NOTICES
DEPARTMENT OF COMMERCE
(C-301-003)
Roses and Other Cut Flowers From Colombia; Preliminary Results of
Countervailing Duty Administrative Review and Intent Not To Terminate Suspended
Investigation
Thursday, October 7, 1993
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AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of preliminary results of Countervailing Duty Administrative Review
and Intent Not to Terminate Suspended Investigation.
SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the agreement suspending the countervailing duty
investigation on roses and other cut flowers from Colombia. This review covers the
period January 1, 1988 through December 31, 1990 and eight programs. On January 31,
1991, the Government of Colombia (GOC) requested termination of the suspended
investigation based on abolishment of the programs for a period of at least three
consecutive years, in accordance with 19 CFR 355.25(a)(1) and 355.25(b)(1). Therefore,
we examined the programs to determine if each program had been abolished for a period
of at least three years. We preliminarily determine that the Government of Colombia
and the signatories/exporters of roses and other cut flowers have complied with the
terms of the suspension agreement. However, we also preliminarily determine that the
GOC has not eliminated each program for a period of at least three consecutive years.
Therefore, we preliminarily determine that the GOC has not met all the requirements for
termination of the countervailing duty suspended investigation on roses and other cut
flowers as outlined in the Commerce Regulations.
For the purpose of revoking a countervailing duty order or terminating a suspended
countervailing duty investigation based on three consecutive years of elimination of
all subsidies pursuant to 19 CFR 355.25(a)(1), it is the Department of Commerce current
policy that administrative reviews must be requested and conducted for each of three
consecutive years. See Memorandum from Joseph A. Spetrini, Deputy Assistant
Secretary for Compliance, to Alan M. Dunn, Assistant Secretary for Import
Administration, of December 14, 1992, which fully describes this issue. However, the
request for termination in this case predates the above policy. Therefore, although no
review was requested for 1989, we nevertheless have examined a three-year period in
order to determine whether termination is appropriate. We invite interested parties to
comment on these results.
EFFECTIVE DATE: October 7, 1993.
FOR FURTHER INFORMATION CONTACT: Robert Bolling or Melissa Skinner, Office of
Agreements Compliance, International Trade Administration, U.S. Department of
Commerce, Washington, DC 20230; telephone: (202) 482-3793.
SUPPLEMENTARY INFORMATION:
Background
On January 17, 1991, the Department published a notice of "Opportunity to Request an
Administrative Review" (56 FR 1793). On January 31, 1991, the GOC requested a
termination administrative review of the suspended countervailing duty investigation
covering roses and other cut flowers (48 FR 2158; January 18, 1983) under 19 CFR
355.25(a)(1) and 355.25(b)(1). On March 5, 1991, the Department initiated this review,
covering the period January 1, 1988 through December 31, 1990 (56 FR 9197). The
Department is now conducting this review in accordance with section 751 of the Traffic
Act of 1930, as amended (the Tariff Act), and 19 CFR 355.22 and 355.25.
Scope and Review
Imports covered by this review are shipments of roses and other cut flowers from
Colombia. During the review period, the merchandise covered by this suspension
agreement was classifiable under Harmonized Tariff Schedule (HTS) item numbers
0603.10.60, 0603.10.70. 0603.10.80, and 0603.90.00. The HTS item numbers are
provided for convenience and Customs purposes. The written description remains
dispositive.
The review covers the period January 1, 1988 through December 31, 1990, and eight
programs: (1) Tax Reimbursement Certificate Program; (2) The Fund for the Promotion of
Export Loans (working- and fixed-capital); (3) Plan Vallejo; (4) Air Freight Rates; (5) Free
Industrial Zones; (6) Export Credit Insurance; (7) Countertrade; and (8) Research and
Development. We visited three producers/exporters of the subject merchandise,
Floramerica, Inc.
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(Floramerica), Minispray, Inc. (Minispray), and Agropecuria
Cuernavaca (Cuernavaca) (collectively, the three companies) to verify the accuracy of
the government responses.
Analysis of Programs
(1) Tax Reimbursement Certificate Program
The Certificado de Reembolso Tributario (CERT) or Tax Reimbursement Certificate
program permits exporters to receive a full or partial rebate on indirect taxes based on
the value of their exports of specific products to specific destinations. Decree 107, issued
by the Colombian Government in January 1987, set the level of CERT payments at zero
percent for exports of the subject merchandise to the United States and Puerto Rico.
