 
order would likely lead to continuation or recurrence of a 
countervailable subsidy, and further, that this conclusion is 
appropriate for the final results in light of the results in the 
recently completed eleventh administrative review (see November 16, 
1999, Case Brief of domestic interested parties at 5).
    The respondent interested parties argue that, because of a recent 
WTO interim panel determination that privatization extinguishes prior 
non-recurring subsidies, \2\ and because the Department has verified in 
the last several reviews the GOI's intention to fully privatize Rotem, 
the Department should reconsider its preliminary results and find that 
revocation of the order on Rotem will not lead to continuation of their 
benefits from subsidies (see November 16, 1999, Case Brief of 
respondent interested parties at 2). They claim that, whereas the 
privatization of Rotem was 68.48 percent complete as of the last 
administrative review, today, it is approximately 98 percent complete. 
Id. Therefore, the Department's calculation of the countervailing duty 
applicable to Rotem, which assumes that most prior, non-recurring 
subsidies are passed through to the new owners, is contrary to the WTO 
dispute panel determination. Id.
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    \2\ See October 8,1999, ``WTO Interim Panel Finds Against U.S. 
CVD Rules on Privatization,'' 17 Inside U.S. Trade No. 140 at 4.
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    In rebuttal, the domestic interested parties argue that the WTO 
finding noted by respondent interested parties is neither relevant nor 
binding, and there is no reason why the Department should alter its 
reasoning as a result of an unadopted interim panel report with no 
legal status in U.S. domestic proceedings (see November 23, 1999, 
Rebuttal of Case Brief of domestic interested parties at 2). Further, 
they argue that the report apparently concludes that the United States 
should not assume, in an administrative review, that the sale of a 
company to private bidders automatically terminates the subsidies the 
company received when it was government-owned, and that the United 
States should recalculate anew

[[Page 6164]]

any countervailable subsidies received after privatization. Id. at 3. 
Therefore, the domestic interested parties assert that were the interim 
report adopted, its relevance to a sunset review would be unclear, and 
the Department still would be free to conclude, in a sunset review, 
that subsidization would be likely to continue or recur.

Department's Position

    We disagree with the respondent interested parties that the WTO 
interim panel finding requires the Department to alter its approach to 
privatization in the instant case and revise its preliminary 
determination of likelihood. The domestic interested parties are 
correct in noting that, because the final panel report has not been 
adopted by the Dispute Settlement Body, the United States has no 
obligation with respect to the report. As the report has not been 
adopted, it is premature to consider what obligations, if any, the 
panel report may impose on the United States.
    Even if it were not premature for the Department to reconsider our 
approach to privatization in light of the panel report, and it were 
otherwise appropriate to do so, 19 U.S.C. Sec. 3533(g)(1) provides that 
a regulation or practice may not be amended, rescinded, or otherwise 
modified in the implementation of such report unless and until very 
specific statutorily mandated actions have been fulfilled and the 
appropriate congressional committees have been consulted. Thus, we 
continue to determine that a portion of subsidies bestowed on a 
government-owned company prior to privatization continues to benefit 
the production of the privatized company.

