51 FR 44498

                                   NOTICES

                           DEPARTMENT OF COMMERCE

                      International Trade Administration

                                  [C-508-064]

       Fresh Cut Roses From Israel; Final Results of Countervailing Duty
   Administrative Review and Determination Not to Revoke Countervailing Duty Order

                          Wednesday, December 10, 1986

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AGENCY: International Trade Administration, Import Administration Commerce.

ACTION: Notice of final results of Countervailing Duty Administrative Review and
determination not to revoke countervailing order.

SUMMARY: On October 17, 1986, the Department of Commerce published the preliminary results
of its administrative review of the countervailing duty order on fresh cut roses from
Israel. The review covers the period October 1, 1981 through September 30, 1984 and ten
programs.

We gave interested parties an opportunity to comment on the preliminary results. After reviewing
all of the comments received, we determine the total bounty or grant to be: 11.03 percent ad
valorem, for the period October 1, 1981 through September 30, 1982; 12.20 percent ad valorem,
for the period October 1, 1982 through September 30, 1983; and 23.70 percent ad valorem, for the
period October 1, 1983 through September 30, 1984.

EFFECTIVE DATE: December 10, 1986.

FOR FURTHER INFORMATION CONTACT:Cynthia Gozigian or Paul McGarr, Office of Compliance,
International Trade Administration, U.S. Department of Commerce, Washington, DC
20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 17, 1986, the Department of Commerce ("the Department") published in the Federal
Register (51 FR 37050) the preliminary results of its administrative review of the
countervailing duty order on fresh cut roses from Israel (45 FR 58516, September
4, 1980). We have now completed the administrative review in accordance with section 751 of the
Tariff Act of 1930 ("the Tariff Act").

Scope of Review

Imports covered by the review are shipments of Israeli fresh cut roses. Such merchandise is
currently classifiable under items 192.1810 and 192.1890 of the Tariff Schedules of the United
States Annotated.

The review covers the period October 1, 1981 through September 30, 1984 and ten programs: (1)
The ECIL; (2) Government-guaranteed Minimum Price Program; (3) preferential short-term
financing; (4) government funding of AGREXCO; (5) cash payments to growers for greenhouses; (6)
cash payments to packing houses; (7) cash payments from the Export Promotion Fund; (8) fuel
grants to rose growers; (9) long-term loans to AGREXCO; and (10) a capital fund for AGREXCO.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the preliminary results. At the request of
the petitioner, Roses, Inc., and the Government of Israel, we held a public hearing on
November 17, 1986.

Comment 1: Roses argues that the Department should have used effective rather than nominal
interest rates in calculating benefits under the Export Production Fund ("EPF"). Since the
Department has information on the effective commercial benchmark rates, Roses contends
that the Department should use those rates to ensure that the full amount of the bounty or grant
conferred by a loan with non-commercial terms is countervailed. Moreover, making comparisons
of effective rates is consistent with Department policy.

The Government of Israel, for its part, contends that the EPF annual preferential rate of 42
percent, used by the Department for the entire review period, actually increased to 50 percent in
1983 and 82 percent in 1984, rather than remaining constant as the Department has maintained.

Department's Position: We agree with Roses. We have revised our calculation of benefits from
the EPF to reflect interest rate differentials based on a comparison of effective rates. For our
commercial benchmark, we derived quarterly effective interest rates from the annual effective
interest rates 
published for each quarter by the Bank of Israel. For our preferential rate, we used as the best
information available the nominal rate of 10.5 percent per quarter for 1982 (42 percent per
annum) from the final affirmative countervailing duty determination on potassium chloride
from Israel (49 FR 36122, September 14, 1984). Since interest on these loans is paid at the end
of the term, and we have no evidence of any charges on these loans other than interest, we consider
the nominal preferential rate to be the same as the effective preferential rate.
We have received no documentary evidence of changes in the EPF preferential rate for 1983 or
1984. Therefore, we are using the quarterly 10.5 percent preferential rate as the best information
available for the entire period of review. See also, our position on Comment 2.

Comment 2: The Israeli government contends that the Department, in using the best information
available, incorrectly calculated the maximum benefit available from the EPF. The credit available
to an exporter is a percentage of the dollar value of his exports, and this amount is converted into
shekels and lent to the exporters.

The Department properly used shekel interest rates but without converting the dollar value of
available credit into shekels. This results in a benefit calculated in dollars instead of shekels, and
because shekel interest rates are higher than dollar interest rates, the Department overstated the
benefit from this program.