Shipments to the rest of the world were eligible for CERT payments of nine percent. In
July 1988, the Ministry of Economic Development issued Decree 1374, which maintained
a zero percent rate for shipments of the subject merchandise to the United States and
Puerto Rico and reduced the rate for the rest of the world to five percent.
CERT payments are received in the following manner: the exporter applies for CERTs after
exportation of the merchandise by preparing a form for the commercial bank to present
to the Banco de la Republica (Central Bank). The form indicates the destination and the
date of shipment of the merchandise. The commercial bank acts as an intermediary
between the exporter and the Central Bank. Other shipment information, such as the port
of exportation, is included in this document. After receipt of this form from the
commercial bank, the Central Bank verifies the accuracy of the information. After the
Central Bank verifies the information and approves the application, it disburses the
payment.
Under the terms of the suspension agreement, producers and exporters will not apply for,
or receive, tax certificates or other rebates, remissions, or exemptions under the CERT
program for exports of the subject merchandise to the United States. At verification, we
examined the GOC's accounting records and found that this program was not used by the
exporters of the subject merchandise for exports to the United States during the period of
review (POR). In addition, we examined the three companies' accounting records which
indicated that the companies did not use the program during the POR. Therefore, we
preliminarily determine that this program did not confer any countervailable benefits
upon exports of the subject merchandise to the United States during the POR. Moreover,
since 1987, when the GOC restructured the CERT program, exports of the subject
merchandise to the United States are no longer eligible to receive countervailable
benefits (i.e., zero rate certificates). Therefore, we also preliminarily determine that the
GOC has eliminated the subsidy on the merchandise by abolishing this program for the
merchandise for a period of at least three consecutive years.
(2) The Fund for the Promotion of Export Loans
The Fund for the Promotion of Export Loans (PROEXPO) provides working capital
(short-term) and fixed capital (long-term) financing to the export sector of the Colombian
economy. Most loans that PROEXPO makes are short-term (less than a year). PROEXPO
loans are administered through Commercial banks or finance corporations. Exporters
must apply to a commercial bank or finance corporation for a PROEXPO loan. The bank or
corporation assesses the creditworthiness of the borrower and the purpose of the loan
and acts as a financial intermediary by providing a portion of the PROEXPO loan.
After the loan is approved by the financial institution, a copy of the loan document is
forwarded to PROEXPO. The exporter is given one year to repay the loan to the fund
through the commercial bank. The commercial bank guarantees repayment of the loan to
PROEXPO. If the exporter is unable to repay the loan, the commercial bank pays
PROEXPO and then recovers payment or security from the exporter.
PROEXPO also distributes long-term loans which are administered through commercial
banks and finance corporations. Long-term loans are based on the cost of the fixed asset
that will be purchased with the loan amount.
When the suspension agreement was signed, the Department established short- term and
long-term benchmark interest rates. The short-term benchmark interest rate was 22.5
percent, and the long-term benchmark interest rate was 21.0 percent. In 1987, the GOC
passed PROEXPO Resolution 11/87 governing working capital (short-term) financing. This
resolution established that interest rates on working capital loans would be at the higher
of the Department's short-term benchmark interest rate of 22.5 percent or the Depositos a
Termino Fijo (DTF) interest rate (a time deposit rate that vaires according to market
forces), payable at the end of each quarter. Subsequently, in 1988, the GOC passed
PROEXPO Resolution 9/88 which established that interest rates on working capital loans
would be at the higher of 25 percent or the DTF interest rate, payable at the end of each
quarter. In 1987, the GOC passed PROEXPO Resolution 4/87 governing fixed capital
(long-term) financing. This resolution established that interest rates on fixed capital loans
would be at the Department's long-term benchmark interest rate of 21.0 percent. Also, in
1987, the GOC passed PROEXPO Resolution 13/87 which established that interest rates on
fixed capital (long-term) loans would be at the higher or 25 percent or the DTF rate,
payable at the end of each quarter.
Under the terms of the suspension agreement, producers and exporters will not apply for,
or receive, for exports of the subject merchandise to the United States, any short-or
long-term export financing provided by PROEXPO other than that offered on
non-referential terms and at or above the established Department benchmark interest
rate. At verification, we examine the appropriate GOC accounting records and found that
PROEXPO charged interest rates on its short-term and long-term loans above the
established Department benchmark interest rate for the subject merchandise during the
POR. In addition, we found that the loans were issued on non-preferential terms. Finally,
we examined the three companies' accounting records which confirmed that the
companies received PROEXPO loans for the subject merchandise on non- preferential
terms and at interest rates at or above the established Department benchmark rate for
exports of the subject merchandise to the United States during the POR. Therefore, we
preliminarily determine that this program did not confer any countervailable benefits
upon exports of the subject merchandise to the United States during the POR. Although
no loans at preferential rates were received by exporters of the subject merchandise, the
program itself has not been abolished. Rather, the above scenario characterizes non-use
of the program.
