95-816

NOTICES

DEPARTMENT OF COMMERCE

[C-301-003; C-301-601]

Roses and Other Cut Flowers From Colombia; Miniature Carnations From Colombia;
Preliminary Results of Countervailing Duty Administrative Reviews of Suspended
Investigations

Wednesday, August 16, 1995

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AGENCY: Import Administration, International Trade Administration,
Department of Commerce.

ACTION: Notice of Preliminary Results of Countervailing Duty Administrative
Reviews of Suspended Investigations.

SUMMARY: The Department of Commerce (the Department) is conducting administrative
reviews of the agreements suspending the countervailing duty investigation on roses
and other cut flowers (roses) from Colombia and the countervailing duty
investigation on miniature carnations (minis) from Colombia. These reviews cover the
period of review (POR) January 1, 1993, through December 31, 1993, and eleven
programs. We preliminarily determine that the Government of Colombia (GOC) and the
signatories/exporters of roses and minis have complied with the terms of the suspension
agreements. We invite interested parties to comment on these results.

EFFECTIVE DATE: August 16, 1995.

FOR FURTHER INFORMATION CONTACT:

Jean Kemp or Stephen Jacques, Office of Agreements Compliance, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230,
telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and to the Department's regulations
are in reference to the provisions as they existed on December 31, 1994. However,
references to the Department's Countervailing Duties; Notice of Proposed Rulemaking
and Request for Public Comments (54 FR 23366 (May 31, 1989)) (Proposed Regulations),
are provided solely for further explanation of the Department's countervailing duty
practice. Although the Department has withdrawn the particular rulemaking proceeding
pursuant to which the Proposed Regulations were issued, the

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subject matter of
these regulations is being considered in connection with an ongoing rulemaking
proceeding which, among other things, is intended to conform the Department's
regulations of the Uruguay Round Agreements Act (See 60 FR 80 (January 3, 1995)).

Background

On January 5, 1994, the Department published in the Federal Register (59 FR 564) a
notice of "Opportunity to Request an Administrative Review" for the 1993 review period.
On January 31, 1994 the Colombian Association of Flower Exporters (Asocoflores)
requested administrative reviews of the suspended countervailing duty investigations
covering roses and minis for the 1993 period. On February 17, 1994, the Department
initiated these reviews (59 FR 7979). The Department is now conducting these reviews in
accordance with section 751 of the Tariff Act of 1930, as amended (the Tariff Act), and 19
CFR 355.22.

Scope of Review

The products covered by these administrative reviews constitute two separate "classes or
kinds" of merchandise: roses and minis from Colombia. During the POR, such
merchandise covered by these suspension agreements was classifiable under Harmonized
Tariff Schedule (HTS) item numbers 0603.10.60, 0603.10.70, 0603.10.80, and
0603.90.00 for roses, and 0603.10.30 for minis. The HTS item numbers are provided for
convenience and Customs purposes. The written descriptions remain dispositive.
These reviews of the suspended investigations involve over 800 Colombian flower
growers/ exporters of roses, over 100 Colombian flower growers/exporters of minis, as
well as the GOC. We verified the responses from six growers/exporters of the subject
merchandise: Flores La Conchita German Ribon E. en C. (roses and minis); Tuchany, S.A.
(roses); Flores de Exportacion, S.A. (roses and minis); Queen's Flowers of Colombia
Ltda. (roses and minis); Florval, S.A. (roses and minis); and Flores de Funza, S.A. (roses
and minis) (collectively, the six companies). The suspension agreement for minis covers
ten programs: (1) Tax Reimbursement Certificate Program; (2) BANCOLDEX (funds for the
promotion of exports); (3) Plan Vallejo; (4) Free Industrial Zones; (5) Export Credit
Insurance; (6) Countertrade; (7) Research and Development; (8) Instituto de Fomento
Industrial (IFI); (9) Financier de Desarrollo Territorial (FINDETER); and (10) Fondo
Financiero de Proyectos de Desarrollo (FONADE). The suspension agreement for roses
covers the ten programs listed above, as well as (11) Air Freight Rates.

