[Federal Register: October 16, 2001 (Volume 66, Number 200)]
[Notices]
[Page 52588-52592]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-337-807]
Preliminary Negative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination: IQF Red Raspberries From Chile
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the ``Department'') preliminarily
determines that countervailable subsidies are not being provided to
producers or exporters of individually quick frozen (``IQF'') red
raspberries in Chile.
EFFECTIVE DATE: October 16, 2001.
FOR FURTHER INFORMATION CONTACT: Craig Matney or Andrew Covington,
Office of Antidumping/Countervailing Duty Enforcement, Group 1, Import
Administration, U.S. Department of Commerce, Room 3099, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
1778 and (202) 482-3534, respectively.
Petitioners
The petition in this investigation was filed by the IQF Red
Raspberries Fair Trade Committee (``Committee'') and its members
(collectively referred to hereinafter as ``the petitioners''). The
Committee is an ad hoc association of growers and processors of IQF red
raspberries. All of the members of the Committee are producers of IQF
red raspberries.
[[Page 52589]]
Case History
On June 28, 2001 the Department published in the Federal Register
the notice initiating this investigation (Initiation of Countervailing
Duty Investigation: IQF Red Raspberries from Chile, 66 FR 34423, June
28, 2001) (``Initiation Notice''). Since the Initiation Notice, the
following events have occurred.
On July 9, 2001, we issued a countervailing duty questionnaire to
the Government of Chile (``GOC''). Due to the large number of producers
and exporters of IQF red raspberries in Chile, we decided to limit the
number of responding companies to the three producers/exporters with
the largest volumes of exports to the United States during the period
of investigation (see July 5, 2001, memorandum entitled ``Respondent
Selection''). We issued countervailing duty questionnaires to these
three companies, Comercial Fruticola S.A. (``Comfrut''); Exportadora
Frucol Ltda. (``Frucol''); and Fruticola Olmue S.A. (``Olmue''), also
on July 9.
On August 3, 2001, the petitioners requested that the Department
extend the deadline for the preliminary determination in this
investigation. Pursuant to section 351.205(f)(1) of our regulations,
the Department extended this deadline until October 9, 2001 (66 FR
42994, August 16, 2001).
The Department received the GOC and company questionnaire responses
on August 20, 2001. The Department issued supplemental questionnaires
to the GOC and the three companies on September 17, 2001, and received
responses to those questionnaires on September 24, 2001.
On October 3, 2001, we received a request from the petitioners,
pursuant to section 351.210(b)(4)(i) of our regulations, to postpone
the final determination in this investigation to coincide with the
final determination in the companion antidumping duty investigation of
IQF red raspberries from Chile. Accordingly, we are aligning the final
determinations in these investigations.
Scope of Investigation
The products covered by this petition are imports of IQF red
raspberries, whole or broken, from Chile, with or without the addition
of sugar or syrup, regardless of variety, grade, size or horticulture
method (e.g., organic or not), the size of the container in which
packed, or the method of packing. The scope of the petition excludes
fresh red raspberries and block frozen red raspberries (i.e., puree,
straight pack, juice stock, and juice concentrate).
Comment on Scope
In the Initiation Notice, we invited comments on the scope of this
proceeding (see 66 FR at 34423). In the companion antidumping duty
investigation, parties filed comments regarding inclusion in the scope
of so-called ``dirty crumbles.'' Dirty crumbles are broken IQF red
raspberries which have a high level of defects, as well as stems,
leaves, and mold.
In order to maintain a consistent scope in the antidumping and
countervailing duty proceedings, we have placed those comments and our
decision memorandum in the file of this proceeding (see September 26,
2001 Memorandum to the File re: Scope). We determined that dirty
crumbles are within the scope of the proceedings on IQF red raspberries
from Chile.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act effective January 1, 1995 (the
``Act''). All citations to our regulations refer to 19 CFR part 351
(April 2001).
