NOTICES
DEPARTMENT OF COMMERCE
[C-301-003]
Roses and Other Cut Flowers From Colombia; Preliminary Results of
Countervailing Duty Administrative Review
Monday, March 2, 1987
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AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty Administrative
Review.
SUMMARY:
The Department of Commerce has conducted an administrative review of the agreement
suspending the countervailing duty investigation on roses and other cut flowers from
Colombia. The review covers the period July 1, 1983 through December 31, 1985 and
fourteen programs.
As a result of the review, the Department has preliminarily determined that Colombian
cut flower exporters complied with the terms of the suspension agreement that as in effect
during the review period. We invite interested parties to comment on these preliminary
results.
EFFECTIVE DATE: March 2, 1987.
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 December 15, 1986, the Department of Commerce ("the Department") published in the
Federal Register (51 FR 44930) the final results of its last administrative review of the
agreement suspending the countervailing duty investigation on roses and other cut
flowers from Colombia (48 FR 2158, January 18, 1983). On January 22, 1986, we
received requests in accordance with section 355.10 of the Commerce Regulations for an
administrative review of the agreement from three domestic interested parties, Roses
Inc., the California Floral Trade Council, and the Floral Trade Council. On January 31,
1986, we received review requests from the Asociacion Colombiana de Exportadores de
Flores and the Association of Floral Importers of Florida. We published the initiation of
the review of February 18, 1986 (51 FR 5751). The Department has now conducted that
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 July 1, 1983 through December 31, 1985 and fourteen
programs: (1) CAT/CERT; (2) air freight reductions; (3) Resolutions 59 and 22; (4) Decree
2366; (5) research and development fund; (6) duty and tax exemptions under Plan
Vallejo; (7) FFA; (8) FFI; (9) FCE; (10) FONADE; (11) Resolution 42; (12) benefits to Free
Industrial Zones; (13) preferential export insurance; and (14) countertrade.
Revised Suspension Agreement
In our last administrative review, we found that Colombian cut flower exporters used
working capital financing under Resolution 59 and fixed asset financing under Decree
2366, programs that we determine to be countervailable in the suspended
countervailing duty investigation on certain textile mill products and apparel from
Colombia (50 FR 9863, March 12, 1985) ("the textiles suspension of investigation").
Therefore, we revised the suspension agreement to include any programs that we
consider countervailable or potentially countervailable, including Resolution 59 loans
and Decree 2366 loans. The revised agreement did not go into effect until December 15,
1986. Therefore, the current administrative review concerns compliance with the original
agreement that was in effect during the period of review.
Analysis of Programs
(1) CAT/CERT
The Government of Colombia provided payments to exporters to cut flowers in the form
of negotiable Tax Credit Certificates ("CAT") that could be used for the payment of various
taxes or sold on the stock exchange at a discount. Rebates were calculated as a
percentage of (1) the value of the exported product attributable to the domestic
value-added content, an (2) imported inputs on which duties have been paid. We
preliminarily determine that Colombian cut flower exporters did not receive CAT
payments on exports of this merchandise to the United States during the period of review.
On April 1, 1984, the Colombian government established in Law 48/83 the Tax Rebate
Certificate ("CERT"), which replaces the CAT. The CERT is intended to rebate all or part of
the indirect taxes paid by exporters. Like the CAT, the CERT is freely negotiable on the
stock market and can be used for paying a variety of taxes.
The Banco de la Republica, Colombia's central bank, certified to the Department on
February 19, 1986 that it has been withholding CAT or CERT payments from signatories to
the agreement on shipments to the United States and Puerto Rico since January 13, 1983.
Therefore, we preliminarily determine that exporters did not receive CAT or CERT
payments on shipments of this merchandise to the United States during the period of
review.
(2) Air Freight Reductions
The Civil Aeronautics Board (DAAC), an agency of the Colombian government,
established in Resolution 5833 minimum and maximum air freight rates for a variety of
products, including cut flowers. The maximum DAAC rate for cut flowers is considerably
lower than the air freight rates for other products carried over the same routes, thereby
raising the possibility that the Colombian government is attempting to suppress cut
flower freight rates. Section D(3) of the suspension agreement states that the Department
may consider rescinding the agreement if the air freight rates paid by cut flower exporters
approach the government-mandated maximum rates set by the DAAC. If we found such
rates, we might consider them indicative of government control rather than the result of
competitive forces.
Pursuant to Resolution 5833, updated by Resolution 6333, the minimum and maximum
air freight rates in effect during the review period for fresh cut flowers were US $0.45 and
$0.60 per kilogram, respectively, for flowers shipped from Colombia to the United
States. We found that most rates negotiated between cut flower exporters and private
air-freight companies were lower than the DAAC maximium rates during the period of
review. In a few cases, the rates exceeded the maximum rates because of a charge for
cooling
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services. This charge is not controlled by the DAAC. Generally, we find
that freight rates for cut flowers are a function of competition in the air freight market and
not the result of government suppression of those rates. We therefore preliminarily
determine that this program provides no benefit and no reason to consider rescinding the
suspension agreement.
(3) Resolutions 59 and 22
Resolution 59, which was passed by the Monetary Board of Colombia on August 30,
1972, and Resolution 22, which was passed by the Board of Directors of the Export
Promotion Fund ("PROEXPO") on December 13, 1984, provide working capital financing at
preferential rates to firms that manufacture, store, or sell products destined for export.