Analysis of Programs

We examined the following programs subject to the suspension agreements:

(1) Tax Reimbursement Certificate Program

The "Certificado de Reembolso Tributario" (CERT) or Tax Reimbursement Certificate
program allows exporters to receive a full or partial rebate on indirect taxes based on the
value of their exports of specific products to specific destinations. The GOC determines
the CERT levels based on product and market conditions.
Under the terms of the suspension agreements, Colombian flower growers/exporters will
be 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 and
Puerto Rico. Moreover, since 1987, when the GOC restructured the CERT program, the
level of CERT payments for exports of the subject merchandise to the United States and
Puerto Rico wee set at zero. Therefore, exporters of the subject merchandise are no
longer eligible to receive countervailable benefits.
At verification, we examined documentation at the GOC and found that this program was
not used by exporters of the subject merchandise for exports to the United States and
Puerto Rico during the POR. In addition, at verification of the six companies, we
examined documentation and confirmed that they did not use the program for exports of
the subject merchandise to the United States and Puerto Rico during the POR. Therefore,
we preliminarily determine that the GOC has eliminated the subsidy on the subject
merchandise by abolishing this program for exports of the subject merchandise to the
United States and Puerto Rico and that this program did not confer any countervailable
benefits upon exports of the subject merchandise to the United States and Puerto Rico
during the POR.

(2) BANCOLDEX

On January 2, 1992, the former Fondo de Promocion de Exportaciones (PROEXPO)
transferred from a government-administered fund to a commercial bank and was
renamed Banco de Comercio Exterior de Exterior (BANCOLDEX). The same resolutions
continued to govern export loans granted by BANCOLDEX as previously granted by
PROEXPO.
There are six major BANCOLDEX credit lines: Short-term working capital Colombian peso
(peso) loans; medium-term working capital peso loans; short- and long-term working
capital U.S. dollar (dollar) loans; long-term capitalization peso loans; long-term
capitalization dollar loans; and long-term fixed investment loans. In accordance with
Departmental practice, we will treat medium-term working capital peso loans as
long-term working capital peso loans.
Under the terms of the suspension agreements, Colombian flower growers/exporters will
not apply for, or receive any export financing for BANCOLDEX other than that offered on
non-preferential terms, and at or above the established Department benchmark interest
rates. For the roses and minis suspension agreements in the Roses and Other Cut Flowers
from Colombia and Miniature Carnations from Colombia: Final Results of
Countevailing Duty Administrative Reviews of Suspended Investigations, (published
concurrently with this notice), the Department established new benchmark interest rates
for all short- and long-term peso loans. The Department's short-term benchmark interest
rate is nominal DTF (the Colombian Central Bank time deposit rate, the "Depositos a
Termino Fijo") plus 3.66 percentage points, and for long-term loans nominal DTF plus
3.66 percentage points and 0.25 percentage point for each additional year after the first.
This change in the benchmark interest rates will be effective 14 days after publication of
the final results for the administrative reviews 1991 and 1992 (See Roses and Other Cut
Flowers from Colombia and Miniature Carnations from Colombia: Final Results of
Countevailing Duty Administrative Reviews of Suspended Investigations, (published
concurrently with this notice). As discussed below, we preliminarily determine to
maintain those benchmark rates.

Colombian Peso Loans

At verification, we examined GOC documents and confirmed that BANCOLDEX charged
interest rates on its short- and long-term peso loans above the established Department
benchmark interest rates in effect during the POR. In addition, we found that BANCOLDEX
issued the loans on non-preferential terms. We also examined the six companies'
accounting records which confirmed that the companies received BANCOLDEX peso
loans for the subject merchandise on non- preferential terms and at interest rates at