Comment 2

    The domestic interested parties agree with the Department's method 
of adjusting the original net subsidies to reflect new and terminated 
programs, and increased usage of a program. Further, they agree with 
the rates selected by the Department to report to the Commission for 
Rotem and Haifa (see November 16, 1999, Case Brief of domestic 
interested parties at 6-7).
    Respondent interested parties assert that, should the Department 
maintain its position that subsidization will continue, then it must 
revise the magnitude of the margin in the preliminary results to 
reflect the Department's findings in the most recent review. The 
respondent interested parties reassert that the Department's 
methodology with respect to privatization of previously subsidized 
companies is contrary to the WTO dispute panel determination holding 
that the Department is in violation of the WTO Subsidies Agreement (see 
November 16, 1999, Case Brief of respondent interested parties at 2). 
Thus, they argue, the Department should adjust its calculation of the 
countervailing duty for Rotem. Id. Respondent interested parties add 
that should the Department find that it can take into account only the 
level of privatization as of the most recently completed administrative 
review, then the Department should still recalculate the rate using the 
privatization level of 68.48 percent to reflect that review. Therefore, 
the Department should report to the Commission a rate of 1.88 percent 
for Rotem (5.97-(0.6848*5.97 = 1.88%). Id. at 3.
    Accordingly, the Department should adjust the Encouragement of 
Capital Investments Law (``ECIL'') Grants benefits from 5.58 percent to 
the 5.43 percent from the most recent review. Id at 3. Further, the 
subsidy of 0.11 percent from the Environmental Grants Program was 
expensed entirely by the Department in the 1996 review and was found 
not to be used in the 1997 review; therefore, the Department should not 
include the program in its calculations. Finally, the Department should 
find no benefit from Long-Term Industrial Development (``LTID'') Loans 
because, as verified in the original investigation, all loans were 
terminated in 1985 and any loan taken in 1985 would be fully repaid ten 
years later, in 1995. Thus, no benefits from this program were found in 
the results of the 1996 review.
    In summary, the respondent interested parties assert that the 
calculation of the likely level of subsidization for Rotem should 
exclude two programs, Environmental Grants Program and LTID Loans, and 
reduce the subsidy from ECIL Grants benefits from 5.58 percent to 5.43 
percent. Thus, according to respondent interested parties, the 
Department should adjust its calculations to include: (1) 5.43 percent 
from the ECIL Grants; (2) 0.18 percent from the Infrastructure Grant 
Program; and (3) 0.04 percent from the Encouragement of Research and 
Development Law (``EIRD'') Grants, for a net subsidy of 5.65 percent.
    In rebuttal, the domestic interested parties reassert that the 
Department's calculation of the net countervailable subsidy for Rotem 
reflects the Department's standard methodology of presuming that the 
rate calculated in the original investigation is the best indicator of 
the behavior of exporters and foreign governments without the 
discipline of the order in place (see November 23, 1999, Rebuttal Brief 
of domestic interested parties at 4). Further, the domestic interested 
parties reassert that the Department's adjustments to the original 
subsidy rate fall well within the Department's discretion. Id.

Department's Position

    The Department agrees, in part, with the respondent interested 
parties' argument. We agree that, in the original investigation, the 
Department found the LTID Loans program was terminated in 1985. The 
Department, nonetheless, included an estimated subsidy from the program 
on the basis that loans taken prior to termination of the program would 
continue to provide countervailable benefits. Loans taken in 1985 would 
not be fully repaid until ten years later; after 1995, there would be 
no benefits conferred by this program. In the 1996 review, the GOI 
stated that the LTID Loan program was terminated in 1985 and had not 
been reinstated. Accordingly, in the 1996 review and all subsequent 
reviews, the Department found the program ``not used'' and that Rotem 
did not hold any outstanding loans from this program.
    We disagree with the respondent interested parties' argument that 
we should eliminate the benefits from the Environmental Grants Program 
from our calculation of the net subsidy. The Department has not found 
the program terminated in any administrative reviews. Without such 
Department determination, consistent with the Sunset Policy Bulletin, 
we find that this program continues to exist and may provide benefits 
in the future. Therefore, we will continue to include a benefit in our 
calculation of the rate to report to the Commission.
    We disagree with the respondent interested parties' assertion that 
we erred in selecting a benefit from the 1996 administrative review of 
5.58 percent for the ECIL Grant program on the basis that the 1997 
administrative review (with the rate of 5.43 percent) reflects the 
results of the Department's most recent review. While the final results 
of our 1997 administrative review, which was issued after the deadline 
for submitting comments for our preliminary results, were not addressed 
by interested parties in pre-preliminary comments, we do not agree that 
our policy is to select the benefit rates from the most recently 
completed review. Rather, as noted in section III.B.3(d) of the Sunset 
Policy Bulletin, where the Department has conducted an administrative 
review of an order and determined to increase the net countervailable 
subsidy rate for any reason, the Department may adjust the net 
countervailable subsidy rate determined in the original investigation 
to reflect the increase in the rate. In our preliminary results we 
stated that

[[Page 6165]]

because, over the life of the order, there has been a consistent 
pattern of increased usage of the grants provided by this program, we 
determined that the rate for this program from the original 
investigation should be adjusted to reflect this increased usage. While 
the reduction in the rate from the 1996 to 1997 administrative review 
reflects a decrease in the benefits from the previously bestowed 
grants, it does not necessarily reflect the behavior of the exporters 
and foreign government without the discipline of the order. The ECIL 
Grant program continues to exist and grants continue to be available. 
Therefore, we continue to determine that the history of increased usage 
of this program makes it appropriate that the Department select a more 
recently calculated rate that reflects the increased usage of this 
program. Therefore, we will continue to add the benefit as determined 
in the 1996 administrative review to determine the net countervailable 
subsidy likely to prevail.
    Therefore, the Department will not include benefits from LTID Loans 
in the net countervailable subsidy. With respect to the ECIL Grants, 
the Department will continue to use the rate of 5.58 percent from the 
preliminary results for Haifa and ``all others.''