Department Position: We agree. Eligibility for EPF loans is based on the dollar value of exports, and
the total amount available to an exporter is calculated as a percentage of his exports, using the
rate-of-credit formula. An exporter draws from this dollar amount but receives
shekel-denominated loans. Because we have no information on actual shekel amounts borrowed,
we have converted the maximum dollar amount exporters are eligible for into shekels. We treated
this amount as being renewed four times 

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yearly, because the loan terms are for 90 days. To calculate the benefit, we converted the dollar
amount to shekels using the exchange rate at the beginning of each quarter. We then multiplied the
shekel value by the differential between our benchmark and the preferential rate to determine the
benefit from each loan in shekels. Finally, we converted the shekel benefit into dollars using the
exchange rate at the end of the quarter because our value of exports was in dollars. In our
calculations, we used the quarterly exchange rates certified by the Federal Reserve Bank of New
York.

By making this adjustment and the adjustment for effective interest rates discussed in our position
on Comment 1, we now find a benefit under the EPF program of 5.91 percent ad valorem for the
1981-82 period, 5.89 percent ad valorem for the 1982-83 period, and 16.72 percent ad valorem of
the 1983-84 period.

Comment 3: The Israeli government contends that the Department's method of calculation for the
EPF program yields a benefit that exceeds the face value of the loans for the 1983/84 growing year.
The Government of Israel argues that this is inconsistent with the Department's policy in that
the maximum benefit from a loan cannot exceed the benefit found if the loan were a grant,
expensed at face value in the year of receipt.

Department's Position: In applying the methodology discussed in our responses to Comments 1 and
2, we calculated no benefit from a loan in excess of its face value.

Comment 4: The Government of Israel aruges that information available to the Department
shows that the EPF now provides dollar loans and that the continued use of a shekel interest rate
for duty deposit purposes is not based on the best information available.

Department's Position: We disagree. We have no documentary evidence on the record to calculate
a duty deposit rate based on dollar loans. Therefore, we have used the rate calculated for the
1983/84 period as the best information available for cash deposit purposes.

Comment 5: The Israeli government contends that the program of fuel grants to rose growers was
terminated after the 1980/81 growing year. Therefore, the Department's assumption that fuel
grants existed during the review period is incorrect. The interest savings on low-cost credit,
included in the 
Department's calculation regarding fuel grants, is actually savings received by exporters for the
EPF and the Imports-for-Exports Fund. Including these benefits as part of the fuel grants program
double-counts the interest savings.

Department's Position: We have no documentary evidence that the program of fuel grants to rose
growers was terminated. Therefore, as the best information available, we are using the rate found in
the last administrative review.

Comment 6: Roses claims that the Department ignored three programs found to be bounties or
grants by the Court of International Trade ("the CIT") in Agrexco v. United States, 604 F. Supp.
1238 (CIT, 1985): (1) Government participation in research and development, (2)
Government-funded extension services, and (3) Government support of the Ornamental Plant
Production and Marketing Board. Roses argues that the Department's failure to collect data or
consider these programs constitutes an abuse of administrative discretion.

Department's Position: In our September 4, 1980 countervailing duty order, we found: (1)
That research and development conducted at Hebrew University of Jerusalem, Rehevot, and the
Volcani Institute of Agricultural Research is not a bounty or grant because the results of the
research are available to rose growers worldwide and have been provided to, among others,
members of Roses, Inc., the petitioner; (2) that government-funded extension services
provided by the Ministry of Agriculture to farmers are not bounties or grants because they are
provided to the entire agricultural sector and are not directed 
exclusively to rose growers or any order industry within the agricultural sector; and (3) that there
is no bounty or grant to the Ornamental Plant Production and Marketing Board because it is funded
by growers without any budget contribution by the Government of Israel. The CIT remanded
all three of these issues for reconsideration because, depending on certain facts, these programs
might be bounties or grants.

Our position remains that these three programs are not bounties or grants. On July 3, 1985, the
United States moved the CIT to vacate that part of its opinion which remanded the case to the
Department. Because the CIT has not yet ruled on this motion, the decision is not yet a final
judgment and is not binding.

Comment 7: The Israeli government argues that the countervailing duty order on fresh cut 
roses from Israel should be revoked. Although this order was issued without an affirmative
injury determination after January 1, 1980, because at the time Israel was not a "country
under the Agreement," the Trade Agreements Act of 1979 ("the TAA") is silent in the matter of
  countervailing duty orders issued under section 303 of the Tariff Act on products from a
country that becomes a "country under the Agreement" after the issuance of the order. The TAA
provides no authority for the imposition of countervailing duties on products from such a
country absent an affirmative injury determination. Moreover, the legislative silence does not
support an interpretation that 
Congress intended to perpetuate this countervailing duty order without an injury test.