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or above the Department benchmark rates for exports of the subject
merchandise to the United States and Puerto Rico in effect during the POR. Therefore, we
preliminary determine that BANCOLDEX did not confer any countervailable benefits
upon exports of the subject merchandise to the United States and Puerto Rico during the
POR.
In order to update previous benchmark rates determined by the Department, we
reviewed interest rates in Columbia to define what interest rate benchmarks were
appropriate for future BANCOLDEX loans. In the case of short- and long-term peso
BANCOLDEX loans, the Department confirmed at verification that the GOC adopted rates
based on the Colombian fixed deposit rate, DTF, because the DTF rates more accurately
reflect interest rate fluctuations in the market. While the Department verified that there is
no single, predominant source of alternative financing in Columbia, we have determined
that the independent government agency, FINAGRO (Fondo para el financiameinto del
Sector Agropecuario), a major intermediary lender to the agricultural sector, is an
appropriate alternative source of financing for the Department's benchmarks. FINAGRO is
the successor to the Fondo Financiero Agropecuario (FFA).
The most recent FINAGRO short-term rate is equal to DTF plus up to 6 percentage points.
Because the Department is unable to set the benchmark as a range (i.e., DTF plus up to 6
percentage points), the Department established a benchmark rate applying the
methodology used in the final determination for the 1991 and 1992 administrative
reviews (See Roses and Other Cut Flowers and Miniature Carnations from Columbia; Final
Results of Countervailing Duty Administrative Reviews of Suspended Investigations;
(published concurrently with this notice). In calculating the prospective benchmarks for
short- and long-term peso loans, the Department preliminarily determines that the most
recent verified weighted-average interest rate on all loans financed by FINAGRO through
Caja Agraria, i.e., DTF plus 3.66 percentage points is the appropriate benchmark for
short-term financing.
Consequently, the Department preliminarily determines that the appropriate benchmark
for the short-term peso loans rate is the nominal DTF plus 3.66 percentage points. The
Department also preliminarily determines that the appropriate benchmark for long-term
peso loans is the nominal DTF plus 3.66 percentage points, plus an additional 0.25
percentage points for each year after the first, including any grace period, reflecting the
spread between BANCOLDEX short- and long-term loans. Loans provided at or above the
benchmark will not be considered preferential.

U.S. Dollar Loans

At verification, we examined GOC documents and confirmed that BANCOLDEX issued
short- and long-term dollar loans. In the case of short- and long-term dollar loans, there
were no benchmark rates in effect during the POR, because these loans were introduced in
1991, i.e., after the last completed reviews of the suspension agreements.
In order to establish dollar benchmark rates. we followed the same calculation
methodology as in the final notice for Roses and Other Cut Flowers and Miniature
Carnations from Columbia; Final Results of Countervailing Duty Administrative
Reviews of Suspended Investigations; (published concurrently with this notice). We
confirmed at verification that during the POR, BANCOLDEX loan interest rates on dollar
loans charged to Colombian flower growers/exporters were based upon the London
Interbank Offered Rate (LIBOR) plus a variable spread. The Department determines that
LIBOR will be the basis of the benchmark for dollar loans, because LIBOR is used as the
basis for dollar loan interest rates in Colombia. Therefore, the Department preliminarily
determines that for the short-term dollar loans the Department's benchmark for
dollar-based loans in Colombia will be the six-month LIBOR rate in effect at the time of
the loan plus 1.52 percentage points. Based on the same methodology used for short-term
dollar loan benchmark, we preliminarily determine that for long-term dollar loans the
Department's benchmark for dollar-based loans in Colombia will be the six-month
LIBOR rate in effect at the time of the loan plus 2.82 percentage points.
It should be noted that the rate specified here was calculated based on effective, not
nominal, interest rates; the effective rate is the equivalent to the nominal rate calculated
on the basis of interest being payable at the end of the quarter. BANCOLDEX should set
the nominal interest rate for dollar- based loans at a level that is high enough to ensure
that the effective interest rate of these loans are at or above the Department's new
benchmark.

