[Federal Register: December 11, 2001 (Volume 66, Number 238)]
[Page 64019-64022]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[C-508-605]
Industrial Phosphoric Acid From Israel; Final Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
review.
-----------------------------------------------------------------------
SUMMARY: On August 31, 2001, the Department of Commerce (``the
Department'') published in the Federal Register its preliminary results
of administrative review of the countervailing duty order on industrial
phosphoric acid from Israel for the period January 1, 1999 through
December 31, 1999 (66 FR 45965). The Department has now completed this
administrative review in accordance with section 751(a) of the Tariff
Act of 1930, as amended (``the Act''). For information on the subsidy
rate for each reviewed company, and for all non-reviewed companies,
please see the Final Results of Review section of this notice. We will
instruct the U.S. Customs Service (``Customs'') to assess
countervailing duties as detailed in the Final Results of Review
section of this notice.
EFFECTIVE DATE: December 11, 2001.
FOR FURTHER INFORMATION CONTACT: Dana Mermelstein or Sean Carey, Office
of AD/CVD Enforcement VI, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
1391 or (202) 482-3964, respectively.
SUPPLEMENTARY INFORMATION:
Background
Pursuant to 19 CFR 351.213(b), this review covers only those
producers or exporters of the subject merchandise for
[[Page 64020]]
which a review was specifically requested. Accordingly, this review
covers Rotem-Amfert Negev Ltd. (``Rotem''). We published the
preliminary results on August 31, 2001 (66 FR 45965). We invited
interested parties to comment on the preliminary results. We received
no comments from any of the parties.
Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended
(``the Act''). All citations to the Department's regulations reference
19 CFR part 351 (2000), unless otherwise indicated.
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
1999.
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 non-recurring 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).
However, in administrative reviews in which 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. When 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 has considered 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 current
countervailing duty regulations apply. Under these circumstances, and
as discussed below, the Department has used different allocation
periods depending upon the date of receipt of the non-recurring
subsidy. For non-recurring subsidies received prior to the 1995
administrative review (the first review for which the Department
implemented the British Steel I decision), the Department is using the
original allocation period of 10 years. For non-recurring subsidies
received since 1995, Rotem has submitted in each subsequent
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 for each respective administrative review
since 1995 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 resulted in an AUL of 23 years.
Pursuant to section 351.524(d)(2) of the Department's regulations, this
company-specific AUL rebuts the presumptive use of the IRS tables.
Therefore, for the purposes of this review, non-recurring subsidies
received during the POR have been allocated over 23 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, 1997 and 1998. In this administrative review, the
Government of Israel (GOI) and Rotem reported that additional shares of
ICL were sold in 1999. 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.
On December 4, 2000, the Department announced a new privatization
approach in a remand determination following the decision of the U.S.
Court of Appeals for the Federal Circuit (CAFC) in Delverde Srl v.
United States, 202 F.3d 1360, 1365 (Fed. Cir. 2000), reh'g en banc
denied (June 20, 2000) (Delverde III). The Department applied this new
approach in the final results of the prior administrative review of
this order. See Final Results of Countervailing Duty Administrative
Review; Industrial Phosphoric Acid from Israel, 66 FR 15839 (March 21,
2001) (1998 Final Results). Under this approach, the first requirement
is to determine whether the person to which the subsidies were given
is, in fact, distinct from the person that produced the subject
merchandise exported to the United States. If the two persons are
distinct, the original subsidies may not be attributed to the new
producer/exporter. The Department would, however, consider whether any
subsidy had been bestowed upon that producer/exporter as a result of
the change-in-ownership transaction. On the other hand, if the original
subsidy recipient and the current producer/exporter are considered to
be the same person, that person benefits from the original subsidies,
and its exports are subject to countervailing duties to offset those
subsidies. In other words, we will determine that a ``financial
contribution'' and a ``benefit'' have been received by the ``person''
that is the firm under investigation or review. Assuming that the
original subsidy had not been fully amortized under the Department's
normal allocation methodology as of the POR, the Department would then
continue to countervail the remaining benefits of that subsidy.
In making the ``person'' determination, where appropriate and
applicable, we analyze factors such as (1) continuity of general
business operations, including whether the successor represents itself
as the continuation of the previous enterprise,
[[Page 64021]]
as may be indicated, for example, by use of the same name, (2)
continuity of production facilities, (3) continuity of assets and
liabilities, and (4) retention of personnel. No single factor will
necessarily provide a dispositive indication of any change in the
entity under analysis. Instead, the Department will generally consider
the post-sale entity to be the same person as the pre-sale entity if,
based on the totality of the factors considered, we determine that the
entity in question can be considered a continuous business entity
because it was operated in substantially the same manner before and
after the change in ownership.
Using the approach described above, we have analyzed the
information provided by the GOI and Rotem to determine whether the
subsidies received by Rotem continued to benefit Rotem during the POR.
