NOTICES
DEPARTMENT OF COMMERCE
[C-337-601]
Preliminary Negative Countervailing Duty Determination; Standard Carnations
From Chile
Monday, October 27, 1986
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AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that no benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to producers or exporters in Chile of standard carnations as described in the "Scope of Investigation" section of this notice. We have notified the U.S. International Trade Commission (ITC) of our determination.
If this investigation proceeds normally, we will make our final determination on or before January 5, 1986.
EFFECTIVE DATE: October 27, 1986.
FOR FURTHER INFORMATION CONTACT: Jessica Wasserman or Gary Taverman, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC. 20230; telephone (202) 377-1442 or 377-0161.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based upon our investigation, we preliminarily determine that there is reason to believe or suspect that no 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 Chile of standard carnations. For purposes of this investigation, we preliminarily determine that none of the programs under investigation were used by producers or exporters of standard carnations in Chile.
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 standard carnations. In compliance with the filing requirements of s 355.26 of the Commerce Regulations (19 CFR 355.26), the petition alleged that producers or exporters in Chile of standard carnations 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 Chile 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 Chile 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 from Chile of standard carnations (51 FR 25751, July 16, 1986).
On June 20, 1986, we presented a questionnaire to the Government of Chile in Washington, DC concerning petitioner's allegations. We received the government and company responses on July 25, 1986, September 15, 1986, and September 26, 1986.
Scope of Investigation
The products covered by this investigation are standard carnations currently provided for in item 192.21 of the Tariff Schedules of the United States (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 Order (49 FR 18006, April 26, 1984).
Consistent with our practice in preliminary determinations, when a response to an allegation denies the
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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 Determined Not to be Used
We preliminarily determine that producers or exporters in Chile of standard carnations did not use the following programs:
A. Export Rebate (Simplified Drawback)
Petitioner alleges that producers and exporters of standard carnations in Chile may benefit from a ten percent tax rebate on "non-traditional" goods whose 1984 exports were 2.5 million dollars or less. According to the Government of Chile Questionnaire Response dated July 25, 1986 (GOC Response), manufacturers in Chile are eligible to receive exemptions or rebates on import duties on imported inputs incorporated in an exported product. The exporter may choose from one of three systems: Decree Law 409, the Temporary Import Warehouse or the Simplified Drawback. The simplified drawback is available only to non-traditional exporters which have averaged U.S. $2.5 million or less in the last two calendar years. According to the company Questionnaire Responses dated July 25, 1986 (Company Responses) the companies under investigation did not apply for or receive export rebates or exemptions during the period of investigation.
Petitioner alleges that exporters of standard carnations in Chile may benefit from export credits provided at preferential rates by the Government of Chile. Under this program, pre-embarkation credits are provided equal to 25 percent of the f.o.b. value of exports plus total shipping and insurance; loans for the remaining 75 percent of the f.o.b. value are made within 180 days of shipment. Petitioner also alleges that a special credit line from Chilean Development Bank (Corporation de Fomento), is available for "non-traditional" exports under $40,000.
According to the GOC Response, the lines of pre- and post-shipment credit available to exporters are regulated by Chapter X of the Compendium of Export Rules of the Central Bank of Chile and the rates of interest applicable to these lines of credit are market rates with no preferential financing.
According to the GOC Supplementary Questionnaire Response dated September 15, 1986 (GOC Supplementary Response), there are two financing categories: advance payments from foreign buyers and loans to finance exports. Buyers' advance payments must be paid in any banking institution in Chile. Exporters which receive advance payments have to report on the account of the buyer. Interest rates are contracted freely between the foreign importer and the exporter. Loans to finance exports are foreign or domestic currency loans. Foreign loans are directly obtained by exporters in foreign countries and domestic loans are obtained from banking institutions with offices in Chile. Although the Banco Central de Chile does not keep a register of the average rates of interest charged concerning loans authorized by Chapter X, the interest rates applicable to these loans are equal to the market rates, according to the GOC Supplementary Response. According to the Company Responses, the companies under investigation have not received loans or credits under this program.
