NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-508-605]
Industrial Phosphoric Acid From Israel: Preliminary Results and
Final Partial
Rescission of Countervailing Duty Administrative Review
Wednesday, September 6, 2000
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AGENCY: Import Administration, International Trade
Administration, Department of Commerce.
ACTION: Notice of preliminary results and final partial rescission of
countervailing duty administrative review.
SUMMARY: The Department of Commerce (the Department) is
conducting an administrative review of the countervailing duty
order on industrial phosphoric acid from Israel for the period
January 1, 1998 through December 31, 1998. For information on the
net subsidy for each reviewed company, as well as for all
non-reviewed companies, please see the Preliminary Results of
Review section of this notice. If the final results remain the same as
these preliminary results, we will instruct the U.S. Customs Service
to assess countervailing duties as detailed in the Preliminary
Results of Review. In addition, we are rescinding the review with
respect to Haifa Chemicals Ltd. (Haifa) because Haifa did not export
the subject merchandise to the United States during the period of
review (POR). Interested parties are invited to comment on these
preliminary results. See Public Comment section of this notice.
EFFECTIVE DATE: September 6, 2000.
FOR FURTHER INFORMATION CONTACT: Sean Carey or Jonathan
Lyons, Office of AD/CVD Enforcement VII, Group III, Import
Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue,
NW., Washington, DC 20230; telephone (202) 482-3964 or (202)
482-0374, respectively.
SUPPLEMENTARY INFORMATION:
Background
On August 19, 1987, the Department published in the Federal
Register (52 FR 31057) the countervailing duty order on
industrial phosphoric acid from Israel. On August 11, 1999, the
Department published a notice of "Opportunity to Request
Administrative Review" (64 FR 43649, 43650) of this
countervailing duty order. We received a timely request for
review, and we initiated the review, covering the period January 1,
1998 through December 31, 1998, on October 1, 1999 (64 FR 53318).
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters of the subject merchandise for which a
review was specifically requested. Accordingly, this review covers
Rotem-Amfert Negev Ltd. (Rotem) and Haifa. Haifa did not export
the subject merchandise during the POR. Therefore, we are finally
rescinding the review with respect to Haifa.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are references
to the provisions of the Tariff Act of 1930, as amended by the
Uruguay Round Agreements Act (URAA) effective January 1, 1995
(the Act). The Department is conducting this administrative review
in accordance with section 751(a) of the Act. All citations to the
Department's regulations reference 19 CFR part 351 (April 1, 2000).
Scope of the Review
Imports covered by this review are shipments of industrial
phosphoric acid (IPA) from Israel. Such merchandise is classifiable
under item number 2809.20.00 of the Harmonized Tariff Schedule
(HTS). The HTS item number is provided for convenience and U.S.
Customs Service purposes. The written description of the scope
remains dispositive.
Subsidies Valuation Information
Period of Review
The period for which we are measuring subsidies is calendar year
1998.
Allocation Period
In British Steel plc. v. United States, 879 F.Supp. 1254 (CIT 1995)
(British Steel I), the U.S. Court of International Trade (the Court)
ruled against the allocation period methodology for non-recurring
subsidies that the Department had employed for the past decade, as
it was articulated in the General Issues Appendix appended to the
Final Countervailing Duty Determination; Certain Steel Products
from Austria, 58 FR 37225 (July 9, 1993) (GIA). In accordance with
the Court's decision on remand, the Department determined that the
most reasonable method of deriving the allocation period for
nonrecurring subsides is a company-specific average useful life
(AUL). This remand determination was affirmed by the Court on June
4, 1996. See, British Steel plc. v. United States, 929 F.Supp. 426, 439
(CIT 1996) (British Steel II).
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However, in administrative reviews where the Department examines
non-recurring subsidies received prior to the POR which have been
countervailed based on an allocation period established in an earlier
segment of the proceeding, it is not practicable to reallocate those
subsidies over a different period of time. Where a countervailing
duty rate in earlier segments of a proceeding was calculated based
on a certain allocation period and resulted in a certain benefit
stream, redefining the allocation period in later segments of the
proceeding would entail taking the original grant amount and
creating an entirely new benefit stream for that grant. (See e.g.,
Certain Carbon Steel Products from Sweden; Final Results of
Countervailing Duty Administrative Review, 62 FR 16549 (April
7, 1997)).
