NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-603]

Preliminary Affirmative Countervailing Duty Determination; Certain Fresh Cut Flowers From Canada

Monday, October 27, 1986

*37925 (Cite as: 51 FR 37925, *37925)

AGENCY: Import Administration, International Trade Administration, Commerce.

ACTION: Notice.

(Cite as: 51 FR 37925, *37925) SUMMARY: We preliminarily determine that benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to producers or exporters in Canada of certain fresh cut flowers (cut flowers) as described in the "Scope of Investigation" section of this notice. The estimated net subsidy is 0.52 percent ad valorem.

We have notified the U.S. International Trade Commission (the ITC) of our determination. We are directing the U.S. Customs Service to suspend liquidation of all entries of cut flowers from Canada that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, and to require a cash deposit or bond on entries of these products in the amount equal to the estimated net subsidy. If this investigation proceeds normally, we will make our final determination on or before January 5, 1987.

EFFECTIVE DATE: October 27, 1986.

FOR FURTHER INFORMATION CONTACT: Mary Martin or Barbara Tillman, Office of Investigations, Import Administration, International Trade Administration , U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone (202) 377-2830, or (202) 377-2438.

(Cite as: 51 FR 37925, *37925)

SUPPLEMENTAL INFORMATION:

Preliminary Determination

Based upon our investigation, we preliminarily determine that there is reason to believe or suspect that certain benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to producers or exporters in Canada of cut flowers. For purposes of this investigation, the Ontario Greenhouse Energy Efficiency Incentives program is preliminarily found to confer a subsidy. We preliminarily determine the estimated net subsidy to be 0.52 percent ad valorem.

Case History

On May 21, 1986, we received a petition in proper form from the Floral Trade Council filed on behalf of the U.S. industry producing cut flowers. In compliance with the filing requirements of § 355.36 of the Commerce Regulations (19 CFR 353.36), the petition alleged that producers or exporters in Canada of cut flowers receive, directly or indirectly, benefits which

(Cite as: 51 FR 37925, *37925)

constitute subsidies within the meaning of section 701 of the Act.

We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on June 10, 1986, we initiated an investigation (51 FR 21953, June 17, 1986). We stated that we expected to issue a preliminary determination on or before August 14, 1986. On June 25, 1986, the Floral Trade Council, petitioner, requested a full extension of the period within which a preliminary countervailing duty determination must be made pursuant to section 703(c)(1)(A) of the Act. On July 3, 1986, we issued a notice of postponement stating that the preliminary determination would be made on or before October 20, 1986 (51 FR 25084, July 10, 1986).

Since Canada is a "country under the Agreement" within the meaning of section 701(b) of the Act, the ITC is required to determine whether imports of the subject merchandise from Canada materially injure, or threaten material injury to, a U.S. industry. On July 7, 1986, the ITC determined that there is a reasonable indication that an industry in the United States is materially injured by reason of imports of cut flowers from Canada (51 FR 25751, July 16, 1986). On June 20, 1986, we presented a questionnaire to the Government of Canada in Washington, DC, concerning petitioner's allegations. On July 10, 1986, *37926

(Cite as: 51 FR 37925, *37926)

we received a letter from the Canadian Embassy in Washington,

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DC, requesting an extension of thirty days for the filing of the questionnaire responses. An extension until August 11, 1986, was granted by the Department. We received the government response on August 11, 1986, and the company responses on September 4, 1986. Additional information was supplied on September 26 and 29 and October 17, in response to a Department of Commerce letter dated September 12, 1986.

Scope of Investigation

The products covered by this investigation are fresh cut miniature (spray) carnations, currently provided for in item 192.17 of the Tariff Schedules of the United States (TSUS), and standard carnations, currently provided for in item 192.21 of the TSUS.

Analysis of Programs

Throughout this notice we refer to certain general principles applied to the facts of the current investigation. These general principles are described in the "Subsidies Appendix" attached to the notice of Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina: Final Affirmative Countervailing Duty Determination and Countervailing Duty Order (49 FR 18006, April 26, 1984).

(Cite as: 51 FR 37925, *37926)

Consistent with our practice in preliminary determinations, when a response to an allegation denies existence of a program, receipt of benefits under a program, or the eligibility of a company or industry under a program, and the Department has no persuasive evidence showing that the response is incorrect, we accept the response for purposes of the preliminary determination. All such responses are subject to verification. If the response cannot be supported at verification, and the program is otherwise countervailable, the program will be considered a subsidy in the final determination.

For purposes of this preliminary determination, the period for which we are measuring subsidies (the review period) is calendar year 1985. Based upon our analysis of the petition and the responses to our questionnaire, we preliminarily determine the following:

I. Programs Preliminarily Determine To Confer a Subsidy

We preliminarily determine that subsidies are being provided to producers or exporters in Canada of cut flowers under the following program:

Ontario Greenhouse Energy Efficiency Program (GEEP)

Pursuant to section 5 of the Ministry of Agriculture and Food Act, the

(Cite as: 51 FR 37925, *37926)

Government of Ontario created the Ontario GEEP. The purpose of this program is to make grants to greenhouse growers by contributing to the capital cost of retrofitting existing greenhouses in Ontario with certain energy-saving equipment and materials.

