NOTICES DEPARTMENT OF COMMERCE Roses and Other Cut Flowers From Colombia; Suspension of Investigation Tuesday, January 18, 1983 *2158 AGENCY: International Trade Administration, Commerce. ACTION: Notice of suspension of investigation. SUMMARY: The Department of Commerce has decided to suspend the countervailing duty investigation involving roses and other cut flowers from Colombia initiated on August 26, 1983. The basis for the suspension is an agreement by 93 Colombian producers and exporters of roses and other cut flowers to renounce all countervailable benefits under the Tax Reimbursement Certificate Program. EFFECTIVE DATE: January 18, 1983. FOR FURTHER INFORMATION CONTACT: Gary S. Taverman, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230, telephone (202) 377-0161. SUPPLEMENTARY INFORMATION: Case History On August 6, 1982, the Department of Commerce (the Department) received a petition from a group of independent producers of roses and other cut flowers (cut flowers) filed on behalf of the U.S. industry producing cut flowers. The petition alleged that certain benefits which constitute bounties or grants within the meaning of section 303 of the Tariff Act of 1930, as amended (the Act), are being provided, directly or indirectly, to the manufacturers, producers, or exporters in Colombia of cut flowers. We found the petition to be sufficient, and on August 26, 1982, we initiated a countervailing duty investigation (47 FR 38570). We stated that we expected to issue a preliminary determination by November 1, 1982. We presented a questionnaire concerning the allegations to the government of Colombia in Washington, D.C. On October 6, 1982, we received the response to the questionnaire. On October 13 and December 3, 1982, supplemental responses were received. On November 1, 1982, we preliminarily determined that the government of Colombia was providing bounties or grants to manufacturers, producers, or exporters of cut flowers under the Tax Reimbursement Certificate Program (CAT). We also stated that we would seek additional information on the Air Freight Reduction Program, alleged by the petitioners to provide bounties or grants to the manufacturers, producers, or exporters of cut flowers in Colombia. Notice of the preliminary affirmative countervailing duty determination was published in the Federal Register on November 5, 1982 (47 FR 50314). We directed the U.S. Customs Service to suspend liquidation of all entries of the subject merchandise, entered or withdrawn from warehouse, for consumption on or after November 5, 1982, and to require a cash deposit or the posting of a bond in an amount equal to 4 percent of the f.o.b. value of the subject merchandise on entries made prior to January 1, 1983, and 5 percent of the f.o.b. value of the subject merchandise on entries made on or after January 1, 1983. From December 7-10, 1982, we verified the responses to the countervailing duty questionnaire by a review of government documents and company books and records for certain members of Asocolflores, the Colombian association of cut flowers producers whose members represent over 85 percent of the volume of exports of cut flowers to the United States. On December 10, 1982, the Department and counsel for the Colombian exporters initialed a proposed agreement to suspend the countervailing duty investigation involving cut flowers from Colombia. The primary basis for the proposed suspension agreement was that the exporters would renounce all bounties or grants on exports of cut flowers received under the CAT program to the United States. In addition, the exporters agreed to renounce all benefits which the Department believes benefit the subject product under any other program subsequently determined by the Department in this or any subsequent proceeding concerning other merchandise from Colombia to constitute bounties or grants under the Act. In compliance with the procedural requirements of section 704(e) of the Act, we notified the petitioners and other interested parties of the terms of the proposed agreement, provided a copy of the proposed agreement to them, arranged to consult with counsel for the petitioners regarding specific aspects of the proposed agreement, and explained how the agreement would be carried out and how the proposed agreement would meet the requirements of section 704 (b) and (d) of the Act. In addition, all parties were invited to submit comments and information regarding the proposed agreement. Scope of Investigation The merchandise covered by this investigation is roses and other fresh cut flowers (excluding miniature carnations), and bouquets, wreaths, sprays, or similar articles made from such flowers or other fresh plant parts. Roses are currently classifiable under item number 192.1800 and other fresh cut flowers (excluding miniature carnations) under item number 192.2100 of the Tariff Schedules of the United States Annotated (TSUSA). The period for which we are measuring subsidization is January through June of 1982. Changes Since the Preliminary Determination Air Freight Reductions We