In this administrative review, the Department is considering
non-recurring subsidies previously allocated in earlier
administrative reviews under the old practice, non-recurring
subsidies also previously allocated in recent administrative reviews
under the new practice, and non-recurring subsidies received during
the POR to which the countervailing duty regulations mentioned
above apply. Therefore, for purposes of these preliminary results,
the Department is using the original allocation period of 10 years
which was assigned to non-recurring subsidies received prior to the
1995 administrative review (the first review for which the
Department implemented the British Steel I decision). For
non-recurring subsidies received since 1995, Rotem has submitted in
each administrative review, including this one, AUL calculations
based on depreciation and values of productive assets reported in its
financial statements. In accordance with the Department's practice,
we derived Rotem's company-specific AUL by dividing the aggregate
of the annual average gross book values of the firm's depreciable
productive fixed assets by the firm's aggregated annual charge to
depreciation for a 10-year period. In the current review, this
methodology has resulted in an AUL of 22 years. Pursuant to section
351.524(d)(2) of the Final Countervailing Duty Regulations, this
company-specific AUL rebuts the presumptive use of the IRS tables.
Therefore, for the purposes of these preliminary results,
non-recurring subsidies received during the POR will be allocated
over 22 years.
Privatization
Israel Chemicals Limited (ICL), the parent company which owns
100 percent of Rotem's shares, was partially privatized in 1992,
1993, 1994, 1995 and 1997. In this administrative review, the
Government of Israel (GOI) and Rotem reported that additional
shares of ICL were sold in 1998. We have previously determined that
the partial privatization of ICL represents a partial privatization of
each of the companies in which ICL holds an ownership interest. See
Final Results of Countervailing Duty Administrative Review;
Industrial Phosphoric Acid from Israel, 61 FR 53351, 53352
(October 11, 1996) (1994 Final Results). In this review and prior
reviews of this order, the Department found that Rotem and/or its
predecessor, Negev Phosphates Ltd., received non-recurring
countervailable subsidies prior to these partial privatizations.
Further, the Department found that a portion of the price paid by a
private party for all or part of a government-owned company
represents partial repayment of prior subsidies. See GIA, 58 FR at
37262. Therefore, in the 1992, 1993, 1995 and 1997 reviews, we
calculated the portion of the purchase price paid for ICL's shares that
is attributable to repayment of prior subsidies. In the 1994
privatization, less than 0.5 percent of ICL shares were privatized. We
determined that the percentage of subsidies potentially repaid
through this privatization could have no measurable impact on
Rotem's overall net subsidy rate. Thus, we did not apply our
repayment methodology to the 1994 partial privatization. See 1994
Final Results, 61 FR at 53352.
We are now applying the privatization methodology to the 1998
partial privatization in which 29.32 percent of ICL's shares were sold.
This approach is consistent with our findings in the GIA and
Department precedent under the URAA. See, e.g., GIA, 58 FR at
37259; Certain Hot-Rolled Lead and Bismuth Carbon Steel Products
from the United Kingdom; Final Results of Countervailing Duty
Administrative Review, 61 FR 58377 (November 14, 1996); Final
Affirmative Countervailing Duty Determination: Certain Pasta
from Italy, 61 FR 30288 (June 14, 1996) (Pasta Investigation).
After the Department's final determination in Pasta Investigation,
one of the companies investigated, Delverde, challenged the
Department's determination in the Court of International Trade
(CIT). Delverde argued that the Department's methodology regarding
change in ownership was erroneous and inconsistent with the Act.
Initially, the CIT agreed with Delverde and remanded the case to the
Department. See Delverde I, 989 F.Supp. at 234. However, after the
Department explained its methodology in more detail and further
argued its reasonableness on remand, the CIT affirmed the
Department's methodology. See Delverde II, 24 F.Supp.2d at 315
(Delverde II). Delverde appealed the CIT's decision to the Court of
Appeals for the Federal Circuit (CAFC). On February 2, 2000, the
CAFC held that the Department may not presume that non-recurring
subsidies survive a transfer in a subsidized company's ownership.