Injury Test
Because Chile is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (ITC) is required to determine whether imports of the
subject merchandise from Chile materially injure, or threaten material
injury to, a U.S. industry. On July 25, 2001, the ITC published its
preliminary determination finding that there is a reasonable indication
that an industry in the United States is being materially injured by
reason of imports from Chile of the subject merchandise (66 FR 38740,
July 25, 2001).
Period of Investigation (``POI'')
The period for which we are measuring subsidies is calendar year
2000.
Subsidies Valuation Information
Benchmarks for Loans: To calculate the countervailable benefit from
loans, we have used U.S. dollar borrowing rates in Chile, as submitted
by the GOC. We have used dollar rates, in accordance with section
351.505(a)(2)(i) of our regulations, because the loans and interest in
question were denominated in U.S. dollars.
Allocation Period: In accordance with section 351.524(d)(2)(i) of
our regulations, we have used a 12-year allocation period based on the
Internal Revenue Service's 1977 Class Life Depreciation Range System.
None of the responding companies disputed this allocation period.
Attribution of Subsidies: Section 351.525(a)(6) of our regulations
directs that the Department will attribute subsidies received by
certain affiliated companies to the combined sales of those companies.
Based on our review of the responses, we find that ``cross ownership''
exists with respect to certain companies, as described below, and have
attributed subsidies accordingly.
Comfrut: Comfrut has responded on behalf of itself and two
affiliated companies, Frutas y Hortalizas Del Sur (``Frusur'') and
Agricosa S.A. (``Agricosa''). Based on the proprietary details of the
relationships between these companies, we preliminarily determine that
cross ownership exists with respect to these companies and that
subsidies received by the three companies are properly attributed to
the combined sales of the three companies. We further determine that
cross ownership exists with respect to certain other companies
affiliated with one or more of these companies and that those companies
did not receive subsidies that were transferred to Comfrut, Frusur, or
Agricosa. For a full discussion of these issues, see October 9, 2001
Proprietary Memorandum to the File, entitled ``Attribution of Subsidies
in CVD Investigation of IQF Red Raspberries from Chile.''
Frucol: Frucol has responded on behalf of itself and Sociedad
Agricola Machicura (``Agricola Machicura''). Based on the proprietary
details of the relationships between these companies, we preliminarily
determine that cross ownership exists with respect to these companies
and that subsidies received by both are properly attributed to the
combined sales of the two companies. We further determine that cross
ownership exists with respect to certain other companies affiliated
with Frucol and/or Agricola Machicura, and that those companies did not
receive subsidies that were transferred to Frucol or Agricola
Machicura. For a full discussion of these issues, see October 9, 2001
Proprietary Memorandum to the File, entitled ``Attribution of Subsidies
in CVD Investigation of IQF Red Raspberries from Chile.''
Olmue: Olmue has responded on behalf of itself and Tecnofrio Cautin
S.A. (``Tecnofrio Cautin''). Based on the proprietary details of the
relationships between these companies, we preliminarily determine that
cross ownership exists with respect to these companies and that
subsidies received by both are properly attributed to the
[[Page 52590]]
combined sales of the two companies. However, Olmue reported that
Tecnofrio Cautin did not operate during the POI and did not use any of
the programs during the POI. Therefore, we have based our calculations
only on Olmue's subsidies and sales. We further determine that cross
ownership exists with respect to certain other companies affiliated
with Olmue and Tecnofrio Cautin, and that those companies did not
receive subsidies that were transferred to Olmue or Tecnofrio Cautin.
For a full discussion of these issues, see October 9, 2001 Proprietary
Memorandum to the File, entitled ``Attribution of Subsidies in CVD
Investigation of IQF Red Raspberries from Chile.''
Analysis of Programs: Based upon our analysis of the petition and
the responses to our questionnaires, we determine the following:
I. Program Preliminarily Determined To Be Countervailable
Law No. 18,634 (Deferrals, Credits and Waivers for Capital Goods
Purchases)
Law Number 18,634 of August 5, 1987, established a three-pronged
program related to purchases of capital equipment and subsequent export
of products produced with that equipment. Under the first prong,
referred to as the ``duty deferral prong,'' both exporters and non-
exporters are allowed to defer paying duties on designated capital
goods that are imported. During the deferral period, the amount of
duties owed is treated as a loan on which the producer is required to
pay interest. Under the second prong of the program, referred to as the
``fiscal credit prong,'' both exporters and non-exporters can apply for
a fiscal credit when they purchase the same designated capital goods
from domestic suppliers. The fiscal credit also functions as a loan on
which the producer is required to pay interest.