stated in our preliminary determination that we would seek additional information on the Colombian domestic air freight rates applicable to the transport of cut flowers, and on the international rates established by the Administrative Department of Civil Aeronautics (DAAC), an agency of the Colombian government, covering other products that are transported from Colombia to the United States to determine whether the rates for cut flowers are comparable. We have since received the Colombian domestic air cargo rate schedule issued by the DAAC. *2159 At verification, we met with DAAC officials and the exporters of cut flowers and learned that there is no significant air transport of cut flowers within Colombia, since the three major growing areas (Bogota, Cali, Medellin) are also the three main distribution points for the product as well. As a result, there is little need to transport cut flowers by air from one of these cities to any other Colombian city. In addition to domestic rate schedules, the DAAC publishes a general international air freight rate schedule and specific international rate schedules for particular products, including cut flowers. The maximum DAAC rate for cut flowers is considerably lower than the general air freight rates for other products carried over the same routes, thereby indicating a possible attempt to surpress cut flower freight rates in an effort to confer bounties or grants on the exporters of the merchandise to the United States. During verification, we reviewed the freight documents of several Colombian exporters of cut flowers, and uniformly found that the actual rates negotiated by the exporters with the air carriers were substantially lower than the DAAC maximum rate, indicating that freight rates for cut flowers are a function of competition in the air freight market in Colombia, and not the DAAC maximum rate. We therefore find that the Colombian air freight rates for cut flowers do not constitute the bestowal of bounties or grants upon the exporters of cut flowers to the United States. The Department has consulted with the petitioners and Roses Inc., an interested party, and received the following comments on the proposed suspension agreement. Our responses are shown for each comment. Comment 1: The ITA must not implement a suspension agreement that is opposed by the domestic industry unless there are compelling reasons to do so. DOC Position: The approval or lack of disapproval by the domestic industry is not a prerequisite to our entering into a suspension agreement. Rather, the Department uses its own expertise and independent judgment in determinig whether a particular agreement is in the public interest. We believe that the suspension agreement serves the public interest and eliminates all benefits of bounties or grants. Comment 2: Respondents do not qualify as a group eligible to conclude a suspension agreement unless they represent at least 85 percent by volume of Colombian exports of roses and other cut flowers to the United States. In addition, no reason is cited for the ITA's failure to obtain an agreement from all of the exporters. DOC Position: The Exporters identified in Appendix I to the suspension agreement as parties to this agreement account for approximately 90 percent by volume of the exported merchandise subject to this investigation. This exceeds the 85 percent required under the "substantially all" standard contained in section 704(b) of the Act and section 355.31 of the Department's Regulations and represents a large enough number of exporters to be deemed in the public interest. Comment 3: The proposed agreement is unworkable with respect to present or future bounties or grants resulting from artificially low air freight rates mandated by the Colombian Government for cut flowers exported from Colombia. DOC Position: We have found that countervailable benefits are not currently being bestowed upon the exporters of cut flowers as a result of government- established air freight rates in Colombia. See comment 10, infra. Under the monitoring provision of the suspension agreement, the Department will periodically review the continued status of air freight rates and will require the Colombian exporters to take appropriate action if necessary. Moreover, Section D(1) of the suspension agreement provides that if the Department determines that the agreement is being or has been violated or no longer meets the requirements of section 704 (b) or (d) of the Act, then section 704(i) shall apply. Comment 4: The ITA must not implement the proposed agreement until it makes a final determination as to whether and to what extent the air freight rates for carriage of cut flowers from Colombia confer bounties or grants. DOC Response: A "final determination" is not a prerequisite to a suspension agreement. However, section 704(g) of the Act provides for the continuation of the investigation if, within 20 days after the date of publication of this notice, a request for continuation is received from either the government of the country in which the subsidy practice is alleged