NOTICES
DEPARTMENT OF COMMERCE
[C-122-603]
Final Affirmative Countervailing Duty Determination; Certain Fresh Cut Flowers From Canada
Tuesday, January 20, 1987
*2134
(Cite as: 52 FR 2134, *2134)
AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We determine that benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to producers or
(Cite as: 52 FR 2134, *2134)
exporters in Canada of certain fresh cut flowers (cut flowers) as described in the "Scope of Investigation" section of this notice. We are not including Unsworth Greenhouses Ltd. (Unsworth) in our countervailing duty determination because Unsworth received no benefits during the review period. The estimated net subsidy is 1.47 percent ad valorem for all other producers or exporters in Canada of cut flowers.
We have notified the U.S. International Trade Commission (the ITC) of our determination. We are directing the U.S. Customs Service to continue to suspend liquidation of all entries of cut flowers from Canada, except for entries of cut flowers produced by Unsworth, that are entered, or withdrawn from warehouse, for consumption, and to require a cash deposit or bond on entries of this merchandise in an amount equal to the estimated net subsidy.
EFFECTIVE DATE: January 20, 1987.
FOR FURTHER INFORMATION CONTACT: Mary Martin, Barbara Tillman, or Ross Cotjanle, 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, (202) 377-2438, or (202) 377-3534.
(Cite as: 52 FR 2134, *2134)
SUPPLEMENTARY INFORMATION:
Final Determination
Based upon our investigation, we determine 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 program is found to confer a subsidy.
We determine the estimated net subsidy to be 1.47 percent ad valorem for all producers or exporters of cut flowers in Canada, except Unsworth Greenhouses Ltd. (Unsworth). Unsworth is not included in this countervailing duty determination because it received no benefits during the review period.
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 section 355.26 of the Commerce Regulations (19 CFR 355.26), the petition alleged that producers or exporters
(Cite as: 52 FR 2134, *2134)
in Canada of cut flowers receive, directly or indirectly, benefits which 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 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, we received a letter from the Canadian Embassy in Washington, DC requesting an
(Cite as: 52 FR 2134, *2134)
extension of 30 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 *2135
(Cite as: 52 FR 2134, *2135)
September 4, 1986. Unsworth and Renkema Florist Ltd. (Renkema) are producers of the subject merchandise. These two companies accounted for more than 60 percent of exports of the subject merchandise to the United States during the review period. Additional information was supplied on September 26 and 29 and October 17, in response to a Department of Commerce letter dated September 12, 1986.
On the basis of the information contained in these responses, we made our preliminary determination on October 20, 1986 (51 FR 37925, October 27, 1986). Based upon the request of the petitioner, on November 26, 1986, we extended the deadline dates for the final determinations in the countervailing duty investigations of certain fresh cut flowers from Canada, Israel, Kenya, the Netherlands, and Peru, and standard carnations from Chile to correspond to the date of the final determinations in the antidumping duty investigations of the same merchandise, pursuant to section 705(a)(1) of the Act, as amended by section 606 of the Trade and Tariff Act of 1984 (PL 98-573) (51 FR 43649, December 3, 1986).
From December 8 to December 12, 1986, we verified the information submitted by the Government of Canada, the Government of the Province of Ontario, Unsworth
(Cite as: 52 FR 2134, *2135)
and Renkema.
At the request of the petitioner, we held a public hearing on December 17, 1986, to afford interested parties an opportunity to present views orally in accordance with our regulations (19 CFR 335.35). We received a case brief from petitioner on December 10, 1986, and comments on the verification report on January 8, 1987. The Canadian Embassy on December 17, 1986, submitted its comments regarding the Department's preliminary determination. The responding companies filed supplemental public responses on January 6, 1987. On January 7, 1987, the Canadian Embassy, on behalf of Renkema, submitted a supplemental response containing the verified sales and export statistics.