Department's Position: We disagree. The statutory scheme of the TAA indicates that Congress did
not intend automatic revocation of countervailing duty orders issued under section 303 of
the Tariff Act. If Congress had intended for such an order to be revoked, it could have explicitly
provided for revocation. Instead, Congress granted a "country under the Agreement" the injury
test in the limited circumstances specified in sections 102 of the TAA (to investigations in progress
at the time a country becomes a "country under the Agreement"), 104(b) of the TAA (to section
303 orders in effect on January 1, 1980, if the request for the injury review were made by
December 31, 1982), and section 701 of the Tariff Act (to investigations not yet filed on products
from a "country under the Agreement"). Congress did not provide for an injury test in the
circumstances of this case, where Israel became a "country under the Agreement" after
issuance of the order under section 303 of the Tariff Act. To read this failure of Congress to provide
for an injury test as a requirement for revocation would produce an absurd result, which we cannot
assume Congress intended. If we revoke the order on Israeli roses, we would be according
greater rights, i.e., automatic revocation, to later signatories of the Agreement on Interpretation
and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade ("the
Subsidies Code") (which 
provides "country under the Agreement" status) than to early signatories. Early signatories
received the right to an injury review that would result in revocation only if the determination of
injury were negative.

Comment 8: The Israeli government argues that the Subsidies Code should be treated as law,
binding on U.S. administrative agencies, because the TAA specifically approved the Subsidies Code
and because, when a U.S. statute is silent on a matter, that statute should not be construed as being
in conflict with international treaty obligations. The Subsidies Code and the 

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GATT require an affirmative injury determination before a countervailing duty can be
assessed.

Department's Position: We disagree. The U.S. statute is not silent or ambiguous on whether the
section 303 order on Israeli roses can remain in effect. We believe that Congress, in the TAA,
clearly provided for revocation in certain situations and explicitly failed to provide for revocation
in the situation presented by the order on Israeli roses. See, our position on Comment 7.

Comment 9: The Government of Israeli argues that there are important policy reasons why the U.S.
should revoke the countervailing duty order on fresh cut roses from Israel. The U.S.
policy of encouraging liberalization of trade and adherence to international agreements favors
revoking this order rather than maintaining it because maintaining the order violates the
international 
obligations of the United States to grant an injury test. For the reasons set forth in Comments 7 and
8, the Israeli government contends that this order should be revoked prospectively from
September 18, 1985, the date Israel became a "country under the Agreement."

Department's Position: We disagree. It was clear that, before signing the Subsidies Code in August
1985, Israel would not be granted an injury test on the countervailing duty order on
fresh cut roses. The Report of the Committee on Ways and Means on the United
States-Israel Free Trade Area Implementation Act of 1985 confirms this conclusion. The
Committee stated that:

Israel upon its accession to the GATT Agreement will become a "country under the Agreement"
under section 701(b) of the Tariff Act of 1930 and thereby receive the material injury test under
the U.S. countervailing duty law on dutiable imports; the test already applies to duty-free
imports from Israel. The test will be applied prospectively, not to existing countervailing
duty orders. (H.R. Rep. No. 99-64, 99th Cong., 1st Sess. 8 (May 6, 1985).)

Israel signed the Subsidies Code after passage of this Act and, we presume, with knowledge of
this legislative history.

Final Results of Review

After considering all of the comments received, we determine the total bounty 
or grant to be 11.03 percent ad valorem for the period October 1, 1981 through September 30,
1982; 12.20 percent ad valorem for the period October 1, 1982 through September 30, 1983; and
23.70 percent ad valorem for the period October 1, 1983 through September 30, 1984.
The Department will instruct the Customs Service to assess countervailing duties of 11.03
percent of the f.o.b. invoice price on all shipments exported on or after October 1, 1981 and on or
before September 30, 1982, 12.20 percent of the f.o.b. invoice price on all shipments exported on
or after October 1, 1982 and on or before September 30, 1983, and 23.70 percent of the f.o.b.
invoice price on all shipments exported on or after October 1, 1983 and on or before September
30, 1984.

The Department will instruct the Customs Service to collect cash deposits of estimated
countervailing duties, as provided by section 751(a)(1) of the Tariff Act, of 23.70 percent of
the f.o.b. invoice price on all shipments of Israeli fresh cut roses entered, or withdrawn from
warehouse, for consumption on or after the date of publication of this notice. This deposit
requirement shall remain in effect until publication of the final results of the next administrative
review.

This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19
U.S.C. 1675(a)(1)) and § 355.10 of the Commerce Regulations (19 CFR 355.10).

Dated: December 3, 1986.

Gilbert B. Kaplan,

Deputy Assistant Secretary Import Administration.

[FR Doc. 86-27726 Filed 12-9-86; 8:45 am]

BILLING CODE 3510-DS-M