to occur, or from an interested party. On the basis of information obtained during verification, we presently believe that the air freight rates for cut flowers do not constitute a countervailable bounty or grant, and conclude that the suspension agreement eliminates all other bounties or grants regarding cut flowers from Colombia. Comment 5: If the ITA accepts the proposed agreement, it should require quarterly reports to specify the volume of flowers exported to the United States, the identity of the growers and exporters involved, the air carriers used, and the specific rates charged. DOC Position: The monitoring provision has been amended to provide that the exporters will report on a quarterly basis their specific volume of exports of the subject merchandise to the United States, as well as the total volume of such merchandise exported to the United States from Colombia. Information regarding individual export transactions and air freight rates will be obtained periodically and verified at the time of the annual review under section 751 of the Act. Comment 6: If the ITA accepts the proposed agreement, it should make the Government of Colombia a party to the agreement, and require the Government of Colombia to rescind the special air freight rate for cut flowers and to agree to refrain from implementing a mandated rate in the future. DOC Position: The Act does not require the foreign government to be a party to the agreement of exporters who account for substantially all of the imports of the subject merchandise are parties to the agreement and the Department does not believe that the public interest requires the Government of Colombia to be a party to the agreement. Furthermore, the Department has verified that no countervailable benefits are conferred on these exports resulting from the special air freight rates. See comment 10, infra. We have, however, modified the agreement to take into account the possibility that cut flower freight rates may in the future approach a government-mandated maximum and to specifically require the monitoring of cut flower freight costs. Comment 7: If the ITA accepts the proposed agreement, it should require the Government of Colombia, the monitoring bank, and the exporters to consent to the disclosure to petitioners' counsel of all information requested by the ITA, the responses thereto, and to any future verification reports prepared by or for the ITA. DOC Position: All non-confidential information and non-confidential summaries of confidential responses will be made publicly available. Confidential submissions may be released under an administrative protective order, in accordance with section 355.20 of the countervailing duty regulations. Comment 8: On the basis of action taken by the Colombian Government in *2160 1974, the Treasury Department determined conditionally that no bounty or grant was paid or bestowed upon the flower producers or exporters within the meaning of section 303 of the Act (39 FR 26922 (1974)). Roses Inc. contends that before any new suspension agreement is signed, the status of the 1974 countervailing duty investigation on cut flowers from Colombia should be reviewed. DOC Position; Regardless of what action the Colombian Government took in 1974 with regard to a prior countervailing duty investigation of cut flowers, the Department believes that the attached suspension agreement is in the public interest. Furthermore, the agreement will be periodically monitored to assure the exporters compliance with its terms. Other Comments Comment 9: Respondents assert that the petition filed on August 6, 1982, did not contain the signatures of the persons or firms seeking to initiate the investigation. Respondents note that the International Trade Commission (ITC) regulations (19 CFR 201.8 (d)-(e)) require that a signature be affixed to a countervailing duty petition. DOC Position: Regardless of the ITC regulations, petitioners satisfied the requirements of section 355.26 of the Department's Regulations regarding the initiation of an investigation by petition. Comment 10: Respondents state that the establishment by the Colombian government of maximum air freight rates does not confer countervailable benefits on the exporters of cut flowers. The air freight rates for cut flowers are freely negotiated and cannot serve as the basis for an affirmative subsidy determination. DOC Position: We agree. If maximum freight rates are established by a governmental authority, and the actual rates charged to an exporter either approach or meet that maximum, then the possibility exists that the government may be attempting to suppress freight rates in an effort to bestow bounties or grants on an exporter of a particular product. We verified the information submitted and have determined that the exporters of cut flowers in Colombia freely negotiate freight charges with the various privately-owned airlines. In fact, the exporters have been able to negotiate rates near, and sometimes below, the government-established minimum rates. Comment 11: Respondents disagree with the