Under the third prong of the program, referred to as ``the waiver
prong,'' the deferred duties and fiscal credits, and the accrued
interest can be waived. Eligibility for the waivers and the amounts of
the waivers are dependent upon exportation. In November 1998, the
waiver portion of Law 18,634 was eliminated. However, producers that
had applied to receive benefits under Law 18,634 prior to that time
continue to be eligible for waivers based on those applications.
In Preliminary Negative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination With Final
Antidumping Determination: Fresh Atlantic Salmon from Chile (62 FR
61803, November 19, 1997) (``Salmon--Preliminary Determination''), we
analyzed the different prongs of Law 18,634 separately. We determined
that the duty deferral prong was not specific within the meaning of
section 771(5A) and, therefore, did not confer a countervailable
benefit. Regarding the second prong, the fiscal credit for purchases of
capital equipment produced in Chile, we found specificity and a
countervailable subsidy. Our specificity determination was based on the
requirement that the producer purchase the capital equipment from
domestic sources (see section 771(5A)(C) of the Act). Finally, we found
that the waiver prong of Law 18,634 provided a countervailable subsidy.
The waivers were specific by virtue of being contingent upon
exportation (see section 771(5A)(B) of the Act), and the benefit was a
grant in the amount of the waiver.
In Final Negative Countervailing Duty Determination: Fresh Atlantic
Salmon from Chile (63 FR 31437, June 9, 1998) (``Salmon--Final
Determination''), we applied a different analysis to Law 18,634.
Instead of analyzing the individual prongs, we examined the program in
its entirety.
We determined that all benefits provided under Law 18,634, when
viewed this way, constituted export subsidies because ``their
overarching purpose ... is to promote exports'' (63 FR at 31442).
For purposes of the preliminary determination in this proceeding,
we are following the analytical framework used in Salmon--Preliminary
Determination. This framework is most consistent with section
351.514(a) of our regulations, which states:
* * * the Secretary will consider a subsidy to be contingent upon
export performance if the provision of the subsidy is, in law or in
fact, tied to actual or anticipated exportation or export earnings,
alone or as one of two or more conditions.
Because the subsidies provided under the waiver prong differ from
the subsidies provided under the other prongs of Law 18,634 and the
eligibility criteria vary under the different prongs, we preliminarily
determine that the duty deferrals and fiscal credits are not contingent
upon exportation or anticipated exportation. We note, however, that
even if we were to apply the analytical framework used in Salmon--Final
Determination, it would not change our negative preliminary
determination in this proceeding.
Duty Deferrals: A Chilean producer who imports capital equipment
designated in Decree No. 506 (June 17, 1999) can apply to the Chilean
Customs Service for a duty deferral. Payment of the deferred amount is
staged, with equal installments due in the third, fifth and seventh
years after importation. In addition to paying the deferred amount, the
producer also pays interest at a rate set by the Central Bank of Chile.
We preliminarily determine that the duty deferral prong of Law
18,634 is not specific within the meaning of section 771(5)(A) of the
Act. Duty deferrals are contingent neither upon exportation nor use of
domestic goods as a matter of law, and Law 18,634 does not limit the
industries in Chile that can receive duty deferrals. Moreover,
information submitted by the GOC indicates that duty deferrals are used
by a wide variety of industries in Chile, and that the industry
producing the subject merchandise does not receive a predominant or
disproportionate share of the deferrals. Therefore, we preliminarily
determine that the duty deferral prong under Law 18,634 does not confer
a countervailable benefit.
Fiscal Credits: Under this prong, companies purchasing domestically
produced capital equipment designated in Decree No. 506 can borrow up
to 73 percent of the amount of customs duties that would have been paid
on the capital goods if they had been imported. The repayment of this
fiscal credit, plus interest, is made according to the same schedule
described above for duty deferrals.