An individual, partnership or corporation may be eligible for a grant from this program if the applicant is in the business of growing food or ornamentals in greenhouses on land owned by the applicant in Ontario. The grower must live in the province, and have a minimum gross income of $12,000 (from the sale of food or ornamentals produced in the greenhouses) in the 12 months immediately preceding the date of application, and not receive a grant for the project under any other Provincial or Federal Government Program.

Under the terms of the program, growers may receive grants of one-third of the capital costs of one or more of the projects. According to the responses, both of the respondents received grants under this program.

Since Ontario GEEP grants are made only to producers growing food or ornamentals in greenhouses, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, within the meaning of section 771(5)(B) of the Act. To calculate the benefit from this program, we used our grant methodology and allocated the grants received over 10 years (the average useful life of agricultural assets). We used as the discount rate the long-term corporate

(Cite as: 51 FR 37925, *37926)

bond rate in Canada, as published by the Bank of Canada. We divided the value of the benefits by the value of sales of Canadian cut flowers and calculated an estimated net subsidy of 0.52 percent ad valorem.

II. Programs Preliminarily Determined Not To Confer Subsidies

We preliminarily determine that the Government of Canada is not providing subsidies to producers or exporters of cut flowers under the following programs:

Farm Improvement Loans

Canada's Farm Improvement Loan Act of 1945 provides intermediate-term and short-term credit to farmers for a wide range of farm improvement projects by authorizing the Ministry of Agriculture to guarantee term loans made to farmers by chartered banks, Alberta Treasury branches, and other lenders designated by the Minister.

The Government of Canada's response states that this loan guarantee program is available to the entire agricultural sector. Furthermore, given the similarities between this program and the farm loan programs found not to be countervailable in the Final Affirmative Countervailing Determination: Live

(Cite as: 51 FR 37925, *37926)

Swine and Fresh, Chilled and Frozen Pork Products from Canada (50 FR 25097, June 17, 1985), we preliminarily determine that this program is not limited to a specific enterprise or industry, or group of enterprises or industries.

III. Programs Preliminarily Determined Not To Be Used

We preliminarily determine that the producers or exporters in Canada of cut flowers did not use the following programs:

A. Federal Programs

1. Investment Tax Credit (ITC)

Petitioner alleges that the Canadian producers/ exporters of the product under investigation received countervailable benefits from investment tax credits (ITC) available in Canada. The responses indicate that the two companies did not use the investment tax credit.

2. Program for Export Market Development (PEMD)

Petitioner alleges that the Canadian producers/exporters of certain fresh cut

(Cite as: 51 FR 37925, *37926)

flowers receive countervailable benefits from PEMD. PEMD is available to businesses in the agricultural sector for the purpose of developing, increasing, and sustaining new or existing export markets. Assistance is in the form of interest free loans with repayment terms dependent upon the success of the export promotion activity.

The responses indicate that the two companies did not benefit from this program during the review period.

3. Promotional Projects Program (PPP)

The PPP is the funding vehicle through which the government underwrites some of the cost to industry of participating in promotional events that are organized by the Department of External Affairs. The program encompasses trade fairs abroad, trade missions and trade visitors.

The responses indicate that the companies under investigation did not benefit from this program.

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B. Joint Federal-Provincial Programs

1. Agricultural and Rural Development Agreements (ARDA)

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Under ARDA, the federal and provincial governments entered into agreements to promote economic development and to alleviate conditions of social and economic disadvantage in certain rural areas. The focus of these agreements was alternative land use, soil and water conservation, and economic development in rural regions. The responses indicate that the companies under investigation have not received any benefits from any ARDA.

2. General Development Agreements (GDA)

GDAs provided the legal basis for departments of the federal and provincial governments to cooperate in the establishment of economic development programs. The responses indicate that the companies under investigation have not received any benefits under GDA or any subsidiary agreement.

3. Economic and Reqional Development Aqreements (ERDA)

Similar to the GDAs, and essentially a continuation of these agreements. ERDA subsidiary agreements establish programs, delineate administrative procedures and set forth the relative funding commitments of the federal and provincial governments. This assistance is directed to infrastructure projects of

(Cite as: 51 FR 37925, *37927)

productivity-enhancing initiatives.

The responses indicate that the companies under investigation have received no benefits from ERDA.

4. Crop Insurance

There are both joint federal-provincial and provincial crop insurance programs in Canada. Under the joint federal-provincial programs, the federal government makes financial contributions to the province of either 50 percent of the administrative cost plus 25 percent of the insurance premiums, or 50 percent of the premiums with no contribution to the administrative costs. Petitioner alleges that joint federal-provincial programs are available in Ontario and British Columbia. The Government of Canada response states that floricultural products are not covered by the federal-provincial crop insurance program.

