86-c15

NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-301-003]

Roses and Other Cut Flowers From Colombia; Final Results of Countervailing
Duty Administrative Review and Revised Suspension Agreement

Monday, December 15, 1986

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AGENCY: International Trade Administration, Import Administration,
Commerce.

ACTION: Notice of final results of countervailing duty administrative review and
revised suspension agreement.

SUMMARY: On October 21, 1986, the Department of Commerce published the
preliminary results of its countervailing duty administrative review and proposed
revised suspension agreement on roses and other cut flowers from Colombia. The
review covers the period January 18, 1983 through June 30, 1983 and nine programs.

We gave interested parties an opportunity to comment on the preliminary results and
proposed revised suspension agreement. After reviewing all of the comments received,
we have determined that Colombian cut flower exporters have complied with the terms of
the suspension agreement. We have also revised the suspension agreement to include
programs found countervailable or potentially countervailable since the original
agreement.

EFFECTIVE DATE: December 15, 1986.

FOR FURTHER INFORMATION CONTACT:Bernard Carreau or Susan Silver, Office of
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION: .

Background

On October 21, 1986, the Department of Commerce ("the Department") published in the
Federal Register (51 FR 37321) the preliminary results of its countervailing duty
administrative review and proposed revised suspension agreement on roses and other
cut flowers from Colombia (48 FR 2158, January 18, 1983). We have now completed
that administrative review in accordance with section 751 of the Tariff Act of 1930 ("the
Tariff Act").

Scope of Review

Imports covered by the review are shipments of Colombian 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 192.1800, and other fresh cut flowers (excluding miniature carnations) under
item 192.2100 of the Tariff Schedules of the United States Annotated.
The review covers the period January 18, 1983 through June 30, 1983 and nine
programs: (1) CAT/CERT; (2) air freight reductions; (3) Resolution 59; (4) Decree 2366;
(5) Resolution 42; (6) FFA; (7) FFI; (8) FCF; and (9) FONADE.

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Analysis of Comments Received

We gave interested parties an opportunity to comment on the preliminary results. At the
request of three domestic interested parties, Roses, Inc., the Floral Trade Council, and the
California Trade Council ("the domestic parties"), we held a public hearing on November
7, 1986.

Comment 1: The domestic parties contend that the Colombian flower exporters have
circumvented the suspension agreement. The Colombian exporters agreed in the
suspension agreement not to receive benefits under the Tax Reimbursement Certificate
Program ("CAT") or any additional programs found to be countervailable in this or any
subsequent proceeding. However, the exporters have continued to receive
countervailable benefits from a program that replaced the CAT, the Tax Rebate Certificate
("CERT"). The CERT program is not related to the rebate of indirect taxes. The CERT rebate
rates of one percent (later revised to zero) for exports to the United States and of 25
percent (later revised to 20 percent) for exports to all other countries clearly indicate
that the exporters are circumventing the agreement. The effect of these disparate CERT
rates is to provide the exporters with approximately the same benefit as they had been
getting from the single five-percent CAT rebate on all exports before signing the
suspension agreement. There has been no change in the net receipt of funds from the
same program, which is now under a different name. The Department should therefore
cancel the suspension agreement and issue a countervailing duty order. To determine
the benefit, the Department should allocate all CERT benefits received by flower
exporters over total exports to all markets. The unique circumstances of this case
warrant consideration of total exports rather than just exports to the United States.

Department's Position: We disagree. We verified that, in accordance with the terms of the
suspension agreement, the exporters received no CAT payments on exports to the United
States during the period of review. Although the Colombian government later changed
the CAT program to the CERT program and changed the rate of rebate on flower exports
depending on the country of destination, we received certification from the Banco de la
Republica, Colombia's central bank, on August 15, 1984, that it withheld CERT
payments to cut flower exporters on shipments to the United States and Puerto Rico. In
light of the verfication and the certification, both of which are provided for in the
suspension agreement, we have no reason to believe that flower exporters have begun to
receive CERT payments on exports to the United States.
The higher CERT rebates on exports to countries other than the United States encourage
the export of flowers to those countries and do not affect shipments to the United States.
In fact, the dual rates provide a potential disincentive to export to the United States.