We preliminarily determine that the fiscal credit prong of Law
18,634 is specific within the meaning of section 771(5A)(C) of the Act
because receipt of the credit is contingent upon the use of domestic
goods. We also preliminarily determine that the fiscal credit is a
direct transfer of funds (see section 771(5)(D)(i) of the Act) that
provides a benefit in the amount of the difference between the interest
the company pays on the fiscal credit and the interest the company
would pay for a comparable commercial loan (see section 771(5)(E)(ii)
of the Act). Therefore, we preliminarily determine that the fiscal
credit prong of Law 18,634 confers a countervailable subsidy.
Olmue had fiscal credits outstanding during the POI.
To calculate the benefit of these credits to Olmue, we treated the
fiscal credits outstanding during the POI as long-term loans taken out
at the time of importation. We used the benchmark rate described above
in the ``Benchmarks for Loans'' section as the measure of what the
recipient would have paid for comparable commercial loans.
[[Page 52591]]
Applying the loan methodology described in section 351.505(c)(2) of
our regulations, we calculated the interest savings received by Olmue
in the POI. With one exception, the capital equipment for which Olmue
received fiscal credits was used for all products produced by the
company. Thus, we have divided the interest savings from these fiscal
credits by Olmue's total sales. The one exception involved capital
equipment used exclusively to produce non-subject merchandise.
Therefore, we have not included the interest savings on this fiscal
credit in the calculation of Olmue's benefit.
On this basis, we preliminarily determine that the subsidy under
the fiscal credit prong of Law 18,634 is 0.00 percent ad valorem for
Olmue.
The GOC stated in its response that the fiscal credit prong of Law
18,634 is not an import substitution program. Instead, according to the
GOC, this prong of the program is intended to encourage capital
investment in Chile and to avoid a preference for imported capital
goods resulting from the duty deferral prong.
We will consider this claim further for our final determination,
but note that we addressed a similar claim by the GOC in Salmon--Final
Determination (66 FR at 31442). In the salmon case, the GOC argued that
the Department should look at the duty deferral and fiscal credit
prongs of Law 18,634 as a single program. We disagreed, stating that to
do so would amount to ``picking and choosing which elements of the law
should be combined in order to achieve the result that the loans to
purchasers of domestic equipment are not specific'' (see id.).
Waivers: Chilean producers that received duty deferrals and fiscal
credits under Law 18,634 can have the duties and credits waived if the
producers export merchandise manufactured with the capital equipment
covered by the deferral or credit. Comfrut and Frucol received waivers
during the POI.
We preliminarily determine that the waiver prong of Law 18,634 is
specific within the meaning of section 771(5A)(B) of the Act because
receipt of the waivers is contingent upon exportation. We also
preliminarily determine that the waiver is a direct transfer of funds
(see section 771(5)(D)(i) of the Act) that provides a benefit in the
amount of the duty or fiscal credit waived (see section 351.508(a) of
our regulations). Therefore, we preliminarily determine that the waiver
prong of Law 18,634 confers a countervailable subsidy.
Consistent with Salmon--Preliminary Determination (unchanged in
final), we have treated the waivers as recurring benefits (see 62 FR at
61805, and section 351.524( c)(1) of our regulations). Consequently, we
have summed the waivers received in the POI and divided these by the
appropriate export sales (all exports, all frozen exports, or raspberry
exports) for both recipients. For certain waivers received by Comfrut,
we lacked the correct sales information. We intend to request this
information for our final determination.
On this basis, we preliminarily determine that the subsidy under
the waiver prong of Law 18,634 is 0.17 percent ad valorem for Comfrut
and 0.64 percent ad valorem for Frucol.
II. Program Preliminarily Determined Not To Confer a Subsidy During
the POI
Fund for the Promotion of Agricultural Exports/ProChile Export
Promotion Assistance
Chile's Fund for the Promotion of Agricultural Exports (FPEA) co-
finances up to 50 percent of the cost of export promotion activities.
