54 FR 39219

                                   NOTICES

                           DEPARTMENT OF COMMERCE

                                  [C-508-064]

       Fresh Cut Roses From Israel; Final Results of Countervailing Duty
                              Administrative Review

                           Monday, September 25, 1989

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

ACTION: Notice of final results of countervailing duty, administrative review.

SUMMARY: On March 13, 1989, the Department of Commerce published the preliminary results of
its administrative review of the countervailing duty 
order on fresh cut roses from Israel. We have now completed that review and determine
the total bounty or grant during the period October 1, 1985 through September 30, 1986 to be 9.89
percent ad valorem.

*39220

EFFECTIVE DATE: September 25, 1989.

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

SUPPLEMENTARY INFORMATION:

Background

On March 13, 1989, the Department of Commerce ("the Department") published in the Federal
Register (54 FR 10395) the preliminary results of its adminstrative review of the
  countervailing duty order on fresh cut roses from Israel (45 FR 58516; September
4, 1980). The Department has now completed that administrative review in accordance with
section 751(a)(1) of the Tariff Act of 1930 ("the Tariff Act").

Scope of Review

Imports covered by this review are shipments of Israeli fresh cut roes. During the review period,
such merchandise was classifiable under item numbers 192.1810 and 192.1890 of the Tariff
Schedules of the United States Annotated. This merchandise is currently classifiable under item
number 0603.10.60 of the Harmonized Tariff Schedule.

The review covers the period October 1, 1985 through September 30, 1986 and twelve programs:
(1) Government-Guaranteed Minimum Price Program; (2) Export Promotion Financing Fund; (3)
Insurance from Israel Foreign Trade Risks Insurance Corporation (FTRIC); (4) Short-term Fuel
Advances to Rose Growers; (5) Government Funding of AGREXCO and Purchase of AGREXCO
Shares; (6) Government Support of the Flower Board of Israel; (7) Rebate of Export Insurance
Premiums; (8) Long-term Industrial Development Loans to AGREXCO; (9) Encouragement of
Capital Investment Law (Agriculture) (ECILA); (10) Preferential Shot-term Financing under the
Export Credit Funds; (11) Cash Payments to Growers for Greenhouses; and (12) Cash Payments to
Packing Houses.

Analysis of Comments Received

We have interested parties an opportunity to comment on the preliminary 
results. We received written comments from the Government of Israel (GOI).

Comment 1: The GOI contends that the deposit rate for the short-term fuel advances to rose
growers should be zero. The Department verified that this program was terminated and that all of
the short-term fuel loans were completely repaid by May 1986. Flower growers received no
advances or loans thereafter.

Department's Position: We agree. For purposes of the cash deposit of estimated countervailing
duties, we determine the benefit from this program to be zero.

Comment 2: The GOI contends that the Department overstated the benefit attributable to IFTRIC
by using only the value of exports for which IFTRIC payments were claimed instead of the total
value of exports during the review period.

Department's Position: We agree and have recalculated each company's benefit accordingly. We
then weight-averaged the resulting benefits by each company's proportion of total rose exports to
the United States during the period of review. On this basis, we determine the benefit from this
program to be 8.48 percent ad valorem.

Comment 3: The GOI argues that the Department erred in determining that government investment
in AGREXCO through the purchase of shares is "inconsistent with commercial considerations, and,
therefore, countervailable." 
No government investing in a commercial venture has the same reason for investing or the same
expectation as a private investor. Whereas the producer organizations and growers receive an
on-going return from their investment in AGREXCO, the GOI's return on its investment in AGREXCO
is commercially reasonable because it is prospectively valuable. In the event of the dissolution of
AGREXCO, its assets revert to the GOI for distribution after the individual shareholders are paid off
at the nominal share value (original purchase price): the estimated value of AGREXCO's assets far
exceeds the value of any investment the GOI has made in AGREXCO. Furthermore, although the
GOI does not itself use the services of AGREXCO, it is under an obligation to provide infrastructure
to its citizens. In 1989, the rights of usage to the AGREXCO facility revert to the Airport Authority,
i.e., the GOI. In effect, by building the airport facility with private as well as public money, the GOI
has been able to build infrastructure at less cost to itself. Finally, if the Department requires that a
government investment be made for the identical reasons and identical expectations as a private
investment, then the Department is fashioning a rule that says that every government investment
in a commercial venture is a subsidy.

Department's Position: We disagree. We have consistently held that government provision of
equity does not per se confer a subsidy. However, to consider a government investment consistent
with commercial considerations, the government 
should expect a reasonable rate of return on equity over a reasonable period of time. As we stated
in our preliminary results, the Israeli government can neither receive dividends nor sell its shares
in a secondary market for more than their nominal value. Thus the government's rate of return as a
shareholder of AGREXCO equity can only be zero. The fact that, in the event of dissolution of the
enterprise, the assets of AGREXCO would revert to the GOI is not a criterion by which a reasonable
investor evaluates and chooses among alternative investments. With respect to the GOI's
obligation to provide infrastructure and the use of its investment in AGREXCO to build
infrastructure at less cost to itself, the GOI has neither defined how the rights of usage could be
considered a real return, nor provided us with information necessary to assign an appropriate
asset value to such rights. Because of the impossibility of analyzing the costs and yield rates of an
investment in fixed assets without information on depreciation, depletion, and capitalized costs,
the "rights of usage" to the AGREXCO facility are an underfined and intangible return.
Furthermore, we have consistently held that government activities such as building roads, ports,
low-cost utilities, training centers, and plant sites, constitute bounties or grants only when they are
limited to a specific enterprise or industry, or group of enterprises or industries. The Israeli
Ministry of Agriculture provided funds to AGREXCO specifically to finance the 
expansion of AGREXCO's air freight terminal at Ben Gurion Airport. While the airport facility is
located on publicly-owned Airport Authority land, it is leased exclusively to AGREXCO and no
other enterprise or industry has access to the terminal.

Final Results of Review

After considering all of the comments received, we determine the total bounty or grant during the
period October 1, 1985 through September 30, 1986 to be 9.89 percent ad valorem.
The Department will instruct the Customs Service to assess countervailing duties of 9.89
percent of the f.o.b. invoice price on all shipments of this merchandise exported on or after
October 1, 1985 and on or before September 30, 1986.

Further, due to the elimination of the Export Promotion Financing Fund and 

*39221

the Short-Term Fuel Advances Program, the Department will instruct the Customs Service to
collect a cash deposit of estimated countervailing duties, as provided by section 751(a)(1)
of the Tariff Act, of 9.44 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 
                           (Cite as: 54 FR 39219, *39221)

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 § 355.22 of the Commerce Regulations published in the Federal Register on
December 27, 1988 (53 FR 53206) (to be codified at 19 CFR 355.22).
Dated: September 18, 1989.

Eric I. Garfinkel,

Assistant Secretary for Import Administration.

[FR Doc. 22520 Filed 9-22-89; 8:45 am]

BILLING CODE 3510-DS-M