Department's preliminary determination that, with respect to cut flowers, the CAT program does not meet the test announced in Industrial Fasteners Group v. U.S., 585 F. Supp. 885 (CIT 1981), because its exclusive purpose was not the rebate of indirect taxes, but included the rebate of certain direct taxes as well. Respondents cite the final determination in Certain Steel Wire Rod from Argentina (47 FR 42393), in which the Department determined that the Reembolso was a bona fide program to rebate indirect taxes even though certain direct taxes were included in the calculation of the total tax incidence. In addition, respondents argue that the net bounty or grant calculated for the CAT program should be adjusted to reflect only that amount of the CAT rebate that exceeds the value of the indirect taxes on physically incorporated items that are allowed to be rebated under the Act. DOC Position: The Department maintains that an allowable export payment program must primarily function as a rebate of indirect taxes. In its final determination in Leather Wearing Apparel from Argentina (46 FR 23090), the Department noted the presence of small amounts of direct taxes. In this regard it stated: However, had the actual tax programs involved been more heavily weighed toward taxes, which may not be rebated on export without involving a subsidy, our conclusion might have been different. The Argentine Reembolso was by law explicitly designed to refund taxes that "bear directly or indirectly on export products." While the law establishing the CAT does relate the rebate to indirect taxes, only a very small portion (less than 5 percent) of the total taxes the government of Colombia claims to be eligible for rebate can be considered to be indirect taxes on physically incorporated items. Through the analysis of documentation provided, we are unable to conclude that the CAT payment, or an explicitly identified portion of that payment, is specifically intended as a rebate of indirect taxes. We therefore find that, with respect to cut flowers, the CAT program operates primarily to rebate taxes in general, and not indirect taxes. Comment 12: Respondents argue that the value of the effective basic CAT rebate should be reduced to reflect the domestic value-added content of cut flowers in Colombia. DOC Position: We verified that the basic CAT rate is applied to the domestic value-added content only when the exporters participate in a voluntary government plan which allows them to import raw materials on a duty-free basis. Those exporters not participating in this program receive CAT certificates based on the full f.o.b. value of the exported merchandise. Given the lack of uniformity in the exporters' participation in this voluntary plan and the administrative impossibility of verifying each of the 143 Colombian cut flower exporters' participation, we have determined that adjustment of the effective basic CAT rate to reflect the domestic added-value content is not warranted. Comment 13: Respondents argue that the value of the effective basic CAT rebate should be reduced to reflect a government-mandated deferral of benefits. DOC Position: Effective January 1, 1983, the government-mandated deferral of benefits was eliminated, making the CAT certificates redeemable at any time. Comment 14: Roses Inc. states that documents submitted in support of changes in the laws and regulations governing Colombia's foreign currency exchange controls be included in the public file. DOC Position: All non-confidential documents have been placed in the public file. Comment 15: Roses Inc. notes that a market research study was submitted to the ITA on June 4, 1981 in connection with the antidumping petition it filed on roses from Colombia. The study indicates that: (1) Several airlines provide flower transportation service; (2) the freight rates for cut flowers charged on shipments between Bogota and Miami are considerably lower than rates for flowers and other products transported by air along other routes: and (3) cut flowers require special handling due to their delicate and perishable characteristics. In addition, petitioners state that the Colombian exporters of cut flowers are receiving bounties or grants amounting to the difference between the government-established rates for cut flowers and the air cargo tariff rates posted by the U.S. Civil Aeronautics Board. This freight rate differential serves a Colombian policy of promoting exports of cut flowers. DOC Position: As already mentioned, we verified that there are several airlines carrying freight from Colombia to the United States, each of which is privately-owned, and that regardless of the published freight rates, the exporters are able to negotiate rates that are much lower than the government- established maximum rate. Through on-site inspections at the airport freight facilities in Bogota, we verified that cut flowers required neither special *2161 handling by the airlines nor specially adapted aircraft. Suspension of the Investigation The Department consulted with the petitioners and has considered the