Comment 3

    The respondent interested parties argue that the Department should 
not report a higher rate for Haifa than the rate it will report for 
Rotem. Specifically, the rate for the LTID Loans program should be 0.00 
percent instead of 5.02 percent because, as noted above, the LTID Loans 
program was terminated in 1985, and any residual benefits from the 
program ended in 1995, after all ten-year loans were repaid (see 
November 16, 1999 Case Brief of the respondent interested parties at 
7). Further, the respondent interested parties note that the Department 
has used Rotem's rates for all other programs to determine Haifa's 
overall rate. Therefore, should the Department disagree with a rate of 
zero for the LTID Loans, then the rate for this program for Haifa 
should still be no greater than 0.06 percent, Rotem's rate for this 
program. Id. at 7.
    In rebuttal, the domestic interested parties contend that the 
Department has no information indicating that Haifa did not obtain LTID 
Loans or that it has not received residual benefits from such loans in 
later years (see November 23, 1999, Rebuttal Brief of domestic 
interested parties at 6). Thus, there is no basis for a downward 
adjustment to Haifa's net countervailable subsidy. Additionally, they 
reassert that the original rate is the most accurate predictor of 
Haifa's actions were the order revoked and the Department should not 
recalculate this rate for its final results. Id. at 7.

Department's Position

     The Department agrees with the respondent interested parties. As 
noted above, we determined in the original investigation that the 
program was terminated in 1985, but that benefits from loans granted 
under the LTID Loans program would be conferred through 1995. Further, 
we found the program to be not used in the administrative reviews since 
1996. Therefore, we will not include the benefits from this terminated 
program in our calculation of the net subsidy likely to prevail. With 
respect to the respondent interested parties assertion that the 
Department has used Rotem's rates for all other programs to determine 
Haifa's overall rate, two programs, the Infrastructure Grant Program 
and the Environmental Grant Program, were not included in the original 
investigation. The third program, EIRD Grants conferred the same 
benefits on Haifa and ``all others'' in the final determination. 
Therefore, the Department, in each instance, has used the only 
available rates to determine Haifa's net subsidy.

Comment 4

    The domestic interested parties agree with the Department's 
description of the information it intends to provide to the Commission 
with respect to the nature of the subsidies found and their 
categorization (whether the subsidy is a subsidy described in Article 3 
or 6.1) under the WTO Subsidies Agreement (see November 16, 1999, Case 
Brief of domestic interested parties at 9). Specifically, they agree 
that the Bank of Israel Export Loans would fall under Article 3 of the 
Subsidies Agreement. Further, domestic interested parties assert that 
the remaining subsidies are actionable subsidies under Article 5 of the 
Subsidies Agreement, which defines an actionable subsidy as one that is 
``specific'' within the meaning of Articles 1 and 2 of the Agreement, 
and causes adverse effects to the interests of other WTO members. Id. 
at 9. Finally, the domestic interested parties note that, of the eleven 
administrative reviews of the order, a net countervailing subsidy 
exceeding five percent was found in all but one (the 1992 review). Id. 
at 11. Accordingly, it is reasonable to assume that these programs 
continue to exist and are utilized, and that the Department is 
justified in reporting to the Commission that these subsidies 
constitute ``serious prejudice'' to the interests of the United States 
under Article 6.1 of the Subsidies Agreement.
    In their rebuttal brief, respondent interested parties agree with 
the Department's approach of providing the

[[Page 6166]]