Therefore, we preliminarily determine that the GOC has not eliminated the subsidy on the
merchandise by abolishing this program for the merchandise for a period of at least three
consecutive years.
(3) Plan Vallejo
Plan Vallejo was established in 1967 under government Decree 444. Its purpose is to
exempt exporters from certain indirect taxes and customs duties assessed on imported
capital equipment used to produce finished products for export. The Instituto
Colombiano de Comercio Exterior
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(INCOMEX) administers the Plan Vallejo
program.
Under Decree 444, Plan Vallejo has two types of exemptions and commitments. Article
173(c) exempts exporters from customs duties and surcharges on imports, and defers
payment of the value-added tax until export of the finished product. In order to receive
these benefits, the exporter must commit to export a minimum of 70 percent of the
merchandise produced with imported capital goods. Article 174 exempts exporters from
customs duties and surcharges on imports, and defers payment of the value-added tax
until export of the finished product. In order to receive these benefits, the exporter
commits to export a minimum of 1.5 times the value of the imported capital good.
INCOMEX has a special committee which evaluates all Plan Vallejo applications. After an
application is approved, in order to assure that the commitment is met, the exporter
provides a monetary guarantee to INCOMEX equal to 20 percent of the FOB value of the
imported capital good. The guarantee can be cash or bond. The penalty for not fulfilling
the export commitment is a charge double the amount of the original exemptions.
Under the terms of the suspension agreement, producers and exporters will not apply for
or receive any benefits from duty and tax exemptions for capital equipment under Plan
Vallejo for exports of the subject merchandise to the United States. At verification, we
examined the GOC's accounting records and confirmed that this program was not used by
the exporters of the subject merchandise for exports to the United States during the POR.
Also, GOC officials stated that, during the POR, no flower producers applied for Plan
Vallejo benefits. In addition, we examined the three companies' accounting records and
found no indication of the program being used during the review periods. Therefore, we
preliminarily determine that this program did not confer any countervailable benefits
upon exports of the subject merchandise to the United States during the POR. However,
we also preliminarily determine that the GOC has not eliminated the subsidy on the
merchandise by abolishing this program for the merchandise for a period of at least three
consecutive years, because the program has not been abolished.
(4) Air Freight Rates
The Departmento Administrativo de la Aeronaurica Civil (DAAC) is the government
agency that develops, maintains and regulates air transport and air space activities.
DAAC officials stated that Resolution 6333 of September 1981 established a minimum
tariff of US$ 0.45/kilo and a maximum tariff of US $ 0.61/kilo on all flowers exported to
the United States. The minimum and maximum rates apply to both domestic and foreign
carriers. DAAC does not monitor or tightly regulate the rates and it does not retain
records of the tariff rates charged by airlines. Resolution 6333 was in effect during the
POR.
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 because such rates might be
indicative of government control rather than the result of the competitive forces. At
verification, we examined Floramerica's and Cuernavaca's air freight bills and found that
the rates negotiated between the flower producers and the air freight carriers were
between the minimum and maximum rates permitted. Therefore, we preliminarily
determine that this program did not confer any countervailable benefits upon exports of
the subject merchandise to the United States during the POR. However, we also
preliminarily determine that the GOC has not eliminated the subsidy on the merchandise
by abolishing this program for the merchandise for a period of at least three consecutive
years, because a program still exists that establishes minimum and maximum rates.
(5) Free Industrial Zones
In December 1985, Law 109 established Free Industrial Zones (FIZs) for industrial and
service sector purposes. Certain regions in Columbia are designed as FIZs. There are
currently six FIZs in Colombia (Manuel Carvajal Sinisterra, Cartagena, Santa Marta,
Barranquilla, Cucuta, and Buenaventura). No FIZs have been designated for agricultural
activities and the GOC does not anticipate creation of agricultural zones. At verification,
we examined documentation at the GOC that indicated that flower producers were not
located in any FIZs. Therefore, we preliminarily determine that this program did not
confer any countervailable benefits upon exports of the subject merchandise to the
United States during the POR. We also preliminarily determine that the GOC has
eliminated that subsidy on this merchandise by abolishing this program for the
merchandise for a period of at least three consecutive years.