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
(Cite as: 52 FR 2134, *2135)
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). For purposes of this final 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 qustionnaire, our verification and written comments submitted by the interested parties, we determine the following:
I. Program Determined to Confer a Subsidy
We 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 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
(Cite as: 52 FR 2134, *2135)
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 may 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 equal to one-third of the capital costs of one or more of the projects. We verified that Unsworth and Renkema received grants under this program. All flowers grown by Renkema and Unsworth are grown in greenhouses. Since Ontario GEEP grants are made only to producers growing food or ornamentals in greenhouses, we 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. First, we compared the total amount of grants received to each company's greenhouse sales in the year in which the grant was received. If the total of all countervailable grants was less than 0.5 percent of the applicable sales, we expensed the grants in the year of receipt. If the total of all
(Cite as: 52 FR 2134, *2135)
countervailing duty grants was greater than 0.5 percent of the applicable sales, we allocated the grants received over 10 years (the average useful life of agricultural assets). The only grant received by Unsworth under the program was a small grant in 1984. This grant was less than 0.5 percent of Unsworth's greenhouse sales; therefore, the grant was expensed in the year of receipt and there are no benefits accruing to Unsworth under the program during the review period. Renkema received two grants under this program, one in 1983 and one in 1985, which were greater than 0.5 percent of sales; therefore, we allocated these grants over ten years. We used as the discount rate the long-term corporate bond rate in Canada, as provided by the Bank of Canada. We divided the value of Renkema's benefits by the company's sales of cut flowers during the review period to calculate an estimated net subsidy of 1.47 percent ad valorem.
II. Programs Determined Not To Confer Subsidies
We determine that subsidies are not being provided to producers or exporters of cut flowers in Canada under the following programs:
A. Farm Improvement Loans
(Cite as: 52 FR 2134, *2135)
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.
We verified that this loan guarantee program is avaialble to the entire agricultural sector. Accordingly, we determine that this program is not limited to a specific enterprise or industry, or group of enterprises or industries, and that these loan guarantees do not confer subsidies.
B. 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 Renkema. The Ontario Farm Tax Reduction Program was created by Order-in-Council No. 2264/83 to provide a rebate *2136
(Cite as: 52 FR 2134, *2136)
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.
(Cite as: 52 FR 2134, *2136)
We verified that Renkema and Unsworth, which ar not located in eastern or northern Ontario, used this program. Because all farmers in Ontario are eligible for this tax reduction if their gross annual production value is Can $8,000, we determine that this portion of the program is not limited to a specific enterprise or industry, or group of enterprises or industries. Accordingly, we determine that the tax reduction for Ontario farmers not located in eastern or nothern Ontario does not confer a subsidy.
C. Investment Tax Credits (ITCs)
Petitioner alleges that the Canadian producers or exporters of cut flowers received countervailable benefits from ITCs available in Canada. There are several categories of ITCs in Canada. In our Final Afirmative Countervailing Duty Determination; Certain Fresh Atlantic Groundfish from Canada, (51 FR 10041, March 24, 1986), we determined that the basic seven percent rate for qualified property is not limited to a specific industry or region. We verified that Unsworth did not claim any ITCs on the tax return filed during the review period, and that the only ITC Renkema claimed was the basic seven percent rate for investment in qualified property. Because the basic seven percent ITC rate is not limited to a specific enterprise or industry, or group of enterprises or industries, or to companies within specific regions, we
(Cite as: 52 FR 2134, *2136)
determine it is not countervailable.
III. Programs Determined Not To Be Used
Based on our verification of the responses of the Government of Canada, the Government of the Province of Ontario, Unsworth, and Renkema, we determine that the producers or exporters in Canada of cut flowers did not use the following programs, which were listed in our notice of initiation:
A. Federal Programs
1. Program for Export Market Development (PEMD)
Petitioner alleges that the Canadian producers or exporters of certain fresh cut 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.
We verified that Renkema and Unsworth did not benefit from this program during the review period.
(Cite as: 52 FR 2134, *2136)
2. 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.
We verified that the companies under investigation did not benefit form this program.
B. Joint Federal-Provincial Programs
1. Agricultural and Rural Development Agreements (ARDA)
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 were alternative land use, soil, and water conservation, and economic development in rural regions.
We verified that the companies under investigation have not received any funding from any ARDA.
(Cite as: 52 FR 2134, *2136)
2. General Development Agreements (GDA)
GDAs provided the legal basis for cooperation between departments of the federal and provincial governments in the establishment of economic development programs. We verified that the companies under investigation have not received any funding under GDA or any subsidiary agreement.
3. Economic and Regional Development Agreements (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 productivity-enhancing initiatives.
We verified that the companies under investigation have received no benefits from ERDA.
4. Crop Insurance
There are joint federal-provincial crop insurance programs in Canada. We
(Cite as: 52 FR 2134, *2136)
verified 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, including a program of export support loans. We verified that neither of the companies under investigation received assistance under this program.
2. Provincial Crop Insurance
Petitioner alleges that producers of exporters of the subject merchandise from Canada may receive benefits from provincial crop insurance programs. The respondents in this investigation are located in Ontario, and we verified that there is no separate provincial crop insurance program in Ontairo.