Accordingly, the CAFC vacated the CIT's decision in Delverde II and
indicated that it would instruct the CIT to remand the case to the
Department. See Delverde v. United States, 202 F.3rd 1360, 1369
(Fed. Cir. 2000). On June 20, 2000, the CAFC denied the
Department's petition for rehearing and suggestion for rehearing en
banc. See Delverde, S.r.L. v. United States, Court No. 99-1186 (Fed.
Cir. 2000).
The Department has not received a remand from the CIT on Delverde
II and has, thus, not yet addressed what revisions to our
change-in-ownership methodology may be necessary. We are
examining the relevance of the change in ownership issue decided in
Delverde II to this administrative review of IPA from Israel. If
necessary, we will collect additional information about ICL's
privatization by issuing a questionnaire as soon as possible. For
these preliminary results, we have continued to use the repayment
methodology described in the GIA in the same way as it was used in
Pasta Investigation and five prior administrative reviews of this
countervailing duty order. We invite comments from interested
parties on revisions to our change of ownership methodology.
Grant Benefit Calculations
To calculate the benefit for the POR, we followed the same
methodology used in the final results of prior administrative reviews.
We converted Rotem's shekel-denominated grants into U.S. dollars,
using the exchange rate in effect on the date the grant was received.
We then applied the grant methodology to determine the benefit for
the POR. See Industrial Phosphoric Acid from Israel; Final Results
of Countervailing Duty Administrative Review, 63 FR 13626,
13633 (March 20, 1998) (1995 Final Results).
Discount Rates
We considered Rotem's cost of long-term borrowing in U.S. dollars as
reported in the company's financial statements for use as the
discount rate
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used to allocate the countervailable benefit
over time. However, this information includes Rotem's borrowing
from its parent company, ICL, and thus does not provide an
appropriate discount rate. Therefore, we have turned to ICL's cost of
long-term borrowing in U.S. dollars in each year from 1984 through
1997 as the most appropriate discount rate. ICL's interest rates are
shown in the notes to the company's financial statements, public
documents which are in the record of this review. See Comment 9 in
the 1995 Final Results.
Analysis of Programs
I. Programs Conferring Subsidies
A. Encouragement of Capital Investments Law (ECIL)
The ECIL program is designed to encourage the distribution of the
population throughout Israel, to create new sources of
employment, to aid the absorption of immigrants, and to develop the
economy's production capacity. To be eligible for benefits under the
ECIL, including investment grants, capital grants, accelerated
depreciation, reduced tax rates, and certain loans, applicants must
obtain approved enterprise status. Investment grants cover a
percentage of the cost of the approved investment, and the amount
of the grant depends on the geographic location of eligible
enterprises. For purposes of the ECIL program, Israel is divided into
three zones; Development Zones A and B, and the Central Zone.
Under the ECIL program the Central Zone was not eligible for
benefits. In Final Affirmative Countervailing Duty Determination:
Industrial Phosphoric Acid From Israel, 52 FR 25447 (July 7,
1987) (IPA Investigation), the Department found the ECIL grant
program to be de jure specific because the program limits the
availability of grants to enterprises located in specific regions. In this
review, no new information or evidence of changed circumstances
has been submitted to warrant reconsideration of this determination.
Rotem is located in Development Zone A, and received ECIL
investment and capital grants in disbursements over a period of
years for several projects. In past reviews, we have treated these
grants as non-recurring. The guidelines set forth in section 351.524
of Department's countervailing duty regulations support finding
these grants to be non-recurring. As explained in the "Allocation
Period" section above, for grants that have been allocated in prior
administrative reviews, we are continuing to use the allocation
period assigned to these grants. For grants received during the POR,
we have used the AUL calculated by Rotem in this review, which is
22 years. To calculate the benefit for the POR, we followed the same
methodology used in the final results of the 1995 administrative
review, as indicated in the "Grant Benefit Calculations" section above.