(6) Export Credit Insurance
Decree 444, issued in 1967, established the Export Credit Insurance program. However,
regulations implementing the program were not issued until 1969. Under the Export
Credit Insurance program a company may receive insurance to cover certain commercial
expenses (transportation, custom duties, insurance expenses, etc.) that it would have
difficulty covering as a result of the insolvency of its foreign client. Resolution 12 issued
in 1987, identifies parties which are eligible to participate in this program. Article 1 of
Resolution 12 specifies several commodities that were ineligible for the program: coffee in
certain forms, crude leathers, oil and by-products, precious and semi-precious stones,
gold, perishable goods, and others. The subject merchndise is classified under the
"perishable goods" category which renders all exports of the subject merchandise
ineligible for the program.
Under the terms of the suspension agreement, producers and exporters shall notify the
Department in writing prior to applying for any benefit from the Export Credit Insurance
program for exports of the subject merchandise to the United States. At verification, we
examined a list of all insurance policies issued in 1990 by the GOC. We found no evidence
that exporters of the subject merchandise participated in the Export Credit Insurance
Program during the POR. Therefore, we preliminarily determine that this program did not
confer any countervailable benefits upon exports of the subject merchandise to the
United States during the POR. We also preliminarily determine that the GOC has
eliminated the subsidy on this merchandise by abolishing this program for the
merchandise for a period of at least three consecutive years.
(7) Countertrade
Law 48 of 1983 established a special system for three types of exchange arrangements: (1)
countertrade; (2) compensation offsets; and (3) three-way trade. During verification, GOC
officials stated that in 1986, Decree 1459 terminated the exchange system and there has
been no follow-up legislation which would re-establish the exchange system. We reviewed
documentation that stated that this program had been terminated on that date.
Therefore, we preliminarily determine that this program did not confer any
countervailable benefits upon exports of the subject merchandise to the United States
during the POR. We also
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preliminarily determine that the GOC has eliminated the
subsidy on the merchandise by abolishing this program for the merchandise for a period
of at least three consecutive years.
Other Program
Although not specifically listed in the suspension agreement, we examined the following
program detailed in the questionnaire responses:
(8) Research and Development
The flower exporters, on a voluntary basis, allowed the Central Bank to withhold a certain
percentage of the CERT rebates earned on exports of the subject merchandise to the
United States and other countries from January 1983 (the effective date of the original
suspension agreement) through November 1985, when the rebate rate for roses and other
cut flowers subject to the suspension agreement was reduced to zero. In 1985, the GOC
issued Resolution 10, which established a fund from the CERT payments that were
withheld for the cultivation of and general and technological research on all flowers. No
additional payments were made to the fund except interest earned. The resolution
requires that any funds expended under this resolution be disbursed in a manner
consistent with the suspension agreement.
At verification, we examined GOC accounting records that indicated none of the funds
were distributed to any flower producers during the POR and all the research findings will
be made public. Therefore, we preliminarily determine that this program did not confer
any countervailable benefits upon exports of the subject merchandise to the United
States during the POR. We also preliminarily determine that the GOC has eliminated the
subsidy on the merchandise by abolishing this program for the merchandise for a period
of at least three consecutive years.
Preliminary Results of Review
As a result of our review, we preliminarily determine that the GOC and signatory
companies have complied with all the terms of the suspension agreement during the
period January 1, 1988 through December 31, 1990. However, we also preliminarily
determine that the GOC has not eliminated all subsidies on the merchandise by abolishing
for the merchandise, for a period of at least three consecutive years, all programs that the
Secretary has found countervailable. Therefore, we preliminarily determine that the GOC
has not met all the requirements for termination of the suspended countervailing duty
investigation on roses and other cut flowers, as required by 19 CFR 355.25(a)(1).
Interested parties may submit written comments on these preliminary results within 30
days of the date of publication of this notice and may request disclosure and/or a hearing
within 10 days of the date of publication. Any hearing, if requested, will be held 44 days
after the date of publication or the first workday thereafter. Rebuttal briefs and rebuttals
to written comments, limited to issues in those comments, must be filed not later than 37
days after the date of publication. The Department will publish the final results of its
analysis of issues 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 19 CFR 355.22
Dated: September 29, 1993.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
(FR Doc. 93-24707 Filed 10-6-93; 8:45 am)
BILLING CODE 3510-DS-M