3. Alberta Beginning Farmer Assistance Program
(Cite as: 52 FR 2134, *2136)
Petitioner alleges that loans at preferential rates are made to beginning farmers in Alberta. We verified that the respondents in this investigation are Ontario-based businesses and, therefore, ineligible to receive benefits or participate in ths program.
4. British Columbia Greenhouse Farm Income Insurance Program
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 we verified that neither of the company respondents are located in British Columbia, we 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 to make permanent improvements to land classified as "farmland." Because we verified that neither of the company respondents are located in British Columbia, we determine this program was not used.
Petitioner's Comments
(Cite as: 52 FR 2134, *2136)
Comment 1: Petitioner alleges that the Department should use best information otherwise available when making its final determination because Unsworth and Renkema did not account for 60 percent of exports to the United States during the review period. Although the response alleges that U.S. Census data do not accurately reflect acutal trade, *2137
(Cite as: 52 FR 2134, *2137)
and asserts that the discrepancy " must have been re-exported, offshore product," the response provides no information regarding the nature of this re-export market.
DOC Response: After consultation with the U.S. Customs Service, we have learned that the U.S. Census IM-146 statistics do not accurately reflect imports of standard carnations from Canada. When the statistics were adjusted by removing the improperly recorded entries, the verified exports to the United States of Unsworth and Renkema accounted for more than 60 percent of exports to the United States of cut flowers from Canada during the review period.
Comment 2: Petitioner asserts that even if the U.S. Census statistics do not accurately reflect imports of cut flowers from Canada of Canadian origin, the Department still needs to address the issue of how to treat imports from Canada of third country origin. Petitioner submits that in order to check the influx of unfairly traded flowers originating from third countries but transshipped via Canada, the agency should impose the highest countervailing duty rate found in any of the other countervailing duty cases brought by petitioner on Canadian
(Cite as: 52 FR 2134, *2137)
exports of the subject merchandise to the United States.
DOC Position: We disagree. There is at present no evidence indicating that large numbers of flowers from third countries are entering the United States through the Canadian border marked as Canadian flowers.
Comment 3: Petitioner maintains that the Department should reject the responses and instead use best information available, because the public information submitted by respondents is inadequate.
DOC Position: We disagree. Any deficiency in the public version of the response was satisfied by the filing of amended public responses, and counsel for petitioner had access on a timely basis to the confidential information under an administrative protective order.
Comment 4: Petitioner argues that the Farm Improvement Loan Program provides countervailable benefits. Petitioner submits that agriculture clearly constitutes a "specific class." The preferential financing extended by the Government of Canada to Canadian farmers is not comparable to the provision of "public goods," or benefits to society at large. The Department's holding that agriculture is too large a group for any benefits conferred to it to be countervailable originated in its Mexican cases (see Negative Countervailing Duty Determination; Fresh Asparagus from Mexico (48 FR 21618, May 13, 1983), and Certain Fresh Cut Flowers from Mexico (49 FR 15007, April 16, 1984)). This rationale is not applicable to the Canadian economy, although the Department
(Cite as: 52 FR 2134, *2137)
has applied it in prior Canadian cases. The Canadian agricultural sector employs a far smaller perentage of the total Canadian workforce than is the case in Mexico, and the farm improvement loans at issue are available only to farmers.
DOC Position: We disagree that this program is countervailable. The Department in such Canadian cases as Final Affirmative Countervailing Duty Determination; Live Swine and Fresh, Chilled and Frozen Pork Products from Canada (50 FR 25097, June 17, 1985), and Final Affirmative Countervailing Duty Determination; Certain Fresh Atlantic Groundfish from Canada (51 FR 10041, March 24, 1986) placed no limits on the percentage of the population that must be employed in agriculture in order to determine that it is indeed a sector of the economy and not simply an industry or group of industries within that economy.
Comment 5: Petitioner alleges that the Department impermissibly excluded the Farm Credit Corporation Program, the Enterprises Development Program, the Ontario Young Farmer Credit Program, and the British Columbia Agriculture Credit Act from its investigation as generally available. Petitioner submits that the Department's refusal to initiate was contrary to the Court of International Trade's teachings in Bethlehem Steel Corp. v. United States, 509 F. Supp. 1237 (1980); Agrexco Agricultural Export Co., v. United States, 604 F. Supp. 1238 (1985); and Cabot Corp. v. United States, 620 F. Supp. 722 (1985).
(Cite as: 52 FR 2134, *2137)
Moreover, with respect to the Farm Credit Program, the Ontario Young Farmer Credit Program, and the British Columbia Agriculture Credit Act, petitioner submits that the Department's determination that the programs are generally available is not applicable in the present case for the same reasons cited in petitioner's Comment 4.