In prior reviews of this order, we applied the methodology described
in our proposed countervailing duty regulations when
determining whether to allocate non-recurring grants over time or
expense them in the year of receipt ("the 0.5 percent test").
Accordingly, grant disbursements exceeding 0.5 percent of a
company's sales in the year of receipt were allocated over time while
grants below or equal to 0.5 percent of sales were countervailed in
full ("expensed") in the year of receipt (see Countervailing Duties
(Proposed Rules), 54 FR 23366, 23384 (section 355.49(a)(3)) (May
31, 1989)). However, section 351.524(b)(2) of our new
countervailing duty regulations directs us to conduct the 0.5
percent test based on the company's sales in the year of
authorization rather than the year of receipt. Where possible, we
applied this new regulation, however, we did not redo the 0.5
percent test for disbursements received prior to the POR because we
had already calculated a benefit stream for those disbursements in a
prior administrative reviews.
Pursuant to section 351.504(c) of our regulations, we used our
standard grant methodology as noted above in the "Grant Benefit
Calculations" section to calculate the countervailable subsidy from
ECIL grants. We allocated some of these grants over time because
they met the 0.5 percent test, as described above, and expensed
others in the POR that did not pass this test.
To calculate the total subsidy in the POR, we first summed the grant
amounts allocated to and received in 1998, after taking into account
the partial privatizations in 1992, 1993, 1995, 1997 and 1998. To
derive the subsidy rates, as discussed in the 1995 Final Results, we
attributed ECIL grants that were tied to a particular facility over the
sales of the product produced by that facility plus sales of all
products into which that product may be incorporated. Accordingly,
we attributed ECIL grants to Rotem's phosphate rock mines to total
sales; we attributed grants to Rotem's green acid facility to total sales
minus direct sales of phosphate rock; and, finally, we attributed
grants to Rotem's IPA facilities to sales of IPA, MKP, fertilizers, and
"IPA- Akonomika" and MKP-HCL (by-products of IPA production
which contribute to Rotem's sales revenue). We summed the rates
obtained on this basis, and preliminarily determine the net
countervailable subsidy from ECIL grants to be 4.19 percent ad
valorem for the POR.
B. Infrastructure Grant Program
During the 1998 review period, Rotem received an Infrastructure
grant to initiate and establish industrial areas in a certain
geographical zone. In the 1996 administrative review, the
Department determined that Infrastructure grants were specifically
provided to Rotem, and that they conferred a benefit. See Industrial
Phosphoric Acid from Israel; Final Results of Countervailing
Duty Administrative Review, 63 FR 13626, 13633 (March 20, 1998).
No new information or evidence of changed circumstances has been
submitted to warrant reconsideration.
In past reviews, we determined these grants to be "non-recurring.
The guidelines set forth in section 351.524 of the Department's
countervailing duty regulations support finding these grants to
be non-recurring. Therefore, we calculated the benefit under this
program using the methodology for non- recurring grants noted
above in the "Grant Benefit Calculations" section. On this basis, we
preliminarily determine the net subsidy from this program to be
0.07 percent ad valorem for the POR.
II. Programs Preliminarily Determined To Be Not Used
We examined the following programs and preliminarily determine
that the producer and/or exporter of the subject merchandise did
not apply for or receive benefits under these programs during the
POR:
A. Environmental Grant Program.
B. Reduced Tax Rates under ECIL.
C. ECIL Section 24 loans.
D. Dividends and Interest Tax Benefits under Section 46 of the ECIL.
E. ECIL Preferential Accelerated Depreciation.
F. Encouragement of Industrial Research and Development Grants
(EIRD).
During the 1998 review period, Rotem did not receive any new EIRD
grants but did receive two small disbursements for prior projects
(payment was withheld until the research was completed). In the
1995 Final Results, we determined that EIRD grants were specifically
provided to Rotem, and that they conferred a benefit. In this review,
we preliminarily determine that the two grants received by Rotem
were tied to research relating to downstream
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products for
which IPA is an input. See, section 351.525(b)(5) of the Department's
countervailing duty regulations concerning the attribution of
subsidies. Therefore, we preliminarily determine that the grants
provide no benefit to the production of IPA.