(3) Plan Vallejo

Plan Vallejo was established in 1967 under 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 (INCOMEX) administers the Plan Vallejo program.
Under the terms of the suspension agreements, Colombian flower growers/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 and Puerto
Rico. At verification, we examined the GOC's documentation and confirmed that this
program was not used by the exporters of the subject merchandise for exports to the
United States and Puerto Rico during the POR. Also, GOC officials stated that, during the
POR, no flower producer applied for Plan Vallejo benefits. In addition, we verified that the
six companies did not use the program for capital equipment during the POR. Therefore,
we preliminarily determine that this program did not confer any countervailable benefits
upon exports of the subject merchandise of the United States and Puerto Rico during the
POR. In addition, we preliminarily determine that Plan Vallejo has been abolished for the
subject merchandise in Resolution 1212 since flower growers are ineligible to receive
benefits for exports to the United States and Puerto Rico.

(4) Free Industrial Zones

In December 1985, Law 109 established Free Industrial Zones (FIZs) for industrial and
service sector purposes. Certain regions in Colombia are designated as FIZs.
At verification, we examined documentation at the Ministry of Foreign Trade and
determined that there were not any flower producers located in FIZs. Therefore, we
preliminarily determine that this program did not confer any countervailing benefits
upon exports of the subject merchandise to the United States and Puerto Rico during
POR. We also preliminarily determine that during the POR the GOC had eliminated the
subsidy on this merchandise by abolishing this program for the merchandise.

(5) Export Credit Insurance

Decree 444, issued in 1967, established the Export Credit Insurance program. 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

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client.
Several commodities are ineligible for the program: coffee in certain forms, crude leather,
oil and by- products, precious and semiprecious stones, gold, perishable goods, and
others. The subject merchandise 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 agreements, Colombian flower growers/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 and
Puerto Rico. Because we did not receive any such notification and confirmed that subject
merchandise is ineligible for this program, we preliminarily determine that this program
did not confer any countervailable benefits upon exports of the subject merchandise to
the United States and Puerto Rico during the POR. We also preliminarily determine that
the GOC has eliminated the subsidy by abolishing this program for the subject
merchandise.

(6) 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. GOC officials have 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 confirmed that
this program had been terminated on that date. Therefore, we preliminarily determine
that this program did not confer any countervailing benefits upon exports of the subject
merchandise to the United States and Puerto Rico during the POR. We also preliminarily
determine that the GOC has eliminated the subsidy by abolishing this program for the
subject merchandise.

Other Programs

Although not specifically listed in the suspension agreements, we examined the following
programs:

(7) Research and Development

Columbian 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 Puerto Rico and other countries for research and development 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. The resolution requires that any funds
expended under this resolution be disbursed in a manner consistent with the suspension
agreements. The resolution 10 account was officially closed in October 1991 and no
contributions were made to the account 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 and Puerto Rico during the POR. We also
preliminarily determine that the GOC has eliminated the subsidy on the merchandise by
abolishing this program for the subject merchandise.