By applying this approach to the facts and circumstances of the instant
countervailing duty administrative review of industrial phosphoric acid
from Israel and the relevant privatization of ICL and its subsidiary,
Rotem, we find that the pre-sale and post-sale entities are not
distinct persons. Specifically, Rotem maintains the same plants and
uses the same production facilities to manufacture and sell the same
products; continues to rely on the same suppliers and customer base;
and employs largely the same personnel and management. See the
Department's June 13, 2001, letter to Rotem (with attached Change in
Ownership Analysis Memorandum from the 1998 administrative review) and
the 1998 Final Results and accompanying Decision Memorandum (section
entitled Change in Ownership), for a complete discussion of our
analysis of ICL's and Rotem's privatization. Therefore, we determine
that the subsidies provided to Rotem, prior to the privatization of
ICL, continue to benefit Rotem after ICL's privatization.
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 dates the grants were received. We
then applied the grant methodology to determine the benefit for the
POR. See e.g., Industrial Phosphoric Acid from Israel; Final Results of
Countervailing Duty Administrative Review, 63 FR 13626, 13633 (March
20, 1998) (1995 Final Results).
As a result of our privatization approach and our determination
that Rotem continues to benefit from subsidies received prior to the
privatization of ICL, the full value of the benefit allocable to the
1999 POR from non-recurring subsidies is being used in the calculation
of Rotem's subsidy rate.
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 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 followed the same methodology used in the final results
of prior administrative reviews in using ICL's cost of long-term
borrowing in U.S. dollars in each year from 1984 through 1999 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
There were no comments submitted to the Department with respect to
our preliminary results of review; therefore, our preliminary results
provide the basis for these final results of review. Accordingly, we
determine the following:
I. Programs Conferring Subsidies
A. Encouragement of Capital Investments Law (ECIL)
In the preliminary results, we found that the ECIL grant program
conferred countervailable subsidies on the subject merchandise. It is
de jure specific because the program limits the availability of grants
to enterprises located only in Development Zones A and B. Rotem is
located in Development Zone A, and received ECIL investment and capital
grants in disbursements over a period of years for several projects.
Our review of the record has not led us to change any findings or
calculations. Accordingly, the subsidy from ECIL grants is 4.57 percent
ad valorem for the POR, which remains unchanged from the preliminary
results.
B. Infrastructure Grant Program
In this review, we preliminarily determined that Rotem received an
infrastructure grant to initiate and establish industrial areas, and
that this grant conferred countervailable subsidies on the subject
merchandise. Our review of the record has not led us to change any
findings or calculations. Accordingly, the subsidy for this program is
0.21 percent ad valorem, which remains unchanged from the preliminary
results.
C. Encouragement of Industrial Research and Development Grants (EIRD)
In the preliminary results, we found that three EIRD grant
disbursements received by Rotem were tied to research related to the
production of IPA. Our review of the record has not led us to change
any findings or calculations. Accordingly, the subsidy for this program
is 0.02 percent ad valorem, which remains unchanged from the
preliminary results.
II. Programs Determined To Be Not Used
We examined the following programs and preliminarily determined
that the producer and/or exporter of the subject merchandise did not
apply for or receive benefits under these programs during the POR. Our
review of the record has not led us to change our finding for these
final results.
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
III.Other Program Examined
Labor Training Grant
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 (significantly less than
0.005 percent ad valorem) that there would be no impact on the overall
subsidy rate. Our review of the record has not led us to change our
finding. Therefore, we do not consider it necessary to address the
issue of specificity for purposes of this administrative review and
have not further considered this program. See e.g., Final Results of
Countervailing Duty Administrative Review: Live Swine from Canada, 63
FR 2210, 2211 (January 14, 1998).
Final Results of Review
In accordance with section 705(c)(1)(B)(i) of the Act, we
calculated an individual ad valorem subsidy rate for each producer/
exporter subject to this administrative review. For the period January
1, 1999 through December 31, 1999, we determine the subsidy rate for
Rotem to be 4.80 percent ad valorem. We will instruct the U.S. Customs
Service (Customs) to assess countervailing duties as indicated
[[Page 64022]]
above on all appropriate entries. Because the URAA replaced the general
rule in favor of a country-wide rate with a general rule in favor of
individual rates for investigated and reviewed companies, the
procedures for establishing countervailing duty rates, including those
for non-reviewed companies, are now essentially the same as those in
antidumping cases, except as provided for in section 777A(e)(2)(B) of
the Act. The requested review will normally cover only those companies
specifically named. See 19 CFR 351.213(b). Pursuant to 19 CFR
351.212(c), for all companies for which a review was not requested,
duties must be assessed at the cash deposit rate. Thus, for the period
covered by this review, January 1, 1999, through December 31, 1999, the
assessment rates applicable to all non-reviewed companies covered by
this order are the cash deposit rates in effect at the time of entry.
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.
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 351.305(a)(3). Timely written
notification of return/destruction of APO materials or conversion to
judicial protective order is hereby requested. Failure to comply with
the regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice 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: December 4, 2001.
Bernard T. Carreau,
Acting Assistant Secretary for Import Administration.
[FR Doc. 01-30604 Filed 12-10-01; 8:45 am]
BILLING CODE 3510-DS-P