DOC Position: We disagree. To the extent that Bethehem, Agrexco, and Cabot stand for the proposition that generally available subsidies may be countervailable, we disagree with those decisions of the court. Furthermore, petitioner has cited only those decisions which it believes support its position on general availability. Petitioner has omitted any reference to those decisions of the Court of International Trade such as Carlisle Tire and Rubber Co. v. United States, 5 CIT 229 (1983) and Al Tech Specialty Steel Corp. v. United States, 12 CIT , Slip Op. 86-124 (December 1, 1986), which clearly support the government's position on specificity. Regarding petitioner's second argument, see DOC Position to petitioner's Comment 4.
Comment 6: Petitioner contends that the value of the benefit the Department calculated in the preliminary determination for the Ontario Greenhouse Efficiency program must be adjusted by the new information obtained at verification.
DOC Position: We agree. Section 776(a) of the Act requires us to use verified information for our final determination.
(Cite as: 52 FR 2134, *2137)
Respondents' Comments
Comment 1: Respondents contend that the Department erred in ruling that the Ontario Greenhouse Energy Efficiency program is limited to a specific enterprise or industry, or group of enterprises or industries. Grants under this program are not limited to the production of particular products. The reference to food or ornamentals in the program covers all products grown in greenhouses, and is available to any farmer using greenhouse technology.
DOC Position: We disagree that this program is not a subsidy. This program is not available to the entire agriculture sector in Ontario, but rather is limited to those industries which utilize greenhouse technology in the growth of food and ornamentals.
Comment 2: Respondents argue that the Ontario Farm Tax Reduction program should not be considered a subsidy. At the very least, rebates to producers meeting the basic eligibility criterion should not be considered countervailable. Both of the producers/exporters of cut flowers are located in southern Ontario, and are, therefore, subject to the basic eligibility criterion. The Ontario Farm Tax Reduction program is analogous to the Investment Tax Credit where the Department determined in Final Affirmative Countervailing Duty Determination; Certain Fresh Atlantic Groundfish from
(Cite as: 52 FR 2134, *2137)
Canada (51 FR 10041, March 24, 1986) that the basic seven percent rate for qualified property was not countervailable, because it is not limited to a specific industry or region.
DOC Position: We agree that rebates that are provided to farmers only under the basic eligibility criterion are not subsidies.
Comment 3: Flowers Canada, which is a trade association representing Canadian producers of flowers, maintains that total Canadian production of standard carnations is *2138
(Cite as: 52 FR 2134, *2138)
well below the reported imports into the United States of these flowers, thus establishing the fact that U.S. import statistics for standard carnations are in error.
DOC Position: Based on our discussions with the U.S. Customs Service, we believe that U.S. import statistics for standard carnations, for the review period, were inaccurate. See our response to petitioner's Comment 1.
Verification
In accordance with section 776(a) of the Act, we verified the information and data used in making our final determination. During verification, we followed normal verification procedures, including meetings with government officials and inspection of documents, as well as on-site inspection of the accounting records of the responding companies.
(Cite as: 52 FR 2134, *2138)
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to continue to suspend liquidation of all entries of cut flowers from Canada, except for entries of cut flowers produced by Unsworth, which are entered, or withdrawn from warehouse, for consumption, on or after October 27, 1986. As of the date of publication of this notice in the Federal Register, the Customs Service shall require a cash deposit or bond of 1.47 percent ad valorem for each entry of this merchandise from Canada other than entries of cut flowers produced by Unsworth.
ITC NOTIFICATION
In accordance with section 705(d) 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 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 Deputy Assistant Secretary for Import
(Cite as: 52 FR 2134, *2138)
Administration.
If the ITC determines that material injury, or the threat of material injury, does not exist, this proceeding will be terminated and all estimated duties deposited or securities posted, as a result of the suspension of liquidation, will be refunded or cancelled. If however, the ITC determines that such injury does exist, we will issue a countervailing duty order, directing the Customs officers to assess countervailing duties on all entries of cut flowers from Canada except for entries of cut flowers produced by Unsworth, entered, or withdrawn from warehouse, for consumption, as described in the "Suspension of Liquidation" section of this notice.
This notice is published pursuant to section 705(d) of the Act (19 USC 1671d(d)).
Paul Freedenberg,
Assistant Secretary for Trade Administration.
January 12, 1987.
[FR Doc. 87-1141 Filed 1-16-87; 8:45 am]
(Cite as: 52 FR 2134, *2138)
BILLING CODE 3510-DS-M