comments submitted with respect to the proposed suspension agreement. We have determined that the agreement will completely eliminate the bounties or grants with respect to the subject merchandise exported directly or indirectly to the United States, that the agreement can be monitored effectively, and that the agreement is in the public interest. Therefore, we find that the criteria for suspension of an investigation pursuant to section 704 of the Act have been met. The terms and conditions of the agreement, signed January 12, 1983, are set forth in Annex 1 to this notice. Pursuant to section 704(f)(2)(A) of the Act, the suspension of liquidation of all entries, entered or withdrawn from warehouse, for consumption of cut flowers from Colombia effective November 5, 1982, as directed in our notice of "Preliminary Affirmative Countervailing Duty Determination, Roses and Other Cut Flowers from Colombia" is hereby terminated. Any cash deposits on entries of cut flowers from Colombia pursuant to that suspension of liquidation shall be refunded and any bonds shall be released. The Department intends to conduct an administrative review within twelve months of the anniversary date of publication of this suspension as provided in section 751 of the Act. Notwithstanding the suspension agreement, the Department will continue the investigation if we receive such a request in accordance with section 704(g) of the Act within 20 days after the date of publication of this notice. (Sec. 704(f)(1)(A) of the Act) Gary N. Horlick, Deputy Assistant Secretary for Import Administration. January 12, 1983. Annex I--Suspension Agreement Roses and Other Cut Flowers From Colombia Pursuant to the provisions of section 704 of the Tariff Act of 1930, as amended (the Act), and § 355.31 of the Commerce Regulations, the United States Department of Commerce (the Department) enters into the following suspension agreement with the Colombian exporters of roses and other cut flowers (excluding miniature carnations) identified in Appendix I (the Exporters). On the basis of this agreement, the Department shall suspend its countervailing duty investigation initiated on August 26, 1982, with respect to roses and other cut flowers (excluding miniature carnations) from Colombia in accordance with the terms and provisions set forth below. A. Product Coverage: The agreement applies to "roses and other cut flowers" from Colombia (hereinafter referred to as the subject product). The subject product covers roses and other cut flowers (excluding miniature carnations), and bouquets, wreaths, sprays, or similar articles made from such flowers or other fresh plant parts as currently provided for in items 192.1800 and 192.2100 of the Tariff Schedules of the United States. B. Basis of the Agreement: 1. The Exporters account for over 85% of the total exports of the subject product to the United States from Colombia. These companies voluntarily agree to the following: a. The Exporters will not apply for or receive any benefits that the Department has determined or determines to be countervailable under the Tax Reimbursement Certificate Program (CAT) with respect to exports of the subject product entering the United States, or withdrawn from warehouse, for consumption on or after the effective date of this agreement. b. The Exporters will not apply for or receive benefits under any other program subsequently determined by the Department in this or any subsequent proceeding concerning other merchandise from Colombia to constitute bounties or grants under the Act which the Department believes benefit and the subject product. c. If any additional program is found to be countervailable in this or a subsequent proceeding, the Department shall officially notify the Exporters. d. The Exporters shall notify the Department, at least sixty days prior to taking any action, of any benefits they intend to apply for or of any benefits they will receive or expect to receive from the government of Colombia. Renunciation of the receipt of benefits under the CAT program or any program subsequently found to be contervailable does not constitute an admission by the Exporters that such benefits are bounties, grants, or subsidies within the meaning of the U.S. countervailing duty law or any other U.S. law. The exporters certify that no new countervailable benefits will be applied for or received with respect to exports of the subject product to the United States as a substitute for any benefits eliminated by this agreement. 2. In accordance with the provisions of the Act and applicable regulations, this agreement applies to the product described in Paragraph A which is produced in Colombia and exported directly or indirectly to the United States. 