(8) Instituto de Fomento Industrial (IFI) Loans

The Instituto de Fomento Industrial, or Institute for the Promotion of the Industrial
Sector, is a branch of the Colombian Ministry of Economic Development. It provides
financing to all sectors of the Colombian economy and to large and small companies.
Companies with assets above 1.25 billion pesos may borrow directly from IFI, while
smaller companies may borrow funds from IFI which are rediscounted through financial
intermediaries.
Two IFI credit lines are available to only exporters. These include a credit line for new
exporters and relocation of export enterprises, and the ANDEAN Trade Preference Act
(ATPA) line of credit. The other IFI credit lines are available to all enterprises. These
include a commercial sector line of credit, a line of credit for free zones, a line of credit for
working capital, a line of credit for capital equipment, a capitalization line of credit,
ordinary resource loans, a line of credit for motel and tourist projects, and a line of credit
for market studies. Loans are available in both pesos and dollars.
Loan terms and rates vary by credit line and length of the loan. Fixed asset dollar loans
are available for five-year terms at LIBOR plus five percentage points. Peso working
capital loans are available for terms of up to three years at TCC (DTF) plus five percentage
points. Long-term peso loans are available for terms up to seven years at TCC plus six
percentage points plus a 0.25 percentage point for each additional year after the fifth.
ATPA loans are available in pesos for up to four years at TCC plus five percentage points
for working capital loans and for terms of up to twelve years for fixed asset peso loans at
TCC plus five percentage points plus a 0.25 percentage point for each year after the fifth.
In addition, ATPA fixed asset loans are available in dollars at LIBOR plus five percentage
points plus 0.25 for each year after the fifth.
We verified that the non-export lines of credit provided by IFI were granted to a broad
range of Colombian industry sectors including: agriculture, mining, textiles, metallic
products, financial establishments, and chemicals, rubber and plastics. Therefore, we
preliminarily determine that IFI's non-export lines of credit are not provided to a specific
enterprise or industry or group thereof and that they are not countervailable.
Furthermore, we verified that no Colombian flower growers/exporters received loans
under the two export credit lines during the POR. We preliminarily determine that the
GOC and the Colombian flower growers/exporters of the subject merchandise were in
compliance with the suspension agreements because IFI's export credit lines were not
used by Colombian flower growers/exporters of the subject merchandise during the POR.
However, flower growers/exporters of the subject merchandise are eligible to apply for
and receive IFI's export credit lines. Any such loans must be on non-preferential terms,
and at or above the Department's most recent benchmarks (See Section II.c of the
suspension agreements). We preliminarily determine that the short- and long- term
benchmarks for IFI loans are the same as those for BANCOLDEX peso and dollar financing
apply (See Section 2 above).

(9) Financiera de Desarrollo Territorial (FINDETER)

FINDETER, a government financial entity, finances state and municipal governments and
governmental entities to promote urban and regional development projects relating to
infrastructure and development in the public sector. The Department verified that all
projects are aimed to improve the public sector, and that Colombian flower
growers/exporters are not eligible to receive FINDETER loans. Therefore, we
preliminarily determine that FINDETER financing is not countervailable for exports of the
subject merchandise to the United States and Puerto Rico during the POR.

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(10) Fondo Financiero de Proyectos de Desarrollo (FONADE)

FONADE is an industrial and commercial state entity owned by the National Department
of Planning. FONADE finances feasibility studies on pre- investment projects that are not
conditioned on exporting. The main client is the National Institute for Road
Development. We verified that no Colombian flower growers/exporters of the subject
merchandise applied for or received financing from FONADE during the POR. Therefore,
we preliminarily determine that FONADE's financing was not used by Colombian flower
growers/exporters of the subject merchandise during the POR.

Program Specific to the Roses and Other Cut Flowers' Suspension Agreement

(11) Air Freight Rates (apply only to the roses suspension agreement)

The Departmento Administrativo de la Aeronautica Civil (DAAC) is the government
agency that develops, maintains and regulates air transport and air space activities.
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 competitive forces.
At verification, we examined the companies' air freight bills and found that the rates
negotiated between the flower producers and air freight carriers were between the
minimum and maximum rates permitted and did not approach the maximum. Therefore,
we preliminarily determine that this program did not confer any countervailable benefits
upon exports of the subject merchandise to the United States and Puerto Rico during the
POR.

Preliminary Results of Review

We preliminarily determine that the GOC and signatory companies have complied with all
the terms of the suspension agreements during the period January 1, 1993 through
December 31, 1993. In addition, we preliminarily determine that the peso and dollar
benchmarks established in the 1991 and 1992 administrative reviews of these suspended
investigations will continue to apply to loans after the date of publication of the final
results of these administrative reviews, and until revised by the Department (See Roses
and Other Cut Flowers and Miniature Carnations from Colombia; Final Results of
Countervailing Duty Administrative Reviews of Suspended Investigations; (published
concurrently with this notice).
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. 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. Any hearing, if requested, will be held 44 days after the date of
publication or the first workday thereafter. 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: August 8, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-20300 Filed 8-15-95; 8:45 am]

BILLING CODE 3510-DS-M