Companies can seek assistance from the FPEA for conducting market
surveys and for projects that help the companies enter and remain in
particular markets. The types of expenses that the FPEA will co-finance
include: advertising and promotion, office space rental, studies, and
operating expenses at trade fairs.
Between 1995 and 1998, the FPEA operated under the direction of a
committee including officials from the Ministry of Agriculture,
ProChile (Chile's Export Promotion Bureau), and agricultural
associations. Day-to-day operations were centralized at ProChile.
Beginning in 1999, the National Contest for Export Promotion
(``Contest'') was developed in order to allocate export promotion
resources as effectively as possible. The Contest is open to persons
exporting (or seeking to export) agricultural products, whether fresh,
frozen or at different stages of processing. Once the plans are
submitted, they are reviewed and ranked by ProChile, and the best are
accepted.
None of the responding companies participated directly in export
promotion programs co-financed by the FPEA through ProChile. However,
two frozen food trade associations which include the responding
companies among their members did participate in projects which were
co-financed by the FPEA through ProChile. The first project, in 1998,
supported the first meeting of the International Berries Association.
The second project, also in 1998, supported publicity for a variety of
IQF fruits and vegetables in Europe, Latin America, and North America.
The third project, in 1999, supported the travel of three officials
(not from the responding companies) to the second meeting of the
International Berries Association.
Under section 351.514(b) of our regulations, government activities
to promote exports do not confer a benefit if the activities consist of
general informational activities that do not promote particular
products over others. Based on the information in the GOC's response,
we preliminarily determine that the projects which were co-financed by
the FPEA through ProChile promoted specific products. Therefore, we
preliminarily determine that this assistance does not fall within the
exception provided by section 351.514(b) of our regulations.
Instead, we preliminarily determine that the co-financing provided
by the FPEA through ProChile confers a countervailable subsidy within
the meaning of section 771(5) of the Act. The co-financing is specific
within the meaning of section 771(5A)(B) of the Act because its receipt
is tied to the anticipated exportation of merchandise covered by the
project. Also, the co-financing is a direct transfer of funds from the
GOC (see section 771(5)(D)(i) of the Act) providing a benefit in the
amount granted (see section 351.504(a) of our regulations).
We are treating this assistance as ``non-recurring'' based on the
factors identified in section 351.524(c)(2) of our regulations. In
particular, each project funded by the FPEA/ProChile requires a
separate application and approval, and the projects represent one-time
events. This is consistent with our treatment of export assistance
provided by ProChile in Salmon--Preliminary Determination (62 FR at
61804-5) (unchanged in final).
To calculate the countervailable subsidy, we used the allocation
methodology described in section 351.524(b) of our regulations. Because
the amounts approved in 1998 and 1999 were less than 0.5 percent of the
value of appropriate exports in those years, we expensed the benefits
in the years of receipt (see section 351.524(b)(2) of our regulations).
We selected, as the ``appropriate'' exports, total berry exports from
Chile for the two grants relating to meetings of the International
Berries Association. For the grant related to IQF fruits and
vegetables, we used total exports of IQF fruits and vegetables from
Chile to Latin America, Europe and the United States. Based on the
descriptions of these projects in the responses, there is no indication
that benefits were limited only to the exports
[[Page 52592]]
of the member companies of the trade associations that received the
funding.
Because all benefits received under this program were expensed in
years prior to the POI, we find no countervailable subsidy to the
subject merchandise.
III. Program Preliminarily Determined To Be Not Countervailable
Supplier Development Program
The Supplier Development Program, which is administered by the
Corporacion de Fomento de la Produccion (``CORFO''), was created in
1998. The purpose of the Supplier Development Program is to encourage
the creation and consolidation of relationships between large companies
and the small companies that supply them or sub-contract from them.
Under this program, CORFO co-finances a two-phase project. In the
first stage, the diagnostic stage, CORFO will fund up to 60 percent of
the cost of analyzing the strengths and weaknesses of the supplier
companies, and developing a plan for improvement. In the second phase,
CORFO will fund up to 60 percent in the first year and 50 percent in
subsequent years of the cost of carrying out the improvement plan. The
maximum duration of the development phase is three years for non-
agricultural producers and four years for agricultural producers.