3. The effective date of this agreement is the date it is published in the Federal Register. C. Monitoring: The Exporters agree to supply to the Department such information as the Department deems necessary, including freight costs, to demonstrate that they are in full compliance with this agreement and to permit such periodic verification and data collection as the Department deems necessary in order to monitor this agreement pursuant to section 751 of the Act. The Exporters will notify the Department if they: (1) Transship the subject product through third countries, (2) alter their position with respect to any terms of the agreement, or (3) apply for or receive directly or indirectly the benefits of the programs described in Paragraph B for the production of the subject product exported to the United States. The Exporters certify that the Banco de la Republica (the Central Bank of the Republic of Colombia) has agreed voluntarily to monitor this agreement to ensure that benefits from the CAT certificate program are not received by the exporters, directly or indirectly. The Central Bank voluntarily agrees to notify the Department, on a quarterly basis, whether CAT certificates are received by the Exporters. The Exporters certify that they will notify the Department on a quarterly basis of the volume of their specific exports of the subject merchandise to the United States, as well as the total volume of such merchandise exported to the United States from Colombia. D. Rescission of the Agreement: 1. If the Department determines that the agreement is being or has been violated or no longer meets the requirements of Section 704(b) or (d) of the Act then Section 704(i) shall apply. Failure of the Central Bank of the Republic of Colombia to supply the quarterly reports described in Paragraph C in a timely fashion will constitute a violation of this agreement. 2. Should the Exporters' quarterly exports account for less than 85% of the subject product imported, directly or indirectly, to the United States from Colombia, the Department may rescind this agreement and reopen the investigation or issue a countervailing duty order, as appropriate, under § 355.32 of the Commerce Regulations. 3. In the event that air freight rates paid to export the subject product from *2162 Colombia to the United States approach the government-mandated maximum air freight rates for the subject product, the Department may consider rescinding this agreement and reopening the investigation or issuing a countervailing duty order, as appropriate. Signed on this 12th day of January 1983. For the Exporters. By Thomas A. Rothwell, Jr. Counsel for the Exporters. I have determined that the provisions of Paragraph B completely eliminate the bounties or grants being provided in Colombia with respect to roses and other cut flowers exported to the United States and that the provisions of Paragraph C ensure that this agreement can be monitored effectively pursuant to section 704(d) of the Act. Furthermore, I have determined that this agreement meets the requirements of section 704(b) of the Act and is in the public interest as required in section 704(d) of the Act. U.S. Department of Commerce. Gary N. Horlick, Deputy Assistant Secretary for Import Administration. Appendix I Alchalay Agricola Benilda Ltda. Agricola Papagayo Ltda. Agrodex Agrosuba Ltda. Bogota Flowers Ltda. CIBA Geigy Colombia S.A. Claveles Colombianos Ltda. CIA. Agricola y Commercial Ltda. (Roses Sabanilla) Floramerica Florandia Herrera Camacho Florlinda Ltda. Flores Alfaya Ltda. Flores Colombianas Ltda. Flores de Suba Ltda. Flores de la Sabana S.A. Flores del Campo Ltda. Flores del Cielo Ltda. Flores del Rio S.A. Flores Estella Ltda. Flores de Funza S.A. Flores Jancalito Ltda. Flores la Conchita Flores la Macarnea Ltda. Monroy Flores Los Rosales Ltda. Flores Mountgar Ltda. Flores San Carlos (Francisco Hennesy) Flores Santa Fe Ltda. Flores Technicas Ltda. Flores Tejas Verdes Ltda. Flores Tokai H.I. de Colombia S.A. Flores Tropicales Florex S.A. Flores de Los Andes Ltda. Flores Monteverde Ltda. Flores de la Pradera Ltda. Hacienda Curubital Ltda. Hana Ichi de Colombia Industrial Agricola Agroindustria Riofrio Ltda. Agricola El Jardin Ltda. Eduardo Cubillos Dianticola Colombiana Ltda. Edir Ltda. Flores Calichana Ltda. Flores El Chircal Ltda. Flores de Hunza Ltda. Flores la Union. Gomez Aranco Y CIA. S. en C. Flores S.A. "Floresa" Flores del Tambo Ltda. Florexpo Ltda. Hacienda la Embarrada Ltda. Inversiones Penas Blancas Ltda. Monserrate Ltda. Multiflores Ltda. Orquideas Acatayma Ltda. Santana Flowers Ltda. Rosas Tesalia Rosas el Juncal Ltda. Universal de Flores Ltda. "Unflor" Flores Timana Ltda. Cultivos del Lago Flores Monserrate Ltda. Inversiones Istra L Ltda. Iversiones Targa Ltda. Jardines Bacata Ltda. Jardines de Chia Ltda. Jardines de Colombia Ltda. Jardines de Los Andes Las Amalias S.A. Las Flores Ltda. Monteverde Ltda. Plantas Ornamentales de Colombia Ltda. Plantas S.A. Pompones Ltda. Rosaflor Ltda. Rosales de Colombia Ltda. Rosas de Colombia Ltda. Rosas Colombia Ltda. Rosas y Flores Ltda. Roselandia Ltda. Royal Carnations Ltda. Santa Helena S.A. Sansa Flowers Ltda. Sun Flowers Ltda. The Beall Company Cultivos Del Caribe Ltda. Exportaciones Bochica S.A. Floral Ltda. Flores Esmeralda Ltda. Inv. Targa de Occidente Ltda. Horticultura de la Sabana S.A. Jardines del Muna [FR Doc. 83-1361 Filed 1-17-83; 8:45 am] BILLING CODE 3510-25-M