Commission with ``descriptions'' of the nature of the subsidy (see 
November 23, 1999, Rebuttal Brief of the respondent interested parties 
at 2). However, with respect to the Bank of Israel Export Loans, they 
assert that, because the Department found in the original investigation 
that the loans were no longer at preferential rates, the program's 
consistency with the Subsidies Agreement is irrelevant. Id. at 3.
    With respect to the other programs, respondent interested parties 
contend that, even as measured by the Department's methodology, the 
other programs will not exceed the five percent threshold of Article 6 
of the Subsidies Agreement in future reviews. First, of the six 
subsidies mentioned in the Preliminary Results other than the Bank of 
Israel Export Loans, three are not relevant: The LTID Loans and the 
Exchange Rate Risk Insurance Scheme (``ERIS'') have been terminated, 
and the Environmental Grant Program was used only one time and provides 
no residual benefits. Id. All the other programs combined i.e., the 
ECIL Grants, EIRD Grants, and Infrastructure Grant Program will not 
exceed five percent in the future. Id. at 3-4. This is because ECIL and 
infrastructure grants are diminishing, both as a result of their 
allocation over time and as a result of the fact that any new grants 
have been minimal. Additionally, further privatization of Rotem, from 
about 31 percent government ownership to about two percent, will 
significantly reduce the residual subsidization from prior grants. Id. 
at 4.

Department's Position

    The Department agrees with the respondent interested parties' 
assertion that descriptions of the Bank of Israel Export Loans, LTID 
Loans, and ERIS should not be included in the nature of the subsidy 
section because these programs were found to be terminated. However, as 
noted above, the Department has not found the Environmental Grant 
Program to be terminated. Therefore, we will revise the descriptions of 
the nature of the subsidies from these programs.
    Additionally, as we noted in our preliminary results, we do not 
have information with which to calculate the net countervailable 
subsidy in accordance with Annex IV of the Subsidies Agreement, nor do 
we believe it appropriate to attempt such a calculation in the course 
of a sunset review.

Nature of the Subsidy

    In the Sunset Policy Bulletin, the Department states that, 
consistent with section 752(a)(6) of the Act, the Department will 
provide to the Commission information concerning the nature of the 
subsidy, and whether the subsidy is a subsidy described in Article 3 or 
Article 6.1 of the Subsidies Agreement.
    Although the programs conferring benefits do not fall within the 
definition of an export subsidy under Article 3.1(a) of the Subsidies 
Agreement, they could be found to be inconsistent with Article 6 if the 
net countervailable subsidy exceeds five percent, as measured in 
accordance with Annex IV of the Subsidies Agreement. The Department, 
however, has no information with which to make such a calculation, nor 
do we believe it appropriate to attempt such a calculation in the 
course of a sunset review. Rather, we are providing the Commission with 
the following program descriptions.
    The Encouragement of Capital Investments Law (ECIL) Grants. In the 
1987 original investigation, the Department found that Negev 
Phosphates, Ltd. (``Negev'') and Haifa Chemicals, Ltd. received 
countervailable subsidies from this program, the benefits of which 
depend on the geographic location of the eligible enterprises. ECIL 
Grants were found to confer subsidies in each subsequent administrative 
review.
    Encouragement of Research and Development Law (``EIRD'') Grants. 
Israeli manufacturers, producers or exporters of IPA may benefit from 
research and development grants under this program. With the exception 
of the 1988, 1989 and 1991 administrative reviews, the Department found 
the EIRD Law Grants to be countervailable in each yearly review since 
the issuance of the order.
    Infrastructure Grant Program. In the administrative review of the 
1996 period, the Department found that this program enables the GOI to 
establish new industrial areas by partially reimbursing companies for 
their costs of developing the infrastructure in certain geographical 
zones.
    Environmental Grant Program. Additionally, in the 1996 
administrative review, the Department found that the GOI administers 
this countervailable subsidy program to provide financial assistance 
for the adaptation of existing industrial facilities to new 
environmental requirements.

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 final results of review. As discussed more fully above, we will 
adjust our calculations of the net subsidy to reflect the termination 
of the LTID Loans program on the rates listed below:

------------------------------------------------------------------------
                                                                Margin
                   Manufacturer/Exporter                      (Percent)
------------------------------------------------------------------------
Haifa, Ltd.................................................         5.91
All Others.................................................         5.91
------------------------------------------------------------------------

    This notice serves as the only 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 CFR 351.305 of the Department's regulations. 
Timely notification of return/destruction of APO material 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 five-year (``sunset'') review and notice are in accordance 
with sections 751(c), 752, and 777(i)(1) of the Act.

    Dated: January 28, 2000.
Holly A. Kuga,
Assistant Secretary for Import Administration.
[FR Doc. 00-2852 Filed 2-7-00; 8:45 am]
BILLING CODE 3510-DS-P