Comment 2: The domestic parties contend that the exporters have been receiving
preferential financing administered by the Export Promotion Fund (PROEXPO), an agency
of the Colombian government, in violation of the agreement. The Department found
Resolution 59 and Decree 2366 loans countervailable in the suspension of
countervailing duty investigation on certain textile mill products and apparel from
Colombia (50 FR 9863, March 12, 1985) ("the textiles suspension of investigation"). The
Department has preliminarily found in this review that the post-shipment loans under
Resolution 42 are countervailable. Because these programs existed before the effective
date of the agreement and because the exporters have been using them since signing the
agreement, the Department should cancel the suspension agreement and issue a
countervailing duty order.

Department's Position: We did not find short-term loans under Resolution 59 or long-term
loans under Decree 2366 to be countervailable until March 1985, over two years after the
signing of the suspension agreement. We find post-shipment financing under Resolution
42 countervailable only with the issuance of these final results. In accordance with з
355.32(b) of the Commerce Regulations, we have renegotiated the agreement to include
these loan programs. We believe that the renegotiation process is best accomplished
within the context of a section 751 administrative review. The delay in completion of this
review should not deprive the Colombian exporters of an opportunity to renegotiate the
agreement.

Comment 3: The domestic parties argue that the suspension agreement should be
canceled immediately because, in addition to the flaws cited above, the agreement is not
in the public interest and it is impossible to monitor. The legal requirements for a
suspension agreement are explicit and strict. Congress intended that suspension
agreements be used only in carefully controlled circumstances, as an unusual remedy for
subsidies. The effect of the agreement should be the same as that of imposing actual
duties. From its inception, this agreement has not covered all subsidies received by the
exporters. The Colombian government and Asocolflores, a trade association of
Colombian flower growers, have not been forthcoming in providing information vital to
the effective monitoring of the agreement. For example, at verification, after persistent
questioning by Department officials, an official of Acocolflores admitted that the Banco de
la Republica was deducting 7.5 percent of the CAT earnings on non-U.S. exports for a
special fund purportedly for technical research in the cut flower industry. Such
information should have been reported to the Department immediately.

Department's Position: The suspension agreement covered all programs that we
considered countervailable at the time of its signing. We verified that the exporters
complied with the terms of the agreement during the period of review. The Colombian
exporters could not have predicted at the time of the original agreement what programs
the Department would subsequently find countervailable. We have negotiated a revised
agreement specifically to include those programs found countervailable since then.
We believe in a rigorous execution of the terms of a suspension agreement, but not
without due process. Section 355.32(b) of the Commerce Regulations provide for the
possibility of renegotiating suspension agreements, except in the event of intentional
violations, which we do not find in this case.
We found no evidence that the Colombian government or Asocolflores had instituted a
program for technical research during the period of review. We will examine this isuse
further in the next administrative review of the agreement.
Contrary to the domestic parties' assertions, we believe that the agreement has been
effectively monitored. The exporters and the Banco de la Republica have provided
monitoring reports in accordance with the terms of the agreement. We also believe that
the revised agreement can be monitored effectively, that it completely eliminates any
countervailable benefits, and that it is in the public interest.

Comment 4: The domestic parties contend that interest rates available from the Fund for
Agricultural Financing (FFA) should not form the basis of a commercial benchmark for
loans provided by PROEXPO. FFA is a government preferential financing

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program set up to pursue certain policy objectives that are not in accordance with
commercial considerations. The Department should use a national average commercial
rate as a benchmark. Furthermore, it is inappropriate for the Department to change from
the benchmark it determined in the textiles suspension of investigation.

Department's Position: We disagree. We have found that the predominant alternative
sources of financing used by agricultural enterprises in Colombia are the FFA and the
Agrarian Fund. The amount of pure commercial financing raised by the agricultural
sector in Colombia is so small as to be insignificant. It is inappropriate to conclude that
this small amount would accurately represent the actual "commercial" environment
facing an agricultural firm absent the preferential financing. In an economy such as
Colombia's where the government controls a large part of the agricultural credit
market, we must consider non-targeted government funds as a legitimate part of the
commercial environment facing any agricultural firm. Even the benchmark that we used
in the textiles suspension of investigation was a weighted average of commercial lending
rates and government-mandated rates because the government also controls a significant
portion of the credit market for other sectors. However, that weighted-average
benchmark would be inappropriate in this case because it includes sources that are either
not available or not used in large measure by agricultural enterprises. See also, final
affirmative countervailing duty determination on live swine and fresh, chilled and
frozen pork products from Canada (50 FR 25097, June 17, 1985).