C. Provincial Programs

1. Ontario Development Corporation (ODC)

The ODC controls, approves and administers loan and loan guarantee programs,

(Cite as: 51 FR 37925, *37927)

including a program of export support loans. The responses indicate that neither of the companies received assistance under this program.

2. Provincial Crop Insurance

Petitioner alleges that producers/exporters of the subject merchandise from Canada may receive benefits from provincial crop insurance programs similar to the one established, and found countervailable in Quebec.

The respondents in this investigation are located in Ontario and the Government of Ontario has stated in its response that floriculture crops, including the subject merchandise, are not eligible for the Crop Insurance Program.

3 Alberta Beginning Farmer Assistance Program.

Petitioners allege that loans at preferential rates are made to beginning farmers in Alberta.

The respondents in this investigation are Ontario-based businesses and, therefore, ineligible to receive benefits or participate in this program.

4. British Columbia Greenhouse Farm Income Insurance Program

(Cite as: 51 FR 37925, *37927)

Under the British Columbia Greenhouse Farm Insurance Plan, participants are eligible for financial assistance when average farm prices fall below a benchmark cost of production figure.

Because neither of the company respondents are located in British Columbia, we preliminarily determine that this program was not used.

5. British Columbia Agricultural Land Development Assistance

Administered under the British Columbia Agricultural Credit Act, this program provides long-term loans on terms inconsistent with commercial considerations to make permanent improvements to land classified as "farmland."

Because neither of the company respondents are located in British Columbia, we preliminarily determined this program was not used.

IV. Program for Which We Need Additional Information

For the following program, the information submitted by respondents is insufficient to determine if a subsidy has been provided to producers or exporters in Canada of cut flowers. Therefore, we determine that additional information is needed on the following program.

(Cite as: 51 FR 37925, *37927)

1. Ontario Farm Tax Reduction Program

In the examination of the questionnaire responses submitted by the respondents in this investigation, the Department discovered a tax credit taken by one of the responding parties. The use of the tax credit was confirmed by the Canadian Embassy in response to Department inquiries. The Department will investigate further the deduction used and determine whether the producers/exporters of cut flowers are receiving any benefits under the Ontario Farm Tax Reduction Program. The Ontario Farm Tax Reduction Program was created by Order-in-Council No. 2264/83 to provide a rebate of 60 percent of municipal property taxes on farmland to all eligible farmers in Ontario. For a farm property to be eligible, annual municipal property taxes must be at least Can$20, and the farm must realize a gross annual production of Can$5,000 if located in eastern or northern Ontario, and Can$8,000 if located elsewhere in the province.

In Live Swine and Fresh, Chilled and Frozen Pork Products from Canada (50 FR 15097, June 17, 1985), this program was determined to be a regional subsidy within the province of Ontario and countervailable, because the eligibility criteria of the program varies depending upon the location of the farm in the province.

(Cite as: 51 FR 37925, *37927)

Suspension of Liquidation

In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of cut flowers from Canada which are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register, and to require a cash deposit or bond for each entry of this merchandise equaI to 0.52 percent ad valorem. This suspension will remain in effect until further notice.

Verfication

In accordance with section 776(a) of the Act, we will verify the information used in making our final determination.

ITC Notification

In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all privileged and proprietary information in

(Cite as: 51 FR 37925, *37927)

our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the *37928

(Cite as: 51 FR 37925, *37928)

Deputy Assistant Secretary for Import Administration.

If our final determination is affirmative, the ITC will determine whether these imports materially injure, or threaten material injury to, a U.S. industry within 45 days after the Department makes its final determination.

Public Comment

In accordance with § 355.35 of the Commerce Regulations, (19 CFR 355.35), we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination at 2:00 p.m. on December 8, 1986, at U.S. Department of Commerce, Room 3708, 14th Street and Constitution Avenue NW., Washington, DC 20230. Individuals who wish to participate in the hearing must submit a request to the Deputy Assistant Secretary for Import Administration, Room B-099, at the above address within ten days after publication of this notice in the Federal Register. Requests should contain: (1) The party's name, address, and telephone number; (2) the number of participants; (3) the reason for attending; and (4) a list of the issues to be discussed. In addition ten copies of the proprietary version and

(Cite as: 51 FR 37925, *37928)

seven copies of the nonproprietary version of the pre-hearing briefs must be submitted to the Deputy Assistant Secretary by December 1, 1986. Oral presentations will be limited to issues raised in the briefs.

In accordance with 19 CFR 355.33(d) and 19 CFR 355.34, written views will be considered if received not less than 30 days before the final determination is due or, if a hearing is held, within ten days after the hearing transcript is available.

This determination is published pursuant to section 733(f) of the Act [19 U.S.C.1673b(f)].

Gilbert B. Kaplan,

Deputy Assistant Secretary for Import Administration.

October 20, 1986.

[FR Doc. 86-24175 Filed 10-24-86; 8:45 am]

BILLING CODE 3510-DS-M