C. Corporacion de Fomento Loans and Debt Rescheduling
Petitioner alleges that producers and exporters of standard carnations in Chile may benefit from subsidized loans and subsidized debt rescheduling provided by the Chilean Development Bank (Corporacion de Fomento--CORFO) to agriculture. Petitioner also alleges that CORFO granted $167 million of credit to industry, tourism, agriculture and mining; planned to provide $47 million of new working capital loans in 1985 at subsidized rates of seven percent plus inflation; and rescheduled debt of outstanding debtors at a subsidized rate of seven percent plus inflation over eight years with a two year grace period.
According to the GOC Response, CORFO provides unsubsidized loans for productive investments although the regulations and controls for CORFO are different from those for commercial banks. According to the Company Respones, no interest was paid on short-term loans during the review period and principal or interest on long-term loans was not outstanding during the review period.
D. Preferential Exchange Rate for Repayment of Foreign Debt
Petitioner alleges that producers and exporters of standard carnations in Chile may benefit from a preferential exchange rate available for repayment of foreign debt incurred before August 6, 1982.
According to the GOC Response, this system was established during August 1982 in view of the deregulation of the national currency which created a difficult situation for debtors in foreign currency. For exporters, the rate is applicable to the percent of internal sales of the company. The preferential dollar system was terminated in June 1985 and was replaced by a mechanism that reimburses an exchange rate differential of foreign currency to the debtor. According to the Company Responses, the preferential exchange rate for repayment of foreign debt was not used.
E. Deferred Import Duties for Capital Goods
Petitioner alleges that producers and exporters of standard carnations in Chile may benefit from a deferral or exemption of import duties on capital goods used in the agricultural industry.
According to the GOC Response, the machinery for agriculture is excluded from the benefits of Decree Law 1,226 providing for the deferred payment of import duties. According to the GOC Response, the deferral is for seven years with only one installment paid without interest. Exporters can write off the corresponding debts on an annual basis according to the percentage of the f.o.b. value of the exporters of goods produced with capital assets relative to the value of total sales. The debt written off cannot exceed 50 percent of the original debt value or the f.o.b. value of the exports for the period. According to the Company Response, this program was not used.
F. Stamp and Seal Tax (SST) Exemption
As of October 29, 1985, the Government of Chile exempts export credit operations from the stamp and seal tax. The SST applies to all credit operations that use IOU or promissory notes. The tax is two-tenths of a percent of the total credit per month with a maximum limit of twelve months. According to the GOC Response, the SST exemption is available to all credit operations related to exports. According
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to the Company Respones this program was not used by the companies under investigation.
Under Article 6 of Decree Number 348, the Government of Chile may provide an additional value added tax (VAT) rebate equal to a percentage of the total paid by the exporter (not just that relating to the export sales), based on the percentage that export sales represent of total sales. According to the Company Responses, the companies under investigation have not received benefits from this program.
As of October 29, 1985, the Government of Chile provides a VAT rebate on fixed assets six months after the assets have been purchased. According to the GOC response, all companies are eligible to apply for the reimbursement of the VAT paid upon purchase of capital goods. According to the Company Responses, the companies under investigation did not receive rebates under this program.
I. Currency Retention Scheme (Foreign Trade Zones)
The Government of Chile allows export operations to retain foreign exchange earnings for ninety days after the shipment is made. According to the GOC Response, this extended period is authorized only for exporters of goods having special marketing characteristics. According to the Company Responses, this program was not used.
Under Law No. 18439, the Government of Chile has increased the levels of authorized bank lending for exports beyond that which is available to producers which sell domestically. According to the Company Responses, this program was not used.
Verification
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 alllow 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 Administration.
If our final determination is affirmative, the ITC will determine whether these imports materially injure, or threaten material injury to, U.S. industry within 75 days after the Department makes its final determination.
Public Comment
In accordance with s 355.35 of 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 10:00 a.m. on December 5, 1986, at the 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 seven copies of the nonproprietary version of the pre-hearing briefs must be submitted to the Deputy Assistant Secretary by November 28, 1986. Oral presentations will be limited to issues raised in the briefs. In accordance with 19 CFR 355.33(d) and 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 703(f) of the Act [(19 U.S.C. 1671b(f))].
Gilbert B. Kaplan,
Deputy Assistant Secretary.