Comment 5: The Colombian exporters note that the interest rate on Resolution 59 loans
was changed to 22 percent on March 5, 1985. Further, the Department did not use the
most recent information available in determining the average interest rates for the FFA
and the Agrarian Fund. The average rate of the two should be 22.5 percent, as the
Department found in the preliminary affirmative countervailing duty determination
on miniature carnations from Colombia (51 FR 37934, October 27, 1986). Finally,
long-term interest rates on FFA loans range from 15 to 21 percent. The Department
should use the average of these rates rather than the highest rate.

Department's Position: We agree that the current interest rate on Resolution 59 loans is
22 percent and the current average of the FFA and the Caja Agraria is 22.5 percent. Our
information on current long-term FFA loans however is that the interest rate is a flat 21
percent.

Comment 6: The Colombian exporters argue that the requirement that all outstanding
loans be refinanced is excessively onerous since the actual interest rate differentials, as
suggested in Comment 5, are very small and would probably lead to de minimis benefts.

Department's Position: We disagree. Section 704 ofthe Tariff Act requires that a
suspension agreement completely eliminate the net subsidy on the merchandise exported
to the United States. Furthermore, we have no information on the current level of
PROEXPO financing used by the exporters and no way to calculate the current benefit.

Final Results of Review

After considering all of the comments received, we determine that the signatories to the
suspension agreement have complied with the terms of the suspension agreement during
the review period. The agreement can remain in force only as long as shipments covered
by it account for at least 85 percent of exports of such merchandise to the United States.
Our information indicates that the signatories comprised over 93 percent of exports of
the merchandise to the United States during the period of review.
Because the signatories have used two programs that we have found countervailable in
another Colombian case, we revised the suspension agreement. The revised suspension
agreement also includes programs investigated in the textiles suspension of investigation.
These programs are: (1) Resolution 14, which provides long-term financing at preferential
rates for capital investment; (2) duty and tax exemptions for capital equipment under the
Plan Vallejo; (3) Export Credit Insurance, which provides guarantees on loans at
preferential rates, and (4) countertrade, which permits companies to engage in barter
arrangements if such trade creates new markets.
This administrative review, revised suspension agreement, and notice are in accordance
with sections 704 and 751(a)(1) of the Tariff Act (19 U.S.C. 1671c and 1675(a)(1)) and зз
355.10, 355.31, and 355.32(b) of the Commerce Regulations (19 CFR 355.10, 355.31, and
355.32(b)).
Dated: December 3, 1986.

Gilbert B. Kaplan,

Deputy Assistant Secretary, Import Administration.

Revised Suspension Agreement

Pursuant to the provisions of section 704 of the Tariff Act of 1930 ("the Act") and з 355.31
of the Department of Commerce Regulations, the Department of Commerce ("the
Department") and the producers and exporters of roses and other cut flowers (excluding
miniature carnations) in Colombia listed in Appendix I hereto (hereinafter "the
producers and exporters"), enter into the following Revised Suspension Agreement ("the
Agreement"). In consideration of this Agreement, the Central Bank of Colombia,
PROEXPO and any other relevant administering authorities agree voluntarily to take such
steps necessary to ensure that the renunciation of benefits by the producers and
exporters is implemented and monitored, and that the Department is informed of any
other companies that are exporting, or begin exporting to the United States, roses and
other cut flowers (excluding miniature carnations) as defined by paragraph I below. On
the basis of the foregoing, the Department revises the suspension agreement that became
effective on January 18, 1983 (48 FR 2158) with respect to roses and other cut flowers
(excluding miniature carnations) from Colombia to include additional programs and
additional exporters in accordance with the terms and conditions set forth below.

I. Scope of the Agreement

The Agreement applies to roses and other cut flowers from Colombia ("the subject
products"). The subject products cover 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 Annotated.

II. Basis of the Agreement

The producers and exporters listed in Appendix I, accounting for more than eighty-five
(85) percent of the total exports of roses and other cut flowers (excluding miniature
carnations) from Colombia to the United States, agree to the following:
a. The producers and exporters will not apply for, or receive, tax certificates or other
rebates, remissions or exemptions under the Tax Reimbursement Certificate program
(CAT/CERT) or any other provision of