Despite the difference in the duration of support for agricultural and
non-agricultural users, the ceiling for the amount CORFO can contribute
to both groups is the same.
We preliminarily determine that the Supplier Development Program is
not specific within the meaning of section 771(5)(A) of the Act. The
provision of co-financing by CORFO for these projects is neither
contingent upon exportation nor upon the use of domestic goods as a
matter of law, and the laws or regulations of the program do not limit
the industries in Chile that can apply for or receive the co-financing.
Moreover, information submitted by GOC indicates that co-financing
under the Supplier Development Program is used by a wide variety of
industries in Chile, and that the industry producing the subject
merchandise does not receive a predominant or disproportionate share of
the deferrals. Therefore, we preliminarily determine that the Supplier
Development Program does not confer a countervailable benefit.
IV. Program Preliminarily Determined To Have Been Eliminated
CORFO Export Credit Insurance Premium Assistance
According to the GOC's response, this program was terminated on
January 19, 1998. In anticipation of the termination, CORFO's Credit
Allocation Committee stopped granting contracts for this insurance in
October 1997. Since the contracts had a one-year duration, all payments
under the program would have been made by October 1998.
V. Programs Preliminarily Determined Not To Have Been Used
CORFO Export Credit Financing
Law No. 18576 (Export Credit Limits)
Law No. 18480 (Simplified Duty Drawback)
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by the respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with section 703(d)(A)(i) of the Act, we have
calculated individual rates for Comfrut, Frucol, and Olmue. We
preliminarily determine that the net countervailable subsidy rate for
each of these manufacturer/exporters is de minimis. Because all the
producers/exporters that received our countervailing duty questionnaire
had de minimis subsidies, we preliminarily determine that producers/
exporters of IQF red raspberries in Chile did not receive
countervailable subsidies (see section 703(b)(4) of the Act).
Accordingly, we are not ordering suspension of liquidation of entries
of IQF red raspberries from Chile.
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
business 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 Assistant Secretary for Import Administration. If our final
determination is affirmative, the ITC will make its final determination
within 75 days after the Department makes its final determination.
Public Comment
In accordance with section 351.310 of our regulations, we will hold
a public hearing, if requested, to afford interested parties an
opportunity to comment on this preliminary determination. Individuals
who wish to request a hearing must submit a written request within 30
days of the publication of this notice in the Federal Register to the
Assistant Secretary for Import Administration, U.S. Department of
Commerce, Room 1870, 14th Street and Constitution Avenue, NW,
Washington, DC 20230. Requests for a public hearing should contain: (1)
The party's name, address, and telephone number; (2) the number of
participants; and, (3) to the extent practicable, an identification of
the arguments to be raised at the hearing.
The hearing in this proceeding, if requested, is tentatively
scheduled for November 21, 2001. Parties should confirm by telephone
the time, date, and place of the hearing 48 hours before the scheduled
time.
If a hearing is held, parties must submit case briefs and the
hearing will be limited to issues raised in the case briefs. Even if a
hearing is not requested, parties may submit case briefs presenting
arguments relevant to the final determination. Six copies of the
business proprietary version and six copies of the nonproprietary
version of the case briefs must be submitted to the Assistant Secretary
no later than 30 days from the date of publication of this preliminary
determination. As part of the case brief, parties are encouraged to
provide a summary of the arguments, not to exceed five pages, and a
table of statutes, regulations, and cases cited. Rebuttal briefs must
be submitted to the Assistant Secretary no later than 4 days from the
date of filing of the case briefs. Again, six copies of the business
proprietary version and six copies of the non-proprietary version of
rebuttal briefs must be filed. Written arguments should be submitted in
accordance with section 351.309 of our regulations and will be
considered if received within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: October 9, 2001.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 01-25974 Filed 10-15-01; 8:45 am]
BILLING CODE 3510-DS-P