III. Other Program Examined
Labor Training Grant
In its questionnaire response, Rotem reported that it had received a
very small labor training grant as payment for hiring and training
conducted in a prior period. In previous administrative reviews, we
have found that this program was not used (see, e.g., 1994 Final
Results and 1996 Final Results). Under section 351.524 of the
countervailing duty regulations, grants for worker training are
normally considered recurring and are expensed in the year of
receipt. For purposes of this administrative review, we expensed this
labor training grant and have found that any subsidy which could be
calculated for this program would be so small (well under 0.005
percent ad valorem) that there would be no impact on the overall
subsidy rate. Accordingly, because there would be no impact on the
overall subsidy rate in the instant review, we do not consider it
necessary to address the issue of specificity for purposes of this
administrative review. See e.g., Final Affirmative Countervailing
Duty Determination: Steel Wire Rod from Germany, 62 FR 54990,
54995 (October 22, 1997), Certain Carbon Steel Products from
Sweden: Final Results of Countervailing Duty Administrative
Review, 62 FR 16549 (April 7, 1997), and Final Results of
Countervailing Duty Administrative Review: Live Swine from
Canada, 63 FR 2204 (January 14, 1998).
Preliminary Results of Review
In accordance with 19 CFR 351.213(b), we calculated an individual
subsidy rate for the producer/exporter subject to this administrative
review. For the period January 1, 1998 through December 31, 1998,
we preliminarily determine the net subsidy for Rotem to be 4.26
percent ad valorem. If the final results of this review remain the same
as these preliminary results, the Department intends to instruct the
U.S. Customs Service (Customs) to assess countervailing duties
as indicated above.
As a result of the International Trade Commission's determination
that revocation of this countervailing duty order would not likely
lead to continuation or recurrence of material injury to an industry
in the United States in the reasonably foreseeable future, the
Department, pursuant to section 751(d)(2) of the Act, revoked the
countervailing duty order on IPA from Israel. See Revocation
Countervailing Duty Order: Industrial Phosphoric Acid from
Israel, 65 FR 114 (June 13, 2000). Pursuant to section
751(c)(6)(A)(iv) of the Act and 19 CFR 351.222(i)(2)(ii), the effective
date of revocation was January 1, 2000. Accordingly, the
Department has instructed Customs to discontinue suspension of
liquidation and collection of cash deposits on entries of the subject
merchandise entered or withdrawn from warehouse on or after
January 1, 2000. The Department, however, will conduct
administrative reviews of subject merchandise entered prior to the
effective date of revocation in response to appropriately filed
requests for review.
Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection
with these preliminary results within five days after the date of
publication of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these
preliminary results. Normally, case briefs are to be submitted within
30 days after the date of publication of this notice, and rebuttal
briefs, limited to arguments raised in case briefs, are to be submitted
no later than five days after the time limit for filing case briefs.
Parties who submit argument in this proceeding are requested to
submit with the argument: (1) A statement of the issues, and (2) a
brief summary of the argument. Case and rebuttal briefs must be
served on interested parties in accordance with 19 CFR 351.303(f).
Also, pursuant to 19 CFR 351.310, within 30 days of the date of
publication of this notice, interested parties may request a public
hearing on arguments to be raised in the case and rebuttal briefs.
Unless the Secretary specifies otherwise, the hearing, if requested,
will be held two days after the date for submission of rebuttal.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than ten days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the
date case briefs, under 19 CFR 351.309(c)(ii), are due. The
Department will publish the final results of this administrative
review, including the results of its analysis of issues raised in any
case or rebuttal brief or at a hearing. These preliminary results are
issued and published in accordance with sections 751(a)(1) and
777(i)(1) of the Act (19 U.S.C. 1675(a)(1) and 19 U.S.C. 1677f(i)(1)).
Dated: August 25, 2000.
Troy H. Cribb,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-22835 Filed 9-5-00; 8:45 am]
BILLING CODE 3510-DS-P