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law that constitute, as determined by the
Department, an overrebate of indirect taxes on shipments of the subject products
exported, directly or indirectly, from Colombia to the United States.
b. The producers and exporters will not apply for, or receive, any short-term export
financing provided by the Export Promotion Fund, PROEXPO (e.g., Resolution 59 and
Resolution 42 loans) and under any special government credit line for cut flowers on or
after the effective date of the Agreement, other than those offered at non-preferential
terms and at or above the most recent short-term benchmark interest rate determined by
the Department in this proceeding. By the thirtieth day from the effective date of this
Agreement, the producers and exporters shall repay, or begin negotiating the refinancing
of, any such financing outstanding as of the effective date of this Agreement on
non-preferential terms and at or above the most recent short-term benchmark interest
rate determined by the Department in this proceeding. The repayment or refinancing
shall be completed no later than ninety days after the effective date of this Agreement.
c. The producers and exporters will not apply for, or receive, any long- term financing
provided by the Export Promotion Fund, PROEXPO (e.g., Resolution 2366 loans and
Resolution 14 loans) and under any special government credit line for cut flowers, other
than those offered on non-preferential terms at or above the most recent long-term
benchmark interest rate determined by the Department in this proceeding. Any such
financing outstanding as of the effective date of this Agreement shall be repaid, or
refinanced, on non- preferential terms and at or above the most recent long-term
benchmark interest rate determined by the Department, by the original due date of the
loan, or by the sixtieth day from the effective date of this Agreement, whichever comes
first. Any such repayment must be consistent with Colombian bankruptcy laws and
procedures.
d. The producers and exporters will not apply for, or receive, any benefits from duty and
tax exemptions for capital equipment under the Plan Vallejo.
e. The producers and exporters shall notify the Department in writing prior to applying
for approval for any countertrade transaction, and prior to applying for any benefits from
the Export Credit Insurance program with respect to exports of the subject products
exported, directly or indirectly, to the United States.
f. The producrs and exporters will not apply for, or receive, any bounties or grants on
shipments of the subject products exported, directly or indirectly, from Colombia to
the United States which are countervailable under the Act. Bounties or grants on exports
of the subject products to the United States include any which have been found or are
likely to be found countervailable in any investigation, or review under section 751 of the
Act, involving any product from Colombia, including bounties or grants which the
Department determines may apply to other products or exports to other destinations
that cannot be segregated as applying solely to such other products or exports.
g. The producers and exporters shall notify the Department in writing at least thirty days
prior to applying for or accepting any new benefit which is, or is likely to be, a
countervailable bounty or grant on shipments of the subject products exported from
Colombia.
h. If any program under which benefits have been received in the past, and which is
included in this Agreement, is found not to constitute a bounty or grant under the Act in
the final determination or the final results of an administrative review of this Agreement
under section 751 of the Act in this proceeding, then the renunciation of the benefits
under that program will no longer be required.

III. Monitoring of the Agreement

1. The producers and exporters agree to supply any information and documentation
which the Department deems necessary to demonstrate that there is full compliance with
the terms of this Agreement.
2. The producers and exporters will notify the Department if they:
a. Transship the subject products through third countries to the United States;
b. Alter their position with respect to any terms of the Agreement; or
c. Apply for, or receive, directly or indirectly, the benefits of the programs described in
Section II for the manufacture or export of the subject products exported, directly or
indirectly, from Colombia.
3. The Department will request information and may perform verifications periodically
pursuant to administrative reviews conducted under section 751 of the Act, in addition to
exercising its rights under paragraphs III.1 and 2, above.
4. The producers and exporters agree to permit such verification and data collection as
deemed necessary by the Department in order to monitor this Agreement.
5. The producers and exporters agree to notify the Department of the volume and value of
exports of the subject products to the United States within 45 days from the end of each
calendar quarter.
6. The producers and exporters agree to provide to the Department a periodic
certification that they continue to be in compliance with the terms of the Agreement. A
certification will be provided within 45 days from the end of each calendar quarter.

IV. General Provisions

1. In entering into this Agreement, the producers and exporters do not admit that any of
the programs investigated constitute countervailable benefits within the meaning of the
Act or the GATT Subsidies Code.
2. The provisions of section 704(i) shall apply if:
a. The producers and exporters withdraw from this Agreement; or
b. The Department determines that the Agreement is being or has been violated or no
longer meets the requirements of section 704 of the Act.
3. If the Department learns of any new producers or exporters to the United States of the
subject products, it may attempt to negotiate an agreement with the additional producers
or exporters.
4. Additionally, should exporters to the United States by the producers and exporters
account for less than 85 percent of the subject products imported, directly or indirectly,
into the United States from Colombia, the Department may attempt to negotiate an
agreement with addtional producers or exporters or may terminate this Agreement and
reopen the investigation under з 355.32 of the Commerce Regulations. If reopened, the
investigation will be resumed for all producers and exporters of the subject products as if
the affirmative preliminary determination were made on the date that the Department
terminates this Agreement.