All industries are eligible, except producers of coffee, petroleum, and petroleum
by-products. Resolution 59 and Resolution 22 loans are administered by PROEXPO, an
agency of the Colombian government. Resolution 59 loans are for 180 days and the
interest is paid quarterly, in advance. Resolution 22 loans are for periods up to one year
with interest paid quarterly, in advance. In February 1986, the maximum annual interest
rate was 22 percent. Colombian exporters of cut flowers received working capital loans
under Resolutions 59 and 22 during the period of review.
For a benchmark rate, we used the short-term interest rate available from the Fund for
Agricultural Financing ("FFA") and the Agrarian Fund, the major sources of financing to
agriculture. The rate for both funds in February 1986, the most recent information
available, was 22.5 percent. On this basis, we preliminarily determine the current interest
differential to be 0.5 percent.
Since we determined Resolution 59 to be counteravailable in the textiles suspension of
investigations we included it in the revised suspension agreement of December 15, 1986.
The revised agreement requires Colombian cut flower exporters not to apply for, or
receive, any short-term export financing from PROEXPO, including Resolution 59 and 22
loans. The revised agreement requires the exporters to repay any such outstanding loans
immediately or renegotiate the interest rates to rates that are at or above the most recent
short-term benchmark interest rate determined by the Department.
(4) Decree 2366
Under Decree 2366, PROEXPO provides exporters with long-term financing for capital
investment at preferential rates. The amount of the loan cannot exceed 100 million pesos,
the maximum term is five years, and the annual interest rate is 18 percent. Exporters of
cut flowers used this program during the period of review.
There are no long-term loans available from the commercial banking system in
Colombia. For a benchmark, we used the long-term interest rate of 21 percent available
from the FFA in February 1986, the most recent information available. On this basis, we
preliminarily determine the current interest differential to be 3 percent.
Since we determined this program to be countervailable in the textiles suspension of
investigation, we included it in the revised suspension agreement of December 15, 1986.
The revised agreement requires Colombian cut flower exporters not to apply for, or
receive, any long-term financing provided by PROEXPO, including Decree 2366 loans.
The revised agreement requires the exporters to repay any such outstanding loans
immediately or renegotiate the interest rates to rates that are at or above the most recent
long-term benchmark interest rate determined by the Department.
(5) Research and Development Fund
Petitioners alleged that a portion of the CAT/CERT rebates earned on exports to countries
other than the United States was being diverted into a special fund for research and
development and the promotion of flower consumption in the United States.
The Colombian government states that the plan for this fund was never put into effect, and
there were no research and development programs available for the floriculture industry
during the review period. On July 23, 1986, PROEXPO issued Resolution No. 10, which
opened a special account in the Banco de la Republica for the diversification and
development of the cultivation of flowers and vegetables for external markets. The
Resolution requires that any funds expended under this program be disbursed in a
manner consistent with the suspension agreement.
On this basis, we preliminarily determine that exporters did not use this program during
the period of review.
(6) Duty and Tax Exemptions under Plan Vallejo
The Plan Vallejo exempts exporters from import duties on imported raw materials,
intermediate products, and capital goods used to produce exported products. The
exemption of customs duties and indirect taxes on imports of physically incorporated
inputs is not countervailable. However, exemptions on non-physically incorporated
inputs, such as imported capital goods, are countervailable when the exemption is
conditioned upon exportation.
We found that 14 companies under review received exemptions on machinery used for
fumigation, irrigation, and cooling devices. Since we preliminarily determined this
program to be countervailable in the preliminary affirmative countervailing duty
determination on miniature carnations from Colombia (51 FR 37934, October 27,
1986), we included it in the revised suspension agreement of December 15, 1986 and
required that Colombian cut flower exporters not apply for or receive any benefits from
this program.
(7) Other Programs
We examined the following programs and preliminarily determine that exporters of cut
flowers did not use them during the period of review:
(A) Fund for Agricultural Financing ("FFA");
(B) Fund for Industrial Financing ("FFI"):
(C) Capital Formation Fund ("FCE");
(D) Fund for National Economic Development ("FONADE");
(E) Resolution 42 Loans;
(F) Benefits to Free Industrial Zones;
(G) Preferential Export Insurance; and
(H) Countertrade.
Preliminary Results of Review
As a result of our review, we preliminarily determine that the signatories to the
suspension agreement complied with the terms of the suspension agreement that was in
effect during the review period. The agreement can remain in force only so 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 87
percent of exports of the merchandise to the United States during the period of review.
Interested parties may submit written comments on these preliminary results and may
request disclosure and/or a hearing within 14 days of the date of publication of this
notice. Any hearing, if requested, will be held on the 14th day after publication, or the
following workday. Any request for an administrative protective order must be made no
later than 5 days after the date of publication. The Department will publish the final
results of this administrative review, including the results of its analysis of any issues
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raised in any such written comments or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the
Tariff Act (19 U.S.C. 1675(a)(1)) and § 355.10 of the Commerce Regulations (19 CFR
355.10).
Dated: February 20, 1987.
Gilbert B. Kaplan,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 87-4309 Filed 2-27-87; 8:45 am]
BILLING CODE 3510-DS-M