V. Effective Date

The effective date of this Agreement will be the date of publication of the final results of
the current administrative review in the Federal Register. The provisions of paragraphs
II. a-h apply with respect to exports of

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the subject products on or after the
effective date. No applications may be made after the effective date of this Agreement for
the benefits described in Section II on the subject products exported from Colombia
before the effective date.
Signed on this 3rd day of December 1986.

Thomas A. Rothwell, Jr.,

Heron, Burchette, Ruckert, and Rothwell.

I have determined pursuant to section 705(b) of the Act that the provisions of Section II
completely eliminate the benefits that the Government of Colombia is providing with
respect to roses and other cut flowers (excluding miniature carnations) exported,
directly or indirectly, from Colombia to the United States. Furthermore, I have
determined that this revised suspension agreement is in the public interest, that the
provisions of Section III and the attached undertaking of the Government of Colombia
ensure that this Agreement can be monitored effectively, and that this Agreement and
attached undertaking meet the requirements of section 704(d) of the Act.
Dated: December 3, 1986.
United States Department of Commerce.

Gilbert B. Kaplan,

Deputy Assistant Secretary, Import Administration.

December 3, 1986.

Colombian Government Trade Bureau, PROEXPO, Suite 810, 1701 Pennsylvania Avenue
NW., Washington, DC
Investigation No. C-301-003, Total Number of Pages: 2
This document contains no confidential information.
Mr. Gilbert B. Kaplan,
Deputy Assistant Secretary, Import Administration, U.S. Department of Commerce,
Room 3099, 14th and Constitution Avenue NW., Washington, DC 20230
Re: Administrative Review of Suspension Agreement on Roses and Other Cut Flowers
from Colombia
Dear Mr. Kaplan: In consideration of the Suspension Agreement between the producers
and exporters of roses and other cut flowers in Colombia and the Department of
Commerce, the Government of Colombia voluntarily agrees to take such steps as are
necessary to ensure that the renunciation of benefits by the producers and exporters in
this Agreement is effectively implemented and monitored, including:
1. Notifying the relevant authorities of the Government of Colombia of the terms of this
Agreement in order to ensure action by those agencies consistent with the terms of this
paragraph;
2. Supplying any information and documentation that the Department deems necessary
to demonstrate full compliance by the producers and exporters with the terms of this
Agreement;
3. Permitting such verification and data collection as deemed necessary by the
Department in order to monitor this Agreement;
4. Notifying the Department if it becomes aware that a producer or exporter is
transshipping the subject products through third countries to the United States;
5.Notifying the Department if it alters its position with respect to any of the terms of this
Agreement;
6. Notifying the Department if it changes the tax rebate rate under the CERT program,
indirect tax rates, or import duty rates for the subject products;
7. Notifying the Department if a producer or exporter of the subject products applies for,
or receives, directly or indirectly, the benefits of the programs described in paragraph II.
a-f for the manufacture or export of the subject products exported from Colombia;
8. Notifying the Department if the producers or exporters become eligible for, apply for,
or receive any new or substitute benefits on the subject products exported from
Colombia in contravention of paragraph II.g of the Agreement; and
9. Notifying the Department of any new firms that it learns are exporting the subject
products to the United States.
The Central Bank, PROEXPO, and any other administering authority also voluntarily agree
to provide to the Department within 45 days of the end of each calendar quarter all
relevant information deemed by the Department to be necessary to maintain this
agreement. The information shall include, but not be limited to:
1. A certification (provided after consultation with each agency responsible for
administering the programs in Section II) that the producers and exporters have not
applied for or received any benefits described in Section II on shipments of the subject
products exported from Colombia;
2. A certification that the producers and exporters continue to account for at least 85
percent of total exports of roses and other cut flowers exported, directly or indirectly,
from Colombia to the United States; and
3. A certification that the producers and exporters continue to be in full compliance with
the Agreement.
The Central Bank, PROEXPO and any other administering authority's voluntary
undertaking is not an admission that any of the programs investigated or included in the
Revised Suspension Agreement constitute countervailable benefits under the Act or the
Subsidies Code.
The Central Bank, PROEXPO and any other administering authority recognize that this
undertaking is essential to the continuation of the Agreement.
Sincerely yours,

Andres Lloreda,

Commercial Attache.

[FR Doc. 86-27861 Filed 12-12-86; 8:45 am]

BILLING CODE 3510-DS-M